On February 9, 2023, the Wage & Hour Division of the Department of Labor issued a Field Assistance Bulletin (No. 2023-1) on (1) how to ensure workers who telework are properly paid in accordance with the Fair Labor Standards Act (FLSA), (2) how to apply FLSA’s protections to nursing employees to express milk while teleworking from their home or another location, and (3) how to apply eligibility rules under the Family and Medical Leave Act (FMLA) when employees telework or work away from an employer’s facility.
Hours Worked Under the FLSA
The FLSA requires employers to pay nonexempt employees for all hours worked regardless of the location of work. “Hours worked” includes not only active productive labor but also time spent on short breaks of 20 minutes or less. Whether an employee works from home or at the employer’s worksite, these short breaks must be considered work time.
Bona fide meal breaks (usually 30 minutes or longer), when an employee is completely relieved from work duties, are not considered hours worked nor are breaks that are longer than 20 minutes when the employee can effectively use the time for their own purposes. Again, this rule applies regardless of where the employee performs his work or take his breaks.
Break Time for Pumping Breast Milk
The FLSA requires employers provide covered employees with “reasonable break time” to express breast milk for up to one (1) year after the birth of their nursing child, as well as a location to express milk that is shielded from view and free from intrusion by co-workers and the public. This applies to employees who work at their worksite and to employee who telework from home or another location.
Employers cannot deny employees the right to take this needed break. While employers are not required to compensate nursing mothers for these breaks, an employer that compensates employees for breaks must compensate a nursing mother who uses her break time to express milk. Additionally, if an employee is not completely relieved from duty during these breaks, the time must be compensated as work time.
Telework and the Family and Medical Leave Act
The FMLA provides eligible employees with job-protected leave for qualified medical and family reasons. To be eligible for FMLA leave, an employee must be employed at a worksite where 50 or more employees are employed by the employer within 75 miles of that worksite, and the employee must have worked for at least one year and worked at least 1,250 hours in the year prior to taking leave. The law requires employers to maintain employees’ health benefits during FMLSA leave and to restore employees to their original or equivalent position when they return to work.
Employees who work remotely are entitled to the same FMLA benefits as those who work at on site. For FMLA eligibility purposes, a teleworker’s worksite is the office where the employee reports for work or the office from where they receive their assignments.
The Bottom Line
Employees who work remotely, whether from home or another location, are still entitled to the rights and benefits provided by the FLSA and the FMLA (if applicable) as set forth above. If you have any questions navigating issues arising under these laws or other employment-related matters, please feel free to contact Ellen.
Ellen M. Leibovitch
Board Certified Labor & Employment Lawyer
ASSOULINE & BERLOWE, P.A.
2385 NW Executive Center Drive, Suite 100 Boca Raton, FL 33431
In a rare show of bipartisan cooperation, the Speak Out Act (SOA) was approved by the House of Representatives November 16, 2022 and signed into law by President Biden on December 7, 2022.
The SOA limits the enforceability of non-disclosure and non-disparagement clauses in settlement agreements entered into before an allegation related to sexual assault or sexual harassment has been made or before a claim has been filed by an employee (or an independent contractor). Note that the SOA applies only to pre-dispute agreements.
After a dispute has arisen, i.e., after an employee has alleged sexual harassment or sexual assault in a charge of discrimination or a lawsuit, employers can still include enforceable non-disclosure and non-disparagement clauses in settlement agreements. Note that the SOA does not define “dispute,” so whether an employee’s making a complaint to a supervisor or human resources without a formal filing is sufficient to create a dispute is unclear. I would argue that an internal complaint that puts the employer on notice of a dispute is sufficient.
Accordingly, if an employee signs a non-disclosure or non-disparagement agreement before an allegation for sexual harassment has been made, the employer may not be able to enforce those terms against the employee. Conversely, after the employee complains of harassment and the employer offers to settle the matter and requires the employee to sign a non-disclosure or non-disparagement agreement as part of the settlement, then such terms in the settlement agreement are enforceable.
Important to note is that the SOA was enacted to prevent situations where alleged victims of sexual harassment or assault cannot, due to having previously signed a non-disclosure and non-disparagement agreement, speak publicly about what occurred. Based on the recent enactment of the SOA, employers should now review (or have legal counsel review) employment agreements, separation agreements, confidentiality agreements, arbitration agreements, and employment policies to ensure that any non-disclosure and non-disparagement clauses therein exclude unknown disputes arising from sexual assault and sexual harassment allegations and that such documents are otherwise compliant with the SOA.
The SOA follows the enactment of the “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act,” another federal law that prohibits employers from requiring arbitration of sexual harassment or sexual assault claims and even after an employee has signed an agreement requiring arbitration of these matters.
The SOA does not apply retroactively to agreements made before December 7, 2022 and does not bar non-disclosure and non-disparagement agreements entered into in settlement of other employment-related disputes.
For any inquiries regarding the SOA or any other employment-related matter, please feel free to contact Ellen.
Ellen M. Leibovitch
Board Certified Labor & Employment Lawyer
ASSOULINE & BERLOWE, P.A.
2385 NW Executive Center Drive, Suite 100 Boca Raton, FL 33431
The recipe to make Coca Cola is one of the oldest trade secrets. But what is a trade secret and how do you protect it?
The Defend Trade Secret Act (DTSA) was signed into federal law in 2016. Since being enacted, the parameters detailing how to interpret the DTSA has worked its way through the federal court system, as is typical for any new federal law. However, with the proliferation of remote work starting in 2020 due to the Covid-19 pandemic, maintaining trade secrets by remote workers has become a challenging task. The safeguards required for on-site employees must be revised to account for employees accessing trade secrets remotely.
The DTSA defines a trade secret as:
all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if
(A) the owner thereof has taken reasonable measures to keep such information secret; and
(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.
The DTSA requires an owner to take “reasonable measures” to keep trade secret information secret, but the term “reasonable measures” is not defined in the DTSA. Courts have held that “reasonable measures” include implementing written confidentiality policies, execution of nondisclosure agreements, limiting access to the trade secrets to personnel on a “need to know” basis using multi-layer credentialed access, and placing restrictions on the unauthorized transfer and use of company owned data.
Before addressing how such reasonable measures can be extended to employees working remotely, the following should be considered:
Is the employee at a home office or in a public setting?
Do other persons have access to the employee while viewing the trade secret?
Is the trade secret being accessed on an open Internet connection?
How long is the trade secret available for viewing once opened?
Is the trade secret downloaded or stored on the remote employee’s local computer indefinitely?
Is the trade secret itself password protected and not only credentialed access for downloading the trade secret?
Should certain trade secrets only be accessible on-site at the employer’s facilities?
Failure to take reasonable measures to protect a company’s trade secrets could result in the trade secret losing its protected status. If that occurs and the trade secret is made public and accessible to competitors without recourse, the company may lose its competitive advantage.
An employer should have a robust employee manual that details how trade secrets are treated, who should have access to the trade secret depending on their status/role within the company, and other industry-specific factors to ensure the trade secret remains secret.
Another aspect of the DTSA is a safe harbor provision for employees (whistleblowers) who disclose a trade secret solely for the purpose of reporting or investigating a suspected violation of law or in a lawsuit made under seal. Employers are advised to pay close attention to the notice provision within the whistleblower section of the DTSA since compliance with the DTSA whistleblower notice provision could affect the ability of the employer to seek certain remedies. To be clear, employers must notify employees of the existence of whistleblower immunity under the DTSA in order to seek punitive damages and attorney’s fees against a former employee for trade secret misappropriation.
