Since the post I have received a number of questions from friends about whether Pinterest is copyright infringement and whether they can be sued because of their Pinterest boards. The short answer I have given to my friends is that Ms. Kowalski is, in my view, being overly cautious. The longer answer is below. (Scroll down to the bottom for the conclusion and how you can best avoid copyright issues with Pinterest.)

Pinterest doesn’t commit copyright infringement, people commit copyright infringement

First, let’s look at what you do with Pinterest. Pinterest members can “pin” images to virtual post boards using a smart phone application, the Pinterest website, or a browser plugin. Pinterest’s use etiquette recommends that you cite the source of the image. This citation should be more than just a link back, but a description of who made it and where it came from. The citation should also be back to the primary source of the image, not a secondary source. Pinterest users are even encouraged to point out when a “pinned” image is not well cited.

Pinterest is not per-se copyright infringement

This is not copyright infringement on its own. If you use the Pinterest iPhone application to take a photo and pin it to one of your Pinterest boards then you have not committed copyright infringement. This is the clearest example of when using Pinterest is well within copyright law. You took the picture, you are the picture’s author, and therefore you own the copyright to the picture.

Pinterest can be used for copyright infringement

Pinterest can, however, be used for copyright infringement. If I take a photo created by someone else, and therefore copyrighted by someone else, and upload it to Pinterest without the copyright owner’s permission then I may have violated copyright law. Copyright gives the copyright owner the right to distribute their work; copyright law limits when a non-copyright owner can distribute someone else’s copyrighted work.

Fair Use—Why Pinterest isn’t evil and we’re not all copyright criminals

Ms. Kowalski recognized that fair use may be the key to the copyright issues facing Pinterest. She’s correct. She is incorrect, however, as to the way it applies to Pinterest.

Fair Use and Pinterest generally

Ms. Kowalski cites the Copyright Act in her post when she analyzes the fair use issues facing Pinterest boards. Nevertheless, she only glosses over this important part of copyright law.

Section 107 of the Copyright Act allows the fair use of a copyrighted work. Fair use is not defined. The reason it is not defined is that fair use was a doctrine developed by the courts to balance copyright law against our first amendment right to free speech.

Section 107 lists some uses that might be deemed fair. This list is not exclusive or exhaustive. Section 107 further lists a number of factors courts may use:

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

This list of four factors is not exclusive. Courts may consider more than these four factors when determining whether a particular use may be deemed fair use.

Ms. Kowalski then focuses on a single case in her blog post: Kelly v. Arriba Soft Corp., 336 F. 3d 811 (9th Cir. 2003). The Arriba Soft case was a lawsuit by a photographer against a search engine who used thumbnails of images in an image search. Think of what happens if you search Google for images. The court in Arriba Soft found that the use of these thumbnail images was fair use.

This is a good result for Arriba Soft, for Google, and for Pinterest. It means little for the users of Pinterest. The Arriba Soft decision is unlikely to have a  no bearing on whether a Pinterest user has committed copyright infringement by uploading a photo to a Pinterest board.

Fair Use Probably Applies to Most Pinterest Situations

Let’s quickly look at the four non-exclusive fair use factors as applied to Pinterest boards.

First, most Pinterest boards are not for commercial use. Most boards are personal. In fact, Pinterest focuses on the personal use of boards as tools for design or remodeling inspiration. Ms. Kowalski, the photographer/lawyer who took down her Pinterest boards, called them her inspiration boards in the title of her post. The fact that most Pinterest users create Pinterest boards for non-commercial, personal reasons weighs heavily in favor of the Pinterest user in a fair use analysis.

Second, the nature of the copyright work are images. These may be photographs, or illustrations, or paintings, or any image in a digital form. Here the fair use analysis favors the owner of the images copyright.

Third, and similarly to the nature of the copyrighted work, the subsantiality of the copying favors the copyright owner. When you copy an image you tend to copy it completely. Thumbnails modify the image by degrading it in order to make it smaller, but the copying is still substantial. This favors the owner of the copyrighted image.

Fourth, and similarly to the first factor above, the effect of a Pinterest board on the market for or value of the image is limited. In fact, it can be easily argued that the market for the image will be expanded through its appearance on Pinterest. This heavily favors Pinterest users in a fair use analysis.

These factors, and whichever additional factors a court might apply, must be applied to the use by the Pinterest user in a lawsuit against a user—not to Pinterest’s use of the image copy. Therefore, fair use analysis under Arriba Soft is not as helpful as the analysis found in other copyright cases. Finally, =the personal use of most Pinterest boards will weigh heavily in favor of fair use in these cases.

The DMCA safe harbor provisions protects Pinterest from lawsuits and therefore may render the applicability of Arriba Soft moot

Ms. Kowalski focused on Arriba Soft. When it comes to protecting Pinterest, however, the DMCA safe harbor provisions protect Pinterest far more than Arriba Soft. You may have heard of these safe harbor provisions before—they are the basis for the DMCA takedown process.

The DMCA roughly divides websites into two categories: service provider and content provider. Service providers do not create content. Rather, they allow their users to create content. This is the classic social media website such as Twitter, Facebook, and Pinterest. This can also include sections of a website, such as the comments section at the end of this blog or an article at the N.Y. Times.

Content providers create content. This blog post falls under the content side of the DMCA—as do the articles at the N.Y. Times and Wall Street Journal. Ms. Kowalski’s blog post is an example of the content side of things as far as the DMCA is concerned.

The DMCA provides a safe harbor for service providers, such as Twitter, Facebook, You Tube, and likely Pinterest, when it comes to copyright infringement. The reasoning is that because these sites provide a service rather than create content, they should not be liable for how people use that service. Therefore, when a user using the service uploads a photo or video or song that violates copyright, the service provider can choose to follow the DMCA safe harbor provisions and, if they do so, not be held liable for the actions of the user.

In contrast, a content provider creates content. If this content violates copyright, then it stands to reason they should be held liable for the infringement. Thus, the DMCA safe harbor provisions place the risk of copyright infringement lawsuits on the party creating content, not on the company providing a service that allows the content to be published.

The DMCA safe harbor provisions require a service provider to register a DMCA agent with the copyright office. Then, if a copyright owner believes a user of a service has violated copyright, the copyright owner sends a DMCA takedown notice to the service providers DMCA agent. The DMCA agent then ensures a copy of the notice is sent to the user, and the user is afforded a chance to respond. In the meantime the content can be taken down.

Pinterest actually has a page devoted to copyright and the DMCA process. If you are a copyright owner and feel someone is infringing your copyright on a Pinterest board, then you can visit this website and fill out a form to electronically send a DMCA takedown notice to Pinterest’s DMCA agent.

The DMCA means it is unlikely Pinterest will be sued, or can be sued, over your Pinterest boards

One of the main worries of Ms. Kowalski is that she will be on the hook for Pinterest’s legal fees. The indemnification language in the Pinterest terms of service is fairly standard. Further, this language does mean you would be potentially liable for any fees Pinterest incurs from a lawsuit based on your actions using Pinterest.

However, the DMCA makes it unlikely that Pinterest can be, or will be, sued for your use of their website. Pinterest, as a service provider, can avoid liability by following the requirements of the DMCA. You can still be sued, your Pinterest account and boards can be deleted, but Pinterest won’t be liable for your actions.

The indemnification language is designed for really odd, outlier situations. For example, if you hack someone else’s Pinterest board, do something to inflict severe emotional distress, and that distress causes your victim to kill themselves, then you can bet the Plaintiff’s attorneys going after you for wrongful death will try and attach Pinterest as a party. This is an extreme example, and it is extreme examples such as this that the indemnification is intended to catch.

Avoiding copyright issues on Pinterest

The easiest way is to use your own photos. If you own the copyright to the photo you upload then you have no copyright worries. This, however, is not how Pinterest is truly designed to be used.

So the next best thing is to properly cite photos. Making sure you properly attribute photos and images you use on Pinterest will make it more likely that your Pinterest board is acknowledging the original author and likely copyright owner. Further, you are providing a potential economic benefit to the copyright owner by referring potential consumers back to them.

You should also use your Pinterest board for non-commercial purposes. Most Pinterest users likely do this already. However, more and more businesses are beginning to jump on the Pinterest train. If you are a small business using Pinterest, be careful how you do so!

Finally, remember the old term “de minimis non curat lex.” This is latin for “the law does not concern itself with trifles.” If your use of an image on Pinterest is non-commercial, if you properly cite the image and refer back to the copyright owner, and you are using it to express yourself, then you will have a strong fair use argument. Further, it is not only the law that does not concern itself with trifles—most copyright owners also do not concern themselves with trifles.

Conclusion

Ms. Kowalski is being overly cautious in deleting her Pinterest boards. Part of it is her great respect for copyrights—something she likely has as a photographer. However, her concern is overblown when it comes to the actual law.

Is it possible for Pinterest to be used for copyright infringement? Yes. However, Pinterest doesn’t commit copyright infringement, people do.

Which leads to the concerns of having to pay Pinterest’s legal fees in a copyright infringement case. This is unlikely because of the DMCA. Pinterest is a service provider under the DMCA and therefore is protected by the DMCA’s safe harbor provisions. Accordingly, Pinterest cannot be sued for  the copyright infringement of its users—only the users can.

Finally, remember that Pinterest is a tool. It is a great tool. It is also a tool that can be misused. Most of us intuitively know when that misuse is occurring.

EDIT: Further Reading on Pinterest and Copyright

Andrés Guadamuz of the University of Edinburgh writes about how the copyright concerns over pinterest are overblown  at his blog, TechnoLlama: http://www.technollama.co.uk/pinterest-and-copyright.

Connie Mableson at DMCAHandbook.com writes in more detail on the DMCA and Pinterest, and how Pinterest can improve its DMCA process: http://www.dmcahandbook.com/2012/02/changes-needed-to-pinterests-dmca-policy/.

