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In April 2023, drama unfolded on Twitter, and it revolved around olive oil. Andrew Benin, the co-founder of Graza, a start-up single-origin olive oil brand that comes in two adorable green squeeze bottles, publicly called out rival Brightland for allegedly copying his squeezable olive oil idea. Mr. Benin wrote, “While friendly competition was always welcome, I do view this as a blatant disrespect and am choosing to voice my discontent.” In response, the internet angrily clapped back, as the internet does. One of these dissidents was Alison Cayne, the founder of Haven’s Kitchen, a cooking company. She wrote, “with all due respect, you did not create the squeeze bottle. Chefs and home cooks have been using it for decades.” Another commenter, Gabrielle Mustapich, a co-founder at Hardpops & Pilothouse Brands, added, “my mom was buying squeezy bottle olive oil in 2007 (and it wasn’t Graza).” 

Ms. Mustapich is right – squeeze bottles have been ubiquitous in chefs’ kitchens for years. However, they seem to be growing in popularity in home kitchens. While Graza may or may not be able to get credit for that societal shift, that doesn’t mean they shouldn’t get any recognition for doing things differently in the olive oil industry. That begs the question – if they were to sue Brightland, would they win? 

Though Graza doesn’t have a patent for its bottle or a trademark for anything except its name, official registration is not required to receive trade dress protection. Trade dress protection is provided by the Lanham Act, which allows the producer of a product a cause of action for the use of “any word, term, name, symbol, or device, or any combination thereof . . . which . . . is likely to cause confusion . . . as to the origin, sponsorship, or approval of his or her goods . . . . ” While trademarks are generally thought to cover things like brand names and their distinct designs, trade dress encompasses the design or packaging of a product or part of a product. For example, while the name “Nike” has a trademark, as does their “swoosh” symbol, the visual design of, say, a sweater or the box it comes in may unofficially deserve trade dress protection (209). 

While courts vary slightly on the elements of a protectable trade dress, they mainly agree that three factors must be met when analyzing the design of a product. First, the trade dress must be primarily non-functional. This requirement might seem counterintuitive since a company should be rewarded for making its product useful. However, the non-functionality requirement does not concern the invention of this aspect of the product, which is left to the world of patents. The non-functionality requirement promotes competition because other companies can make similar products with the same useful qualities without legal repercussions. 

The landmark 2001 Supreme Court case Traffix Devices v. Marketing Displays redefined the test for functionality. While circuits vary on their precise balancing tests, many follow that of the Ninth Circuit in Talking Rain Bev. Co. v. South Beach Bev. Co. from 2003: Whether advertising “touts the utilitarian advantages of the design,” whether “the particular design results from a comparatively simple or inexpensive method of manufacture,” whether the design “yields a utilitarian advantage,” and “whether alternative designs are available,” (603) – though, per Traffix, the “mere existence of alternatives does not render a product non-functional” (33-34). 

Next, the trade dress must be inherently distinctive or have acquired a secondary meaning to customers (which can be difficult to prove). Finally, the alleged infringement must create a likelihood of confusion among customers as to a product’s source. This inquiry is a step-by-step process, so if the product design is primarily functional, the inquiry ends, and the design’s trade dress cannot be protected. 

If Graza’s squeeze bottle is considered part of its product design rather than its packaging, it is functional and therefore not protectable trade dress. First, its own Instagram includes in its bio, “Fresh Squeezable Single Origin Olive Oil / As squeezed in @bonappetitmag.” The home page of its website features a video of a chef gingerly unscrewing the squeeze top and gracefully applying the oil to a hot pan. Second, the squeeze bottle itself is a simple design. Restaurants can bulk purchase 500 of these basic bottles, and the patent for the generic squeeze bottle, though not identical to Graza’s, is not terribly complex. Third and fourth, while alternative designs are available – most typical olive oils come in bulky containers with regular pour spouts – the squeeze spout is likely attractive to many consumers for its uniqueness and convenience. 

But what if the bottle is not considered to be the product’s design – that is, the appearance of the product itself – but rather the packaging – the container holding the product? According to the Wal-Mart Court, product design and packaging trade dress should be analyzed differently (215). The Court reasoned that, to a consumer, product packaging may identify the source of a product much more clearly than product design would (212-13). Therefore, the court says, a producer need not prove that a package has acquired secondary meaning to receive trade dress protection. 

The squeeze bottle, the pretty green color, and the charming label are all selling points for Graza, with one reviewer saying, “These olive oils are one of the few things I find attractive enough to leave out on my countertop.” Arguably, however, the main reason people are purchasing it is to get to the product inside – a quick Google search of “Graza review” brings up articles primarily reviewing the oil’s quality, not the bottle’s attractiveness of the bottle or the utility of the squeeze function. Consider the difference between a consumer purchasing an olive oil known to be delicious but in a poorly designed, ugly bottle – there, the bottle is the packaging for the product – as opposed to an olive oil known to be terrible but in a limited-edition, beautiful bottle – there, the bottle is the product, and there is no packaging. 

In Graza’s case, however, it can be difficult to know what’s really in the average consumer’s head, and in many ways, the “average consumer” is a myth. When Courts determine a product’s likelihood of confusion with another product or the likelihood that a consumer will see a product or its packaging and know what brand it comes from, they are necessarily guessing. The Wal-Mart Court tried to correct for that by advising courts in ambiguous product design/product packaging cases to lean toward finding that they are design, presumably to force greater proof of distinctiveness, etc., from producers. 

When it comes to Graza, though, it seems entirely possible that a typical, reasonable consumer would see the Brightland olive oil in a squeeze bottle and think: That’s just like the Graza bottle! Even if the trusty squeeze bottle has been ubiquitous in kitchens for decades, Graza may have brought it to the attention of home chefs everywhere. Similarly, though many olive oil bottles are dark green, their tall, skinny, matte green appearance with the pointed tip is unique enough – and their advertising aggressive and targeted enough – that many consumers (mostly those of the Gen Z and Millennial generations) would easily recognize the design as Graza if it flashed before their eyes. 

But, if we are to follow the Wal-Mart Court’s suggestion and reason that the bottle is Graza’s product design instead of packaging in this moment of ambiguity, Graza’s argument that they deserve trade dress protection – or, more simply, credit for coming up with the squeeze bottle olive oil idea – is weak. Andrew Benin may have realized such, as he, shockingly, issued a public Twitter apology retracting his earlier accusations. 

INTRODUCTION 

Every day across the world many people, brands, and companies believe that their names are defamed, or trademarks have been infringed on. With over 440,000 US Trademark Applications filed in 2022 alone, disputes over these trademarks arise frequently. However, these quarrels are not always encircling such a large-scale platform like one of the highest rated television series ever created. But when they do, it often spurs up illustrious discussions by the media about intellectual property laws in the United States.  

On September, 25, 2023, the United States District Court of the Southern District of New York granted the Creators of the hit Television series “Better Call Saul,” their motion to dismiss for claims of defamation and trademark infringement brought by Liberty Tax Service for the show’s depiction of a tax preparation service in an episode of the show from April 2022. The depiction of the tax service in the show offers many similarities of Liberty Tax Service and its more than 2,500 offices across the country, including the same red, white, and blue colors, as well as the Statute of Liberty logo. This case, JTH Tax LLC v. AMC Networks Inc., implicates many facets of intellectual property law, including trademark infringement and dilution under the Lanham Act, trade dress, and New York statutory defamation law. Ultimately, the court ruled that the “Rogers Test” was applicable to the defendant’s alleged use of Liberty Tax Service’s trademarks. However, the Court’s decision on the motion to dismiss could certainly be up for debate, especially if Liberty Tax Service raised certain arguments regarding the second prong of the Rogers Test.   

A. APPLICABILITY OF THE “ROGERS TEST” 

The “Rogers Test” was developed by the United States Court of Appeals, Second Circuit in Rogers v. Grimaldi. It is a two-pronged balancing test that can be implicated when there are opposing interests under the First Amendment and the Lanham Act. The test states,  

“[w]here the title of an expressive work is at issue, the “balance will normally not support application of the [Lanham] Act unless the title has no artistic relevance to the underlying work whatsoever, or, if it has some artistic relevance, unless the title explicitly misleads as to the source or the content of the work.”  

In the matter at hand, the court quickly and rightfully found that the applicability of the Rogers test was appropriate because to the extent that the defendant’s used the plaintiff’s marks, they were in furtherance of the plot of Better Call Saul by heightening the understanding of key characters for the audience.   

1. ARTISTIC RELEVANCE  

Under this prong, defendants argued that the alleged use of plaintiff’s marks met the purposely low threshold for artistic relevance in the Rogers Test because the reference to “Sweet Liberty” in the episode in question is undeniably ironic and clearly related to the character’s role in the series because it is the business they created with illegal intent. On top of that, the court found that the character’s use of the plaintiff’s trade dress (i.e., the design and configuration of the product itself) was simply an appropriation of patriotism that highlights their deceptiveness as crime ridden characters which all has relevance to the episode. Thus, the court concluded that the artistic relevance of the episode’s use of the plaintiff’s marks were clearly above “above zero.” 

