Phantom trademark of the Opera: Dastar bars Slep-Tone’s claim

(There are a lot of Slep-Tone cases floating out around there. I like this one.)

Slep-Tone Entertainment Corp. v. Canton Phoenix Inc., 3:14-cv-00764 (D. Or. Sept. 4, 2014) (magistrate judge)

Slep-Tone, a maker of karaoke CDs, alleged that defendants (a bar) possessed a hard drive storing over 24,000 unauthorized karaoke tracks “bearing Slep-Tone’s trademarks and distinctive trade dress,” and used those tracks to provide karaoke entertainment services to their customers without a license.  The marks display as part of the audio-visual display of a karaoke track when it’s played.  But Slep-Tone apparently won’t or can’t bring a copyright claim (indeed, elsewhere it’s being sued for infringing music companies’ copyrights in creating its karaoke CDs) so it brought trademark claims under state and federal law. Slep-Tone alleged that defendants’ customers were likely to be deceived by the graphical display of the marks during karaoke performances into believing that the tracks were properly licensed or legally purchased.  (Query whether it’s plausible that reasonable bar consumers would have any belief at all about this unless prompted.)
Defendants argued that this was a job for copyright.  The judge agreed that “not all potential consumer confusion involving commercial use of a product bearing an enforceable trademark (or bearing protectable trade dress) can give rise to a Lanham Act claim,” particularly when there was an overlap with copyright.  Though Slep-Tone’s claims didn’t depend on Fox’s rejected theory of required attribution in Dastar, Dastar nonetheless provided guidance by reaffirming the rule that the Lanham Act doesn’t provide protections of the same nature as those provided by copyright or patent.  In general, copying is allowed unless an IP right like copyright or patent protects it.  (What about a disclaimer requirement to harmonize TM with copyright/patent?  Since disclaimers often don’t work, especially when they’re about matters that are immaterial to most consumers, I’d suggest it doesn’t make sense to make protection from trademark claims based on copying an expressive work or functional item turn on whether or not there was some sort of disclaimer.)
So, in Dastar and Traffix, for example, the Court cautioned against “misuse or over-extension” of trademark and related protections into areas traditionally occupied by patent or copyright. Dastar rejected Fox’s theory because its interpretation of the Lanham Act “would permit trademark rights to be enforced to  prohibit the public from copying and using intellectual property, which is beyond the scope of trademark law.”  Dastar’s reasoning was not limited to cases in which the copyrights at issue were expired: “either in the absence of an enforceable copyright or where a copyright-holder elects not to invoke its copyright, under Dastar the protections of the Lanham Act cannot be construed as ‘dropping down’ to provide protection exclusively available under copyright law.”
Ninth Circuit cases similarly establish “a bright line between rights that may properly be enforced under copyright law and the protections available under the Lanham Act.”  Smith v.
Chanel, Inc., 402 F.2d 562 (9th Cir. 1968), held that someone who’s copied an unpatented article sold under a trademark can use the mark in advertising to identify the copied product, absent misrepresentations or confusion about source or sponsorship.  As Smith said, “it is difficult to see any other means that might be employed to inform the consuming public of the true origin of the design.” The alternative would be to convert a monopoly on a mark to a monopoly on a product.  Lack of protection against deliberate copying is not the unintentional result of the current law but rather the product of a congressional decision, and the copyist is tolerated for the greater public good. “Viewed from the narrow perspective of trademark law, copying the intellectual proprty of another, even if for the purpose of commercial gain, is not wrongful (notwithstanding  its potential wrongfulness relative to the metric of copyright or patent law).”
Nintendo v. Dragon Pac. Int’l, 40 F.3d 1007 (9th Cir. 1994), approved both copyright and trademark infringement damages against the argument that this was an inappropriate double recovery. But the Nintendo court “finely parsed the defendant’s complained-of conduct to detrmine which elements of the conduct specifically infringed the Lanham Act, and which the Copyright Act.”  The defendant imported video game cartridges with unauthorized copies of Nintendo’s games; the cartridges “bore the plaintiff s trademarks, and indeed were represented as the plaintiff s products.”  The Ninth Circuit found that there were separate wrongful acts, and that if the defendant had sold the cartridges without representing that they were Nintendo’s, it still would have infringed the copyright.  If the defendant had represented that its cartridges were Nintendo’s without copying, it still would have infringed the trademark.  (Note that the copyright infringement version would certainly still involve Nintendo’s marks appearing in the game itself.)  Thus, separate damage awards were allowed.
