U.S. Court of Appeals for the Fifth Circuit, Bell v. Eagle Mountain Saginaw Independent School District, Docket No. 21-10504

Copyright Infringement

Tweets

Fair Use

Effect on Licensing

Tweets: A Fair Use of Copyright That Bars This Suit?

Attorney’s Fees in a Copyright Action

« Win One for the Gipper »

 

 

Appeal from the United States District Court for the Northern District of Texas USDC No. 4:20-CV-1157

 

Just as famous as some great upsets in sports history are the motivational speeches that inspired them. Knute Rockne, in a speech immortalized in film by a future President, asked his Notre Dame players at halftime to “win one for the Gipper.” They did just that, rallying to beat an undefeated Army. See Knute Rockne: All American (Warner Bros. 1940). Herb Brooks convinced a group of American college players that for one night they could be “the greatest hockey team in the world.” They were, defeating the mighty Soviets in the Miracle on Ice. See Miracle (Walt Disney Pictures 2004).

 

Technology now allows inspirational messages to be conveyed not only in the locker room but also on social media. The softball team and flag corps at a public high school outside Fort Worth used their Twitter accounts to post a motivational passage from sports psychologist Keith Bell’s book, Winning Isn’t Normal.

 

We do not know if the tweets motivated the students to perform at a higher level. We do know that the tweets resulted in Bell’s suing the school district for copyright infringement. We must decide if the tweets were a fair use of the copyright that bars this suit.

 

In 1982, Bell published Winning Isn’t Normal, a 72-page book that provides strategies for success in athletics. Bell continues to market and sell Winning Isn’t Normal through online retailers and his personal website, where he also offers merchandise, including t-shirts and posters that display the passage that was quoted in the tweets.

 

That passage, which Bell calls the WIN Passage, is separately copyrighted. Bell offers licenses for its use. The passage reads:

(…)

 

(…) The leading treatise on fair use observes that “increasingly, courts have considered fair use on a Rule 12(b)(6) motion to dismiss for failure to state a claim.” William F. Patry, PATRY ON FAIR USE § 7:5 & n.10 (2017) (citing more than 25 cases that have evaluated fair use at the Rule 12 stage).

 

(…) Our question, then, is whether a successful fair-use defense appears on the face of Bell’s complaint.

 

(…)

Congress codified the fair-use doctrine in the Copyright Act of 1976 and listed four factors that courts should consider when applying it:

(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.

17 U.S.C. § 107.

 

The four factors are not exclusive. Harper & Row, 471 U.S. at 560. “All are to be explored, and the results weighed together, in light of the purposes of copyright.” Campbell, 510 U.S. at 578. A fair-use defense can succeed even if one or more factors favor the claimant. See id.; Compaq Comput. Corp. v. Ergonome Inc., 387 F.3d 403, 409–10 (5th Cir. 2004). Courts typically give particular attention to factors one and four (the purpose and market effect of the use). See Monge v. Maya Mags., Inc., 688 F.3d 1164, 1171 (9th Cir. 2012); Barton Beebe, An Empirical Study of U.S. Copyright Fair Use Opinions, 1978–2005, 156 U. Pa. L. Rev. 549, 584 (2008) (finding that “the outcomes of factors one and four very strongly correlated with the test outcome” in a survey of caselaw). But, ultimately, courts have “almost complete discretion in determining whether any given factor is present in any particular case” and whether the totality favors fair use. See Melville B. Nimmer & David Nimmer, 4 Nimmer on Copyright § 13.05(A)(4) (Matthew Bender rev. ed. 2021).

 

The first factor considers “the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes.” 17 U.S.C. §107(1). This involves a few considerations. The first and most obvious is commerciality—“whether the user stands to profit from exploitation of the copyrighted material without paying the customary price.” See Harper & Row, 471 U.S. at 562. The second is whether the user acted in good faith. Google LLC v. Oracle Am., Inc., 141 S. Ct. 1183, 1204 (2021); NXIVM Corp. v. Ross Inst., 364 F.3d 471, 478 (2d Cir. 2004). The third is whether the use is “transformative,” meaning it “adds something new” to the copyrighted work. Google, 141 S. Ct. at 1203. The school district does not assert that its use was transformative but argues the other inquiries tip the first factor in its favor. We agree.

First, the school’s use was noncommercial. (…)

(The school district did not, for example, charge others to access the WIN Passage, cf. Elvis Presley Enters. v. Passport Video, 349 F.3d 622, 628 (9th Cir. 2003), or pawn the work off as its own, Triangle Publ’ns, Inc. v. Knight-Ridder Newspapers, Inc., 626 F.2d 1171, 1176 (5th Cir. 1980). Nor did it reproduce a substantial portion of Winning Isn’t Normal to save its students the cost of purchasing the book. Cf. Worldwide Church of God v. Phila. Church of God, Inc., 227 F.3d 1110, 1118 (9th Cir. 2010). (Fn. 1)).

 

The school’s good faith adds another point to the scorecard. See Nunez v. Caribbean Int’l News Corp., 235 F.3d 18, 23 (1st Cir. 2000). Good faith does not excuse infringement. See id. Nevertheless, because “fair use presupposes good faith and fair dealing,” the propriety of the defendant’s conduct does factor into “the equitable balance of a fair use determination.” Fisher, 794 F.2d at 432 (quoting Harper & Row, 105 S. Ct. at 2232). The school posted the WIN Passage in quotes and credited Bell as the author. See Nunez, 235 F.3d at 23. Bell discovered the posts soon after but waited nearly a year before telling the school he disapproved of them. Once he did, the school immediately removed the posts and responded that the incident was “a teachable moment” it would be sure not to repeat. We do not see anything in the school’s conduct “sufficiently blameworthy” to weigh against fair use. See id.

 

(…) The pleadings, however, also indicate that the WIN Passage was freely accessible before the softball team and flag corps posted it. The WIN Passage appears in images that Bell posts online. Indeed, the complaint suggests that Bell merely took issue with the post because it “was not the generally circulated version.” If an infringing use “enables a viewer to see such a work which he had been invited to witness in its entirety free of charge, the fact that the entire work is reproduced . . . does not have its ordinary effect of militating against a finding of fair use.” Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 449–50 (1984). The school quoted a small excerpt from Winning Isn’t Normal, which was already freely available to the public. As a result, the third factor is neutral.