2. WHETHER THE USE OF SUCH MARKS WERE “EXPLICITLY MISLEADING” 

Since the Court concluded that defendants’ alleged use of plaintiff’s marks had at least an ounce of artistic relevance to the show, the Court focused on the second prong of the Rogers Test, whether the defendants’ use of the plaintiff’s marks was “explicitly misleading,” which would allow the Lanham Act to apply to the show. The essential question to ask for the second prong is “whether the defendant[s’] use of the mark ‘is misleading in the sense that it induces members of the public to believe [the work] was prepared or otherwise authorized’ by the plaintiff.” To do so, the court focused on the eight non-exhaustive factors from Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492 (2d Cir. 1961), in order to assess the likelihood of confusion to satisfy this prong. The eight factors include: “(1) strength of the trademark; (2) similarity of the marks; (3) proximity of the products and their competitiveness with one another; (4) evidence that the senior user may bridge the gap by developing a product for sale in the market of the alleged infringer’s product; (5) evidence of actual consumer confusion; (6) evidence that the imitative mark was adopted in bad faith; (7) respective quality of the products; and (8) sophistication of consumers in the relevant market.”  

a. THE COURT’S ASSESSMENT OF THE POLAROID FACTORS DISSECTED 

The court’s assessment of the eight Polaroid factors in this matter could genuinely be up for debate, especially if the plaintiff raised stronger, or any, arguments regarding multiple factors. The Polaroid factors are weighed against each other depending on which way a court decides each factor favors the respective parties. Here, the court found that only the first factor weighed in favor of the plaintiff, as the defendants did not contest the strength of the plaintiff’s mark. The other seven factors either weighed in favor of the defendant or were deemed neutral. Most of the factors were weighed in the defendant’s favor, but mainly because the plaintiff failed to argue them in their Amended Complaint.   

For example, and probably most convincing, factor five could have been evaluated in favor of the plaintiff. This factor requires evidence of actual consumer confusion, but it is considered black letter law that actual confusion does not need to be proven to prevail under the Lanham Act or this factor since it is often too challenging and expensive to prove. The Act strictly requires only that a likelihood of confusion be shown as to source, meaning that consumers will mistakenly believe the goods or services come from the same source, according to the Lois v. Sportswear, U.S.A., Inc. v. Levi Strauss & Co., case.  

An opportunity that the plaintiff failed to point out that could have helped satisfy this factor stems from an example the Supreme Court of the United States prescribed in the Jack Daniels case, which involved a somewhat analogous situation where Jack Daniels sued a company on similar grounds for their creation of a dog toy that closely represented a bottle of Jack Daniels whiskey. The illustration provided in that case by the court offered a scenario where a luggage manufacturer uses another brand’s marginally altered logo on their luggage to foster growth in the luggage market. The Supreme Court compared this example with another and noted that the greater likelihood of confusion would occur in the luggage illustration because it was conveying possible misinformation about who is responsible for the merchandise. Now, as stated in the Jack Daniels case, if the plaintiff were able to have created this analogy, relevant to the facts at bar, and argued it in their Amended Complaint by displaying that the show clearly conveyed misinformation through their image of “Sweet Liberty Tax Services” and that it was blatantly a slightly modified image of Liberty Tax Service, this factor would have most likely been weighed in favor of the plaintiff. This would be due to the likelihood of confusion as to the source of the show’s representation of the character’s business.  

Secondly, factor seven requires taking into account the respective quality of the product. In the Flushing Bank v. Green Dot Corp. case, the United States District Court for the Southern District of New York interpreted this factor to mean that if the quality of a junior user’s (the show) product or service is low compared to the senior user (Liberty Tax Service), the chance of actual injury when there is confusion would be increased. If confusion, as stated above, was created, then the plaintiff’s argument in their Amended Complaint regarding defendant’s use of their marks linking Liberty Tax’s Trademarks to the show’s depiction of an inferior quality of service would further the weighing of this factor in the plaintiff’s direction as well.  

Lastly, the eighth factor, based on the sophistication of purchasers, could strongly be construed in favor of the plaintiff. The theory for this factor is that the more sophisticated the senior user’s purchasers are, the less likely they will be confused by the presence of similar marks. To determine consumer sophistication, courts consider the product’s nature and price. The plaintiffs failed to raise any concern as to this factor. However, there is an argument that could have been made to weigh this factor in their favor, which would have evened out the weight of the factors equally between the plaintiff and defendant. If that were the case, it could be assumed to be viewed in the light most favorable of the plaintiff, which would be the standard at the motion to dismiss stage.  

If the plaintiff were to shed light on Liberty Tax Services’ prices compared to the average professional tax preparer, the evidence would clearly force this factor to fall in favor of the plaintiff. Liberty Tax Service has a basic tax preparation rate of only $69.00, while the average professional tax preparer charges an average of $129.00 for similar services. This distinction would logically prove that that Liberty Tax Service maintains a lower consumer sophistication than the average professional tax preparer, leading to the conclusion that their consumer’s would be more likely to be confused by the presence of similar marks. Therefore, this would result in the fourth of eight factors being found in favor of the plaintiff.  

CONCLUSION 

If the plaintiffs applied the arguments above in their Amended Complaint, which regard the second element of the Rogers Test, and further, the Polaroid factors, it would demonstrate that the plaintiff’s display of confusion is indeed plausible. Because such compelling arguments would tilt the scale in favor of the plaintiff, Liberty Tax Service, the Lanham Act would most likely be implicated. Therefore, this case may have concluded in a completely different verdict at this stage of litigation, supporting the plaintiff, rather than the creators of television series.  

1. Introduction to Generative AI and Deepfakes 

The advent of generative Artificial Intelligence (AI) and deepfake technology marks a new era in intellectual property law, presenting unprecedented challenges and opportunities. As these technologies evolve, their creations blur the lines between reality and fiction, escalating the risk of consumer deception and diluting brand values. Deepfakes, a fusion of the words ‘deep learning’ and ‘fake,’ stand at the forefront of this revolution. These ultra-realistic synthetic media replace a person’s image or voice with someone else’s likeness, typically using advanced artificial intelligence. Relying on deep learning algorithms, a subset of AI, deepfakes employ techniques like neural networks to analyze and replicate human facial and vocal characteristics with stunning accuracy. The result is a fabricated version of a video or audio clip that is virtually indistinguishable from the original. 

2. Broad Applications and Challenges of Deepfakes 

The spectrum of deepfake applications is vast, encompassing both remarkable prospects and significant risks. On the positive side, this technology promises to revolutionize entertainment and education. It can breathe life into historical figures for educational purposes or enhance cinematic experiences with unparalleled special effects. However, this technology’s downside reveals consequences, particularly for businesses and brands. Generative AI and deepfakes possess the potential to create highly convincing synthetic media, obfuscating the line between authentic and fabricated content. This capability poses substantial risks for consumer deception and brand damage.  

When consumers encounter deepfakes featuring well-known trademarks, it not only challenges the authenticity of media but also erodes the trust and loyalty brands have cultivated over the years. This impact on consumer perception and decision-making is central to understanding the full implications of AI on trademark integrity, as it leads to potential deception and undermines the critical connection between trademarks and consumer trust. This dual nature of deepfakes as both a tool for creative expression and a source of potential deception underscores the complexity of their impact on intellectual property and consumer relations. 

3. Trademark and Brand Identity in the Context of AI 

As generative AI introduces opportunities on the one hand, risks abound regarding consumer deception. This direct threat to perception highlights trademarks’ growing vulnerability. At the heart of branding and commerce lies the trademarks, distinguishing one business from another. They are not just mere symbols; they represent the core identity of brands, extending from distinctive names and memorable phrases to captivating logos and designs. When consumers encounter these marks, they do not just see a name or a logo; they connect with a story, a set of values, and an assurance of quality. This profound connection underscores the pivotal role of trademarks in driving consumer decisions and fostering brand loyalty. The legal protection of these trademarks is governed by the Lanham Act, which offers nationwide protection against infringement and dilution. Infringement occurs when a mark similar to an existing trademark is used, potentially confusing consumers about the origin or sponsorship of a product. Dilution, on the other hand, refers to the weakening of a famous mark’s distinctiveness, either by blurring its meaning or tarnishing it through offensive use. 

However, the ascent of generative AI and deepfake technology casts new, complex shadows over this legal terrain. The challenges introduced by these technologies are manifold and unprecedented. While it was once straightforward to distinguish between intentional and accidental use of trademarks, the line is now increasingly blurred. For instance, when AI tools deliberately replicate trademarks to deceive or dilute a brand, it is a clear case of infringement. However, the waters are muddy when AI, through its intricate algorithms, unintentionally incorporates a trademark into its creation. Imagine an AI program designed for marketing inadvertently including a famous logo in its output. This scenario presents a dilemma where the line between infringement and innocent use becomes indistinct. The company employing the AI might not have intended to infringe on the trademark, but the end result could inadvertently imply otherwise to the consumer. 

This new landscape necessitates a reevaluation of traditional legal frameworks and poses significant questions about the future of trademark law in an age where AI-generated content can replicate real brands with unnerving precision. The challenges of adapting legal strategies to this rapidly evolving digital environment are not just technical but also philosophical, calling for a deeper understanding of the interplay between AI, trademark law, and consumer perception. 

4. Legal Implications and Judicial Responses 

The Supreme Court’s decision in Jack Daniel’s Properties, Inc. v. VIP Products LLC significantly sets a key precedent regarding fair use defenses in the age of AI. This case, focusing on a dog toy mimicking Jack Daniel’s whiskey branding, highlights the tension between trademark protection and First Amendment rights. 

