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Topics covered in our latest newsletter:
Over 2000 Applications Received for the new gTLDs; ICANN Announces Intentions to Re-Open Application Period
ICANN announced that over 2000 applications have been received for the new gTLDs, with the potential for even more as there are plans to briefly re-open the application period following a technical glitch that left the application system temporarily unavailable. The final number far exceeds expectations, with ICANN having officially budgeted for around 500, and industry speculation that actual interest would be closer to 1000.
Due to a technical issue, ICANN took the application system offline on April 12. The re-opening is tentatively set for May 22, and will likely extend for 5 business days thereafter to allow users who registered by the March 29 cut-off date to review and complete their applications.
The identity of the vast majority of applicants remains unknown, although a few have voluntarily revealed themselves, and include intended gTLDs spanning geographical locations, brands, and generic terms such as .tokyo, .chicago, .green, .google, .godaddy, .music (sought by multiple applicants ). Although some brand owners have revealed intent to apply for one or multiple brands, the majority of those voluntarily revealed at this point appear to be generic, geographic or community related. Although no definitive date is set for the reveal of submitted applications, it could occur as late as the end of June.
Even with submitted expectations far exceeding estimates, the actual number of successful applications that will eventually go online is unpredictable. Each one will need to undergo the rigorous technical review, multiple claims for the same string will need to be resolved, and there are still opportunities for third parties to raise objections.
—Jeannine Rittenhouse
John Wiley & Sons, Inc. v. Kirtsaeng, No. 09-4896-cv (2d. Cir. August 15, 2011)
On April 16, 2012, the Supreme Court granted a writ of certiorari to review the decision from John Wiley & Sons, Inc. v. Kirtsaeng, No. 09-4896-cv (2d. Cir. August 15, 2011), holding that the first sale doctrine does not apply to copies of copyrighted material made outside the United States. The Supreme Court will again seek to answer whether the phrase "lawfully made under this title" means manufactured within the United States only or manufactured in accordance with U.S. copyright law, whether produced in the United States or abroad. The decision has the potential to impact the ever-growing e-commerce section, with companies like eBay and Amazon.com thriving on gray or secondary market goods. It has also the potential to greatly affect consumers, who will likely see less "discount" options available online if the decision is upheld.
In John Wiley & Sons, Inc. v. Kirtsaeng, book publisher John Wiley & Sons, Inc. filed suit against Kirtsaeng after finding that the defendant had been re-selling foreign editions of textbooks produced by the company. Kirtsaeng was a college student who had recently moved to the U.S. from Thailand. To make extra money to pay for school, he would have friends and family abroad send him foreign editions of textbooks printed by a Wiley subsidiary in Asia. Kirtsaeng chose the international versions, as he was aware that such versions used different paper and bindings and fewer colors, and that as a result the company offered such books for lower prices. Many of these books came with disclaimer language indicating that they were to be sold only in particular countries (the United States not included). He made over $1 million selling the books online. The district court rejected Kirtsaeng's first sale defense, and found him liable for willful copyright infringement, setting damages at $600,000. Kirtsaeng appealed, and the 2d Circuit affirmed the lower court decision, however finding it a "close call."
The first sale doctrine, codified at 17 U.S.C. § 109, provides that notwithstanding the provisions of Section 106(3)... the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord. The right to distribute ends, however, once the owner has sold that particular copy. See 17 U.S.C. § 109(a) & (c).
In reaching its decision as to whether or not this defense also applies to works produced abroad, the Court focused on interpreting Congress's intended meaning by the language "lawfully made under this title." It looked at the interplay between Section 602(a)(1) of the Copyright Act and Section 109, where the first sale doctrine is codified. Section 602(a)(1) provides that importation into the United States of copies acquired outside the United States without permission constitutes an infringement of the exclusive rights granted by the Act per Section 106. The first sale doctrine, however, is limited in Section 109 to say notwithstanding the provisions of Section 106. The Court noted this tension, with Section 602(a) granting broad control to copyright owners over importation, and Section 109 limiting the extent to which a copyright owner may limit distribution following an initial sale. To resolve the issue, the Court looked elsewhere in the Act, noting that the Act refers to activity abroad elsewhere (i.e., in Section 104). In addition, the Court reasoned that had Congress intended the first sale doctrine only to apply to works made in the United States, it would have explicitly said so (as it does in Section 1006(a)(1). Finally, it noted that Section 602(a)(1) would have little force if the first sale doctrine were applicable to every copy lawfully manufactured abroad. Thus, it found that "lawfully made under this title" means made in the United States, and held the first sale doctrine defense inapplicable. It noted, however, that it was a "particularly difficult question of statutory construction in light of the ambiguous language of [section] 109".
This decision went further than the Ninth Circuit did in Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008), decided in 2011. In that case, the Supreme Court upheld a lower court ruling finding that the first sale doctrine did not apply to works made abroad unless the copyright owner had already approved of an earlier sale within the United States. The ruling was a split decision, however, which always results in the lower court ruling being upheld, and thus was not precedential. In that case, Omega had produced watches in Switzerland for sale by authorized distributors to consumers outside the United States. Unidentified third parties then purchased the watches and resold them to a New York company, which in turn sold them to Costco for resale to consumers in California. Because Omega had not already authorized any sale of the Switzerland produced watches within the United States, the first sale defense was unavailable to Costco.
