On Wednesday, the Supreme Court heard oral argument in Warner Chappell Music, Inc. v. Nealy, an appeal of the Eleventh Circuit’s determination that a copyright plaintiff can recover damages for infringement occurring more than three years prior to filing suit. The Eleventh Circuit’s decision was based on the discovery accrual rule, which begins the limitations period at the moment a plaintiff becomes aware of or should reasonably learn of the infringement upon which a claim is based.

Sherman Nealy and Music Specialist, Inc. brought the underlying lawsuit against Warner and others based upon the alleged unauthorized licensing and use of songs owned by the plaintiffs. Much of alleged infringement occurred while Nealy was incarcerated, and he alleged that he did not become aware of the infringement until 2016. Nealy filed suit in 2018, within three years of the date he allegedly discovered the infringement.  The district court held that Nealy’s claims were timely, but that he could only obtain damages for the three years prior to the filing of his lawsuit. The Eleventh Circuit overturned the finding that such a limit on damages existed, holding that Nealy could potentially recover damages outside the three-year period.

Continue Reading Skeptical of the Second Circuit: U.S. Supreme Court Hears Arguments on Copyright Damages

You might recall that the judge in  Andersen v. Stability AI —the case in which a group of visual artists sued the makers of several different generative AI platforms for copyright infringement—tossed most of the plaintiffs’ claims last year. However, the court allowed the plaintiffs an opportunity to replead. Specifically, the judge said that for their vicarious copyright infringement claims to remain viable, the plaintiffs would have to at least allege that derivative works created using AI programs that generate images in response to user prompts are “substantially similar” to their original copyright-protected works.

The plaintiffs took the judge’s ruling to heart. They filed an amended complaint, adding new plaintiffs and using statements by the AI companies’ employees on social media to bolster their claims that the AI programs are copying their art. Most interesting to us, however, was the images the plaintiff artists inserted into their amended pleading providing a side-by-side comparison of their original visual works and what they allege is substantially similar AI-generated output. (Plaintiffs in other cases involving written works have been taking notes on the Stability AI decision and similar decisions too, which we’ll be writing about in the coming weeks).

Continue Reading Reader Survey: Tell Us Whether You Think Stability AI Outputs are Substantially Similar to Andersen Plaintiffs’ Original Works

This blog has been cross-posted on Seyfarth’s California Peculiarities Employment Law blog.

Seyfarth Synopsis: Collaborations with athletes, actors, and singers have always been a great way for companies to grow their brand recognition and create profitable products. Similar to celebrity-filled ads in the Super Bowl, collaborative relationships between influencers and companies on social media continue to be prevalent. With California’s unique laws on classifying independent contractors, including how “work made for hire” language is interpreted in California, businesses should pay attention to best practices for a successful partnership.

Like Patrick + Brittany and Travis + Taylor: Partnerships Are Key

Nowadays, celebrities and social media influencers are more business savvy. In the past, famous people simply served as the face of a brand or endorsed a product in a short advertisement. However, celebrities and even their family members, as well as budding social media influencers, are increasingly involved with brand collaborations. This includes providing input on package or product designs and colorways, and overseeing the production process. Whether it is Kansas City Chiefs’ quarterback Patrick Mahomes creating a clothing line with Adidas, or a clothing collection curated by Patrick’s off-the-field partner, Brittany, with Vitality (the commercial even features Patrick and Brittany’s daughter, Sterling Skye, after whom the line was named), the possibilities are endless. Even the mere appearance of a singer, athlete, or influencer in commercials or ads for businesses unrelated to sports or music can create brand associations, like Travis Kelce and Pfizer, Taylor Swift and Capital One, Christian McCaffrey and Xfinity, or Charli D’Amelio and Dunkin’ Donuts. But what if the collaboration results in the creation of legally protectable intellectual property rights? Who owns the copyright? The answer to this question often turns on the celebrity’s or influencer’s legal relationship with the business.