Dave Fagundes, a law professor at Southwestern Law School in Los Angeles, has written a thoughtful and in-depth analysis of the fair use implications for Pinterest users at it regards the fourth, non-exclusive factor above (“effect on the potential market”) over at Prawfs Blawg. My post glosses over this analysis, Professor Fagundes goes into greater detail. Read it if you want to know more about the craziness that is copyright law and fair use.

Nancy Sims at the University of Minnesota Libraries has a great post comparing the Pinterest terms of service with the terms of service for other social media websites. She also has a clarification post on some of her points. A great read for those interested in how new media like social media affects copyrights.

Transfers of copyrights, and exclusive licenses, must be in writing and signed by the owner of the copyright

Max Kennerly over at Litigation & Trial wrote that the iBooks Author EULA attempts to create an exclusive license but fails to do so. He’s wrong about the  attempt to create an exclusive license, and I’ll outline why below, but he’s correct that it fails to create an exclusive license under U.S. copyright law. (Probably because that was never the intent.)

Section 204 of the Copyright Act of 1976 states that:

(a) A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.

Section 101 of the of the Copyright Act of 1976 defines a transfer of copyright to include exclusive licenses. This means that any exclusive license must meet the transfer requirements of Section 204 above. Apple’s EULA fails to do this, and therefore fails to meet the requirements of an exclusive license.

The iBooks Author EULA defines a work as the output generated by the program for the purpose of the license

The iBooks Author EULA defines a “Work” as what you generate using the iBooks Author software. Specifically, the EULA states:

IMPORTANT NOTE: If you charge a fee for any book or other work you generate using this software (a “Work”), you may only sell or distribute such Work through Apple (e.g., through the iBookstore) and such distribution will be subject to a separate agreement with Apple.

A work is not a work as used in copyright law, but rather the output generated by the iBooks Author program. This is poor contract drafting because the terms Apple’s iBooks Author EULA uses are technical terms in copyright law, but the definition they are using is different than the technical definition of those terms. Further, even if Apple or someone else were to later argue that this use of the term “Work” includes the copyright in the text of the book, it would fail under the above Section 204 requirements for the transfer of a copyright.

The iBooks Author EULA specifically disclaims ownership over the text and other content displayed or accessed by the Apple Software

Section 2.D of the EULA states as follows:

2. Permitted License Uses and Restrictions.
. . .
D. Copyright and Content. [. . .] Title and intellectual property rights in and to any content displayed by or accessed through the Apple Software belongs to the respective content owner.

This passage may be intended to apply to the stock graphics or other materials that come with the software, but it also clearly disclaims ownership of any copyrighted material “displayed or access through the Apple Software.” This indicates Apple’s recognition that the copyrighted works of third parties, which would include authors/publishers using iBooks Author, are separate and distinct from the copyright in iBooks Author itself.

Might it be said that the “exclusive transfer” Kennerly and others focus on is in the copyright of the eBook file generated by iBooks Author?

Yes, and this the only argument that may be made along these lines. The argument goes something like this.

1. iBooks Author is software that is copyrighted.
2. The user of this software is granted a license to use it based on certain conditions, including how it is distributed.
3. Anything outputted by this software falls under the software’s copyright either directly or indirectly as a derivative work.
4. Therefore, if someone creates an eBook using the iBooks Author software and sells it on their own website instead of through Apple’s iBooks store, then this person would be violating copyright by violating the copyright license (the EULA).

Any litigation attorney worth his or her salt would make such an argument, and they would have a legal basis for doing so. I’m not sure this argument will be bought by the judge, however. It is also problematic from a litigation standpoint.

For example, copyright law requires you to register a copyright before you can sue upon it. Section 411 of the Copyright Act of 1976 states that “no action for infringement of the copyright in any work shall be instituted until registration of the copyright claim has been made in accordance with this title.” In a lawsuit based on violations of the EULA, what is the copyright being sued upon?

If the copyright being sued upon is the iBooks Author copyright, then it is likely the work is registered and the lawsuit can proceed. But where is the infringement? It is using a copy of the program in violation of the license, which appears to be a single infringement. Plus, Section 4 of the EULA provides an out: “[u]pon the termination of this License, you must cease all use of the Apple Software and destroy all copies, full or partial, of the Apple Software.” If this term is met, then what are the damages? Can the statutory ones even be brought?

If the copyright being sued upon is the generated output of the program, then there is a question of whether this needs to be registered with the copyright office individually or if it can piggyback on the registration of the iBooks Author software. And what elements of it are copyrightable? The issue with the exclusive license will also come into play, leaving the license unenforceable in this kind of action.

In short, attempting to enforce the iBooks Author’s distribution restrictions based on copyright would be difficult. Further, courts may have a hard time swallowing the arguments Apple will be forced to make. Instead, Apple may bring contractual claims against someone who has violated the EULA.

Contractual claims based on the iBooks Author EULA are more enforceable, but less harmful

Mr. Kennerly and myself have already outlined why the EULA fails to create an exclusive license, and the above section outlines the difficulties of a copyright case based on violations of the EULA. Apple, however, can bring a lawsuit based on contract law rather than copyright law, and it will have stronger arguments on its side. Thankfully, the harm to a user if Apple were to win (which is not a foregone conclusion anyhow) is much less.

The EULA is a contract between the user and Apple. In the contract, the user has agreed not to distribute the eBook files generated by the iBooks Author program. The user is breaching this contract if he decides to sell the eBook on his own website.

The question is what form of remedy may Apple receive for this breach? Apple would need to show the damages it suffered through the breach in order to receive economic damages. It is highly likely this amount, if one can even be proven, will be less than the statutory damages one faces in a copyright action.

Apple may seek specific performance under the license, but courts are loathe to grant specific performance in most cases. While it is more likely this kind of situation will be the kind in which a court grants specific performance, Apple still has a tough argument to make. Further, they will have to pay court costs and attorney fees in order to make it.

The distribution language is likely targeted at large publishers, not individuals

The likely reason the distribution terms are in the iBooks Author EULA are to precent large publishing houses from using the software to create iBooks-compatible eBooks and distribute them on their own websites. These publishing houses have the means to provide a viable distribution method comparable to the iBooks store. Individual authors, however, likely do not.

The distribution platform provided by Apple through its iBooks store is superior to what most individuals can create. It also requires much less expertise and time than a roll-your-own solution. This is why Apple takes a 30% cut. This may seem high, but if you have 500% more sales then that 30% cut isn’t so bad.

The important take away is that the copyright in your work is safe

Nothing in Apple’s iBooks Author EULA transfers the copyright in your work to Apple. This means that you can take your book and put it into another eBook format with no penalty. The iBooks Author EULA can’t stop you.

What you get from iBooks Author is professional-quality eBook creation software that typically only large publishers get. In fact, I’m not even sure how eBooks using Apple’s format that were sold in the iBooks store were created before iBooks Author. It is likely that publishers were given something similar to iBooks Author, along with a similar license. (It may have even been more restrictive.) The only other way I know to publish through the iBooks store was through the open ePub format. (And this lacked DRM, if that was important to you.)

You also have the output you create from this software locked behind Apple’s walled-garden. As I wrote in my first post on the iBooks Author EULA, there are certainly negative aspects of this. Further, I think the walled-garden approach will be a loser in the end. Still, the garden, protected by those Apple walls, is rather pretty at the moment.

NOTE: You can read a follow-up to this post outlining in more detail why the iBooks Author EULA doesn’t create an exclusive license and doesn’t steal your copyright here.

Thomas Claburn at Information Week implores authors to Just Say No to the iBooks Author software. John Gruber of Daring Fireball has stated that “this is Apple at its worst.” Dan Wineman has stated that “[i]t’s akin to Microsoft trying to restrict what people can do with Word documents, or Adobe declaring that if you use Photoshop to export a JPEG, you can’t freely sell it to Getty.”

Apple’s strategy of restricting how you can distribute what you create in iBooks Author sure comes across as petty and shortsighted. It certainly will rub the wrong way all the developers and publishers who have complained about Apple’s walled garden. But what does the license actually mean?

Read on to learn more.

You don’t lose your copyright.

The section people are complaining about states the following:

2. Permitted License Use and Restrictions.

. . .

B. Distribution of your Work. As a condition of this License and provided you are in compliance with its terms, your Work may be distributed as follows:

(i) if your work is provided for free (at no charge), you may distribute the Work by any available means;

(ii) if your Work is provided for a fee (including as part of any subscription-based product or service), you may only distribute the Work through Apple and such distribution is subject to the following limitations and conditions: (a) you will be required to enter into a separate written agreement with Apple (or an Apple affiliate or subsidiary) before any commercial distribution of your Work may take place; and (b) Apple may determine for any reason and in its sole discretion not to select your Work for distribution.

Apple will not be responsible for any costs, expenses, damages, losses (including without limitation lost business opportunities or lost profits) or other liabilities you may incur as a result of your use of this Apple Software, including without limitation the fact that your Work may not be selected for distribution by Apple.  (My own emphasis added.)

This is a wall of text, but what it essentially says is that you have to distribute the file you create in iBooks Author using Apple. This means you can’t take the file over to Amazon, or Barnes & Noble, or even your own website for distribution.

It says nothing, however, about copyright. Therefore, the content of the book you create still remains your own copyright. This makes sense under U.S. law, too. The only way to transfer copyright ownership under U.S. law (not license, but actually transfer a copyright) is in a writing signed by the copyright’s owner.

The restriction here is on the use of the file outputted by iBooks Author, not on the text you created to make the book. Therefore, the iBooks Author file can only be distributed under the terms of this license, but you could put the book’s text in another format, say the Kindle format, and distribute it any way you wish.