Then there’s Comedy III Prods., Inc. v. New Line Cinema, 200 F.3d 593, 595 (9th Cir. 2000). The owner of the Three Stooges’ trademark rights sued New Line for using a public domain clip from a Three Stooges film in the background of a scene in a New Line film.  The Ninth Circuit characterized the plaintiff’s argument as “fanciful,” and rejected it in “summary fashion,” stating that “the Lanham Act cannot be used to circumvent copyright law.”  The court further noted that Comedy III’s argument was that the Stooges’ images could be protected by the Lanham Act “because it contains elements that in other contexts might serve as trademarks.”  If New Line had used the Three Stooges’ likenesses on T-shirts, maybe there’d be an arguable trademark claim, but the claim at bar intruded “squarely into the dominion of copyright law,” by claiming trademark coverage of “a piece of footage taken directly from a film by The Three Stooges.”
This reasoning applied with equal force where the underlying material was not in the public domain. Comment: The way I’d put it for these purposes is that if the trademark claim stems solely from the copying of an expressive work, rather than from the separable packaging of that work (and images of/metadata about the expressive work should be considered inseparable), then copyright law must trump trademark law.  In other words, an expressive work’s producer shouldn’t be able to create a trademark claim by embedding a network bug or other logo in its copyrighted work.
Though none of the cases was precisely on point, together they guided the judge to the conclusion that Slep-Tone’s claim was untenable.  Slep-Tone alleged facts tending to establish that its tracks were derivative works created based on underlying works, and that defendants’ hard drive contained unlicensed, unauthorized copies thereof.  The allegations, if true, established unauthorized reproduction and public performance; it was outside the scope of the pleadings to speculate about why Slep-Tone didn’t sue for copyright infringement.
The question was whether calling defendants’ conduct trademark infringement would “impermissibly intrude on the exclusive bailiwick of copyright law.”  It would.  Under Smith, the presence of Slep-Tone’s marks at the beginning of a track, and the display of its trade dress, “is not calculated to cause consumer confusion but rather performs the entirely appropriate function of conectly identifying the provenance of the tracks.” Under Dastarand Comedy III, it would infringe to sell CDs labeled with Slep-Tone’s marks or advertised Canton Phoenix as offering “Sound Choice” karaoke services. But copying or publicly performing the tracks doesn’t infringe.
In a footnote, the judge noted that other opinions had disagreed on the theory that Slep-Tone wasn’t seeking to protect its “intellectual content” but rather to prevent an unauthorized third party from using Slep-Tone’s marks to create the impression that it was Slep-Tone’s licensee. [The problem with that, of course, is that Slep-Tone has embedded its marks in expressive works.  The “use” is the copying.]
Ultimately, “a trademark holder may not rely upon trademark law to safeguard rights available only under the Copyright Act.”  And here the judge offers a fantastic example:
[B]ecause the 1925 silent film The Phantom of the Opera is in the public domain, it is uncontroversial that it may be performed publicly, including for the purpose of commercial gain, and that copies of the 1925 public-domain version of the film (as opposed to more recent re-edits which may be subject to copyright as derivative works) may be (and routinely are) packaged under a new label and sold to the public for commercial benefit.  The fact that the public-domain film opens and closes with Universal Studios’ registered and still­enforceable trademarks is no obstacle to either public performance or sale of the public-domain film, so long as the packaging or labeling of the medium in which the copy is fixed does not bear the Universal Studios trademark or any information likely to confuse consumers as to whether the repackaged copy is a Universal Studios product. 
Defendants’ alleged conduct was no different.  Slep-Tone’s remedies would sound exclusively in copyright. 
The judge also recommended dismissal of Slep-Tone’s state law claims on the merits, not just for lack of federal subject-matter jurisdiction.  The state law claims would stand or fall with the Lanham Act claims.  For state statutory trademark infringement, defendants’ use of the marks wasn’t “in connection with” sale, distribution, offer for sale or advertisement of goods or services, but rather was in connection with public performance of the karaoke tracks.  [Use as a mark can be used as spackle to solve complicated trademark problems!]  The fact that defendants allegedly derived economic benefit from the performance isn’t enough to create a sale, distribution, offer for sale, or advertisement.  Likewise, Oregon common law requires competition, and defendants don’t compete with Slep-Tone in  the production, marketing, or sale of karaoke CDs, nor would the presence of Slep-Tone’s marks suggest that the tracks were defendants’ products.

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