You know you’ve chuckled at a few of them–the ubiquitous internet meme. But, have you ever wondered whether all this sharing, changing and going “viral” is legal.
Protecting or commercializing your meme
If you create or are the subject of a meme, it can be difficult to commercialize it or protect it. There are generally two “rights” that can be associated with a meme—trademark and copyright.
Copyright: Copyright protects original works of authorship including literary, dramatic, musical, and artistic works, such as poetry, novels, movies, songs, computer software, and architecture. As the person who created a work, you have a copyright regardless of whether you file it with the U.S. Copyright Office. To sue over a copyright, you need to register it, but your lack of registration does not otherwise lessen the right to claim something you created as yours. If you take the picture, then generally you own the copyright. But, if you add a few new words to someone else’s picture, your addition does not likely transform ownership to you.
The point of internet memes, however, is that they be shared. If you are aggressive and enforce your copyright, the meme won’t become, well, a meme.
Trademarks: A trademark protects a word, phrase, symbol and/or design that distinguishes the source of the goods. These are brand marks that give a particular product or service a distinct identity or help consumers distinguish between various products or services. Could your meme be a source indicator for your goods or services?
It does not happen often, but it has happened before. Grumpycats.com turned its meme into a business by selling books, shirts, posters and even Christmas decorations. The trademark holder is the family who originally took the picture of the cat and posted it online. The original trademark registration listed the goods associated with the mark Grumpy Cat as “stuffed and plush toys, action figures, dolls and toy animals, all based on a real cat that is an internet meme.”
So what about the risk of using memes?
Most creators launch their memes for the love of the meme and want people to share and tweak. But, there have been claims in the past. Getty Images, which has a reputation for strictly enforcing their intellectual property, has enforced the use of one of its images in a meme.
The Socially Awkward Penguin was a short-lived meme that was shared and people would often change the text to include awkward sayings. The original image of the penguin came from a National Geographic photographer and Getty Images enforced their rights and demanded money from people who used the image in memes.
But what about fair use?
Fair use is the most obvious defense to a claim. The problem with fair use is that there is no bright line test and no lawyer can guarantee you that a court would find that your use of the meme was a fair use.
The fair use factors include:
(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.
Because most memes are meant to be parodies or include critical comments in a non-commercialized way, fair use will likely save the day. If you use it in a commercial way in advertising or try to sell items using someone else’s images for your meme, then you will likely find yourself in trouble.
For the most part, internet memes are harmless fun. If you are sharing with your friends and commenting on current events, you likely don’t have much to worry about. Share the Salt Bae image to celebrate your buddy’s epic bottle flip. On the other hand, if you are using a meme to sell products, you may want to think twice.
If you created the original image that has gone viral and you want to sell products or otherwise monetize it, you may want to take the right legal steps to protect yourself.
Back in late 2015, I wrote a five-part series on the Expanding Scope of the TCPA or Texas’ Anti-SLAPP law. The Supreme Court of Texas confirmed our analysis last week with its decision in the ExxonMobil v. Coleman confirming that Anti-SLAPP protections can and do apply to internal corporate communications when there is a defamation claim.
The Texas Anti-SLAPP law is known as the Texas Citizens Participation Act (the “TCPA” found at Tex. Civ. Prac. & Rem. Code at § 27.001, et seq.).
“If a legal action is based on, relates to, or is in response to a party’s exercise of the right of free speech, right to petition, or right of association, that party may file a motion to dismiss the legal action.” Id. at 27.003(a). A defendant invoking the TCPA must therefore show three elements by a preponderance of the evidence: (1) there is a legal action; (2) “based on, relates to, or is in response to”; and (3) one of the protected activities.
“[A] court shall dismiss a legal action against the moving party if the moving party shows by a preponderance of the evidence that the legal action is based on, relates to, or is in response to the party’s exercise of: (1) the right of free speech; (2) the right to petition; or (3) the right of association.” Id. at 27.005(b).
The Dallas Court of Appeals ruled no “public concern” in internal communications
In 2015, the Dallas Court of Appeals held that the law did not apply to internal communications within a company about an employee’s performance because that was not a matter of “public concern” despite the claim by the employer (ExxonMobil) that the issues touched on matters of public safety. See ExxonMobil v. Coleman, 2015 WL2206466 (Tex.App.—Dallas May 12, 2015).