 

The fourth factor examines “the effect of the use” on the market for and value of the copyrighted work. 17 U.S.C. § 107(4). We consider actual market harm but, more broadly, whether widespread use of the work in the same infringing fashion “would result in a substantially adverse impact on the potential market” for the original work and any derivatives. Campbell, 510 U.S. at 590; see also Compaq, 387 F.3d at 410. “This last factor is undoubtedly the single most important element of fair use.” Harper & Row, 471 U.S. at 566.

 

Bell does not allege that he actually lost any revenue due to the school’s use of the passage. Instead, his complaint contends that widespread use of the WIN Passage on social media could reduce “the incentive to purchase Winning Isn’t Normal or related merchandise.”

 

We do not see a plausible economic rationale to support Bell’s assertion that widespread tweeting of the WIN passage would undermine the value of his copyright. See Twombly, 550 U.S. at 566–68 (considering market realities in evaluating whether a claim is plausible). The tweets do not reproduce such a substantial portion of Winning Isn’t Normal “as to make available a significantly competing substitute” for the original work. See Author’s Guild, 804 F.3d at 223. If anything, the properly attributed quotation of a short passage from Winning Isn’t Normal might bolster interest in the book; it is free advertising. See Narell v. Freeman, 872 F.2d 907, 914 (9th Cir. 1989). The same is true for merchandise. An online post is not a market substitute for a coffee mug. Viral sharing of the WIN Passage on Twitter might enhance the notoriety and appeal of Bell’s work, thereby increasing the incentive to purchase products displaying it. The opposite inference does not make sense: How would online references to the WIN Passage reduce the market for merchandise displaying it?

 

(The school district asserts that Bell carries the burden on this factor because its use was not commercial. Although some courts once interpreted Sony as creating a presumption of de minimis harm for nonprofit uses, see e.g., Princeton Univ. Press v. Mich. Document Servs., Inc., 99 F.3d 1381, 1385–86 (6th Cir. 1996), the Supreme Court has since clarified that no such presumption exists, see Patry § 6:4 (“The burden of proving the defense always remains on the party asserting it.”); Campbell, 510 U.S. at 584–85; Harper & Row, 471 U.S. at 566–69. (Fn. 4).

 

Bell also alleges that the tweets might impact his ability to license similar uses of the WIN Passage. But we cannot recognize a “theoretical market for licensing the very use at bar.” Swatch Group Mgmt. Servs., Ltd. v. Bloomberg L.P., 756 F.3d 73, 91 (2d Cir. 2014) (quoting 4 NIMMER ON COPYRIGHT § 13.05(A)(4)). To weigh any possible effect on licensing, we must first find it plausible that there is a “traditional, reasonable, or likely to be developed market” for licensing the kind of use at issue. See Am. Geophysical Union v. Texaco Inc., 60 F.3d 913, 930 (2d Cir. 1994); see also Cambridge Univ. Press v. Patton, 769 F.3d 1232, 1276 (11th Cir. 2014) (finding that the availability of licenses for the plaintiff’s copyrighted work “is not determinative” of a potential market for licensing the defendant’s use). Bell says he offers licenses for the WIN Passage. Yet despite being embroiled in litigation for years, Bell is unable to allege that anyone has ever purchased a license before posting the WIN Passage on social media—much less a public school district, which has no commercial interest in its online presence. Even in his brief, Bell’s only authority that “such a market exists” is his own “filing of at least 26 copyright infringement lawsuits” and obtaining settlements “from at least 90 different alleged infringers.” Bell’s aggressive efforts to litigate, no matter how successful, are not indicative of a “traditional” or “reasonable” market for his work. See Hofheinz v. AMC Prods., Inc., 147 F. Supp. 2d 127, 141 (E.D.N.Y. 2001) (explaining alleged infringers “are likely to seek a license to avoid entering the murky realm of fair use law during the course of litigation”). Absent any plausible allegation that public schools would willingly pay to tweet the WIN Passage, Bell’s licensing concerns “are purely speculative.” See Narell, 872 F.2d at 914.

 

Bell has failed to plausibly allege a “substantially adverse impact” on a legitimate market for his copyrighted work. The fourth factor thus weighs in favor of fair use.

 

Time to tally up the scorecard. The first and fourth fair-use factors favor the school district, the second narrowly favors Bell, and the third is neutral. In both their number and importance, the statutory factors show that the school’s tweets were fair use. This conclusion comports with the “ultimate test of fair use”: whether copyright law’s goal of promoting creativity would be better served by allowing the use than preventing it. Castle Rock Ent., Inc. v. Carol Publ’g Grp., Inc., 150 F.3d 132, 141 (2d Cir. 1998).

 

Bell also challenges the district court’s award of attorney’s fees. We review this ruling only for abuse of discretion. See Hunn v. Dan Wilson Homes, Inc., 789 F.3d 573, 588 (5th Cir. 2015).

 

“Attorney’s fees to the prevailing party in a copyright action is the rule rather than the exception and should be awarded routinely.” Virgin Records Am., Inc. v. Thompson, 512 F.3d 724, 726 (5th Cir. 2008) (quotation omitted). Still, “recovery of attorney’s fees is not automatic.” Id. It is a matter of the district court’s discretion. Fogerty v. Fantasy, Inc., 510 U.S. 517, 533 (1994). Relevant factors include: “frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.” Id. at 539 n.19 (quotation omitted).

 

The district court did not abuse its discretion by following the normal rule. Bell is not the typical copyright plaintiff seeking “a fair return for his creative labor.” See Twentieth Cent. Music Corp. v. Aiken, 422 U.S. 151, 156 (1975). He has a long history of suing public institutions and nonprofit organizations over de minimis uses of his work. Taking these cases into account, the district court reasonably concluded that Bell is a serial litigant, who makes exorbitant demands for damages in hopes of extracting disproportionate settlements. This case is another in the line. The school shared a single page of Bell’s work with fewer than 1,000 online followers and immediately removed the posts upon request. Bell was unable to identify any actual financial injury associated with that use but brought suit anyway. Attorney’s fees were thus an appropriate deterrent, both with respect to Bell and other copyright holders who might consider a similar business model of litigation. See id. at 618.

