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IP Law up for Best Supporting Role in the COVID-19 Relief Spending Bill and Other New Legislation

January 26, 2021 Articles
The Recorder

The new, more than 5,000-page spending bill (formally known as The Consolidated Appropriations Act), which includes the latest COVID-19 relief, had a few surprises under its cover. Two of those surprises focus directly on intellectual property and amount to sea changes in the trademark and copyright infringement realms.

Trademark

Longtime character actor Trademark Law comes to the big screen, as the spending bill incorporates the Trademark Modernization Act of 2020 (the TMA) to provide valuable new weapons against trademark infringement.

The U.S. Patent and Trademark Office’s application system provides an opportunity for fraudulent “intent-to-use” applications that raise barriers to registration by the true rights owner and can be used as leverage. Because the trademark owner’s sole remedy against such applications has traditionally been to file to oppose registration, the costs of the dispute process often made it more practical to simply pay bad-faith demands by unscrupulous filers of blocking applications.

The TMA provides a mechanism by which the trademark owner can submit evidence to the USPTO during the examination period arguing for refusal of the application due to the lack of good-faith intent. Where the rights owner files such a petition, the USPTO will have two months to make a nonreviewable decision as to whether such evidence should be included in the application file. Notably, even an adverse decision would not prevent the rights owner from raising the same evidence in an opposition proceeding, thereby giving such rights owner an additional bite of the proverbial apple. The procedure for such evidentiary claims is to be established by the USPTO within the year.

The TMA also creates the opportunity to “expunge” a registration on the grounds that the mark was never actually used in commerce with some or all of the goods in connection with which the mark was registered. Again, rather than engaging in a costly cancellation dispute, the new procedure will enable the ex parte introduction of evidence concerning nonuse. That said, the TMA requires that the USPTO provide a procedure by which the registrant can respond and provide evidence of use or excusable nonuse. Nonetheless, the costs and practical dynamic will be significantly shifted by this new “procedural” opportunity.

Finally, the TMA makes it easier to obtain injunctive relief by providing for a statutory rebuttable presumption of actual harm to plaintiffs in trademark infringement litigation where the plaintiff demonstrates a likelihood of confusion (or, in connection with a request for a preliminary injunction, a likelihood of success on the merits). The rights-owning plaintiff will no longer have to prove actual harm, making it much more difficult for infringers to avoid an injunction. Rebutting the presumption of such harm will be a difficult task and reverses the usual cost dynamic in such litigation. As such, the new procedural rule will have an outsized substantive and practical effect.

Copyright

Trademark was not the only form of intellectual property lending its long-honed chops to the grand theater of the spending bill. Another of the most notable provisions starring in the legislation is the CASE Act, or “Copyright Alternative in Small-Claims Enforcement Act.”

The CASE Act creates a new “Copyright Claims Board” within the U.S. Copyright Office that will be staffed by three full-time copyright claims officers empowered to hear and adjudicate copyright infringement claims valued at under $30,000. The officers will be appointed by the Librarian of Congress after recommendations by the Register of Copyrights. All such officers will be attorneys who have no less than seven years of legal experience. Moreover, two of the three officers must have even more experience in the evaluation, litigation, or adjudication of copyright infringement claims and must have represented or presided over a diversity of copyright interests, including those of both owners and users of copyrighted works.

Where there is conflicting judicial precedent on an issue of substantive copyright law, the act requires the board to follow the law of the federal jurisdiction in which the action could have been brought if filed in a U.S. District Court. However, if the action could have been brought in more than one such jurisdiction, the board must follow the jurisdiction that the board determines has the most significant ties to the parties and conduct at issue.

There are no necessarily statutory advantages or disadvantages for copyright holders to bringing an action to the board rather than federal court; however, providing a mechanism for plaintiffs to file many claims for less than $30,000 under one judicial entity may make it easier for plaintiffs to bring multiple actions against different defendants for the same copyrighted work. Additionally, once the board starts making decisions and establishing patterns, this may become attractive to plaintiffs filing nuisance troll-like litigation.

Additional Legislation

There is no question that the spending bill will have an unexpectedly outsized effect on trademark and copyright infringement claims. But perhaps more practically important for online companies is proposed legislation introduced just after the introduction of the spending bill. This bill currently up for consideration includes significant changes to overhaul the Digital Millennium Copyright Act. At the heart of the overhaul is a “notice-and-stay-down” provision, which would require web platforms to remove copyrighted material upon notice and keep such material from being reuploaded. The new requirements would be in response to copyright owner complaints that the DMCA’s current “notice-and-takedown” system creates a whack-a-mole situation making policing effectively impossible. Specifically, while the notice-and-takedown system merely required a host to remove content, which could be immediately reposted, the notice-and-stay-down system will require the host to eliminate the possibility of reposting.

This proposed “notice-and-stay-down” system bears resemblance to Article 17 of the EU Copyright Directive, which requires content-sharing platforms to obtain authorization from the copyright holder before displaying copyrighted material. Similarly, this new bill would require content-sharing platforms to monitor and filter user-uploaded content before displaying copyrighted material on their platforms.

There is no question that such a system requires a technological solution. Indeed, compliance will almost surely require a software solution—likely incorporating artificial intelligence—that prior to posting can assess whether uploaded content amounts to previously removed content. Currently existing AI algorithms are available to monitor the internet to root out the latest copyright infringements for the purpose of filing takedown requests and, where appropriate, infringement claims.

If the notice-and-stay-down procedures are enacted, the hosting platforms themselves will need to employ similar technologies to review uploaded content before posting. We may see a cottage industry rise to service all but the biggest players who have ample data to create algorithms and use existing AI technologies to adapt to this new requirement.

Not surprisingly, copyright ownership associations, such as the Copyright Alliance and RIAA, have come out in support of the bill. Free speech-leaning entities, such as the Electronic Frontier Foundation and Public Knowledge, have voiced opposition.

We will have to wait and see on the DMCA overhaul, but in the meantime, the short-term effects of the TMA and CASE Act should begin to quickly show themselves in the new year. Whether these new weapons amount to mere bit parts or career-changing roles will play out over the coming years.

Reprinted with permission from the January 26, 2021 issue of The Recorder. © 2021 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

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