ExxonMobil claimed that the plaintiff failed to “gauge” one of the storage tanks and after an investigation ExxonMobil terminated him. The plaintiff denied all wrongdoing and sued ExxonMobil and the employees who participated in the investigation for publishing defamatory statements about him during the internal investigation bringing the TCPA into a typical employment dispute.
Both the trial court and the court of appeals held the TCPA did not apply and refused to dismiss the suit. Despite the defendants’ efforts to claim it was a matter of public safety, the court found the investigation focused on job performance and not the results that could happen if the storage tanks were not properly maintained. Therefore, the statements “involve nothing more than an internal personnel matter at Exxon” and therefore “were not a matter of public concern.”
The Texas Supreme Court says matters of public concern are matters of public concern
Relying upon its earlier decision of Lippincott v. Wisenhunt, 462 S.W.3d 507, 509 (Tex. 2015) (per curiam), the Supreme Court of Texas ruled there is no requirement that the communications themselves have to be public. Instead, the statute only requires that the communication be made in connection with a matter of public concern. The court wrote:
The allegations include claims that Whisenhunt “failed to provide adequate coverage for pediatric cases,” administered a “different narcotic than was ordered prior to pre-op or patient consent being completed,” falsified a scrub tech record on multiple occasions, and violated the company’s sterile protocol policy. We have previously acknowledged that the provision of medical services by a health care professional constitutes a matter of public concern. See Neely v. Wilson, 418 S.W.3d 52, 70 n.12 & 26 (Tex. 2013) (determining that the public had a right to know about a doctor’s alleged inability to practice medicine due to a mental or physical condition); see also TEX. CIV. PRAC. & REM. CODE § 27.001(7) (defining “matter of public concern” to include issues related to health or safety, community well-being, and the provision of services in the marketplace, among other things). Thus, we conclude these communications were made in connection with a matter of public concern.
In ExxonMobil v. Coleman, the Supreme Court of Texas criticized the Dallas Court for suggesting that the communications at issue had to involve more than a “tangential relationship” to matters of public concern. Not finding that required by the statute which expressly states that the communications have to be made “in connection with” or about “an issue related to” safety, the court held the TCPA applied. As a result, the case was sent back to see whether the plaintiff Coleman met his burden of establishing clear and specific evidence for each essential element of his claim.
Plead defamation with care
If you add a defamation claim to your case, do so with caution. Regardless of who sees the alleged defamatory statement, if the defendant can make an argument that the alleged statement was made “in connection with” or about “an issue related to” a public concern, you will likely face a Motion to Dismiss. It automatically stays discovery, gives the defendant an automatic right to appeal and if a defendant prevails on a motion to dismiss, Texas courts are required to award the defendant “(1) court costs, reasonable attorney’s fees, and other expenses incurred in defending against the legal action as justice and equity may require; and (2) sanctions against the party who brought the legal action as the court determines sufficient to deter the party who brought the legal action from bringing similar actions described in this chapter.” Id. at 27.009(a).
What do I need to do to protect my mark after it is registered?
Unlike copyrights and patents, trademarks can last forever if you take the right steps. Once properly registered, you will have to file your first Declaration of Continued Use between the 5th and 6th anniversary date of your filing. Your next renewal will fall between the ninth and tenth year. After that, you have to renew the mark every ten years.
At the five year mark, assuming you have continued to use the mark, you will want to file a “Declaration of Incontestability” giving you the greatest protection under trademark law. This will prevent others from contesting your trademark on grounds often subject to attack such as: (1) the mark is not inherently distinctive; (2) it is confusingly similar to a mark someone else began using before you; or (3) the mark is simply functional as opposed to identifying the source of the goods or services.
What do I do if someone is infringing?
Often a trademark owner will send out a cease and desist letter demanding that the infringing party stop using the mark. Many times, the infringement is not done on purpose and the infringing party will stop when notified that their conduct is in clear violation of another’s rights.
Sometimes, the infringing party will ignore the demand or take the position that they are not infringing. At that point, you may have to consider a trademark infringement lawsuit. To prevail, you would have to prove:
- You are the owner of a valid mark – which is presumed if you have a federal trademark registration; and
- The other side is using the mark without authority in connection with the sale of goods or services in a manner that is likely to cause confusion to reasonable consumers.
