Legal Geek No. 198: Theater Owners vie to maintain the Paramount Consent Decrees

Hi, and welcome back to Legal Geek.  This week, we review how theater owner trade groups are trying to stop the Department of Justice from removing rules that have governed conduct of the major film studios they deal with for over 70 years.

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Back in the 1930's and 40's, various antitrust enforcement actions by the U.S. government against major film studios led to what is known as the Paramount Consent Decrees.  These decrees bar several major studios from owning both the distribution and exhibition operations for films, while also banning a number of specific distribution practices such as setting of minimum prices for movie tickets and forcing theaters to license multiple films bundled together instead of individual films.  The decrees were intended to separate theater providers from film studios while also making the film studios "play fair" in distributing films to theaters for viewer consumption.

These decrees have been active since 1949 and are one of over 1300 antitrust judgments with no expiration date.  Periodically the Department of Justice reviews these active judgments on the books to determine if all are still necessary, the most recent such review happening in late 2018.  That review resulted in the Paramount Consent Decrees being identified as one judgment that the DOJ no longer considered necessary.  As such, the DOJ made a court action to terminate these decrees with a two-year sunset period on some of the current bans.

Which brings us to the present, and the counter motions and briefs filed by the theater owner trade groups.  The trade groups argue that these provisions have maintained a thriving film exhibition and distribution market where independent smaller studios can properly compete for screen time, even in towns and regions with fewer screens per theater.  The trade groups specifically call out the block booking rule as crucial, noting that bigger studios could force out competitors and smaller studios by demanding a group of their films be licensed by a theater in order to have access to the big moneymaking blockbuster.

The trade groups also argue that the government hasn't followed the technical standard for removing such consent decrees from the books, which requires a showing that it's in the public interest to remove such decrees.  I expect the DOJ will craft a response arguing that removing this decree is in the public interest to try and overcome this technical legal challenge.

Of course, the trade groups do not directly address the government's position regarding the change in the movie industry with streaming services and the like as alternatives.  This sets up to be the potential core of the court decision, as the theater owners have a legitimate concern about potentially being bullied by major film studios, but they may not really be how small independent studios distribute anymore in the age of streaming services.  It's a close call, in my legal opinion, and the shifting movie consumption landscape makes this a ripe question for handling in 2020.

The Bottom Line is: antitrust law and consent decrees have an important place in our regulatory scheme to protect against monopolies and unfair business practices.  However, times change in industry and when change occurs, the same protections from the past may not be applicable.  It will be fascinating to see if the courts think the movie distribution industry has changed enough to take the reins of control off the major film studios.

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Legal Geek No. 197: Are Administrative Patent Judges even Legal?

Hi, and welcome back to a new year of Legal Geek.  I survived a nasty holiday bug that took my voice away with coughing fits, but I'm back and ready to roll with 2020 vision.

This week, we review a massive appeals court case decided a few weeks ago on whether all Administrative Patent Judges at the Patent Office, or APJ's, are appointed in an unconstitutional manner.

https://archive.org/details/legalgeekep197 

When the U.S. reformed its patent laws a few years ago, one of the biggest changes was the creation of a more robust challenge system for invalidating patents.  These Inter Parties Review proceedings are heard before 3 judge panels from the Patent Trial and Appeal Board, which is made up of APJ's who are currently appointed to those positions by the Secretary of Commerce and the Patent Office Director rather than the President.  The inventive legal challenge made by the loser of one of these patent challenges was that APJ's are not properly appointed under the rules of the Constitution, therefore making their decisions invalid.  

The potential was there for possibly undermining 6 years of these proceedings that have invalidated many patents.  Hence why this case was a big deal.  The Federal Circuit tackled this question and carved out a way for APJ's to still be constitutional without undermining the validity of the patent owner's challenge in this particular instance.

Under the appointments clause of the constitution, the President appoints all officers of the United States that are not inferior officers.  So if APJ's are principal officers, then they cannot be appointed by the Secretary of Commerce.  The appeals court first confirmed that APJ's are Officers of the United States because they clearly exercise significant authority pursuant to the laws of the U.S. in conducting trials and issuing final written decisions on validity of U.S. Patents.  Then the question turned to whether APJ's are principal or inferior officers. 