This is similar to the changes made by Apple involving in-app purchases that caused so many problems last year. Those changes forced Amazon to remove the ability to buy books through the Kindle App, and it removed the ability of magazines to process their own subscriptions. In-app purchases and subscriptions had to go through Apple.

Microsoft Office, and other software programs, have similar license restrictions.

One of the first intellectual property cases I had any involvement with was a case about Microsoft Office. A small business was turned into one of the various software licensing enforcement groups for using the Student version of Office. My involvement was limited to consulting with the lawyer defending the small business, as I was still in law school at the time.

Microsoft’s Home & Student license for Microsoft Office restricts the use of the product to essentially non-business uses. Section 12 of the Retail License in the Microsoft Software License Terms (MSLT) for Microsoft Office 2010 states:

12. HOME AND STUDENT SOFTWARE. For software marked “Home and Student” edition, you may install one copy of the software on up to three licensed devices in your household for use by people for whom that is their primary residence. The software may not be used for commercial, non- profit, or revenue-generating activities.

Similarly, the Macromedia Software End-User License Agreement limits the use of its educational versions for non-commercial purposes in Section 3(4). (“3(f)  Education Versions may not be used for, or distributed to any party for, any commercial purpose.”)

The difference here is that Microsoft and Adobe/Macromedia are limiting software use, not the use of the outputted file. Nevertheless, Dan Wineman’s comment that this is like Microsoft trying to restrict what people can do with their Word documents is correct, but it is correct because Microsoft already does this with its Home & Student Office versions.

The power of a EULA to limit use is based on the software’s copyright.

An End User License Agreement, or EULA, grants the user of a piece of software the right to make use of the underlying copyright in the software. This right is limited by the terms of the EULA. Therefore, a EULA gains its power through the underlying copyright in the software program.

The reason you need a license to use a software program is that you usually must copy copyrighted elements of a program before you can use it. First, you must install it on your hard drive. Then, you must load portions of the program into your computer’s memory before it can work. Each of these steps results in copying of copyrighted code.

The EULA grants you the right to do this by licensing the programs copyright based on whatever conditions the copyright holder chooses. Microsoft chooses to limit the license of Office Home & Student to non-commercial, home-based use. Adobe/Macromedia chooses to limit the license of its academic version to non-commercial, academic settings. Apple, with iBooks Author, has chosen to limit its license such that the output of the program—the file created by iBooks Author—may only be distributed in specific ways.

 What about the damages and losses language?

Some, such as Thomas Claburn at Information Week, have highlighted the language in the license that hold Apple harmless loss for any damages or losses because Apple has chosen not to distribute a work created by iBooks Author. This language, accompanied by the restrictions on distribution of books that folks want to sell to Apple-only channels, seems unfair. Apple, it would seem, holds all the cards.

And they do, but it’s not as malicious as it might first appear. The reality is that, without this language, such an undertaking would be impossible because of the legal risks involved. This hold-harmless language allows Apple to avoid death by a thousand lawsuit paper cuts, and this is why any service such as Apple’s iBook service will include this language.

For example, Section 6.2 of the iOS Developer Program License Agreement similarly states in part that

Apple shall not be responsible for any costs, expenses, damages, losses (including without limitation lost business opportunities or lost profits) or other liabilities You may incur as a result of Your Application development, use of this Apple Software, use of any services, or participation in the Program, including without limitation the fact that Your Application may not be selected for distribution via the App Store or VPP/B2B Program Site.

In short, the iBooks Author EULA is not much different than what you already have to agree to in order to publish applications through Apple’s various app stores.

Make no mistake, this perpetuates Apple’s walled-garden approach.

Some have already pointed out how iBooks Author furthers Apple’s walled-garden approach. Apple does not argue its approach isn’t a walled-garden. Rather, it simply argues that its efforts are to create beautiful, simple products that benefit their users. One way it does this is by ensuring the user experience is uniform, and its walled-garden approach is the method used to achieve this goal.

I remember visiting London when I lived in England for a year. There were gardens within the city with iron-wrought fences around them. These fences had gates with locks, and the folks living in the neighborhood had keys to the locks.

These gardens were beautiful—you could see them through the fences—and a nice break from the hubbub of the London city sidewalks and streets. But there were also walls keeping folks out. The only way to get in was to play by whatever the rules for the garden were.

Apple’s walled garden is similar, yet different. The garden itself is beautiful—iOS is the market leader in applications for mobile devices, and iOS devices are quite good—but it is only accessible with the right keys to the locks. To get those keys, you have to buy Apple products—which are rarely the cheapest option for any type of product.

Unlike the walled gardens of London, however, it’s also quite difficult to take the flowers out with you. Some program engines allow this to a certain degree, but in the end what you do with the content is dependent on the rules laid down by Apple. Ultimately, Apple is a corporation looking out for its own best interests (and the interests of its shareholders), so you can’t expect favors from them unless those favors also benefit Apple.

In the end, I believe information wants to be free. Moreover, I believe it will become free. The more we try to lock it down, the more ways it will find to get free. Hackers hack DRM all the time, and people find ways of spreading knowledge even when folks try to lock it away behind gates and walls. Ultimately the walled-garden approach of Apple is doomed to fail.

Until then, I may just give iBooks Author a download and try. As I said, it is quite a lovely garden—and there is a reason so many want in, and so few want out.

The heirs of Miles Davis filed a lawsuit against Miles’ Cafe, a jazz cafe started by a jazz fan who plays trumpet and goes by “Miles” (Satoru “Miles” Kobayashi). Since its filing, the cafe has changed its name to SOMETHIN’ Jazz Club. (You can see the old name and the new on Miles’ Cafe’s Facebook page.)

While this is not strictly a law and tech lawsuit, we do cover trademark issues on Lex Technologiae, and this case allows us to examine the ins-and-outs of trademark law and litigation. Any trademark litigation, of course, starts with the trademarks that have allegedly been infringed.

What trademarks are implicated?

Miles Davis Properties LLC, the entity run by the heirs of Miles Davis, owns a few trademarks. The USPTO database show the following trademarks being owned by Miles Davis Properties LLC:

Miles Davis Properties’ lawsuit covers two of these marks: serial number 75430133 and 77770108. The first mark is a typed drawing of the name “Miles Davis” for use in clothing, namely men’s and women’s t-shirts, vests, and ties (international class 25). Registered in 1999, this mark is an odd one to be used against a cafe.

The second mark is more recent—registered in 2010—and covers more relevant services: “Music publishing services; entertainment services in the nature of a website providing information relating to music, motion pictures, and artwork.” (International Class 41.) This second mark—technically a service mark—is also registered under International Class 42 for “computer services, namely, creating an on-line community for registered users to participate in discussions.”

While neither of the goods or services protected under either of the two marks is spot on for a cafe, the second mark comes closest. After all, Miles’ Cafe does advertise entertainment services on its website and Facebook page. Nevertheless, the use of these marks by Miles Davis Properties LLC in this lawsuit does stretch each mark’s stated purpose.

Miles Davis Properties is claiming a third mark, however. Miles Davis Properties’ Complaint states in paragraph 10(b) that uses “over the past 55 years have made the Silhouette Profile immediately recognizable to the public as the source of Miles Davis’ entertainment services.” For example, the black-silhouette of a trumpet player was used on a number of Miles Davis’ album covers. It is not, however, a federally registered trademark.

Marks don’t have to be registered to be protected

People register marks to obtain presumptions in their favor in a trademark action. For example, if the Silhouette Profile of a trumpeter was a federally registered trademark, then Miles Davis Properties wouldn’t need to prove that the image evokes Miles Davis (and thereby Miles Davis Properties) as a source of the good or service. Federal registration results in this being presumed.

So you can sue for trademark violations even if you have not registered your trademark, but you will have to prove that your mark evokes you and identifies you as the source origin for a specific good or service. This even allows someone like Miles Davis Properties to sue even if their federally registered trademarks don’t cover the way the trademark is being used. (Think of the t-shirt trademark being used against a cafe.) The trademark won’t benefit from the presumptions described above, but the lawsuit can still go forward.

It all comes down to the likelihood of consumer confusion over the mark.

Likelihood of confusion and its role with un-registered marks

The Lanham Act outlines prohibitions against false designations of origin in 15 U.S.C. § 1125. It states that anyone using a “word, term, name, symbol, or device” in connection with a good or service which:

is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person . . . shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

This grants anyone a cause of action against someone else who is naming a good or service in a way that is likely to lead to confusion over the source of the good or service. This is the underlying ground for any trademark lawsuit, and the grounds upon which Miles Davis Properties base their claims (especially for the black-silhouetted trumpeter).

The problem with trademarking a name

Personal names are problematic trademarks. A name is merely descriptive of an individual, and many individuals might have the same or similar names. For this reason, a secondary meaning must be shown to the USPTO before it typically grants registration over a name-based trademark. Miles Davis, for instance, would need to show that his name has become more than an identifier of him, but that it has come to identify the source of a specific good or service. (Music, t-shirts, websites, etc.)

If a name is successfully registered as a trademark, there are still fair-use exceptions for the use of that name. In other words, you won’t find folks being able to prevent, say, another Miles Davis from picking up a trumpet and playing jazz (or using his name to advertise his jazz playing). The second Miles, however, might be limited in the specific ways he advertises it or makes money from it (no t-shirts, perhaps). This is one reason why folks take stage names.

Property over-reach, or why I think this case is important

People over-reach when it comes to their property, whether it be physical or intellectual, and this case provides an example of this. I do not think Miles Davis’ heirs should succeed in a lawsuit over these issues. The claims stretch the purpose of the trademarks, and it smacks of an approach where they might view another trumpeter named Miles as infringing their marks.