In his petition for writ of certiorari, Kirtsaeng alleges that there is actually currently a three way split on the issue, alleging that beyond the 2nd and 9th circuit decisions, the 3rd Circuit in Sebastian International Inc. v. Consumer Contacts (Pty) Ltd., 847 F.2d 1093, 7 USPQ2d 1077 (3d cir. 1988), also made a different finding. In that case, the Court found that Section 602(a) defines unauthorized importation as an infringement of the Section 106(3) exclusive right to copy, but that it is not a separate exclusive right in and of itself. Because the exclusive right to copy is specifically limited by the first sale provisions, then it necessarily follows that the right to control importations is as well. Thus, once a copyright owner authorizes a sale of its work abroad, there is no infringement if it is later imported back into the United States. At that point, the first sale doctrine has extinguished the copyright owner's right to control importation per Section 602(a). Essentially, the Court reasoned that the importation prohibition does not enlarge distribution rights, but rather serves only as a specific example of how rights per section 106, which are still subject to the first sale limitation, could be infringed.
Amicus briefs have been filed by numerous parties arguing that the correct interpretation of "lawfully made under this title" should be made according to or in conformance with the Copyright Act, and not made in the United States, including the Retail Industry Leaders Association, the American Free Trade Association, eBay Inc., the NetCoalition, and the Internet Commerce Coalition, amongst others. In dissent, Judge Garvan Murtha agreed that the focus should be on whether the copy was manufactured lawfully (i.e., authorized by the copyright owner), rather than where it was manufactured. He argued that the decision essentially provides more copyright protection to foreign made works than domestic, providing an incentive for companies to move manufacturing abroad, which could be harmful to the United States economy. Critics also argue that the 2nd Circuit decision makes the sale of lawfully purchased items risky, as in many cases it may not be clear where they were manufactured, and will raise prices for consumers when fewer discount products are available. Only time will tell whether the Supreme Court will be swayed more by policy implications such as these, or statutory construction.
—Carlynn Ferguson Davis
Protecting Trademark Rights from Infringement by the new gTLDs
Over 2000 applications have been filed by 1,268 applicants. It is unclear what the total number of generic top level domains will be, but appropriately objecting based on a trademark owner's legal rights will protect against potential infringers. Given the high costs of applying for a generic top level domain ($185,000), it is unlikely for a run of the mill cyber-squatter to hold a gTLD in the hopes of selling it to a trademark owner. Nevertheless, it is entirely plausible that an applicant for a gTLD runs afoul of a trademark owner's legal rights.
In these cases, appropriately objecting to the application during the seven-month Objection Period will protect a brand owner's legal rights. Although there are three other basis for objections: String Confusion, Limited Public Interest and Community Policy, most trademark owners are likely to only have standing based on the Legal Rights basis.
Instead of objecting, trademark owners can wait until issuance of the gTLD and utilize the Post Delegation Dispute Resolution Procedures for Trademarks. Also, the traditional remedies of trademark infringement suits, UDRP complaints and anti-cyber-squatting claims are still available.
To object during the Objection Period, the Objector has to satisfy the standing requirement to file a formal objection. Generally, an existing legal right holder will be able to establish standing to object based on existing registrations or unregistered trademarks. The objection process is not for the faint of heart, it is an expensive proposition. For objections based on Legal Rights, the filing fees alone are in the range of $10,000-$20,000. The Legal Rights based objections are handled by the Arbitration and Mediation Center for the World Intellectual Property Organization. Generally, the requirements for an Objection are as follows:
- Objections must be filed electronically and in writing by the posted deadline.
- They must be filed in English.
- Objection must be based on a single ground and can only target one application. A separate objection must be filed for each additional ground or application. Fees for each objection must be paid separately.
- Name and contact information for each objector must be specified.
- Objections must include a statement of the basis for standing and a description of the basis including: the specific ground upon which the objection is being filed and a detailed explanation of the validity of the objection and why it should be upheld, as well as any documents supporting the basis.
- Objections are limited to 5000 words or 20 pages (excluding attachments), whichever is less.
The filing of an objection will lead to an internal review by the Dispute Resolution Service Provider (DRSP) for a determination on whether the objection meets the formal requirements. If it meets the formal requirements, the objection will be accepted for processing.
Within thirty days from the closing of the objection window, ICANN will publish a notice containing information on all of the objections to a particular application.
The Applicant will then have thirty days to prepare and file a response. A panel of experts will be selected within thirty days of receiving the response. Within ten days of the panel being appointed the DRSP will send a cost estimate to the Objector and Applicant. The Objector and Applicant will then have ten days to submit their payments in advance.
The panel will then have discretion to issue a decision upon the written materials. The Panel may provide leave to submit additional written materials or conduct a hearing. Most matters will be decided based on the materials that are submitted and based on principles of international law. The Panel must render its decision within 45 days of being appointed to a case.
Reviewing the published list of gTLDs applied for and filing an appropriate objection can be an important part of a brand owner's trademark policing policy.
—Vihar R. Patel
Disclaimer: The contents of this newsletter are presented for information purpose only, and as such are not intended to constitute legal advice and should not be construed as such or acted upon without seeking advice of legal counsel. This information is not intended to and shall not create an attorney-client relationship of any kind or nature with IpHorgan Ltd. Please contact the firm with queries, concerns or for further details regarding the information presented herein. The entire contents are current only as of the date of the newsletter and are not to be interpreted as the opinions of our clients past, present, pending or future. (c)2012, IpHorgan Ltd. All Rights Reserved.
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Newsletter Volume 76, May 2012
