ARNSTEIN & LEHR LLPAttorneys at Law

Intellectual Property

President Signs Trademark Dilution Revision Act

President Bush has signed into law the Trademark Dilution Revision Act of 2006,
which was intended by Congress to remedy the pre-existing law to protect famous
trademarks from uses that blur their distinctiveness or tarnish their reputation. The
About our Intellectual Property
legislation was prompted by recent court decisions refusing certain protection for
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famous marks against noncompeting uses.
Arnstein & Lehr's Intellectual Property
Practice Group is comprised of attorneys
from our Florida and Illinois offices. Our
The new Act provides that, subject to the principles of equity, the owner of a
Firm provides legal services related to famous mark that is distinctive, inherently or through acquired distinctiveness, shall
patents, copyrights, trademarks and trade
secrets, including preparation and
be entitled to an injunction against another person who, at any time after the
processing of trademark, patent and owner's mark has become famous, commences use of a mark or trade name in
copyright applications, consultation
regarding infringement, preparation of
commerce that is likely to cause dilution by blurring or dilution by tarnishment of
licensing agreements and related matters. the famous mark, regardless of the presence or absence of actual or likely
If you have any questions about this
confusion, competition, or actual economic injury. The Act also exempts from
article, including how it may impact you or dilution actions any references to a famous mark by another person other than as a
your company, or for updates regarding
Intellectual Property Law, please contact
designation of source for that person's own goods or services, as well as all forms
the lawyer in the firm with whom you are of news reporting and news commentary, and all noncommercial use of a mark.
regularly in contact or one of the following
persons in the Arnstein & Lehr Intellectual
Property Practice Group: Aside from providing for injunctive relief, the new law also permits courts to grant
West Palm Beach
additional remedies, subject to the discretion of the court and the principles of
John A. Turner equity, if dilution began after the effective date of the new law and the defendant
Miami
willfully intended to trade on the recognition of the famous mark or to harm the
Jeffrey B. Shapiro reputation of the mark. Ownership of a valid registration under the federal
Chicago
Lanham Act is a complete bar to a dilution action against the owner that is brought
Robert D. Butters by another person seeking to protect trademark rights under the common law or a
James F. Gossett
statute of a state.1
Norman P. Jeddeloh

Sixth Circuit Holds Liability for Lanham Act Infringement Should

Not Be Confined to Producers of Counterfeit Goods,
But May Extend to Retailers

The U.S. Court of Appeals for the Sixth Circuit, reversing a lower court decision
not to grant a preliminary injunction prohibiting a retailer from selling counterfeit
goods, has held that Lanham Act liability for selling counterfeit goods need not be
confined to the manufacturer of such goods. The ruling came in a suit brought by
Lorillard Tobacco Co. against retailer Amuri's Grand Foods, Inc. after counterfeit
packages of cigarettes bearing Lorillard's NEWPORT brand were found in
defendant's store.

_____________________________
1 Source: Trademark Dilution Revision Act of 2006.

Intellectual Property | Winter 2007 | Page 1

The lower court, refusing to grant a preliminary injunction
prohibiting the defendant from selling counterfeit Lorillard
products, did so without making specific findings
concerning the factors justifying issuance of a preliminary
injunction as set forth in prior rulings by the Sixth Circuit.
On review of that decision, one of the arguments offered
by the defendant was that it was not liable for any relief
under federal law for selling the cigarette products in its
store, even if they were counterfeit, because it had neither
manufactured nor packaged the goods, and consequently
had no way of knowing whether the products were
counterfeit.
The Sixth Circuit, however, declined to excuse the
defendant from liability due either to its ignorance or to its
role as a retailer rather than a producer of the counterfeit
goods. Examining the Lanham Act, the Court of Appeals
found that liability for counterfeiting in violation of the Act
need not be based on production of counterfeit goods by
the defendant, but is based on a finding that the defendant
"used" counterfeit goods "in commerce." Furthermore, the
Sixth Circuit agreed with other courts that no clearer "use"
of goods "in commerce" could be found than offering them
for sale.
Normally, where a lower court had improperly addressed a
motion for a preliminary injunction, the Sixth Circuit said it
would point out the error in the lower court's decision and
remand the case for reconsideration by the lower court.