Miles’ Cafe, however, has changed its name to SOMETHIN’ Jazz Club. From where I sit, despite my belief the lawsuit over-reached, this is a positive outcome. It appears, based on this evidence, that both sides were reasonable and found a way to move forward without expensive court battles. (Although I do not know if this was done by settlement, or by Miles’ Cafe on its own.)

Still, it bears remembering that property over-reach can have negative results. Do we really want folks to lose their ability to use their own names because of trademark? It doesn’t really happen now, for a number of reasons, but it could if the more strained arguments of some trademark owners were accepted as law.

With the potential for over-reach, and the loss of one’s identity if we’re not too careful, I’ll leave you with a paper that examines the dangers of various laws that commoditize the self: When selling your personal name mark extends to selling your soul, by Yvette Liebesman, and published by the Temple Law Review.

In denying the motion to dismiss, Judge Scheindlin disagrees with both Techdirt and Rihanna’s lawyers. The judges decision hangs on which elements in LaChappelle’s photos are protectable by copyright, and which ones are not. Before dissecting the order denying Rihanna’s motion to dismiss, however, it’s important to first provide a brief lesson on the laws of civil procedure.

This case isn’t over—this is a preliminary ruling

Lawsuits go through three stages: (1) pleadings, (2) discovery, and (3) trial. Each stage has a method lawyers can use to try and end the case. Motions to dismiss can be filed during the pleading stage, motions for summary judgment in the discovery stage, and trial can end with a verdict from judge or jury. The motion to dismiss in Rihanna’s case is part of the first stage, so there is still a lot more to be done in this case.

About Rule 12(b)(6)—Failure to state a claim upon which relief can be granted

Motions to dismiss during the pleading stage are often filed under Federal Civil Procedure Rule 12(b)(6) for “failing to state a claim upon which relief can be granted.” (You can also ask for a judgment on the pleadings, or 12(c) motion.) Judge Scheindlin denied Rihanna’s 12(b)(6) motion to dismiss for failure to state a claim upon which relief may be granted.

LaChappelle's works on the left, stills from the Rihanna video on the right: Exhibit A of the Order.

Judge Scheindlin’s ruling only discusses whether Mr. LaChappelle has pleaded factual allegations sufficient to sustain a legal claim upon which the court can grant relief. To do this, Judge Scheindlin can only take into account the facts pleaded by both parties in their Complaint and Answer. These facts must meet a plausibility standard where, if the facts can be proven true by evidence submitted later during the lawsuit, Mr. LaChappelle has a valid claim for copyright infringement.

This standard makes motions to dismiss difficult to win for defendants. Rule 12(b)(6) is intended to dispose of lawsuits not based on the law, and therefore not appropriately before the court. Rule 12(b)(6) does not measure the merit of the evidence or claims, only if they were pleaded in such a way as to provide a valid remedy.

Ideas, as a matter of law, cannot be copyrighted and therefore claims for infringing ideas should be dismissed under Rule 12(b)(6)

Techdirt’s argument, and the argument of Rihanna’s defense lawyers, is that LaChappelle’s copying claims relate to the ideas behind the photos, but not for any protectable elements of expression in the photos. This would be a failure to state a claim upon which relief can be granted because you can’t protect your ideas, only the way you express those ideas.

LaChappelle's works on the top, stills from the Rihanna video on the bottom: Exhibit B of the Order.

Judge Scheindlin, however, rejected this argument. She focused on the ways in which the images were similar:

hot-pink and white striped walls; two single-hung windows in the middle of the back wall; windows with glossy hot-pink casings and interior framework, with opaque panes exhibiting a half-vector pattern of stripes against a yellow background; hot=pink baseboards; a hot-pink couch under the windows; women wearing frizzy red wigs; a woman posed on top of a piece of furniture; black tape wrapped around a man; and a generally frantic mood.

Judge Scheindlin also focused on how LaChappelle composed his images. LaChappelle’s composition, through design and orchestration of their scenes, lent greater originality and, thus, greater protection to the works in the eyes of Judge Scheindlin. In short, Judge Scheindlin found that LaChappelle sufficiently pleaded facts indicating that what Rihanna’s video copied from his photos were not just the ideas behind the photos, but protectable elements of the photos. Scheindlin relied on the decision in Mannion v. Coors Brewing to support her decision.

Thin versus Thick Copyright Protection

This comes back to the idea of thin versus thick copyright protection. I’ve discussed this before in my post on how Auto-Tune the News made me look at the DMCA and copyright laws again. Some copyrighted works possess great creativity and originality, such as novels and paintings. Not only are the layout of elements in these works particular expressions of ideas, the representation of these elements are expressions as well. These works have thick copyright protection—they have more protectable copyright elements, and therefore have stronger copyright protection.

LaChappelle's works on the top, stills from the Rihanna video on the bottom: Exhibit C of the Order.

Some works possess little creativity and originality. The famous example, from Feist v. Rural Telecommunications, are phone books—they are collections of facts (phone numbers tied to names—laid out in an alphabetical manner. Facts, like ideas, cannot be copyrighted. Further, an alphabetical layout of these facts is not very original, and therefore afforded limited protection. The Supreme Court in Feist indicated that only mechanical copying of the phone book at issue would constitute infringement. Copying the factual data and the common alphabetical layout of the data was rejected as copyright infringement, however. These types of works have thin copyright protection—they have fewer protectable copyright elements, and therefore have weaker copyright protection.

Judge Scheindlin effectively found that LaChappelle’s photos deserved more than thin copyright protection as a matter of law. Her opinion found that there are copyrightable elements in the photos that might be substantially similar to elements in the Rihanna video. While Scheindlin did not go so far as to say LaChappelle’s photos deserve the same level of protection as a novel, her willingness to go as far as she did, and the willingness of courts before her to do the same, raise questions about the idea/expression dichotomy and whether it’s still legally effective.

What is the idea/expression dichotomy?

I touched on this earlier in the post. A common refrain in copyright law is that copyright does not protect ideas, it protects the expression of an idea. This is the idea/expression dichotomy—in copyright law, ideas are contrasted with expression. Thus, copyright views ideas and expressions as being entirely different for the purposes of determining whether something is copyrightable.

Why the idea/expression dichotomy is troublesome

The effectiveness of this approach is questionable. Judge Scheindlin’s ruling on Rihanna’s motion to dismiss illustrates the problems with the idea/expression dichotomy—it is often difficult, if not impossible, to draw a bright line around whether the elements of a work are ideas (and therefore not copyrightable) or expressions (and therefore are copyrightable). Expression, after all, depends on the existence of an idea.

LaChappelle's works on the top, still from the Rihanna video on the bottom: Exhibit D of the Order.

So while a dichotomy requires two things to contrast with one another, to be different from each other, ideas and expressions don’t really fit the ‘dichotomy’ mold. This leads to tortured legal exercises, such as those undertaken by Judge Scheindlen, to determine where the idea ends and the expression of it begins. In the end, the idea/expression dichotomy that is often written about, offered up to courts as a legal doctrine, and held out as defining aspect of copyright, is anything but definite, anything but defining, anything but clear.

One court might find a work to possess thin copyright protection because most of the elements are non-copyrightable as ideas, whereas another court might find the exact same work possesses thicker copyright because the second court finds protectable expressions in the work.

Photographs are especially difficult under the idea/expression dichotomy

Facts cannot be copyrighted because they are ideas stripped of any original expression. For example, if it is a fact that I have one orange then there are limited ways I can express that fact. The underlying fact is the idea that I have one orange. I might select a method for communicating this fact that is original and expressive, and this method might be copyrightable. Nevertheless, another person could take the same fact (that I have one orange) and choose to represent it in another way. I cannot stop this with copyright law.

This works well enough with data. Feist‘s phone book ruling is an example of relative clarity compared to the otherwise difficult analysis of idea versus expression. It works less well with photographs, however.

A photograph is a mechanical representation of facts. This is unlike a painting, which is a non-mechanical representation of something—be it facts, such as an attempt to paint an outdoor scene or create a portrait of someone, or imagination in the form of how the artist sees the world, such as the Vincent van Gogh’s Starry Night painting. Paintings, therefore, are pure expressions of ideas or facts. Photographs, however, are mechanical expressions of facts.

So can a photograph be copyrighted, even though it is a mechanical representation of facts? Yes.

Remember the Feist case—if the defendant in Feist had photocopied their competitor’s phone book pages then copyright infringement had occurred. They didn’t photocopy the pages, however—they copied the factual data and arranged it themselves. So even thin copyright allows some copyright protection, even if its limited.

A photograph deserves at least thin copyright protection. It is an expression of facts, even if it is a mechanical representation. Originality in the expression exists despite its mechanical origins—the angle, lighting, focus, and framing of the photo are controllable by the photographer. This allows a photograph to be original from another.

But how much should this expression in a photograph be protected? Allowing the angle at which a photo is taken to be copyrighted would lead to the undesired result that others would not be able to take photographs with that same angle. This rightfully seems absurd.

Nevertheless, courts try and pick out the elements of copyright that might be protected in a photograph. The angle, the color, the organization of a scene, where do the facts of a scene—the ideas—stop and where do the expressions begin? Moreover, to what extent can these expressions be protected?

Photographs shouldn’t be granted thick copyright protections because this leads to decisions where facts and ideas end up being copyrighted

Copyright protects expressions, not ideas or facts. This was stated at the beginning of this post. Copyright grants a monopoly over the copying and distribution of a work. The very power of this monopoly requires that it be limited to original expressions of ideas, but not to the ideas themselves.

Photographs, however, create problems for copyright law when it comes to drawing the line between the ideas represented (the facts) and the expression. This renders the idea/expression dichotomy problematic for photographs.

A photograph must possess a modicum of original expression in order for it to be capable of obtaining copyright protection. Nevertheless, a photographic is a mechanical representation of facts, no matter how creative the lighting or angle or scene composition might be. This leaves judges, like Scheindlen, attempting to graft expression onto the ideas to justify copyright protection.

