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January 11, 2020

Stroock Client Alert

By: Laura Goldbard George, Binni N. Shah, Walker H. Bowman

Despite President Trump’s initial reluctance to sign the Consolidated Appropriations Act 2021 (the “Act”) into law, he finally did so on December 27, 2020.[1] Somewhat unexpectedly, the Act includes provisions having a significant impact on intellectual property, and in particular, on copyright and trademark practice. For example, as further detailed herein, the Act incorporates the Trademark Modernization Act of 2020, which provides, inter alia, for additional avenues of attacking applications and registrations, and the Copyright Alternative in Small-Claims Enforcement Act, which creates a copyright small claims court in the U.S. Copyright Office.

Trademark Related Provisions in the Act: Trademark Modernization Act of 2020

The Trademark Modernization Act of 2020 (“TMA”) creates new post-registration proceedings in the United States Patent and Trademark Office for the purpose of reducing the number of registrations and eliminating those registrations which are not in use for a period of three years or more, reaffirms the rebuttable presumption of harm for a determination of injunctive relief, and modifies trademark examination procedure.

Revisions to Trademark Examination Procedures

First, the TMA provides that third parties may elect to submit evidence, relevant to a ground for refusal of registration during the examination of an application, to the Director with a request that such evidence be considered, effective as of December 27, 2021.[2] If a third party submits such a petition and the petition is granted, an applicant can expect an increase of the costs of prosecution of its application as well as increased duration of the examination. However, third parties interested in protecting their registered marks and keeping the register clear should monitor newly-filed U.S. trademark applications, instead of relying solely on a published application watch, to determine whether it would be efficient to intercede in an examination of an application prior to publication.  

Second, the TMA amends 15 U.S.C. § 1062(b) to allow the Director to modify the present response period of six months to a notification for a refusal to register to a shorter response period of no less than 60 days. If the prescribed response period is less than six months, an applicant can automatically obtain an extension of time upon request. However, the Director can set regulations for the length of individual periods of the extension and to prescribe a fee for any extension request.

Finally, the TMA includes amendments to confirm the authority of the Director of the United States Patent and Trademark Office, so he may reconsider, modify, or set aside decisions of the Trademark Trial and Appeal Board (“TTAB”). A dissatisfied party can seek to have the Director’s decision or a TTAB decision reviewed by the Federal Circuit or alternatively, file a civil action in a court.

Post-Registration Challenges

The TMA sets forth procedures to challenge registrations based on non-use of a mark, namely ex parte expungement and ex parte reexamination. Such procedures will become effective as of December 27, 2021 and will apply to any mark registered before, on, or after that date. In addition, the TMA adds a ground for cancellation based on a mark never having been used in connection with some or all goods and services identified in an registration.

In an ex parte expungement, a third party may file a petition to expunge a mark on the “basis that the mark has never been used in commerce on or in connection with some or all of the goods or services recited in the registration.”[3] For ex parte expungement petitions, a third party may file a petition between three and ten years after the date of registration of a mark. However, for the first three years after enactment (i.e. through December 2024), third parties may file an ex parte expungement petition for any mark that has been registered for at least three years, even if it has been more than ten years after registration. Going forward, a review of a client’s registrations is recommended in order to determine if they are subject to ex parte expungement, especially for registrations obtained based on a foreign registration under Section 44(e), for which use is not required at the time of registration.

Alternatively, in an ex parte reexamination, a third party may file a petition to re-examine a registration on the basis that the mark was not in use in commerce for or in connection with some or all of the goods and services on or before the relevant date as determined by the initial filing basis, i.e. the date of filing for a “use” application or when use was alleged for an “intent-to-use” application. Here, a petition may be filed no later than five years after the date of registration of a mark based on use in commerce. If a mark is challenged in this manner, the registrant should consider whether a new application should be filed based on those goods and services that are actually being used and the date that such goods and services were offered.