The court used a Supreme Court precedent that defined an inferior officer as one whose work is directed and supervised at some level by others appointed by Presidential nomination and consent of the Senate.  The Court applied a 3 factor test for this, looking for review power, supervisory power, and removal power of the closest appointed officer, that being the USPTO Director.  First, the court reviewed whether the Director had power to review or overturn final written decisions of APJ's, and the Court concluded the Director did not have such review power.  The Court also determined that the Director had sufficient supervisory powers over the APJ's, but no power to remove such judges from judicial service other than for cause.  Thus, 2 of the 3 factors favored APJ's being principal officers, which makes their current appointment not done by the President and Senate unconstitutional.

To avoid a quagmire where the entire Patent Trial and Appeal Board is thrown into chaos with all re-appointments to be done by a single President, the Court then modified the patent law to remove the restrictions on removing patent judges to push a second factor in favor of them being inferior officers.  In other words, they made the patent law constitutional again by making the Director have full removal power at will over Administrative Patent Judges.  The patent owner who challenged this patent review would thus be granted a new IPR trial in front a new panel of APJ's that are now properly inferior officers, but this did not cause upheaval of all prior decisions or remove the process for patent reviews.

What will be interesting to see is whether the USPTO Director actually wields this removal power more to take out APJ's who are overly biased for or against patents.  Or if the issue is handled in the future by using Presidential appointments for such judges.

The Bottom Line is: this argument against constitutionality of appointments of all administrative patent judges was a "Hail Mary" of sorts, but sometimes those long shots work.  It remains to be seen if this will create any substantive change for how the Patent Trial and Appeal Board works.  But this is the front line of many battles over IP in America, and so it's vital that the process works properly under the Constitution and all other laws.

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Legal Geek No. 196: FTC, COPPA Takes Aim at YouTube

Hi, and welcome back to Legal Geek. This week, we explain a recent story of how YouTube got into trouble with the Federal Trade Commission over COPPA and the controversy surrounding how the settlement is being applied to content creators on that platform.

https://archive.org/details/legalgeekep196 

Back in September 2019, the FTC settled a case brought against YouTube for alleged violations of a Children's Online Privacy Protection Act, also known as COPPA.  COPPA has existed since 1998 and the pertinent part thereof is this: the law requires websites directed towards children to obtain permission from parents before collecting various types of personal data from children, ranging from name and address all the way up to browsing history and persistent identifiers like cookies.  The law can be enforced by state attorney generals or federal consumer protection agencies like the FTC, who we've covered before including recently in their settlement with the maker of stalker software apps.

So what happened here?  On a public forum, YouTube marketing agents were telling some major brand representatives that they were the number one spot for attention of kids and could help them target advertisements to children using the information they collect on users.  But there was a glaring problem with this assertion...YouTube did not go through any hoops to allow parents to give permission for child users to allow collection of such personal information.  Thus, the State of New York and the FTC jointly brought an enforcement action for YouTube violating COPPA.  YouTube settled the action by paying a $170 million dollar fine as well as agreeing to business practice changes.  The fine is massive, but that's in part because YouTube is a massive money making platform that more easily draws the attention of agencies who enforce COPPA.

And that's where the internet controversy comes in, as many content creators on YouTube, podcasts, and other platforms began to worry about the new practices YouTube was implementing to shield itself from further COPPA liability.  YouTube is now requiring as of January 1 channels to affirmatively state whether their content is directed to children under 13 or not.  If they indicate the content is directed to children, advertising is basically cut off (AKA the revenue stream) and other features like comments on videos are also unavailable.  If they indicate the content is not directed to children, the status quo applies, but with the risk that if this statement is false and the content is later found to be actually directed to children, COPPA can be enforced against the content creator with a penalty of up to $42 thousand dollars per violation.

In one particular fandom of yours truly, which is the Pokémon Go game, content creators are highly worried that even though they may make videos clearly targeted at adults who enjoy the game and things like competitive PVP, the underlying cartoon IP will perhaps force them to be considered as directed to children.  Many content creators are wondering if this risk is too great, but the economic and community-building downsides to being "directed to children" would force them out of the content creation marketplace if they make that statement.

A public comment period was twice extended on this implementation issue, and the FTC may yet modify the settlement terms with YouTube depending on the public feedback.  However, understanding the FTC a little better may help quell the initial concerns content creators have.

First, the FTC is a limited government agency.  Even though this agency employs over 1,000 investigators and attorneys, they handle all types of consumer protection and privacy breach issues, not just COPPA.  As such, there's only so much attention to go around, and if you look at most of the enforcement actions taken by the FTC, it's usually against bigger companies or blatant offenders of these laws, not gray area cases or small businesses.  Pragmatically, the FTC will make sure YouTube implements a reasonable policy here and then sticks to it, and then will basically move on to other investigations and new cases.  To this end, YouTube really remains more in the crosshairs here than the content creators themselves. 

