Happy Fourth of July weekend!!

Photograph is courtesy of Michael Marrs.

May everyone have a wonderful Independence Day.  We hope you celebrate it with family, friends and a barbecue.

Historical Note:  On July 4, 1776, the Continental Congress adopted the Declaration of Independence.

- Henry Park and Joseph J. DiDonato

Trademark - How does an international audience view your mark?

    I have to credit a Facebook post on a local group for highlighting this trademark issue.

    This month, a new restaurant opened in the Metalli Center in Zug, Switzerland.  The restaurant is called The Butcher and it is a burger restaurant.  So far, so good.  The restaurant even has a slogan (see below photo).

Yes.  You read the slogan correctly -- the last word there is:  F*CK.

In the U.S., most businesses wouldn't use this word in their branding because of its sexual, vulgar meaning. So I though that perhaps in Switzerland this word doesn't have the same sexual, vulgar meaning as it does in the U.S. I asked several Swiss locals, and they were appalled by the use of this word in the slogan.

I then checked the Swiss Federal Institute of Intellectual Property to see whether anyone had tried to register a trademark including this word.  I found seven registrations.

While most businesses in the U.S. wouldn't use this word, there also was a prohibition on registering federal trademarks that included immoral and scandalous matter. 15 U.S.C. 1052(a). However, it may soon be possible to obtain a federal trademark including such a word. In December 2015, the Court of Appeals for the Federal Circuit held that the law prohibiting trademarks from containing disparaging matter was unconstitutional.  In rem Tam, 808 F.3d 132 (Fed. Cir. 2015). This decision is currently on appeal to the U.S. Supreme Court. The effects of the Tam case were quickly felt. The U.S. government in a letter brief on appeal of a decision to deny registration of the mark FUCT stated:

Although a court could draw constitutionally significant distinctions between these two parts of [the Lanham Act -- immoral and scandalous vs. disparaging], we do not believe, given the breadth of the court’s Tam decision and in view of the totality of the court’s reasoning there, that there is any longer a reasonable basis in this court’s law for treating them differently.

In re Brunetti, Case No. 15-01109, Dkt. 52 (Jan. 21, 2016) (hosted on Mega.nz).  Thus, all these grounds for denying the registration of a federal trademark could be invalidated.

Which brings me to the point of this post.

If you plan on using your marks internationally, you should confirm that your marks are not offensive. See Nike flame logo which resembled the word Allah in Arabic script. 


- Henry Park

P.S.  The story about the naming of the Chevrolet  Nova not selling well in Latin American countries because Nova in Spanish means "no go" is a myth.  See Snopes Urban Legend.

P.P.S.  On September 29, 2016, the U.S. Supreme Court announced that it had accepted the appeal of the In rem Tam case.

Brexit - It happened

     On June 23, 2016, Britain held a referendum on whether to leave the European Union (EU), of which it was joined in 1973, and the majority of the population voted to leave (51.9% versus 48.1%).

     There is a plethora of articles discussing the ramifications of this vote.  While most articles forecast the British economy to suffer in the short and medium term, no articles have pointed out the opportunity for lawyers is greater than ever due to the number of agreements that will have to be negotiated.  As disruptive as this referendum is, eventually this vote will be viewed as the "job security act" for lawyers.

- Henry Park

Trademark - Who owns the Sky?

     Trademark owners need to be vigilant about protecting their marks.  However, owners should be careful not to be vilified as a trademark bully.

     Over the weekend, there was a story about how British Sky Broadcasting Group plc objected to the game developer Hello Games using the word "Sky" in their forthcoming video game "No Man's Sky".  See Digital Trends.  As always the devil is in the details.

     Hello Games had filed an EU trademark application for "NO MAN'S SKY" for broadly claimed goods and services within Classes 9, 14, 16, 18, 21, 25, 28, 35, 38, 41, 42 and 45.  See EUIPO link (opposition records also can be found here).  On May 14, 2014, Sky plc filed a notice of opposition asserting a likelihood of confusion, senior user rights, and unfair competition based on its registered marks and non-registered marks.  See Observations (hosted on Mega.nz).  Over the course of the next two years, the parties negotiated a settlement wherein the developer dropped some classes of goods and services (letter to OHIM, hosted on Mega.nz) and narrowed other classes of goods and services by adding a science fiction limitiation.  Letter to OHIM (hosted on Mega.nz).