But, in this case, the Court of Appeals found that the
plaintiff, Lorillard, had met all requirements for issuance of
preliminary injunctive relief, and the Court of Appeals
therefore remanded the case with a direction that the lower
court enter a preliminary injunction.2
Eleventh Circuit Determines Appropriate Legal
Standard for Good Faith with Respect to Trademark
Usage Fair-Use Defense
In a case of first impression for that court, the U.S. Court of
Appeals for the Eleventh Circuit has determined that the
appropriate legal standard for good faith with respect to a
trademark usage fair-use defense is whether the alleged
infringer intended to benefit from the good will associated
with the owner of the mark. The ruling came in a suit
brought by a producer of greeting cards and note cards
against the U.S. Postal Service, which the plaintiff alleged to
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2 Source: Lorillard Tobacco Co. v. Amuri's Grand Foods, Inc., U.S. Court of Appeals for the Sixth Circuit, No. 05-1642, June 30, 2006.
3 Source: International Stamp Art, Inc. v. United States Postal Service, U.S. Court of Appeals for the Eleventh Circuit, No. 05-13492, July 18, 2006.
have violated its trademark in a perforated border design,
used in some of its cards, that evoked the functional flat-
edged perforation of older postage stamps, after the Postal
Service began producing its own line of "stamp art" note
cards and greeting cards.
In the trial court, the Postal Service had asserted a fair-use
defense in response to the plaintiff's infringement claim, and
the trial court granted summary judgment to the Postal
Service on that defense. On appeal of that determination,
the Eleventh Circuit noted that a fair-use defense required
showing that the plaintiff's mark was used by the defendant
not as a mark, but in a descriptive sense, and in good faith.
The Eleventh Circuit had never determined the legal
standard for "good faith" in relation to a fair-use defense. In
this case, the Eleventh Circuit joined with four other circuits
in holding that the legal standard is the same as for any other
trademark infringement inquiry into good faith - whether
the alleged infringer intended to benefit from the good will
associated with the owner of the mark.
The Eleventh Circuit then examined the evidence, which
indicated that the perforated border design trademark
claimed by the plaintiff appeared in plaintiff's cards and
incorporated the design of old postage stamps, to which the
Postal Service had a copyright and for which the Postal
Service had licensed the plaintiff's use. Furthermore, the
evidence indicated that the Postal Service, when it
developed its own "stamp art" cards, merely incorporated
the perforated border of its own original stamp as part of
the stamp's images on the cards, and always clearly indicated
that the cards were the products of the Postal Service,
generally including with its cards information about the
history of the stamp or stamp art depicted thereon. For that
reason, the Court of Appeals concluded that the evidence
did not indicate any intent by the Postal Service to trade on
the good will of the plaintiff, and the Eleventh Circuit
affirmed the lower court's summary judgment.3
Licensee of Trademark Rights May Not Sublicense
to Third Parties Without Original Licensor's Express
Consent
The U.S. Court of Appeals for the Ninth Circuit, upholding
a lower court decision, has ruled that a licensee of trademark
and related publicity rights may not sublicense those rights
Intellecutal Property | Winter 2007 | Page 2
to third parties without express permission from the
original licensor. The ruling came in a suit brought by the
adopted children of Helen Miller, wife of world-renowned
band leader Glenn Miller, and their exclusive licensing
agent, who sued Glenn Miller Productions, Inc. for alleged
breach of a license agreement for the GLENN MILLER
mark.
Helen Miller's children claimed that the defendant
obtained rights in the GLENN MILLER mark by way of
a license from Helen Miller in 1956, but thereafter
breached the license agreement by attempting to sublicense
the mark. The defendant claimed that it had a right to
sublicense the mark, or, alternatively, it had not sublicensed
the mark, but had merely licensed rights in its own
registered GLENN MILLER ORCHESTRA mark.