This is unnecessary. There is no need to address the originality of a photograph for the purpose of a photograph being copyrightable. Nothing in copyright indicates its protections should expand further than this. Indeed, the downsides of doing so are clear.

If I take a photo of the Statue of Liberty at a unique angle and with interesting lighting, might this grant me the ability to sue others who emulate my photo? The strained rationalizations of the courts, as echoed in Judge Scheindlen’s opinion on the motion to dismiss in Rihanna’s case, make this seem less absurd.

What if I later seek to emulate a famous photograph of a famous person, but do so with a not-so-famous relative? Would I be liable in this case? Once again, the tortured reasoning of the 2nd Circuit (and other) courts as echoed in Judge Scheindlen’s opinion makes this not so ridiculous.

Creating a bright-line rule—photographs should only receive thin copyright protections, and nothing more

Photographs are mechanical representations of fact. Anyone who has ever taken photography seriously understands that these mechanical representations take a lot of work, effort, and result from each individual photographer’s expression of the scene being shot. Further, any commercial photographer will readily tell you of the importance of setting up a scene—be it in a studio, outdoors, or just knowing how to be in the right place at the right time.

But extending copyright protection beyond the mechanical copying of a photograph (i.e., scanning it and sending it to all your friends) is extending copyrights in photographs too far. The expression of a photograph cannot be separated from its factual reproduction of actual events. Attempting to do so leads to absurd results.

Therefore, a bright-line rule should reserve copyright protection in photographs only for the reproduction of those photographs. Copyright protection should not extend to the elements within the photographs themselves—doing so results in copyrighting facts, which is beyond the scope of copyright law.

This is not as radical as it sounds. Sound recording copyrights are similarly thin. I can record my own version of, say, one of Rihanna’s songs and the owner of the sound recording copyright cannot sue me for copyright infringement. (The owner of the work’s composition and performance copyrights, however, could.)

It is time for a bright-line rule; it is time for the copyright nonsense in the 2nd Circuit (in regards to photographs) to end.

Copyright and trademark law are different, however, and for very good reasons. Each law protects different interests and confers different types of rights.

So read on, dear reader, for a quick primer on the differences between copyright law and trademark law.

Copyright protects the expression of an idea

Copyright does not protect ideas themselves, it protects the expression of an idea. Whenever you hear someone say “I should have copyrighted that idea” you can say “Actually, you can’t copyright an idea, only an expression of an idea.” (Or you might just think it, thus avoiding being labeled the know-it-all.)

Trademark protects source-identification

Trademark’s function is to provide consumers the ability to identify the source of a product or service. It does this by allowing a person to have a monopoly on a mark that identifies a product as coming from that person. This is why trademark requirements generally require:

1. The mark to be used in commerce;
2. The mark is unique enough to identify the owner as the source of a product or service bearing the mark; and
3. The mark is not likely to confuse consumers with another mark held by another person for the sale of goods or services.

Copyright has a time limit for protection; Trademark protection can last forever but requires continuous use

Copyright grants folks a monopoly over the expression they’ve created. This monopoly is currently life of the author plus 70 years. There are no registration requirements for copyright, although registration does confer a added protection and benefits (such as statutory damages in infringement cases).

Registered trademarks grant their owners a monopoly over the use of the mark in commerce to identify specific classes of goods or services. This monopoly has no term limit, but a registered trademark must be renewed every ten years by showing the mark is still being used in commerce by the holder of the mark. Failure to do so may result in the trademark being abandoned. (Although it may be re-registered.)

Trademarks do not have to be registered, but the protection for non-registered, common law marks is more limited. Federally registered trademarks grant owners a presumption that the mark is unique, not likely to confuse consumers, and any infringer should have known not to use the mark. Common law marks do not provide these presumptions.

Copyright and Trademark can protect the same thing, but the protections are different and cannot overlap

Copyright can protect any expression “fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.” Copyright Act of 1976 § 102(a).  This includes images, movies, recordings, songs, and more.

Trademark can protect anything capable of acting as a source identifier for a particular good or service. This includes images, sounds, smells, colors, and something called ‘trade dress.’ It generally does not include whole works, such as a movie or book, but it does include works such as images or jingles.

Copyright and trademark can therefore overlap in various ways. Take an image mark; it may be both copyrighted and function as a trademark. Similarly, a song may be a song and may also function as a jingle indicating the source of a good or service. But they cannot overlap in protection.

Copyright protects copying of a work of expression, whereas trademark protects use of a mark in commerce for source identification purposes. Courts will not allow the holders of either a copyright or trademark to attempt to use either for purposes more related to the other.

In other words, I cannot use trademark laws to try and restrict the use of a work that should be handled by copyright laws. Similarly, the holder of a trademark cannot try and use trademark law to restrict my use of a mark in a copyright settings. (Think of Coca-Cola arguing that I can’t use the mark Coca-Cola in a novel I’m writing because it violated their trademark. It doesn’t, for many reasons. Similarly, think of an author arguing that a work of theirs they licensed openly using Creative Commons couldn’t be copied because it violated a trademark for the name of their company.)

Copyright and trademark law share various free speech, fair use rights

Section 107 of the Copyright Act of 1976 codified common law principles of fair use developed by courts over the years to protect free speech rights under the First Amendment. Section 107 is broad and does not independently define fair use (something left to the courts), but it does provide non-exclusive factors used to help determine whether something is a fair use:

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

Trademark law also possesses certain fair use exceptions. These are based both on free speech rights and the source identification purpose of trademark law. Trademarks can be used in the news discussion of a company or product. It serves the public and free speech to allow this, but the mark also isn’t being used as a source identifier for the product (which would be the commenting news, not the good or service).

Similarly, a mark can be used as part of another good or services description. Sunmark Inc. v. Ocean Spray Cranberries, Inc., 64 F.3d 1055 (7th Cir. 1995), is an example. Sunmark held the trademark for Swee TARTS. Ocean Spray aired a commercial for products using the term Sweet Tart to describe them. This was done in a descriptive manner, not to indicate the name of the product, and therefore the court allowed it. As the court in Sunmark said,

That Swee TARTS is an incontestable mark for sugar candy does not make Sunmark the gatekeeper of these words for the whole food industry.

Courts also won’t allow copyright law or trademark law to be used as an end-run around the constraints of another. The Supreme Court articulated this in Dastar Corp. v. Twentieth Century Fox Film Corp. by denying an attempt to use the trademark protections granted in the Lanham Act to prevent the distribution of a work based off another work existing in the public domain. The short take on Dastar is that the Lanham Act cannot be used to create an additional layer of protection beyond that provided by copyright.

According to the USPTO website, the lawyer has indeed withdrawn the trademark application. It is unknown whether he is pursuing the trademark abroad. Regardless, it is worth looking at how the Bitcoin community can respond to future, similar attempts to trademark the term ‘bitcoin.’ (For the TLDR version, scroll down to the bottom and read the conclusion.)

What is a trademark?

A trademark is a mark identifying a trade. The idea behind trademarks is ancient—think of all the stories you heard or read about craftsmen marking their creations to identify who made them. These are trademarks.

Trademarks are intended to identify the source of a good. I’ve written about how this makes trademarks the consumer’s intellectual property law before. In short, trademarks protect consumers because they identify who made a good, therefore allowing a quick calculation on the good’s quality.

The two categories of trademarks in the United States

Trademarks in the U.S. may either be common law or federally registered marks. Anyone can claim a common law trademark if a mark is used in commerce in a way that identifies a good or service. These are the marks you see with a TM after the name. No registration of the mark is required. Protection is often limited to the geographic area in which the mark is used.

Federally registered trademarks must be used (or intended to be used) in interstate commerce. Federally registering a mark allows you to have trademark protection across the entire nation. For example, if you run a restaurant named “The Fuzzy Math Shack” in Iowa, and register your mark federally (meeting the interstate commerce requirements), then a restaurant in Florida couldn’t copy your restaurant’s trademark. Federally registered marks are the ones allowed to show the R in a circle after them—the ® symbol.

Trademark requirements

A mark must be able to distinguish your good or service from another’s good or service. Therefore, the mark must not be generic. You cannot trademark the term ‘apple’ because it cannot distinguish your apples from the apples of another. Similarly, your mark cannot be a geographic term—otherwise you could monopolize the use of the geographic term in commerce. (For example, the Steinbrenner’s couldn’t trademark the New York in the New York Yankees. They could only obtain a mark for the entire team name, not just the city name.)

The strength—or trademark-ability—of a mark is often boiled down into four categories: (1) generic, (2) descriptive, (3) suggestive, and (4) fanciful or arbitrary. Generic marks, as described above, cannot be registered. Descriptive marks are difficult to register; a showing that the mark has acquired secondary meaning is required. Suggestive, fanciful, and arbitrary marks are more likely to be successfully registered.

The power of registered trademarks

Federal trademarks, as mentioned above, apply across the country. The USPTO keeps a database of all federally registered trademarks. Accordingly, the law begins with the presumption that no one has the excuse that they didn’t know a mark was registered before they use it. (This is called ‘constructive notice,’ similar to the idea behind ignorance of the law is no excuse—ignorantia juris non excusat.) The holder of a registered trademark can also bring a lawsuit in federal court rather than state court. The registered trademark can be recorded with U.S. Customs and Border Protection to prevent goods bearing the mark from being imported into the U.S. without your permission.

How a trademark application can be challenged

There are three ways to challenge a trademark application. Two exist prior to the registration of a trademark, one is available after registration of a trademark. The three are, in order of timeliness, (1) letters of protest, (2) opposition hearings, and (3) cancellation hearings.

