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February 20, 2024
The Second Circuit recently issued a(nother) decision in the dispute between bridalwear designer Hayley Paige Gutman and her former employer, JLM Couture, Inc. over ownership of Instagram and Pinterest accounts Gutman created while employed by JLM. You can find background on this case here.
The Second Circuit reversed the District Court’s 2022 decision, which held JLM owned the accounts. More notably, the Second Circuit rejected the lower court’s six factor test considering how the account describes itself; whether the account was promoted on the employer entity’s advertisements or publicity materials and linked to other internet platforms of the entity; whether it promoted the business; and whether employees of the entity (other than the account creator) had access to and managed the account.
In reversing the lower court, the Second Circuit held social media accounts “should be treated in the first instance like any other form of property,” and, in figuring out who currently owns one, courts should look to who owned it when it was created and whether there is any evidence the account was ever transferred to someone else. “[T]he law has long accommodated new technologies within existing legal frameworks,” the Circuit wrote. Translation: “Enough with the new tests already. We have plenty.”
Overall, the Second Circuit’s conclusion lines up with what I suggested in a New York Law Journal article last month: Who Owns a Social Media Account? It’s Pretty Simple, Really. The article is paywalled, but the gist is this: Courts should stop coming up with new tests to determine whether a social media account belongs to a business or an individual associated with the business and, instead, look to existing and well-established legal frameworks to determine ownership.
Hopefully, this is what will happen when the District Court takes up Gutman’s case again. Here, the Second Circuit sent the case back to the lower court with a note that the ownership of the social accounts may turn, at least in part, on the terms of service of the relevant social media platforms and, specifically, does “ownership” of a social media account include the right to transfer the account to another. The Second Circuit also suggested that the District Court might want to separate the ownership of content posted on the accounts from the ownership of the accounts themselves, noting that rights to the accounts and rights to the accounts’ content may or may not be the same.
And on it goes. I’ll be paying particular attention to what the District Court says about the role of the terms of service for social media accounts. As we all know, social media companies change their terms of service — a lot. Does this approach give an outsized role to the terms of service even though the litigants in cases over ownership of social media accounts have no input into the terms of those agreements? Second, how will courts factor in changes to terms of service that parties may or may not be aware of, particularly as at least one of the parties to a dispute over ownership of a social media account probably never agreed to the terms of service? I suspect these issues will mean the District Court downplays the significance of the terms of service and instead looks at doctrines governing the ownership of other intangible property. Because tests that are well established… tend not to fail.
January 30, 2024
I started my law firm in February 2017. As I approach that anniversary again, I have some reflections on the lessons I’ve learned over the past seven years.
First, some background. Early in my career, I worked at two large NYC firms (i.e. BigLaw). My experience at those firms is a story for another day, but if you want an idea what that life is like, others have a more recent tale to tell.
After leaving BigLaw, I spent more than 10 years at a litigation boutique. My colleagues were incredibly good to me over that decade, teaching me a lot about how to be an effective lawyer. They supported me when I needed to get my feet underneath me after the death of both of my parents, and then when I got married and had a baby. But I reached a point where not only had I learned everything they had to teach me, I knew that I needed and wanted something else for my next chapter. I spent about a year figuring out what I wanted to do (while still working full time) and, ultimately, decided I couldn’t see myself working for someone else anymore. Also, having worked for people who had started their own law firms, I figured it couldn’t be that hard.
To a certain extent, I was right. It wasn’t that hard. However, in some ways, I was really, really wrong. I hadn’t fully anticipated the amount of reflection and introspection required to not just build something, but to build something that works for me and my clients. I believe the lessons I learned are worth sharing because they apply not only in the context of a small law firm, but to anyone trying to develop a client base.
First, I am not for every client, and not every client is for me. This has probably been the hardest thing for me to learn and an area where I’ve repeatedly failed to take my own advice, although I keep trying. I’ve slowly learned to interview potential clients so I can decide if they’re people I want to work with and, most importantly, to say no to those I think aren’t going to align with how I work and what my firm is about.
Why does this matter so much? Working with clients who aren’t a good fit can feel like a chore. It’s a drain on my time and energy and, I suspect that no matter how hard I try, these clients are going to be disappointed with my work. It’s not a formula for success, especially considering I get about 99 percent of my business from referrals. I know there will be attorneys better suited for the people I turn down, and I do my best to help those potential clients find them.