Lastly, the TMA adds a new ground for cancellation, namely that a third party can initiate a cancellation proceeding at any time after three years have elapsed following the date of registration on the grounds that the registered mark has never been used in commerce with some or all of the goods or services recited in the registration. Neither the ex parte reexamination nor the ex parte expungement practice precludes a cancellation proceeding. However, when deciding which approach to take, one should consider that the ex parte proceedings presently appear to be much more streamlined than a cancellation proceeding, and thus, are likely to be less costly. Accordingly, it is likely preferably to pursue an ex parte proceeding rather than the inter partes cancellation proceeding unless the issue is other than use, such as likelihood of confusion.

Rebuttable Presumption of Irreparable Harm

The TMA clarifies that, effective immediately, a plaintiff seeking injunctive relief pursuant to 15 U.S.C. § 1116(a) is entitled to a rebuttable presumption of irreparable harm upon a finding of a likelihood of success on the merits for a violation if a preliminary injunction or temporary restraining order is sought, or upon a finding of a violation if a permanent injunction is sought.[4] In light of the 2006 Supreme Court decision in eBay v. MercExchange, LLC, 547 U.S. 388 (2006), holding that plaintiffs in patent cases were not entitled to a presumption,[5] certain circuit courts found that trademark plaintiffs were not entitled to such a presumption either resulting in a circuit split.[6] This clarification resolves the circuit split, establishing a uniform standard to apply for determining whether an injunction should issue. The plaintiff-friendly presumption may result in increased litigation seeking preliminary and/or permanent injunctive relief.

Copyright Related Provisions

Included in the Act are two provisions affecting copyrights, namely (a) the creation of a copyright small claims court and (b) changes to penalties for illegal digital streaming.

The Copyright Alternative in Small-Claims Enforcement (CASE) Act of 2020

The CASE Act of 2020 creates a Copyright Claims Board (the “Board”) within the U.S. Copyright Office,[7] which will have the authority to hear copyright disputes valued up to $30,000.[8] As provided by the Act, the Board must begin operation no later than December 27, 2021, which is extendible by 180 days upon good cause and with notification provided to Congress.

Staffed by three Copyright Claim Officers, the Board will allow claimants to bring proceedings before the Board, instead of in court, no later than three years after the claim accrued. Specifically, parties may bring claims relating to: (1) the infringement or a declaration of noninfringement of an exclusive right in a copyrighted and registered work; (2) a claim for a declaration of noninfringement of an exclusive right in a copyrighted and registered work; (3) a claim under 17 U.S.C. §512(f) for misrepresentation; (4) a counterclaim that is asserted solely against the claimant in a proceeding brought before the Board; or (5) a legal or equitable defense in response to a claim or counterclaim asserted before the Board. Generally, discovery in this proceeding in limited to production of documents, written interrogatories, and written requests for admission. The Board can consider evidence such as relevant documentary and nontestimonial evidence, as well as testimonial evidence in written form or presented at a hearing, without regard for the formal rules of evidence.

Participation in this procedure is voluntary. Specifically, a claimant may (but need not) bring a proceeding before the Board, and a defendant may elect to opt out of the proceeding within 60 days of notice of a complaint before the Board. If a defendant opts out of the proceeding, the claim is dismissed without prejudice and the claimant can refile in federal court.

With respect to available remedies, the Board will have the authority (a) to issue actual or statutory damages,[9] at the claimant’s election, in an amount no greater than $30,000, exclusive of attorney’s fees and costs, (b) to order a party to cease its infringing conduct or cease sending takedown notices with such party’s consent, and (c) to award attorney’s fees and costs of not more than $5,000,[10] if the proceeding was brought or pursued in bad faith pursuant to 17 U.S.C. § 1506(y)(2). 

The determinations made by the Board prevent relitigation of the claims and counterclaims, actually asserted and finally determined by the Board, before the Board or a federal court by the same parties. However, the same parties may bring litigation before any court or the Board with respect to “the same or similar issues of fact or law in connection with claims or counterclaims not asserted or not finally determined by the [Board].” An appeal must be filed within 90 days after the Board’s final determination, and can be made for the following limited cases: (a) if the determination was issued as a result of fraud, corruption, misrepresentation, or other misconduct, (b) if the Board exceeded its authority or failed to render a final determination, or (c) in the case of a default determination, if it is established that the default was due to excusable neglect.

