GDPR's Eephus Pitch to Trademark Enforcement

The changes to the European privacy laws, earlier this year, has brought about a real set of challenges to the enforcement of trademarks.  Much like an Eephus pitch in baseball[1], the General Data Protection Regulation (GDPR), first initiated in 2012, has made its slow journey with passage in May, 2018, causing a real scramble in the IP community.  It did so by making the personally identifiable information on the WHOIS database inaccessible, leaving trademark owners struggling to figure out how to track down infringers. 

GDPR regulates the privacy and data of individuals in the EU.  With the passage of these regulations, it attempts to ensure that individuals in EU be guaranteed:

• Protection of the individual’s data by requiring that it not be publicly available
• Ease in transferability of their data from one provider to another
• A right of erasure of your information
• Notification in case of breach of their data

Does it affect US based companies?

If you are a US based company that:

• Provides goods and services to the citizens of EU, or
• Has a web presence/provides marketing material online targeted to the EU citizen located in EU (e.g. presented in the country’s local language and targeted to the citizen of that country), or
• Accepts local currency. (See Forbes).

Then, GDPR will apply to you.

How does it affect trademark owners?

Due to the regulatory changes under GDPR, data that was crucial in identifying trademark counterfeiters will no longer be easily accessible due to stricter privacy laws.   

The information that identifies all domain name registrants is stored on the WHOIS database. This database is regulated by ICANN (Internet Corporation for Assigned Names and Numbers).  This database maintains a list of a domain registrant’s name, email, telephone and physical contact information. ICANN has traditionally entered into contractual agreements with domain registrars which ensured that such information of the registrants on their domain be listed and accessible.  Therefore, the very purpose and nature of WHOIS for trademark owners roots from the accessibility to information available in that database.  Although it has long been argued that the system is flawed as it had become very easy for registrants to provide false information, uptil now, this database served as a first point of contact with a trouble making registrants (source of malware or counterfeiters, etc).  Nonetheless, it served as a viable course of action to deal with counterfeiters/ infringers.  A trademark owner could initiate the enforcement process by investigating and sending a cease and desist letter to the counterfeiter’s associated email address, for example, found on the WHOIS database. 

Now, GDPR has thrown a real wrench into that by safeguarding the contact information and not having it be publicly available. So where does one even begin the task of finding the infringer?

INTA is spearheading the process in identifying methods with which domain name registrants can be found (See Toolkit for IP Professionals).  This is a great resource to start with.  In the interim, ICANN allows for some recourse through its Temporary Specification for gTLD Registration Data.  A trademark owner can request the personally identifiable information of the registrant from the domain registrar when provided with a “legitimate and proportionate purpose for accessing the non-public Personal Data.” However, to comply with the GDPR's requirements of anonymization of private data, contact with registrant itself will be – you guessed it – through an “an annonymized email or web form.”  If all else fails, then one can head straight to court to subpoena the registrars and get the information one seeks. 

In short, it is going to be a long and challenging path for trademark owners, as many more resources will need to be used in order to obtain the information of such counterfeiters.  

This one is best chalked off as a "to be continued".... 

[1] a slow junk pitch that requires the batter to unexpectedly bring all the force and thus throwing the batter off his/her game

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The Music Modernization Act finally addresses the issue of mechanical licenses

The Music Modernization Act has been unanimously passed by the Senate Judiciary Committee.  Having previously been approved by the House of Representatives, it is now expected to become law once it receives passage from the entire Senate.  This Act is being hailed by the musicians and digital music streaming services as a very workable compromise that will help both sides in fairly addressing the contentious issues surrounding mechanical license revenues.  

To give you context, a music track that is streamed online, consists of multiple components, such as, a musical composition and sound recording.  A composition and recording are separate aspects of a musical work, triggering separate copyright ownership.  A musical composition consists of the lyrics of the song and the sheet music, and a copyright in it is usually owed by the lyricist and composer.  A sound recording comprises of the final product that includes the “fixation” of the music and the words as performed by the singer/recording artist.  It is embodied in different media like a CDs, MP3s, vinyl recordings etc.  A copyright in a song recording is usually owned by the performer or a Record Label Company. 

Until now, the creators of content (recording artists, song writers, etc) alleged, through numerous lawsuits, that while statutory licenses were being levied on the performance of music, the revenue from mechanical licenses (related solely to the musical compositions) was not being accurately assessed and forwarded to them.  It was the responsibility of the digital music service providers to figure out who the copyright owner of each and every musical composition in each and every song was, and then send them the necessary notices of intent to use the work.  To make matters more complicated, the Record Label companies rarely included information on the owners of the musical composition in its labels.  Consequently, companies such as Spotify and Apple Music claimed that they did not have enough information to identify the appropriate owners of the music composition itself and were unable to assess or forward such fees.  Agencies such as Harry Fox Agency (HFA) and Music Reports Inc. (MRI) were often tasked with identifying the rightful owners of the copyright in the musical compositions and then forwarding the related royalty payments.  Needless to say this was a cumbersome process that was clearly not sustainable.  It resulted in a loss of millions of dollars’ worth of revenue from mechanical licenses, and consequently, contentious lawsuits. 

To address this issue of lost revenue from mechanical licenses of musical works, the Music Modernization Act, aims to establish a Mechanical License Collective.  This Collective will (i) maintain a publicly accessible database of information on the musical work, including its recordings, owners etc, and (iii) collect and forward fees levied on mechanical licenses i.e. just the musical composition of the song, for each time the song is digitally streamed or downloaded.  Digital music streaming services will no longer need to seek the rightful owners of the musical composition as they will now receive a blanket license from the Mechanical Licensing Collective.  This model mirrors the process followed by BMI, ASCAP etc, that use the blanket license for performances.  Most importantly, the royalty rates will be based on a “willing buyer willing seller” rationale ensuring increased royalty fees for the owners of musical compositions.  

