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NewslettersLegal UpdateClient Newsletter of Carr, Morris & Graeff, P.C. December 2003 - January 2004
View as PDF In This Issue:Trademark
Internet Advertising Practice Triggers Trademark DisputesAn advertising technique that is being used with increasing frequency by internet search engines has started an international dispute over trademark rights. The controversial practice—so-called “key word” advertising—involves the search engine’s display of banner advertisements for products and services related to the search term(s) in the user’s query. For example, a user may enter a trademarked brand like Jim Beam® Bourbon as a search query. The search engine then renders a web page containing search results that contain banner advertisement for competing alcoholic products. A recent case criticized this practice and penalized a subsidiary of the popular Google search engine for utilizing it. As a result, this potentially lucrative method of search criteria directed internet advertising has been cast in doubt. In October, 2003 a French court issued a ruling holding Google France liable for infringement of the intellectual property rights of two travel agencies. The court ordered Google’s subsidiary, Google France, to pay over $80,000 in damages to two travel companies after ndingfinding that when users entered the travel agencies’ trademarks, “bourse des vols” and “bourse des voyages,” as search terms in the Google France search engine, advertisements for competing travel agency sites were displayed. The court found that the practice infringed the travel agencies’ trademarks and that Google France was duty-bound to develop methods to block advertisements by third parties who do not have rights in the trademarks at issue. Similar suits by other trademark holders are pending against Google France. In addition to Google, many other search engines sell rights to advertise to specific keywords as a means of generating revenue. Google’s AdWords Program that was the subject of the France litigation allows advertisers to target their advertisements to users of Google’s search engine that enter particular keywords to search for information. If the search term a user enters into Google’s search engine matches a keyword selected by the advertiser, that advertiser’s ad and a link to the advertiser’s web page are displayed on the screen. Although Google has a policy of disabling keywords used in an ad campaign if a trademark owner brings such misuse of a trademark to Google’s attention, the French court stated that the burden of avoiding trademark infringement is on Google and not the trademark owner. In the U.S., only one court appears to have confronted the trademark implications of “key word” advertising sales. In Playboy Enterprises, Inc. v. Netscape Communications & Excite, Inc., the defendant search engines sold a package of keywords that included the words “playboy” and “playmate” to an advertiser. When users entered those keywords into defendants’ search engines, the resulting page included banner advertisements for adult entertainment websites not sponsored or affiliated with Playboy. Playboy contended that defendants’ use of the words “playboy” and “playmate” to sell advertising to competitors infringed Playboy’s trademarks. The Federal Court in California held that there was no trademark infringement because the defendants were not using the plaintiff’s trademarks. The Court reasoned that since “playboy” and “playmate” are common English words, there was no means of determining whether users entering these words were using them in the sense in which they were trademarked or were using them in their ordinary dictionary sense. The Court further held that there was little likelihood of confusion because there was no evidence presented that users typing in the words “playboy” or “playmate” were seeking information about Playboy’s goods and services. Playboy has appealed the Court’s decision. Although the trademark owner in Playboy was unsuccessful due to the commonality of the trademarked material claimed, this theory of trademark of infringement that was successful against Google in France is likely to have repercussions in the United States. As “key word” advertising grows in popularity with search engines and advertisers, additional suits by trademark owners are a virtual certainty. Timothy FeelyLitigation
D.C. Court Of Appeals Wrestles With Inadequate DamagesA system of civil justice which relegates questions of liability and damages valuation to amateur juries is certain to generate puzzling situations of verdicts which simply do not match the proof presented. For instance, in the recent D.C. Court of Appeals case Worjloh v. Stephens, D.C.App.No. 00-CV-975 (November 20, 2003), the court faced the irreconcilable jury conclusions that (1) Plaintiff’s injuries were proximately caused by Defendant’s negligence, but (2) Plaintiff’s uncontested loss justifi ed no award of damages. Ultimately, the court concluded that the outcome was unjust and ordered a new trial on damages. Stephen Worjloh and his wife sued for personal injuries arising from a rearender automobile accident. Defendant did not dispute negligence, so the only issue presented in the brief trial was damages. In other words the questions presented were whether and to what extent Mr. and Mrs. Worjloh were injured. Mrs. Worjloh had presented to a hospital by ambulance after the accident. Mr. Worjloh testifi ed at trial that he suffered back and neck pain as a result of the accident. Mr. Worjloh explained that his pain did not require E.R. treatment and that childcare needswere also a factor in his choosing not to seek immediate treatment. Mr. Worjloh said he experienced discomfort later that evening at home but that he did not seek treatment until referred to a chiropractor by counsel he retained the next day. Mr. Worjloh was treated by the chiropractor for about a month, when he terminated treatment for fi nancial reasons. After closing argument, an agreed upon verdict form was submitted to the jury. The