Although the lasting impact of the Board will not be known for some time, small copyright owners, who otherwise did not have the means to sue in federal court, may now have a more effective avenue to use to protect their copyrights. On the other hand, the Board may also provide an avenue for large-scale copyright owners to file streamlined infringement actions against numerous unsophisticated defendants—a downside that may be somewhat mitigated by allowing the Registrar of Copyrights to establish regulations relating to the permitted number of proceedings each year by the same claimant. Nevertheless, the efficacy and usefulness of the Board may be limited by the voluntary nature of participation by both plaintiff and defendant in this type of proceeding.

Unauthorized Streaming of Copyrighted Material

The Act adjusts the penalties for unauthorized streaming of copyrighted material.[11] Specifically, the Act now makes it a felony for a person to willfully, for purposes of commercial advantage or private financial gain, or without any other “commercially significant purpose,” offer a digital transmission service that publicly performs copyrighted works without permission. Violations may result in a fine and up to five years jail time for a first offense, and up to ten years for subsequent offenses. On its face, this change seems significant, but because actions will need to be brought by the Department of Justice, such penalties may likely be imposed only on commercial, for-profit piracy services (and not your every-day user of such piracy services).

Patent Related Provision

Information Regarding Patents for Biologics

The Act also amends the Food and Drug Administration’s Purple Book, now requiring that the Purple Book include more information about the patents that cover the biological products listed therein.[12] Specifically, biological product manufacturers now have 30 days after giving biosimilar applicants a list of the patents and their corresponding expiry dates used in creating the biological product to give the same to the FDA, so such information can included in the Purple Book.

Conclusion

The majority of the provisions discussed herein will not be effective until late December 2021. Indeed, many of the provisions require further regulations to be established by the USPTO and the U.S. Copyright Office in order to set forth the particulars of the various new proceedings that are permitted under the Act. Thus, the utility and convenience of these new proceedings remains to be seen.

___________________________________________

For More Information:

Laura Goldbard George

Binni N. Shah

Walker H. Bowman

[2] Amending Title 15, United States Code, Section 1051.

[3] Amending Title 15, United States Code, Section 1066.

[4] To be codified at Title 15, United States Code, Section 1116(a).

[5] See eBay v. MercExchange, LLC, 547 U.S. 388 (2006).

[6] Compare, e.g., Herb Reed Enters., LLC v. Fla. Entm’t Mgmt., Inc., 736 F.3d 1239, 1249 (9th Cir. 2013) (holding that a trademark plaintiff was not entitled to a presumption of irreparable harm upon a finding of infringement), and Salinger v. Colting, 607 F.3d 68, 81-82 (2d Cir. 2010) (same), with Abraham v. Alpha Chi Omega, 708 F.3d 614, 627 (5th Cir. 2013) (holding that irreparable injury is presumed where a likelihood of confusion is found), and Warner Bros. Entm’t, Inc. v. X One X Prods., 840 F.3d 971, 982 (8th Cir. 2016) (same).

[7] The new laws creating and regulating the Board are located at Title 17, United States Code, Chapter 15.

[8] The Register of Copyrights will also be required to establish regulations for the consideration and determination of claims in which the total damages sought do not exceed $5,000.

[9] Notably, the Board will not consider whether the infringement was willful in determining the amount of statutory damage.

[10] The maximum award of attorney’s fees can be greater if the party against whom an award is assessed has engaged in a pattern of bad faith. If the adversely affected party has appeared pro se, then the maximum award shall be limited to costs only, in an amount no greater than $2,500.

[11] To be codified at 18 U.S.C. § 2319(c).

[12] These amendments are to be made to Title 42, United States Code, Section 262(k).

This Stroock publication offers general information and should not be taken or used as legal advice for specific situations, which depend on the evaluation of precise factual circumstances. Please note that Stroock does not undertake to update its publications after their publication date to reflect subsequent developments. This Stroock publication may contain attorney advertising. Prior results do not guarantee a similar outcome.

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