The lower court found that a licensee of trademark and
related publicity rights may not sublicense those rights to a
third party without the express permission of the original
licensor, extending a well-established "sublicensing rule"
from copyright and patent law to trademark and related
publicity rights. The Ninth Circuit agreed with the lower
court's reasoning, and found that the defendant had
violated the 1956 license agreement with Helen Miller by
attempting to sublicense rights in the GLENN MILLER
mark. In so ruling, the Ninth Circuit noted that, even
though the defendant had registered the GLENN
MILLER ORCHESTRA mark at the U.S. Patent and
Trademark Office, and that registration had become
incontestable, that registration did not affect the plaintiffs'
ownership of the GLENN MILLER mark, and did not
foreclose the plaintiffs from demonstrating that the
defendant had breached the 1956 agreement and infringed
upon their rights in the GLENN MILLER mark.
On the other hand, the Ninth Circuit also went along with
the lower court in finding that, even if the defendant
breached the 1956 license agreement, the plaintiffs could
not now sue for such breach. Both the lower court and the
Ninth Circuit found that the plaintiffs were barred by the
equitable doctrine of laches from bringing this suit against
the defendant because the plaintiffs waited too long to file
their suit, even though the plaintiffs did not acquire
absolute knowledge of the defendant's activities for some
_____________________________
4 Source: Miller v. Glenn Miller Productions, Inc., U.S. Court of Appeals for the Ninth Circuit, No. 04-55874, July 19, 2006.
5 Source: Au-Tomotive Gold, Inc. v. Volkswagen of America, Inc., U.S. Court of Appeals for the Ninth Circuit, No. 04-16174, August 11, 2006.
time after those activities began. Key to that decision was
the fact that the plaintiffs had constructive knowledge of
those activities more than 20 years before they filed the
current suit, since they should have discovered the
defendant's activities at that time had they been diligently
seeking to enforce their rights in the GLENN MILLER
mark.4
Doctrine of Aesthetic Functionality Does Not Allow
Maker of Automobile Accessories to Sell Key Chains
and License Plate Covers Bearing Audi and
Volkswagen Marks Without Authorization
The U.S. Court of Appeals for the Ninth Circuit has ruled
that the doctrine of "aesthetic functionality" did not
permit a maker of automobile accessories to sell, without
license or other authorization, key chains and license plate
covers bearing trademarks owned by Audi and
Volkswagen. The ruling came in a suit brought against the
automobile manufacturers by Au-Tomotive Gold, Inc.,
seeking a declaratory judgment that, because the
trademarks of Audi and Volkswagen were "aesthetically
functional" elements of the products sold by Au-Tomotive
Gold, they were unprotected by the federal Lanham Act.
Audi and Volkswagen counterclaimed for trademark
infringement and dilution.
On appeal of a district court summary judgment for Au-
Tomotive Gold on the basis of "aesthetic functionality,"
the Ninth Circuit reversed the judgment, reversed the
lower court's denial of the auto manufacturers' motion for
summary judgment with respect to their infringement and
dilution claims, and remanded the case for further
proceedings. In doing so, the Ninth Circuit found that,
even though there might be some aesthetic value to the
Audi and Volkswagen marks that would make Au-
Tomotive Gold products more attractive to consumers, the
car manufacturers' marks were not functional as applied to
Au-Tomotive Gold's products, the approach for which Au-
Tomotive Gold argued would distort basic principles of
trademark law, and the doctrine of aesthetic functionality,
which had been recognized by some other courts in other
cases, did not provide a defense for what appeared to the
Ninth Circuit to be a naked appropriation of the
manufacturers' marks by Au-Tomotive Gold.5
Intellectual Property | Winter 2007 | Page 3
 Self-Screening Methodology by Which Those Who
Are Not Website's Intended Users Can Voluntarily
Excuse Themselves from Access Held Insufficient
to Allow Protection of Website Under Stored
Communications Act
The U.S. Court of Appeals for the Eleventh Circuit has
held that the owner of a website could not sue others for
accessing that site without permission under the federal
Stored Communications Act if the defendants could
access the website merely by registering, creating a
password, and then agreeing to additional terms. The
Court of Appeals noted that the Act did not provide a
cause of action for accessing websites without
authorization unless the website was configured so as to
not be readily accessible by the general public, and the
court found that the "self-screening methodology" used by
the plaintiff for protecting his website did not meet that
requirement.
