By Lou Perry and Darren Cahr
2020 was a year filled with unforeseen developments of every kind, and a final surprise emerged from December’s marathon omnibus spending and COVID-19 relief negotiations. Congress included a trio of notable and hotly debated intellectual property measures in its multi-trillion-dollar spending and relief package which could fundamentally alter the manner in which intellectual property owners protect and enforce their rights. Former President Donald Trump signed these measures in late December 2020, and the ripple effects will be felt by IP owners and practitioners for years to come.
The Trademark Modernization Act of 2020, among other technical changes to the Lanham Act:
• Allows third parties to submit evidence to the United States Patent and Trademark Office (USPTO) during the examination phase of an application, under certain circumstances, to encourage the USPTO to refuse registration on the ground that claims of use are inaccurate;
• Allows third parties to submit evidence in ex parte re-examination and expungement proceedings, seeking to cancel registrations (in whole or in part) for non-use, and;
• Provides plaintiffs seeking an injunction under the Lanham Act with a statutory rebuttable presumption of irreparable harm, lessening the evidentiary burden. When considered in light of the spread of prevailing party fee shifting awards in Lanham Act cases, and the potential for greater access to profit awards due to the U.S. Supreme Court’s recent decision in Romag Fasteners, Inc. v. Fossil, Inc., 590 US (2020), Lanham Act plaintiffs may be more encouraged to litigate their claims.
The Copyright Alternative in Small-Claims Enforcement (CASE) Act:
• Creates a voluntary, quasi-judicial tribunal that would resolve copyright infringement claims outside of federal court where the rights owner seeks $30,000 or less in damages — $15,000 per work, $30,000 per matter — with each party to pay its own attorney fees. This tribunal would be comprised of three attorneys appointed by the Library of Congress who are knowledgeable about copyright law. This tribunal is bound by the judicial precedent of the federal jurisdiction where the action could have been brought.
• Specifies that the process is voluntary and provides respondents with a mechanism by which to opt out — but the cap on damages incentivizes respondents to strongly consider the financial exposure that accompanies federal litigation. Libraries and archives may pre-emptively opt out of proceedings before the tribunal if they so desire.
• Provides for limited discovery nowhere near as robust as is available in federal litigation. For instance, third-party subpoenas are not available.
• Supporters say the act will make it easier for independent artists to enforce rights and combat piracy (assuming the accused infringers do not simply opt out).
• Critics fear that it could be weaponized by copyright trolls looking to extract settlement dollars for common online behavior. Others fear that larger corporations will use the process to target legitimate fair use and bully individuals into ceasing legal use of copyrighted works. The act takes some steps to address these concerns, including empowering the tribunal to dismiss frivolous claims, award attorney fees of up to $5,000 in extraordinary circumstances, prohibit the bad actor from filing a new case for a year, and dismissing all pending cases filed by the bad actor.
In addition, the bill includes language that criminalizes the operation of a website primarily engaged in streaming unlicensed or pirated copyrighted works, potentially allowing the Justice Department to charge businesses with felonies. This language does not criminalize an individual’s streaming of unlicensed works and is directed to those who pirate for commercial gain.
While the full impact of these new provisions will remain uncertain for months as rules and regulations implementing these new processes are promulgated by the Copyright Office and the USPTO, some of the impact will be immediate, especially for those concerned with trademarks and branding.
First, mark owners need to consider whether their own portfolio of trademark registrations (or a competitor’s portfolio) is potentially a target for these new cancellation tools. Second, businesses and practitioners alike need to think through how these new rules may impact their efforts to search and clear new marks, and whether marks uncovered in watch programs should be more aggressively challenged at earlier stages. Third, anyone considering an action alleging trademark infringement or violations of Section 43(a) of the Lanham Act should consider how a new presumption of irreparable harm can alter their broader enforcement strategy if injunctions are indeed more attainable.
In the months to come, while we wait for additional guidelines and regulations, IP owners and practitioners should take the opportunity to reassess their strategies and goals in light of these new mechanisms.•
• Lou Perry and Darren Cahr are partners in Faegre Drinker’s intellectual property practice. Opinions expressed are those of the authors.