Notice of whistleblower immunity under the DTSA should be included in employee manuals, policies, confidentiality and other employment-related agreements. Employers should look at the language in these materials to ensure protection of trade secrets in the new remote work world, which certainly appears to be here to stay. If proper safeguards are not in place, the employer may lose trade secret protections and leave their trade secrets unprotected.
For any questions about the DTSA and complying with its requirements to protect your important trade secrets, contact Greg Popowitz, Board Certified Intellectual Property Attorney, and Ellen Leibovitch, Board Certified Labor and Employment Attorney.
So far in 2022, GS Holistic, LLC has filed 98 lawsuits in Florida federal courts for trademark infringement to enforce its rights in various brands for vape products and accessories, including G-Pen and Stündenglass. Most consumers expect a cease and desist letter before a party initiates a lawsuit but that is not required. A plaintiff does need to conduct its own due diligence before filing a lawsuit to assess the merit in its claims. If a lawsuit is baseless or frivolous, the plaintiff may be subject to sanctions under Rule 11 of the Federal Rules of Civil Procedure.
To assess the infringement, a plaintiff may use a third party investigator to order the allegedly infringing product. When the product is received, the plaintiff assesses whether or not the seller’s product is infringing any of their intellectual property, including trademark rights. If yes, the plaintiff may file suit and use the investigator’s order as evidence of infringement.
That is the tactic in most of GS Holistic’s cases. Given the volume of federal lawsuits GS Holistic has filed in Florida this year, use of their brands G-Pen and Stündenglass are prevalent across the state. As part of a trademark owner’s rights is the obligation to police against unauthorized use of confusingly similar marks. If you suspect there is infringement, you should actively enforce your rights. If not, you may lose your trademark rights.
In case of trademark infringement, defendants should look at the DuPont factors to assess the strength or weakness of the plaintiff’s trademark infringement claim. A defendant should also look to affirmative defenses, such as laches, statute of limitations, and invalidity of the underlying trademark registration. Being served with a federal trademark infringement lawsuit can be daunting, but engaging competent intellectual property counsel will help you assess the claims and develop a strategy on defending the case, including claims against the individual owners of the entity.
For any questions about your Intellectual Property questions, please contact Greg below:
The third quarter of 2022 has seen a dramatic uptick in incidences of federal cryptocurrency litigation. The common questions that are being asked of the courts are whether certain cryptocurrency assets are to be treated as a commodity and/or a security? Investment groups, the Commodity Futures Trading Commission (CFTC), and the Securities Exchange Commission (SEC) have begun filing a host of lawsuits across the federal district courts, five major lawsuits alone in the months of September 2022 and October 2022. Perhaps, this is indicative of an uptick in cases being filed across other jurisdictions.
What are Securities?
Before diving further, we should look to the Securities Exchange Act’s definition of what a “security” is, and it is defined broadly to include, among other things, stocks, bonds, debentures, investment contracts, a variety of other instruments, or, “in general, any instrument commonly known as a ‘security.’” 15 U.S.C. § 78c(a)(10). Yet, the definition of security expressly excludes “currency or any note, draft, bill of exchange, or banker’s acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.” 15 U.S.C. § 78c(a)(10).
In general, all securities offered in the United States must be registered with the SEC or must qualify for an exemption from the registration requirements. Securities which are generally exempt include government bonds, agencies, municipal bonds, commercial paper, and private placements. If a broker or dealer is going to be effecting transactions in securities for an account or others, or for their own accounts, they are generally required to register with the SEC and join a “self-regulatory organization.” 15 U.S.C. § 78o. Like with registering securities, the law does have exemptions for brokers and dealers who do not have to register.
This appears to be where selling and marketing cryptocurrency assets skates a very skewed line and raises questions for both investors and regulators as to whether cryptocurrency assets should in fact be considered a security and be registered with the SEC.
The SEC Laws at issue
In general, issues have arisen with cryptocurrency assets in the context of whether investment contracts exist. The United States Supreme Court in the Howey decision, and its subsequent case law, found that investment contracts exist when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others. SEC v. W.J. Howey Co., 328 U.S. 293, 66 S.Ct. 1100, 90 L.Ed. 1244 (1946). The Howey analysis applies to any contract, scheme, or transaction, regardless of whether it has any of the characteristics of typical securities. https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets#_ednref6. Depending on the facts or circumstances surrounding an individual case, it is possible for a cryptocurrency asset to be considered a security by virtue of it being an investment contract.
If a cryptocurrency asset is deemed to be a security, a broker or dealers trading of an unregistered asset could lend itself to potential liability. Section 10(b) of the Securities Exchange Act of 1934 makes it unlawful to “use or employ, in connection with the purchase or sale of any security” a “manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe.” 15 U.S.C. § 78j(b). Further, SEC Rule 10-b5, makes it unlawful for any person to defraud or deceive someone, including through the misrepresentation of material information, with respect to the sale or purchase of a security.
Taking the fraud liability further, the offer and sale of securities, by the use of the means and instrumentalities of interstate commerce, directly or indirectly have: (a) employed devices, schemes and artifices to defraud; (b) obtained money or property by means of untrue statements of material fact or by omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaged in transactions, practices, or courses of business that operated or would operate as a fraud or deceit upon the purchasers of such securities under Section 17(a) of the Securities Exchange Act. 15 U.S.C. § 77q.
Section 5(b) of the Securities Exchange Act makes it unlawful for any person to directly or indirectly: (a) make use of means or instrumentalities of transportation or communication in interstate commerce or of the mails to sell, through the use or medium of a prospectus or otherwise, securities as to which no registration statement was in effect; (b) for the purpose of sale or delivery after sale, carry or cause to be carried through the mails or in interstate commerce, by means or instrumentalities of transportation, securities as to which no registration statement was in effect; and (c) make use of means or instrumentalities of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy, through the use or medium of a prospectus or otherwise, securities as to which no registration statement had been filed. 15 U.S.C. § 77e(a) and (c).
Recent SEC Cases
Securities and Exchange Commission v. Chicago Crypto Capital LLC et al
In the Northern District of Illinois, the SEC has brought a civil action against Chicago Crypto Capital LLC (“Chicago Crypto”), its president and sole owner Brian B. Amoah, and two of its salesman, Darcas Oliver Young and Elbert G. Elliott. The allegations were that Crypto Capital, it’s owner, and salespeople conducted an unregistered offering of cryptocurrency assets called BXY, which the SEC contends was a security, illegally raising $1.5M in proceeds through unregistered offers and sales of the securities to about 100 individuals, many of whom were cryptocurrency novices. The allegations are that the BXY offering was not registered with the SEC and did not meet any exemption from registration.
Adding to the issues, none of the defendants were registered with the SEC as brokers, and the allegations are that the defendants effected transactions in BXY for Chicago Crypto customers’ accounts, advised prospective investors about the merits of investing in BXY, and received transaction-based compensation. There were also allegations of fraud in that the defendants misled investors about the custody and delivery of BXY, and made false and misleading statements about the markup charged by Chicago Crypto, the delivery of account statements, Chicago Crypto’s liquidation of an investor’s BXY, their personal investments in BXY, and the financial and management problems occurring at BXY’s issuer, Beaxy Digital Ltd., in late 2019. This resulted in the SEC seeking relief under 5 counts in their complaint for violations of Sections 5(a), 5(c), 10(b), 15(a), and 17(a) of the Securities Exchange Act.