 

 

 

Secondary sources: William F. Patry, PATRY ON FAIR USE § 7:5 & n.10 (2017); Barton Beebe, An Empirical Study of U.S. Copyright Fair Use Opinions, 1978–2005, 156 U. Pa. L. Rev. 549, 584 (2008); Melville B. Nimmer & David Nimmer, 4 Nimmer on Copyright § 13.05(A)(4) (Matthew Bender rev. ed. 2021).

 

 

 

(U.S. Court of Appeals for the Fifth Circuit, Feb. 25, 2022, Bell v. Eagle Mountain Saginaw Independent School District, Docket No. 21-10504)

U.S. Supreme Court, Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., Docket No. 20-915

Copyright

 

Registration Application

 

Inaccurate Information in a Registration

 

Copyright Infringement

 

Safe Harbor, Validity of Certificate of Registration

 

“Ignorance of the Law Is No Excuse.”?

 

 

 

 

To obtain registration, the author of a work must submit to the Register of Copyrights a copy of the work and an application. §§408, 409. The application must provide information about the work. §409. Some of this information is purely factual, but some of it incorporates legal conclusions. Ibid. If the Register determines that the work is copyrightable and meets other statutory requirements, she will issue a certificate of registration. §410(a). The information on this certificate reflects the information that the copyright holder provided on the application.Ibid.

 

Naturally, the information provided on the application for registration should be accurate. Nevertheless, the Copyright Act provides a safe harbor. It says that a certificate of registration is valid 

“regardless of whether the certificate contains any inaccurate information, unless— 

“(A) the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate; and 

“(B) the inaccuracy of the information, if known, would have caused the Register of Copyrights to refuse registration.” §411(b)(1) (emphasis added).

 

The important point for our purposes is that a certificate of registration is valid even though it contains inaccurate information, as long as the copyright holder lacked “knowledge that it was inaccurate.” §411(b)(1)(A).

 

The question before us concerns the scope of the phrase “with knowledge that it was inaccurate.” The Court of Appeals for the Ninth Circuit believed that a copyright holder cannot benefit from the safe harbor and save its copyright registration from invalidation if its lack of knowledge stems from a failure to understand the law rather than a failure to understand the facts. In our view, however, §411(b) does not distinguish between a mistake of law and a mistake of fact. Lack of knowledge of either fact or law can excuse an inaccuracy in a copyright registration. We therefore vacate the Court of Appeals’ contrary holding.

 

Our reasons are straightforward. For one thing, we follow the text of the statute. See Hardt v. Reliance Standard Life Ins. Co., 560 U. S. 242, 251 (2010). Section 411(b)(1) says that Unicolors’ registration is valid “regardless of whether the registration certificate contains any inaccurate information, unless . . . the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate.” Both case law and the dictionary tell us that “knowledge” has historically “meant and still means ‘the fact or condition of being aware of something.’” Intel Corp. Investment Policy Comm. v. Sulyma, 589 U. S. ___, ___ (2020) (slip op., at 6) (quoting Webster’s Seventh New Collegiate Dictionary 469 (1967)); see also Black’s Law Dictionary 888 (8th ed. 2004); New Oxford American Dictionary 938 (def. 2) (2d ed. 2005); Webster’s New College Dictionary 625 (3d ed. 2008).

 

Unicolors says that, when it submitted its registration application, it was not aware (as the Ninth Circuit would later hold) that the 31 designs it was registering together did not satisfy the “single unit of publication” requirement. If Unicolors was not aware of the legal requirement that rendered the information in its application inaccurate, it did not include that information in its application “with knowledge that it was inaccurate.” §411(b)(1)(A) (emphasis added). Nothing in the statutory language suggests that this straightforward conclusion should be any different simply because there was a mistake of law as opposed to a mistake of fact.

 

To the contrary, nearby statutory provisions help confirm that here “knowledge” refers to knowledge of the law as well as the facts. Registration applications call for information that requires both legal and factual knowledge. See, e.g., §409(4) (whether a work was made “for hire”); §409(8) (when and where the work was “published”); §409(9) (whether the work is “a compilation or derivative work”). Inaccurate information in a registration is therefore equally (or more) likely to arise from a mistake of law as a mistake of fact. That is especially true because applicants include novelists, poets, painters, designers, and others without legal training. Nothing in the statutory language suggests that Congress wanted to forgive those applicants’ factual but not their (often esoteric) legal mistakes.

 

Further, those who consider legislative history will find that history persuasive here. It indicates that Congress enacted §411(b) to make it easier, not more difficult, for nonlawyers to obtain valid copyright registrations. The House Report states that its purpose was to “improve intellectual property enforcement in the United States and abroad.” H. R. Rep. No. 110–617, p. 20 (2008). It did so in part by “eliminating loopholes that might prevent enforcement of otherwise validly registered copyrights.” Ibid. The Report specifically notes that some defendants in copyright infringement cases had “argued . . . that a mistake in the registration documents, such as checking the wrong box on the registration form, renders a registration invalid and thus forecloses the availability of statutory damages.” Id., at 24. Congress intended to deny infringers the ability to “exploit this potential loophole.” Ibid. Of course, an applicant for a copyright registration—especially one who is not a lawyer—might check the wrong box on the registration documents as a result of a legal, as well as a factual, error. Given this history, it would make no sense if §411(b) left copyright registrations exposed to invalidation based on applicants’ good-faith misunderstandings of the details of copyright law.

 

H&M also argues that our interpretation is foreclosed by the legal maxim that “ignorance of the law is no excuse.” See Brief for Respondent 41–43. This maxim “normally applies where a defendant has the requisite mental state in respect to the elements of a crime but claims to be unaware of the existence of a statute proscribing his conduct.” Rehaif v. United States, 588 U. S. ___, ___ (2019) (slip op., at 8) (internal quotation marks omitted). It does not apply in this civil case concerning the scope of a safe harbor that arises from ignorance of collateral legal requirements. See ibid.