jury was asked specifically whether Mr. Worjloh “sustained personal injuries which were directly and proximately caused him by the negligence of defendant.” The jury responded affirmatively to that question but then awarded him no damages. The jury had found that Mrs. Worjloh sustained injuries and awarded her $297.30 in damages, precisely the amount of her emergency room treatment. The Worjlohs’ counsel moved for a new trial on the issue of damages. The trial court denied the motion, explaining that the verdict did not result “from prejudice, passion, partiality, oversight or mistake.” The trial court observed that Mr. Worjloh did not seek medical attention immediately, that he missed no time from work, and that photographs of the vehicles involved demonstrated that the accident did not involve great speed or force. The trial court also noted the possibility that the jury took into account the temporal relationship between Mr. Worjloh’s visit to an attorney and his seeking treatment. Finally, the court noted the complicating factor of two subsequent accidents. Mr. Worjloh argued on appeal that the trial court was in error denying his motion for a new trial. The Court of Appeals reviews a motion for new trial based on inadequate jury award of damages for “an abuse of discretion.” The court will reverse a trial court’s denial of such motion “only when the amount of the award evidences prejudice, passion or partiality on the part of the jury or when the verdict appears to be an oversight (or) mistake, or (rest upon) consideration of an improper element.” Citing Anthony v. Allstate Insurance Company, 790A.2d 535,537 (D.C. 2002), quoting Romer v. D.C., 449 A.2d 1097,1099 ( D.C. 1982). The Anthony decision, the court noted, is strikingly similar and compels reversal of the trial court’s ruling. The issue in Anthony, like here, is the irreconcilable conclusion that Defendant’s negligence caused personal injury but that the treatment for the injury is not compensable. In Anthony medical bills totaling $2,485 were admitted without objection and with uncontroverted testimony linking the injury and treatment. The Court of Appeals determined that the same result should be compelled in the Worjloh situation. It is illogical and inappropriate for the jury to have found the injuries caused by the negligence but then to reject the unchallenged expense for treatment. An interesting aside to this decision is the time value of this effort. The Worjlohs’ accident was in June of 1995. Here, eight years later, the Court of Appeals is returning the matter to the trial court for further action. Mrs. Worjloh will presumably collect her $297.30, while Mr. Worjloh gets a new damages trial. A new jury is as likely as the last to view Mr. Worjloh’s injury claims as dubious. Moreover, he certainly is not likely to be showing the effects of his injury now. Although Mr. Worjloh is entitled to his day in court, perhaps he should consider whether his day could be better spent elsewhere. Lawrence CarrTraffic
Enforcing Traffic Laws By Surveillance Technology A Touchy IssueAutomated photo enforcement programs are a popular solution adopted by states to enforce traffic laws by photographing the license plates, and in most cases the driver, of vehicles whose drivers exceed posted speed limit or run red lights. The license plate number is used to determine the name of the registered owner. The vehicle owner is then fined and sent a citation in the mail. The issuing authority assumes the vehicle owner was driving the vehicle at the time of the traffic violation. These programs have been incredibly successful in generating revenue for states. Despite protests from drivers, courts have repeatedly found that traffic enforcement systems are legal. Some of the most frequent complaints regarding these types of programs are that they invade an individual’s right to privacy, subject the driver to an unreasonable search in violation of the Fourth Amendment and impermissibly shift the burden of proof to the owner of the vehicle to prove that he was not driving at the time of the violation. Arguments that photo enforcement of traffic laws invades one’s privacy are rarely successful. The Supreme Court recognizes that individuals have a reasonable expectation of privacy regarding fundamental rights such as marriage, education and procreation. Operation of a vehicle on public roads, though, does not fall within that category of rights protected by the zone of privacy. In fact, given the limited privacy expectations, vehicle use is subject to a great deal of state and federal regulation. Courts repeatedly have concluded that a driver who engages in deadly driving by running red lights or speeding has no claim to privacy. Recently, the District of Columbia Superior Court held that “[a]lthough cameras operated by the Government are a concern regarding privacy issues, those concerns are outweighed by the legitimate concerns for safety on our public streets.” Agomo v. Williams, D.C.Super.Ct. Civ. No. 02-0006520 (June 12, 2003). Arguments that photo enforcement programs violate the Fourth Amendment are also unpersuasive. Under the Fourth Amendment a person has a constitutional right to freedom from unreasonable search and seizure in circumstances where the person has a reasonable expectation of privacy. This constitutional right is protected through the requirement that a police officer have probable cause and a warrant in order to engage in certain types of searches. As discussed above, an individual does not have a reasonable expectation of privacy regarding operation of vehicle. Further, by using public roads a driver knowingly exposes himself and his activities to the public and therefore forfeits his right to claim his privacy was violated. The camera is only able to photograph the driver and the vehicle because the driver intentionally placed himself on public roads. Finally, it is often argued that photo enforcement programs controvert the law by placing the burden of proof on the driver rather than the state. There is a presumption that the owner of the automobile was driving at the time of the alleged infraction. Therefore, the burden is on the owner who erroneously receives a citation to provide proof that he was not driving the vehicle at the time the photograph was taken. In essence, the defendant is obligated to prove his innocence. The District of Columbia Superior Court recently addressed this issue and held that it is a permissible presumption that the owner of a vehicle was in fact the driver. It is not irrational or arbitrary to conclude that the automobile owner was the driver and the court noted that motor vehicle owners are routinely held liable for infractions involving their automobiles. Agomo v. Williams. Dana TheriotCopyright