Defendant DirecTV had been involved in a nationwide
effort to stop the pirating of its encrypted satellite
transmissions by individuals who intercepted the
transmission without paying fees to DirecTV. As part of
its strategy, DirecTV had initiated thousands of suits, one
of which was against the plaintiff, who then created his
noncommercial website as a "private support group" for
"individuals who have been, are being, or will be sued by
any Corporate entity." To gain access, one was required to
register, create a password, and agree to additional terms
that, among other things, expressly forbid access by
DirecTV and its agents.
In this case, the plaintiff sued DirecTV and certain alleged
agents of that company, arguing that they violated the
federal Stored Communications Act by accessing his
website without authorization. A lower court dismissed
the suit, finding that the Act, which was created to update
existing wiretapping laws to protect electronic
communications, did not apply to electronic bulletin
boards such as the plaintiff had created on his website.
On appeal, the Eleventh Circuit agreed with the lower
court that the plaintiff had failed to state a cause of action
for which relief could be granted under the Act, but on a
_____________________________
6 Source: Snow v. DirecTV, Inc., U.S. Court of Appeals for the Eleventh Circuit, No. 05-13687, June 1, 2006.
different ground from that cited by the lower court. The
Eleventh Circuit affirmed dismissal of the plaintiff's
complaint because he failed to allege that his website was
configured so as to not be readily accessible by the general
public.
Considering the allegations of the complaint, the Court of
Appeals noted that they described "in essence, a self-
screening methodology" by which those seeking access
would have to register, create a password, and indicate
agreement with certain terms, which prohibited access by
anyone associated with DirecTV. In the view of the
Eleventh Circuit, such a methodology did not create the
inference that the website was not readily accessible by the
general public, as required for protection under the Act,
even though the defendants in this case, in order to access
the website, would have been required to lie in indicating
their agreement with the stated terms.6
Legitimate Commercial Transport or Sale of
Trademarked Goods by Failing Business, as Part of
Good Faith Effort to Deplete Inventory, Held
Sufficient to Defeat Claim of Abandonment
The U.S. Court of Appeals for the Ninth Circuit has held
that a summary judgment determination of trademark
abandonment by a lower court was inappropriate in a case
where the record supported an inference that the
trademark holder - a small, troubled business - was
continuing to transport and sell trademarked goods in the
ordinary course of trade as part of a good faith effort to
deplete its inventory. The ruling came in an infringement
suit brought by the successor in interest to Ronald Mallett,
who sold a backpack/luggage line under a federally
registered trademark for years before running into
business difficulties and assigning his mark to the plaintiff
in this case. The defendant argued that Mallett had
abandoned the mark before assigning it to the plaintiff,
and the trial court agreed, giving summary judgment to the
defendant in the infringement case and ordering
cancellation of the assigned mark.
On appeal, the Ninth Circuit noted that Mallett's business
had been failing for some time before the assignment, and,
Intellectual Property | Winter 2007 | Page 4
at that time, he was selling only a few backpacks and
promoting them at trade shows in an attempt to deplete his
inventory, before he eventually assigned his remaining
inventory, along with his trademark, to the plaintiff in the
infringement suit. The lower court concluded that
Mallett's use of his mark while depleting his inventory was
neither bona fide nor in the ordinary course of trade, and
that he therefore abandoned the mark prior to the
assignment. But the Ninth Circuit disagreed.
The Ninth Circuit noted that trademark law required two
things for an abandonment to take place: discontinuance
of bona fide trademark use in the ordinary course of trade
and an intent not to resume such use. But the Court of
Appeals held that Mallett's use of his mark to deplete his
inventory through sale of the product before the
assignment constituted legitimate transport or sale of
trademarked goods and, even for a failing business, that
was sufficient to defeat the claim of abandonment by the
defendant in the infringement suit, though Mallett's
commercial sale of trademarked goods might have been
nominal or limited, because the sales were made for a
legitimate business reason other than sustaining rights to
the mark. Consequently, the Ninth Circuit reversed the
trial court's grant of summary judgment to the defendant
in the infringement suit and vacated the lower court's order
canceling the assigned registration.7
Likelihood of Confusion Issue Previously Litigated
and Decided in Cancellation Proceedings Cannot Be
Re-litigated in Subsequent Infringement Action
The U.S. Court of Appeals for the Third Circuit has held
that a trademark registrant, having successfully argued that
there was no likelihood of confusion between its registered
mark and other marks in a cancellation proceeding, could
not then sue the owner of the other marks for
infringement, since that would require re-litigation of the
likelihood of confusion issue. The ruling came in a suit by
Jean Alexander Cosmetics, Inc. against L'Oreal USA, Inc.,
in which the plaintiff argued that there was an
infringement of its EQ SYSTEM mark and associated
design by L'Oreal's SHADES EQ mark.