If you can prove those elements, you may be entitled to an injunction, or court order that requires the defendant to stop using the mark, an order requiring the destruction or forfeiture of infringing articles; your damages or the infringer’s profits, and, sometimes, recovery of your attorneys’ fees.
What Happens After My Application is Filed?
After your application is filed, you should receive an email from the USPTO confirming the submission. In a few business days, the USPTO will confirm the application has the necessary information to be considered. On average, it is then taking about two to three months for an application to be assigned to an attorney within the USPTO. If there are no issues, the USPTO will publish the mark to see if anyone in the public challenges the mark. If no one timely challenges the mark after it is published, then your mark will be registered approximately three months later.
If the USPTO has an issues with your application, it may issue a letter to you which is referred to as an “Office Action.” At that point, you can respond to the USPTO or abandon your efforts. You may want to consult with qualified counsel about the appropriate response. Usually, there is a deadline to respond, so taking the Office Action seriously is important. If the USPTO continues to challenge your application, you can eventually file an appeal with the Trademark Trial and Appeal Board which is commonly referred to as the TTAB. You may also end up before the TTAB if a third party challenges your mark. If you find yourself involved in a TTAB proceeding, you may want to hire an attorney. You can represent yourself, but the TTAB is just like a trial and there are procedural rules you will be expected to follow that may trip you up.
What are some common issues raised by the USPTO about trademark registrations?
The USPTO may raise an issue through the issuance of Office Action for a number of reasons including: (1) your mark is generic or descriptive; (2) your mark is too similar to someone else’s; (3) you need to disclaim part of your mark; or (4) you need to move from the principal to the supplemental register. As explained above, you may want to consult with an attorney about any one of these issues. You are free to challenge the USPTO’s initial decision on these issues. We will briefly describe the latter two issues: disclaimer and the supplemental register.
Many times your mark may be a group of words together with one or more of them describing the product (e.g., tires) or be merely descriptive (e.g., great). While it may be appropriate to register the mark, as a whole, the USPTO may raise questions if you try to claim some of the individual product or descriptive terms. Thus, you may want to disclaim those words without giving up on registering your mark as a whole. For example if you try to register “Great Turtle Tires,” the USPTO may ask you to disclaim the terms “great,” and “tires” so that you cannot claim exclusivity to those terms within your appropriate category.
The disclaimer does not remove the unregistrable part of your mark or affect its appearance. The disclaimer will be on the USPTO database and it lets the world know you are not making an exclusive claim to that particular part of your mark. If you choose not to disclaim part of your mark, it may be cause for rejection. Often times, you can simply consent to the proposed disclaimer, but you may want to consult with a trademark attorney before doing so.
The USPTO uses the following examples to illustrate when you would need to use a disclaimer:
- Merely Descriptive Words: Disclaiming “Creamy” from “Famous Mark Creamy Yogurt.”
- Generic Words: Disclaiming “Yogurt” from “Famous Mark Creamy Yogurt.”
- Geographic Terms: Disclaiming “Southwest” from “Famous Mark Southwest Guacamole”
- Business Type Designations: Disclaiming “Corporation”, or “Inc.”
- Informational Words: Disclaiming designations such as size of the product or the year of founding which is usually applicable to registering logos.
- Well-known Symbols: Disclaiming the “$” for a financial services company.
- Misspellings from “telescoped words”: Disclaiming “Super” and “Rinse” from “Superinse Cleaner.” Another example is disclaiming “quick” from Jay’s Quik Print.
- Compressed compound wording: Disclaim “Cool Pack.com” from the brand CoolPack.com because CoolPack is a compressed compound term and .com provides no indication of the source of the goods or services.
- Foreign wording: If the translation of the foreign word is a generic or descriptive term, the USPTO says you disclaim it. The example the USPTO uses is disclaiming “Rouge” from “Gala Rouge” for wine because Rouge just means “red” which is descriptive of red wine.
- Multiple words disclaimer: Some words just go together so the USPTO says they need to be disclaimed together instead of separately. The example they give is disclaiming “Pizza Parlor” from “Pete’s Pizza Parlor.”
The Supplemental Register
Another common issue raised by the USPTO is whether you should be on the Supplemental Register as opposed to the Principal Register. If your mark is descriptive, a surname or a geographic term, then you may have to try and register it on the Supplemental Register. Often times, the USPTO will deny your right to file on the Principal Register and suggest you file on the Supplemental Register.
