intellectual property - ttu-ir.tdl.org

INTELLECTUAL PROPERTY

by Herbert J. Hammond* and Larry G. Cassil, Jr.**

I. INTRODUCTION ........................................................ 419II. TRADEMARKS .......................................................... 420

A. Blue Bell Bio-Medical v. Cin-Bad, Inc ................. 420B. Syrelec v. Pass & Seymour, Inc .......................... 425C. United States v. Yamin ..................................... 427

III. COPYRIGHT ............................................................ 429A. Estate of Vane v. The Fair, Inc ......................... 429B. Broadcast Music, Inc. v. Xanthas, Inc ................. 432C. Easter Seals Society v. Playboy Enterprises,

R evisited ......................................................... 434IV. TRADE SECRETS ...................................................... 436

A. Sheets v. Yamaha Motors Corp .......................... 436V. RIGHT OF PUBLICITY ................................................ 438

A. Benavidez v. Anheuser Busch, Inc ...................... 438VI. CONCLUSION ........................................................... 439

I. INTRODUCTION

The Fifth Circuit decided no cases of enduring interest to theintellectual property bar during this survey period, although five casesdeserve some comment. In a trade dress infringement case, the courtdealt with the extent to which a former distributor has a duty todistinguish the trade dress of its competitive product from the formerproduct.' In two copyright cases, the court dealt with issues ofstatutory damages, willful infringement, and proof of the infringer'sprofits in recovering actual damages. 2 The court also decided four

* Partner, Gardere & Wynne, Dallas, Texas; B.S., University of New Mexico, 1973;

J.D., New York University, 1976.** Associate, Gardere & Wynne, Dallas, Texas; B.A., Vanderbilt University, 1985; J.D.,

Columbia University, 1988.1. Blue Bell Bio-Medical v. Cin-Bad, Inc., 864 F.2d 1253 (5th Cir. Feb. 1989).2. Estate of Vane v. The Fair, Inc., 849 F.2d 186 (5th Cir. July 1989), cert. denied,

- U.S. -, 109 S. Ct. 792, 102 L. Ed. 2d 783 (1989); Broadcast Music, Inc. v. Xanthas,Inc., 855 F.2d 233 (5th Cir. Sept. 1988).

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cases of lesser importance - two trademark cases,3 a trade secret case4

and a case involving the noncommercial use of an individual'slikeness.'

II. TRADEMARKS

A. Blue Bell Bio-Medical v. Cin-Bad, Inc.

A suit for trade dress infringement 6 under section 43(a) of theLanham Act, 7 Blue Bell Bio-Medical v. Cin-Bad, Inc.,' was a con-fusing pronouncement from the Fifth Circuit on the duty of an ex-distributor to steer clear of his former supplier's trade dress inpurveying a competitive product. In Blue Bell, the Fifth Circuitaffirmed the district court's denial of a preliminary injunction which,if granted, would have prohibited the appellees ("CBi") from mar-keting a medical cart embodying allegedly infringing trade dress. 9

The Fifth Circuit panel concluded that the district court had appliedthe proper legal analysis and that its findings of fact were not clearlyerroneous. 10

The case involved a medical cart used in hospitals and othermedical facilities embodying what Blue Bell claimed was a distinctivetrade dress." CBi had previously been Blue Bell's Texas distributor. 2

3. Syrelec v. Pass & Seymour, Inc., 869 F.2d 838 (5th Cir. Apr. 1989); United States v.Yamin, 868 F.2d 130 (5th Cir. Mar.), cert. denied, __ U.S. -, 109 S. Ct. 3258, 106 L.Ed. 2d 603 (1989).

4. Sheets v. Yamaha Motors Corp., U.S.A., 849 F.2d 179 (5th Cir. July 1988).5. Benavidez v. Anheuser Busch, Inc., 873 F.2d 102 (5th Cir. May 1989).6. Trade dress is defined as the "total image" of a product or service. John H. Harland

Co. v. Clarke Checks, Inc., 711 F.2d 966, 980 (lth Cir. 1983). This may include featuressuch as size, shape, color or color combination, texture, graphics, or sales techniques. Id.

7. The Lanham Act § 43a, 15 U.S.C. § 1125(a) (1982), amended by 15 U.S.C. § 1125a(1988) (effective date of amendment was Nov. 15, 1989). The Lanham Act creates a cause ofaction for trade dress infringement. See Chevron Chem. Co. v. Voluntary Purchasing Groups,Inc., 659 F.2d 695, 700-02 (5th Cir. Unit A Oct. 1981), cert. denied, 457 U.S. 1126 (1982).

8. 864 F.2d 1253 (5th Cir. Feb. 1989).9. Id. at 1254.

10. Id. at 1259-60.11. Id. at 1254. The carts manufactured by Blue Bell were regal blue with an off-white

molded plastic top and off-white accessories. Id. Blue Bell's medical carts were capable ofbeing customized by adding top rails, side rails, equipment shelves, dividers, and otherattachments. Id. Blue Bell's market strategy revolved around the "Blue Bell" name, mark andblue color. Id. The plaintiff was headquartered in Blue Bell, Pennsylvania, used a blue belllogo and the letters "B-L-U-E B-E-L-L" in its telephone number. Id. at 1254 n.1.

12. Id. at 1254.


Alleging dissatisfaction with CBi's sales, Blue Bell terminated thedistributorship in 1987.13 Immediately, CBi began -to develop andmarket its own medical cart embodying a similar trade dress underthe trademark "Top Drawer.' 14

In designing the accused cart, CBi specified that it wanted ablue medical cart.". CBi's manufacturer then selected a shade of bluevirtually identical to the color of Blue Bell's cart. 16 There was alsoconflicting deposition evidence that CBi had copied the Blue Bellcart to "get back" at Blue Bell for terminating the distributorship.' 7

CBi's manufacturer "purchased Blue Bell medical carts and usedBlue Bell brochures and pricing schemes in the design and develop-ment of the CBi cart,"' 8 although the manufacturer's president laterdisclaimed direct copying, contending that he had looked at the cartsof other manufacturers as well as those produced by Blue Bell. 19

