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WHAT TO DO IF YOU GET SUED | November 07, 2012 (0 comments)
New York, NY--The most common litigation in the jewelry industry involves accusations of copying designs, or intellectual property (IP). IP involves copyright, design patents, trademarks, trade dress, and utility patents. Before you sue—or if you’re being sued--it’s important to understand the legal issues surrounding IP.
Copyright registration is available in the U.S. Copyright Office, one of the only government offices around the world that issues registrations. Most countries consider that designs are automatically protected by copyright, and registration is not necessary.
Due to the registration process in the Copyright Office, examiners have standards that must be met before designs are approved for copyright registration. In general, ordinary shapes and symbols cannot be copyrighted. This includes letters, common symbols, numbers, and geometric shapes. Much modern jewelry is of geometric shape, and unfortunately for those designers, such jewelry often cannot be protected by copyright.
Copyright applications are filed (in today’s world, online) and a response is usually received within 6-10 weeks. If the examiner turns down the design as not being copyrightable subject matter, the designer can appeal. The likelihood of success on appeals is quite small, but on occasion, can succeed. The basis usually is that the standard applied by the examiner was too stringent, and the design does, in fact, meet “copyrightable” standards.
This is an important issue because if you receive a letter charging infringement, a first question is whether or not the design is copyrightable. While opposite parties can argue about copyrightability, issuance of a copyright registration for a specific design is evidence that the design is copyrightable and a turn-down is evidence that it is not.
Peter Berger
Sometimes a defendant will be sued without a prior cease and desist letter, but such letters are not required. All copyright cases are heard only in the federal courts, and each of the 11 circuits may have different rules about what is required for a complaint to be properly filed. Some courts require that a copyright application be acted upon whether approved or turned down prior to a litigation being commenced. Other courts (New Jersey and California) merely require that the complainant file a copyright application without waiting for a decision from the Copyright Office.
This will not be material in the long run, although it can cause greater anxiety if one is sued in a federal court rather than merely receiving a cease and desist letter. Since the Copyright Office’s decision on copyrightability of a specific design is important to any complainant’s case, early filing of a lawsuit only increases cost, legal expense and intensity, as well as anxiety—without necessarily putting either party in better shape legally.
Assume you are notified of violating someone’s copyright rights. Here are some initial questions:
- Is the letter from a lawyer?
- Is the letter from the IP owner - a competitor?
- Have I received only a letter or a copy of a lawsuit filed in a U.S. Court?
- How important is the design to my business?
- Am I a manufacturer with retail customers or a retailer with consumer customers?
- If a manufacturer, what is the likely reaction of my customers?
- Has the accuser notified my customers?
- Do I need to do immediate damage control?
- Do I know the sender?
- What relationship do I have with the potential complainant?
- Can I talk with him/her?
- Can we get it resolved quickly?
- If a retailer, can I rely on my vendor to protect me?
- Is the vendor domestic or foreign?
- Does my insurance policy protect me?
After going through the above questions, compare the designs. Also, please be honest with yourself and your lawyer as to how the accused design came to be in your line. We all know in the industry that there are many ways this can happen. One obvious way is intentional knocking off. Frankly, most reputable companies in the U.S. do not “knock off” intentionally, especially for a popular design that is copyrightable. It just does not make economic sense.
On the other hand, many retailers will ask a vendor to copy a pre-existing design and want a better price than the first source. In today’s economic times, manufacturers are often unwilling to forego business, even where there may be a risk, because producing product and making sales keeps companies alive. It would be wise for the manufacturer to do a little initial “nose sniffing” to see whether or not the design is (a) copyrightable and (b) likely to cause a litigation which, if it occurs, often has the retailer immediately pulling product and returning all inventory, which can be a disaster for the manufacturer.
Another way accused copying occurs is when manufacturers buy from foreign sources that have open stock items. There is no international registry of copyrighted designs and anyone purchasing open stock from a foreign source runs the risk that the foreign source copied some design. Knowing your source, and knowing whether or not your source employs full time designers to create original designs or primarily copies existing designs will help in making an initial judgment on the likelihood that the accused design was copied or an original created by your source.
If you are a retailer, it is easy enough to ask your manufacturer, (assuming it’s located domestically or a significant supplier if foreign) to protect and indemnify you for legal costs and damages for the possible litigation expenses. For a retailer the choice is often to stop and not worry about the consequences to the vendor, or work with the vendor, accept an indemnity, continue selling, and not change your business activities. Either way has benefits and costs.
One frequently overlooked major factor relates to insurance coverage. Almost all businesses have commercial liability insurance, and all insurance policies have clauses that relate to litigation defenses. Over the past several years, insurance companies have become more clear in excluding certain types of coverage or including them for a higher fee. Copyright litigation may or may not be covered depending upon the language in your policy, the ferocity of your agent, and the general experience with the insurance company. Needless to say, some insurance companies are easier to work with to assist their insureds, and others are much more difficult. Investigating insurance coverage is significant, because if there is insurance coverage, your financial problem is reduced, and the plaintiff may be less likely to push forward since money for the defense is from an insurance company.
The issue of insurance also relates to renewals. Most companies automatically renew and may not look at their policies even though policy language changes. It would be valuable for someone inside to become more familiar with insurance language, insurance companies and determine whether or not IP litigation defense coverage is important to address when renewals are actively being considered.
While copyright infringement is a relatively easy legal issue to address, and judges are often quick to rule after looking at the competing designs, IP litigation in other areas can be more complicated, extensive, expensive and difficult.
Design patent litigation is relatively similar to copyright litigation, but design patent protection only lasts for 14 years. Copyright protection currently has been extended to the author’s life plus 75 years, or 100 years from the date of registration. Filing for and obtaining copyright protection is rather simple, and can be done online. Many clients learn to do this themselves, saving money and are able to register and protect more designs. Other clients request that their attorneys do so for important designs to make sure that the copyright registration process is as faultless as possible so that if a potential accusation is made, surprises are minimized when the copyright registration process becomes investigated.
This article has addressed a defendant being accused of copyright infringement. In our next installment, we’ll address the topic from the other side—what a potential plaintiff needs to know before filing a lawsuit.
Attorney Peter Berger, of Levisohn Berger LLP, has been actively involved in the jewelry industry for almost 40 years, specializing in intellectual property (copyright, trademark, and patent law) as well as other legal issues. He has developed a special appreciation for how members of the industry integrate legal issues in their business activities. The New York-based firm may be reached at (212) 486-7272.
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