U.S. Securities and Exchange Commission v. The Hydrogen Technology Corporation et al
In the Southern District of New York, the SEC brought another civil action. This time it was against The Hydrogen Technology Corporation (“Hydrogen Tech”), its President and CEO Michael Ross Kane, and Tyler Oster, President and CEO of Moonwalkers Trading Limited (“Moonwalkers”). The allegations are that during January 2018 and April 2019, Hydrogen Tech and Kane offered and sold cryptocurrency asset securities called Hydro tokens, and hired Ostern and Moonwalkers to fraudulently manipulate the price and volume of Hydro tokens traded on cryptocurrency asset trading platforms so that Hydrogen Tech could sell its own Hydro tokens at a greater profit.
The allegations state that Ostern and Moonwalkers used a customized trading bot through Kane’s and Hydrogen Tech’s trading accounts to sell Hydro tokens. It resulted in $2.2M in profits for Hydrogen Tech. Among other manipulation tactics, Ostern allegedly placed and canceled both buy and sell orders at random increments to artificially inflate the Hydro token’s trade volume and price, thereby enabling sales of the company’s Hydro to be more profitable.
The SEC contends that Hydro tokens distributed by Hydrogen Tech and Kane through the bounty programs, employee compensation, and sales in the crypto asset trading market, including through Ostern, were offered and sold as investment contracts, and therefore were securities whose offer or sale required registration with the SEC unless an exemption from registration was available. Ultimately the SEC brought this suit seeking relief under 6 counts in their complaint for violations of Sections 5(a), 5(c), 9(a), 10(b), 15(a), 17(a) and 20(b) of the Securities Exchange Act.
What are Commodities and What are the Laws at Issue?
The CFTC defines a commodity as (1) those articles including agricultural commodities enumerated in Section 1a(4) of the Commodity Exchange Act, 7 USC 1a(4), and all other goods and articles, except onions as provided in Public Law 85-839 (7 USC 13-1), a 1958 law that banned futures trading in onions, and all services, rights, and interests in which contracts for future delivery are presently or in the future dealt in; and (2) physical commodities such as an agricultural product or a natural resource as opposed to a financial instrument such as a currency or interest rate.
The CFTC has posted on its website that virtual currencies, such as Bitcoin and other cryptocurrencies have been determined to be commodities under the Commodity Exchange Act. Further, per the CFTC, the CFTC’s jurisdiction in cryptocurrency assets is implicated when a virtual currency is used in a derivatives contract, or if there is fraud or manipulation involving a virtual currency traded in interstate commerce.
The Commodity Exchange Act generally requires intermediaries in the derivatives industry to register with the CFTC. An “intermediary” is a person or firm who acts on behalf of another person in connection with trading futures, swaps, or options. Depending on the nature of their activities, they may also be subject to various financial, disclosure, reporting, and recordkeeping requirements. Intermediaries include: Associated Persons (AP), Commodity Pool Operators (CPO), Commodity Trading Advisors (CTA), Floor Brokers (FB), Floor Traders (FT), Futures Commission Merchants (FCM), Introducing Brokers (IB), Principals Retail Foreign Exchange Dealers (RFED), and Swap Dealers (SD).
Recent CFTC Cases
Commodity Futures Trading Commission v. Todd et al
In the Southern District of Florida, the CFTC brought an action against Adam Todd, Digitex LLC, Digitex Limited, Digitex Software Limited, and Blockster Holdings Limited Corporation (d/b/a Digitex Futures). The allegations are such that Adam Todd purportedly owned, built, and operated an asset derivatives trading platform through a common enterprise of corporate entities, including Digitex LLC, Digitex Limited, Digitex Software Limited, and Blockster Holdings Limited Corporation (all referred to in the complaint as “Digitex Futures” collectively). The pleadings argued that Digitex Futures accepted customer funds as margin collateral and matched customer orders for digital asset derivatives, such as bitcoin futures contracts and ether futures contracts. In connection with its offering of digital asset futures contracts, Digitex Futures allowed users to trade with leverage of up to 100 to 1. The CFTC is arguing that through the operation of their exchange platform, Digitex Futures became subject to the requirements under Section 4 of the Act, 7 U.S.C. § 6, to register with the Commission as a designated contract market (“DCM”) or foreign board of trade (“FBOT”), as well as the requirement under Section 4d of the Act, 7 U.S.C. § 6d, to register as a futures commission merchant (“FCM”). The CFTC contended that neither Digitex Futures nor Todd had ever been registered with the Commission in any capacity and therefore violated 7 U.S.C. §§ 6 and 6d.
Because of the CFTC’s argument that Digitex Futures also met the statutory definition of an FCM, Regulation 42.2, 17 C.F.R. § 42.2 (2021), it required Digitex Futures to comply with the applicable provisions of the Bank Secrecy Act (“BSA”), including requirements to implement effective know-your-customer (“KYC”) procedures and a customer information program (“CIP”). However, the CFTC believes that Digitex Futures did not have effective KYC procedures at any time and it believes that Digitex Futures did not implement an effective CIP, thus violating 17 C.F.R. § 42.2. Lasty, the CFTC sought relief for a purported attempt by Todd to manipulate the price of the Digitex Futures native currency, DGTX, by engaging in non-economic trading activity on third-party digital asset trading platforms with the intent to artificially inflate the price of DGTX and increase the value of the DGTX tokens held by Todd and Digitex Futures for their benefit. This resulted in the pleading having counts for violations of Section 6(c)(1), 6(c)(3), and 9(a)(2) of the Act, 7 U.S.C. §§ 9(1), 9(3), and 13(a)(2), and Regulations 180.1(a)(1) and 180.2, 17 C.F.R. §§ 180.1(a)(1), 180.2 (2021).
Commodity Futures Trading Commission v. Ooki DAO
In the Northern District of California, the CFTC brought an action against Ooki DAO. The company bZeroX, LLC (“bZeroX”) designed, deployed, marketed, and made solicitations concerning a blockchain-based software protocol (the “bZx Protocol”) that accepted orders for and facilitated margined and leveraged retail commodity transactions. The allegations are that the bZx Protocol permitted users to contribute margin to open leveraged positions whose ultimate value was determined by the price difference between two virtual currencies from the time the position was established to the time it was closed. Additionally, the CFTC alleged the bZx Protocol purportedly offered users the ability to engage in the transactions in a decentralized environment. Further, bZeroX, having never registered with the Commission, purportedly engaged in unlawful activities that could only lawfully be performed by a registered designated contract market (“DCM”) and other activities that could only lawfully be performed by a registered futures commission merchant (“FCM”) under the Commodity Exchange Act, 7 U.S.C. §§ 1-26, and Commission Regulations, 17 C.F.R. pts. 1-190 (2021).
In addition, the CFTC alleged that bZeroX failed to conduct KYC diligence on its customers as part of a CIP as required of FCMs by the Regulations. In August 2021, bZeroX transferred control of the bZx Protocol to the bZx DAO, which was later renamed and currently doing business as Ooki DAO. Ooki DAO is an unincorporated association comprised of holders of Ooki DAO Tokens who vote those tokens to govern the bZx Protocol (renamed the “Ooki Protocol”). The CFTC alleged that bZeroX transferred the bZx Protocol to bZx DAO, in an effort to circumvent the Commodities Exchange Act and other Regulations. The CFTC brought the action violation of Sections 4(a) and 4d(a)(1) of the Act, 7 U.S.C. §§ 6(a), 6d(a)(1), and Regulation 42.2, 17 C.F.R. § 42.2 (2021), and is seeking relief.
