Insights

On May 18, 2023, the US Supreme Court issued a long-anticipated decision in Andy Warhol Foundation for Visual Arts, Inc. v. Goldsmith, which alters the Courts’ interpretation of the copyright fair use doctrine. Specifically, the Court, in a majority opinion written by Justice Sotomayor, affirmed an earlier Second Circuit decision and held that the “purpose and character” factor of the fair use test does not focus on whether the new work is “transformative.” “[I]nstead, the analysis focuses on whether an allegedly infringing use has a further purpose or different character, which is a matter of degree, and the degree of difference must be weighed against other considerations, like commercialism.”

The Federal Trade Commission (“FTC”) sued three operators, Sean Austin, John Steven Huffman, John Preston Thompson, and their affiliated companies last year for falsely promising to eliminate or substantially reduce credit card debt for consumers.  These companies operated under several names, including ACRO Services, American Consumer Rights Organization, Consumer Protection Resources, Reliance Solutions, Thacker & Associates, and Tri Star Consumer Group.

On April 13, 2023, the Federal Trade Commission (“FTC”) announced that it has notified approximately 670 companies of potential FTC advertising regulation violations, triggering FTC authority to pursue steep civil penalties if companies fail to substantiate their product claims.  The target of this crusade is companies primarily advertising over-the-counter drugs, homeopathic products, dietary supplements, and functional foods.  Once on notice, companies could be subject to civil penalties of up to $50,120 per violation for unsubstantiated product claims.

Following its recent grant of a registration for Zarya of the Dawn, a comic book incorporating certain images generated by artificial intelligence, the U.S. Copyright Office (“Copyright Office) has issued new Guidance regarding its examination of works containing material that has been generated by artificial intelligence (“AI”), effective as of March 16, 2023.[1] In sum, works that incorporate material generated by AI may be eligible for copyright protection and registration under certain circumstances, provided that the work contains sufficient human authorship. Applicants seeking to register their works with the Copyright Office now have a duty to disclose any AI-generated material in copyright applications, as well as in existing registrations. Any AI-generated content that is more than de minimis must be excluded from the filing.

Trademark infringement lawsuits are often resolved early on in the litigation lifecycle.  Many defendants will simply change the mark they are using to limit damages and disincentivize a plaintiff from pushing forward with a claim.  Further, many trademark lawsuits are resolved at the preliminary injunction stage.  However, there are recent cases that suggest a growing trend of substantial verdicts being awarded to plaintiffs in trademark infringement lawsuits. These cases should serve as an opportunity for companies to think more strategically when it comes to allegations of trademark infringement.

The Food and Drug Administration (“FDA”) recently issued guidance recommending that the term “milk” extend beyond dairy (cow) milk products to plant-based alternatives. Although not legally binding, the guidance indicates that nondairy milk alternatives can be labeled “milk” and need not be restricted as nondairy “beverages” or “drinks.” These plant-based alternatives should, however, include a statement on their product label describing how they are nutritionally different from milk (e.g., “contains a lower amount of potassium than milk”).

#ICYMI—The Federal Trade Commission (“FTC”) extended the public comment period on its solicitation for public comments regarding potential updates and changes to the Green Guides (Guides for the Use of Environmental Marketing Claims) by 60 days.  On December 14, the FTC held an open meeting and voted to notice the public comment period. On December 20, the FTC noticed the public comment period on the Federal Register, which would have originally expired on February 21, 2023. All public comments must now be filed by April 24, 2023.

Is there a legal, cognizable claim for a consumer who was misled by a movie trailer? Perhaps. In June 2022, two Plaintiffs filed a lawsuit against Universal concerning a movie they streamed titled Yesterday which is owned by Universal.  Woulfe et al v. Universal City Studios LLC et al., 22-cv-00459, ECF No. 83 (C.D. Cal. Dec. 20, 2022).  Prior to streaming, the Plaintiffs watched the movie trailer, which featured actress Ana De Armas.  In the complaint, Plaintiffs alleged they were persuaded by the trailer, and De Armas’ role in particular to stream the movie.  However, De Armas’ character was cut from the final version of Yesterday, so she was not featured in the film whatsoever.  The Plaintiffs alleged they would not have rented the movie had they known De Armas would not appear in the movie. The Plaintiffs then sued Universal under a host of consumer protection violations, including a violation of the California Unfair Competition Law, California Consumer Legal Remedies Act, and California False Advertising Law. 

The Federal Trade Commission (“FTC” or “Commission”) recently announced that it has adjusted the maximum civil penalty dollar amounts for violations of 16 provisions that the Commission enforces. The increase is required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, and is intended to account for inflation. The act directs agencies to implement annual inflation adjustments based on a prescribed formula. Given the uptick in FTC enforcement actions, companies are likely to begin feeling the impact of the increased penalties in the coming year.

Monster has matched the size of its energy drinks with its recent arbitration award—securing a staggering $175 million in a trademark dispute heard by arbitrator Bruce Isaacs. While many contractual conflicts are resolved through arbitration, few trademark infringement cases land in arbitration and even fewer involve such a high monetary award.