Letters of opposition

The USPTO outlines the procedure for submitting letters of protest in its examination guide. Section IX of the document states that the following “are not appropriate as the subject of a letter of protest” and will not be sent to the examining attorney:

Claims of fraud, earlier common-law use, ownership of state registrations, and claims based on evidence of use other than federal registrations and prior-pending applications for federal registration . . . .

Examples of appropriate evidence to include in a letter of protest include:

(1) that the term sought to be registered is generic or descriptive; (2) that a federally registered mark or prior-pending application exists for which there is a likelihood of confusion between this mark and the mark in the application that is the subject of the letter of protest; and (3) that registered marks are being used inappropriately in identifications of goods and services for particular applications.

These guidelines limit the effectiveness of letters of protest. Adversarial positions—such as claims that the mark is already in use in commerce, albeit not-yet registered with the USPTO—cannot be forwarded on to the examining attorney. One powerful exception is that you can challenge the mark as being either generic or descriptive.

Notices of Opposition; Opposition Hearings

Notices of opposition must be filed within 30 days of the publication of a trademark. Trademarks are published by the USPTO once they have passed the examination process. This provides interested parties the opportunity to see a mark prior to registration and, if necessary, oppose the mark’s registration.

A notice of opposition begins an adversarial process that may ultimately lead to an opposition hearing in front of the Trademark Trial and Appeal Board (TTAB). This operates similar to federal litigation. There are pleadings, a discovery process, motions, briefs in support of motions, and potential for an oral hearing. Moreover, the discovery process borrows heavily from the Federal Rules of Civil Procedure. (You can read about the TTAB’s process here.)

Unlike letters of protest, any valid reason for why a mark should not be registered may be presented at an opposition hearing. This includes evidence of the mark being used in commerce prior to the application and by someone other than the applicant.

Standing to file a notice of opposition

Whether you have the right to file a notice of opposition is what we lawyers call a threshold question. It must be answered before you can do anything else—you can’t cross the courthouse door’s threshold unless you have standing to bring the claim. Thankfully, standing for filing a notice of opposition is broad.

Section 13(a) of the Trademark Act lays out the basic standing requirements for a notice of opposition:

Any person who believes that he would be damaged by the registration of a mark upon the principal register . . . may, upon payment of the prescribed fee, file an opposition in the Patent and Trademark Office, stating the grounds therefor, within thirty days after the publication under subsection (a) of section 1062 of this title of the mark sought to be registered.

The term ‘person’ in the above quote means any legal person in the eyes of U.S. law, including individuals and corporations. The term damage relates to a party’s standing to bring suit. The Trademark Trial and Appeal Board Manual of Procedure (3d. ed., May 2011) states that:

A party may establish its standing to oppose or to petition to cancel by showing that it has a “real interest” in the case, that is, a legitimate personal interest in the outcome of the proceeding and a reasonable basis for its belief in damage.

Real interest means a direct and personal stake in the outcome. Most holders of any amounts of Bitcoin, for example, would have a direct and personal stake in the outcome of a Bitcoin trademark. A legitimate personal interest is no more than the interest the general public would have in the matter. Further, a reasonable base to believe damages may occur does not require proof of damages, it merely requires a reasonable basis for the belief damages may occur. A holder of any amount of Bitcoin should easily meet this requirement since the value of Bitcoin, and the ability to transfer it, may be effected.

Petition for cancellation

Petitions for cancellation are the third and final way for a trademark registration to be challenged. A petition for cancellation may only be filed after a mark is registered, unlike letters of protest and notices of opposition (which must be filed prior to registration of the mark). The process is similar to an opposition hearing; it is a quasi-judicial proceeding that follows the Federal Rules of Civil Procedure in many ways. The questions of standing and what claims may be brought also mirror those in an opposition hearing.

The Bitcoin community’s arguments against the registration of ‘bitcoin’ as a trademark

The Bitcoin community can use a number of different strategies to challenge attempts to register ‘bitcoin’ as a trademark. This includes arguments that the term is generic, that applicants are not the source of products, and that the mark is used in commerce broadly by many people and will therefore lead to likelihood of confusion. Further, the folks maintaining the code running the Bitcoin peer-to-peer network and mining operations may seek a trademark in their own right, but we’ll examine why this may be more harmful than helpful. First, however, we’ll examine why the term ‘bitcoin’ is arguably generic or descriptive in nature and, therefore, cannot be trademarked.

Bitcoin is generic or descriptive

This argument is the first place to start. Remember, Letters of Protest can contain evidence that a mark is generic or descriptive—and Letters of Protest are much simpler and cheaper than a Notice of Opposition or Petition for Cancellation. This argument can be used, and should be used, at any of the three stages of challenging a trademark registration.

Bitcoin as a generic term

Trademarks must be able to function as a source identifier. Generic marks cannot function as source identifiers. I cannot trademark ‘apple’ because it is generic—the mark is the thing. No one would be capable of distinguishing my apples from the apples of another based on my ‘apple’ mark.

Similarly, Bitcoin is the thing. A bitcoin is a bitcoin. You cannot separate the thing from the term—and this is the essence of generic terms. Because you cannot separate ‘bitcoin’ from the thing that is bitcoin, the term ‘bitcoin’ cannot function as a mark indicating source of origin for the thing.

Bitcoin as a descriptive term

Unlike apples, however, bitcoins are not tangible ‘things’ that exist naturally in the world. They are man-made. Therefore it may be difficult for a trademark examiner to consider them generic. Even so, bitcoins are almost certainly descriptive.

Descriptive marks are difficult to register for reasons similar to generic marks. While a generic mark is the thing, descriptive marks describe the thing. Therefore, it is difficult for descriptive marks to function as a method for identifying the origin or source of a something.

Think of the term ball. It is generic. Baseball is less generic—it might be argued that baseball is descriptive. It describes a specific type of ball. Trademarking the term baseball, however, will not help consumers identify the source of a baseball.

This is why descriptive marks must have acquired secondary meaning before they can be registered. Secondary meaning means that the descriptive term ‘baseball’ would no longer have the meaning we ascribe to it—the description of a type of ball—but has acquired a secondary meaning in the minds of consumers—a ball made by a specific manufacturer.

Bitcoin describes a type of digital thing. A bitcoin is a ditigal ‘something,’ a specific type of digital ‘something.’ Just as with a baseball, the term ‘bitcoin’ does not indicate the source of the ‘thing.’ It cannot—bitcoins exist as a result of ‘mining’ through a peer-to-peer network. There is no central issuer of bitcoin; no central server for bitcoin management.

So the fact that bitcoin describes a digital thing, coupled with the decentralized method for creating and transferring these digital things, lends itself to an argument that bitcoin, as a term, is descriptive and therefore cannot be registered as a trademark without it acquiring secondary meaning.

But bitcoin, as of this writing, hasn’t acquired secondary meaning. If I say bitcoin, you don’t think ‘product from X corporation.’ Rather, you think ‘a digital currency.’

Trademark applicants are not the source of Bitcoins

This argument is similar to the above argument over bitcoin being a descriptive term. However, it strikes at the ability of the applicant to claim it is the source of products bearing the term rather than the general trademarkability of the term ‘bitcoin.’

Trademarks must be capable of indicating a product or service’s source. Bitcoins, however, originate through a peer-to-peer networking process. This process is decentralized. Folks connected to the network can ‘earn’ bitcoins through a process nicknamed ‘mining’—they provide computing hardware to solve complex mathematical riddles with bitcoins being created for them if the hardware is successful.

A financial services company, such as the one for which a trademark application was registered, is not, nor can it be, the source origin for the issuance of bitcoins. The process is decentralized, based on the mining process, and arguably not capable of being controlled by anyone. (Although some argue the maintainers of the code for the bitcoin peer-to-peer network control it, these folks still aren’t the financial services companies that might try to trademark ‘bitcoin.’)

Because a financial services company like the one which sought to register ‘bitcoin’ as a trademark cannot control the issuance of a bitcoin, it has no control over its quality and cannot function as the source for the bitcoin. For this reason, these types of attempts to register ‘bitcoin’ as a trademark should fail. However, unlike the arguments about the generic and descriptive nature of the term ‘bitcoin’ above, it is likely this argument focusing on an applicant being incapable of acting as the source of the item may only be raised during an opposition hearing or cancellation hearing.

The advantages and disadvantages of a community-controlled registered trademark in the term ‘bitcoin’

Bitcoin is open-source, community-driven software. Anyone can see the code, download the code, and even submit new code to be implemented by the bitcoin software. (A Git repository is available on Github here.) While community driven, there are certainly individuals who possess greater control over what codes goes into, and what codes does not go into, the bitcoin system.

This community, through the group who act as gatekeepers to the code, could trademark their open source product’s name. There is precedent for this: Linus Torvalds owns the registered trademark Linux. Use of the mark is administered through the Linux Mark Institute at the Linux Foundation.

The bitcoin community could take similar action, but there are risks involved. One risk is how best to set up a run an organization, such as the Linux Mark Institute, that handles a community-owned trademark? Who will pay for managing such an undertaking, or for setting up the effort to begin with?

Another issue was touched on in my first Bitcoin post—a trademark might lend credence to the argument that a Bitcoin is a security because it operates through a common enterprise. This exposes Bitcoin to potential securities regulation—a major hassle in its own right.

Keeping trademark management out of a community structure also fits the current community identity for Bitcoin. Bitcoin is favored by anonymous folks, and favored because it offers anonymous methods for transacting business. The more involved bitcoin gets with regulatory agencies—be they the USPTO or the Securities and Exchange Commission—the more the Bitcoin community’s identity will change.

Conclusion

The Bitcoin community has a number of ways to challenge questionable attempts to trademark the term ‘bitcoin.’ There is a strong argument that the term itself cannot be registered as a trademark; in the alternative, there is a very strong argument that the only ones capable of registering the mark is the Bitcoin community. Therefore, financial services companies—like the one which attempted to register the mark—shouldn’t be able to do register a ‘bitcoin’ mark. Finally, the Bitcoin community always has the option to register the mark itself, but this seems to be counter to the regulatory hands-off approach the community appears to possess. On top of that, such a registration may more readily expose Bitcoin to regulatory oversight by the likes of the SEC or other government agencies.