Specifically, the pleading states that Ooki DAO operated, marketed, and made solicitations concerning the Ooki Protocol, accepting orders for and facilitating margined and leveraged retail commodity transactions. Further allegations purported that Ooki DAO existed for the exact same purpose as bZeroX in running a business, and specifically, operating and monetizing the Ooki Protocol. The Ooki DAO allegedly did so via the votes of Ooki Token holders who, through their votes, chose to participate in running the business. Just like the bZx Protocol, the Ooki Protocol allegedly permitted, and continued to permit, users to contribute margin collateral to open leveraged positions whose value was determined by the price difference between two virtual currencies from the time the position was established to the time it was closed. The Ooki Protocol purportedly offered users the ability to engage in the transactions in a decentralized environment. In so doing, the unregistered Ooki DAO was purportedly engaging in unlawful activities that can only lawfully be performed by registered DCMs and other activities that can only lawfully be performed by registered FCMs under the Commodities Regulations. In addition, the CFTC argued that Ooki DAO does not conduct KYC diligence on its as part of a CIP, as required of FCMs by the Commodities Regulations.
Investment Group Class Action
Laffoon v. Coinbase Global, Inc. et al
In District Court of New Jersey, a group of disgruntled investors brought a class action lawsuit against Coinbase Global (“Coinbase” or the “Company”), Brian Armstrong, Alesia J. Haas, and Emilie Choi for securities violations. The allegations are that Coinbase misrepresented and/or failed to disclose (1) crypto assets Coinbase held as a custodian on behalf of its customers could qualify as property of a bankruptcy estate—and not the Company’s customers—in the event Coinbase filed for bankruptcy; (2) Coinbase allowed Americans to trade crypto assets that the Company knew or recklessly disregarded should have been registered as securities with the SEC; (3) Coinbase had plans to, and did in fact, engage in proprietary trading of crypto assets; and (4) as a result, Defendants’ made statements about the Company’s business, operations, and prospects lacking a reasonable basis and misled investors regarding material risks attendant to Coinbase’s operations. The main issue setting up this cause of action was the untimely disclosure that “because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets [the Company] hold[s] in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.” Later, Defendant Brian Armstrong, who was the CEO and co-founder of Coinbase, told investors on Twitter that Coinbase “should have updated [its] retail terms sooner” and acknowledging that the Company “didn’t communicate proactively.” News of this broke and purportedly caused media attention and diminution of Coinbase’s common stock, causing investors to take action for damages. The complaint pled two counts for violations of Sections 10(b) and 20(a) of the Securities Exchange Act.
As the new year approaches, we anticipate that these filings will continue to become more and more prevalent. Investors and the Federal Commissions themselves are becoming wiser regarding the exact nature of crypto assets and crypto asset schemes. The firm has begun to see issues here in the State of Florida where brokers and dealers are failing to register with the SEC and/or the CFTC in trading of articles that under the statutory definitions are securities and/or commodities that should also be subject to registration. The firm is monitoring these dockets closely as the cases continue to progress. If you or any person you know has suffered damage in trading or purchasing unregistered securities or commodities without proper disclosures, please do not hesitate to contact us to discuss your options.
Eleventh Circuit clarifies its position on the “Second Scienter” Requirement for a willful violation of the Digital Millennium Copyright Act (“DMCA”). Full fascinating opinion pulled on Westlaw from today below:
VICTOR ELIAS PHOTOGRAPHY, LLC, Plaintiff-Appellant,v.ICE PORTAL, INC., Defendant-Appellee.
No. 21-11892 – Date Filed: 08/12/2022 Appeal from the United States District Court for the Southern District of Florida
D.C. Docket No. 0:19-cv-62173-RS
Before NEWSOM and MARCUS, Circuit Judges, and COVINGTON,* District Judge.
Opinion of the Court
COVINGTON, District Judge:
*1 In 2016, commercial photographer Victor Elias discovered infringing uses of his copyrighted images on the internet. Instead of pursuing the infringing parties, Mr. Elias brought a lawsuit against Ice Portal, Inc. – now a division of Shiji (US), Inc. (“Shiji”) – which acts as an intermediary between the hotels that licensed Mr. Elias’s photographs and online travel agents (“OTAs”) like Expedia and Travelocity.1 In optimizing the photographs for use by the OTAs, Shiji’s software allegedly removed certain copyright-related information that Mr. Elias had embedded within the metadata of the photographs. Mr. Elias, through his company Victor Elias Photography, LLC (“Elias LLC”), claimed that Shiji therefore violated the Digital Millennium Copyright Act (“DMCA”).
The district court correctly granted summary judgment to Shiji because Elias LLC did not show an essential element of its claim – namely, that Shiji knew, or had reasonable grounds to know, that its actions would induce, enable, facilitate, or conceal a copyright infringement. Accordingly, we affirm.
A. Mr. Elias’s photographs and their CMI
Mr. Elias is a professional photographer who specializes in taking photographs of hotels and resorts throughout the United States, Mexico, and the Caribbean. He is the sole owner and operator of Elias LLC. Mr. Elias registers his photographs with the Copyright Office, and Elias LLC holds those copyrights by written assignment.
Between 2013 and 2017, Mr. Elias took photographs for hotels owned by Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”)2 and Wyndham Hotels & Resorts (“Wyndham”) (collectively, the “Hotels”). Mr. Elias claims that the following information was inserted into the metadata within the image files that he sent to the Hotel properties:
Creator Victor Elias
Creator’s Job Title Owner/Photographer
Copyright Notice @Victor Elias
Creator’s Contact Info USA, 5301 N. Commerce Ave. Suite 4, 805-265-5421
Rights Usage Terms Rights Managed
This information was embedded in IPTC format3 in all the images at issue.
This information is commonly referred to as copyright management information (“CMI”).4 Because CMI is embedded within the image file, an individual must make several “clicks” on the file to access this information. Specifically, the person viewing the file would have to right-click on the image file and then open the “properties” or “more info” field to access the information.
*2 After Mr. Elias took the photographs at issue, Elias LLC would extend broad licenses to the Hotels, allowing them to use the photographs to promote their properties in unlimited quantities, for an unlimited time, and in any format – without a restriction on how the photographs’ CMI could be manipulated or removed.5 The Hotels were licensed to use the photographs at issue to market their properties on their own websites and on third-party travel booking websites or OTAs. The parties do not dispute that, as they were displayed on the Hotels’ own websites, the at-issue photographs included Elias LLC’s CMI embedded within the metadata.
B. Shiji’s role
Shiji acts as an intermediary between hotel chains, like Starwood and Wyndham, and OTAs by receiving copies of photographs from the hotels and making them available to OTAs. From 2013 to 2018, Shiji housed approximately 1.5 million different hotel images in its system. During the relevant time periods, Starwood and Wyndham contracted with Shiji to make images for thousands of their properties available to OTAs. Of the more than 9,400 images that Shiji processed for the Hotels, 220 were taken by Elias.
Between 2013 and 2018, Shiji processed photos collected from the Hotels in the following manner. First, Shiji’s software would download copies of image files from the Hotels’ respective servers and store them on Shiji’s server. Each image file provided to Shiji came with a separate spreadsheet file containing pertinent information about the image that would be displayed on the OTA websites, such as room type or a caption. After receiving the image files, Shiji’s software would then convert the files into JPEG format, making copies of the photos in various industry-standard sizes. The conversion to JPEG format optimized the image files for faster display on OTA websites, but it came at a cost – sometimes the metadata on the image file, such as the CMI, would be erased. Finally, the JPEG copies of the photographs would be saved on Shiji’s server, along with the accompanying spreadsheet file, and made available to OTAs.