On May 20, 2022 the Federal Trade Commission’s (“FTC”) Commissioners unanimously approved a request for public comment on proposed updates to its Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Endorsement Guides” or “Guides”). In the draft revisions, released last week, the FTC seeks to update the Endorsement Guides and provide new examples that reflect advertisers’ growing reliance on social media advertising. The Endorsement Guides were last revised in 2009. See 16 CFR pt 255.

On March 24, 2022, the European Union (EU) co-legislators (the European Parliament and the Council) reached political agreement on the final provisions of the Digital Markets Act (DMA). The DMA aims at ensuring fair and contestable markets in the digital sector by imposing specific regulatory obligations on so-called “gatekeepers,” i.e., major digital platforms with a powerful and entrenched position which act as important gateways for businesses to reach end users. The European Commission (EC) will act as the central enforcer of the DMA. It will have extensive investigative powers and be able to impose hefty fines as well as behavioral and structural remedies (including the breaking up of companies). As an instrument of ex ante regulation, the DMA is designed to complement (not replace) the ex post enforcement of competition law, which is often viewed as too slow to effectively rein in the market power of “Big Tech” players.

In recent months, the metaverse, a term that is meant to encompass a mixture of virtual reality and augmented reality, has increasingly become a conversation topic for companies and consumers. Companies have begun to invest in this space and have started staking out virtual property on platforms like Decentraland and The Sandbox. Lawsuits and trademark applications have also popped up alongside these investments. This recent legal activity indicates that the metaverse will be a critical area for companies to begin to learn about and monitor to ensure they are adequately protecting their intellectual property and avoiding risk.

Earlier this month, Crowell & Moring issued an alert regarding the robust enforcement of the California Consumer Privacy Act (“CCPA”) since its 2020 effective date. Other states and state consortiums, such as the Attorney General Alliance, continue to focus on the perceived need for consumer data privacy, which maintains bipartisan appeal. Currently, Colorado is preparing for the July 1st, 2023 effective date for the Colorado Privacy Act (“CPA”), various other states are working toward passing consumer data privacy legislation, and some states are attempting to pass measures of protection against “big data” that are different from California, Virginia or Colorado’s data privacy acts.

The California Consumer Privacy Act (“CCPA”), which went into full effect on January 1, 2020, has seen robust enforcement efforts by the office of the California Department of Justice. In late January, California Attorney General Rob Bonta announced an investigative sweep of businesses operating loyalty programs in California and sent notices alleging noncompliance with the CCPA to major corporations in the retail, home improvement, travel, and food services industries. In addition, Attorney General Bonta has encouraged consumers to know and express their privacy rights through an online platform that allows them to directly notify businesses of potential violations. 

On Friday, June 11, 2021, the Second Circuit Court of Appeals ruled that the Federal Trade Commission (“FTC”) failed to show that 1-800 Contacts violated antitrust law by entering into and enforcing trademark infringement settlement agreements against competitors that restricted certain bidding in online advertising auctions conducted by search engines, such as Google.  The Second Circuit’s decision reverses the FTC’s finding that these agreements violated Section 5 of the FTC Act.  The Second Circuit held that, while trademark settlements are not immune to antitrust scrutiny, the FTC applied an incorrect standard of review in concluding that they were “inherently suspect” and violated the antitrust law and, applying a proper “rule of reason” analysis, the Second Circuit concluded that the FTC had not shown direct evidence of anticompetitive harm and failed to properly acknowledge the clear procompetitive benefits of trademark enforcement. 

On May 5, 2021, Facebook’s Oversight Board upheld Facebook’s January 2021 ban of former president Trump from Facebook and Instagram for encouraging violence following the January 6, 2021 U.S. Capitol siege, based on two posts Trump made on Instagram and Facebook that afternoon and evening calling the rioters “great patriots” and “very special.” However, the Board left open the possibility for Trump to return to Facebook, claiming that his indefinite suspension was “standardless” and giving Facebook six months to modify its penalties against Trump proportionately based on its existing platform rules. Facebook had requested the input of the 20-member Board as to whether its decision was correct and sought recommendations on future suspensions of political leader users.

Last week the Supreme Court unanimously held that §13(b) of the Federal Trade Commission Act does not give the Federal Trade Commission the power to seek equitable monetary relief such as disgorgement or restitution. The Court’s opinion in AMG Capital Management LLC v. Federal Trade Commission removes a powerful tool that the FTC has long relied on to pursue monetary relief for consumers in both consumer protection and competition matters.

On April 15, 2021, the FTC filed its first complaint under the COVID-19 Consumer Protection Act (the CCP Act). The complaint, filed in the United States District Court for the Eastern District of Missouri, alleges that an in-state chiropractor and his company violated both the CCP Act and the FTC Act by deceptively marketing Vitamin D and Zinc products to treat COVID-19.