No, iTunes’ new iCloud match features cannot and will not be used to chase down music pirates. (And Ars Technica’s conclusion is correct.)

First, let’s reject the pirate label

My post on why you can’t steal an idea touches on why ‘music pirate’ is the wrong term. You can’t steal music—you can only violate someone’s copyright. These are not the same thing. Nina Paley sums this up nicely in a song she wrote about why copying is not theft; something I touched on in my post about the difference between rivalrous and non-rivarlous ‘things.’

Copying music you don’t have a right to copy isn’t theft—it’s a copyright violation. You’re not a ‘music pirate,’ despite how the Recording Industry might want to paint you (or you might want to paint yourself, because Johnny Depp made pirates cool again).

Second, what’s the argument iTunes will lead to a mass copyright violation hunt?

The Ars Technica article asks two questions: (1) “Could Apple reliably identify pirated music?” and (2) “What would [Apple] do with that information?” It cites a recording industry insider answering the first question as yes, Apple will be able to identify pirated music.

Another article, cited by both Slashdot and Techdirt, goes further and argues that iTunes’ music match service might be a ‘honey pot’ for identifying copyright violators. In this Between the Numbers article, Daniel Nolte lays out the argument that Apple will be able to identify individual files that have been ‘stolen’—or in legal terms, copied without permission (and therefore a copyright violation).

The gist of these arguments is that meta data contained in an MP3 file on a computer might allow Apple or a music company to identify that file as one downloaded or copied illegally. MP3 files can contain all sorts of meta data—from the username or email of the person using an MP3 download service like Amazon’s, or a hash tag identifying that download specifically to a purchase by someone, or any other identifying features. Both the Ars Technica article and the Between the Numbers article detail how this might work.

Third, why these arguments are legally rubbish

Each of these arguments focus on the uniqueness of Apple’s service and the potential information on users it might provide, while ignoring the realities of what it takes to make a prima facie case for copyright infringement. Even presuming each of the technical arguments made by folks in both articles—which can only be a presumption, as the Ars Technica article rightly points out we do not know how Apple’s service actually works—a specific song cannot and will not be identifiable as infringing another’s copyright without additional information.

So what is this ‘additional information’ you mention?

A prima facie case for copyright infringement is the bare minimum that must be alleged to prove copyright infringement if all the factual statements are taken to be true. Section 501(a) of the Copyright Act of 1978, as amended, states that a copyright infringer is “[a]nyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 122.” Section 106 of the Copyright Act of 1978, as amended, lists two exclusive rights we’re interested in for the purposes of music sharing: (1) reproduction and (2) distribution.

So a prima facie case for copyright infringement is one where the defendant has copied or distributed a copyrighted work (song) without the permission of the copyright’s holder (the music company, et cetera). At first blush, the information Apple is likely to collect (according to the articles above) will include the information necessary to make this claim. Except it doesn’t.

Let’s assume I use Amazon’s MP3 music service. I purchase and download a song. I then receive a license through Amazon’s terms of use that allows me to use the MP3 (i.e., play it in iTunes or on my phone) for my personal, non-commercial use.

The idea of the tech arguments in the above articles is that the unique identifier Amazon has in the meta data of the MP3 can identify my MP3. And it could. And it might show where other accounts have that MP3 on Apple’s service. Ah ha, some might say, evidence of infringement! And they’d be right.

Except it’s not enough evidence to identify who is the infringer, and which file or files are the infringing files. Perhaps I have two iTunes accounts (which I actually do, for various reasons, and so do others). Perhaps it was uploaded twice or more as a result of that. Perhaps a family member copied it without my permission and against my knowledge. Perhaps I violated copyright law and copied it and distributed it to anyone I know.

The point is we don’t know which scenarios above apply based on the limited evidence Apple’s data presents. All we would know is that there are duplicates of a file where there should only be a few (or one). In this situation all the infringing copies are scooped together in the data with all the non-infringing copies.

Compare this with the data you’ve read about in the file sharing cases that have been ongoing. Each of those cases identified an individual who was sharing the data. The evidence culled from file sharing services had that person sharing music that was copyrighted. This creates a prima facie case for distribution of a copyright work without permission.

In the Apple iTunes match situation, there is no distribution without permission. Apple’s received the permission from recording companies for you to distribute and copy MP3s to its service. (In fact, in a situation where music is identified and its in the iTunes catalog, you’ll be using Apple’s copy.)

It’s not like the file sharing cases that have caught headlines—no one is caught red handed (and no one can be caught red handed). At most there is evidence that a file might have been shared illegally, but no evidence exist to point to who violated the law.

What about my ripped CDs I upload to Apple?

Ripped CDs are even less problematic. Unlike MP3s downloaded from Amazon or elsewhere, ripped CDs only contain metadata included during the copying process. There are no unique identifiers as their might be in an MP3 you download from Amazon (or Apple). So even the idea that a unique identifier can be used to identify illegally copied music is moot.

Ripped CDs might provide evidence of copyright infringement, but only on a statistical level. For example, if only 100 CDs of an album have been bought, but Apple’s users collectively have 1,000 of them in the iCloud service, it’s clear unauthorized copying has occurred somewhere. But, once again, and as in the above situations, no evidence exists to show who was the illegal copier.

Lawyers and legal scholars worrying about this should calm down and reexamine copyright law

I’ve come across a number of discussions of this conspiracy theory—that Apple is (or might because of legal pressure) sell out its iCloud and iTunes Match users to copyright holders—and I am unimpressed with the lack of analysis. Ars Technica’s article reaches the right conclusion, even if it hedges more than this post.

The legal scholars Ars Technica’s writer Chris Foresman interviews for the article are on point. Julie Samuels, a staff attorney for the EFF, points out in Foresman’s article that the grounds for getting a subpoena for Apple’s data is will be difficult to show. Evan Brown, a Chicago-based attorney, points out in Foresman’s article that the practicality of getting Apple’s data is limited because what is in that data isn’t publicly available.

The reason, dear readers, is that Apple’s data in-and-of-itself is insufficient to sustain a claim for copyright infringement. More information than Apple can and will collect is necessary, and that’s why Apple’s new iTunes Match service cannot and will not be used to chase down ‘music pirates’ (or more accurately, copyright infringers).

NOTE: This is a simplified analysis of complex issues. I welcome any comments or debate. A more detailed analysis of the legalities of Bitcoin is in the works.

Where the term ‘security’ comes from

A security implies an investment method or instrument that is secured against something else. A classic example is a share of stock. Stock is secured against the equity interests of a company. Therefore, by owning a share of stock you own an interest in a company.

Similarly, bonds, notes, and other evidences of indebtedness are securities because the ‘thing’ securing it is the debt instrument itself. This instrument creates an obligation for one entity to pay another entity. For this same reason, currency can be considered a security because a U.S. dollar bill represents a promise of value made by the U.S. government. (It used to be backed by our gold reserves, but this ended during the Nixon administration.)

But if currency can be a security, then Bitcoin is a security because it’s a type of currency, right?

Wrong. Bitcoin is not really a type of currency, at least not of the type recognized as securities. No entity or assets back up Bitcoin value. Bitcoin value is entirely virtual—a Bitcoin is only worth what another person thinks its worth. This is different than currency issued by countries.

A country’s currency is backed by that country’s government. This backing can either be by fiat (government regulation or law) or by commodity (such as the gold standard the U.S. used to use). Some compare Bitcoin’s value to the value of fiat money, because like fiat money it is not backed by a commodity, but this is where the similarities between Bitcoin and fiat money end.

Bitcoin is backed by no entity, no commodity, no organization. Bitcoin value is not based on government regulation or law mandating its use in a country. Similarly, it is not backed by a whole bunch of gold sitting in Fort Knox.

That seems simple, so why is everyone confused?

Because it’s not that simple. I alluded to the complexity of securities law at the beginning of this post. This section will delve into it more in-depth. If you’re not interested in nitty-gritty details, I suggest scrolling down to the conclusions below.

So, what is a security under federal law?

Federal securities law is written to provide the courts and Securities Exchange Commission flexibility to handle a great variety of investment schemes. Think of all the financial alchemy you’ve heard about when it came to the recent housing market crash and the collapse of Lehman Brothers and Bear Stearns. Those collateralized debt obligations, or CDOs, you keep hearing about are securities.

The SEC is concerned with more than financial instruments, however. The SEC seeks to regulate all types of investment schemes.  A leading case on one type of security, investment contracts, illustrates federal law’s flexibility.

The SEC v. W.J. Howey Co. involved the sale of units of a Florida citrus grove coupled with a service contract for farming those units. The U.S. Supreme Court ruled that this arrangement amounted to an investment contract. Investment contracts are included in the definition of securities in both the Securities Act of 1933 and the Securities Exchange Act of 1934 and are therefore subject to SEC regulations. The Court defined an investment contract as:

a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise.

Some who argue that Bitcoins might be classified as securities point to the broad definition of investment contracts. But, before we delve into a detailed analysis of investment contracts, there is another broad category of securities listed in the securities laws of 1933 and 1934: “in general, any interest or instrument commonly known as a ‘security’.”

The U.S. District Court of Oregon concluded that pyramid schemes can fall under this general category in the 1972 case SEC v. Glenn W. Turner Enterprises, Inc. The defendants in Glenn Turner were selling tapes and lessons on selling . . . something. These contracts were called “Adventures.” The more you paid the more expensive ‘adventures’ you could in turn sell to others. Yet, like a classic pyramid scheme, latecomers would find the market for selling these ‘adventures’ was saturated.