     While the grounds of Sky plc's decision to file a notice of opposition may be debatable (i.e., is there really a likelihood of confusion between SKY or SKY TEAM and NO MAN'S SKY?), the notice did achieve positive results for Sky plc.  It reinforced Sky plc's no nonsense reputation around protecting its trademarks, and it forced the game developer to limit its claimed goods and services.


- Henry Park

Copyright - Don't publish my demand letter!

       Attorney Charles J. Harder, on behalf of his clients Ivari International and Edward Ivari, sent a demand letter to Gawker concerning the publication of a story about Donald Trump's hair being a $60,000 weave sourced from Ivari International.

     Mr. Harder's letter threated Gawker with a number of dubious legal claims, and concluded with the following paragraph:

This letter is confidential and protected by applicable Copyright law, and therefore may not be copied, published, disseminated or used by any person or for any purpose, other than internally at your company and its outside legal representatives for purposes of evaluating the claims herein and complying with the foregoing demands

Demand letter at 5.

     Can you demand that a third-party keep an unsolicited letter confidential?  Yes, you can make the demand.  But, you shouldn't expect the letter to be kept confidential because there is no agreement between the parties about confidentiality.

     Can you assert Copyright law to prohibit the distribution of the letter?  Yes, you can make that assertion. But, you shouldn't expect to win on such an argument.  While Mr. Harder may own the copyright on the letter, he cannot prohibit the recipient from showing the actual physical letter.  Moreover, the recipient can still reproduce the letter as a fair use if the use is limited and transformative, such as to criticize or comment upon a copyrighted work.  See 17 U.S.C. 107.  In this case, Gawker's publication of the letter with comments should qualify as a fair use.  Demand letter.

     Thus, if you are sending an unsolicited letter to a third-party, you should not expect it to be kept private.

- Henry Park

Internet - FCC Net Neutrality Survives

    Yesterday, the Court of Appeals for the District of Columbia Circuit, ruled 2-1 that the Federal Communication Commission's 2015 Open Internet Order which reclassified broadband interent service as a telecommunications service was valid. See U.S. Telecom Assoc. v. FCC, Case No. 15-1063 (June 14, 2016) (hosted on Mega.nz).

     The Open Internet Order forces broadband providers to treat all internet traffic the same -- colloquially known as net neutrality.  For consumers, it means that their broadband service provider cannot (1) block access to legal content, applications, services, or non-harmful devices; (2) throttle internet traffic -- impair or degrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices; and/or (3) favor some lawful Internet traffic over other lawful traffic in exchange for consideration of any kind -- no paid prioritization.  For broadband service providers, it means (a) they are no longer considered an information service but a telecommunications service and are subject to Title II common carrier obligations, and (b) they are subject to some Title II provisions.

     Interestingly, the dissent was not a full disagreement with the ruling but, potentially a full agreement that the FCC could reclassify broadband service as a telecommunication service.

I agree with the majority that the Commission’s reclassification of broadband internet as a telecommunications service may not run afoul of any statutory dictate in the Telecommunications Act.

Opinion at Dissent p.4.

      The likely next step is an appeal by broadband providers to the full bench of the D.C. Circuit Court of Appeals, and a potential appeal to the U.S. Supreme Court.

      If this decision stands after appeals, then broadband service providers will need to comply with the regulations that govern telecommunications companies.  Although the FCC will likely grant broadband providers a grace period to comply, they should begin planning how to comply with such regulations.

- Henry Park

6/16 updated

Copyright - AMC versus The Spoiling Dead Fans

     AMC, the television station, has a hit show called The Walking Dead that just wrapped up its sixth season with a cliffhanger.  And, the show has a devoted fan base, including The Spoiling Dead Fans (TSDF), who can be found at their website, on Facebook, on Tumblr.