Although the case did not directly address AI, its principles are crucial in this field. For both trademark infringement and dilution claims, the Court narrows the boundaries of fair use, particularly in cases where an “accused infringer has used a trademark to designate the source of its own goods.” The Court also limited the scope of the noncommercial use exclusion to the dilution claims, stating that it “cannot include… every parody or humorous commentary.” This narrower scope of fair use makes it tricky for AI content users to navigate fair use defenses when parodying trademarks, where the lines between illegal use, parody, and unintentionally confusing consumers about endorsement or sponsorship may blur.  

This ruling has direct repercussions for AI models generating noncommercial comedic or entertainment content featuring trademarks. Even if AI-created content is noncommercial or intended as parody, it does not automatically qualify as fair use. If such content depicts or references trademarks in a way that could falsely suggest sponsorship or source affiliation, then claiming fair use becomes extremely difficult. Essentially, the noncommercial nature of AI-created content offers little protection if it uses trademarks to imply an incorrect association or endorsement from the trademark owner. 

As such, AI developers and companies must be cautious when depicting trademarks in AI-generated content, even in noncommercial or parodic contexts. The fair use protections may be significantly limited if the content falsely suggests a connection between a brand and the AI-generated work. 

In this light, AI-generated content for marketing and branding requires meticulous consideration. AI Developers must ensure their AI models do not generate contents that incorrectly imply a trademark’s source or endorsement. This necessitates thorough review processes and possibly adapting algorithms to prevent any false implications of source identification. At the same time, the users of the AI technology for branding, marketing or content creation need to employ stringent review processes of how trademarks are depicted or referenced to ensure their creations do not inadvertently infringe upon trademarks or mislead consumers about the origins or endorsements of products and services. With AI’s capacity to precisely replicate trademarks, the potential for unintentional infringement and consumer deception is unprecedented. 

This evolving landscape calls for a critical reevaluation of existing legal frameworks. Though robust in addressing the trademark issues of its time, the Lanham Act was conceived in an era before the emergence of digital complexities and AI advancements we currently face. The Court’s ruling in Jack Daniel’s case could influence future legislation and litigation involving AI-generated content and trademark issues. Today, we stand at a critical point where the replication of trademarks by AI algorithms challenges our traditional understanding of infringement and dilution. Addressing this requires more than mere amendments to existing laws; it calls for a holistic overhaul of legal frameworks. This evolution might involve new legislation, innovative interpretations, and an adaptive approach to defining infringement and dilution in the digital age. The challenge is not just to adapt to technological advancements but to anticipate and shape the legal landscape in a way that balances innovation with the need to protect the essence of trademarks in a rapidly changing world. 

5. Right of Publicity and Deepfakes 

Deepfakes and similar AI fabrications pose risks to not just trademarks but also individual rights, as the right of publicity shielding personal likenesses confronts the same consent and authenticity challenges in an era of scalable deepfake identity theft. The concept of the right of publicity has gained renewed focus in the age of deepfakes, as exemplified by the unauthorized use of Tom Hanks’ likeness in a deepfake advertisement. This case serves as a potent reminder of the emerging challenges posed by deepfake technology in the realm of intellectual property rights. California Civil Code Section 3344, among others, protects individuals from the unauthorized use of their name, voice, signature, photograph, or likeness. However, deepfakes, with their capability to replicate a person’s likeness with striking accuracy, raise complex questions about consent and misuse in advertising and beyond. 

Deepfakes present a formidable threat to both brand reputation and personal rights. These AI-engineered fabrications are capable of generating viral misinformation, perpetuating fraud, and inflicting damage on corporate and personal reputations alike. By blurring the lines between truth and deception, deepfakes undermine trust, dilute brand identity, and erode the foundational values upon which reputations are built. The impact of deepfakes on brand reputation is not a distant concern but a present and growing one, necessitating vigilance and proactive measures from individuals and organizations. The intricate dynamics of consumer perception, influenced by such deceptive technology, underscore the urgency for a legal discourse that encompasses both the protection of trademarks and the right of publicity in the digital age. 

6. Additional Legal and Industry Perspectives 

While the complex questions surrounding AI, deepfakes, and trademark law form the core of this analysis, the disruptive influence of these technologies extends across sectors. The latest widespread dissemination of explicit AI-generated images of Taylor Swift serves as a stark example of the urgent need for regulatory oversight in this evolving landscape, particularly highlighting the implications for the entertainment industry. The entertainment industry, particularly Hollywood, is another sphere significantly impacted by AI advancements. The ongoing discussions, notably during the  SAG-AFTRA strike, highlight the critical issues of informed consent and fair compensation for actors whose digital likenesses are used. The use of generative AI technologies, including deepfakes, in creating digital replicas of actors raises crucial questions about intellectual property rights and the ethical use of such technologies in the industry. 

The legal and political landscape is also adapting to the challenges posed by AI and deepfakes. With the 2024 elections on the horizon, the Federal Election Commission is in the preliminary phases of regulating AI-generated deepfakes in political advertisements, aiming to protect voters from election disinformation. Additionally, legislative efforts such as the introduction of the No Fakes Act by a bipartisan group of senators mark significant steps toward establishing the first federal right to control one’s image and voice against the production of deepfakes, essentially the right of publicity. 

Moreover, the legislative activity on AI regulation has been notable, with several states proposing and enacting laws targeting deepfakes as of June 2023. President Biden’s executive order in October 2023 further exemplifies the government’s recognition of the need for robust AI standards and security measures. However, the disparity between the rapid progression of AI technology and the comparatively sluggish governmental and legislative response is evident, as shown by the limited scope of interventions like President Biden’s executive order. This order, which includes the implementation of watermarks to identify AI-generated content, signals a move toward a more regulated AI environment, although the tools to circumvent these measures by removing watermarks are readily available. The order marks a step toward creating a more rigorous environment for AI development and deployment, but it also hints at the potential for the development of tools designed to undermine such security measures. These developments at the industry, legal, and political levels reflect the multifaceted approach required to address the complex issues arising from the intersection of AI, deepfakes, intellectual property, and personal rights. 

7. Ongoing Challenges and Future Direction 

The ascent of generative AI and synthetic media ushers in a complex new era, posing unprecedented challenges to intellectual property protections, consumer rights, and societal trust. As deepfakes and similar fabrications become indistinguishable from reality, risks of mass deception and brand dilution intensify. Trademarks grapple with blurred lines between infringement and fair use while publicity rights wrestle with consent in an age of identity theft. 

Given the potency of deepfakes in shaping narratives, the detection of such content is essential. A number of technologies have shown promise in recognizing deepfake content with high accuracy, particularly machine learning algorithms, proving effective at spotting these AI-generated videos by analyzing facial and vocal anomalies. Their application in conflict zones is crucial for mitigating the spread of misinformation and malicious propaganda. 

Recent governmental initiatives signal the beginnings of a framework evolution to suit new technological realities. However, addressing systemic vulnerabilities exposed by AI’s scalable distortion of truth demands a multifaceted response. More than mere legal remedies, restoring balance requires ethical guardrails in technological development and usage norms, plus the need for public awareness. 

In confronting this landscape, maintaining foundational pillars of perception and integrity remains imperative, even as inventions test traditional boundaries. Our preparedness hinges on enacting safeguards fused with values that meet this watershed moment where human judgment confronts machine creativity. With technology rapidly outpacing regulatory oversight, preventing harm from generative models remains an elusive goal. But don’t worry. I am sure AI will come up with a solution soon. 

Background: Sephora and ModiFace 

In a market filled with a mixture of new direct-to-consumer influencer brands gaining traction, brick and mortar drug stores providing cheaper options known as “dupes”, and high-end retailers investing in both their online and in stores, one major player dominates: Sephora. Founded in 1970, Sephora is a French multinational retailer of beauty and personal care products. Today, Sephora is owned by LVMH Moët Hennessy Louis Vuitton (“LVMH”) and operates 2,300 stores in 33 countries worldwide, with over 430 stores in America alone.  

LVMH attributes much of Sephora’s success to its “self-service” concept. Unlike its department store competitors who stock beauty products behind a counter, Sephora allows consumers to touch and test is product with the mediation of a salesperson. This transformation of a store to an interactive experience underscores Sephora’s main value proposition: providing customers with a unique, interactive, and personalized shopping experience.¹ Keeping with its customer experience-centric business model, Sephora has utilized technology to continue providing its customers with a personalized beauty experience.  

The tension created by two separate growing marketplaces puts significant pressure on Sephora to replicate the online shopping experience in-store and vice versa. For make-up, having a perfect complexion match for face products and flattering color of lipstick and blush requires an understanding of the undertones and overtones of the make-up shades. Typically, this color match inquiry is what makes or breaks the sale—if a shopper is not confident the make-up is a match, they are less likely to purchase. To address this friction in the customer purchase journey, Sephora rolled out “Find My Shade,” an online tool designed to help shoppers find a foundation product after inputting their preferences and prior product use. This tool provides the in-store feel of viewing multiple products at once, while providing some assurance on a color match. For Sephora, the online sale provides ample customer data: which products were searched, considered, and ultimately purchased all against a backdrop of a user’s name, geography, preferences, and purchase history. The resulting customer data is the backbone of Sephora’s digital strategy: facilitating customer purchases online by reducing friction, while mining data to inform predictions on customer preferences.  