Of course, no one can always pick and choose clients. Like everyone else, I need to make a living. But screening clients carefully is critical regardless of your field, and this holds particularly true for what I do — commercial litigation. I frequently have adversaries who think that the best way to litigate is to be incredibly unpleasant (generally, it’s not, but that’s a subject for another post), and I don’t need to deal with this and a difficult relationship with a client at the same time, especially when a part of my job is sometimes to deliver bad news to the people I represent. Of course, this isn’t to say that my relationships with clients are all sunshine and flowers and unicorns who poop rainbows. The nature of the litigation beast is that sometimes things are going to get tense. All part of the job. However, focusing on working with simpatico clients is a north star that has been incredibly helpful, and has gotten me to a place where I work more and more with people I respect and trust — and who respect and trust me.
A second key lesson I’ve learned is to make time for the uncomfortable and the unpleasant. In my experience, to run a successful business you’re going to have to do some things that are difficult or you don’t enjoy. For a long time, what I hated more than anything was marketing myself. I felt I had no idea what I was doing and I was really afraid that someone out there on the Internet was going to criticize my marketing efforts. As I look back, I realize this self-doubt was something I picked up at one of the firms I worked at previously, but that too is a story for another day.
Because of this, for the longest time I would start every day intending to write a blog post, a newsletter, or something for LinkedIn, but because I found this marketing work so uncomfortable it was all too easy to push it aside in favor of other, less unpleasant or less scary things. Then, when I blew it off I would get frustrated with myself and feel bad about not doing the work. Suffice it to say, this was a pretty awful spiral that I do not recommend.
My solution began with recognizing the pattern, then blocking out an hour in the middle of each day to devote to growing my firm (I’m writing this during this time). Do I use this hour wisely and productively every day? Of course not. But do I use it wisely and productively more often than not? Yes. This doesn’t necessarily solve the problem of feeling uncomfortable doing things to market my firm — I still am — but it does make sure I don’t avoid it.
Stay tuned for more and let me know if there are any business development topics you’d like to see me talk about. I know we can all benefit from an exchange of ideas.
January 16, 2024
I closed out 2023 by writing about one lawsuit over AI and copyright and we’re starting 2024 the same way. In that last post, I focused on some of the issues I expect to come up this year in lawsuits against generative AI companies, as exemplified in a suit filed by the Authors Guild and some prominent novelists against OpenAI (the company behind ChatGPT). Now, the New York Times Company has joined the fray, filing suit late in December against Microsoft and several OpenAI affiliates. It’s a big milestone: The Times Company is the first major U.S. media organization to sue these tech behemoths for copyright infringement.
As always, at the heart of the matter is how AI works: Companies like OpenAI ingest existing text databases, which are often copyrighted, and write algorithms (called large language models, or LLMs) that detect patterns in the material so that they can then imitate it to create new content in response to user prompts.
The Times Company’s complaint, which was filed in the Southern District of New York on December 27, 2023, alleges that by using New York Times content to train its algorithms, the defendants directly infringed on the New York Times’ copyright. It further alleges that the defendants engaged in contributory copyright infringement and that Microsoft engaged in vicarious copyright infringement. (In short, contributory copyright infringement is when a defendant was aware of infringing activity and induced or contributed to that activity; vicarious copyright infringement is when a defendant could have prevented — but didn’t — a direct infringer from acting, and financially benefits from the infringing activity.) Finally, the complaint alleges that the defendants violated the Digital Millennium Copyright Act by removing copyright management information included in the New York Times’ materials, and accuses the defendants of engaging in unfair competition and trademark dilution.
The defendants, as always, are expected to claim they’re protected under “fair use” because their unlicensed use of copyrighted content to train their algorithms is transformative.
What all this means is that while 2023 was the year that generative AI exploded into the public’s consciousness, 2024 (and beyond) will be when we find out what federal courts think of the underlying processes fueling this latest data revolution.
I’ve read the New York Times’ complaint (so you don’t have to) and here are some takeaways:
- The Times Company tried (unsuccessfully) to negotiate with OpenAI and Microsoft (a major investor in OpenAI) but were unable to reach an agreement that would “ensure [The Times] received fair value for the use of its content.” This likely hurts the defendants’ claims of fair use.
- As in the other lawsuits against OpenAI and similar companies, there’s an input problem and an output problem. The input problem comes from the AI companies ingesting huge amounts of copyrighted data from the web. The output problem comes from the algorithms trained on the data spitting out material that is identical (or nearly identical) to what they ingested. In these situations, I think it’s going to be rough going for the AI companies’ fair use claim. However, they have a better fair use argument where the AI models create content “in the style of” something else.
- The Times Company’s case against Microsoft comes, in part, from the fact that Microsoft is alleged to have “created and operated bespoke computing systems to execute the mass copyright infringement . . .” described in the complaint.