There was also evidence that on one occasion CBi attempted to"pass off" its carts as Blue Bell carts to a former customer whowas unaware that CBi's distributorship had been terminated.20 Aftersoliciting additional sales from the customer, CBi supplied its "TopDrawer" carts in response to a purchase order from the customerfor carts corresponding to Blue Bell's model numbers.2 1 These cartswere later returned by the customer who concluded that they wereinferior in quality to the carts Blue Bell previously supplied. 22

The district court, which rendered its decision on the basis of arecord consisting only of affidavits, depositions and documents with-out a live hearing, 23 applied the now familiar "Sno-Wizard analy-

13. Id. at 1254-55.14. Id. at 1255. CBi's "Top Drawer" brand medical cart had a similar overall color

scheme. Id. The tops of its carts were light gray molded plastic, and the attachments werelight gray, off-white and white. Id. Like the Blue Bell cart, the CBi cart could be customizedby adding various accessories. Id. The dimensions of the two carts were also similar. Id. TheCBi cart, however, was clearly labeled "Top Drawer." Id. At trial, CBi introduced evidencesuggesting that there was not much variation in the size and design of medical carts throughoutthe entire market. Id.

15. Id.16. Id.17. Id. at 1258.18. Id. at 1255.19. Id.20. Id.21. Id.22. Id. at 1255-56.23. Id. at 1257 n.4.

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sis. '24 This analysis requires the court to decide first whether the

alleged trade dress qualifies for protection 25 and if so, whetherprotectable trade dress has been infringed. 26 The district court foundthat Blue Bell had established neither distinctiveness nor secondarymeaning in the features of its medical cart, thereby precluding itfrom meeting its burden of showing a likelihood of success on themerits. 27 The district court went on to find that even if Blue Bell'scart embodied a protectable trade dress, Blue Bell had failed to showa likelihood of success on the infringement issue, 2 precluding issuanceof a preliminary injunction. 29

Blue Bell appealed the ruling, arguing that the district court hadignored the parties' prior distributorship relationship and disregardedevidence of CBi's intent to copy Blue Bell's product.30 Blue Bellasserted that "a former distributor always has an affirmative dutyto distinguish its goods from those of its prior licensor," 3 and that"by failing to consider intent expressly, the district court engaged inan erroneous legal analysis which requires [the appellate] court toconduct a de novo review." '3 2

As to Blue Bell's first ground for appeal, the Fifth Circuit panelacknowledged that "a previous licensing or distributorship agreementmay provide evidence of a defendant's intent to copy the plaintiff'sgoods."" The court declined, however, to hold that a former dis-tributor always "has a greater duty . . . to distinguish its productfrom that of its prior manufacturer." '3 4 Rather, the court concluded

24. See Sno-Wizard Mfg. v. Eisemann Prods. Co., 791 F.2d 423 (5th Cir. 1986).25. According to Sno-Wizard, the inquiry into whether a trade dress is protectable under

the Lanham Act involves three issues: "(1) distinctiveness, (2) secondary meaning, and (3)functionality." See 864 F.2d at 1256.

26. Id.27. Id. at 1257.28. Id.29. See Dallas Cowboys Cheerleaders v. Scoreboard Posters, Inc., 600 F.2d 1184, 1187

(5th Cir. 1979). In the Fifth Circuit, the movant for a preliminary injunction must satisfy fourrequirements: (1) a substantial likelihood of success on the merits; (2) a substantial threat thatthe movant will suffer irreparable injury if the injunction is not issued; (3) a showing that thethreatened injury to the movant outweighs any damage the injunction might cause the opponent;and (4) a showing that the injunction will not disserve the public interest. Id. at 1187.

30. 864 F.2d at 1257.31. Id.32. Id. at 1258.33. Id. at 1257 (citations omitted) (emphasis added).34. Id.

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that in the case where a former licensee continues to use a registeredtrademark of its former licensor without permission, "the courtshave ordered the defendant to discontinue this misleading practiceand take affirmative steps to distinguish its product." 3 In cases suchas this one, where the defendant does not continue to use a registeredtrademark, said the court, there is "no broad requirement that aformer distributor must always take affirmative steps to distinguishits product. 3 6 Since CBi in no way adopted or used any registeredtrademark of Blue Bell, the court reasoned that CBi had no affir-mative duty to change the design of its cart to distinguish it fromBlue Bell's, and it declined to overturn the district court's ruling onthis ground.37

In refusing to endorse the broad principal that a former distrib-utor must always take affirmative steps to distinguish its product,the court relied on its 1984 decision in Sicilia Di R. Biebow & Co.v. Cox.3 8 In Biebow, "the court noted that the defendant was aformer distributor of the plaintiff, but did not infer any legal dutyfrom this fact." 3 9 While this may be true, the plaintiff in Biebowdid not, apparently, raise the issue of whether a former distributorshould be forced to take affirmative steps to distinguish its tradedress from that of supplier's goods. As further support for its refusalto find such a duty in Blue Bell, the Fifth Circuit stated that "whenthis position was explicitly argued by a plaintiff [in Falcon Rice Mill,Inc. v. Community Rice Mill, Inc.], 40 we declined to recognize ageneral duty of every prior distributor to stay 'well clear' of thetrade dress of its former supplier." ' 4' The plaintiff in Falcon RiceMill argued that an inference of intent to copy, deceive, or confusewas mandated in that case because the parties' prior relationshiprequired that the defendant stay "well clear" of the plaintiff'smarks. 42 However, the Fifth Circuit held that the district court did

35. Id. at 1258 (citing Burger King Corp. v. Mason, 710 F.2d 1480, 1491-93 (11th Cir.1983), cert. denied, 465 U.S. 1102 (1984) and Holiday Inns, Inc. v. Alberding, 493 F. Supp.1025, 1028 (N.D. Tex. 1980), aff'd, 683 F.2d 931 (5th Cir. 1982)).

36. Id. at 1258.37. Id.38. 732 F.2d 417 (5th Cir. 1984).39. See 864 F.2d at 1258.40. 725 F.2d 336 (5th Cir. 1984).41. 864 F.2d at 1258 (quoting Falcon Rice Mill, 725 F.2d at 346-47).42. 725 F.2d at 346-47.

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not err in refusing to infer intent under such circumstances becausethere was no direct evidence of an intent to copy and because onlylimited copying occurred. 43 Accordingly, it does not appear that theFifth Circuit squarely addressed this specific issue prior to the BlueBell case.