     As their name suggests, TSDF is a group of fans that "love this show so much we always want to know what's going to happen and speculate on all those possibilities. Our spoilers are intended only for fans that seek them out to enhance their own viewing experience."  See Facebook post.

     On June 7th, AMC sent TSDF a cease and desist letter stating:

AMC is aware that The Spoiling Dead Fans site is promoting your claims that you have received copyright protected, trade secret information about the most critical plot information in the unreleased next season of The Walking Dead. You also state that you plan to distribute this purported highly confidential information despite your knowledge that such distribution, if the information is indeed accurate, is unauthorized and will greatly damage AMC, distributors of The Walking Dead as well as Walking Dead fans awaiting the new seasons' release who wish to watch their favorite show unspoiled.

Copy of letter.  This letter was aimed at TSDF's work to identify the person who was killed in the season six cliffhanger by Negan with Lucille, his barb wire covered bat.  See Facebook post. 

     The letter then raises copyright law claims:

The release of plot summaries and particularly the types of crucial plot elements that you have stated you intend to release, have been found to constitute copyright infringement. Specifically, in Twin Peaks Productions vs. Publications International, [996. F.2d 1366 (2nd Cir. 1993)] the Court ruled that publishing a work that ‘recount[s] for its readers precisely the plot details’ of a fictional work constitutes copyright infringement.

Copy of letter. The applicability of the Twin Peaks case holding is suspect because there are substantial factual differences between the Twin Peaks case which concerned summaries of released episodes and the release of a spoiler about a future event.  See TorrentFreak post.

     As noted by TSDF, AMC failed to identify where those fly-in-face-of-reason claims were made.  The lack of identification raising the specter that this letter was sent without a proper cause and solely for the purpose of intimidating TSDF.

     We won't know whether those claims were true because the letter had its intended effect:  TSDF won't reveal who it believes was killed by Lucille.  TSDF made this announcement after deciding that they don't have the resources to fight AMC should AMC sue.

     The letter will have some unintended effects too.  Much like Barbara Streisand, by shutting down TSDF from releasing to its prediction about who was killed by Lucille, AMC has focused more attention on it.  It also raises the question of how content owners should interact with their fans.  Was a cease and desist letter the best way for AMC to contact TSDF about spoilers?

- Henry Park

6/16 substantially revised

Trade Secrets - Trump University's Playbooks

     Donald Trump is engaged in a few lawsuits concerning the defunct Trump University.  Particular attention has been drawn to two lawsuits in San Diego because of Mr. Trump's attacks against the Judge's integrity.

     In one of those cases (Cohen v. Trump, Case No. 13-cv-2519, S.D. Ca.), trade secret protection was at issue. The Washington Post moved to intervene and to unseal certain exhibits filed with the Court.  After briefing, the Court ruled that the Trump University 2009 and 2010 Playbooks, Field Team Playbook and the Sales Playbook should be unsealed.  Order ECF 176 (hosted on Mega.nz).

     The bases for that order were:

1.  A trade secret must be kept secret.  Even a single public disclosure may defeat trade secret protection (Order at 9).

In this case, the 2010 Playbook was published in its entirety by Politico a few months ago.  The Court found that the 2009 Playbook and the Field Team Playbook were duplicative of the materials in the 2010 Playbook; and the Sales Team Playbook similarly was duplicative of the materials in the 2010 Playbook and that any time-sensitive information was no longer relevant.

2.  The burden of establishing that information is a trade secret is on the trade secret's owner (Order at 9-10)

Mr. Trump needed to identify what information should be considered a trade secret and to support that identification with some evidence. Instead, the Court found that he made bare conclusory allegations that information was a trade secret, which is insufficient.

3.  The information sought to be protected must have commercial value (Order at 10).

Under California law, information may be a trade secret if the holder can derive commercial value from it.  However, Trump University stopped enrolling students in 2010 and has not made any plans to start enrolling new students.