In line with its innovative in-store strategy, in 2014 Sephora announced a partnership with Modiface to launch a Visual Artist Kiosk to provide augmented reality mirrors in its brick-and-mortar stores. First introduced in Milan, Sephora sought to make testing make-up easier for customers by simulating makeup products on a user’s face in real time without requiring a photo upload.² To begin their session at the kiosk, users provide their e-mail address and contact information either tied to their pre-existing customer account with Sephora or to provide Sephora with new customer information. Using facial recognition technology, the ModiFace 3-D augmented reality mirror uses a live capture of a user’s face and then shows the user how to apply make-up products overlaid onto the live capture user’s face. This allows users to test thousands of products tailored to the user’s unique features. Without opening a real product, users are able to see whether the product is suitable to their skin tone, thus bringing personalization and tailored options typically available only online to the store while providing Sephora with valuable consumer data. At the end of their use of the ModiFace mirror, the user receives follow-up information about the products tested via the e-mail address provided or via their Sephora account.  

At the time of Visual Artist Kiosk’s introduction to stores in the United States in 2014, Sephora did not need to consider federal privacy laws—there were none to consider. Consumer data privacy laws were in their infancy, with the Federal Trade Commission (FTC) at the helm of most cases aimed to provide consumers protection from data breach and identity theft and to hold corporations accountable to their respective privacy policies.³ Significantly, however, Sephora did not consider the state-specific laws at play. Specifically, Sephora did not consider the Illinois Biometric Information Privacy Act (BIPA) which applied to all Sephora locations in the state of Illinois (IL).  

Issue 

In December 2018, Auste Salkauskaite (Plaintiff) brought a class action suit against Sephora and ModiFace Inc. (Modiface) claiming that both violated the Illinois Biometric Information Privacy Act (BIPA) by using ModiFace’s technology to collect biometric information about customer facial geometry at a Virtual Artist Kiosk in a Sephora store in Illinois. Plaintiff further alleged that her biometric information, cell phone number, and other personal information were collected and disseminated by both Sephora and ModiFace in an attempt for Sephora to sell products to the plaintiff.⁴ Plaintiff further alleged that Sephora did not inform her in writing that her biometrics were being collected, stored, used, or disseminated. Sephora allegedly did not get Plaintiff’s written or verbal consent, provide any notice that Plaintiff’s biometric information was being collected, or if it would be retained and/or sold. In pursuing a class action lawsuit, Plaintiff sought to include individuals who had their biometrics “captured, collected, stored, used, transmitted or disseminated by ModiFace’s technology in Illinois”, with an additional subclass of those who experienced the same treatment from Sephora in Illinois.”⁵ 

BIPA “governs how private entities handle biometric identifiers and biometric information (“biometrics”) in the state of IL.”⁶ By including a private right of action, residents of the state of IL are able to file suit against private entities who allegedly violate the law. In this case, Plaintiff claimed that Sephora and ModiFace violated three provisions of BIPA: 1) requiring a private entity in possession of biometrics to release a publicly accessibly written policy describing its use of the collected biometrics, 2) forbidding a private entity from “collecting, capturing, purchasing, receiving, or otherwise obtaining biometrics without informing the subject that biometrics are being collected and stored,” and 3) “disclosing or disseminating biometrics of a subject without consent.”⁷ 

Response 

In the immediate aftermath of the suit, Sephora did not release any statements on the pending litigation. In Sephora’s answers to the Plaintiff’s complaints filed in January 2019, Sephora denied all claims by 1) pointing to its publicly available privacy statement, and 2) denying taking, collecting, using, storing or disseminating Plaintiff’s biometrics. Specifically, Sephora claimed that by using its mobile application and/or website, users agree to accept Sephora’s terms of service which releases Sephora from liability. This included the Virtual Artist Kiosk, which required users to sign and accept Sephora’s terms of service before prompting users to provide any contact information.  

Sephora and the Plaintiffs (once class action status was granted) reached a settlement agreement in December 2020, which allowed for anyone who interacted with the Virtual Artist Kiosk in a Sephora store in IL since July 2018 to file a claim for a share of the settlement—which allows for claimants to get up to $500 each. As of April 2020, 10,500 notices were sent to potential claimants. Hundreds of claims were filed by potential class members, which could result in just under $500,000 in total claims. Sephora has never officially commented on the suit, despite some media coverage in IL.⁸ 

ModiFace, on the other hand, successfully moved to dismiss the claim for lack of personal jurisdiction in June 2020. The Court reasoned that ModiFace did not purposefully avail itself of the privilege of conducting business in IL. The Court cited a declaration of ModiFace’s CEO which stated that ModiFace never had property, employees, or operations in Illinois and is not registered to do business there. He further stated that ModiFace’s businesses is focused on selling augmented-reality products to beauty brand companies and does not participate in marketing, sales, or commercial activity in Illinois. ModiFace claimed that its business relationship with Sephora did not occur in Illinois, and that Sephora never discussed the use of ModiFace technology in Illinois: there was no agreement in place regarding Illinois and no transmission of biometric information between the companies. Overall, the Court found that Sephora’s use of ModiFace technology in Illinois did not establish minimum contacts.  

Despite the lawsuit, ModiFace was acquired by L’Oreal in March 2018. L’Oreal is the world’s biggest cosmetics company, and, unlike Sephora, designs, manufactures, and sells its own products. L’Oreal and ModiFace worked together for about seven years before the acquisition. Like Sephora, L’Oreal ramped up investment in virtual try-on technology in an effort to decrease customer barriers to purchase. Since the acquisition, L’Oreal’s Global Chief Digital Officer has said that conversion rates from search to purchase has tripled.(citation)? At the time of the ModiFace acquisition, L’Oreal spent about 38% of its media budget on digital campaigns like virtual try-one. It’s estimated that this investment has grown significantly as L’Oreal strategizes around minimizing friction in the customer experience. More recently, Estee Lauder was also sued for alleged violation of BIPA for collecting biometric data via virtual “try-on” of make-up through a similar technology as ModiFace.⁹  

Lessons Learned for Future: CCPA and Beyond 

Sephora’s data privacy legal woes have ramped up significantly since the BIPA lawsuit in 2018. On August 24, 2022, California Attorney General Rob Bonta announced a settlement resolving allegations that the company violated the California Consumer Privacy Act (CCPA). The Attorney General alleged that Sephora failed to disclose to consumers that it was selling their personal information, failed to process user request to opt out of sale, and did not remedy these violations within 30 days after being alerted by Attorney General, as allowed per the CCPA. The terms of the settlement required Sephora to pay $1.2 million in penalties and comply with injunctive terms in line with its violations including updating its privacy policy to include affirmative representation that it sells data, provide mechanisms for consumers to opt out of the sale of their personal information, conform to service provider agreements in line with CCPA’s requirements and provide states reports to the Attorney General documenting progress.  

Sephora’s settlement is the first official non-breach related settlement under the CCPA. Many legal analysts argue that the California Office of the Attorney General (OAG) intends to be more aggressive in enforcing CCPA, which they are signaling in a significant manner via their settlement with Sephora. Specifically, the OAG is expected to focus on businesses that engage in sharing or selling of information to third parties for the purpose of targeting advertising.¹⁰ Importantly, under the California Privacy Rights Act (CPRA) which goes into effect on January 1, 2023, companies will no longer benefit from the 30-day notice to remedy their alleged violations.  

Like the BIPA lawsuit, Sephora did not make any official statements on the CCPA settlement. Sephora’s privacy policy is regularly updated, however, signaling the company’s attention to the regulations set forth by CCPA minimally.¹¹ In 2022, Sephora saw revenues grow 30%, with a significant rebound in in-store activity, indicating that Sephora customers nationwide have not been deterred by its privacy litigation woes. As Sephora continues to innovate its in-store experience, it must continue to keep a watchful eye on state-specific regulation as Colorado and Virginia launch their own data privacy laws in the near future.  

1. Introduction 

Due to a shortage of mental health support, AI-enabled chatbots offer a promising way to help children and teenagers address mental health issues. Users often view chatbots as mirroring human therapists. However, unlike their human therapist counterparts, mental health chatbots are not obligated to report suspected child abuse. Legal obligations could potentially shift, necessitating technology companies offering these chatbots to adhere to mandated reporting laws. 

2. Minors face unprecedented mental health challenges 

Many teenagers and children experience mental health difficulties. These difficulties include having trouble coping with stress at school, depression, and anxiety. Although there is a consensus on the harms of mental illness, there is a shortage of care. An estimated 4 million children and teenagers do not receive necessary mental health treatment and psychiatric care. Despite the high demand for mental health support, there are approximately only 8300 child psychiatrists in the United States. Mental health professionals are overburdened and unable to provide enough support. These gaps in necessary mental health care provide an opportunity for technology to intervene and support the mental health of minors.   