Even if you are on the Supplemental Register? You can still:
* Use the ® symbol
* Put others on notice that you are already using the mark
* File a trademark infringement suit in federal court
* Prevent others from obtaining confusingly similar marks from the USPTO – even on the Principal Register.
Unfortunately, you are not the presumed owner of a valid mark if there is a lawsuit. You can’t use a Supplemental Register mark to prevent the importation of counterfeit goods. Finally, regardless of how long you have your mark registered on the Supplemental Register, it will never become incontestable like a mark on the Principal Register can. If your mark obtains secondary meaning, you can refile for acceptance on the Principal Register even if you first filed on the Supplemental Register.
Common Questions During the Application Process
Have you used your mark in commerce and what is the impact of that?
If you are already selling your product or service with the mark on it, you are “using” your mark in commerce. As a result, you will need to provide proof that you are already using it. You can still register your mark even if you have not started yet. You can file what is referred to as an intent to use application to hold your place in line. You will have to make another filing when you actually start using your mark or file extensions to hold your place in line.
What do I use for a specimen?
As mentioned above, if you are using your mark in commerce, you will have to provide proof which is referred to as a specimen. The specimen can’t just be your logo in a vacuum. It needs to be something that shows you are actually using it like scanned or digitally photographed tags, labels, instruction manuals, or containers that show the mark on the goods. The USPTO warns that invoices, announcements, order forms, bills of lading, leaflets, brochures, publicity releases and other printed advertising material generally are not acceptable specimens for goods. If you are selling services, acceptable specimen are signs, photographs, brochures, websites or advertisements that show the mark used in the sale or advertising of the services.
Are you selling goods or services?
For trademarks, you have to distinguish between whether you are selling goods or services. Goods involve the sales of actual physical products. Services, on the other hand, are activities you perform for others such as professional services. In many cases it will be easy to distinguish between goods and services. Sometimes, it won’t be as easy. For example, renting goods to others means you are providing a service.
The USPTO uses shirts as an example. If you sell shirts with your own logo, you sell goods. If you allow others to bring you shirts and you put their logo on there for them, then you provide a service. If you sell shirts to people, but put your customer’s designs on them, then you may provide a good and service and may need to file in two classes and pay two class fees. If you operate an online store where you sell other people’s shirts to customers, then you are likely involved in the retail service.
Software can be both a good and service. If you are selling actual software purchased by customers through a disk or download then you are selling a good. But, if you are selling SaaS from your website, then you are selling a service.
What category do I use for the goods and services associated with my mark?
As part of the application process, you will have to select a category for the goods and services from a pre-selected list. This is used by the USPTO to help determine whether you are selling similar goods and services as someone else who might be using a similar name. If you use your mark in multiple categories and want it protected for each category, you may have to make multiple $275 payments to the USPTO.
Your selection of a category is important because it identifies the types of goods or services where you may have the exclusive right to use your mark. At the same time, you also need to make sure you actually sell products and services in that category because if you don’t, your registration could be invalidated. Also, changing the category designation can be difficult and require an additional filing fee.
How do I describe my goods or services?
In addition to picking a category, you will have to provide some more details about your goods and services. This is anywhere from a one-word description (t-shirts), to a sentence-long description. Your description, or identification of goods and services, provides the public and the USPTO the necessary information they need to determine whether your mark may interfere with a similar mark. While you have some latitude, the USPTO disfavors using open-ended phrases such as “including,” etc.” and “such as.” You cannot simply repeat the same broader category name. By way of example, if you sell t-shirts, you would pick the category “Clothing” and then use the description “t-shirts.” If you sold a variety of clothing items, your description might be “t-shirts, collared shirts, pants, shorts and shoes.”
Do I trademark my name, my logo or both?
You can register just your name, your logo, or you can do both. The logo and the name constitute two separate trademark registrations and would require two separate payments to the USPTO of $275.
If you need to choose, then, generally speaking, companies start with trademarking their name. Protecting your name gives you the broadest protection because it prevents any use of it that causes confusion, even if someone tries to use your name within their logo. A mark for your logo protects the exact shape, orientation, stylization and sometimes color in that particular logo. The company name can, but does not have to be part of the logo. Registering the logo protects it and prevents others from using a logo that is confusingly similar.