In this case, the plaintiff had previously been required to
defend its registration for the EQ SYSTEM mark before
_____________________________
7 Source: Electro Source, LLC v. Brandess-Kalt-Aetna Group, Inc., U.S. Court of Appeals for the Ninth Circuit, No. 04-55844, August 14, 2006.
8 Source: Jean Alexander Cosmetics, Inc. v. L'Oreal USA, Inc., U.S. Court of Appeals for the Third Circuit, No. 05-4321, August 14, 2006.
the Trademark Trial and Appeal Board in a cancellation
proceeding brought by L'Oreal's predecessor in interest,
which argued that there was a likelihood of confusion
between the EQ SYSTEM mark and L'Oreal's then
unregistered SHADES EQ mark. At that time, the
plaintiff in this case successfully argued to the Board that
there was no likelihood of confusion between the marks,
and the Board agreed, denying the petition to cancel filed
by L'Oreal's predecessor because, among other things,
there was no likelihood of confusion between the marks.
Relying on the Board's decision in the cancellation action
that there was no likelihood of confusion between the
marks, L'Oreal then sought to register its SHADES EQ
mark, and the mark was approved for publication, which
entitled third parties to file an opposition. Jean Alexander
filed a notice of opposition, arguing that the SHADES EQ
mark would likely be confused with the EQ SYSTEM
mark. But the Trademark Trial and Appeal Board held that
the likelihood of confusion issue had been fully and
decisively litigated in the cancellation proceedings, and the
Board granted summary judgment in favor of L'Oreal in
the opposition proceeding.
Jean Alexander then filed a complaint for trademark
infringement against L'Oreal in federal district court,
specifically alleging likelihood of confusion. The district
court dismissed the complaint, holding that the doctrine of
issue preclusion, also known as collateral estoppel,
prevented Jean Alexander from re-litigating the likelihood
of confusion issue and foreclosed its claim for trademark
infringement.
On appeal of the district court decision, the Third Circuit
agreed that the likelihood of confusion issue had been
actually litigated and previously decided in the cancellation
proceeding between the parties. The Third Circuit noted
that the Board's conclusion on likelihood of confusion in
the cancellation proceeding was not its only basis for
denying the cancellation petition, but one of two
independently sufficient grounds on which the Board
resolved the case (the other having to do with priority of
rights). But the Court of Appeals found no reason not to
apply the doctrine of issue preclusion under those
circumstances, and affirmed the district court's dismissal of
Jean Alexander's infringement complaint.8
Intellectual Property | Winter 2007 | Page 5
 Visual Artists Rights Act Does Not Apply to
"Site-Specific Art"
The U.S. Court of Appeals for the First Circuit has decided
that the federal Visual Artists Rights Act of 1990, which
gives the authors of visual art certain rights in preventing
its destruction, does not apply to "site-specific art," defined
as a work of art having a location that is essential for the
work to retain its meaning and integrity. The ruling came
in a suit by sculptor David Phillips under federal and state
law to prevent the moving of certain sculptures Phillips
had created for display in Eastport Park, a South Boston,
Massachusetts public sculpture park with a nautical theme.
In this case, Pembroke Real Estate, Inc., which leased the
land on which the park was built, proposed to redesign the
park and move some of the sculptures originally placed
there, including some of Phillips' sculptures. Phillips sued
Pembroke, arguing that moving any of his "site-specific
art" displayed in the park would amount to a destruction of
that art contrary to the Visual Artists Rights Act and state
law, since the location of "site-specific art" is critical to its
meaning and integrity. A federal district court ruled against
Phillips on his federal law claims and certified his state law
claims to the Massachusetts Supreme Judicial Court, which
held that state law also did not prevent the moving of
Phillips' sculptures as proposed by Pembroke.