Relative to concerns that tracking bots will look for cartoon images or bright colors like in pokemon content and automatically flag that as directed to children, the enforcement of this policy necessitates more care than YouTube's automated policing of potential IP infringement.  It has already been confirmed that a human review will occur of content that may become flagged as directed to children on channels that state they are not.  And while no system is perfect, one would think a human review and actual human discourse with the parties involved would lead to proper results most of the time.  

As a result, the risk of content creators getting booted into the non-advertising, non-comment COPPA version of YouTube is small, and the risk of being fined for COPPA violations is even smaller.  The FTC has discretion to apply fines or reduce fines depending on the defendant's circumstances, and innocent content creators on YouTube are not going to be hit hard, if at all by such monetary fines.  It's not like copyright infringement where the other party is trying to maximize set damages, as in the Napster file sharing cases, so we cannot assume worst-case scenario relative to the fines.

The guidelines and rules for what is directed to children are intentionally vague, and that's because bright line rules and tests tend to fail in actual practice.  The COPPA law exists for good reason, but common sense will be applied to make sure the law doesn't harm consumers and the marketplace in a manner out of proportion to the children's privacy rights being protected.  To do anything else would jeopardize YouTube as a platform, which the company obviously does not want to have happen.

The Bottom Line is: the FTC settlement and fine against YouTube was a big deal and will lead to significant business practice changes on that platform.  However, for those content creators not really directing their content to children under 13, pragmatically any risk of losing advertising revenue or being fined by the FTC is minimal at best.  So the sky is not falling here, and following a period of initial adjustment to the new practices in early 2020, it should be business as usual for all our favorite content creators.

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Legal Geek No. 195: Future TV Tech evokes Latest Phone Innovations

Hi, and welcome back to Legal Geek. This week, we celebrate the Thanksgiving holiday in the most American way possible...by looking at future television tech that may define Black Friday deals in years to come. 

https://archive.org/details/legalgeekep195 

LG has been one of the top television manufacturers over the past decade, and the Korean company continues to innovate beyond just the resolution level.  LG previously announced in 2019 a rollable TV that can retract by rolling up into a base to make the television blend in with other furniture rather than being a static "black mirror" and centerpiece.  While that is certainly an exciting development for LED television screens, another big announcement may be coming when reviewing the recent patent application publications of this same company.

To this end, a patent application published in the U.S. from LG describes a foldable OLED television.  Much like the rolling design, the goal is to fold up the television screen into a much more compact space when not in use, which can allow for customers to enjoy having a much wider screen like a 21:9 aspect ratio without having to have that equipment always present at full size.  

According to the drawings in the patent, this television design will follow the example of some recent smart phone innovations allowing for foldable phone screens.  In this case, more folds are necessary for the large TV screen, and the patent shows six segments folding in a zig-zag or accordion style on top of one another when moving to the stowed position.  Unlike rollable TV's with a base that holds the core electronics, the foldable TV shown in the patent application proposes end frames on opposite sides that presumably hold the internal electronics for the TV, while also holding speakers and acting as stands for the screen when deployed.

Of course, LG will need to overcome the same hurdles that have plagued smart phone manufacturers like Samsung in making these foldable screens durable and reliable.  However, if LG can successfully solve the problem of a rolling OLED screen, one would think this company can also solve and bring to market some foldable option.  Regardless, until we see a more finalized design on a show floor like CES, the jury will be out on whether this future TV tech will become reality of tomorrow.

A quick legal point before we head back to turkey leftovers.  Patent applications generally publish 18 months after an initial filing, so LG has been working on this design for quite some time.  Patent publications put the world on notice regarding what companies are seeking to patent, but until the national patent offices actually examine and grant the patent, there is no enforceable right.  So LG is far from dominating the market, let alone hitting the sales shelves on Black Friday.  Nevertheless, this gives us a glimpse into the product development process and where the legal battles may be over intellectual property in the tech field for the future.

The Bottom Line is: tech products will never stop innovating, and consumers will generally continue to benefit.  As a closing note about American Thanksgiving, I want to thank Tom and Scott for continuing to make Current Geek in all its iterations and making this segment an integral part of their podcast.  Furthermore, I'm thankful for all you listeners who send feedback and suggestions, and I look forward to providing more legal knowledge and insight in 2020 and beyond.