C. Mr. Elias discovers photographs missing his CMI
Protecting his copyrights is important to Mr. Elias. He claims that he embedded the CMI within his photographs because the CMI’s text is fully searchable, allowing him to patrol the internet and find instances of copyright violations. As the district court succinctly summarized, Elias employs six methods by which he searches for his images and ensures that his copyright is not being violated:
(1) Elias visits OTA websites, types in the names of locations where he has shot photos of a hotel, then looks for the hotels he shot, and then looks for the images; (2) Elias Googles the hotel name plus “Victor Elias”; (3) Elias uses ImageRights software, which searches for visual image matches on the internet; (4) Elias uses TinEye which searches for copies of images he uploads; and (5) Elias uses Google images to search for copies of the photos. According to Elias, he also uses Google to search using keywords such as “Victor Elias” and “Victor Elias Photography,” which can result in the return of pages containing keywords in the embedded metadata.
*3 In September 2016, using the methods described above, Mr. Elias discovered unauthorized copies of his photographs posted on non-party, non-OTA websites without his CMI. Although some of these photographs included visible credits, the photographs credited someone other than Mr. Elias. He admits that he has no actual knowledge of where these non-party websites obtained the images. Mr. Elias then discovered that on OTA websites, his CMI was stripped out of the images at issue.
D. Procedural History
Based on the foregoing facts, Elias LLC filed suit against Shiji in August 2019. In its amended complaint, it alleged in a single count that Shiji violated two sections of the DMCA – 17 U.S.C. §§ 1202(a) and 1202(b) – through its stripping of the CMI in Elias LLC’s copyrighted photos.6
Following discovery, Shiji moved for summary judgment, and Elias LLC sought partial summary judgment. The district court ruled in favor of Shiji, finding that Elias LLC could not satisfy the “second scienter requirement” of the statute, a concept we will explain further below. Relying on the Ninth Circuit Court of Appeals’ decision in Stevens v. Corelogic, Inc., 899 F.3d 666 (9th Cir. 2018), the district court held that Elias LLC could not satisfy the second scienter requirement because it had not established that Shiji “knew or had reason to know that its actions would induce, enable, facilitate, or conceal infringement” and had failed to present any evidence “demonstrating that [Shiji] was aware or had reasonable grounds to be aware of the probable future impact of its actions.”
The district court reasoned that Elias LLC had failed to make its showing for two reasons. First, it had not shown that Shiji’s removal of CMI “is the reason, or even the likely reason, for the infringing use of the images [Mr. Elias] has found on the internet.” Second, Elias LLC had not shown that Shiji was even aware that searching for terms embedded in the extended attributes was a method used by copyright holders to find infringement on the internet. The district court also dismissed Elias LLC’s argument that a prior arbitration gave Shiji the requisite awareness because (1) it had failed to show that “mere familiarity” with the DMCA gave Shiji reason to know that removal of CMI from the photos it copied would induce, enable, facilitate, or conceal infringement; and (2) the arbitration panel ruled in Shiji’s favor, finding that the other party “had not shown that [Shiji’s] removal of CMI would result in infringement.”
Because the district court concluded that Elias LLC could not, as a matter of law, show that Shiji knew, or had reasonable grounds to know, that its actions would “induce, enable, facilitate, or conceal infringement,” the court entered summary judgment in favor of Shiji. This appeal followed.
(b) Removal or alteration of copyright management information. – No person shall, without the authority of the copyright owner or the law –
(1) intentionally remove or alter any copyright management information, [or]
(3) distribute, import for distribution, or publicly perform works, copies of works, or phonorecords, knowing that copyright management information has been removed or altered without authority of the copyright owner or the law,
knowing, or … having reasonable grounds to know, that it will induce, enable, facilitate, or conceal an infringement of any right under this title.
By its plain terms, the statute requires proof that the defendant knew, or had reasonable grounds to know, that its conduct “will” induce, enable, facilitate, or conceal an infringement. Use of the word “will” indicates a degree of likelihood or certainty. See Spokane Cnty. v. Dep’t of Fish & Wildlife, 430 P.3d 655, 662 (Wash. 2018) (canvassing multiple dictionaries for definitions of the term “will,” and explaining that it “can be a statement of future tense, of strong intention or assertion about the future, or a probability or expectation about something,” although it can also mean “inevitability” or “probability” (citations and quotation marks omitted)). The statute does not state that a violation occurs if a defendant knows, or has reason to know, that its actions “may” or “might” enable infringement. As we explain further below, the statute requires more than that.
To assist in interpreting the statute, we may also look to the opinions of our sister Circuits. The Second Circuit has held that, to establish a violation of Section 1202(b)(3), a plaintiff must prove: (1) the existence of CMI in connection with a copyrighted work; and (2) that a defendant “distribute[d] … works [or] copies of works”; (3) while “knowing that copyright management information has been removed or altered without authority of the copyright owner or the law”8; and (4) while “knowing or … having reasonable grounds to know” that such distribution “will induce, enable, facilitate, or conceal an infringement.” Mango, 970 F.3d at 171. The last two of these elements comprise a “so-called ‘double-scienter requirement.’ ” Id. “[T]he defendant … must have actual knowledge that CMI ‘has been removed or altered without authority of the copyright owner or the law,’ as well as actual or constructive knowledge that such distribution ‘will induce, enable, facilitate, or conceal an infringement.’ ” Id. (quoting 17 U.S.C. § 1202(b)(3)); see also Stevens, 899 F.3d at 673 (explaining that both Section 1202(b)(1) and (3) “require the defendant to possess the mental state of knowing, or having a reasonable basis to know, that his actions ‘will induce, enable, facilitate, or conceal’ infringement”).
*5 We agree with our sister Circuits’ interpretation of the plain language9 of Section 1202(b)(1) and (3) and with their formulation of the scienter requirement necessary to prove a violation thereof. As the Ninth Circuit explained in Stevens:
To avoid superfluity, the mental state requirement in Section 1202(b) must have a more specific application than the universal possibility of encouraging infringement; specific allegations as to how identifiable infringements “will” be affected are necessary.
[W]e hold that a plaintiff bringing a Section 1202(b) claim must make an affirmative showing, such as by demonstrating a past “pattern of conduct” or “modus operandi,” that the defendant was aware [of] or had reasonable grounds to be aware of the probable future impact of its actions.
Elias LLC urges this Court to adopt a standard by which a defendant that knowingly removes CMI without consent can be held liable so long as the defendant knows, or has reasonable grounds to know, that its actions “make infringement generally possible or easier to accomplish.” By contrast, Shiji argues, as the district court held, that the defendant must know, or have reasonable grounds to know, that removing CMI would likely lead to future infringement.
The Ninth Circuit in Stevens, facing a similar fact pattern to the one now before us, rejected the statutory interpretation favored by Elias LLC. The plaintiffs there, also photographers whose CMI had allegedly been removed by an intermediary software provider, argued that “because one method of identifying an infringing photograph has been impaired, someone might be able to use their photographs undetected.” 899 F.3d at 673 (emphasis in original). The court explained that such a general approach to statutory interpretation “won’t wash.” Id. Citing the text of the statute and the legislative history of Section 1202, the Ninth Circuit concluded that plaintiffs must “provide evidence from which one can infer that future infringement is likely, albeit not certain, to occur as a result of the removal or alteration of CMI.” Id. at 675.
B. Whether Shiji knew, or had reasonable grounds to know, that its actions would induce, enable, facilitate, or conceal infringement
Before the district court and on appeal, Elias LLC points to three pieces of evidence that, it claims, create a genuine dispute of material fact as to whether Shiji knew or had reason to know that its actions “will induce, enable, facilitate, or conceal infringement” of copyrighted works. We examine each in turn.