- OpenAI allegedly favored “high-quality content, including content from the Times” in training its LLMs.
- When prompted, ChatGPT can regurgitate large portions of the Times’ journalism nearly verbatim. Here’s an example taken from the complaint showing the output of ChatGPT on the left in response to “minimal prompting,” and the original piece from the New York Times on the right. (The differences are in black.)
- According to the New York Times this content, easily accessible for free through OpenAI, would normally only be available behind their paywall. The complaint also contains similar examples from Bing Chat (a Microsoft product) that go far beyond what you would get in a normal search using Bing. (In response, OpenAI says that this kind of wholesale reproduction is rare and is prohibited by its terms of service. I presume that OpenAI has since fixed this issue, but that doesn’t absolve OpenAI of liability.)
- Because OpenAI keeps the design and training of its GPT algorithms secret, the confidentiality order here will be intense because of the secrecy around how OpenAI created its LLMs.
- While the New York Times Company can afford to fight this battle, many smaller news organizations lack the resources to do the same. In the complaint, the Times Company warns of the potential harm to society of AI-generated “news,” including its devastating effect on local journalism which, if the past is any indication, will be bad for all of us.
Stay tuned. OpenAI and Microsoft should file their response, which I expect will be a motion to dismiss, in late-February or so. When I get those, I’ll see you back here.
December 19, 2023
This year has brought us some of the early rounds of the fights between creators and AI companies, notably Microsoft, Meta, and OpenAI (the company behind ChatGPT). In addition to the Hollywood strikes, we’ve also seen several lawsuits between copyright owners and companies developing AI products. The claims largely focus on the AI companies’ creation of “large language models” or “LLMs.” (By way of background, LLMs are algorithms that take a large amount of information and use it to detect patterns so that it can create its own “original” content in response to user prompts.)
Among these cases is one filed by the Authors Guild and several prominent writers (including Jonathan Franzen and Jodi Picoult) in the Southern District of New York. It alleges OpenAI ingested large databases of copyrighted materials, including the plaintiffs’ works, to train their algorithms. In early December, the plaintiffs amended their complaint to add Microsoft as a defendant alleging that Microsoft knew about and assisted OpenAI in its infringement of the plaintiffs’ copyrights.
Because it is the end of the year, here are five “things to look for in 2024” in this case (and others like it):
- What will defendants argue on fair use and how will the Supreme Court’s 2023 decision in Goldsmith impact this argument? (In 2023 the SCOTUS ruled that Andy Warhol’s manipulation of a photograph by Lynn Goldsmith was not transformative enough to qualify as fair use.)
- Does the fact that the output of platforms like ChatGPT isn’t copyrightable have any impact on the fair use analysis? The whole idea behind fair use is to encourage subsequent creators to build on the work of earlier creators, but what happens to this analysis when the later “creator” is merely a computer doing what it was programmed to do?
- Will the fact that OpenAI recently inked a deal with Axel Springer (publisher of Politico and Business Insider) to allow OpenAI to summarize its news articles as well as use its content as training data for OpenAI’s large language models affect OpenAI’s fair use argument?
- What impact, if any, will this and other similar cases have on the business model for AI? Big companies and venture capital firms have invested heavily in AI, but if courts rule they must pay authors and other creators for their copyrighted works it dramatically changes the profitability of this model. Naturally, tech companies are putting forth numerous arguments against payment, including how little each individual creator would get considering how large the total pool of creators is, how it would curb innovation, etc. (One I find compelling is the idea that training a machine on copyrighted text is no different from a human reading a bunch of books and then using the knowledge and sense of style gained to go out and write one of their own.)
- Is Microsoft, which sells (copyrighted) software, ok with a competitor training its platform on copyrighted materials? I’m guessing that’s probably not ok.
These are all big questions with a lot at stake. For good and for ill, we live in exciting times, and in the arena of copyright and IP law I guarantee that 2024 will be an exciting year. See you then!
December 5, 2023
The web is rife with information and advice on how to register a trademark and, more importantly, how to protect one once you’ve got it. Much of the latter boils down to policing your mark by sending cease and desist letters whenever you suspect someone is infringing it. Good advice and, in many cases, all you need to ward off an infringer or potential infringer. But cease and desist letters aren’t always enough. Two recent cases highlight different routes that businesses traveled to protect their marks, one wrapping up quickly while the other dragged on for six years of litigation, with opposite results.