In any event, since registered trademarks and unregistered tradedress are afforded essentially the same protection under the LanhamAct, 44 a duty to distinguish goods on the part of a former distributoror licensee which depends on whether a mark or trade dress isregistered does not seem to make a great deal of sense. In theauthors' view, the fact of registration should be irrelevant to a formerlicensee's duty to refrain from using an otherwise distinctive trade-mark or trade dress.

On the issue of CBi's intent to copy the trade dress embodiedin Blue Bell's cart, the panel rejected Blue Bell's contention that thedistrict court's failure to make an explicit finding as to intent wasan error of law requiring de novo review. 45 The Fifth Circuit claimedthat Blue Bell's contention was based upon the erroneous assumptionthat intent alone sufficed to establish trade dress infringement. 46 "Adefendant's intent to copy," said the court, "is a relevant factorwhich a court may consider when deciding whether there is a likeli-hood of confusion between the products of the plaintiff and thedefendant. ' 47 Since CBi's intent to copy was only one element ofthe likelihood of confusion inquiry,' 8 and since the district court

43. Id.44. See Falcon Rice Mill, 725 F.2d at 344; Chevron Chem. Co. v. Voluntary Purchasing

Groups, Inc., 659 F.2d 695, 702 (5th Cir. Unit A Oct. 1981), cert. denied, 457 U.S. 1126(1982); Sun-Fun Prods., Inc. v. Suntan Research & Dev., Inc., 656 F.2d 186, 192 (5th Cir.Unit B Sept. 1981).

By statute, trade dress is not explicitly made registrable since § 45 of the Lanham Act, 15U.S.C. § 1127 (1982), amended by 15 U.S.C. § 1125a (1988) (effective date of amendmentwas Nov. 16, 1989), only provided for the registration of any "word, name, symbol, or deviceor any combination thereof adapted and used by a manufacturer or merchant to identify hisgoods and distinguish them from another." However, judicial, decisions have long ago estab-lished that distinctive packaging, containers or product configurations are registerable on thePrincipal Register. See In re World's Finest Chocolate, Inc., 474 F.2d 1012, 1014-15 (C.C.P.A.1973); In re Kotzin, 276 F.2d 411, 414-15 (C.C.P.A. 1960); Oxford Pendaflex Corp. v. RolodexCorp., 204 U.S.P.Q. (BNA) 249, 255 (T.T.A.B. 1979).

45. 864 F.2d at 1258.46. Id.47. Id. at 1259.48. Id.

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adopted the proper "digits of confusion ' 49 test, making expressfindings regarding other factors, the.Fifth Circuit assumed that thedistrict court considered the issue of intent but found it not to becritical.5 0

After taking pains to reiterate that the defendant's intent ismerely one factor in the likelihood of confusion calculus," the FifthCircuit undercut its -own argument by referring to both the Sno-Wizard and Chevron decisions to the effect that if the mark was"adopted [by the defendant] with the intent of deriving benefit fromthe reputation of [the plaintiff], that fact alone may be sufficient tojustify the inference that there is confusing similarity [between theproducts], 5 2 Certainly the facts elaborated in the court's opinionwould tend to indicate that CBi was intending to do just that. Thus,the court's assumption that the district court considered the issue ofintent but did not find it to be critical may be questioned. If thedistrict court failed to consider intent expressly, 3 if, as the courtindicated, intent alone may be sufficient to justify the inference thatthere is a confusing similarity between two products,5 4 and if, ashere, there was significant evidence of wrongful intent in the record,the Fifth Circuit's refusal to consider de novo the district court'sruling on likelihood of confusion would seem to be in error.

B. Syrelec v. Pass & Seymour, Inc.

The Fifth Circuit was called upon in Syrelec v. Pass & Seymour,Inc." to determine whether in order to prove likelihood of confusion

49. Id. In this circuit, likelihood of confusion is determined by looking at some eight-odd digits or factors of likelihood of confusion. These include: (1) the type of trademark ortrade dress, that is, the strength of the prior owner's mark; (2) the degree of similarity betweenthe two marks or trade dress; (3) the similarity between the products; (4) the identity of retailoutlets and purchasers; (5) the identity of advertising media utilized by the respective parties;(6) the defendant's intent; (7) the existence of actual confusion; and (8) the degree of careexercised by purchasers of the respective products. See, e.g., Fuji Photo Film Co. v. ShinoharaShoji Kabushiki Kaisha, 754 F.2d 591, 597-98 (5th Cir. 1985); Sun-Fun Prods., Inc. v. SuntanResearch & Dev., Inc., 656 F.2d 186, 189 (5th Cir. Unit B Sept. 1981); Roto-Rooter Corp. v.O'Neal, 513 F.2d 44, 45 (5th Cir. 1975).

50. 864 F.2d at 1259. The court also upheld the district court's refusal to consider BlueBell's unfair competition claims under Texas law because Blue Bell failed to show likelihoodof confusion, an essential element of a claim for unfair competition in Texas. Id. Accordingly,the district court's failure to consider the unfair competition claim did not require reversal.Id.

51. Id. at 1259.52. Id. at 1259 (emphasis added) (quoting Chevron, 659 F.2d at 704).53. 864 F.2d at 1258.54. See Sno-Wizard Mfg. v. Eisemann Prods. Co., 791 F.2d 423, 428 (5th Cir. 1986).55. 869 F.2d 838 (5th Cir. Apr. 1989).

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between a registered mark and a company name, the party claimingsuperior rights in the company name had the burden of showing thatthe abbreviated form of its name as well as the full name was entitledto legal protection . 6 The case arose in the context of an appeal froma district court's decision upholding the Trademark Trial and AppealBoard's 7 finding in a Patent and Trademark Office cancellationproceeding that there was a likelihood of confusion between appel-lant's "SYRELEC" mark and appellee's "SYRACUSE ELECTRON-ICS" mark.5 On appeal, Syrelec propounded the novel theory thatSyracuse Electronics had the burden of proving that "Syrelec," theabbreviation of the corporate name by which it was often known,had acquired secondary meaning in the minds of the relevant public. 9

In rejecting appellant's argument, the Fifth Circuit stated thatthe fact "that one mark abbreviates the other was merely evidencebearing on the ultimate factual conclusion drawn by TTAB and thedistrict court. Syracuse Electronics was not attempting to obtainprotection for an abbreviation of its trade name, but for its fullname.' ',

