October 7, 2022
When she gives her employer broad rights to use her name even after her employment ends.
Of course, of course.
This may sound like a bad (or completely nonsensical) Mr. Ed joke, but allow me to explain. Here is the story of renowned wedding dress designer Hayley Paige Gutman, who recently announced she will henceforth be known as Cheval (aka “horse” in French). Why? Because, as a result of an agreement with her former employer, she no longer owns the Instagram account she created and which bears her name.
This case is particularly interesting to me because (1) it shows how existing laws — here, contract and the work-for-hire doctrine — are applied to new platforms and novel situations, and (2) the Court went to great lengths in an attempt at resolution, but ultimately, simply went back to existing laws to reach a decision.
Let’s begin with the facts: In 2011, Gutman entered into an employment agreement with a company named JLM Couture, which designs and manufactures luxury bridal gowns. The agreement stated Gutman would neither compete with her employer nor use her name in connection with wedding dresses and bridal items during its term and for two years after its termination. Gutman also agreed that JLM would own everything she created in connection with her employment and could trademark her name — some pretty broad rights. In exchange, JLM promised to invest money into the “Hayley Paige” brand and pay Gutman a salary and royalties. Of course, this being the modern age, a vital marketing element for the venture was the Instagram account @misshayleypage that Gutman created shortly after entering into the contract and which was used to promote the dresses she designed for JLM.
Everything was fine — at least, from a legal standpoint — until 2019 or 2020, when negotiations over a new contract broke down. Gutman locked JLM out of the Instagram account and began using it to promote non-JLM products. JLM sued Gutman for, among other things, breaching her agreement by taking over the account; JLM also sought to prevent Gutman from using the @misshayleypage Instagram unless approved by JLM. The lower court agreed with JLM.
Gutman appealed and the Appellate Court found the lower Court wrong to restrain Gutman without first deciding whether JLM could show it owned the social media accounts and sent the case back to the lower Court to figure that out.
Once there, Gutman argued this question was answered by the fact that she created the Instagram account as a personal account. The lower Court was not convinced. It said that the issue needed to be resolved by looking at: (1) how the Instagram account was described to the public; (2) how it was used; and (3) if JLM employees accessed it. Based on this, the Court held that JLM was likely to succeed on its claim that it owns the Instagram account or, at least, show it had superior rights to the account because it linked to JLM websites and was regularly used to promote JLM’s business and communicate with its customers.
The Court also noted that, under her contract with JLM, Gutman agreed that anything she developed in connection with her employment belonged to JLM. To me, it seems like the Court could have saved itself a lot of time by starting there. In my view, there was no need to dissect the use of the Instagram account in order to determine ownership just as there would have been no need to debate ownership of, say, a printed JLM catalog featuring a dress designed by Gutman. The employment agreement covered all materials related to the Hayley Paige brand regardless of media type or who initiated its creation.
As a result, the “Hayley Paige” brand and Instagram account continue to be owned by JLM, and Gutman is operating as Cheval. I’m really curious to see whether the @misshayleypaige followers will follow her Cheval Instagram and whether she will be able to monetize this new persona. Will the answer be yay or… neigh?
Sorry, it had to happen.
August 11, 2022
The Southern District of Florida recently issued a decision in a case that brands using social media influencers should note. While the decision was not an all out loss for the brand, it did conclude that the brand could be liable if the copyright owner was able to show the brand profited from its social media influencers’ use of copyrighted materials.
By way of background, Universal Music is suing Vital Pharmaceuticals, Inc., which makes an energy drink called Bang, and its owner, Jack Owoc, for copyright infringement. The lawsuit alleges that Bang and Owoc directly infringed on Universal Music’s copyrights with TikTok posts that included Universal Music’s copyrighted music. Universal Music further claims Bang was contributorily and/or vicariously liable for videos posted by social media influencers featuring Bang. In response, Bang and Owoc claimed that the TikTok videos were covered by TikTok’s music licenses and that Bang could not control what its influencers posted to TikTok.
As an introduction (or refresher), direct infringement is where someone uses copyrighted materials that belong to someone else. In contrast, contributory infringement is where someone encourages another to use copyrighted material belonging to a third-party, and vicarious infringement is where a party profits from another’s direct infringement and does not stop that direct infringement.
In support of its claims, Universal Music introduced evidence that Bang encouraged influencers to create and post TikTok videos promoting Bang’s products with Universal Music’s copyrighted works. Universal Music claimed that, because Bang had the power to withhold payment to its influencers, it could control whether influencers used Universal Music’s copyrighted works.
On Universal Music’s motion for summary judgment, the court held that Universal Music established that Bang and Owac directly infringed on its copyrights. Specifically, the court found that Bang and Owac directly copied Universal Music’s copyrighted works.
The court went on to find that Universal Music was not entitled to summary judgment on its claim of contributory infringement as it had not shown that Bang had any input into the music used by its influencers.
The court further concluded that Universal Music established that Bang had sufficient control over its influencers to prevail on a claim of vicarious infringement. Despite this finding, the court denied Universal Music’s motion for summary judgment because Universal Music had not shown that Bang received any financial benefit as a result of its influencers’ posts. As a result, this issue will have to await trial when Universal Music can introduce evidence as to whether Bang benefited.
Despite the fact that this decision was not an all out loss for Bang, brands should definitely keep it in mind when working with influencers.
