Supreme Court Issues Important Rulings on Two Intellectual Property Cases

While the news media and the world have been focused on COVID-19, the U.S. Supreme Court has continued to issue important rulings related to intellectual property.

Trademarks

In Romag Fasteners, Inc. v. Fossil Group, Inc., decided April 23, 2020, the Supreme Court held a plaintiff in a trademark infringement suit is not required to show that a defendant willfully infringed the plaintiff’s trademark as a precondition to a profits award.  

Years ago, Romag and Fossil signed an agreement allowing Fossil to use Romag’s fasteners in Fossil’s handbags and other products. “Initially, both sides seemed content with the arrangement,” the Court noted. “But in time Romag discovered that the factories Fossil hired in China to make its products were using counterfeit Romag fasteners—and that Fossil was doing little to guard against the practice. Unable to resolve its concerns amicably, Romag sued.”  Romag claimed “that Fossil had infringed its trademark and falsely represented that its fasteners came from Romag.”

Romag’s suit sought an order requiring Fossil to hand over the profits it had earned thanks to its trademark violation. But the district court refused this request pointing out that “controlling Second Circuit precedent requires a plaintiff seeking a profits award to prove that the defendant’s violation was willful.”  The Supreme Court granted certiorari to resolve a split among the regional circuit courts on whether a finding of willful infringement is a prerequisite to an award of profits.

The relevant statute, 15 U. S. C. §1117(a), provides:

"When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established . . . , the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action."

The Court stated:

"Immediately, this language spells trouble for Fossil and the circuit precedent on which it relies. The statute does make a showing of willfulness a precondition to a profits award when the plaintiff proceeds under §1125(c). That section, added to the Lanham Act some years after its initial adoption, creates a cause of action for trademark dilution—conduct that lessens the association consumers have with a trademark. But Romag alleged and proved a violation of §1125(a), a provision establishing a cause of action for the false or misleading use of trademarks. And in cases like that, the statutory language has never required a showing of willfulness to win a defendant’s profits."

The Court concluded by noting, “Given these traditional principles [of equity and statutory construction], we do not doubt that a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate. But acknowledging that much is a far cry from insisting on the inflexible precondition to recovery Fossil advances.” 

When is an award of an infringer’s profits appropriate in the absence of a finding of willfulness?  Justice Sotomayor, in her concurring opinion, states “a district court’s award of profits for innocent or good-faith trademark infringement would not be consonant with the ‘principles of equity’ referenced in §1117(a) and reflected in the cases the majority cites.”  She also suggests that “reckless and indifferent behavior” may lead to a proper award of profits even when there is no finding of willfulness.

This case highlights the need for all engaging in commerce to exercise due diligence when selecting and using trademarks.  Just as advice of competent legal counsel may serve as a defense to a willfulness claim, such advice can also serve to defend against an assertion that profits should be awarded due to recklessness or indifference.  The experienced trademark practitioners of DeWitt’s IP group are available to assist with your due diligence concerning trademarks.

Copyrights

In Georgia v. Public.Resource.Org, Inc, decided on April 27, 2020, the Supreme Court held the non-binding annotations published together with the text of all statutes of the State of Georgia in the “Official Code of Georgia Annotated,” or OCGA, are ineligible for copyright protection under the “government edicts” doctrine.  The case is interesting for three reasons.  First, the Court’s decision acknowledges in strong terms the power and value of copyrights.  Second, the Court was split five to four in an interesting and unusual way given the political leanings of the justices.  Third, the rationale adopted by the Court’s majority divided the court on technical rather than ideological grounds.

The Court’s decision was written by Chief Justice Roberts who wrote, “The Copyright Act grants potent, decades-long monopoly protection for ‘original works of authorship.’ 17 U. S. C. §102(a)…” Unlike other forms of intellectual property, copyright protection is both instant and automatic. It vests as soon as a work is captured in a tangible form, triggering a panoply of exclusive rights that can last over a century.”

Joining Roberts in the majority were liberal Justices Sotomayor and Kagan and conservative Justices Gorsuch and Kavanaugh.  Dissenting were conservative Justices Thomas and Alito and liberal Justices Breyer and Ginsburg.