Consequently the federal district court entered judgment
for Pembroke on all counts.
On appeal, Phillips argued that the district court was
wrong in concluding that the federal Act did not prohibit
moving his "site-specific art." But the Court of Appeals
disagreed, holding that the federal Act did not apply to
"site-specific art" at all and therefore did not prevent
Pembroke from moving any of Phillips' "site-specific art,"
even if moving the artwork from its original site would,
essentially, destroy it.
In so doing, the Court of Appeals noted that the term
"site-specific art" did not appear in the Act. Yet, in the
view of the Court of Appeals, a holding that the Act
applied to "site-specific art" would have far-reaching
effects that could dramatically impact real property
interests and laws, giving artists rights that would
encumber private and public land with restrictions lasting
_____________________________
9 Source: Phillips v. Pembroke Real Estate, Inc., U.S. Court of Appeals for the First Circuit, No. 05-1970, August 22, 2006.
beyond the life of the artist, since, once a piece of art was
considered site-specific and protected by the Act, it could
not be moved or otherwise altered by the property owner
absent consent of the artist.
Because the Act did not mention "site-specific art," and
because of the potentially far-reaching impact the
protection of such art under the Act would have, the Court
of Appeals refused to read the Act so as to provide
protection for such artwork. Since the plain language of
the Act did not protect "site-specific art," the Court of
Appeals stated that, if such protection was necessary,
Congress should do the job, as the Court of Appeals could
not do it by rewriting the statute in the guise of statutory
interpretation.9
Court Can Consider Evidence of Specifications for
Product in Expired Utility Patents to Determine
Whether Product Elements Can Be Trademarked
The U.S. Court of Appeals for the Sixth Circuit has held
that a court can consider evidence that product features for
which trademark protection is sought in an infringement
suit were disclosed in expired utility patents, finding, on the
basis of that evidence, as well as claims made in product
advertising, that the alleged trademarks are functional and
unprotectable. The ruling came in a suit brought by Fuji
Kogyo Co., LTD, a Japanese maker of fishing tackle,
against American distributors of competing goods that
allegedly displayed features of Fuji's products for which
Fuji claimed trademark protection.
In this instance, the Sixth Circuit noted that Fuji had
obtained various utility and design patents covering fishing
line guides, which guide fishing line along the axes of a
fishing rod. When the patents began to expire, Fuji sought
trademark protection for many of the features embodied
in its fishing line guides, obtaining three trademark
registrations for such product elements.
In the case before the court, Fuji was suing the American
distributors for alleged infringement of the three registered
trademarks and an unregistered mark. But a federal district
court dismissed Fuji's suit, finding that all of Fuji's
trademarks were functional and canceling all three of its
registrations.
Intellectual Property | Winter 2007 | Page 6
On appeal of that decision, the Sixth Circuit affirmed,
concluding that the district court's determination that Fuji's
trademarks were functional was not clearly erroneous. In
doing so, the Sixth Circuit held that the district court
correctly considered evidence that some of the product
elements for which Fuji sought trademark protection were
disclosed in the specifications for Fuji's expired utility
patents, determining on the basis of that evidence, as well
as utility claims made for those product features in Fuji's
own advertising, that the product elements for which Fuji
sought trademark protection were actually functional
features of the products and, therefore, ineligible for
trademark protection.
In reviewing the district court decision, the Sixth Circuit
noted that the lower court faced something of a
conundrum because Fuji had obtained utility and design
patents covering features of its fishing line guides, and
while product elements disclosed in a utility patent were
presumed functional, the features of a product disclosed in
a design patent were legally presumed to be nonfunctional.
However, the Sixth Circuit held that the district court was
correct in evaluating and weighing all of the available
evidence as to functionality of the claimed trademarks in
this case, rather than relying on evidentiary presumptions.