1. The Leonardo arbitration
In urging us to reverse the district court’s grant of summary judgment, Elias LLC’s principal piece of evidence is a 2016 arbitration proceeding between Shiji and a competitor in the OTA photo distribution business, Leonardo Worldwide Corporation.10 The dispute began when two of Leonardo’s clients were looking to switch photo management services to Shiji (at the time, ICE Portal). In the arbitration, Leonardo accused Shiji of corporate infiltration and theft. It claimed that Shiji improperly accessed Leonardo’s image database, downloaded multiple images from the database without Leonardo’s consent, processed those images through Shiji’s own software (thereby scrubbing the images of CMI inserted by Leonardo), and then re-published the images on Shiji’s own website for financial gain. According to Leonardo, Shiji’s actions of removing CMI from the images or distributing the images knowing they were cleansed of CMI violated Section 1202(b) of the DCMA because they “induced, enabled, facilitated, or concealed [Shiji’s] infringement of the copyrighted images.” Importantly, the DMCA claim rested on Leonardo’s insertion of its own CMI into images that were owned by third-party hotels, not Leonardo.
*6 The arbitration panel dismissed the DMCA claim on multiple grounds: (1) “Leonardo has not shown the essential ingredient of a DMCA claim that any allegedly improper actions regarding CMI would result in an infringement of a copyright”; (2) the panel construed Section 1202(b) as requiring that a DMCA claimant be both the owner of the copyright and the party who inserted the wrongly removed CMI, and Leonardo was not both because it was not the copyright owner; (3) Shiji’s removal of Leonardo’s CMI did not result in an infringement of any hotel copyrights; and (4) Leonardo lacked standing because the DMCA is intended to protect copyright holders that have employed CMI, and Leonardo had no copyright in the stolen images.
According to Elias LLC, Leonardo’s claims in the arbitration “put [Shiji] on notice and imbued [Shiji] with the necessary mental state to violate § 1202 in the future where, as here, [Shiji’s] metadata stripping system was challenged by [a] copyright owner.” In other words, while Leonardo’s lack of copyright ownership may have left its DMCA claim dead in the water, it was reasonably foreseeable to Shiji that another litigant (who is a copyright owner) could assert similar claims against Shiji in the future. This is a tempting inference to make, but it is insufficient to raise a genuine issue of material fact as to the second scienter requirement for several reasons.
First, the facts of the Leonardo arbitration are distinguishable. There, Shiji went farther than simply running images through its automated software and making those optimized images available on its server. Rather, it allegedly accessed, knowingly and without permission, a competitor’s database of copyrighted images, put those images through the scrubber, and then re-published them for direct financial gain. Therefore, “Leonardo allege[d] that [Shiji’s] actions induced, enabled, facilitated, or concealed [Shiji’s own] infringement of the copyrighted images.” (emphasis added). The Leonardo arbitration had nothing to do with whether Shiji’s role as an intermediary image optimizer might induce or enable infringement by a third party.
Second, and more importantly, the record before us does not indicate that the Leonardo arbitration adduced any facts that would give Shiji reason to know that its software’s effects on CMI would make copyright infringement “likely, albeit not certain” to occur. At most, the 2016 Leonardo arbitration gave Shiji knowledge that its software was scrubbing CMI from some of the extended attributes of the images – and, in fact, different extended attributes than the ones at issue here. But there is no evidence that Shiji learned, for example, that copyright owners routinely rely on embedded CMI to police infringements of their works on the internet or that would-be infringers prefer to utilize images from OTAs because they have already been cleansed of CMI.
Third, it may have been reasonable for Shiji to presume, in the wake of the Leonardo arbitration, that the next DMCA lawsuit it faced would come from a copyright owner. But it does not follow that Shiji must have also known that it was engaging in conduct that violated the law. We do not hold here that prior litigation or arbitration of a DMCA claim can never give a defendant the requisite knowledge under Section 1202(b). We limit our holding to an affirmation of the district court’s conclusion that Leonardo’s particular accusations in this case did not give Shiji reasonable grounds to know that its software’s removal of CMI, and the subsequent distribution of photographs stripped of CMI, would induce, enable, facilitate, or conceal the infringement of Elias LLC’s copyrighted works.
For these reasons, the Leonardo arbitration fails to create a genuine issue of material fact as to whether Shiji knew, or had reasonable grounds to know, that its actions of stripping CMI and distributing those stripped images would “induce, enable, facilitate, or conceal an infringement.” See Stevens, 899 F.3d at 676 (“Because the [plaintiffs] have not put forward any evidence that [the defendant] knew its software carried even a substantial risk of inducing, enabling, facilitating, or concealing infringement, let alone a pattern or probability of such a connection to infringement, [the defendant] is not liable for violating [the DMCA].”).
2. Mr. Elias’s purposeful insertion of CMI into images
*7 Elias LLC claims that, unlike the photographer-plaintiffs in Stevens, Mr. Elias did use the CMI contained within the images’ extended attributes to police copyright infringement on the internet. This also fails to clear the summary judgment bar.
There is no indication in the record that Shiji knew at the relevant time that copyright owners use CMI in this manner. Elias LLC therefore cannot show that Shiji knew or had reason to know that removal of CMI could conceal an infringement. And Elias LLC cannot explain how it could police copyright infringement if an infringer can just as easily remove CMI metadata from an image as it could download an image from an OTA website. See Stevens, 899 F.3d at 676 (explaining that “a party intent on using a copyrighted photograph undetected can itself remove any CMI metadata, precluding detection through a search for the metadata. … [Thus,] one cannot plausibly say that removal by a third party ‘will’ make it easier to use a copyrighted photograph undetected”).
Elias LLC argues that the district court read requirements into Section 1202(b) that do not exist – namely, that it prove “keyword searches” are an effective method for finding infringement and/or that Shiji be aware that copyright owners will search for keywords embedded in the metadata to find infringement on the internet. Elias LLC misunderstands the district court’s order. The district court did not impose additional, extra-statutory requirements; rather, it was explaining why Elias LLC’s method of proving knowledge was ineffective. Similarly, neither the district court nor the Ninth Circuit imposed an additional requirement that the plaintiff show evidence of a pattern of conduct or modus operandi. Consistent with Stevens, the district court explained that demonstrating past patterns of conduct or modus operandi are examples of ways in which plaintiffs can meet their burden of proof. See Stevens, 899 F.3d at 675 (“There are no allegations, for example, of a ‘pattern of conduct’ or ‘modus operandi’ involving policing infringement by tracking metadata.”). Elias LLC could have provided different evidence to show that Shiji possessed the requisite level of knowledge to satisfy the second scienter requirement, but it did not.
3. Instances of infringement on the internet
According to Elias LLC, Shiji allegedly has a modus operandi of removing a photographer’s CMI “knowing that CMI [being removed] has likely directly resulted in infringement of the Elias Images.” In support of this argument, Elias LLC pointed to the infringing images that Mr. Elias found on non-party websites that had been stripped of his CMI.
There is a fundamental problem with this argument – there is no evidence linking Shiji’s actions of removing the photographs’ CMI with the instances of infringement Mr. Elias uncovered on the internet. See Stevens, 899 F.3d at 675 (explaining that to prevail, a plaintiff must “provide evidence from which one can infer that future infringement is likely, albeit not certain, to occur as a result of the removal or alteration of CMI” (emphasis added)). Elias LLC argues that the at-issue photographs on the OTA websites have been stripped of CMI, and the infringing images he found on non-party websites have also been stripped of CMI; therefore, the infringing parties must have pulled the images from OTA websites. But this argument rests on speculative and unsupported assumptions. For example, the argument presumes that infringing parties would go to an OTA website (instead of the Hotels’ or Elias LLC’s own website) to copy the image. It also presumes that an infringing party would download the image, as opposed to taking a screenshot or screengrab11 of the image. Yet nothing in the record substantiates these inferences. For example, Mr. Elias admitted that he did not know from which website the third-party infringers copied the images. It is also unclear how the infringing parties copied the images – anyone with a smart phone could simply take a screenshot of the photograph from a website, which process inherently does not preserve the photograph’s embedded CMI. Similarly, Mr. Elias acknowledged that unscrupulous infringers could easily remove CMI themselves.