3. AI-enabled chatbots offer a mental health solution 

AI-enabled chatbots offer mental health services to minors and may help alleviate deficiencies in health care. Technology companies design AI-enabled mental health chatbots to facilitate realistic text-based dialogue with users and offer support and guidance. Over forty different kinds of mental health chatbots exist and users can download them from app stores on mobile devices. Proponents of mental health chatbots contend the chatbots are effective, easy to use, accessible, and inexpensive. Research suggests some individuals prefer working with chatbots instead of a human therapist as they feel less stigma asking for help from a robot. There are numerous other studies assessing the effectiveness of chatbots for mental health. Although the results are positive for many studies, the research concerning the usefulness of mental health chatbots is in its nascent stages. 

Mental health chatbots are simple to use for children and teenagers and are easily accessible. Unlike mental health professionals who may have limited availability for patients, mental health chatbots are available to interact with users at all times. Mental health chatbots are especially beneficial for younger individuals who are familiar with texting and interacting with mobile applications. Due to the underlying technology, chatbots are also scalable and able to reach millions of individuals. Finally, most mental health chatbots are inexpensive or free. The affordability of chatbots is important as one of the most significant barriers to accessing mental health support is its cost. Although there are many benefits of mental health chatbots, most supporters agree that AI tools should be part of a holistic approach to addressing mental health. 

Critics of mental health chatbots point to the limited research on their effectiveness and instances of harmful responses by chatbots. Research indicates that users sometimes rely on chatbots in times of mental health crises. In rare cases, some users received harmful responses to their requests for support. Critics of mental health chatbots are also concerned about the impact on teenagers who have never tried traditional therapy. The worry is that teenagers may disregard mental health treatment in its entirety if they do not find chatbots to be helpful. It is likely too early to know if the risks raised by critics are worth the benefits of mental health chatbots. However, mental health chatbots offer a promising way to ease the shortage of mental health professionals.  

4. The law may evolve to mandate reporting for AI-enabled therapy chatbots  

AI is a critical enabler for growth across the world and is developing at a fast pace. As a result of its growth, the United States is prioritizing safeguarding against potentially harmful impacts of AI [such as, privacy concerns, job displacement, and a lack of transparency]. Currently, the law does not require technology companies offering mental health chatbots to report suspected child abuse. However, the public policy reasons underlying mandatory reporting laws in combination with the humanization of mental health chatbots indicate the law may require companies to report child abuse.  

Mandatory reporting laws help protect children from further harm, save other children from abuse, and increase safety in communities. In the United States, states impose mandatory reporting requirements on members of specific occupations or organizations. The types of occupations that states require to report child abuse are those whose members often interact with minors, including child therapists. Technology companies that produce AI-enabled mental health chatbots are not characterized as mandated reporters. However, like teachers and mental health counselors, these companies are also in a unique position to detect child abuse.  

Mandatory reporting is a responsibility generally associated with humans. The law does not require companies that design AI-enabled mental health chatbots to report suspected child abuse. However, research suggests that users may develop connections to chatbots in a similar way that they do with humans. Often, companies creating mental health chatbot applications take steps to make the chatbots look and feel similar to a human therapist. The more that users consider AI mental health chatbots to be a person, the more effective the chatbot is likely to be. Consequently, technology companies invest in designing chatbots to be as human-like as possible. As users begin to view mental health chatbots as possessing human characteristics, mandatory reporting laws may adapt and require technology companies to report suspected child abuse.  

The pandemic compounded the tendency for users to connect with mental health chatbots in a human-like way. Research by the University of California illustrates that college students started to bond with chatbots to cope with social isolation during the pandemic. The research found that many mental health chatbots communicated like humans which caused a social reaction in the users. Since many people were unable to socialize outside of their homes or access in-person therapy, some users created bonds with chatbots. The research included statements by users about trusting the chatbots and not feeling judged, characteristics commonly associated with humans.  

As chatbot technology becomes more effective and human-like, society may expect that legal duties will extend to mental health chatbots. The growth in popularity of these chatbots is motivating researchers to examine the impacts of chatbots on humans. When the research on personal relationships between chatbots and users becomes more robust, the law will likely adapt. In doing so, the law may recognize the human-like connection between users and chatbots and require technology companies to abide by the legal duties typically required of human therapists.  

While the law may evolve and require technology companies to comply with the duty to report suspected child abuse, several obstacles and open questions exist. Requiring technology companies that offer AI-enabled mental health chatbots to report suspected child abuse may overburden the child welfare system. Mandatory reporting laws include a penalty for a failure to report which has led to unfounded reporting. In 2021, mandatory reporting laws caused individuals to file over 3 million reports in the United States. However, Child Protection Services substantiated less than one-third of the filed reports indicating the majority of reports were unfounded. False reports can be disturbing for the families and children involved. 

Many states have expanded the list of individuals who are mandated reporters, leading to unintended consequences. Some states extended mandatory reporting laws to include drug counselors, technicians, and clergy. Requiring companies offering mental health chatbots to follow mandatory reporting laws would be another expansion and may carry unintended consequences. For example, companies may over-report suspected child abuse out of fear of potential liability. Large volumes of unsubstantiated reports could become unmanageable and distract Child Protection Services from investigating more pressing child abuse cases.  

Another open question with which the legal system will have to contend is how to address confidentiality concerns. Users of mental health chatbots may worry that a mandatory disclosure requirement would jeopardize their data. Additionally, users may feel the chatbots are not trustworthy and that their statements could be misinterpreted. Such fears may stigmatize those who need help from using mental health chatbots. A decline in trust could have the inadvertent effect of disincentivizing individuals from adopting any AI technology altogether. The legal system will need to consider how to manage confidentiality and unfounded report concerns. Nevertheless, as chatbots become more human-like, the law may require technology companies to comply with duties previously associated with humans.  

6. Conclusion  

AI-enabled mental health chatbots provide a promising new avenue for minors to access support for their mental health challenges. Although these chatbots offer numerous potential benefits, the legal framework has not kept pace with their rapid development. While the future remains uncertain, it is possible that legal requirements may necessitate technology companies to adhere to mandatory reporting laws related to child abuse. Consequently, technology companies should contemplate measures to ensure compliance. 

The monopolization of intellectual property (IP) in the video game industry has increasingly attracted attention as many antitrust-like issues have arisen. These issues are, however, not the prototypical issues that antitrust law is classically concerned with. Rather, supported by the United States’ IP system, video game publishers (VGPs) have appropriated video game IP to construct legal monopolies that exert control over individuals involved in the esports (and greater video game) industry. Particularly, this control disproportionately affects the employees of VGPs who provide live commentary, analysis, and play-by-play coverage of esports competitions (hereinafter “esports casters”) by impeding their ability to freely utilize and monetize their skills and knowledge. This restriction further hampers their capacity to adapt to evolving market conditions and secure stable employment in the field. Moreover, it creates barriers to entry for aspiring casters, thereby diminishing the industry’s diversity of voices and perspectives. 

The Pieces That Make Up the Esports Industry 

First, it is important to understand the structure and landscape of esports. The esports industry can be, generally, equated to any other “traditional” sport. Like in any “traditional” sport, there are players, coaches, team/player support staffs, casters & analysts, and production crews. Excluded from this list are game developers. Game developers are an integral part of the esports industry but have no comparative equivalent in “traditional” sports. From a functional perspective, the esports industry also operates incredibly similarly to “traditional” sports. There are regional leagues, seasons, playoffs, championships, team franchising & partnerships, rules (and referees), salary parameters, player trading & player contracts, practice squads, scrimmages, and sports betting.  

So why are esports casters disproportionately affected if esports and “traditional” sports are structured effectively in the same manner? To answer this, it is important to understand the role legal IP monopolies play in the esports industry. 

The Monopoly Power of IP in the Context of Video Games 

Unlike “traditional” sports, esports exists in a unique landscape where the IP of the entire sport is legally controlled by a single entity, the VGP. As an exploratory example, let’s analogize American football to esports. No entity entirely owns the game of football, but individual entities entirely own video games (like Riot Games for League of Legends and Valorant, Valve for Counter-Strike, and Activision Blizzard for Call of Duty). Moreover, the National Football League (NFL) lacks both the legal and physical capacity to stop or otherwise place conditions on every group that would like to play football, but Riot Games, Valve, and Activision Blizzard are legally within their rights to prevent players or entire leagues from playing their video games. This inherent quality of the esports industry functions as a legal monopoly and makes the industry unlike any other broadcasted competition. 

The Legal IP Monopoly is NOT a Competitive Monopoly 

When people think of monopolies, they typically think of competitive monopolies. Simply put, competitive monopolies are created when a single seller or producer assumes a dominant position in a particular industry. However, the monopolies VGPs have created are limited legal monopolies and thus are not the monopolies that antitrust law is concerned with. 

The precise distinction between the two monopolies (and their associated governing legal frameworks) is as follows. Antitrust law promotes market structures that encourage initial innovation with a competitive market, while IP law encourages initial innovation with the asterisk of limited exclusivity. More specifically, antitrust law enables subsequent innovation by protecting competitive opportunities beyond the scope of an exclusive IP right. When competitive opportunities are not present (i.e. a competitive monopoly has been created), antitrust law steps in to reestablish competition. Contrarily, IP law enables subsequent innovation by requiring disclosures of the initial innovation. The nature of these disclosures limit the scope of the control possessed by any particular holder of an IP right. What this means is that IP law provides narrower, but legal monopoly power over a particular innovation. 

While the above discussion is patent-focused, it is equally applicable to businesses that rely more heavily on copyright and trademark. Nevertheless, VGPs rely on all forms of IP to construct a comprehensive IP wall around their respective video game titles. 

