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COVID-19 Relief and Government Funding Bill Brings Significant Changes to Trademark and Copyright Law

It may come as some surprise that embedded within the over 5,500-pages of the recent COVID-19 relief and government funding bill (the Consolidated Appropriations Act) are several (not-insubstantial) changes to copyright and trademark law and procedure.

Specifically, the relief package — which was signed into law on December 27, 2020 — incorporated the Trademark Modernization Act of 2020, the Copyright Alternative in Small-Claims Enforcement Act of 2020, and the Protecting Lawful Streaming Act, which bring significant developments in the field of intellectual property and will certainly impact the actions of intellectual property owners and third parties alike.

Trademark Modernization Act of 2020

The Trademark Modernization Act of 2020 (TMA) introduces several amendments to the Lanham Act that update trademark examination procedures, combat the recent flood of fraudulent registrations claiming use in commerce where none exists, and provide the long-awaited confirmation that a rebuttable presumption of irreparable harm applies in trademark infringement cases. These key features of the TMA are briefly summarized below:

Ex Parte Petitions for Expungement or Reexamination of Trademark Registrations

In a significant alteration to the current US Patent and Trademark Office practice, the TMA created two new ex parte cancellation mechanisms, providing an avenue of attack against the growing number of fraudulent or “deadwood” trademark registrations crowding the USPTO register and blocking new market entrants from obtaining registrations.

The first mechanism allows a third party to file an ex parte petition for expungement against a registration for a trademark that has never been used in commerce with some or all of the identified goods and/or services. The petition must identify the specific goods or services for which the petitioner alleges that the trademark has never been used, and the interested third party must also supply evidence of a “reasonable investigation” supporting that allegation. The second mechanism allows a third party to file an ex parte petition for reexamination of a registration for which improper use claims “were made during the examination process before registration.” Here, the third party must submit evidence of a “reasonable investigation” showing that a trademark was not actually in use at the time the registrant averred under oath during the application process that the mark was used in commerce. Once either proceeding has been initiated, the registrant will be required to provide documentary evidence that establishes adequate use of the mark on or before the relevant date (though a registrant from outside the US that obtained the registration based on a home country registration or via the International Registration process may present evidence of excusable non-use).

Essentially, the provisions for expungement and reexamination differ in that: (i) expungement is for cases in which a mark has never been used, whereas reexamination is for cases in which the mark was not in use at the time that the use was claimed (but could have been used later); and (ii) a petition for expungement may only be filed starting three years after a registration issued, whereas a petition for reexamination may be filed any time within five years of issuance. Both provisions do contain estoppel language barring subsequent challenges for the same goods and services against a registration once it has survived a challenge under the given provision, regardless of the identity of the later challenger. And, under both provisions, the Director may initiate the appropriate proceeding independent of a third-party petition, if information creating a prima facie case of nonuse comes to the Director’s attention.

Changes to Trademark Examination Process

The TMA also provides several new provisions affecting trademark prosecution practice before the USPTO. First, the TMA authorizes the USPTO to permit third parties to submit evidence supporting the refusal to register a trademark on a particular ground and to collect a fee from the filing third party. In essence, this codifies and expands the USPTO’s longstanding practice of accepting “Letters of Protest.” According to the TMA, the Director then has two months to review the evidence submitted.

Second, the TMA provides the USPTO with the flexibility to adjust office action response times. Currently, a trademark applicant must respond to an office action within six months. The TMA permits the USPTO to set shorter response periods, which can be no shorter than 60 days, as long as those response periods are extendable up to a total of six months. The USPTO is also authorized to charge a fee for the extension request.

Presumption of Irreparable Harm in Trademark Infringement Cases

Resolving a split that developed amongst circuit courts following the Supreme Court’s ruling in eBay, Inc. v. MercExchange LLC, 547 U.S. 388 (2006), the TMA provides definitive clarification that irreparable harm can be presumed in requests for injunctive relief upon a finding of trademark infringement (or a showing of likelihood of success on the merits for preliminary injunctions). In short, a trademark owner will not have to prove irreparable harm and infringement. Instead, and given the consumer protection concerns that would occur otherwise, once infringement has been shown, the alleged infringer will be required to prove that there was no irreparable harm in order to prevent an injunction.