Instant Replay—Is the Celebrity an Independent Contractor or Employee under California Law?

The difference between employees and independent contractors is critical in California. If a worker is an employee, the business must report the worker’s earnings to the Employment Development Department (EDD) and must pay employment taxes on those wages. Thus, companies have a clear interest in ensuring that the freelancers they occasionally contract with are deemed independent contractors, not employees. Companies also benefit under federal copyright law if the celebrity or influencer can be classified as an independent contractor. The U.S. Copyright Act provides that certain specially ordered or commissioned works can be considered “works made for hire” and, when created by an independent contractor, the commissioning party is considered the author of the work and holder of the copyright. As a result, companies often include “work made for hire” clauses in contracts with independent contractors to ensure that the company owns all copyrights in the contractor’s work. But even if the contracted work qualifies as a work made for hire under federal copyright law, companies must still consider California law, which complicates the possibility of contractor status.

Call Reversal Where California’s View Of Work Made For Hire Effects Employment Status

Normally, the determination of whether an independent contractor should be classified as an employee in California is governed by AB 5 and its successor legislation AB 2257, which address the three-part ABC test for employment classification. But different rules apply when an independent contractor agreement includes work made for hire language.

According to California Labor Code section 3351.5(c) and California Unemployment Insurance Code section 621(d) and 686, an “employee” includes any person, including independent contractors, who enters into a written agreement to create a specially ordered or commissioned work of authorship stating “the work shall be considered a work made for hire.” This essentially means that by including a simple “work made for hire” clause in a contract, an otherwise independent contractor is deemed an employee under California law by statute. This arguably dispenses with the ABC test for these type of employment classification assessments. The independent contractor’s level of involvement in the project does not matter, because the inclusion of the work made for hire clause itself determines the employment status.

Avoiding a Flag on the Play: What Companies Can Do To Adjust and Win the Game

The employment status of their celebrity and social media partners may be more startling to California companies than the 49ers’ muffed punt in the 2024 Super Bowl. To avoid pitfalls, including penalties, companies with such partnerships and work made for hire contractual language, can properly classify these workers as employees.

Alternatively, companies considering partnering with a celebrity or influencer may opt to work with an individual who has created a corporation, LLC, or other business entity (excluding sole proprietorships), and contract with the business entity as opposed to the individual. This is a common approach for celebrities who contract through an entity on a loan-out basis. Entities are not considered employees in California and this strategy may allow a company to avoid the work made for hire employment classification risk. However, whether a loan-out company will survive an EDD audit remains an unanswered question.

Some celebrities and most influencers are unrepresented by a formal legal entity. When facing this kind of situation, companies may opt to omit the “work made for hire” clause and instead acquire the requisite rights through another mechanism, such as an assignment or license. This will allow the company to appropriately utilize the work. Ultimately, when dealing with an independent contractor in California, it is crucial to devise a game plan and consider the company’s end goal. Businesses seeking to own intellectual property created by a celebrity or influencer or as a result of such a collaboration should consider an assignment of rights or a license from the content creator to avoid needing a work made for hire clause and risking employment status. This approach is not without its own risks; grants of rights in copyright can be terminated after a period of time, which could result in the rights reverting back to the independent contractor.

Workplace Solutions

If you have questions or would like to strategize regarding compliance with this facet of California law, “works made for hire” generally, or other intellectual property and employment-related pitfalls that arise when working with celebrities, social media influencers, or independent contractors, don’t hesitate to reach out to your Seyfarth lawyer or the authors of this blog.

Edited by Coby Turner and Cathy Feldman

The one and only TTABlogger, to whom we are very much indebted, recently reviewed and analyzed the decisions concerning Section 2(d) and Section 2(e)(1) refusals that the Trademark Trial and Appeal Board issued in 2023.  Based on these numbers, the Board seems to be increasingly receptive to challenges of likelihood of confusion refusals under Section 2(d), but is perhaps getting more harsh on appeals of mere descriptiveness refusals under Section 2(e)(1).

