Monthly Archives: March, 2013

You Do Not Automatically Own The Copyright To A Work Just Because You Paid To Have It Created

Consider the following situations: a person or business hires an outside contractor to design a website or logo, to take some photographs, to do some graphics, to design a proprietary computer program, or even take some family photographs.  In such situations, who owns the copyright to the works created?  Most people would answer that the person who paid for the work owns the copyright.  But that is not correct.  The person who paid for the work owns the physical object that was created.  But the person who paid for the work does not automatically own the copyright just because they hired and paid someone to create the work.  On the contrary, the person who created the work – not the person who paid for the work – owns the copyright.  And to make matters worse, the person who paid for the work cannot legally make any copies of the work, and will be guilty of copyright infringement if a copy is made.

While the foregoing might seem strange, there is a simple solution: the person paying for the work needs to enter into a simple written agreement with the person to doing the work to make sure that ownership of the copyright ends up in the right place.  If the work is one that falls within one of the nine categories that are eligible for work made for hire status under 17 USC 101, then the agreement simply needs to state the work is a work made for hire.  If the work does not qualify as a work made for hire, then the agreement should simply provide that the contractor transfers the copyright to the person paying for the work.

It really is as simple as that, but experienced copyright counsel should be consulted for the language of an appropriate agreement.


Breaking News – US Supreme Court Issues Eagerly Anticipated Decision in First Sale Doctrine Case

In a 6-3 decision, the United States Supreme Court found that the copyright doctrine known as the “first sale doctrine” applies to copyrighted items purchased outside the United States but re-sold in the United States.  The case is Kirtsaeng v. John Wiley & Sons, Inc. and the decision can be found here:

Explained simply, the “first sale doctrine” means that the copyright protection for an otherwise protected work ceases to exist upon the “first sale” of the work. In other words, the copyright owner only has control of the work through the first sale. Therefore, you can re-sell CDs and DVDs, artwork, books, electronics, and all manner of other works to whomever you please after the first sale. Swap meets and websites like eBay and Craigslist exist in large part because of the protection of the first sale doctrine.

The Kirtsaeng case challenged the first sale doctrine in an important way. In the Kirtsaeng case, the issue was whether copyright holders of works that were made outside the US can require that a person have the copyright holder’s permission for resale. A lower appellate court said yes, thereby seriously undermining the first sale doctrine.

The Supreme Court reversed, holding that the language of the statute that sets forth the first sale doctrine, as well as the context of the statute and the common law history of the first sale doctrine favored an interpretation of the doctrine that was not geographically limited.  The Supreme Court also noted that a geographic limitation on the first sale doctrine would threaten ordinary scholarly, artistic, commercial and consumer activities, which were harms that Congress could not have intended in enacting the first sale doctrine.

The significance of the Kirtsaeng case cannot be overstated.  Had the Supreme Court accepted a geographically limited interpretation of the first sale doctrine as urged by the respondent, copyright owners would have had a strong incentive to shift the manufacture of their works outside the US, which would have allowed them to obtain almost perpetual control over the re-distribution of their works. The danger of such a result was obvious on many levels, and would have severely damaged re-sale e-commerce sites like eBay and Craigslist.  Fortunately, the Supreme Court adopted a practical, common sense interpretation and the first sale doctrine is safe.

When Can A Product Be Labeled “Made In The USA?”

The Federal Trade Commission (FTC) regulates claims of products advertised as being “Made in the USA” under its general authority to act against deceptive acts and practices.  In order for a product to be labeled “Made in the USA,” it must meet the very strict requirement of the FTC that “all or virtually all” of the production and content be of US origin.  What exactly does this mean?

A product that is “all or virtually all” made in the USA is one in which all significant parts originated in the United States and substantially all of the manufacturing or processing of the product took place in the United States.  The FTC has explained that the product should only contain a “de minimus” or “negligible” amount of foreign content.  But the FTC has not provided any definitions for these terms, stating instead that there is no bright line test that can be applied to determine whether “all or virtually all” of a product is made in the United States.

However, the FTC has enacted enforcement guidelines which provide some more specific factors that will be analyzed to determine whether a product qualifies for “Made in the USA” status:

1.  Whether the site of final assembly or processing is in the United States – the technical term is that the item must be “substantially transformed” in the United States?

2.   What is the proportion of US manufacturing costs (i.e. US parts and processing) to foreign manufacturing costs?

3.  How remote is the foreign content – in other words, where in the manufacturing process is the foreign content incorporated (the more remote the better)?

The FTC evaluates these factors on a case-by-case basis and historically has strictly applied the factors.

One warning about the foregoing standards: the State of California has adopted a more strict standard for goods sold in California bearing a “Made in the USA” label.  California’s rule is set forth in Section 17533.7 of the Business & Professions Code.  The key difference between the FTC standard and the California standard is that the FTC looks at the foreign content of a product as a whole, while the California standard applies to articles, units or parts of a product, which potentially results in a stricter standard.

As can be seen, whether a product can be labeled as “Made in the USA” potentially involves a complicated analysis.  Therefore, a business that intends to sell product labeled “Made in the USA” must consult with counsel before marketing and selling the product.

As Red Sox Fans Have Always Known, The Yankees Really Are The “Evil Empire” (And Now It’s Official For Trademark Purposes!)

As those readers who are baseball fans (and especially Red Sox fans) will remember, in 2002 Larry Lucchino – one of the owners of the Red Sox – referred to the Yankees as the “Evil Empire” (no doubt in an homage to Star Wars and that lovable baseball fan Darth Vader!) when the Yankees beat out the Red Sox for the signing of pitcher Jose Contreras.  Over the years, the Yankees (and especially the late George Steinbrenner) have embraced the Evil Empire moniker, going so far as to play Star Wars music during home games.

Here’s where the legal angle begins: in 2008, a private company named Evil Enterprises, Inc., which had no association with the Yankees, filed an application to obtain a federal registration for the trademark “Evil Empire.”  By seeking to register the phrase Evil Empire as a trademark, the company tried to obtain the exclusive right to market baseball-related merchandise using the term “Evil Empire.”

Needless to say, the Yankees objected to the company’s application.  For those readers not familiar with trademark law and procedure, trademark registration disputes like the one involving the Evil Empire mark are resolved by administrative litigation conducted by a federal administrative agency/court called the Trademark Trial and Appeal Board (TTAB).  The Yankees submitted substantial evidence (newspaper articles, media reports, etc.) showing that they are widely recognized throughout the baseball world by the term “Evil Empire.”  The Yankees consequently argued that consumers would be confused into believing that the Yankees themselves were selling or sponsoring the merchandise branded with the Evil Empire name when it fact it was a private company not affiliated with the Yankees.

The TTAB agreed and earlier this month issued a decision rejecting the private company’s attempt to register the Evil Empire trademark.  IN issuing this ruling, the TTAB stated: “”[t]he record shows that there is only one Evil Empire in baseball and it is the New York Yankees . . .  Accordingly, we find that [the Yankees] have a protectable trademark right in the term . . . as used in connection with baseball.”

Such a positive spin on the “Evil Empire” name probably was not what Larry Lucchino had in mind when he first used the term to refer to the Yankees.  But he was a good sport about it.  When asked to comment on the TTAB ruling, Mr. Lucchino said “I give them credit. Their embracing it is clever indeed.”

So now, the Yankees officially are the “Evil Empire,” at least for trademark purposes!


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