 

 

 

(U.S. Supreme Court, Feb. 24, 2022, Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., Docket No. 20-915, J. Breyer)

U.S. Court of Appeals for the Eight Circuit, Wildhawk Investments, LLC v. Brava I.P., LLC, Docket No. 21-2496

License Agreement and Asset Purchase Agreements

 

Know-How

 

Right of First Refusal

 

Contract Interpretation

 

Extrinsic Evidence of a Contemporaneous Oral Agreement

 

Parol Evidence Rule

 

Breach of Contract

 

Equitable Estoppel Defense

Iowa Law

Contract Drafting

 

 

 

Appeal from United States District Court for the Southern District of Iowa – Central

 

Wildhawk Investments, LLC (“Wildhawk”) initiated this breach of contract action against Brava I.P., LLC (“Brava I.P.”), Paragon Roof Systems, LLC (“Paragon”), and Billibob Boor (collectively, “Paragon Defendants”) for producing composite roofing shingles contrary to an exclusive license agreement. The district court entered a preliminary injunction prohibiting the Paragon Defendants from manufacturing or selling their products. The Paragon Defendants appeal, contending the district court misinterpreted the contract, erroneously rejected their equitable estoppel defense, and improperly found a threat of irreparable harm. We reverse and vacate the preliminary injunction.

 

Wildhawk approached Boor and Edson about purchasing Brava Roof Tile. In July 2015, Boor sent an email to Wildhawk member Adam Brantman proposing “an exclusive license for manufacturing current roofing products.” Boor specified that Wildhawk would “have a right of first refusal on all new product developments.” Brantman responded with a draft letter of intent reiterating that “Wildhawk would have a first right of refusal on new inventions and developments from Boor/Edson.” Brantman characterized Wildhawk’s offer as “what we believe is a fair price for the business as it exists today.” Boor requested in another message, “Remove other compression mold products wording. This deal is for the four products only as discussed.” Brantman sent back, “Agreed.” The final nonbinding letter of intent, signed on July 14, 2015, included the first refusal language from the earlier draft.

 

On November 25, 2015, the parties executed asset purchase agreements and a license agreement. Wildhawk paid a total of almost $4 million for Brava Roof Tile’s assets and for licenses to its patents, know-how, and intellectual property rights.

 

The license agreement granted Wildhawk “an exclusive, perpetual, license to use the Know-How in practicing the Patents or in the manufacturing of raw materials for the production of Licensed Products in accordance with the Manufacturing Guidelines and Conditions.” Know-How included “all engineering, manufacturing data, formulas, designs, methods and processes, programs, listings, documentation and drawings, notes, flow charts, manuals, manufacturing aids, plans, technology, trade secrets, know-how, and other proprietary information licensed by Licensor and related to the Field of Use.” Field of Use was defined as “the manufacture and sale of quality Roofing Shingles and the related accessories.” Roofing Shingles meant “products used as roofing shingles and related materials and accessories including, as an example, the items shown in the list attached hereto as Exhibit A,” which specifically identified the four existing Brava Roof Tile products. The agreement defined Licensed Products as “all quality Roofing Shingles and Related Materials products licensed for production herein or that, if unlicensed, would infringe or otherwise violate one or more claims of the Patents or utilizes the Know-How.”

 

Moreover, the license agreement conferred on Wildhawk an automatic license to “any Improvements,” defined as “improvements to the Technology, whether patentable or not, including any method, apparatus, design, component, system or device.” Technology meant “the Patents and Know-How, collectively.” Brava I.P., Boor, and Edson also warranted that the “Patents, Know-How and/or Intellectual Property Rights constitute all of the intellectual property used in or necessary to conduct the business of manufacturing and selling plastic roofing shingles as conducted and as currently planned to be conducted by Seller or any other entity owned and/or controlled by Seller.”

 

A month before executing the license agreement, the parties agreed to remove a “New Product Applications” section due to requirements imposed by Wildhawk’s lender. The deleted section read:

In the event that Licensor develops new products under its rights to the Technology, Licensee will have forty five (45) calendar days upon being informed of the new product by Licensor in which Licensee may choose to itself seek to purchase a license to the product prior to Licensor’s entering into a binding agreement with a third party purchaser or licensee.

 

Boor and Wildhawk acknowledge that despite removal of that language, they entered into an oral handshake agreement for a right of first refusal at the time they signed the license agreement.

 

Wildhawk achieved success after the acquisition, growing Brava Roof Tile’s gross annual sales from approximately $1 million to $13 million in four years. None of Wildhawk’s members had previous experience in the composite roofing industry. As a result, Wildhawk retained Boor and Edson as paid consultants subject to initial 18-month noncompete agreements. Brantman referred to Boor as “the most important person in the organization.”

 

In August 2016, Boor sent an email to Wildhawk that began with, “As per our handshake agreement, Gerald and I would like to let you know of, and offer your group first right of refusal on the below products.” Among the proposed products was “Platinum Tile,” a design for composite shingles that would later become known as Natura shake. Boor followed up several months later with an outline of a research and development deal structure for Natura shake that suggested “design and IP rights will remain under Billibob and Gerald ownership until” reaching a $1 million royalty cap. He also mentioned duplicating the deal for a Natura slate design.

 

On May 5, 2017, Boor, Edson, and Wildhawk entered into a confidentiality and nondisclosure agreement (“NDA”) regarding “possible R&D ‘new or enhanced product’ agreements.” The NDA stated in part:

As part of the license agreement, it was agreed that Billibob Boor and Gerald Edson would give Recipient first right of refusal on all new R&D developments that they develop related to the composite roofing industry. This agreement was requested to be made a binding verbal agreement on or before November 2015, between Gerald Edson, Billibob Boor, and Wildhawk Investments LLC, due to restrictions on Recipients SBA financing requirements. Recipient understands that breaching this confidentiality agreement would be a breach of the license agreement.