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Legal Geek No. 194: Privacy Law Issues with Facebook and Stalking Apps

Hi, and welcome back to Legal Geek. This week, we take a look at a couple more news stories in the always evolving field of privacy law, these being related to Facebook and Stalking software apps.

https://archive.org/details/legalgeekep194  

Retina-X Studios is the maker of three stalking apps designed to keep tabs on computers or mobile devices.  These software apps are called Mobile Spy, Phone Sheriff, and Sniper Spy.  Such apps allow for real-time monitoring and reports of activities and movements of such devices, along with some blocking capabilities.  On their website, Retina-X markets these apps as useful for tracking employees use of computers as well as children.  In other words, people and devices that the software user hypothetically has control over.

However, in 2018 some of the data collected by these apps became subject to public knowledge thanks to some hackers who attacked this company and its technology.  For example, some photographs saved on phones for the user's review were revealed.  This data breach led as most do to a consumer protection complaint to the FTC, which investigated the company and eventually settled on an agreement to avoid significant monetary sanctions.

In addition to the failure to secure all data from the hackers, the FTC found that Retina-X did not do enough to ensure that the applications were used solely for legitimate tracking purposes.  Evidence supporting this conclusion included that Retina-X facilitated surreptitious use of tracking by telling customers how to keep the tracking app icon from showing on the device it was installed on.  Furthermore, the app could be installed without the knowledge or consent of the device user by bypassing manufacturer restrictions such as by jailbreaking devices.  Both of these practices opened the door for significant criminal and dangerous use of the software.

So the FTC settlement requires that the company halt sales of any software that bypasses security protections, while also making the customers affirmatively state that they will only use such apps to monitor children or employees or someone who provides written consent.  The establishment of comprehensive security protocols to protect sensitive data is also being required.  Despite the FCC efforts to protect consumers, we must all understand that such types of software exist and are easily obtained.

This week another big privacy issue hit the news about Facebook, which had its iOS app operating without user consent to activate and capture live video images with the rear-facing camera while the user was scrolling through their news feed.  The live video capture was hidden behind other onscreen content.  Whether this was intentional or an accidental bug, as Facebook assets, Facebook took swift action to patch this issue and remove the problem from the iOS app.  Even with the fix, this is another reputational hit to Facebook, with consumers growing ever more sensitive and aware of the lack of data privacy on that social networking platform.

The Bottom Line is: consumers and private citizens have a lot of help on their side in the battle over data and privacy, including the government agency the FTC as well as all the technophiles who keep close tabs on functionalities within apps like Facebook.  Nevertheless, we would all be wise to be aware of how open and at risk our sensitive and private data and information can be, so that we can opt-in or take precautions based on our own personal preferences.

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Legal Geek No. 193: Monopoly and Hasbro define cutting edge in EU Trademark Law

Hi, and welcome back to Legal Geek. This week, we review how Hasbro and its Monopoly brand have surprisingly ended up being the center of a seminal case changing how trademark filing practice works in the European Union.

https://archive.org/details/legalgeekep193 

Like many other jurisdictions, the European Union allows trademark registrations on brands and logos that have not yet gone into actual use, but eventually use in commerce must be proven to confirm the validity of the trademark.  Whereas in the U.S. applicants are give up to 3 years to prove use to finalize a registration, in the EU a five-year grace period is provided before proof of use is necessary.  The EU is more liberal as well in that during the grace period, the trademark rights are still enforceable, unlike the U.S. where use is required before final registration or enforcement.

As a result of this set of laws, many trademark owners in the EU have commonly refiled new applications covering their brands before the expiration of the 5 years, thereby resetting the clock on the grace period and avoiding the need to prove use through evidence.  However, this practice is in jeopardy after a case involving Hasbro and its famous Monopoly brand.

Hasbro followed the common practice of re-filing trademark applications for the Monopoly brand in several classes of goods and services before the end of a 5-year grace period in a pending prior registration.  Hasbro's most recent re-filing came under a cancellation attack from a company called Kreativni Dogadaji, specifically for violating a rule prohibiting bad faith in trademark filings, this rule demanding honest commercial and business practices from EU applicants.  While an administrative review panel originally favored Hasbro and the historical re-filing precedent or practice, an Appeal Board reversed this decision last month and sent the EU trademark world into a new reality.