    Moreover, Mr. Trump's position in this case would not have improved had he been able to rely upon the federal Defend Trade Secrets Act (DTSA) which was signed into law on May 11, 2016. While the DTSA establishes a federal trade secret claim, it did not preempt state trade secret protection.  Additionally, the DTSA's definition of trade secret has been conformed to that in the Uniform Trade Secret Act which has been adopted in almost every state.

- Henry Park

Copyright - Can you register a copyright on trade secrets?

     A colleague asked if it was possible to register a copyright on a work that contains trade secrets.

     The issue is that when you register a copyright with the U.S. Copyright Office you generally have to provide a deposit copy of the work to be registered to the Library of Congress.  And, distributing a trade secret without restriction means that it no longer remains a trade secret.

     The Copyright Office provides instructions for how to handle this situation as applied to computer software. See Circular 61 (Copyright Registration for Computer Programs).

Computer Programs Containing Trade Secrets

Where a computer program contains trade secret material, include a cover letter stating that the claim contains trade secrets, along with the page containing the copyright notice, if any. Include a source code deposit as described below. The source code may be uploaded electronically with the exceptions noted above.

Entirely new computer programs
• First 25 and last 25 pages of source code with portions containing trade secrets blocked out, or
• First 10 and last 10 pages of source code alone, with no blocked out portions, or
• First 25 and last 25 pages of object code plus any 10 or more consecutive pages of source code, with no blocked out portions, or
• For programs 50 pages or less in length, entire source code with trade secret portions blocked out

Revised computer programs
If the revisions are present in the first 25 and last 25 pages, any one of the four options above, as appropriate, or if the revisions are not present in the first 25 and the last 25 pages:
• 20 pages of source code containing the revisions with no blocked out portions, or
• any 50 pages of source code containing the revisions with some portions blocked out

note: Whenever portions of code are blocked out, the following requirements must be met:
1 the blocked out portions must be proportionately less than the material remaining; and
2 the visible portion must represent an appreciable amount of original computer code.

Circular 61 at 3; See also Help: Deposit Copy.

     The Copyright Office, however, does not offer any specific guidance for other works. The limited guidance that is provided pertains to requesting "Special Relief" from the deposit copy requirements.  See Circular 7d (Mandatory Deposit of Copies or Phonorecords for the Library of Congress) at 4.  But, such relief is discretionary and depends on a number of factors such as the acquisition policies of the Library of Congress, the examining requirements of the Copyright Office, and the hardship to the copyright owner.

     Thus, you can register a copyright on a computer program containing trade secrets. However, unless you are granted Special Relief, you should not register a copyright on a non computer program containing trade secrets.

- Henry Park

Corporate - Five Steps to Sell Your Private Company Stock

     I'm honored to have Dayrel S. Sewell, a friend and colleague, as a guest blogger. Dayrel is a published author in the American Bar Association Securities Newsletter and is Managing Principal of the LAW FIRM OF DAYREL SEWELL, PLLC based in New York City.

Five Steps to Sell Your Private Company Stock

When you are holding private company stock and want to sell it, what should you do? One will quickly find out that the process is different from publicly-traded securities: you can’t just click your mouse to find a stockholder to sell your shares.  The following five steps should be considered when contemplating the sale of your private stock.

First, Determine Whether You Can Sell Your Shares under Rule 144 under the Securities Act of 1933. 

At the beginning of your potential transaction, one thing to recognize is that holding private company shares doesn’t mean that you can sell it whenever and however you want.  If your shares are restricted securities or you are holding controlled securities, you must find an exemption from the Securities Exchange Commission’s (hereinafter, the “SEC”) registration requirements, such as Rule 144 under the Securities Act of 1933 (hereinafter, the “Rule 144”) to sell them in a public marketplace, such as relevant holding period, availability of current public information, trading volume formula, and so on.  See https://www.sec.gov/rules/final/2007/33-8869fr.pdf.  Rule 144 provides non-exclusive exemptions under Section 4(a)(1) of the Securities Act for selling security holders that seek to resell their restricted securities. 