Copyright Alternative in Small-Claims Enforcement Act of 2020

The Copyright Alternative in Small-Claims Enforcement Act of 2020 (CASE Act) amends the Copyright Act and was crafted by lawmakers with the objective of creating a new venue outside of filing a lawsuit in federal court for copyright owners to enforce their rights. The CASE Act does so by forming a Copyright Claims Board within the United States Copyright Office, which is tasked with adjudicating claims and counterclaims related to: (i) copyright infringement; (ii) declarations of non-infringement; and (iii) notice and takedown disputes under § 512 of the DMCA. The Board consists of three Copyright Claims Officers and must issue written decisions setting forth factual findings and legal conclusions. Participation in a proceeding before the Board is voluntary for both the copyright owner and the accused infringer, but by choosing to adjudicate claims before the Board, the parties waive any right to a jury trial. Importantly, to timely opt-out, the alleged infringer must do so within 60 days of receiving notice of the claim.

For copyright infringement claims, parties before the Board may seek actual or statutory damages, but the total monetary recovery (exclusive of any attorneys’ fees and costs) per proceeding cannot exceed $30,000, notwithstanding the number of claims asserted. Further, the Board may not award more than $15,000 in statutory damages per work (or $7,500 per work if the work was not timely registered[1]). Attorneys’ fees may only be awarded if the Board finds the accused infringer has engaged in “bad faith conduct”, and even then, any attorneys’ fees award may not exceed $5,000 (absent extraordinary circumstances, such as where a party has engaged in a pattern of bad faith conduct).

Proceedings before the Board will take place in writing and by tele-or videoconference, and there will be no in-person appearances. When making decisions, the Board must follow the law in the federal jurisdiction in which the action could have been brought if filed in federal court. However, where an action could have been brought in multiple jurisdictions, and it appears that there may be conflicting judicial precedent on an issue of substantive copyright law that cannot be reconciled, the Board must apply the law of the jurisdiction it determines has the most significant ties to the parties and conduct at issue. Board decisions are not precedential, and may not be cited as legal precedent in any action, including in any subsequent Board proceeding.

Once the Board issues its decision, there is a limited appeals process. First, a written request for reconsideration may be filed. If reconsideration is denied, the requesting party may ask the Register of Copyrights to review the Board’s decision for abuse of discretion. As a final option, the party may appeal to a federal district court, but the district court will only disrupt the Board’s decision under very limited circumstances: (A) if the determination was issued as a result of fraud, corruption, misrepresentation, or other misconduct; (B) if the Copyright Claims Board exceeded its authority or failed to render a final determination concerning the subject matter at issue; or (C) in the case of a default determination or determination based on a failure to prosecute, if it is established that the default or failure was due to excusable neglect.

The CASE Act includes several provisions seemingly intended to curtail abuse. First, the CASE Act provides sanctions against any party who pursues a claim or defense in bad faith more than once in a 12-month period, which includes being barred from initiating a claim before the Board for 12 months and having all pending claims summarily dismissed. Second, the CASE Act grants the Register of Copyrights with authority to issue regulations limiting the number of proceedings initiated by any one claimant in any given year.

Protecting Lawful Streaming Act

Under the current law, the unauthorized reproduction or distribution of a copyrighted work may be charged as a felony, whereas unauthorized streaming of copyrighted content can only be charged as a misdemeanor. The Protecting Lawful Streaming Act (PLS Act) amends Title 18 of the US Code by instead making it a felony to offer unauthorized streaming services.

The PLS Act is meant to go after commercial, for-profit streaming services that offer streaming of pirated content, and comes in an age where streaming is increasingly overtaking copying as the default way to disseminate and consume content. Specifically, it gives the US Department of Justice the authority to bring felony charges against a digital streaming service that: (1) is primarily designed or provided for the purpose of streaming copyrighted works without authorization; (2) has no commercially significant purpose or use other than to provide such unauthorized streaming services; or (3) is intentionally marketed by or directed to promote its use in streaming of copyrighted works without authorization. Per the PLS Act, those accused of illegal streaming face up to 10 years of imprisonment.

Takeaways

It remains to be seen how each of these acts will be implemented by the agencies and courts called on to do so, but the potential of these acts to profoundly impact the protection and enforcement of copyrights and trademarks is already evident. Moving forward, we will certainly be waiting for answers to numerous questions, including whether the TMA’s new ex parte mechanisms are adequate to achieve the intended goals, the extent that copyright owners and accused infringers in small copyright disputes will consent to Copyright Claims Board proceedings, and whether the statutory language of the PLS Act is narrow enough to prevent it from being used to limit free speech online.

[1] A copyright owner may file a claim with the Board based on a pending copyright application, but the Board will not render a decision under the registration has issued. The CASE Act does contemplate the Copyright Office putting into place regulations that would expedite the processing of applications for works at issue before the Board.

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