 

After signing the NDA, Wildhawk responded with a proposal to purchase the Natura shake design. Wildhawk offered an increased $1.5 million royalty cap and requested “a right of first refusal . . . for all future profile/product developments.” A Wildhawk member boasted that “if this deal yields the type of success that both parties anticipate, there would be no reason to think that this deal couldn’t serve as a framework...for subsequent deals including” additional composite shingle designs. The parties continued negotiations throughout late 2018 and early 2019 but failed to reach an agreement.

 

Boor and Edson formed Paragon in May 2019, while Boor was still employed as a consultant for Wildhawk. On August 18, 2019, Boor emailed Wildhawk with a final offer regarding the Natura designs. Boor stated that he and Edson had assessed what “we can make on our own over the next five years producing the materials ourselves while still owning the company and have settled on 10 million USD being the number for us to step away from that and to place the program in the hands of Wildhawk.” The email concluded, “Time is of the essence. If we are going to work on a program and tie ourselves together then the time is now.” Wildhawk never substantively responded to the offer.

 

In January 2020, Paragon began producing Natura products in barrel, shake, and slate styles. Ten months later, Wildhawk sued the Paragon Defendants in Iowa state court for breach of contract and other claims not relevant here. The Paragon Defendants removed the case to federal court. The district court granted Wildhawk’s ensuing motion for a preliminary injunction and barred the Paragon Defendants from manufacturing or selling composite roofing products. This appeal followed.

 

A. License Agreement Breach 

The Paragon Defendants principally dispute the district court’s interpretation of the license agreement. “The cardinal rule of contract interpretation is to determine what the intent of the parties was at the time they entered into the contract.” Pillsbury Co. v. Wells Dairy, Inc., 752 N.W.2d 430, 436 (Iowa 2008). The words of the contract provide “the most important evidence of the parties’ intentions at the time of contracting.” Peak v. Adams, 799 N.W.2d 535, 544 (Iowa 2011). Iowa courts “also look to extrinsic evidence such as the situation and relations of the parties, the subject matter of the transaction, preliminary negotiations and statements made therein, usages of trade, and the course of dealing between the parties.” NevadaCare, Inc. v. Dep’t of Hum. Servs., 783 N.W.2d 459, 466 (Iowa 2010) (cleaned up).

 

The license agreement’s plain language belies the argument that Wildhawk purchased only the rights to manufacture and sell the four original Brava Roof Tile products. The contract partially defined Licensed Products as “all quality Roofing Shingles . . . that, if unlicensed, . . . utilizes the Know-How.” And Roofing Shingles merely “included, as an example,” the four Brava Roof Tile products. Adopting the Paragon Defendants’ interpretation would render those provisions meaningless. See Art Etc. LLC v. Angel Gifts, Inc., 686 F.3d 654, 657 (8th Cir. 2012) (“Iowa law strives to give effect to all language in a contract.”). The broad language chosen to define key terms indicates the license extended to yet undeveloped products.

 

The Paragon Defendants next focus on the scope of the license being limited to the Know-How used “in practicing the Patents or in the manufacturing of raw materials for the production of Licensed Products in accordance with the Manufacturing Guidelines and Conditions.” They contend that the Natura products fall outside the license because Wildhawk does not claim patent infringement or the impermissible manufacture of actual raw materials. Yet the word “manufacture” can mean “to work up as or convert into a specified product.” Manufacture, n.2.a., Oxford English Dictionary Online, https://www.oed.com/view/Entry/113770 (last visited Feb. 10, 2022). Construing the license to cover the Know-How utilized in the working up or converting of raw materials for producing Licensed Products is consistent with the context surrounding the contract. During the preliminary negotiations, Boor proposed “an exclusive license for manufacturing . . . roofing products.” Neither Wildhawk nor the Paragon Defendants manufacture the raw materials needed to produce composite shingles. In addition, the referenced Manufacturing Guidelines discuss the process for making finished composite roofing products. “Because an agreement is to be interpreted as a whole, . . . an interpretation which gives a reasonable, lawful, and effective meaning to all terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect.” C & J Vantage Leasing Co. v. Wolfe, 795 N.W.2d 65, 77 (Iowa 2011) (citation omitted). When interpreted as a whole, the license agreement afforded Wildhawk a license to the Know-How used in producing composite shingles.

 

Finally, the Paragon Defendants claim that the NDA cleared the way for them to produce the Natura products. The NDA portrays the oral handshake agreement as a “first right of refusal on all new R&D developments . . . related to the composite roofing industry.” Since the NDA retroactively describes what the parties allegedly agreed to at the time they executed the license agreement, it is not a modification of the original contract. Instead, the NDA is extrinsic evidence of a contemporaneous oral agreement. See Garland v. Branstad, 648 N.W.2d 65, 69 (Iowa 2002) (noting that the parol evidence rule affects “negotiations or agreements that are prior to or contemporaneous with the writing”). Under the parol evidence rule, “where there is a binding agreement, either completely or partially integrated, evidence of prior or contemporaneous agreements or negotiations is not admissible in evidence to contradict a term of the writing.” Restatement (Second) of Contracts § 215 (Am. L. Inst. 1981). The right of first refusal for all new product developments in the NDA contradicts the full ownership rights granted to Wildhawk in the license agreement. There is no dispute that the license agreement is partially integrated. The Paragon Defendants thus cannot rely on the NDA or any other extrinsic evidence to contradict its written terms. See Bartlett Grain Co. v. Sheeder, 829 N.W.2d 18, 24-25 (Iowa 2013) (rejecting extrinsic evidence that contradicted partially integrated agreement). The district court did not err when interpreting the license agreement.

 

Evidence from the preliminary injunction hearing illustrates that the Paragon Defendants manufactured the Natura products by using the Know-How exclusively licensed to Wildhawk.

 

We discern no error in the district court’s finding that Wildhawk had a fair chance of proving the Paragon Defendants violated the terms of the license agreement.

