Major Changes To Trademark And Copyright Law Included In Massive Stimulus Package

Fox Rothschild LLP

Fox Rothschild LLP

Highly publicized pandemic relief and economic stimulus legislation that hurriedly passed Congress late in 2020 with little debate also includes what has been called the most significant trademark legislation since the Lanham Act, the Trademark Act of 1946.

Signed into law on December 28, the voluminous Consolidated Appropriations Act of 2021 makes major changes to American intellectual property laws via its inclusion of the Trademark Modernization Act of 2020 (TM Act); the Copyright Alternative in Small-Claims Enforcement Act of 2020 (CASE Act); and an amendment to Title 18 of the United States Code that adds Section 2319C titled “Illicit digital transmission services.” The new laws will make it easier for brand owners to obtain injunctive relief, create new procedures to challenge trademark registrations, establish a copyright small claims procedure and make illegal streaming of copyrighted material a felony.

New Trademark Laws

Clarifies That Presumption of Irreparable Harm Does Exist for Trademark Violations

Historically, a court could issue an injunction based on a trademark owner’s rights without having to establish that the owner suffered irreparable harm due to infringement. In other words, there was a presumption that the court would enter an injunction against the competitor’s continuing use of a confusingly similar trademark so that consumers would not be misled about the source of a good or service. 

In 2006, the Supreme Court held in eBay, Inc. v. MercExchange LLC, 547 U.S. 388 (2006) that irreparable harm could not be presumed in a patent infringement lawsuit. In the years following that decision, a circuit split developed on the application of that holding to trademark infringement. Over a decade after the decision, uncertainty still surrounded eBay's application to trademark infringement cases with no judicial consensus as to whether the presumption of irreparable harm survived eBay. When seeking an injunction, practitioners had to be prepared to submit evidence in support of irreparable harm, especially when before the U.S. Courts of Appeals for the 1st, 3rd, 9th, and 11th circuits. 

The Act resolves and clarifies the circuit split, stating that in light of the consumer protection concerns that would occur otherwise, a reputable presumption of irreparable harm does exist for trademark violations. This presumption reduces the evidentiary burden on trademark owners and will make it easier for them to obtain injunctive relief, particularly in jurisdictions that have applied eBay to preclude application of the presumption in the trademark context. 

New Procedures to Address False Use Claim Problems at USPTO

  • Third-Party Submission of Evidence During Examination. The TM Act codifies an ability to submit evidence during examination of an application. In particular, it states “A third party may submit for consideration for inclusion in the record of an application evidence relevant to a ground for refusal of registration.” That evidence is to be reviewed and considered for inclusion within two months by the Director of the USPTO. The Director’s decision is final and non-reviewable.
  • Flexible Response Periods. Applicants were previously provided with a six-month window to respond to any Trademark Examining Attorney actions. The TM Act permits Examiners to set response times between 60 days and six months, with extensions of up to six months permitted for a fee.
  • Ex Parte Expungement and Reexamination Proceedings. The TM Act also creates new ex parte procedures to cancel trademark registrations at the USPTO for marks that have not been used. The first is an expungement procedure that could be used to attack the registration of a mark on the basis that it has never been used in commerce. The second is a reexamination process that could be used to attack the registration of a mark on the basis that the mark was not in use in commerce on or in connection with some or all of the goods listed in the registration on or before the use dates alleged.

New Copyright Laws

Two new provisions relating to a copyrighted work: (1) the CASE Act; and (2) federal criminal penalties for “illicit digital transmission services” are also incorporated within the Act.

New Voluntary Alternative Dispute Resolution Process Before the U.S. Copyright Office

The CASE Act establishes a new voluntary alternative dispute resolution process for copyright infringement disputes before the U.S. Copyright Office. A Copyright Claims Board is established, comprised of at least three Copyright Claims Officers and two Copyright Claims Attorneys appointed by the Librarian of Congress. The Copyright Claims Officers will have many powers similar to those of a federal judge, with the specific purpose of facilitating the settlement of a claim or a resolution on the merits. 

Claims of copyright infringement, declaratory relief, misrepresentation in connection with Section 512 of the Digital Millennium Copyright Act (DMCA), certain compulsory counterclaims, and legal and equitable defense may all be brought before the Copyright Claims Board. Participation is voluntary, and when a claim is originally brought before the Board, the defending party may choose to “opt out” within 60 days. Importantly, “preemptive[] opt out” procedures will also be established, allowing Libraries and Archives (both terms are defined by the Act) to avoid any claims brought against them before the Copyright Claims Board under the CASE Act.

Likely due in large part to its $30,000 limit on damages recovery, the CASE Act provides expedited procedures to keep litigation costs low, allowing Claims Board Officers to hold conferences to address case management or discovery issues, but not formal motion practice like in federal court. Likewise, to avoid costly discovery practice, discovery will be limited to that established by the Register of Copyrights. While attorneys’ fees may be recovered under a proceeding before the Board, a fees award is limited to situations in which bad faith conduct occurs, and cannot exceed $5,000. Confirmation of the Board’s judgment may be sought before the U.S. District Court to enforce the Board’s ruling/determination.

New Federal Criminal Penalties for Illicit Digital Transmission Services

The Act also adds criminal liability for “Illicit digital transmission services” to the main federal criminal code to close a loophole for “streaming” (rather than copying) certain works, which has now become the primary way audiences consume entertainment. Section 2319C, which the Act adds the section criminalizing unauthorized recording of motion pictures in a motion picture exhibition facility, prohibits the willful digital transmission to the public for the purposes of commercial advantage or private financial gain, of certain protected copyrighted works. It will be up to the U.S. Department of Justice to enforce this provision, which may be asserted against digital transmission services, as opposed to consumers of the content. A violation of this provision may result in a fine and/or imprisonment of up to three years for a first offense and 10 years for a second or subsequent offense. Such penalties are in addition to those available to a copyright owner, thus not affecting an owner's civil remedies.

As summarized above, the Act includes significant changes to both trademark and copyright law. Businesses should be prepared for these changes and how they could affect the prosecution, use and maintenance of their trademarks, as well as the use of copyrighted materials.

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