The court reasoned that since the appellee had not soughtcancellation of the registered mark on the basis of likelihood ofconfusion with the abbreviated version of its name, the TTAB'slikelihood of confusion analysis between appellant's "SYRELEC"

56. Id. at 839.57. The case originally began as a cancellation proceeding between the parties. A cancel-

lation proceeding is an inter parties proceeding in the United States Patent and TrademarkOffice in which one party seeks to cancel a federal registration obtained by another on groundsthat the petitioner believes it is or will be damaged by registration of the mark on the PrincipalRegister. 15 U.S.C. § 1064 (1988). Cancellation proceedings are conducted before the TrademarkTrial and Appeal Board (TTAB) pursuant to 15 U.S.C. § 1067 (1988). The TTAB cancelledSyrelac's registration on the ground that the Syrelec mark and the Syracuse Electronics markare likely to be confused. 869 F.2d at 839. Syrelec appealed the TTAB's decision to the UnitedStates District Court pursuant to 15 U.S.C. § 1121 (1988), which permits a party to suchproceeding to obtain de novo review as an alternative to appealing the decision to the UnitedStates Court of Appeals for the Federal Circuit. Id. at 839.

58. Id. at 838-39. Appellant and appellee had at one time been partially owned by thesame entity. Id. at 838. Syrelec had originally been called "Sedelec." Id. Later, the owner ofSyracuse Electronics acquired 50% of Sedelec and its name was eventually changed to "SyracuseElectronics France" to reflect the change in ownership. Id. Still later, the then president ofSyracuse Electronics sold his interest in Syracuse Electronics France and that company changedits name to Syrelec. Id. When Syrelec expanded its business to the United States, this litigationensued. Id. at 838-39.

59. Id. at 839.60. Id.

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and appellee's "SYRACUSE ELECTRONICS" was proper and shouldnot be disturbed. 61 The court rejected appellant's reliance on caselaw holding that an "abbreviation, like any other unregistered mark,will only be protected if it has acquired secondary meaning, '62

because Pass & Seymour had not sought cancellation on the basis ofits rights in "Syrelec" per se.63 The court upheld the TTAB's findingof likelihood of confusion between "SYRELEC" and "SYRACUSEELECTRONICS," 64 agreeing with the First Circuit in Purolator, Inc.v. EFRA Distributors, Inc. 65 which held that the fact that the publicidentifies a shorthand of a mark with the owner's products is yetadditional evidence going to likelihood of confusion between theunabbreviated and the accused marks. 66

C. United States v. Yamin

In the only criminal case represented in the survey, 67 the FifthCircuit held that to prove trafficking in counterfeit goods under theLanham Act, only likelihood of confusion, not actual confusion,need be proved.6 This, of course, has always been the law in civilactions .69

The case was originally brought against the three codefendantsunder a statute providing criminal penalties for anyone who "inten-tionally traffics or attempts to traffic in goods or services andknowingly uses a counterfeit mark on or in connection with suchgoods or services." ' 70 Defendants appealed their convictions for traf-ficking in counterfeit watches on several grounds. One defendant

61. Id.62. Id. (quoting Continental Corrugated Container Corp. v. Continental Group, 462 F.

Supp. 200, 204 (S.D.N.Y. 1978)).63. Id. at 839. Even if the court had accepted Syrelec's argument, Syrelec failed to

challenge the district court's factual finding that there was a likelihood of confusion between"Syracuse Electronics" and "Syrelec." Id. Presumably these unchallenged findings alone wouldhave been sufficient for the court to affirm the district court's decision on appeal.

64. Id.65. 687 F.2d 554 (1st Cir. 1982).66. Id. at 560.67. United States v. Yamin, 868 F.2d 130 (5th Cir. Apr.), cert. denied, - U.S.

__ 109 S. Ct. 3258, 106 L. Ed. 2d 603 (1989).

68. Id. at 133.69. See, e.g., Sun-Fun Prods., Inc. v. Suntan Research & Dev. Inc., 656 F.2d 186, 191

(5th Cir. Unit B Sept. 1981); Exxon Corp. v. Texas Motor Exchange, 628 F.2d 500, 506 (5thCir. 1980); Roto-Rooter Corp. v. O'Neal, 513 F.2d 44, 45 (5th Cir. 1975).

70. 18 U.S.C. § 2320(a) (1988).

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contended that the court's jury instructions 'so misstated the law asto be plain error.7 The allegedly objectionable instruction stated:

The prosecution is not required to prove that the defendant everhad an intent to deceive or defraud anyone. The Governmentsimply has to show that the use of the spurious trademark islikely in the future to cause either confusion, mistake, or deceptionof the public in general..... The public in general includes personswho have no intent to purchase such as the recipient of a gift orthe guest in the house who simply views goods as well as pur-chasers and potential purchasers. The intent here is an intent bythe defendant to copy the trademark even if there is concededlyno intention to deceive the purchaser.72

Applying the plain-error standard of review,73 the Fifth Circuitstated that the "statute's application is not restricted to instances inwhich direct purchasers are confused or deceived by the counterfeitgoods." 7 4 Rather, the statute was "fashioned for the protection oftrademarks themselves and for the prevention of cheapening anddilution of the genuine product. 7 5 Rejecting the appellants' conten-tion that none of the witnesses who purchased the illicit watches wasdeceived into thinking that the watches were genuine, the Fifth Circuitagreed with the Eleventh Circuit's prior decision in United States v.Torkington,76 holding that likelihood of postsale confusion77 wassufficient to support conviction. 78

The defendants next challenged the jury's verdict on evidentiarygrounds, contending that the Government failed to introduce the"best evidence" of the counterfeit marks - namely, the watchesthemselves, 79 and that without the "best evidence" of the counterfeitmarks, testimony about the counterfeit marks was inadmissible unlesssome exception to the best evidence rule was established. 0

71. 868 F.2d at 132.72. Id. (emphasis added).73. At trial, defense counsel failed to object to the instruction. Therefore, the standard

of review was one of "plain-error," which requires that the error must have been "sofundamental as to have resulted in a miscarriage of justice." Id.; see United States v.Hernandez-Palacios, 838 F.2d 1346, 1350-51 (5th Cir. 1988).

