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In Case You Missed It: IP Reforms Passed with COVID-19 Relief and Spending Package

January 4, 2021, Covington Alert

On December 27, 2020, the Consolidated Appropriations Act of 2021 was signed into law.[1] Nestled among the much-publicized $2.3 trillion package for COVID-19 relief and appropriations are three significant reforms to copyright and trademark law. Here is what you need to know.

1. Trademark Modernization Act (“TMA”): Codified Presumption of Irreparable Harm, Implemented Two New Proceedings for Clearing Fraudulently Secured or “Deadwood” Registrations, Codified Procedures for Submission of Evidence During Application Examination Phase by Third Parties and Provided Trademark Office with Discretion to Shorten Time Period for Responding to Office Actions

Key Takeaways:

  • When seeking preliminary or permanent injunctions in federal trademark cases, plaintiffs that make a sufficient showing of infringement will be entitled to a presumption of irreparable harm.

  • Two new procedures will make it easier to clear the federal register of marks that have never been used or for which registration was secured based on fraudulent or unfounded claims of use in commerce.

  • The submission of evidence by third parties against a trademark application during the examination phase (i.e., via letters of protest) has now been codified and, while the implementing regulations are expected to track the existing practice and procedures, there may be changes to the type of evidence the Director will consider and to the fee the Director may set for such submissions.

  • Response times for certain Office Actions may now be shorter, including as short as 60 days.

The TMA includes four significant changes to trademark law. First, the TMA amends the Lanham Act to codify that when a federal trademark plaintiff makes an adequate showing of infringement or a likelihood of success on the merits, it is entitled to a rebuttable presumption of irreparable harm in seeking a permanent or preliminary injunction. This reform resolves a circuit split on the viability of the rebuttable presumption in trademark cases, simplifies the procedure for obtaining an injunction under federal law, and eases the burden on a plaintiff seeking such relief.

Second, the TMA creates two new ex parte proceedings to help clear fraudulently secured or “deadwood” trademark registrations―(1) a new ex parte proceedings to expunge trademark registrations registered under the Madrid Protocol or under Section 44(e) that, after three years of registration, have “never been used in commerce on or in connection with some or all of the goods or services recited in the registration” and (2) a new ex parte proceeding to re-examine trademark registrations secured based on a claim of use in commerce when such marks were “not [in fact] in use in commerce on or in connection with some or all of the goods or services recited in the registration on or before the relevant date [(i.e., the date when the claim of use was submitted to the USPTO)].” These new ex parte proceedings contemplate a streamlined procedure that allows a third party to submit evidence or testimony to the Director of the USPTO to make a “prima facie” showing of “never been used” or nonuse as of the relevant date, which the registrant can then rebut with contrary evidence (or a showing of excusable nonuse in the case of an expungement proceeding). Unlike traditional cancellation proceedings, such ex parte proceedings would provide a more streamlined process that would be less costly, less time-consuming, and less intrusive. An ex parte expungement proceeding may be initiated “at any time following the expiration of 3 years after the date of registration and before the expiration of 10 years following the date of registration” whereas an ex parte re-examination proceeding may be initiated “not later than 5 years after the date of registration of a mark registered based on use in commerce.” The USPTO may itself sua sponte initiate an expungement or a re-examination proceeding against a registration. The USPTO must complete its rulemaking process within one year of enactment.

Third, the TMA codifies the submission of evidence by third parties against a trademark application during the examination phase―i.e., evidence submitted via “letters of protest.” Although it is expected that the implementing regulations will largely track the existing letters of protest practice and procedures, the Director has the ability to modify such current practices and procedures and to impose a higher fee for such submissions.

Fourth, the TMA grants the Director authority to set more flexible and shorter response time periods for Office Action responses. The Director will have the right to set response time periods for non-final Office Actions from between 60 days and 6 months, inclusive of all extensions. For any time response period that is less than 6 months, the Director “shall provide, by regulation, for extensions of time” and “shall allow the applicant to obtain extensions of time to reply or amend aggregating 6 months from the date of notification…” The TMA allows the Director to proscribe a fee for any extension of time. 