The rapid resolution came in a proceeding Mattel, Inc. brought this summer against Burberry Ltd. For anyone who has been living under a rock, Mattel makes Barbie — the dolls, the movie, the inescapable cultural “phenomenon.” The toy company brought an action before the United States Patent and Trademark Office to prevent fashion house Burberry — perhaps best known for its famous plaid-lined trenchcoats — from registering the mark “BRBY.”
Mattel claimed BRBY was likely to cause confusion because it is “visually similar” to Barbie and, “when spoken aloud, the marks are phonetically identical.” What’s more, according to Mattel, the likelihood of confusion was increased because many products sold by Mattel bearing the Barbie trademark overlap with the types of goods that Burberry was proposing to make with the BRBY mark, such as clothing, jewelry, and cosmetics. As the action stated, “[c]onsumers would be likely to wonder if, or assume that, [Burberry’s goods] are licensed by or affiliated with [Mattel].”
It’s impossible to tell exactly what went down in the proceeding because the parties reached an undisclosed settlement. However, Burberry subsequently withdrew its application to register the BRBY mark so I think we can take it as game over — in just under four months. If you ask me, it seems unlikely that anyone was going to get confused between Barbie and BRBY even though the vowelless mark could be pronounced in the same way. But clearly, Burberry figured the value of the BRBY mark wasn’t enough to justify protracted litigation.
At the other end of the spectrum, we have a federal litigation between Alfwear, Inc. and Mast-Jaegermeister US, Inc. (“MJUS”), initially filed in August 2017 and, after six years in the courts, concluded this September with the 10th Circuit Court of appeals affirming the lower court’s grant of MJUS’ motion for summary judgment.
Alfwear is a Salt Lake City company that makes outdoor apparel and gear under the brand name “KÜHL” (yes, it’s German for “cool”) and has registered trademarks for this brand name. MJUS is the US-based distribution arm of the German company that makes a herbal liqueur under the brand name — you guessed it — Jägermeister, which had a fairly repulsive shot of popularity in the mid-aughts as the drink of choice for frat parties.
As stated in the 10th Circuit’s decision, in 2016 MJUS “launched an advertising campaign to distance itself from its association with ‘pukey frat guys’ and spring break parties and remake the Jägermeister image as a ‘more premium’ brand and emphasize its German heritage.” Mast-Jaegermeister’s campaign did this by incorporating German words such as “kühl” “perfekt,” “and “dekadent ” into phrases such as “Drink it ice kühl” and “Be kühl — throw it back.” These phrases, which were intended to be easily understood by English speakers, were consistently accompanied by the Jägermeister mark.
In August 2017, Alfwear filed suit against MJUS, asserting that MJUS’s unauthorized use of the term “kühl” in connection with the advertising of MJUS’s goods or services infringed Alfwear’s registered trademarks and constituted federal and common law unfair competition. The district court held that MJUS’s use of “kühl” did not infringe on Alfwear’s “KÜHL” trademark, which it uses on its line of outdoor products, “because no reasonable juror could find a likelihood of confusion between the parties’ marks.” Yet Alfwear, refusing to back off, appealed and the case trundled on.
The 10th Circuit affirmed the district court, agreeing that MJUS’s use of “kühl” was unlikely to cause any consumer confusion and noting that MJUS had never put the word “kühl” on a Jagermeister bottle or any promotional clothing, and that Alfwear and MJUS’s products generally occupied distinct markets. (It is, however, worth mentioning that Alfwear has a pending trademark application for “KÜHL” in connection with wine, which presumably suggests that Alfwear is contemplating entering a market closer to that in which MJUS sells its products.)
So why did Mattel triumph in a matter of months while Alfwear fought MJUS for six years and, ultimately, lost? Was Mattel’s case really that much stronger than the one brought by the maker of KÜHL? Well, one key distinction is that there is overlap between Mattel’s Barbie-branded products and what Burberry sells, whereas there is no current overlap between KÜHL and Jägermeister. Knowing this, should Alfwear have realized it had a weaker case than Mattel and backed off earlier or not filed suit at all?
I think not. It isn’t always easy to accurately predict whether you’ll win or lose a trademark dispute because there are so many variables. Is your adversary going to be reasonable (like Burberry) or stand firm (MJUS)? How much time and effort have you and your adversary invested? Do you know all of your adversary’s motivations?
With that said, despite the risks, protecting a mark through litigation is a critical part of maintaining a mark and its value. Each time you don’t defend your mark, it potentially weakens your rights to it in the future. This is cumulative and can make it possible for others to obtain similar marks for their products. Moreover, even a loss might have a silver lining. It can aid in future decision-making when considering expansion into new markets.