Ownership – Work For HireMany businesses hire artists to design or create art or other works for use by the business on or in its products, advertisements and business related items. The question then arises – who owns the commissioned artwork? According to U.S. Copyright law, the artist owns the copyright to his work as soon as it is expressed in fixed form, regardless of who pays for it. The artist does not need to formally register his work with the copyright office in order to receive copyright protection. The only way an independent artist (i.e., one who is not an employed by the contracting business) forfeits his ownership rights is in writing prior to the artwork being released to the business or third party. Therefore, if a business expects to own the commissioned artwork, it must memorialize this understanding in writing prior to engaging the artist. One notable exception to this rule, however, is the “work for hire” situation. “Work for hire” is a contractual situation whereby an artist gives up all or most of his rights of ownership in the artwork to the contracting party. A work for hire can occur in two ways: (1) by virtue of an employment relationship, and (2) by agreement. If the artist is an employee, his artwork belongs to the employer provided it was prepared for the employer within the scope of employment. However, the Copyright Act does not defi ne “employee.” Generally, an employed artist is one who physically worked at the employer’s place of business, used supplies provided by the employer and was paid a salary by the employer. The second way to create a work for hire is if both the artist and client sign an agreement and the work fits one of nine categories defined by the Copyright Act. The categories include: a contribution to a collective work, such as a story for a magazine; contribution to a motion picture; an instructional text; a test; and supplementary work, such as illustrations to supplement the work of another. Most freelancers or design firms are independent contractors; thus, if a contracting business wishes to create a work for hire and own the artwork created by these individuals, it must do so by express, written agreement. A business or other individual who has commissioned a work for hire is free to use that artwork for any other purpose. Further, the artist has no rights in the work and the only person who can prevent a third party from reproducing the artwork is the copyright owner. Dana TheriotEstate Planning
Estate Tax Exemption Increases . . . TemporarilyFor the year 2004, the estate and generation-skipping transfer taxes exemptions increase to $1.5 million. The gift tax exemption stays at $1.0 million. However, in the year 2011 the estate tax exemption is automatically reduced to its 2003 level of $1.0 million. Therefore, estate planning must proceed as if the exemption amount were $1.0 million since, barring a terminal illness, date of death is impossible to predict. In practice this means that a couple with a well-planned estate can pass up to $2 million to their beneficiaries free of estate taxes. It also means that couples with an unplanned estate of the same amount will, under certain circumstances, bequeath their beneficiaries an estate tax bill of $435,000. In our experience most couples hold their assets in joint tenancy. By the simple expedients of severing joint tenancies and creating bypass trusts, the estate tax can be completely eliminated for married couples with a combined net worth of between $1 million and $2 million. For couples with net worth in excess of $2 million, irrevocable life insurance trusts and/or a lifetime gifting program might be in order. The annual gift tax exclusion for donations of present interests to noncitizen spouses goes up to $114,000 in 2004, and the annual gift tax exclusion of present interests stays at $11,000. Unfortunately, the applicable exclusion amount for nonresident aliens has not been indexed for inflation and thus remains at $60,000. There are many creative techniques, however, whereby we can help nonresident aliens completely avoid U.S. estate taxes. If you have any questions on estate planning, please feel free to call Roy Morris or the author. Néstor CruzStaff NotesThe Schwartz clan proudly announced the New Year arrival of a three-pound bundle of joy. Charlie Chan’s his name. Pug. Smooshed face and funny eyes. Yes, Daddy, we’ll take care of him. At 3:00AM, rain or shine, Phil can be found in the yard imploring little Charlie to prove his insistence that now is the time. * * * Yes, we’re sorry for misspelling Aidan Theriot’s name in a recent announcement. But how were we to know that “Aidan” is rated as the most popular name for baby boys in 2003? We have it on good authority that A.T. set this trend, he didn’t follow it. * * * Like every other periodical in the Washington area, we celebrate the triumphant return of Joe Gibbs to the Redskins. Like many, though, we cannot ignore the enormity of the challenge. As Calvera (Eli Wallach) said in The Magnificent Seven, “You came back...a man like you...why?” The articles in this publication are designed to give general information on the matters covered. Space limitations prevent exhaustive treatment or analysis of any topic. The articles are not intended to substitute for advice on specific legal problems.
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