*8 Here, Elias LLC produced evidence, essentially, that his CMI-cleansed photographs appeared in at least two places on the internet: OTA websites and certain non-party websites that are unaffiliated with the OTAs. We do not believe that Congress meant to impose liability under the DMCA based on such a tenuous connection. See Stevens, 899 F.3d at 673 (rejecting liability when an infringer “might” be able to use copyrighted works undetected because such an assertion “simply identifies a general possibility that exists whenever CMI is removed”). The district court was correct to grant summary judgment in the face of such speculation. See Josendis v. Wall to Wall Residence Repairs, Inc., 662 F.3d 1292, 1318 (11th Cir. 2011) (“At the summary judgment stage, such ‘evidence,’ consisting of one speculative inference heaped upon another, [is] entirely insufficient.”).
Elias LLC argues that this reasoning requires a Section 1202(b) plaintiff to show a specific and identifiable infringement. Not so. What the statute requires is a showing that a defendant took certain actions, such as wrongly removing CMI or distributing images wrongly scrubbed of CMI, (1) knowing that the CMI has been wrongly removed or altered, and (2) knowing or having reason to know that such removal or distribution “will induce, enable, facilitate, or conceal an infringement.” See17 U.S.C. § 1202(b)(3); see also Mango, 970 F.3d at 171 (setting forth the elements of a Section 1202(b)(3) claim).
What’s more, we agree with the Ninth Circuit that the statute’s use of the future tense does not require a plaintiff to show that any specific infringement has already occurred and does not “require knowledge in the sense of certainty as to a future act.” Stevens, 899 F.3d at 674 (citation omitted) (emphasis added). Elias LLC is thus incorrect that the district court required it to show that Shiji’s CMI removal “be directly linked to a particular infringement.” Elias LLC chose to frame its DMCA claim in terms of proving that actual infringement occurred (and therefore that infringement was allegedly induced or enabled). We, and the district court before us, therefore, grapple with the evidence presented by Elias LLC to determine whether Shiji was the inducer or enabler. Elias LLC cannot make that showing because the evidence indicates that the infringing parties could have purloined these images from any number of sources, and Elias LLC has identified no evidence indicating that Shiji’s distribution of these photographs ever “induce[d], enable[d], facilitate[d], or conceal[ed] an infringement.”
In short, the statute’s plain language requires some identifiable connection between the defendant’s actions and the infringement or the likelihood of infringement. To hold otherwise would create a standard under which the defendant would always know that its actions would “induce, enable, facilitate, or conceal” infringement because distributing protected images wrongly cleansed of CMI would always make infringement easier in some general sense. See Stevens, 899 F.3d at 673, 674 (finding that a mere showing of CMI removal, leading to the possibility that an infringer could use the photos undetected, is insufficient to meet Section 1202(b)’s second scienter requirement because “it simply identifies a general possibility that exists whenever CMI is removed” and “Section 1202(b) must have a more specific application than the universal possibility of encouraging infringement”). This reading would effectively collapse the first and second scienter requirements. Congress enunciated the double scienter requirement for a reason, and we must interpret the statute to effectuate that intent. See CBS Inc. v. PrimeTime 24 Joint Venture, 245 F.3d 1217, 1222 (11th Cir. 2001) (“The rule is that we must presume that Congress said what it meant and meant what it said.” (quotation marks omitted)).
*9 For the reasons stated, we conclude that the district court properly granted summary judgment to Shiji on Elias LLC’s claim under the DMCA. Elias LLC did not meet its burden of coming forward with sufficient evidence demonstrating Section 1202(b)’s second scienter requirement, and judgment in Shiji’s favor was therefore appropriate. Accordingly, we affirm.
During the relevant time periods, ICE Portal, Inc. was the company acting as the intermediary between the hotels and OTAs. Shiji (US), Inc. acquired Ice Portal in February 2019, at which time ICE Portal merged into Shiji and became a division of the larger company. This opinion will refer to the companies collectively as Shiji.
IPTC format is named for the International Press Telecommunications Council, which developed metadata standards to facilitate the exchange of news, and typically includes the title of the image, a caption or description, keywords, information about the photographer, and copyright restrictions. See Stevens v. Corelogic, Inc., 899 F.3d 648, 671 (9th Cir. 2018).
CMI metadata is specifically copyright identifying information manually added to the image by the photographer or editor. Shiji also refers to this information as “extended attributes.” At least in the context of this case, “extended attributes” and “CMI” are interchangeable terms.
Elias LLC claims that it reserved this right by including a disclaimer in the agreements with the Hotels that it reserved “[a]ll rights not specifically granted in writing, including copyright” as the “exclusive property of [Elias LLC].” But Elias LLC does not explain how this language prevents the Hotels (or their agents) from removing CMI. Moreover, Elias LLC’s argument that it reserved this right by requiring proper attribution of the photographs also does not establish that Elias LLC desired to preserve its CMI. Finally, while Elias LLC cites the license for the Marriott Casa Magna Resort, which provided that “[a]ll metadata information included within the images shall remain intact,” Shiji argues that Elias LLC slyly inserted that term into a new version of the licenses sent to Marriott upon request, without revealing that the term did not appear in the original licensing agreement. Elias LLC does not respond to this argument in its reply brief. And, in any event, Shiji never received files from Marriott or made images of Marriott hotel properties available to OTAs.
Shiji maintains that it did not intentionally or knowingly remove the CMI from the photographs. We need not address this first scienter requirement because we can affirm the district court’s grant of summary judgment for failure to demonstrate the second scienter requirement.
The Ninth Circuit in Stevens cogently explained why its interpretation of the statute is also supported by the legislative history of Section 1202. See Stevens, 899 F.3d at 674–75. We need not repeat that legislative history here. See Harris, 216 F.3d at 976 (explaining that “[w]hen the import of words Congress has used is clear … we need not resort to legislative history”).
The record on appeal included an interim dispositive order issued by the arbitration panel and certain deposition excerpts, but no other underlying evidence. Thus, we will present the facts and holdings as set forth in the arbitration order.
A screengrab or screenshot is essentially a digital picture of the image on the screen. When an individual takes a screenshot of the picture, the metadata of the underlying picture is not carried through with the screenshot.
There are a few simple things you can do as a business owner to protect your Intellectual Property (IP) and avoid the common mistakes. Knowledge is key so you can plan accordingly and take the right steps to maximize and protect your valuable IP.
1. Failing to federally register your brand
You are starting a new business providing services or products locally. You create a catchy brand and logo. Your business takes off and you are a viral hit! Now you are doing business throughout the entire Southeast. A competitor copies your brand and starts using it in California for identical services/products. What can you do? Well, if you only have common law rights in the Southeast and have no presence in California, there may be little you can do.
But, if you had applied for and received federal protection of your brand through the United States Patent and Trademark Office (USPTO), you have constructive use of your brand throughout the United States as of the registration date. In that situation, you would likely be able to stop the infringer, or if desirable, negotiate a license for the company to use your brand on the West coast. It is important to protect your Intellectual Property early in the process so you can stop potential infringers and minimize the impact/damages to your business from copycats.
2. Waiting too long to file for patent protection
Often potential clients tell me that they started selling their products more than a year ago. This is one of the most frustrating aspects of my job as their invention is now in the public domain. An inventor/applicant must file for patent protection within one year of any sale, offer for sale, or public disclosure of the invention. This is called a statutory bar deadline, which is not extendable. In some cases, the inventor/applicant may still seek protection for improvements on their invention that occurred within the one year timing, but the underlying invention that was sold more than one year prior is now in the public domain.