Are VGPs’ Legal Monopolies Harmful? 

Because the legal monopoly is not one that antitrust law is concerned with, there is no law or governing body investigating or overseeing the monopoly-like practices and problems created by VGPs. As a result, these issues have been deemed as intrinsic characteristics of the esports industry, limiting the ways in which individuals can seek remedies. While there have been isolated wins related to equal pay and discrimination, there is yet to be any comprehensive attention given to the power imbalance of this industry. What this leads to is issues of job mobility and skill transferability for esports casters. 

Why Only Esports Casters? 

Game developers and production crews aren’t as affected by the job mobility and skill transferability issues simply because the skills required for their respective roles are easily transferable to other industries. A game developer who works on character design, can move to the film industry and work on CGI. Similarly, a camera operator for North American Valorant competitions can go be a camera operator for Family Feud. For players, their employment is controlled by the partnered / franchised teams and not the VGPs. As it is in “traditional” sports, players are free to move within and between the leagues as their contracts permit. 

Esports casters are different though. In professional football, casters, while well versed in the game of football, have substantial opportunities for job mobility if a particular situation is unfavorable. The reason being relates back to the NFL’s inability to monopolize the sport of football, meaning other football leagues can exist outside of the NFL. What this means is not only are football casters capable of transferring their skills within the NFL (such as Al Michaels’ move from NBC to Amazon), but football casters can also move to other leagues (like NCAA Football, Indoor Football, and the XFL). Comparatively, this is simply not an option for esports casters. Because VGPs are able to create a legal IP monopoly around a particular game (making them the single source and sole employer for esports casters of that respective game), they can completely control the leagues and broadcasts associated with their games. The economics of this makes it so VGPs can underpay their esports casters because (1) there is no other league that covers the same game they cast and (2) while possible, transitioning from casting one video game to another is not easy (think a football commentator becoming a basketball commentator). As a result, VGPs can create an exploitative employment structure in which esports casters are not treated in accords with the value they provide. This leads to barriers to entry for new casters, a lack of diversity in the industry, and challenges for existing casters to adapt to changing market conditions. 

Possible Solutions 

Esports casters’ ability to monetize their skills and knowledge is often limited by the exclusive use of IP rights by VGPs. To resolve this, a careful balance must be struck between IP rights and the livelihoods of individuals in the esports industry, including casters. One possible solution could be to consider a union-like structure that advocates for casters. This solution would give esports casters the opportunity to consolidate pay information, standardize contractual obligations, and voice their concerns about the structure of the esports industry. While the implementation of such an organization would be challenging considering the novel, underdeveloped, or constantly fluctuating nature of the industry, there are already many advocates in esports that are pushing for better compensation, inclusivity, and benefits for casters and analysts. 

Even though progress is slow, the industry is improving. Hopefully with these efforts, the esports industry can become fairer and more inclusive than other “traditional” sports. Nonetheless, the only certainty moving forward is that the legal IP monopolies surrounding video games are not going anywhere. 

Companies Face Massive Biometric Information Privacy Act (BIPA) Allegations with Virtual Try-On Technology 

Virtual try-on technology (“VTOT”) allows consumers to use augmented reality (“AR”) to see what a retailer’s product may look like on their body. By providing the retailer’s website access to their device’s camera, consumers can shop and try on products from the comfort of their home without ever stepping into a brick-and-mortar storefront. Retailers provide customers the option to virtual-try consumer goods through their website, app, or through social media filters like Instagram, Snapchat, and TikTok. While virtual try-on emerged in the early 2010s, the COVID-19 pandemic spurred its growth and adoption amongst consumers. Retailers, however, have seen a recent uptick in lawsuits due to biometric privacy concerns of virtual-try on technology, especially in Illinois. In 2008, Illinois passed the Biometric Information Privacy Act (“BIPA”), one of the strongest and comprehensive biometric privacy acts in the country.  

This blog post will explore current lawsuits in Illinois and the Seventh Circuit that could impact how retailers and consumers use virtual-try on technology, as well as the privacy and risk implications of the technology for both groups.  

Background on Virtual Try-On 

From trying on eyeglasses to shoes, virtual try-on technology allows consumers an immersive and fun opportunity to shop and visualize themselves with a product without ever leaving their homes. Fashion brands often use virtual try-on technology to enhance consumer experiences and find that it may positively affect purchase decisions and sales. By providing customers with the opportunity to shop from home, customers may be less likely to return the item, since they are more likely to pick the correct product the first time through the enhanced virtual-try on experience. With revenue in the AR and VR market expected to exceed $31 billion dollars in 2023 and one-third of AR users having used the technology to shop, brands are responding to the growing demand for AR and virtual try-on.  

Although the pandemic really drove brands to grow their virtual try-on and AR offerings, brands have used virtual try-on for many years prior. Sephora launched an augmented reality mirror back in 2014. Maybelline allowed consumers to virtually try on nail polish. In the summer of 2019, L’Oreal Group partnered with Amazon to integrate ModiFace, the company’s AR and artificial intelligence (“AI”) company, into Amazon’s marketplace. The pandemic only pushed brands to grow those offerings.  

By mid-2021, social media and tech brands expanded their AR offerings to cash in on the increasing role that virtual try-on has on consumers’ purchase decisions. Perfect Corp., a beauty technology company, integrated with Facebook in 2021 to expand the platform’s AR offerings specifically geared towards beauty. The integration allows Facebook to make it easier and cheaper for brands and advertisers to “integrate their catalogs with AR.” The integration expanded who could use Meta’s platforms for AR-enhanced shopping since any merchant who uses Perfect Corp. could  advantage of Facebook’s Catalog, AR-enabled advertisements, and Instagram Shops. Perfect Corp.’s CEO Alice Chang wrote in the announcement:  

“There’s no denying the impact that social media platforms like Instagram continue to play in the consumer discovery and shopping journey. This integration underlines the importance of a streamlined beauty shopping experience, with interactive AR beauty tech proven to drive conversion and enhance the overall consumer experience.”  

That same week, Facebook, now Meta, announced their integration with Perfect Corp. and later announced plans to integrate ModiFace into its new advertising formats. In addition, Meta’s Instagram also partnered with L’Oréal’s ModiFace. With the swipe of a button, consumers on Instagram can try on new lipsticks and then purchase the product immediately within the app. The expansion of AR features on Meta’s platforms makes it seamless for consumers to shop not only without leaving their home and without leaving the app.  

Outside of Meta, Snapchat offers consumers the chance to use various lenses and filters, including the AR shopping experiences. In 2022, Nike sponsored its own Snapchat lens to allow consumers to try on and customize their own virtual pair of Air Force 1 sneakers. Consumers could swipe through several colors and textures. Once satisfied, consumers could then select “shop now” to purchase their custom Nike Air Force 1s instantaneously.  

Rising Biometric Concerns and Lawsuits  

While demand for AR and virtual try-on is growing, the innovative technology does not come without major concerns. Brands like Charlotte Tilbury, Louis Vuitton, Estee Lauder, and Christian Dior have been slapped with class actions lawsuits in Illinois and the Seventh Circuit for violating BIPA.  

According to the American Civil Liberties Union (“ACLU”) of Illinois, BIPA requires that private companies: (1) inform the consumer in writing of the data they are collecting and storing, (2) inform the consumer in writing regarding the specific purpose and length of time that the data will be collected, stored, and used, and obtain written consent from the consumer. Additionally, BIPA prohibits companies from selling or profiting from consumer biometric information. The Illinois law is considered to be one of the most stringent biometric privacy laws in the country and stands to be one of the only laws of its kind “to offer consumers protection by allowing them to take a company who violates the law to court.” BIPA allows consumers to recover up to $1,000 of liquidated damages or actual damages per violation, whichever is greater, in addition to attorneys’ fees and expert witness fees. 

In November 2022, an Illinois federal judge allowed a BIPA lawsuit to move forward against Estee Lauder Companies, Inc. in regards to their Too Faced makeup brand. The plaintiff alleges that the company collected her facial-geometry data in violation of BIPA when she used the makeup try-on tool available on Too Faced’s website. Under Illinois law, a “violation of a statutory standard of care is prima facie evidence of negligence.” Kukovec v. Estee Lauder Companies, Inc., No. 22 CV 1988, 2022 WL 16744196, at *8 (N.D. Ill. Nov. 7, 2022) (citing Cuyler v. United States, 362 F.3d 949, 952 (7th Cir. 2004)). While the judge ruled that the plaintiff did not sufficiently allege recklessness or intent, he allowed the case to move forward because the plaintiff “present[ed] a story that holds together,” and did more than “simply parrot the elements of a BIPA claim.” The judge found that it seemed reasonable to infer that the company had to collect biometric data for the virtual try-on to work.  