“The question in this case is whether that [copyright] protection extends to the annotations contained in Georgia’s official annotated code,” according to Justice Roberts.  He continued by casting the relevant facts as follows:

The OCGA is assembled by a state entity called the Code Revision Commission. In 1977, the Georgia Legislature established the Commission to recodify Georgia law for the first time in decades. The Commission was (and remains) tasked with consolidating disparate bills into a single Code for reenactment by the legislature and contracting with a third party to produce the annotations. A majority of the Commission’s 15 members must be members of the Georgia Senate or House of Representatives. The Commission receives funding through appropriations “provided for the legislative branch of state government.” OCGA §28–9–2(c)(2018). And it is staffed by the Office of Legislative Counsel, which is obligated by statute to provide services “for the legislative branch of government.” §§28–4–3(c)(4), 28–9–4.  Under the Georgia Constitution, the Commission’s role in compiling the statutory text and accompanying annotations falls “within the sphere of legislative authority...”

Each year, the Commission submits its proposed statutory text and accompanying annotations to the legislature for approval. The legislature then votes to do three things:  (1) “enact[ ]” the “statutory portion of the codification of Georgia laws”; (2) “merge[ ]” the statutory portion “with[the] annotations”; and (3) “publish[ ]” the final merged product “by authority of the state” as “the ‘Official Code of Georgia Annotated.’” OCGA §1–1–1 (2019)

Chief Justice Roberts further noted that the annotations were actually prepared by a division of the LexisNexis Group pursuant to a work for hire agreement.  This agreement states that all copyrights in the OCGA vest in the State of Georgia, acting through the Commission, but that Lexis “enjoys the exclusive rights to publish, distribute and sell the OCGA.”

Public.Resource.Org (PRO), without permission, posted a digital version of the OCGA on various websites, where it could be downloaded by the public without charge. PRO also distributed copies of the OCGA to various organizations and Georgia officials.  In response, the Commission sued PRO for copyright infringement, limiting its claims to the annotations only and not the actual statutes.  The trial court found infringement and entered an injunction.  The Eleventh Circuit Court of Appeals reversed the decision. 

While the Supreme Court joined with the Eleventh Circuit in holding the OCGA ineligible for copyright protection, it did so “for reasons distinct from those relied on by the Court of Appeals.”  According to the Supreme Court’s ruling,

Under the government edicts doctrine, judges—and, we now confirm, legislators—may not be considered the “authors” of the works they produce in the course of their official duties as judges and legislators. That rule applies regardless of whether a given material carries the force of law. And it applies to the annotations here because they are authored by an arm of the legislature in the course of its official duties.

Chief Justice Roberts reasoned that while the annotations in question were written by Lexis employees, and not the legislature, they were written pursuant to the work for hire agreement.  Under that agreement and the Copyright Act, the Commission is deemed to be the sole “author” of the work.  Further, the Commission functions as an arm of the Georgia legislature working within the sphere of legislative authority.

Justice Roberts also addressed the question of whether the Commission creates the annotations in the “discharge” of its legislative “duties” stating, “annotations published by legislators alongside the statutory text fall within the work legislators perform in their capacity as legislators.”

Justice Thomas, in a dissenting opinion, wrote that the Court’s ruling “will likely come as a shock to the 25 other jurisdictions—22 States, 2 Territories, and the District of Columbia—that rely on arrangements similar to Georgia’s to produce annotated codes.”  He argued that, “it must follow from our precedents that statutes and regulations cannot be copyrighted, but accompanying notes lacking legal force can be… Allowing annotations to be copyrighted does not run afoul of any of these possible justifications for the government edicts doctrine.”

Justice Ginsburg questioned whether the annotations in the OCGA were written in a legislative capacity.  She asserted they were not because it is not the role of the legislature to interpret statutes and the annotation of the statutes “begins only after lawmaking ends.”

The ruling is of obvious importance to all forms of government and legal publishers.  It is also important to organizations like PRO who wish to share broadly and freely to the public information about governmental actions.  All must understand that agreements like the one in question can be recast to circumvent the impact of the Court’s ruling and protect the annotations written by private companies.

A key fact in the case is that the copyrights vested in the Georgia Commission rather than the publisher who created the annotations.  The agreement between the publisher and the State could easily be changed so that the copyrights to the annotations vest in the publisher.  The experienced intellectual property lawyers at DeWitt certainly are well equipped to provide guidance and creative solutions taking into account applicable principles of the Copyright Act and court decisions interpreting that act.