 

B. Equitable Estoppel 

All that said, Wildhawk’s conduct after executing the license agreement leads us to conclude that success on the merits of the breach of contract claim is unlikely. Under Iowa’s equitable estoppel doctrine, “the parties to a valid contract may estop themselves from asserting any right under the contract by conduct inconsistent with the continued existence of the original contract.” Margeson v. Artis, 776 N.W.2d 652, 659 (Iowa 2009) (internal quotation marks omitted). An equitable estoppel defense requires clear and convincing evidence that: (1) the opposing party made a false representation or concealed material facts; (2) the party asserting estoppel lacked knowledge of the true facts; (3) the opposing party intended the party asserting estoppel to act upon the representation or concealment; and (4) the party asserting estoppel relied on the representation or concealment and thereby suffered prejudice. Sioux Pharm, Inc. v. Summit Nutritionals Int’l, Inc., 859 N.W.2d 182, 191 (Iowa 2015). “To establish false representation or concealment, there must be evidence the party acted ‘with the intent to mislead the injured party. ’”Boehme v. Fareway Stores, Inc., 762 N.W.2d 142, 147 (Iowa 2009) (quoting Hook v. Lippolt, 755 N.W.2d 514, 525 (Iowa 2008)).

 

Wildhawk professed that the NDA “did not accurately state . . . Wildhawk’s understanding of the right of first refusal arrangement.” Boor’s repeated proposals to sell the Natura designs plainly revealed he thought they came within the right of first refusal rather than the preexisting license. Meanwhile, Brantman testified that Wildhawk believed “we had already paid for this” from the moment Boor sent the initial offer in August 2016. Wildhawk representatives never shared that belief with Boor during the protracted negotiations. Standing alone, silence from a party to an arms-length transaction is insufficient to sustain an equitable estoppel defense. EMC Ins. Grp. v. Shepard, 960 N.W.2d 661, 674 (Iowa 2021). But Wildhawk did more than stand mute. It affirmatively signed the NDA, which ostensibly reserved only a right of first refusal in “all new R&D developments . . . related to the composite roofing industry.” When fairly read, that language necessarily included the Natura products. Wildhawk then proceeded to offer Boor millions of dollars in royalties to purchase the Natura designs and negotiated for months as if the right of first refusal applied. A Wildhawk member went so far as to suggest the possibility of more deals for Boor’s composite shingle designs in the future. Wildhawk misrepresented its position on its entitlement to the Natura products in a manner inconsistent with the license agreement.

 

As for intent to induce reliance, again in its own words, “Wildhawk executed the NDA in an effort to continue its valuable relationship with Boor.” Boor asked Wildhawk to sign the NDA as an assurance before deciding to renew his consulting agreement. Brantman testified that because Boor was “very valuable” to Wildhawk, “we weren’t ready to really pick a fight with him.” He went on to describe “the idea that Boor wouldn’t be working with us as a sales consultant” as “concerning.” That concern led Wildhawk to sign the NDA and to go along with Boor’s offers to sell the Natura designs without ever claiming an existing right to them under the license agreement. Cf. Hawkeye Land Co. v. Iowa Power & Light Co., 497 N.W.2d 480, 487 (Iowa Ct. App. 1993) (deeming intent element met where opposing party “never informed” party asserting estoppel “it was receiving anything less than a full and complete permanent easement” as envisioned by oral contract). Wildhawk intended to entice Boor to stay on as a consultant by misrepresenting its understanding of the right of first refusal arrangement.

 

The remaining equitable estoppel elements are satisfied as well. Boor lacked knowledge of Wildhawk’s true understanding. The preliminary negotiations for the license agreement, offers to sell the Natura designs, and hearing testimony uniformly evince that Boor believed Wildhawk had nothing more than a right of first refusal in all new product developments, even those related to the composite roofing industry. See Bricker v. Maytag Co., 450 N.W.2d 839, 840-41 (Iowa 1990) (upholding estoppel defense notwithstanding relevant contract language due to opposing party’s representations). Boor testified he would not have formed Paragon or incurred over $1 million in expenses to commence production if he had known about Wildhawk’s legitimate claim to the Natura products. Equity bars Wildhawk from now declaring ownership after the Paragon Defendants detrimentally relied on its representations.

 

Uncontroverted evidence establishes each element of equitable estoppel. The district court abused its discretion in rejecting the defense and in finding Wildhawk had a likelihood of success on its breach of contract claim.

 

C. Irreparable Harm 

We have doubts about whether Wildhawk faced a threat of irreparable harm. To demonstrate irreparable harm, the movant “must show that the harm is certain and great and of such imminence that there is a clear and present need for equitable relief.” Roudachevski v. All-Am. Care Ctrs., Inc., 648 F.3d 701, 706 (8th Cir. 2011) (citation omitted). The absence of irreparable harm “is an independently sufficient ground upon which to deny a preliminary injunction.” Grasso Enters., LLC v. Express Scripts, Inc., 809 F.3d 1033, 1040 (8th Cir. 2016) (quoting Watkins Inc. v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003)).

 

The district court determined that Wildhawk would suffer irreparable harm by losing customers and market share to Paragon. “Economic loss, on its own, is not an irreparable injury so long as the losses can be recovered.” DISH Network Serv. L.L.C. v. Laducer, 725 F.3d 877, 882 (8th Cir. 2013). Wildhawk submitted an itemized list of all Paragon’s sales from inception and specifically identified which sales came from its past customers. Such harm is compensable by money damages. See MPAY Inc. v. Erie Custom Comput. Applications, Inc., 970 F.3d 1010, 1020 (8th Cir. 2020) (“It appears that any harm plaintiff may suffer in the form of lost customers and lost profits is quantifiable and compensable with money damages . . . meaning this harm is not irreparable.”); Mgmt. Registry, Inc. v. A.W. Cos., 920 F.3d 1181, 1183-84 (8th Cir. 2019) (concluding that plaintiff lacked threat of irreparable harm where only injury was calculable loss of revenue).