In February 2023, Christian Dior was able to find a BIPA exemption, which allowed a class action lawsuit filed against them to be dismissed. Christian Dior offered virtual try-on for sunglasses on their website. According to the lead plaintiff, the luxury brand failed to obtain consent prior to capturing her biometric information for the virtual-try on offering violating BIPA. The judge, however, held that the BIPA general health care exemption applied to VTOT for eyewear, including nonprescription sunglasses offered by consumer brands. BIPA exempts information captured from a “patient” in a “health care setting.” Since BIPA does not define these terms, the judge referred to Merriam-Webster to define the terms. Patient was defined as “an individual awaiting or under medical care and treatment” or “the recipient of any various personal services.” The judge found sunglasses, even nonprescription ones, are used to “protect one’s eyes from the sun and are Class I medical devices under the Food & Drug Administration’s regulations.” Thus, an individual using VTOT is classified as a patient “awaiting . . . medical care” since sunglasses are a medical device that protect vision and VTOT is the “online equivalent” of a brick-and-mortar store where one would purchase sunglasses.  

Further, health care was defined as “efforts made to maintain or restore physical, mental, or emotional well-being especially by trained and licensed professionals.” The judge stated that she had “no trouble finding that VTOT counts as a ‘setting.’” Thus, under BIPA’s general health care exemption, consumers who purchase eyewear, including nonprescription sunglasses, using VTOT are considered to be “patients” in a “health care setting.” 

Both cases show that while virtual try-on may operate similarly on a company’s website, the type of product that a brand is offering consumers the opportunity to “try on” may allow them to take part in exemptions. The “health care” exemption in the Christian Dior was not the first time that a company benefitted from the exemption. BIPA lawsuits can be costly for companies. TikTok settled a $92 million BIPA lawsuit in 2021 with regards to allegations that the social media app harvested biometric face and voice prints from user-uploaded videos. Although that example does not deal with virtual try-on, it exemplifies how diligence and expertise with BIPA requirements can save brands huge settlements. Companies looking to expand into the virtual try-on space should carefully consider how they will obtain explicit written consent (and other BIPA requirements, like data destruction policies and procedures) from consumers to minimize class action and litigation exposure.   

INTRODUCTION

We live in an insatiable society. Across the globe, particularly in the United States, everyone with an Instagram account knows that the “phone eats first.” Young professionals rush to happy hour to post the obligatory cocktail cheers video before they take their first sip. On Friday nights, couples sprint to their favorite spot or the up-and-coming Mediterranean restaurant to quickly snap a picture of the “trio of spreads.” Everyone from kids to grandparents alike are flocking to the nearest Crumbl every Monday to share a picture of the pink box and the half-pound cookie inside. Social media has created a food frenzy. We are more obsessed with posting the picture of a meal than eating the meal itself. While a psychologist might have a negative view of the connection between social media and food, the baker or chef behind the photogenic creation is ecstatic by the way platforms such as Instagram and YouTube bring new patrons into their storefronts.

Due to the rise of social media over the past twenty years, food has become an obsession in our society. Many of us are self-proclaimed “foodies.” Historically, food has not fit neatly into the intellectual property legal scheme in the United States. Trademark, trade dress, and trade secrets are often associated with food, but we rarely see recipes or creative platings receive patent or copyright protection. Intellectual property law is not as enthralled with food as many of us are, but pairing the law with social media may create another way to protect food.

A RECIPE FOR IP PROTECTION

There are four main types of intellectual property: patents, copyrights, trade secrets, and trademarks. The utilitarian and economic perspectives are the two main theories behind intellectual property law. The utilitarian purpose of food is to be consumed. Economically, the food business in America is a trillion-billion-dollar industry. Intellectual property law aims to promote innovation, creativity, and economic growth. All three of these goals can be found within the food industry; however, the recipe for intellectual property protection has yet to be perfected.

Patent law is designed to incentivize and promote useful creations and scientific discoveries. Patent law gives an inventor the right to exclude others from using the invention during the patent’s term of protection. To qualify for a patent, an invention must be useful, novel, nonobvious, properly disclosed, and made up of patentable subject matter. Patentable subject matter includes processes, machines, manufactures, compositions of matter, and improvements thereof. Novelty essentially requires that the patent be new. It is a technical and precise requirement that often creates the biggest issue for inventors. Novelty in the context of food “means that the recipe or food product must be new in the sense that it represents a previously unknown combination of ingredients or variation on a known recipe.” According to the U.S. Court of Customs and Patent Appeals, to claim protection in food products, “an applicant must establish a coaction or cooperative relationship between the selected ingredients which produces a new, unexpected, and useful function.”A person cannot simply add or eliminate common ingredients, treating them in ways that would differ from the former practice. There are very few patents for food, but common examples include Cold Stone Creamery’s signature Strawberry Passion ice cream cake and Breyer’s Viennetta ice cream cake.

Copyright law affords protection to creative works of authorship that are original and fixed in a tangible medium. Fixation is met “when its embodiment … is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.” The Supreme Court has stated, “that originality requires independent creation plus a modicum of creativity.” Copyrights are not extended to “any idea, procedure, process, system, method of operation, concept, principle, or discovery.” Food, specifically food designs, are typically not eligible “for copyright protection because they do not satisfy the Copyright Act’s requirement that the work be fixed in a tangible medium.” A chef does not acquire rights for being the first to develop a new style of food because this creation is seen as merely ideas, facts, or formulas. Furthermore, shortly after a food’s creation, it is normally eaten, losing its tangible form. Recipes alone are rarely given copyright protection because recipes are considered statements of facts, but “recipes containing other original expression, such as commentary or artistic elements, could qualify for protection.”

Trade secrets are more favorable to the food industry. Traditionally, trade secret law has encompassed recipes. To be a trade secret the information must be sufficiently secret so that the owner derives actual or potential economic value because it is not generally known or readily ascertainable. The owner must make reasonable efforts to maintain the secrecy of the information. It is unlikely that food design, the shape and appearance of food, will be given trade secret protection as “food design presents a formidable challenge to trade secret protection: once the food is displayed and distributed to consumers, its design is no longer secret.” However, certain recipes, formulas, and manufacturing and preparation processes may be protected by trade secret law. Regarding food and intellectual property, trade secrets are probably the most well-known form of IP. Examples of still valid trade secret recipes and formulas include Coca-Cola’s soda formula, the original recipe for Kentucky Fried Chicken, the recipe for Twinkies, and the recipe for Krispy Kreme donuts.

Trademark is the most favorable type of IP protection given to the food industry. Trademarks identify and distinguish the source of goods or services. Trademarks typically take the form of a word, phrase, symbol, or design. Trade dress is a type of trademark that refers to the product’s appearance, design, or packaging. Trade dress analyzes “the total image of a product and may include features such as size, shape, color or color combinations, texture, graphics, or even particular sales techniques.”

Different types of trademarks and trade dress receive different levels of protection. For trademarks, it depends on the kind of mark. Courts determine whether the mark is an inherently distinctive mark, a descriptive mark, or a generic mark. Similarly, trade dress receives different levels of protection depending on whether the trade dress consists of product packaging or product design. In the context of food, ‘the non-functionality of a particular design or packaging is required” for a product to receive protection as trade dress. Some examples of commonly-known trademarks include Cheerios, the stylized emblematic “M” logo from McDonald’s, and the tagline “Life tastes better with KFC.” Food designs that have federally registered trademarks under trade dress include: Pepperidge Farm’s Milano Cookies, Carvel’s Fudgie the Whale Ice Cream Cake, Hershey’s Kisses, General Mills’ Bugles, Tootsie Rolls and Tootsie Pops, and Magnolia Bakery’s cupcakes bearing its signature swirl icing.

SOCIAL MEDIA – THE LAST DEFENSE

When it comes to food, there is no recipe to follow to receive intellectual property protection, but social media can be a way for bakers, chefs, and restauranteurs to be rewarded for their creations and ensure creativity in the food industry. Social media influences the way businesses conduct and plan their marketing strategies. Many businesses use social media to communicate with their audience and expand their consumer base. Social media allows a chef to post the week’s “Specials Menu” to their restaurant’s Instagram, and in a few seconds, anyone who follows that account can post that menu on their account and share it with hundreds if not thousands of people. As noted previously, this single menu would not receive IP protection because it is primarily fact-based, not a secret, is obvious, and is likely not a signifier of the restaurant to the general public. However, the power of social media will bring hundreds of excited and hungry foodies to the business.

Social media alone cannot ensure that another chef or baker won’t reverse engineer the dish featured on the special’s menu, but social media has done what IP cannot. The various social media platforms embody what the framers of the Constitution were trying to accomplish through intellectual property when they drafted Article I centuries ago — the promotion of innovation, creativity, and economic growth. The Constitution states that “Congress shall have power to … promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries….” While there is no indication that the framers ever intended food to be a part of what they knew to be intellectual property, two hundred and fifty years later, it is clear that food is a mainstay in the IP world, even if it does not fit systematically into patents, copyrights, trademarks, or trade secrets. Unfortunately, the law has fallen short when addressing IP protection for the food industry; but, luckily social media has continued to fulfill the goal of intellectual property that the framers desired when it comes to the food industry.

Social media allows others to connect with the satisfying creation and gives chefs the opportunity to be compensated for their work. After seeing the correlation between the Instagram post and the influx of guests, the chef will be incentivized to create more. The chef will cook up another innovative menu for next week, hoping that she will receive the same positive reward again. The food industry is often left out, unable to fit into the scope of IP law, but through social media, chefs and bakers can promote innovation, creativity, and economic growth at the touch of their fingers.

Alessandra Fable is a second-year law student at Northwestern Pritzker School of Law.