74. 868 F.2d at 132.75. Id. at 133.76. 812 F.2d 1347, 1353 (llth Cir. 1987).77. 868 F.2d at 133.78. Id.79. Id. at 134; see FED. R. Evio. 1002.80. 868 F.2d at 134.

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The Fifth Circuit disagreed, finding that the purpose of the bestevidence rule - to prevent inaccuracy or fraud - was not violated bythe failure to admit an exemplar of the counterfeit watches soldbecause a witness was not likely to remember a counterfeit markinaccurately."' Moreover, the court noted that "an object bearing amark is both a chattel and a writing, and the trial judge has discretionto treat it as a chattel, to which the best evidence rule does notapply. '" 8 2 On the basis of the testimony by several witnesses that theyhad purchased counterfeit watches from the defendants and theadmission of 324 counterfeit watches seized from the defendants'stock, the panel found that "[t]he inference that the seized watchesthat were entered into evidence were the same as, or substantiallyidentical to, the watches sold to the various witnesses is too strongto be seriously questioned. ' 83 Given the defendants' failure to maketheir "best evidence" objection at trial, the defendants failed to showplain-error sufficient to overturn the jury's verdict on this issue.14

III. COPYRIGHT

A. Estate of Vane v. The Fair, Inc.

In Estate of Vane v. The Fair, Inc. ,85 the Fifth Circuit affirmedthe district court's refusal to award the infringer's profits in acopyright infringement case because the evidence was too speculativeto support the award.8 6

Appellant Vane, a photographer, was hired by The Fair, adepartment store, to prepare slides of its merchandise to be used inpreparing advertising material to be sent to customers.8 7 Subsequently,The Fair hired a different advertising agency to prepare televisioncommercials using some of the slides prepared by Vane.88 Vane suedfor copyright infringement, claiming that his agreement with The

81. Id.82. Id. (emphasis in original); see FED. R. EvrD. 1002.83. 868 F.2d at 135.84. Id.85. 849 F.2d 186 (5th Cir. July 1988), cert. denied, __ U.S. , 109 S. Ct. 792, 102

L. Ed. 2d 783 (1989).86. Id. at 187.87. Id.88. Id.

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Fair was only for the production of mailers, and that he owned allother rights in the slides provided by copyright law.8 9 The districtcourt found The Fair and its advertising agency liable for infringe-ment and Vane elected to recover actual damages pursuant to section504(b) of the Copyright Act.90 Because The Fair's financial recordslacked sufficient detail to enable Vane to establish The Fair's grossrevenues attributable to the sales of merchandise shown in the slides,Vane called as an expert witness a professor of marketing, whoopined on how much sales revenue each dollar The Fair spent ontelevision advertising would generate. 91 The expert's testimony wasbased upon the results of a multiple regression analysis he conductedwhich took into account monthly financial data, including profit andloss statements and summaries of media costs over a five yearperiod.

92

The Fifth Circuit held these calculations to be too speculativebecause cross-examination established that the expert's analysis wasflawed. 93 The expert's mathematical model, for example, failed totake into account all of the expenses in producing the commercials,

89. Id.; see 17 U.S.C. § 201(a)-(b) (1988). Under § 201, "[c]opyright in a work . . . vestsinitially in the author or authors of the work . .. fu]nless the parties have agreed otherwisein a written instrument signed by them."

90. 849 F.2d at 187; see 17 U.S.C. § 504(b)-(c) (1988). A copyright infringer is liable foreither: (1) the copyright owner's actual damages and any additional profits of the infringer,as provided by § 504(b); or (2) statutory damages provided by § 504(c). In a case such as this,where the successful plaintiff elects to recover actual damages and profits, the measure ofactual damages and profits is governed by the following:

(b) ACTUAL DAMAGES AND PROFITS. - The copyright owner is entitled torecover the actual damages suffered by him or her as a result of the infringement,and any profits of the infringer that are attributable to the infringement and arenot taken into account in computing the actual damages. In establishing the infrin-ger's profits, the copyright owner is required to present proof only of the infringer'sgross revenue, and the infringer is required to prove his or her deductible expensesand the elements of profit attributable to factors other than the copyrighted work.

Id. § 504(b).91. Id. at 188. The expert calculated that The Fair had sold $25.60 in merchandise for

every dollar it spent on television advertising. Id. He multiplied $25.60 by the number ofdollars The Fair spent on the infringing television commercials to yield a gross revenue figure.Id. He then deducted certain costs to The Fair, including the actual costs that The Fair hadpaid for the merchandise it sold, transportation charges for getting the merchandise to thestores, a five dollar allowance for pilferage, and other direct operating expenses. Id. Afteradjusting the resulting figure for inflation, the expert concluded that the appellee's profitsattributable to its infringement of Vane's slides exceeded $694,000.00. Id.

92. Id.93. Id. at 189.


neglected to consider that the infringing slides were used only someof the time the commercials were aired and ignored the relativeimportance of other parts of the commercials in generating profits. 94

But ultimately, Vane's expert conceded that his model could notanswer the critical question: How much revenue was generated byuse of the infringing work? 95 Given these deficiencies in the underlyingmathematical model, the district court had refused to award damagesbased upon such speculative "lost profits," and the Fifth Circuitagreed .96

While the Fifth Circuit accepted the basic proposition that experttestimony (and presumably statistical evidence) may, in appropriatecircumstances, be used to establish lost profits in a copyright in-fringement case, 97 it rejected the actual analysis employed in this casebecause that analysis simply failed to take into account too manyfactors. 9 As is common in trademark infringement cases, the use ofstatistical evidence to establish secondary meaning or likelihood ofconfusion is seldom successful, because surveys are usually poorlydesigned and significantly flawed.9 Unfortunately, the costs of con-ducting a scientifically designed mathematical model or survey areso considerable in relation to the potential damages that are usuallyrecoverable that use of such evidence is just not cost effective. Incases such as this where evidence of lost profits attributable toinfringement is not readily available and no actual damage can beproven, the copyright owner may be well advised to seek recoveryof statutory damages, the award of which is discretionary with thecourt. 100

94. Id.95. Id.96. Id. at 189-90.97. The Fifth Circuit noted that "[wihen financial records sufficiently detailed to show

an infringer's sales are not available, expert testimony may be used to develop either suchproof or, as Vane attempted, proof of its profits rather than its sales." Id. at 188.