It is important to meet with a patent attorney early in the process. That way you can learn about critical dates and timing considerations as you develop your invention and decide how to best protect your invention. By understanding the patent process, you can make educated decisions about when or if you want to seek patent protection. If do not not have that information, you could be unintentionally giving up your patent rights.
3. Getting a written copyright assignment when hiring an artist/graphic designer
A common misconception is that when you hire and pay an artist to create your logo or a photographer to take pictures, you own the copyright interest in the work prepared. Not true. If you hire an independent contractor to create the graphic and don’t get a written assignment of the copyright interest, you are left with an implied license to use the graphic. If you are using it as a brand, you don’t have ownership in the logo to apply for federal trademark protection. To properly own the copyright interest, you must secure a written copyright assignment from the artist.
In some cases, a company uses an employee to create the graphics. If the employee creates the graphic in the scope of their employment, the artist is automatically the employer company (not the employee). Knowing how to properly secure your Intellectual Property rights is critical. Otherwise, you may not even be aware that you have minimal or no rights in what you thought was your Intellectual Property.
You secured a trademark registration from the USPTO, congrats! Now what? Take a few minutes and record your trademark registration with U.S. Customs and Border Protection (CBP). Why? Let CBP help you enforce your trademark rights with products imported into the country.
If you record your trademark (or copyright) registration with CBP, they will cross reference branded products crossing the US border against the CBP database. If there is a hit, CBP will freeze the products at the border and notify you as the registrant to confirm if they are your products or if you authorized the import of products that use your brand. This is a great tool that is often overlooked. Why let the products hit the market when CBP can freeze them at the border?
5. Not using an Attorney to Protect your Intellectual Property
For most start ups and independent entrepreneurs, budget is a primary consideration. Most business owners know they need to protect their IP, but often do not prioritize the budget to hire competent counsel to navigate the application processes to secure the applicable registrations. This can be fatal to your IP protection years down the road. Compared to patent applications, trademark and copyright applications are not overly complex for applicants to prepare on their own. However, knowing what and why certain information goes into an application can be critical to maintaining the validity of your rights.
For example, you prepare and file a trademark application for the brand ABC, owned by the ABC Company. You state in the trademark application that the brand ABC was first used in commerce on January 1, 2022. That is the date your formed ABC Company with the state. But you started selling products with the brand ABC on June 1, 2022, six months later. The sworn statement you made to the federal government was inaccurate. The USPTO is unlikely to catch the issue as they accept your sworn statement. But when you enforce your trademark registration against an infringer harming your business, it may be grounds to invalidate your trademark registration. Then you are left with common law rights. An attorney will ask questions so you understand the legal implications of your answers in a trademark application.
For any questions about your Intellectual Property questions, please contact Greg below:
The Trademark Trial and Appeal Board (TTAB) found the mark JOKER for cigarette paper dissimilar with the mark NOJOKE for e-cigarettes. Republic Technologies, owner of the mark JOKER and related federal trademark registration, opposed an application to register the mark NOJOKE for e-cigarette liquid.
During the federal trademark application process, after examination by the Examining Attorney, a trademark application is published in the Official Gazette for 30 days. During these 30 days, a third party can oppose the trademark application with the TTAB presuming there are grounds to challenge the application. Until the opposition is resolved, the application process is stalled. Often oppositions are based on a likelihood on confusion between the opposer’s mark and the applied for mark, as was the case with Republic Technologies. A TTAB opposition is effectively litigation within the TTAB, but the fight is over the right to register the applied for mark, as opposed to damages in typical litigation.
Some trademark owners engage watch services to monitor what marks are applied for with the United States Patent and Trademark Office (USPTO) and what marks reach the publication period. This is critical so the potential opposer can either contact the applicant directly, or formally oppose the application during the 30 day publication window with the USPTO. If this window is missed, the opposer would have to wait and seek cancellation of any resulting registration. The opposer may also have grounds to assert trademark infringement if or when the applicant begins using the applied for mark in business.
In some cases, the opposer and applicant agree to enter into a co-existence agreement. A co-existence agreement is a contract where each party agrees that the respective marks (brands) do not cause confusion in the marketplace, that the parties will not oppose each other’s applications/registrations in the specified classes, and other conditions as the parties agree upon. Oftentimes, an Office action rejection by an Examining Attorney based on likelihood of confusion will be retracted if the parties enter into a co-existence agreement with the correct language.
Turning back to the TTAB decision here, the TTAB stated that the products are related as they are sold by the same retailers (cigarette paper and e-cigarette liquid). The board also noted that the federal government restricts the marketing of cigarette paper. This fact decreased the strength of opposer’s mark as the opposer is limited to direct retail sales, trade shows, and point of sale engagement.
Although the two marks use the same base of JOKE, the TTAB held that that two marks have different impressions. NOJOKE emphasizes the truthfulness of something potentially unbelievable, and communicates an air of seriousness. While JOKER, and its design mark (logo) gives the impression of a court jester, a comic foolish clown. The TTAB stated that despite the common base term, the meaning and impressions of the marks are not similar. The Board dismissed the opposition, which allows the application for NOJOKE to proceed.
If you need help monitoring your trademark portfolio or want to oppose/cancel a pending trademark application/registration, contact Board Certified Intellectual Property Attorney Greg Popowitz.
The team at Assouline & Berlowe P.A. congratulates Board Certified Labor and Employment Partner Ellen Leibovitch for being sworn in on Saturday night as President of the South Palm Beach County Bar Association. Assouline & Berlowe P.A. is proud of Ellen’s achievement and is excited to see what Ellen has in store for her term as President.
What a time to be in Miami. To think, with all the bad things going on in the world, Miami seems like it is a magical place.
Yesterday, history was made with the confirmation of Judge Ketanji Brown Jackson to the United States Supreme Court, making her the first black female justice in history and only the 8th Justice out of 116 on the High Court who was not a white male. But here in Miami we are extra proud, as Justice Jackson is the first Floridian on the Supreme Court and Her Honor was born and raised in Miami. Justice Jackson graduated from Palmetto High School and was a classmate of Assouline & Berlowe name partner Peter Berlowe. In fact their names, Berlowe and Brown, are so close in the alphabet that they appear on opposite pages of the high school yearbook.
Justice Jackson’s father, Johnny Brown, was also a graduate of the University of Miami School of Law, as were the two named partners of Assouline & Berlowe.
Miami is also going through a transformation to become a hub of technology and innovation. This month is Miami Tech month, with last week being Miami NFT Week, and this week kicked off Bitcoin 2022, a conference in Miami Beach with 30,000 attendees, the largest Bitcoin conference in the world.
In the professional basketball department, the Miami Heat have locked in 1st place in the NBA Playoffs. In the professional hockey department, the Florida Panthers have locked in 1st place in the NHL playoffs. In the professional football department, the Miami Dolphins have acquired six time pro bowl wide receiver Tyreek Hill, possibly the most high profile trade ever made for the team. And today is opening day for the Miami Marlins, who have also made a few high profile off season trades to be more competitive.
Up the road, today is another historic day in Florida in that it is the first time that the United States has sent up a space mission to the International Space Station with four civilian passengers.
Miami and Florida has seen an incredible growth in population and popularity over the past several years and in the midst of all the bad in the world has stood out as a beacon of hope.
For all of us to be here in Miami at this time, we should be exceptionally grateful and appreciate what we are a part of and cherish it.
Eric N. Assouline, Esq., Managing Partner, Assouline & Berlowe