You’ve picked your mark, now search to better assess its availability
Once you have picked your mark, you should do some searches to see if others might be using it before you invest the time and money trying to register it. A search will help avoid obvious duplications of pre-existing marks. If the USPTO rejects your application, the fees to the USPTO are not refundable. If your company is just beginning, it’s also better to make name changes now rather than invest years building a brand only to learn that you have to change the name and lose all of your goodwill.
Searches can range from a basic exact-match searches on the USPTO database to global and common law searches for the use of the mark by others although they may not have registered it as a trademark. While the more robust the search, the better assurances you will have, a “clean” search does not mean someone will not claim they were using the mark before you. Nevertheless, you should consider running a search before filing.
Now, it is time to apply
To apply, you will need some basic information. For a typical application, be prepared to provide at least the following:
- The full legal name and address of the owner of the mark.
- If you are using the mark, an example of how you are using it to actually sell goods or services.
- Information on how you are using it or plan to use it.
- The dates you first began using the mark.
In the most general sense, getting a trademark protects your brand. A trademark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of another. By registering your trademark, you will be entitled to a presumption of ownership of the brand on a national level and a presumed right to use the brand nationwide. It prevents someone from registering a confusingly similar mark after you and allows you to sue in federal court if someone infringes on the brand you have worked hard to build. Once registered, you can also present yourself as an established and serious business because you can start using the ® symbol after your name, logo or slogan.
Making your mark a good one
The United State Patent and Trademark Office will not approve every name for a trademark. Under trademark law, names can be described as “generic,” “descriptive,” “suggestive,” “arbitrary,” or “fanciful.” You are more likely to receive a registration and be protected as you move from left to right or from generic to fanciful.
Generic names are almost never given protection. For example, you could not trademark the name “The Screwdriver Company” if you made screwdrivers. Almost as problematic as generic names are merely descriptive names. “The Metal Screwdriver Company” is also not likely to pass muster because it merely describes your screwdriver as being made of metal.
Descriptive marks are only entitled to trademark protection if they have gained secondary meaning. That is a legal term of art that means the name has become so famous that despite the generic nature, the public associates the product with a specific company. Examples include International Business Machines or IBM. Obviously, if you are just starting out, you shouldn’t rely upon a secondary meaning to get your generic name through. While a descriptive mark may obtain secondary meaning, generic names cannot and therefore they should always be avoided.
Your chances of getting approved improve dramatically as you move toward a suggestive mark. These hint at the quality or another aspect of the company such as “Herculean Screwdriver Company.” It is better than “Strong Screwdriver,” but conveys the same meaning. These you can usually register, but you run the risk that the USPTO says what you thought was suggestive was actually descriptive. Some popular examples include Microsoft which makes software for microcomputers or Citibank for financial services. Brand owners often like these names because it gives the consumer a good idea of what the company does without having to educate them or spending a lot on advertising to get them used to the name for the particular product or service.
Next on the list are arbitrary marks. These are existing words used in a way unrelated to their normal everyday meanings. Hence, Chocolate Screwdrivers may work. The textbook example of the arbitrary mark is Apple Computers – not to be confused with Apple Records.
Finally, fanciful marks are the easiest to get approved. A fanciful mark is a made up word or a very rarely used word that has nothing to do with describing the products. “Glotz” for a screwdriver company may work. You are likely familiar with Yahoo!, Google, Exxon and Spotify which would all be considered fanciful marks.
In addition to being rejected because the name is generic or descriptive, your name may be rejected for a number of other reasons including:
- it is too similar to another name already registered.
- it is a surname.
- it is geographically descriptive of where you are doing business.
- it is disparaging
- it is a foreign term that translates to a generic or descriptive English term.
- it uses an individual’s name or likeness, or is the title of a single book or movie.
You may have heard about new overtime rules from the Department of Labor. It’s not all about bathroom laws. Michael Kelsheimer, author of the Employer Handbook, broke down the new rules in Federal Changes to Overtime Exemptions Alert.
In a gross over-simplification, employees that oversee others, i.e, manager, were exempt from overtime if they earned more than $23,660 year. Come December 1, that amount is increased to $47,476 per year.