The court in Glenn Turner borrowed a California test for determining whether something classified as a security—the risk capital test. The test looks at whether the investor subjects his money to the risk of an enterprise over which he exercises no managerial control. The idea behind the test is that investments of this type are the basic economic reality of a security transaction.

The test looks at whether the subjection of the investor’s money to the risk of an enterprise over which he exercises no managerial control is the basic economic reality of a security transaction.

So for those keeping score, a number of things can be classified as securities. There are the specifically enumerated types of securities, such as notes and company shares, listed in the 1933 and 1934 securities laws. Those two laws also contain two general, broad categories of securities:

1. Investment Contracts, and
2. Anything commonly known as a security.

Both of these general categories share common characteristics:

1. Investors investing money;
2. An expectation of profits from the investment;
3. Substantial third-party control of the enterprise.

An investment scheme possessing some or all of these traits might be deemed a security under U.S. law and, thereby, be subject to federal laws (and state laws) regulating securities.

Bitcoin is not an investment contract

Investment contracts are

contract[s], transaction[s] or scheme[s] whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party, it being immaterial whether the shares in the enterprise are evidenced by formal certificates or by nominal interests in the physical assets employed in the enterprise.

Bitcoins do not require direct investments of money. It only requires investment of computing power. Further, while it might be said the Bitcoin community is a common enterprise, that enterprise is distributed and not run by a single individual or entity. Profits from Bitcoin cannot be expected from the efforts of a “promoter,” for there is no Bitcoin central entity, nor from third parties.

The Oregon District Court in Glenn Turner makes the point that investment contracts should be flexible in their definition, and the Howey court never intended to create a strict definition for investment contracts. Nevertheless, none of the four characteristics of an investment contract—(1) investment in (2) a common enterprise with (3) the expectation of profits from (4) the efforts of another—really fit Bitcoin’s model. As far as Bitcoins themselves are concerned, they do not meet the definition of investment contracts.

Bitcoin does not possess the general characteristics of a security

A Bitcoin does not exist based off of a monetary investment. It exists based off of a computer processing investment. Further, Bitcoins are not reliant on the managerial control of others. In fact, the Bitcoin network is distributed in a way that prevents one party from exercising managerial control.

Bitcoins fail to meet the basic economic reality of a security transaction under the risk capital test created by California courts and relied on by a number of states and federal courts. A Bitcoin itself should not be considered a security under the general definition of securities in federal security law for this reason.

So Bitcoin isn’t a currency, and it isn’t a security, then what is it?

This is the million-dollar question. Bitcoins are not currency and are not securities. Yet, they have the ability to represent value. In some ways they are pure representations of value—their value is not based on relations to outside elements, such as commodities or government regulations, but their value is rather based on what one person is willing to give another for the Bitcoin transfer.

Bitcoin shares some elements of fiat money in the sense it is not tied to tangible goods, yet it doesn’t share fiat money’s government backing. Bitcoins themselves are simply cryptographic strings that represent transactions; except for the willingness of some people to exchange Bitcoins for real-world money, Bitcoin valuation is incredibly difficult.

So Bitcoin ‘investors’ don’t need to worry about securities regulations or laws?

Bitcoin investors should absolutely worry about securities laws. The securities definitions outlined above might not apply to Bitcoins themselves, but they are flexible enough to apply to Bitcoin exchanges that convert a Bitcoin to real-world currencies. Securities law might even apply to exchanges converting Bitcoin to other virtual currencies such as Lindens.

Is their a common economic scheme where a profit is expected based on the efforts of a third party? Then the transactions occurring on an exchange might constitute an investment contract. Is the Bitcoin investor subjecting his money to an enterprise over which a third party has primary control? Then the Bitcoin transaction itself might be a security under federal security law. Securities law is broad enough to potentially capture any enterprise where investment for profit is involved.

This is why security law is so complex—many types of transactions might fall under securities regulation, even if the objects or subjects of the regulation do not. Therefore, the land purchase and servicing deals in the Howey case, while not securities in their own right, become part of an overall security by being an investment contract. Similarly, the investment rules and requirements of a Bitcoin exchange might convert those Bitcoin transactions into a security, even though Bitcoins themselves are not securities.

Dr. Richard Bartle wrote about this intrusion of the real world into the virtual in his article Virtual Wordliness: What the imaginary Asks of the Real. This is the same Richard Bartle who, along with Ro Trubshaw, created Multi-User Dungeon, or MUD, perhaps the first virtual world.

Bartle makes the point in Virtual Worldliness that virtual worlds have three fundamental characteristics: the game conceit, the freedom to evolve, and support for the hero’s journey. Each of these characteristics make virtual worlds different from discrete, close-ended games. You can finish a game of Monopoly or Super Mario World, but you can never really finish a virtual world. Virtual worlds are open-ended—the freedom to evolve, the support for player-created heroic journeys, and the imagination of the game conceit work together to ensure this.

Government regulation, either directly or indirectly by forcing common law theory into a virtual world setting, will destroy the ability of virtual worlds to create these fundamental characteristics. The game conceit—the imaginative construct upon which the world is based—will, as Dr. Bartle says, “evaporates upon contact with . . . reality.” The world will no longer be free to evolve—its evolution will be constrained by the laws injected into its sphere. The world’s support for the hero’s journey will be conditional upon the rules and regulations of laws from the outside—laws from the real world.

Why do people want laws to intrude into virtual worlds?

Virtual worlds have become big money. World of Warcraft has millions of players. Chinese workers earn salaries by playing the game, earning in-game ‘gold pieces,’ and then selling it to other players for real-world money. Some companies have willingly commodified their virtual worlds, allowing users to spend real-world money for virtual world objects. There is real money in these virtual worlds.

Yet virtual worlds are autocratic entities. Their creators and administrators are known as ‘super users’ or ‘gods’ because of the power they possess. Regular users, on the other hand, have few powers to regulate the behavior of other players in the game.

At the same time, regular players must agree to terms of use (ToU) or end user license agreements (EULAs) that outline general behavior expectations. Harassing other players is prohibited. Using in-game exploits is prohibited. These worlds have a basic framework regulating user behavior, but it’s enforced by the super-users, by the gods of the machine.

If one user harasses another user, the victim can only report it to these super-users. If one user uses an exploit to take stuff from another user, then the victim can only report it to these super-users. The victim’s recourse is through the creators of the virtual world.

Sometimes virtual world creators have a responsive system in place for these victims. Sometimes super-users respond quickly, execute accurate and swift justice, and restore the victim to their previous state. Sometimes victims get no response and are left with two options: keep playing, or give up.

People who want real-world laws to apply to virtual world situations think this is unfair. If a player uses an exploit to take another player’s virtual objects, why shouldn’t that person be able to sue them in a real court? What if the player continually harasses them in game, making game-playing a miserable experience? Lawsuits based on the harasser’s failure to abide by the ToU or EULA contract terms should be allowed, people argue.

After all, these people spend lots of time playing these games. They spend time and effort acquiring virtual ‘stuff.’ Virtual world users shouldn’t be allowed to interfere with another’s ‘stuff’ without consequence. These folks should have rights!

Which is why many of them argue Locke’s labor theory of property acquisition applies to the virtual objects folks acquire when they play in virtual worlds.

Property rights? Why Locke’s labor theory doesn’t apply to virtual world scenarios

I’ve written on this before. Folks who argue Locke’s labor theory applies, and should apply, to virtual worlds are missing fundamental presumptions of the labor theory. Locke’s labor theory applies to initial acquisition of property in the wild—the so-called fountainhead of property. It does not apply to property right acquisition in objects already owned by others.

Locke’s famous example is the acorn. If he picks up the acorn from the ground he has mixed his labor (picking it up) with the acorn, thus making it his. What virtual labor theorists miss, however, is that virtual Locke isn’t picking an acorn out of the wild when doing so in a virtual world. Rather, virtual Locke is performing the equivalent of picking an acorn out of a basket at a market, where the basket’s owner already mixed his labor with the acorns in the wild.

The acorn basket’s owner has a property right in the basket of acorns under Locke’s labor theory. Locke doesn’t acquire a property right by picking up an acorn from this basket; he only obtains a property right if he buys it.

Similarly, a virtual acorn has already been plucked from the wild when the virtual world creator designed the code allowing it to be implemented. Therefore, the virtual world creator owns the virtual acorn, having plucked it from the wild through his labor, whereas the user is in the position of Locke at the acorn market. The virtual world creator might choose to transfer the acorn’s ownership to the user, as might the acorn marketer, but property rights cannot transfer absent this choice.

In short, Locke’s labor theory does not apply to virtual world scenarios.

Shouldn’t virtual world users be protected from exploits and harassment?

Yes they should, and they are. People love property so much that they often miss the legal theories and policy theories that already protect users from the bad acts of their fellow men.

I’ve written about how privacy laws might be best suited to protect against situations where a user’s accounts have been hacked. The common law of privacy can apply to virtual world scenarios where property law cannot. Similarly, computer intrusion criminal laws can apply to hacked accounts where theft laws cannot.

On top of this, virtual world super-users often have the ability to restore accounts and equipment. This is the beauty of the digital—easy and instant creation or copying of items. A World of Warcraft player who lost everything—account, weapons, equipment, special tools, and more—might be capable of getting it all back within a day or two. The loss suffered, in light of the ability to restore lost ‘stuff,’ becomes minimal.

Finally, virtual worlds where exploits are common and users are allowed to harass each other mercifully have a built-in economic protection. In the real world folks sometimes can’t escape someone who’s harassing them. Users of virtual worlds can—they just have to log off. Quit. Stop paying.

Some might say this type of harassment can spill over into the real world, and they’d be right. However, the harassment then becomes real-world harassment and laws protecting against such behavior will come into play.