98. Id. at 189.99. See, e.g., Sno-Wizard Mfg. v. Eisemann Prods. Co., 791 F.2d 423, 427 (5th Cir.

1986) (finding survey evidence flawed because it included a disproportionate percentage ofowners or operators of snow cone machines); Zatarains, Inc. v. Oak Grove Smokehouse, Inc.,698 F.2d 786, 797 (5th Cir. 1983) (criticizing survey offered to prove secondary meaning asinadequate in size and improperly conducted); Bank of Texas v. Commerce Southwest, Inc.,741 F.2d 785, 789 (5th Cir. 1984) (rejecting survey because results could not be assumed tobe representative of entire county).

100. In the case of statutory damages, however, courts have great discretion in determining

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B. Broadcast Music, Inc. v. Xanthas, Inc.

The second copyright case of note from the survey period,Broadcast Music, Inc. v. Xanthas, Inc.,1°1 concerned copyright in-fringement by a jukebox operator. 10 2 The Copyright Act of 1976provides that a jukebox operator who wishes to play copyrightedmusic without specific permission from the copyright owner mustregister his jukeboxes with the United States Copyright Office andpay an annual registration fee to the Copyright Office. 03 The feesare forwarded to the principal performance rights society, such asBroadcast Music, Inc. ("BMI"), the plaintiff.' 4 Failure to pay theannual registration fee to the Copyright Office constitutes infringe-ment. 105 Where the alleged infringer "knows his action constitutesinfringement,"'06 the infringer may be guilty of willful infringe-ment. 107

Under the Copyright Act, the prevailing copyright owner mayelect to recover either actual damages and lost profits or statutorydamages. 0 In Broadcast Music, the appellee elected to recover thelatter. In such a case, a court may award statutory damages of notless than $500 and not more than $20,000 per work in the amountit determines to be just.1°9 In cases where the court finds that theinfringement was willful, it has discretion to increase the award ofstatutory damages up to $100,000 per work." 0

Broadcast Music presented several issues concerning copyrightinfringement which have application beyond the jukebox context.First, the court rejected Xanthas' challenge to the trial court's finding

a basis for awarding damages. See infra notes 101-22 and accompanying text. Note, however,that in the case of unpublished works, statutory damages are not recoverable prior toregistration. 17 U.S.C. § 412 (1988). In the case of published works, statutory damages maynot be received before registration unless registration was made within three months ofpublication of the work. Id. § 412.

101. 855 F.2d 233 (5th Cir. Sept. 1988).102. Id. at 235.103. Id. at 236; see 17 U.S.C. § 116(b) (1988).104. 855 F.2d at 236; see 17 U.S.C. § 116(b) (1988).105. 17 U.S.C. § 116(b)(2) (1988).106. 855 F.2d at 236.107. 17 U.S.C. § 504(c)(2) (1988). In such cases, statutory damages for infringement

occurring prior to registration may not be available. See supra note 90.108. 17 U.S.C. § 504(a) (1988).109. Id. § 504(c).110. Id.

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of willful infringement based on Xanthas' knowledge of the statutorylicensing and registration requirement. 1' The court noted that Xan-thas had previously paid the fees, deliberately ignored the require-ments and made "a conscious decision not to pay the fee," evenafter a request by BMI before suit to remedy the deficiency." 2 TheFifth Circuit summarily rejected the appellant's argument that theinfringement was not willful because Xanthas could not afford topay the fees, noting that Xanthas could have approached BMI andsought permission to play the copyrighted songs, instead of contin-uing in business and using the music without paying for it."'

The court next addressed the number of infringements committedby the appellant. At trial, Xanthas stipulated that it had owned sevenjukeboxes and had committed forty-four of the infringements, butpleaded ignorance as to ownership of the remaining jukeboxes onwhich the additional infringements allegedly took place. 114 Relyingon testimony by BMI's attorney concerning answers to questionnairessubmitted to BMI by the proprietors of various establishments wherethe jukeboxes were located (which identified the defendant as theowner of various jukeboxes), the district court found that 182 in-fringements had occurred on the dates and at the locations allegedby BMI." 5 On each date, Xanthas had owned and operated thejukeboxes on which the songs were played without having paid theCopyright Office the registration fee. 16 In determining statutorydamages, the district court multiplied the number of jukeboxesallegedly owned by Xanthas by the fifty dollar delinquent fee pro-vided by the statute, and trebled the amount to obtain an award of$319,500.111

The Fifth Circuit reversed that portion of the district court'sopinion dealing with the number of infringements committed by the

111. 855 F.2d at 236.112. Id.113. Id.114. Id. at 235.115. Id.116. Id. BMI's attorney "read the responses of proprietors of establishments with jukeboxes

to questionnaires that BMI had sent asking who owned the jukebox in their establishment."Id. at 237. The proprietors of those jukeboxes did not testify. The Fifth Circuit found thatinformation supplied on these questionnaires was inadmissible hearsay. Id. at 238. Since theproprietors of the jukeboxes did not complete these forms in the course of their regularbusiness activities, the information did not come within the records exception of Federal Ruleof Evidence 803(b).

117. Id. at 235-36.

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appellant on grounds that "[section] 504(c) [of the Copyright Act]* . .does not give the district court discretion to premise its awardon a number of infringements not proved by admissible evidence.""'

The Fifth Circuit found that admission of hearsay testimony was notharmless error, especially in the context of awarding damages forcopyright infringement, because the court, even in awarding statutorydamages, must award damages according to the number of "separateand independent" works infringed." 9 Since the district court enjoyssuch wide discretion in fixing the amount of statutory damages foreach work infringed, reasoned the court, it is "all the more importantthat [they] review its premise as to the number of works infringed." 20

Accordingly, the panel reversed the district court's finding concerningthe number of infringements committed by the appellant to the extentsuch infringements were not stipulated to or proven by otherwiseadmissible evidence.' 2' Since the trial court's discretionary award wasbased on the number of infringements allegedly committed by Xan-thas, the court remanded the issue of calculation of damages to thetrial court for reconsideration based on the number of infringementssupported by admissible evidence. 22

C. Easter Seals Society v. Playboy Enterprises, Revisited

The Supreme Court of the United States recently resolved theconflict among the circuits as to the proper interpretation of theterm "employees" as used in the "work for hire" doctrine underthe 1976 Copyright Act.2 3 The work for hire doctrine, as well as the