So that means anyone earning less than that can no longer be exempt no matter how many employees they oversee and will be entitled to overtime pay if they work more than 40 hours per week.
Does your account lead that oversees a team make less than that? Do they work more than 40 hours per week? What about the lead developer? Or customer service team leader?
We know many of you use independent contractors as opposed to employees and these rules would not apply if the person is truly an independent contractor. But, classifying someone as an independent contractor is harder than you think. Luckily, Michael has written about that, too in Are you an Employee or an Independent Contractor?
My colleagues Michael Kelsheimer (author of the monthly Employer Handbook blog), intellectual property lawyer David Lisch and I put together a client alert on the new Federal Defend Trade Secrets Act of 2016 law. You can download the DTSA 2016 Client Alert or keep reading.
President Obama is expected to sign the Defend Trade Secrets Act of 2016 (DTSA), which was passed by Congress at the end of April 2016. This law could impact your property protection, litigation and employment law strategies.
Background on the Law
The DTSA allows parties to bring lawsuits in federal court when another party steals or misappropriates trade secrets. Before the DTSA, most litigants were forced to sue in state court under the Uniform Trade Secrets Act (UTSA), which was approved by 48 of the 50 states including Texas, unless there was another unrelated avenue to appear in federal court. The DTSA is similar to the existing state trade secret laws, but with a few important distinctions discussed below.
What is a trade secret?
Trade secrets touch almost every business in America because they are broadly defined and implicated almost every time you hire or terminate an employee. The DTSA, like the UTSA, defines a trade secret as:
All forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and regardless of whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if:
(a) the owner has taken reasonable measures to keep such information secret; and
(b) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by another person who can obtain economic value from the disclosure or use of the information.
What intellectual property protections do I need?
Trade secrets can protect more of your business assets than copyrights, trademarks or patents. The latter are limited in availability and the protections granted. A trade secret does not have to rise to the level of a patentable invention and you do not have to disclose it to the world in order to protect it, as you would a trademark, copyright or patent. Textbook examples of trade secrets are the allegedly secret formula to Coca-Cola and Kentucky Fried Chicken’s secret recipe.
Because trade secrets are secrets, they must be kept secret. Restricting employee disclosure of trade secrets is only helpful if the secret is not leaked or shown to prospective customers. The key is to implement company-wide measures to keep the secrets, secret. Counsel can help review what company assets or information may be trade secrets (as opposed to utilizing other intellectual property protections) and whether you have the right processes in place to prevent disclosure.
Ask yourself, how hard is it for an employee to walk out with your information? How damaging would that be?
How does the law impact my litigation strategy?
When signed into law, the DTSA will not preempt state law. If you believe your trade secrets have been misappropriated, you will have the option to sue in federal court under the new law or the existing UTSA under state law.
So, why use the DTSA instead of the UTSA? The DTSA allows a federal court to seize property and prohibit the dissemination of the trade secret “ex parte” (without advance notice to the former employee) in “extraordinary circumstances”.
Obtaining a seizure will not be easy. You must show that the more traditional preliminary injunction, currently available under the UTSA, will not provide adequate protections. To prevent abuses, you are not allowed to make copies of any seized property. Finally, all ex parte orders must include specific instructions regarding when the seizure can take place and whether force may be used to access locked areas.
This remedy is in addition to whatever damages you recover. Under the DTSA, you can recover actual damages, restitution, injunctive relief, exemplary relief (up to two times the award of actual damages) and attorney’s fees.
Courts will not, however, enter an injunction under the DTSA if doing so would keep the defendant, such as a former employee, from entering into a new employment relationship. The DTSA would allow for conditions to be put on that employment, but only if you can show threatened misappropriation and not just argue that misappropriation is likely because of information the defendant knows. The DTSA will not, in other words, support an “inevitable disclosure” claim.
The DTSA also bolsters possible criminal penalties for stealing trade secrets by increasing the penalties for a criminal violation from $5 million to the greater of $5 million or three times the value of the stolen trade secrets, including the costs of reproducing the trade secrets.
Using the DTSA may also clarify what law is applicable. While most states have adopted the UTSA, there are still minor variances. If you invoke the DTSA, you will know exactly what law applies regardless of where the parties are located within the United States.
As an employer, do I need to take action?