Alibaba & just One Other? A Tale Of Cryptocurrencies & Jurisdictions

In April of this year, a Dubai based firm called Alibabacoin Foundation (ABBC) was sued by Alibaba Group (Alibaba), China's retail giant, for trademark infringement, false advertising, false designation of origin and trademark dilution.  Alibaba alleged that ABBC was using its trademark term "Alibaba" to raise 3.5 million in cryptocurrencies called Alibabcoins by having this term be displayed on its websites, wallet websites, apps etc.  Such unauthorized use of the trademark was causing consumer confusion, such that the consumers would believe that the two were affiliated.

Initially, Alibaba successfully obtained a temporary restraining order against ABBC's use of the mark "Alibaba".  However, on April 30th, 2018, the District Court (S.D.N.Y.) dissolved the order and denied Alibaba's request for a preliminary injunction against ABBC's use of the "Alibaba" mark. 

For preliminary injunction, a plaintiff must essentially demonstrate that: (i) its case has merits to warrant further litigation, (ii) there has been injury, (iii) the monetary compensation is insufficient recourse for the injury caused, (iv) if the preliminary injunction is granted, who would have greater hardship (Plaintiff/Defendant), and last, (v) would the granting of this preliminary injunction be a disservice to the public. (For more on case law see Opinion) 

For District Courts to be able to consider preliminary injunctions, it must first be established that the Court has personal jurisdiction.  Accordingly and in its defense, ABBC sought to establish that the Court had no subject matter or personal jurisdiction and that the matter would fail on its merits.

Per the appropriately applicable Act, the Lanham Act, the Court has subject matter jurisdiction.  To establish subject matter jurisdiction, Alibaba successfully established that ABBC displayed its trademark on its websites etc.  In its defense, however, ABBC was not so successful in explaining why its initial coin offerings should not be considered "sale in commerce." 

ABBC did prevail on the question of personal jurisdiction.  

Alibaba attempted to establish that the Court had "specific personal jurisdiction" under Section 302(a)(1) of New York’s long-arm statute as ABBC's website would be considered "interactive."  However, Alibaba failed to provide "sufficient proof of commercial activity to justify a preliminary injunction" given the lack of evidence of even a "single sale of Alibabacoins" that might have occurred in New York.  The existence of a Wallet Website run by DigitalOcean LLC, a company headquartered in NYC and contracted by ABBC, did not rise to the level of an "articulatable nexus" i.e. the evident connection between the Company's action and the alleged trademark infringement.  The connection was merely "coincidental" and no evidence was provided to demonstrate that the Company was actively involved in administering this website in question. Furthermore, Alibaba's allegation, that ABBC had presence in New York given the anticipated listings of the Alibabacoins on the New York Exchange, did not amount to the level of presence required for this Court to have jurisdiction.  The Court deferred to the Securities Exchange Act indicating that the listing of securities are encouraged without the the party being subject to NY Law, and that such listings only established US wide contact, not specific state contact that would fall within the purview of this Court under New York Law.  Lastly, Alibaba failed to demonstrate that consumers were actually confused by viewing the mark on the ABBC website or that Alibaba suffered economic tort.  Unfortunately, Alibaba has repeatedly disassociated itself with this genus of goods i.e., cryptocurrencies, and was unable to demonstrate "specific, non-speculative harm."

Blockchain & Trademarks

As a trademark attorney, invariably the first question we ask our clients is - Do you own this mark? When was this mark first used  in commerce? And so starts the collection of documents that help establish ownership and priority. Or you can utilize Blockchain. 

Blockchain, is a decentralized P2P network that maintains a secure ledger of transactions.  A highly attractive feature of this platform is that the transactions in question cannot be altered or tampered with.  Blockchain is, therefore, a critical tool, especially where the ownership, priority or authenticity of the goods/services are pivotal, as is the case in trademark and brand protection.  

US Trademark applications referencing blockchain in the description first appeared in 2014. (See Brief History - Blockchain & TMs).  However, it was not until 2016 that marked a turning point and a definite uptick in such trademark applications and registrations in the US.  So what's all the excitement about?

This technology is plenty useful, but with specific relevance to trademarks, the three things that truly stand out is the ability to establish:

• ownership
• priority
• authenticity

Companies are creating solutions to take advantage of these features. Cognate, a US based Common Law Trademark Registry, is using Etheruem blockchain to create a ledger, a time stamped "smart contract" that records "the mark, class, date of first use, a specimen of use, etc." and "facilitates, verifies, or enforces a contract, transaction or agreement which cannot be altered or tampered with."  Essentially, this "immutable, time-stamped record of the registrant’s rights" goes to establish ownership and priority.    

Another great example of how useful blockchain is to protecting ones brand is evinced by its utilization in the Fashion industry.  The Provenance App used by Designer Martine Jarlgaard, logs a story of how the garment came to be, covering all stages from raw material, to production, inventory control, warehousing, supply chain, and finally to the retail store.  Every step is logged in blockchain and a consumer can view this on that App thus becoming immersed in the story and being able to authenticate for him/herself that it is indeed the same soft alpaca sweater they paid for. (Also See #Whomademyclothes).  Blockchain is a definite boon in the fight against counterfeiting as well.