Furthermore, the Sixth Circuit held that it was not clearly
erroneous for the district court to conclude that the
preponderance of the evidence indicated the alleged
trademarks were functional and overcame any presumption
of nonfunctionality attaching to the product elements
disclosed in the Fuji design patents.10
Computer Program Registration Copyright
Application Required
for Copyright Owner to Sue Under Computer
Software Rental Amendments Act
The U.S. Court of Appeals for the Eighth Circuit has held
that a copyright owner cannot sue for infringement under
the federal Computer Software Rental Amendments Act of
1990 unless the copyright owner has applied for
registration of copyrights in a computer program,
depositing source code with the Copyright Office. The
ruling came a suit by Action Tapes, Inc. against the owner
of a sewing machine supplies store that allegedly infringed
_____________________________
10 Source: Fuji Kogyo Co., LTD v. Pacific Bay International, Inc., U.S. Court of Appeals for the Sixth Circuit, No. 05-5854, August 23, 2006.
Action Tapes' copyrights in a portfolio of graphic
embroidery designs that Action Tapes imbedded on disk-
like memory cards which enabled computerized sewing
machines to stitch the imbedded designs on fabric and
apparel.
Action Tapes argued that the store owner violated the
Computer Software Rental Amendments Act by repeatedly
renting Action Tapes memory cards to customers without
Action Tapes' permission. The Act prohibits a person in
possession of "a particular copy of a computer program"
from disposing of that copy for commercial purposes by
"rental, lease, or lending," unless authorized to do so by
"the owner of copyright in (the) computer program."
At the trial court level, both parties in this case moved for
summary judgment, and a federal district court granted
summary judgment in favor of the store owner, concluding
that Action Tapes' memory cards contained only data, and
not computer programs protected by the Act. Action
Tapes appealed that decision, and the Eighth Circuit
affirmed, but on a different ground - that Action Tapes
failed to prove it applied for registration of computer
program copyrights before commencing its infringement
suit.
The Court of Appeals noted that application for
registration of copyrights is necessary before any copyright
owner can bring an infringement suit under federal law, and
the court reasoned that, since the Act extended a particular
type of protection to copyrights in a specific type of work,
it was necessary for a copyright owner to apply for
copyright registration of a "computer program" in order to
protect copyrights under the Act, meeting whatever
requirements the Copyright Office had established for
registration of computer programs.
In this case, Action Tapes had not sought a copyright
registration for a "computer program" by meeting the
requirements of the Copyright Office for registration of
such works, including the depositing with the Copyright
Office of source code for the program reproduced in a
form visually perceptible without the aid of a machine or
device, either on paper or microform. Instead, Action
Tapes had applied for, and obtained, six visual arts
copyright registrations, and Action Tapes argued that its
Intellectual Property | Winter 2007 | Page 7
visual arts registrations sufficed to satisfy the requirement
that a copyright owner apply for registration of copyrights If you would like further information about
before commencing an infringement suit, even if the suit any of the topics mentioned in this
was brought under the Act. publication, please contact James F. Gossett
at jfgossett@arnstein.com or 312.876.7833.
The Eighth Circuit disagreed, however, noting that Action
Tapes was seeking the benefit of a statute that conferred
extra protection on the owners of a limited category of Disclaimer: This newsletter provides
copyrights, and in order to obtain the benefits of the Act, information on current legal issues.
a copyright owner was required to comply with the However, this information should not be
Copyright Office's promulgated regulations instructing construed as legal advice or an opinion as to
applicants as to what material they must deposit in order to particular situations or applications.
obtain a copyright "in a computer program," which
included source codes. Because Action Tapes never
deposited source code with the Copyright Office, and had
sought and obtained copyright registration only for the
designs imbedded in its memory cards and then stitched on
fabric, not the instructions that caused a computerized
sewing machine to stitch the design, Action Tapes was
barred from bringing its claims for protection under the
Act.11

_____________________________
11 Source: Action Tapes, Inc. v. Mattson, U.S. Court of Appeals for the Eighth
Circuit, Nos. 05-3309 and 05-3520, August 30, 2006.

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302 Knights Run Avenue, Suite 1100 561.833.9800 phone Hoffman Estates, IL 60195-5224
Tampa, Florida 33602-3343 561.655.5551 fax 847.843.2900 phone
813.254.1400 phone 847.843.3355 fax
813.254.5324 fax Milwaukee, Wisconsin
7161 N. Port Washington Road
Milwaukee, WI 53217
414.351.2440 phone
414.352.6901 fax

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Intellectual Property | Winter 2007 | Page 8