 

Wildhawk’s alternative assertion that the Paragon Defendants will irreparably injure its “business reputation and goodwill,” Med. Shoppe Int’l, Inc. v. S.B.S. Pill Dr., Inc., 336 F.3d 801, 805 (8th Cir. 2003), is undermined by its decision to wait more than a year to bring this lawsuit despite knowing Boor and Edson intended to produce the Natura products themselves. See Benisek v. Lamone, 585 U.S. ___, 138 S. Ct. 1942, 1944 (2018) (per curiam) (explaining that “a party requesting a preliminary injunction must generally show reasonable diligence”); Adventist Health Sys./Sunbelt, Inc. v. U.S. Dep’t of Health & Hum. Servs., 17 F.4th 793, 806 (8th Cir. 2021) (finding lack of irreparable harm where plaintiff delayed suit until one year after adoption of challenged policy). When Boor gave Wildhawk a final opportunity to purchase the Natura products in August 2019, he implied that he and Edson planned to “produce the materials ourselves while still owning the company” if Wildhawk declined the offer. Boor emphasized that “time was of the essence.” Rather than tell Boor about its putative ownership rights or expeditiously file suit, however, Wildhawk did not meaningfully respond to the offer and waited until November 2020 to commence this action.

 

The Paragon Defendants were prejudiced by Wildhawk’s delay. See Kroupa v. Nielsen, 731 F.3d 813, 821 (8th Cir. 2013) (evaluating prejudice where defendant claimed delay in seeking preliminary injunction counseled against irreparable harm). Boor incurred over $1 million in expenses to start manufacturing the Natura products through Paragon, which he had formed eight months earlier. Wildhawk waited until Paragon had been producing the Natura products for ten months before making its ownership claim. Wildhawk failed to show either reasonable diligence or harm that cannot be compensated by money damages.

 

 

(U.S. Court of Appeals for the Eight Circuit, Feb. 23, 2022, Wildhawk Investments, LLC v. Brava I.P., LLC, Docket No. 21-2496)

Georgia Supreme Court, Edible IP, LLC v. Google, LLC, Docket No. S21G0798

Internet Law

 

Internet Search Algorithms

 

Keyword Advertising Program

 

Advertisement

 

Trade Name

 

Trademark

 

Goodwill

 

Third Party’s Right to Use a Trade Name

Civil Theft of Personal Property

Conversion

 

Trademark Infringement

 

Failure to State a Claim

 

“Money Had and Received” ((Common Law) Unjust Enrichment))

 

Georgia Law

 

 

 

This case involves Google LLC’s application of internet search algorithms, which it uses to auction off search terms for profit to advertisers, and the interests of Edible IP, LLC, which seeks to exercise control over the profit generated from its trade name and associated goodwill. In 2018, Edible IP brought an action against Google arising from Google’s monetization of the name “Edible Arrangements” without permission in its keyword advertising program. Google moved to dismiss the complaint, or in the alternative, to compel arbitration. The trial court granted the motion, dismissing the complaint on several grounds, including that it failed to state a claim, and alternatively compelling the parties to arbitration. Edible IP appealed from that order, and the Court of Appeals affirmed the dismissal for failure to state a claim. See Edible IP, LLC v. Google, LLC, 358 Ga. App. 218 (854 SE2d 565) (2021). We granted certiorari to address whether the trial court properly granted Google’s motion to dismiss. For the reasons that follow, we conclude that Edible IP has not stated a cognizable claim for relief and therefore affirm.

 

The Court of Appeals summarized the relevant facts underlying this appeal as follows:

The complaint alleges that Edible IP owns the trademarks, trade names, and other intellectual property associated with Edible Arrangements, a business consisting of websites and “brick-and-mortar” franchises that sell, among other things, floral-shaped arrangements of fresh-cut fruit. To support these websites and franchises, Edible IP licenses the use of its intellectual property to various entities. Edible IP, however, maintains ownership of the intellectual property, which includes the trademark/trade name “Edible Arrangements,” as well as the goodwill generated by the brand.

 

Google operates an internet search engine that allows individuals to search for information by typing relevant words into a search bar. Using algorithms that analyze the search terms and requested information, Google returns “organic” results of the query on a results page. According to the complaint, Google monetizes its search engine by “selling . . . ‘keywords’” to advertisers that “trigger advertisements on the search results page when Google users search for the keyword term.”

 

Keyword advertising is purchased through an auction-like process, with prospective advertisers bidding on terms suggested by Google. The auction includes general terms like “shoes” and “mother’s day gift,” as well as trade names such as “Edible Arrangements.” Google has never contracted with Edible IP for the right to use the Edible Arrangements trade name, and Edible IP has not otherwise given Google permission to include its trade name in the keyword advertising program. Nevertheless, Google began auctioning the trade name to advertisers in approximately 2011. As described by the complaint, Google places advertisements purchased through the keyword program “in a more attractive location on the results page than its ‘organic’ results in an effort to drive consumer behavior and get those consumers to click on the ad rather than Google’s ‘organic’ results.”

 

Based on these and other allegations, Edible IP sued Google for theft of personal property, conversion, money had and received, and civil Racketeer Influenced and Corrupt Organizations (“RICO”) violations. Google moved to dismiss the complaint, arguing that any claims alleged by Edible IP needed to be arbitrated, that a forum selection clause deprived the trial court of personal jurisdiction over Google, and that the complaint failed to state a claim upon which relief could be granted.

 

Google also requested that the trial court compel the parties to arbitration. 

Edible IP has alleged four claims: (1) civil theft of personal property; (2) conversion; (3) money had and received; and (4) violations of Georgia’s RICO Act. We will address each of the claims in turn.

 

a.   Civil Theft of Personal Property

Georgia law authorizes the owner of property to bring a civil action to recover damages from any person who either (1) willfully damages the owner’s personal property or (2) commits a theft as defined in OCGA § 16-8-2. See OCGA § 51-10-6 (a).

 

In its complaint, Edible IP (…), alleging that “Google has committed theft by taking, in violation of OCGA § 16-8- 2” by “unlawfully taking and otherwise appropriating Edible IP’s property by selling that property without permission to others and keeping the proceeds for itself.” Edible IP identified the property as its “trade name ‘Edible Arrangements’ and the good will and reputation associated with that name.”

 

(…) We are, thus, first required to determine whether Edible IP’s trade name and associated goodwill are “property” within the meaning of the civil theft statute and, if so, the contours of the associated property rights and whether Edible IP has sufficiently alleged that Google has wrongfully “appropriated” this property.