According to the TTABlog, last year the Board issued 219 decisions regarding Section 2(d) refusals and 60 decisions regarding Section 2(e)(1) refusals.  Meanwhile, the Board reversed 31 of the Section 2(d) refusals and four of the Section 2(e)(1) refusals.  This provides an affirmance rate of 85.8% and 93.3%, respectively.  Comparatively, the Board had an affirmance rate of 92.5% for 2(d) refusals and 88.2% for 2(e)(1) refusals in 2022.  See Is That Really Appealing? 2022.  

It is difficult to know whether these changes represent a lasting trend, or just statistically insignificant fluctuations.  Either way, it seems the odds are still stacked against applicants filing ex parte appeals of Examining Attorney’s decisions.  Therefore, applicants should carefully consider the implications of filing and appeal to avoid a final decision of the Board with potentially negative consequences.  A mark owner would not want to take action that might undercut future efforts to register, or undercut future policing efforts if a third party uses the decision against the mark owner. In some cases, the Board will even apply collateral estoppel to bar future applications.

In sum, the Board’s affirmance rates, along with all pertinent facts, should strongly be considered when determining whether your case is really worth appealing. 

The class of plaintiff authors seeking to hold OpenAI liable for copyright infringement has faced yet another setback. The U.S. District Court for the Northern District of California has knocked out the majority of their claims, refusing to accept the blanket allegation that “every output of the OpenAI Language Model is an infringing derivative work.” However, the court has allowed the plaintiffs another chance to cure many of the deficiencies in their pleadings, so the battle is not yet over.

As we’ve previously reported, named plaintiffs including Paul Tremblay, Sarah Silverman, and Michael Chabon have filed class action lawsuits against several companies associated with popular Large Language Model tools like ChatGPT. The lawsuits claim that because the defendants copied their original works of authorship to use as training material for the LLMs, the AI companies are liable under the federal Copyright Act and various state tort laws. For a quick recap of the theories they are asserting, check out our recent AI Update.

Continue Reading The Latest Chapter in Authors’ Copyright Suit Against OpenAI: Original Pleadings Insufficient

In 2022, the Federal Circuit definitively ruled that artificial intelligence (AI) systems cannot be named inventors or co-inventors on patent applications, reinforcing the longstanding principle that only natural persons are eligible as inventors under the Patent Act.  This decision, however, left an important question unanswered: Are inventions created with AI assistance patentable?

Today, the United States Patent and Trademark Office (USPTO) has shed light on this matter with its latest guidelines for AI-assisted inventions.  These guidelines recognize the contribution of AI in the invention process while highlighting the crucial role of human inventors in this dynamic area.

The guidelines draw parallels to the legal requirements for multiple human inventors.  Here, each individual must make a “significant contribution” to the invention to be named as an inventor, as established in existing case law.  The guidelines clarify the focus: Rather than equating AI’s role in inventions to that of a human, the emphasis is on whether the human applicant has made a “significant contribution” to warrant inventorship.

Here are some key insights from the USPTO Guidelines:

Beyond Problem Identification

Identifying a problem or setting a research goal alone does not constitute an inventive act.  Prompting generative AI to find a solution, such as asking the generative AI system to design a water bottle with an integrated Bluetooth speaker, does not by itself qualify as a “significant contribution.”  In cases where a patent application is filed based on the AI’s output from such a prompt, the individual providing the prompt cannot be named as an inventor.  Still, the guidelines recognize the inventorship of individuals who formulate specific problems for AI systems to solve, especially those who meticulously craft prompts to elicit specific solutions from AI.

Contribution Beyond Realization

Merely recognizing an AI-generated invention does not automatically confer inventorship.  The USPTO guidelines stress the importance of substantial contributions to AI output.  For example, if the engineer from the previous scenario engages in additional experimentation and modifications of the water bottle designs suggested by the AI, these efforts could qualify them as an inventor for inventions stemming from the experimentation and/or modifications.