118. Id. at 237.119. Id.; see 17 U.S.C. § 504(c) (1988).120. 855 F.2d at 237.121. Id. at 239.122. Id. at 239-40.123. Id. If a work is one "made for hire," the employer or other person for where the

work is prepared is considered the "author" and, therefore, the initial owner of the copyrightin the work. 17 U.S.C. § 201(a)-(b) (1988). 17 U.S.C. § 101 defines a "work made for hire"as:

(1) a work prepared by an employee within the scope of his or her employment;and (2) a work specially ordered or commissioned for use as a contribution to acollective work, as a part of a motion picture or other audio-visual work, as atranslation, as a supplementary work, as a compilation, as an instructional text, asa test, as answer material for a test, or as an atlas, if the parties expressly agree ina written instrument signed by them that the work shall be considered a work madefor hire. For the purpose of the foregoing sentence, a "supplementary work" is a

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1990] INTELLECTUAL PROPERTY

interpretation of "employee" were last addressed by the Fifth Circuittwo years ago in Easter Seals Society v. Playboy Enterprises.'24 InEaster Seals, the Fifth Circuit specifically addressed the statutorilyundefined term "employee" for purposes of determining when awork is properly considered a "work for hire" under the CopyrightAct, and held that the most appropriate definition of "employee"for purposes of section 101 was one derived from common-lawprinciples of agency. 125

Although it denied certiorari in the Easter Seals case, 126 theSupreme Court addressed the identical issue in Community for Cre-ative Non-Violence v. Reid in its last term. 27 Accepting the basicidea expounded by the Fifth Circuit in Easter Seals, that common-law notions of agency law provide the best definition of employeein the absence of statutory mandate, the Court stated, "Nothing inthe text of the work for hire provisions indicates that Congress usedthe words 'employee' and 'employment' to describe anything otherthan ' " 'the conventional relation of employer and em-ployee.' "' 128 In accepting this definition of "employee," theCourt specifically rejected the so-called "supervised and controlled"standard employed by the Second, Fourth and Seventh Circuits, 129

work by another author for the purpose of introducing, concluding, illustrating,explaining, revising, commenting upon, or assisting in the use of the other work,such as forewords, afterwards, pictorial illustrations, maps, charts, tables, editorialnotes, musical arrangements, answer material for tests, bibliographies, appendixes,and indexes, and an "instructional text" is a literary, pictorial, or graphic workprepared for publication and with the purpose of use in systematic instructionalactivities.

17 U.S.C. § 101 (1988).124. 815 F.2d 323 (5th Cir. 1987), cert. denied, 485 U.S. 981 (1988). See generally

Hammond, Intellectual Property, Fifth Circuit Survey, 19 TEX. TECH L. REv. 707, 718-22(1988) (giving the author's analysis of the case from an earlier survey).

125. 815 F.2d at 335.126. 485 U.S. 981 (1988).127. - U.S. , 109 S. Ct. 2166, 104 L. Ed. 2d 811 (1989).128. Id. at -, 109 S. Ct. at 2172, 104 L. Ed. 2d at 824 (citing Kelley v. Southern Pac.

Co., 419 U.S. 318, 323 (1974)).129. Brunswick Beacon, Inc. v. Schock-Hopchas Publishing Co., 810 F.2d 410, 413-14 (4th

Cir. 1987); Evans Newton, Inc. v. Chicago Sys. Software, 793 F.2d 889, 894 (7th Cir.), cert.denied, 479 U.S. 949 (1986); Aldon Accessories, Ltd. v. Spiegel, Inc., 738 F.2d 548, 552-53(2nd Cir.), cert. denied, 469 U.S. 982 (1984). In rejecting the Aldon Accessories test, theCourt agreed with the Fifth Circuit that "[tihere is simply no way to milk the 'actual control'test of Aldon Accessories from the language of the statute." - U.S. at - , 109 S. Ct.at 2174, 104 L. Ed. 2d at 826 (quoting Easter Seals Soc. v. Playboy Enters., 815 F.2d 323,334 (5th Cir. 1987), cert. denied, 485 U.S. 981 (1988)).


the "right to control the product" standard 3 ° articulated by a Col-orado district court, and the position that the term "employees"only refers to "formal, salaried" employees adopted by the NinthCircuit.' The question of how the term "employee" is to be definedwith respect to works for hire under the Copyright Act is nowconclusively settled among the Circuits.

IV. TRADE SECRETS

A. Sheets v. Yamaha Motors Corp.

In the area of trade secrets, the Fifth Circuit handed down onlya single case during the survey period. Sheets v. Yamaha MotorsCorp.12 was an action for misappropriation of trade secrets basedon Louisiana's codification of the Uniform Trade Secrets Act,'which defines a trade secret as

information, including a formula, pattern, compilation, program,device, method, technique, or process, that: (a) derives independ-ent economic value, actual or potential, from not being generallyknown to and not being readily ascertainable by proper means byother persons who can obtain economic value from its disclosureor use, and (b) is the subject of efforts that are reasonable underthe circumstances to maintain its secrecy. 3 4

The appellant Sheets had designed a modification for the engineof Yamaha's all-terrain motorcycles, which he claimed kept the enginefrom stalling in mud, water, snow and dust.' He disclosed hismodification, without any obligation of confidence, to various per-sons including Yamaha dealers and representatives. 3 6 When Yamahalater incorporated Sheets' improvement in its motorcycle, Sheets filedsuit seeking damages for misappropriation of trade secrets and unjustenrichment. 3 7 The trial court dismissed the case under Federal Ruleof Civil Procedure 41(b) following the close of the plaintiff's case

130. Peregrine v. Lauren Corp., 601 F. Supp. 828, 829 (D. Colo. 1985).131. Dumas v. Gommerman, 865 F.2d 1093, 1102 (9th Cir. 1989).132. 849 F.2d 179 (5th Cir. July 1988).133. LA. REV. STAT. ANN. § 51:1431 (West 1987). The court's jurisdiction was based on

diversity of citizenship. 849 F.2d at 182.134. LA. REV. STAT. ANN. § 51:1431(4) (West 1987).

135. 849 F.2d at 181.136. Id. at 181-82.137. Id. at 182.

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on grounds that Sheets had failed to maintain the secrecy of hisalleged trade secret and that he was not entitled to recover for unjustenrichment.