2. The Copyright Alternative in Small-Claims Enforcement (“CASE”) Act: Establishing a Copyright Small Claims Board

Key Takeaways:

  • The CASE Act creates a new forum to resolve copyright disputes with a total amount in controversy up to $30,000.

  • The procedure is voluntary, and less formal and intensive than federal litigation.

The CASE Act establishes a Copyright Claims Board (“CCB”), which provides a tribunal for litigants to resolve copyright disputes with an amount in controversy less than $30,000. Under the statute, the CCB will begin hearing cases by December 27, 2021. There are several key features that distinguish CCB proceedings from federal litigation.

First, participation in CCB proceedings is voluntary; once a CCB claim is filed, the respondent may “opt out.”

Second, in litigating cases before the CCB, in-person appearances are not required, discovery is generally limited to the production of relevant information and documents, written interrogatories, and written requests for admission, and testimonial evidence by expert witnesses is only allowed “in exceptional cases.”

Third, in terms of governing law, when there is conflicting judicial precedent, the CCB will follow the law of the federal jurisdiction in which the action could have been brought. If the action could have been brought in more than one jurisdiction, then the jurisdiction with the most significant ties to the conduct and parties will govern.

Fourth, damages recoverable through CCB proceedings is limited. For works that were timely registered, statutory damages are capped at $15,000, and the total damages in a single proceeding cannot exceed $30,000. For works that were not timely registered, statutory damages are capped at $7,500, or a total of $15,000 for all such works in a single proceeding.

Finally, a party can recover a separate award of attorneys’ fees if the other party engaged in bad faith conduct. The potential fee award is generally limited to $5,000, but the CCB can exceed that amount where there is a pattern or practice of bad faith.

Proponents of the CASE Act hope that the CCB will provide a faster and more cost-effective alternative to federal litigation, and allow independent rights holders to bring claims that would have been prohibitively expensive to litigate in federal court.[2] Critics have expressed concern that the CASE Act will incentivize “copyright trolls” and “fine ordinary internet users for engaging in everyday online behavior like sharing memes.”[3] Whether defendants will consistently opt in to this process remains to be seen.

3. The Protect Lawful Streaming Act (“PLSA”): Unlawful Commercial-Scale Streaming Becomes a Felony

Key Takeaways:

  • Providers of unlawful streaming services may now face felony criminal charges.

  • The law targets those who willfully seek to profit from offering services designed or marketed for, or having no commercially significant purpose other than, unauthorized streaming.

The PLSA adds a new criminal statute that makes it a federal felony to “willfully, and for purposes of commercial advantage or private financial gain, offer or provide to the public” a digital streaming service that (a) “is primarily designed or provided for the purposes” of unauthorized streaming; (b) “has no commercially significant purpose or other use” than unauthorized streaming; or (c) “is intentionally marketed by or at the discretion of that person to promote its use in” unauthorized streaming. Under prior law, criminal streaming was a misdemeanor, while criminal reproduction and distribution were felonies. The PLSA closes that loophole; all are felonies now.

If you have any questions concerning the material discussed in this client alert, please contact the following members of our Copyright and Trademark practice.

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[1] Consolidated Appropriations Act, 2021, H.R. 133, 116th Cong. (2020), available at https://rules.house.gov/sites/democrats.rules.house.gov/files/BILLS-116HR133SA-RCP-116-68.pdf).

[2] See e.g., Claudia Rosenbaum, Congress Passes CASE Act as Part of COVID-19 Relief Bill, Billboard (Dec. 22, 2020) https://www.billboard.com/articles/business/9503848/congress-case-copyright-reforms-covid-19-relief-bill (last visited Dec. 29, 2020).

[3] Makena Kelly, Sweeping New Copyright Measures Poised to Pass in Spending Bill, The Verge (Dec. 21, 2020, 3:54 PM EST) https://www.theverge.com/2020/12/21/22193976/covid-relief-spending-congress-copyright-case-act-felony-streaming (last visited Dec. 29, 2020).

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