Essential Building Blocks

Individuals who play a key role in developing the components that lead to an invention are recognized under these guidelines.  For example, a person that designs, constructs, or specifically trains an AI system in relation to a particular problem can qualify as an inventor.  Conversely, a person who trains an AI system for general purposes might not meet the inventorship criteria.

Ownership vs. Inventorship

Simply owning or overseeing an AI system is not enough for inventorship.  The guidelines distinguish inventorship as requiring active and significant involvement in the invention’s conception.

Disclosure and Duty of Inquiry

The USPTO maintains its stance on disclosure requirements, reminding practitioners of their duty to disclose relevant information.  This includes evidence that might indicate a named inventor did not significantly contribute to the invention, particularly if an AI system actually made the contribution.

The guidelines also remind patent practitioners of their duty of reasonable inquiry, noting that patent practitioners should inquire about the use of AI in the invention creation process.  We recommend that inventors and in-house counsel should begin to document the role of AI in the invention processes.

The USPTO will be accepting comments on this guidance for 90 days and plans to update it as AI technology and legal precedents evolve.

The USPTO will host a webinar on Inventorship Guidance for AI-Assisted Inventions on Tuesday, March 5, from 1-2 p.m. EST.

Finally, the USPTO has provided two examples related to inventorship for AI-assisted inventions:

In the film “Any Given Sunday,” Al Pacino, portraying Coach Tony D’Amato, poignantly compares football to life, describing it as a “game of inches … one half a step too late or too early and you don’t quite make it. One half second too slow, too fast and you don’t quite catch it. The inches we need are everywhere around us.” This razor-thin margin is what gives football its unique charm. Not every play is a Hail Mary; often, the game hinges on tense moments, such as the dreaded 4th and inches. Not all teams have mastered the tush push and some of these drives end with a pile of players on the ball. The poor referees are forced to sift through a pile of players to determine the ball’s location. Sometimes, referees resort to watching replays frame-by-frame to pinpoint the spot of the football. Even then, they’re not always correct. These decisions typically leave one group of fans jubilant and the other in dismay. In the midst of the debate over the ball’s placement, it might come as a surprise that the NFL tracks the location of each game ball in real time using an RFID tracking chip.

Since the 2017-18 season, the NFL has collaborated with Zebra Technologies and Wilson Sporting Goods to implant RFID chips within footballs to monitor the football’s position. Weighing only 3.3 grams, these inconspicuous chips are inserted between an inner air bladder and the outer leather shell of the football. Even the players wear RFID chips in their clothing, allowing teams to generate a postgame report with detailed analytics as to player movement. Behind the scenes, Zebra and Wilson are building a rich patent portfolio directed to positional-tracking technology. A look at Zebra’s patents provides a scouting report as to how the positional-tracking technology works.

Continue Reading Tech Touchdowns: Revolutionizing Football with RFID Tracking

As attorneys, we’ve all taken Legal Research and Writing. This is where we first encountered Westlaw and Lexis, using these sites to delve into case law for various assignments while chasing Westlaw and Lexis points in the hopes of getting a free TV or iPod (back when that was a thing). Professors always emphasized the critical process of tracing the history of a case and determining if the case is still considered “good law.”

With the rise of generative AI over the past year, it’s unsurprising that lawyers are turning to this advanced technology for legal research. However, there’s a growing concern: the blind acceptance of AI-generated content. This issue was highlighted in U.S. Supreme Court Chief Justice John Robert’s 2023 year-end report on the federal judiciary. A notable incident involved the Second Circuit reprimanding a New York attorney for submitting a brief with reference to a non-existent case, hallucinated by ChatGPT, without proper verification.

Continue Reading USPTO Sets to Clarify Attorney Guidelines in the Age of Generative AI

We presented a webinar last week entitled How to Win Your Next Trademark Battle: Lessons Learned in 2023 to give brand owners and their lawyers an overview of key takeaways from last year’s trademark cases.