138

The Fifth Circuit affirmed, finding that Sheets failed to takereasonable steps to maintain secrecy under the circumstances, 3 9 andholding that "[a] disclosure of a trade secret to others who have noobligation of confidentiality extinguishes the property right in thetrade secret."'"4 Although the court did not make reference to itsdecision last term in Smith v. Snap-On Tools Corp. ,141 it reached thesame result as in that case, finding there to be no breach ofconfidential relationship under circumstances where the putative tradesecret owner disclosed an idea without insisting on any obligation ofconfidence or any remuneration. 42 Sheets and Smith make it clearthat the Fifth Circuit will not impose liability on manufacturers whoreceive ideas and disclosures about improvements in their productsabsent the taking of some steps on the part of the owner to preserveor at least request confidentiality.

As to Sheets' claim for unjust enrichment, the court found thatLouisiana's equitable doctrine of unjust enrichment was inapplicablebecause unjust enrichment is available only where there is no otherremedy at law.1 43 Finding that the Louisiana Uniform Trade SecretsAct supplied a remedy for the particular tort complained of, thecourt declined to permit Sheets to rely on the doctrine of unjustenrichment since he failed to make a reasonable effort to preservesecrecy and thereby benefit from the protection afforded by theUniform Trade Secrets Act.' 44 "An action for unjust enrichment,"

138. Id.139. Id. at 183. As codified in Louisiana law, the Uniform Trade Secrets Act requires only

relative, not absolute secrecy:Reasonable efforts to maintain secrecy have been held to include advising employeesof the existence of a trade secret, limiting access to a trade secret on a "need toknow basis," and controlling plant access. On the other hand, public disclosure ofinformation through display, trade journal publications, advertising or other care-lessness can preclude protection.

LA. REV. STAT. ANN. § 15:1431, comment (f) (West 1987).140. 849 F.2d at 183-84.141. 833 F.2d 578 (5th Cir. 1987). The case was decided under Wisconsin law. For a full

discussion of the case, see Hammond, Intellectual Property, Fifth Circuit Survey, 20 TEx.TEC H L. Rav. 495, 510 (1989).

142. 833 F.2d at 579.143. 849 F.2d at 184.144. Id.

1990]


said the court, "must not be allowed to defeat the purpose of a ruleof law directed to the matter at issue.' 145

The court's decision in Sheets was unquestionably correct. Itwill be appreciated that if a manufacturer is liable for use of an ideaor improvement disclosed to it by an individual without any obli-gation of secrecy on an unjust enrichment rationale, the idea sub-mission or idea suggestion process will be throttled because liabilityconsiderations will foreclose all contact between manufacturers andinnovative inventors with ideas and improvements.

V. RIGHT OF PUBLICITY

A. Benavidez v. Anheuser Busch, Inc.

In Benavidez v. Anheuser Busch, Inc. ,'6 the Fifth Circuit wasfaced with a relatively straightforward application of section 652Cof the Restatement (Second) of Torts 47 involving an essentiallynoncommercial use of the appellant's'4 likeness in a documentaryfilm about Hispanic Congressional Medal of Honor recipients. Theappellee, Anheuser Busch, provided the film to schools, governmentalagencies, veterans organizations and Hispanic organizations, andshowed the film in an Anheuser Busch-sponsored hospitality suite ata convention, providing its own products as refreshments free ofcharge. 49 Anheuser Busch derived no revenue from either the hos-pitality suites or the distribution of the film.150

145. Id. (emphasis added) (citing Edmonston v. A-Second Mortgage Co., 289 So. 2d 116,122 (La. 1974)). The Fifth Circuit also noted the Uniform Trade Secrets Act was by its termsintended to have preemptive effect. Id. at 184 n.3.

146. 873 F.2d 102 (5th Cir. May 1989).147. "One who appropriates to his own use or benefit the name or likeness of another is

subject to liability to the other for invasion of his privacy." RESTATEMENT (SECOND) OF TORTS

§ 652C (1977). A cause of action for misappropriation was judicially recognized in Texas inKimbrough v. Coca-Cola/USA, 521 S.W.2d 719 (Tex. Civ. App.-Eastland 1975, writ ref'dn.r.e.).

148. The appellant, Roy P. Benavidez, is a war hero of Hispanic origin. 873 F.2d at 104.The allegedly misappropriated likeness of Mr. Benavidez was prepared by Anheuser Busch,Inc. at the request of the National Association of Latino Elected and Appointment officials.Id. Mr. Benavidez' permission for his likeness to appear in the film was not obtained. Id.

149. 873 F.2d at 103.150. See id. at 104.

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Relying on previous Fifth Circuit authority,"' the court held thatsince Anheuser had not commercialized the appellant's personalityor used his likeness for pecuniary gain, a cause of action formisappropriation could not lie.' 52 The fact of tangential profitabilitybased on "increased good will in the Hispanic community as a resultof the production and showing of [the film]," said the court, wasnot a commercial benefit sufficient to support the appellant's mis-appropriation claim.'53 The Fifth Circuit affirmed the lower court'sjudgment that Benavidez had not sustained his burden of provingmisappropriation under Texas law. 54

VI. CONCLUSION

As noted at the outset, there were no decisions this year of greatsignificance in the field of intellectual property law. One decision ofimportance, however, was the United States Supreme Court's decisionlast term in Community for Creative Non-Violence v. Reid,'55 inwhich the Court settled the question of what constitutes an employeefor purposes of determining when a work is one for hire under theCopyright Act. The Court in Reid adopted essentially the samedefinition previously articulated by the Fifth Circuit in 1987 in theEaster Seals'56 case, eliminating a three-way conflict among thecircuits.

151. Moore v. Big Picture Co., 828 F.2d 270, 275 (5th Cir. 1987) ("to prove a cause of

action for misappropriation, a plaintiff must show that his or her personal identity has beenappropriated by the defendant for some advantage, usually of a commercial nature, to thedefendant") (quoting National Bank of Commerce v. Shaklee Corp., 503 F. Supp. 533, 540(W.D. Tex. 1980))).

152. 873 F.2d at 104.153. Id.154. Id. at 103.155. - U.S. -, 109 S. Ct. 2166, 104 L. Ed. 2d 811 (1989).156. 815 F.2d 323 (5th Cir. 1987); see supra notes 123-31 and accompanying text.

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