July 14, 2022
On June 9, 2022, Senators Patrick Leahy (D-VT) and Thom Tillis (R-NC), the Chair and Ranking Member of the Senates Judiciary Committee’s Subcommittee on Intellectual Property, sent a letter to the Director of the United States Patent and Trademark Office (PTO) and the Director of the United States Copyright Office (Copyright Office) asking them to complete a study on various issues related to non-fungible tokens (NFTs). The non-exhaustive list of topics in this letter includes:
- What are the current and future intellectual property and intellectual property-related challenges stemming from NFTs?
- Can NFTs be used to manage IP rights?
- Do current statutory protections for copyright, for example, the Digital Millennium Copyright Act, apply to NFT marketplaces, and are they adequate to address infringement concerns?
On July 8, 2022, the PTO and Copyright Office responded to the Senators. In their response, they stated that they would consult with relevant stakeholders and complete the requested study.
While the list provided by the Senators is a good starting place, the fact that they gave the PTO and Copyright Office until June 2023 to complete the study, means that it’s going to be a while until we have any additional information from the PTO and Copyright Office. Moreover, while the PTO and Copyright Office certainly have a role to play here, the legal framework will continue to develop as Courts rule on cases involving NFTs.
March 8, 2022
A good part of my practice involves disputes between company co-founders or co-owners. Although people seem to think I’m crazy when I say this, it’s a type of work I find particularly satisfying because it requires a combination of legal knowledge, problem-solving, and empathy.
As a result, I’m frequently asked for advice about what to do in this type of situation. While there’s no perfect answer, here are my top five tips:
One: If you have documents governing the company, you need to review them. Ideally, there’s a written document that says how the company and its owners are supposed to operate and that document addresses your circumstances.
If that’s not the case for you, don’t panic! This is very common. A lot of people never get around to documenting how a company is going to operate.
In the absence of a formal agreement signed by all of the company’s owners, there are some other sources that may clarify things. For starters, the law of the state where the company was formed may provide some guidance. In addition, emails, texts, and other communications between co-owners, as well as past practices, can also help fill in gaps.
Two: Recognize that even if you have straightforward and clear documents, there’s almost always a significant human element involved in resolving this kind of dispute. This means it’s important to be clear about what you want and what you’re willing to give up. For example, is your prime goal ousting a co-founder or co-owner? Or, are you more interested in reframing your relationship and setting up new lines of communication? Do you simply want to exit the business and move on from a relationship that has become toxic?
Three: Think about what you want to do if you can’t get your preferred outcome and develop a list of priorities.
Four: Consider the possible roadblocks to a resolution. Some are obvious — having enough money to buy out a co-founder or an operating agreement provision that requires unanimity. Others are less obvious. For example, are you concerned about letting go and moving on to the next thing? Is your co-owner someone who enjoys fighting?
Once you’ve identified these roadblocks, think about what you can do to remove them or lessen their impact.
Five: Work with a skilled professional or professionals. This can be a lawyer, but it can also be a mediator or a coach. The important point is that you have an outsider who can serve as a sounding board and suggest options and different strategies.
Please reach out if you have any questions.
May 15, 2019
Chances are you or your company use multiple software as a service or “SaaS” applications. They’re ubiquitous. This blog post was written using one — Google Docs. My firm uses one to keep its books and another to issue invoices.
One long running issue with these applications is what happens to the data in a SaaS platform.
Data, of course, is a hot commodity and most SaaS services want rights to as much of their customers’ data as possible. This allows them to use it to refine their offerings, repurpose it or, in some cases, monetize the data themselves.
In contrast, a SaaS user probably wants to retain as much control as possible over any data. There are many reasons for this. For example, to avoid privacy and compliance problems (especially in light of the GDPR, California’s Consumer Privacy Act, and similar laws that may be enacted in other states) and to protect the hard work and goodwill involved in gathering the data.
Thus, in negotiating SaaS contracts, one big sticking point is frequently who owns the data on a SaaS platform — the company who provided the data in the first place, or the SaaS vendor with the platform that analyzes, aggregates and/or alters it? While consumers might not have a lot of room for negotiation, where two companies are involved, there’s likely to be a lot of back and forth on this topic.
Generally speaking, these discussions are shaped by well-established principles governing the protection of trade secrets and, to a lesser extent, copyright law. The former focuses on what a database owner has done to protect its data from the outside world. The latter applies where the work to be protected is, to some degree, original. Because of this, copyright law is generally less important here because a database that is merely a collection of facts lacks the originality required for copyright protection.
The incorporation of data published on a public blockchain to any SaaS platform adds another wrinkle to any discussion about data ownership and protection. By way of background, a public blockchain is a blockchain network that is open to anyone. Bitcoin is one of the largest and best-known public blockchains. In contrast, as the name suggests, a private blockchain requires permission to publish information to it and, thus, limits who can publish and see information on the blockchain.
Obviously, publishing previously private information on a public blockchain changes the nature of the information when it makes the information public to the network. Probably the best example of this is cryptocurrency transactions. While it’s generally difficult to connect a transaction to a particular individual, the public blockchain for a cryptocurrency is a huge, publicly available collection of information that is open to anyone who wants to participate. This makes it difficult, if not impossible, to claim trade secret protection because publication of information on a public leger such as blockchain negates any claim that the information is secret.
Because of this there are limits to the degree to which anyone can claim ownership and — as a result — the right to control data on a public blockchain — there are still some issues that a user and SaaS vendor in this situation should discuss:
- Particularly in light of the GDPR, California’s Consumer Privacy Act and other similar laws, does the data contain any personally identifying information? If so, who is responsible under those laws for protecting it?
- What happens if there’s a data breach?
- Who owns the data that is altered/aggregated by the SaaS platform? How about the output from the SaaS platform?
- What can the SaaS vendor do (or not do) with the data it receives? Can the owner of the data license its use by the vendor?