The DTSA offers some unique benefits for employers. If you have employees throughout the country, the DTSA will allow a uniform mechanism to protect your secrets. If you need to seize property from a former employee, the DTSA is probably your best option.
If these provisions are valuable, update your employment contracts to include the immunity notice required under the DTSA. This will allow you to recover punitive damages and attorney’s fees. Without the notice “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information,” these added benefits are unavailable.
Of course, the immunity language might give some employers pause, as it warns employees that they are protected in providing trade secret and other confidential information to the government for the purpose of reporting a company’s violation of the law. For employers in good standing, this should not be a problem.
The Bottom Line
The DTSA presents an interesting weapon to protect your trade secrets. If you take action in your employment agreements and protect your trade secrets now, you may be able to file lawsuits in federal court. There are a number of factors that go into deciding whether to pursue a claim in state or federal court, but, with the passage of the DTSA, companies seeking to protect trade secrets will have that option and additional remedies available to them.
If you watched the first round of the NFL Draft, the big story was the sliding of Ole Miss offensive tackle Laremy Tunsil out of the top five to number 13. As the draft was unfolding, someone released a video of him smoking marijuana through a gas mask. You can read the story here. You can watch this interview right after he was picked.
To make matters worse, after he was picked, someone released text messages between Tunsil and one of the assistant coaches at Ole Miss where it looks like Ole Miss was paying Tunsil’s rent or his mother’s electric bill. Read about it and see the texts here. Here is another interview where Tunsil admits the texts were his.
So, can Tunsil sue or is there a possible crime?
Yes and yes.
Assuming someone “hacked” his Twitter or Instagram account, even if Tunsil was somewhat lackadaisical about protecting it, and that this person did not have “authority” to access the account, then there is likely a violation of the Stored Communications Act.
The SCA makes it illegal for anyone to “intentionally access without authorization a facility through which an electronic communication service is provided or . . . intentionally exceeds an authorization to access that facility; and thereby obtains, alters, or prevents authorize access to a wire or electronic communication while it is in electronic storage in such system.” Accessing his Twitter or Instagram accounts without his permission would likely be a violation.
In addition to these statutes, there could be additional claims like RICO, breaches of contracts, fiduciary duty, wire fraud, trespassing, theft, extortion if there was money demanded in advance, and a number of other state law claims.
So, what are the criminal penalties?
Pursuant to 18 U.S.C. § 2701, “if the offense is committed for purposes of commercial advantage, malicious destruction or damage, or private commercial gain,” the criminal penalty for a first offense is a fine or imprisonment for not more than five years or both.
What about a civil lawsuit?
Tunsil could also sue the perpetrator. Assuming he can establish there was no authority to access his accounts, the SCA provides that a plaintiff can recover:
damages in a civil action under this section the sum of the actual damages suffered by the plaintiff and any profits made by the violator as a result of the violation, but in no case shall a person entitled to recover receive less than the sum of $1,000. If the violation is willful or intentional, the court may assess punitive damages. In the case of a successful action to enforce liability under this section, the court may assess the costs of the action, together with reasonable attorney fees determined by the court.
18 U.S.C. § 2707.
To prove damages, I would have a composite of the mock drafts immediately prior to the release of the video to determine where Tunsil would have likely been drafted had the video not come out. Then, you take the difference between the guaranteed money that pick would have received and the money the 13th pick receives as your actual damages. Those damages could easily exceed $10 million.
Assuming the defendant wanted to purposefully hurt Tunsil, punitive damages would also be available.
What about Tunsil’s conduct?
Yes, Tunsil is shown smoking marijuana. Yes, it appears he took benefits from Ole Miss in violation of the NCAA rules. If you are making a negligence claim, the plaintiff’s own negligence comes into play.
But, under the Stored Communications Act, his alleged bad acts don’t really come into play as far as liability. A jury might consider his actions when deciding the causation. What really caused his damages? Was it the hacking by the defendant or Tunsil’s own bad acts?
Causation is usually a fact question in a civil trial, but would anyone really be surprised that an NFL prospect smoked marijuana at some point in his life? Tunsil says the video is old and his pre-draft drug tests all came up clean.
The video came out 13 minutes before the draft started. The argument is the slide in the draft only happened when the video came out. After all, even after he did these things (although no one knew), he was still considered a top five pick.
If there was a civil case, there could be a huge verdict, but then there is always the matter of collecting.