 

(…) “Goodwill” has been defined as “essentially the positive reputation that a particular business enjoys. This ‘positive reputation’ manifests itself as an expectancy that a business has of continued patronage from its customer.” 38 Am. Jur. 2d Good Will § 1. See also Armstrong v. Atlantic Ice & Coal Corp., 141 Ga. 464, 466 (81 SE 212) (1914) (“Good will is the favor which the management of a business wins from the public, and the probability that old customers will continue their patronage and resort to the old place.” (citation omitted)); Goodwill, Black’s Law Dictionary (11th ed. 2019) (defining goodwill as “a business’s reputation, patronage, and other intangible assets that are considered when appraising the business”).

 

We have expressly recognized that goodwill is a type of intangible property interest. See Nat. Assn. for Advancement of Colored People v. Overstreet, 221 Ga. 16, 29 (4) (a) (142 SE2d 816) (1965) (“It is uniformly recognized that good will is a species of property and constitutes a valuable asset of the business of which it is a part.” (citation omitted)). See also Reis v. Ralls, 250 Ga. 721, 723 (1) (301 SE2d 40) (1983) (“It appears clear that in addition to a trademark, a trade name, along with the goodwill it represents, may be the subject of an Article 9 security interest.”).

 

Construing these factual allegations in favor of Edible IP for the purpose of analyzing Google’s motion to dismiss, as we must, Edible IP has sufficiently alleged a property interest in the trade name “Edible Arrangements” and its associated goodwill within the meaning of OCGA § 51-10-6.

 

(…) Under each of these statutes, it is clear that trade names are only protected from use by others to the extent that such use is deceptive or there is a likelihood of confusion by the public.

 

Here, Edible IP has not alleged that Google’s use of the “Edible Arrangements” trade name in its keyword advertising program causes any confusion, and in fact, has disclaimed in the complaint that it is “seeking any . . . relief for any consumer confusion.” Thus, we see no basis in Georgia statutory law for Edible IP’s claim that Google has appropriated the “Edible Arrangements” trade name simply by using it in Google’s algorithms and keyword advertising programs.

 

And although Edible IP disclaims asserting any federal trademark claim, a review of federal trademark law is instructive on the contours of a third party’s right to use a trade name. Like Georgia statutory law and the common law, federal trademark law offers only limited trademark and trade name protection. For example, the doctrine of fair use permits reference to a competitor’s trade name in an advertisement.

 

(…) We see no reason to extend civil theft in Georgia to encompass the mere use of a trade name, without implicating consumer confusion, when doing so would subvert Georgia trademark law, federal trademark law, and the common law of trademark infringement.

 

(…) In sum, given Edible IP’s express disavowal of the element of consumer confusion in the complaint, it cannot state a claim for civil theft arising from the use of its trade name and associated goodwill.

 

Accordingly, the trial court did not err in granting Google’s motion to dismiss Edible IP’s claim for civil theft.

 

b. Conversion

Although Georgia law may provide relief for the conversion of certain intangible property, we have never extended that tort to claims based on the mere use of a trademark or on trade name infringement, and we decline to do so now.

 

Again, the cases Edible IP relies upon are readily distinguishable. For example, in English & Sons, Inc. v. Straw Hat Restaurants, Inc., 176 FSupp.3d 904 (N.D. Cal. 2016), the court concluded that the plaintiffs had “converted” the defendant’s trademark and other intellectual property by wrongfully registering ownership of the trademark with theU.S. Patent and Trademark Office – not just by simple use. See id. at 923 (2).

 

Other courts have likewise rejected attempts to expand the tort of conversion to encompass the type of intangible property traditionally protected within the scope of trademark law. See, e.g., Ortega v. Burgos, Case No. 12-CV-05421, 2014 U.S. Dist. LEXIS 70457, at *3 (II) (E.D.N.Y. May 22, 2014) (dismissing trademark conversion claim because “not only has this Court been unable to find any authority that recognizes trademark conversion, the leading treatise on trademark law states that, ‘every court to consider such a claim has rejected it’” (citation omitted)). See also 4 McCarthy, supra, § 25:9.50 (“Occasionally, a trademark owner will allege, either along with or instead of a traditional infringement claim, that its mark has been ‘converted’ by defendant. Every court to consider such a claim has rejected it. The author agrees that the tort of ‘conversion’ should not be stretched and deformed to substitute for the traditional law of trademark infringement.”).

 

Accordingly, we cannot say that the trial court erred in concluding that Edible IP had failed to state a claim for conversion.

 

c. Money Had and Received

In Count 3 of its complaint, Edible IP asserts a claim for money had and received, alleging that Google currently holds a sum of money belonging to Edible IP. The common law action for money had and received “is founded upon the equitable principle that no one ought to unjustly enrich himself at the expense of another.” Sentinel Offender Services, LLC v. Glover, 296 Ga. 315, 331 (4) (a) (766 SE2d 456) (2014) (citation omitted). This action “is maintainable in all cases where one has received money under such circumstances that in equity and good conscience he ought not to retain it.” Id. (citation and punctuation omitted).

 

Edible IP’s claim for money had and received again relies on its unavailing assertion that, rather than selling advertising space, Google is in essence selling Edible IP’s trade name and illegally profiting from it. And, despite Edible IP’s insistence that our courts have previously held that “the fact that money was received from a third person will not affect a defendant’s liability,” this holding does not change the futility of Edible IP’s claim for money had and received because Edible IP has no claim to the profits that Google has earned by selling advertising. Accordingly, for this reason and for the reasons discussed above in Divisions 1 (a) and (b), Edible IP cannot, as a matter of law, show that it is entitled to profits that Google earns through its keyword advertising program (even if the program uses the trade name “Edible Arrangements”) or that Google has been unjustly enriched at Edible IP’s expense, and this claim likewise fails.

 

 

Secondary sources: J. Thomas McCarthy, Conversion of a Trademark, 4 McCarthy on Trademarks and Unfair Competition, § 25:9.50 (5th ed. 2019) 

 

 

 

 

(Georgia Supreme Court, Feb. 15, 2022, Edible IP, LLC v. Google, LLC, Docket No. S21G0798)