To this end, the Appeal Board held that when a party seeking cancellation of a trademark uses objective factors to support a claim of bad faith, the burden of proof shifts to the trademark owner to prove its use of good faith in the filing.  That can be incredibly difficult to do when the new application contains identical or substantially similar marks or goods and services covered, as was the case in the Hasbro case.  Hasbro appeared to admit clearly on the record that an important reason for the re-filing was the resetting of the grace period to minimize administrative burden of maintaining the trademarks, and the Appeal Board latched heavily onto this in their decision.

So the Monopoly brand is vulnerable to more competition in Europe, which puts Hasbro in a somewhat similar spot as in the U.S., where the suffix -opoly has been deemed to be descriptive and allowed for all similar game competitors to use.  More importantly, the overall filing and maintenance strategy for trademarks in the EU has changed for all brand owners, as now avoiding the proof of use requirement is very difficult.  And it all stems back to a case about the tabletop game Monopoly, go figure.

It will be interesting to see how filing strategy changes for European brand owners moving forward.  Further court decisions are also due which may vary the outcome from the initial ruleset put out in the Monopoly decision.

The Bottom Line is: while the Appeal Board made a drastic change in trademark law and practice in the EU with this decision by shifting the burden of proof in a bad faith/good faith analysis, the end result may be an EU trademark system more in line with how brand owners must prove use to actually obtain an enforceable registration in many other jurisdictions.  Consistency is a good thing for companies doing worldwide business, so this may be a welcome change despite the increased costs that will be incurred for collecting and submitting the proof of use evidence when the grace periods have run out.  One might say the EU no longer has a monopoly on enforcing non-used trademarks, but we don't want to be too on the nose.

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Legal Geek No. 192: A Spooky Legal Battle over Vampire Drinks

Hi, and welcome back to Legal Geek. This week, we celebrate Halloween with a review of a recently-filed lawsuit over Vampire drinks, and we don't mean blood.

https://archive.org/details/legalgeekep192

Happy Halloween everyone, and I hope you find plenty of treats and not many tricks. In the legal world, we have many tricks up our sleeve, including reverse confusion in trademarks. But before we bite into that concept in detail, let's explain the conflict leading to the case we're covering today.

Vampire Family Brands is a California company that has sold Vampire-branded wine since 1988. In the 3 decades of operation, Vampire has extended itself into other fields including Vampire Taco and Vampire Gourmet Bloody Mary Cocktails. Nothing is more on brand than using Vampire for a bloody mary, after all. Vampire has sued the owners of the Applebee's brand and their major franchisees for alleged trademark infringement.

Applebee's restaurants introduced a $1 cocktail called the Vampire cocktail this month, a drink that is a Tiki beverage consisting of rum and various fruit drinks, served with a plastic set of vampire fangs. This is being done as a loss leader to bring in customers to purchase meals at Applebee's, and Vampire Family Brands did not take kindly to this invasion of their dark-themed liquor space. So this lawsuit was filed claiming that Applebee's is infringing the Vampire trademark in this endeavor.

The legal theory of the case is what is known as reverse confusion. Unlike regular consumer confusion, where a usually-smaller startup infringes the branding of a more established company that has built up consumer goodwill in the brand, reverse confusion is defined by having a powerful entity upstart that threatens to link itself to a smaller pre-existing brand. In other words, Applebee's, the new kid on the block to Vampire drinks, has large resources to market and advertise to consumers, which may lead to the consumer confusion that Vampire Family Brands is an unauthorized user of trademarks that the bigger company Applebee's owns.

Vampire Family Brands does have several federal trademark registrations on various glassware and food and beverage products, including restaurant and bar services. This entitles them to a presumption of nationwide rights and that means a valid case can be made against Applebee's here. That being said, the alcoholic drink itself is not identical to anything Vampire Family Brands has registered as a covered good or service, nor is the Tiki drink identical to anything Vampire Family Brands offers. That gives Applebee's a counterargument to make, but the Vampire drink is really being used to promote restaurant and bar services, which is covered by a live registered trademark. The facts seem to favor the small company Vampire, so perhaps Applebee's will have to submit to a settlement here to avoid being put in a casket of damages.

The Bottom Line is: October never fails to give us a good spooky themed legal case, and this year it is a battle of Vampires that Bram Stoker would be proud of. This proves the importance of big companies doing some clearance research before launching big marketing campaigns and new brands, as the Vampire trademarks would have been readily apparent upon a quick search of the US trademark database. Applebee's could've avoided hot water here, but maybe they will find a wooden cross or silver dagger to save them in this legal fight.

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