Restricted securities are securities acquired in unregistered, private sales from the issuing company or from an affiliate of the issuer.  See SEC, Rule 144: Selling Restricted and Control Securities, http://www.sec.gov/investor/pubs/rule144.htm (modified on Jan. 16, 2013).  Generally, most private sales are unregistered private sales, but it is wise to ask the issuing company for details about selling your shares.  Besides, one also needs to understand that restricted securities include securities acquired directly or indirectly from the issuer, or from an affiliate of the issuer, in a transaction or chain of transactions not involving any public offering.  See Bradley Berman and Steven J Bleiberg: Restricted Securities vs. Control Securities: What are the Differences (Insight, Volume 27 Number 12, December 2013).  Moreover, if you received the securities as a gift or if securities sold on behalf of an estate or a beneficiary, the story is different.  Gift transactions are not subject to any of the limitation of Rule 144 but the donee stands in the shoes of the donor and is subject to Rule 144.  See Lloyd S. Harmetz: Frequently Asked Questions About Rule 144A (http://media.mofo.com/docs/pdf/faqrule144a.pdf). Non-affiliate trusts and estates, and non-affiliate beneficiaries are not required to comply with minimum holding period requirement.  See SEC Rule.33-6188 (1980).

Controlled securities are those held by an affiliate of the issuing company.  An affiliate of the issuing company is a person in relationship of control with the issuing company.  See SEC, Rule 144: Selling Restricted and Control Securities, http://www.sec.gov/investor/pubs/rule144.htm (modified in Jan.16, 2013).

Therefore, you need to clarify what type of securities you are holding before determining your next step.  Non-compliance with Rule 144 could result in rescission of the transaction, civil liability, or even criminal liability. You can find more information regarding this issue at www.sec.gov. 

Second, Contact The Issuing Company Agent As Soon As Possible. 

Transfer of private company stock subjects the seller(s) to the issuing company’s corporate agreements, such as bylaws, articles, and/or shareholder agreement.  The Stockholder is required to comply with the specified regulations among those corporate agreements, such as right-of-first-refusal (ROFR).

You should inform the company of your intent to sell/transfer your stock, and inquire whether the issuing company desires to buy-back your stock.  A buy-back is the repurchase of outstanding shares by the issuing company in order to reduce the number of shares on the market.  If the company says yes, this buy-back offer can save time and/or money in finding potential buyers.  Otherwise, ask whether the issuing company can provide you with a prospective buyers list, if available, which facilitates the finding of potential buyers.  You should also reference other Company and industry documents such as annual reports, stock sale records, and industry performance, which serve a significant role in your stock sale transaction. 

Third, Ask Potential Buyers to Execute A Non-Disclosure Agreement Before Making Disclosures. 

Providing information about the issuing company is the best way to strengthen your negotiations and the best inoculations against buyer claims of fraud and against the issuing company regarding claims of confidentiality.  Before releasing information regarding the issuing company and the potential transaction, one should request the potential buyers to execute the confidentiality agreement (hereinafter, the “NDA”) before making deal-related disclosures.

With respect to the NDA, there are many strategies and tactics to reduce your exposure to liability from the prospect of overwhelming and expensive securities litigation.  For example, an experienced securities attorney will reasonably and permissibly broaden the scope of confidential material to broaden the scope of your protection.  We strongly recommend that you should find a securities attorney to draft related paperwork for you after you decide to go ahead with your securities transaction. 

Fourth, Make a Brilliant Memorandum to Potential Buyers. 

Often when private companies desire to offer and sell its securities, they will provide a Private Placement Memorandum to the public to attract potential investors.  The Private Placement Memorandum served as a guidebook of the issuing company and gives potential investors a thoughtful understanding of material aspects of the issuing company.  Generally, while such memoranda are unnecessary for the resale of stocks conducted by private shareholders, such memoranda is a wise investment, as the documents can strengthen the shareholders sale.  In part, that’s the reason why you should ask the issuing company for related documents, such as annual report and bylaws.  The Private Placement Memorandum can include the following several parts:

1) Basic Information about Company;

2) Executive management;

3) Financial Analysis based on annual report provided by the issuing company;

4) Risk Factors; and

5) Legal Matters

Take note that the Private Placement Memorandum should include relevant disclaimer language to better guard against claims concerning the withholding of information, making false claims, or misinformation regarding the potential transaction. 