If you missed our live presentation, you can view a recording here. For a quick recap of the most important takeaways, keep reading:

  1. In Jack Daniel’s Properties, Inc. v. VIP Products LLC, the U.S. Supreme Court limited application of the two-factor Rogers test when a party asserts its use is “artistic” and entitled to a First Amendment defense to infringement claims. The test will not apply “when an alleged infringer uses a trademark in the way the Lanham Act most cares about: as a designation of source for the infringer’s own goods.” Instead, the traditional, multi-factor likelihood of confusion analysis will apply.
  2. In Abitron Austria GmbH et al v. Hetronic Int’l, Inc., the U.S. Supreme Court held that the Lanham Act was not intended to be applied extraterritorially, and only covers infringing activity occurring through “use in commerce” within the United States. Domestic parties that want to enforce their rights abroad must now do so on a jurisdiction-by-jurisdiction basis. They may also consider the possibility of non-U.S. misuse of their trademarks when drafting license or distribution agreements with non-U.S. parties.
  3. Trademark registrations for real-world goods may be sufficient to enforce brand owners’ rights in digital environments—at least according to the way Hermès International v. Rothschild has unfolded so far. Hermès, based on registrations for real-world goods, was awarded damages and a permanent injunction based on defendant Rothschild’s digital depictions of Hermes BIRKIN® bags attached to NFTs advertised using Hermès’ trademarks. Rothschild is appealing.
  4. The Federal Circuit, in Spireon, Inc. v. Flex Ltd., clarified the relative burdens of proof applied when a party raises a “crowded field” defense by asserting that third-party registrations of similar marks render the plaintiff’s mark “conceptually weak.” Specifically, when third-party registrations for identical marks and identical goods are asserted, the burden is on the plaintiff to prove non-use of those marks. The TTAB has since clarified that, in situations where the third-party marks or goods are not identical, the burden is on the defendant to prove the marks are in use.
  5. The Ninth Circuit, in San Antonio Winery, Inc. v. Jianxing Micarose Trade Co., became the first appellate court to decide whether service of process under 15 U.S.C. § 1051(e)—which allows service on a designated domestic representative or the Director of Trademarks—applies to court proceedings involving an applied-for or registered mark, as opposed to being limited to administrative proceedings before the TTAB. The Ninth Circuit’s conclusion that the statutory language includes cases filed in court, a conclusion already followed by courts in the Second and Eleventh Circuit, opens the door for a more simplified means of serving process on non-U.S. defendants.
  6. A precedential decision at the TTAB confirmed that ESTTA cover sheets are more than ministerial. In Sterling Computers Corp. v. IBM Corp., the Board held that claims asserted in an opposition to a Section 66(a) application (i.e., an application filed pursuant to the Madrid Protocol) are limited to those enumerated in the cover sheet form filed electronically with a Notice of Opposition, as opposed to the contents of the Notice itself. It is not possible to amend the cover sheet to add grounds that may have been included in the Notice.
  7. Priority in a TTAB opposition is established by pleading a prior registration—even when that registration was issued based on an application filing that post-dated the applicant’s first use and the filing of the opposed application. In Nkanginieme v. Appleton, the Board held that the applicant’s attempt to challenge the opposer’s priority at trial “amount[ed] to an impermissible collateral attack” against the opposer’s pleaded registration. The Board held that the applicant should have filed a separate opposition to the opposer’s application or else asserted a counterclaim for cancellation. By the time the applicant got to trial, it was too late, and priority was no longer a disputed issue by virtue of the existence of the “prior” pleaded registration.
  8. The TMA’s expungement and reexamination proceedings should not be overlooked when attacking prior registrations. Both can be filed by any third party, with the former used to address registrations where the mark has never been used on all or some of the identified goods/services, and the latter used to address registrations where the mark was not in use on all or some of the identified goods/services. While several thousand requests have been filed, many get rejected for failing to follow the USPTO’s specific requirements.