Fifth, Require Buyer to Execute Stock Purchase Agreement. 

This is the final step and you should never ignore it.  The Stock Purchase Agreement (hereinafter, the “SPA”) will regulate all related rights and obligations between you and the buyer in this transaction.  A well-drafted SPA is likely to include such sections as Consideration; Warranties and Representations; Termination; and, Governing Law, including potential matters even after the closing of the transaction.

After you finalized the Stock Purchase Agreement and received payment from the buyer, you can ask the transfer agent of the company to transfer your shares to the buyer.

- Dayrel S. Sewell

Data breach - Check your email address or user names

     It is hard not to hear about website data breaches.  100 million records from this site.  300 million records from that site.  I typically cross my fingers and hope that my email addresses or usernames aren't included in these publicly acknowledged breaches.

     However, I found a website, Have I been pwned?, that aggregates usernames and email addresses from such data breaches.  Try out the website to see if your usernames or email addresses may have been compromised.

- Henry Park

Startup Iceland 2016 - The wrap up

President of Iceland, Olafur Ragnar Grimsson

     The fifth annual Startup Iceland conference wrapped up earlier this week, and its focus was on scaling up a business and building's Iceland's startup environment.

     Among the dignitaries was the US Ambassador of Iceland, Robert C. Barber, who spoke briefly on a topic near and dear to my heart -- the importance of protecting your startup's intellectual property (IP) and retaining IP counsel.

    The speakers shared many stories about their experiences scaling up their businesses.  But, there were core concepts: don't wait to launch a perfect product - launch your minimally viable product; you have to understand who your customers are and what they want -- a local presence is helpful; the difficulties involved in scaling up vary depending on what stage your company is at; and technology can permit a startup to disrupt established industries.  The speakers on the investor panel focused on how investors can help build a vibrant startup culture in Iceland, and among the points was that investors need to fund many startups to ensure that there will be at least a few successful fundings.

     Finally, a huge thank you to Bala Kamallakharan and his team for organizing this well-executed conference.

- Henry Park

Gaming – East Coast Gaming Congress Looks to Millennials for the Future of Gaming

     The participants at the 20th Annual East Coast Gaming Congress in Atlantic City, New Jersey brought various perspectives on issues regarding the present status and the future of gaming around the world.  A central topic was finding new participants in gaming; a search that will include and be centralized on millennials.  After mutual agreement was found quickly on the inclusion of millennials, the focus changed on how to attract this group. 

     Efforts to attract millennials will be based on a multiple pronged approach to interest and to challenge to this group.  The core of this approach will focus on millennials inherent bias towards games that include an analytic element rather than entertainment only; it is recognized that what worked in the past -- a cup of nickels and a slot machine -- will not attract millennials.  Millennials are mostly educated and require some type of analytical necessity to keep their attention and interest.  Further, the competitive nature of millennials needs to be included in any approach to obtain and maintain millennials in gaming.

     Recognizing these attributes of the millennial, the focus of new games will include iGaming which is very familiar to millenials based on the corresponding development of smart phones and related technology during their maturing years and now into adulthood.  The iGaming area has the analytical challenge and familiarity but also allows for an increase in gaming without the need for “brick and mortar” casinos or “racisinos “.  Evidence exists that the amount of time that millennials spend on their i-technology continually increases.  This increased time will be the opportunity to provide them with an introduction to gaming, and more particularly, iGames which have been designed specifically with the millennial as a target. 

     In conjunction with challenging technologies designed to draw the attention of the millennial, entertainment of the millennial in the form of nightclubs, fine dining and exclusivity are clearly required.  Sportsbar and corporate restaurants can play a part for the millennial dollar and interest but, it is apparent that fine dining, exclusive dance clubs, live entertainment and themed establishments which cater to specific tastes, e.g., cigar bars, are also required to bring the millennial to any entity whether it includes gaming or can be complementary to iGaming.

- Joseph J. DiDonato