Introduction  

In April 2022, someone paid $130,000 for a pair of Nike Dunks. Here’s the kicker – it was for a pair of virtual sneakers. Shelling out five to six figures for a pair of exclusive shoes is not rare in the sneaker world, but paying that much for a pair of virtual kicks is unprecedented.

This sale illustrates Nike’s wider strategy in conquering the next frontier of commerce: the metaverse. In 2021, Nike started making strategic investments to grow and protect its brand in the metaverse. First, Nike submitted several trademark applications with the United States Patent and Trademark Office for virtual goods. Second, Nike announced a partnership with Roblox, an online gaming platform, to create a Nike-branded virtual world where gamers can play virtual games and dress their avatar in digital versions of Nike’s products. Third, Nike acquired RTFKT, an organization that creates unique digital sneakers. John Donahoe, Nike’s President and CEO, described the acquisition as “another step that accelerates Nike’s digital transformation and allows us to serve athletes and creators at the intersection of sport, creativity, gaming and culture.”

Nike is not the only brand exploring the metaverse. Other brands are now offering virtual merchandise through NFTs, including other sportswear brands like Asics and Adidas, luxury fashion brands like Hermès and Gucci, and even fast-food chains like Wendy’s and Taco Bell. Despite these companies’ growing activity in the space, the application of current intellectual property protection to branded NFTs is still unclear. A recent complaint filed by Nike against StockX, a popular sneaker resale platform, illustrates this uncertainty. The outcome of this case could determine the scope of trademark protection in the metaverse and will have serious implications on the commercial viability of brands’ significant investments in the space.

The Nike StockX Lawsuit

In February 2022, Nike sued StockX, a popular sneaker resale platform, after StockX began selling Nike-branded NFTs alongside physical Nike sneakers. The complaint, filed in the United States District Court for the Southern District of New York, laid out several causes of action, including trademark infringement. Nike stated that it “did not approve of or authorize StockX’s Nike-branded Vault NFTs. . . Those unsanctioned products are likely to confuse consumers, create a false association between those products and Nike, and dilute Nike’s famous trademarks.”

In its answer, StockX raises two key defenses. First, it claims that its “use of images of Nike sneakers and descriptions of re-sale Nike products in connection with StockX NFTs is nominative fair use. It is no different than major e-commerce retailers and marketplaces who use images and descriptions of products to sell physical sneakers and other goods, which consumers see (and are not confused by) every single day.” Second, StockX raises a first sale defense, arguing that “Nike’s claims are barred, in whole or in part, by the first sale doctrine permitting purchasers of lawfully trademarked goods to display, offer, and sell those good under their original trademark.” Thus, the outcome of the case turns on how courts will apply traditional intellectual property doctrines to more modern trademark issues.

StockX’s Nominative Fair Use Defense

Nominative fair use is an affirmative defense for defendants who use another’s trademark deliberately to refer to that party, for purposes such as advertising, commentary, and news reporting. To raise a successful nominative fair use defense, the user must meet three requirements: “First, the product or service in question must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.”

     StockX can likely meet the first and second requirements but will struggle to meet the third. StockX can argue that it would be difficult to sell the virtual NFT Nike sneaker without using Nike’s trademarked logo and that it is only using the Nike logo as much as reasonably necessary for the consumer to identify the product. As StockX’s argues in its answer, “the image and product name on the Vault NFT play a critical role in describing what goods are actually being bought and sold.” As some have pointed out, the Nike logo “does not appear to be used by StockX separate and apart from its appearance in the photo of the shoes corresponding to the NFT.”

At issue is the third requirement regarding an implied sponsorship or endorsement. StockX’s website includes a disclaimer of any affiliation with the Nike brand, but it is unclear if this adequately safeguards against consumer protection. Nike’s complaint characterizes the disclaimer as “comically and intentionally small” and “difficult to read.” As evidence that the disclaimer does not prevent consumer confusion, Nike points to numerous social media users who expressed uncertainty as to whether Nike endorses, approves, or gets a commission from StockX’s NFT sales. This confusion is further compounded by the fact that Nike sells its own NFTs. Thus, StockX will likely have difficulty in succeeding on its nominative fair use defense.

StockX’s First Sale Defense

The success of StockX’s first sale defense requires a more complex, fact-intensive analysis. The first sale defense establishes that “the right of a producer to control distribution of its trademarked product does not extend beyond the first sale of the product.” Whether or not this rule applies to Nike’s case, however, depends on how the court characterizes the NFT. On one hand, StockX will argue that its NFTs are each tied to the resale of a physical Nike shoe – similar to a receipt –  and thus fall under the first sale doctrine. On the other hand, Nike will argue that the NFTs are standalone, separate products and thus are not protected by the first sale doctrine. To succeed on the trademark infringement claim, Nike must establish that the NFT and the physical shoe are two independent products.

On its website, StockX added a disclaimer in an attempt to address this issue directly, “Please note: the purpose of Vault NFT is solely to track the ownership and transactions in connection with the associated product. Vault NFTs do not have any intrinsic value beyond that of the underlying associated product” (emphasis added). However, this disclaimer does not preclude Nike from demonstrating that there is a separate value and that the shoe and the NFT are independent products.

First, Nike can point to the fact that the NFTs being sold on StockX are generally more expensive than the value of the sneaker itself (even if one accounts for the markup of sneakers that is common in the resale market). Nike points to this divergence in monetary value: “Thus far, StockX has sold Nike-branded Vault NFTs at prices many multiples above the price of the physical Nike shoe.” For example, as of October 25, 2022, the Nike Dunk Low Off-White Lot 50 was on sale for $715. The NFT of that very same shoe, however, was on sale for $8,500. This significant divergence in price suggests that there is an independent economic value of the NFT beyond the ownership of the physical shoe.

Second, Nike can argue that the NFTs are an independent product because NFT ownership gives consumers unique perks. When the program initially launched, StockX’s website explicitly stated that NFT “owners may also receive exclusive access to StockX releases, promotions, events, as a result of ownership.” Since the lawsuit, this language has been removed, likely because it could be used as ammunition by Nike to defeat the first sale defense. But NFT owners still get some exclusive perks. For example, the ownership of the NFT means that StockX will store the physical shoe in their “brand new, climate-controlled, high-security vault” and NFT owners will be able to flip/trade the shoe instantaneously, rather than waiting for the shoes to be shipped or paying shipping fees. The storage and the ability to bypass shipping costs associated with flipping sneakers are benefits that are unique to owners of the NFTs but are unavailable to those who only own the physical show.

Conclusion

The Nike-StockX litigation highlights the uncertainty of how traditional intellectual property law applies to more modern trademark issues. The outcome of the case will have serious implications for how companies can protect their brands in the growing world of virtual commerce.

Jeanne Boyd is a second-year JD student at the Northwestern Pritzker School of Law.

In January 2022, after nearly one hundred years of copyright protection, Winnie-the-Pooh entered the public domain. This blog post will discuss copyright law’s grounding in the Constitution, the story of Winnie-the-Pooh’s copyright, and how the changing landscape of U.S. copyright law has affected this beloved story and the characters contained within it.

Congress’ Power to Enact Federal Copyright Law

Congress’ power to regulate federal copyright law derives from the Constitution. Specifically, Article 1, Section 8, Clause 8 (the “Intellectual Property” Clause) grants Congress the power “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” While this clause grants Congress general powers to govern certain aspects of intellectual property law, it does not actually supply any laws on its own. Instead, acting pursuant to this constitutional authority, Congress can write and enact federal copyright laws.

Congress enacted its first set of federal copyright laws in the late 1700’s. The laws were relatively limited in scope, protecting “books, maps, and charts for only fourteen years with a renewal period of another fourteen years.” Modern copyright laws have since become more expansive, protecting a wider variety of works for longer periods of time.

The copyright laws relevant to Winnie-the-Pooh are: (1) the 1909 Copyright Act, (2) the 1976 Copyright Act, and (3) the 1998 Copyright Term Extension Act. Under all three Acts, an original work of authorship gains copyright protection the moment it is published. The copyright protection immediately grants the author exclusive rights to reproduce, distribute, perform, and display the work. Further, all three Acts permit authors to transfer these rights to third parties, which is often exercised by authors in exchange for royalty income. While these three copyright Acts are very similar in substance, their primary differences relate to the amount of time that authors enjoy these protections.

1. The 1909 Act

Under this Act, works could receive protection for up to 56 years. Upon publication, a work was initially protected for 28 years, and if the copyright was renewed in its 28th year, an additional protection term of 28 years was granted.

2. The 1976 Act

The 1976 Copyright Act made one significant change to the renewal term of works created before 1978; it gave all current copyrights an additional 20 years of protection, for a total of 76 years. Additionally, this Act gave authors an opportunity to terminate any licensing agreements previously made under the 1909 Act.

3. The 1998 Copyright Term Extension Act

The 1998 Copyright Term Extension Act added yet another 20 years to the renewal period of previously copyrighted works, which automatically applied to works “subsisting in their second term between December 31, 1976, and December 31, 1977,” and extended the maximum length of copyright protection to 95 years.

Winnie-the-Pooh’s Copyright

In 1926, Alan Alexander Milne wrote Winnie-the-Pooh, the first of several collections of short stories about a boy named Christopher Robin, his stuffed bear, Winnie-the-Pooh, and their friends in the Hundred Acre Wood. Since the book was published during the 1909 Copyright Act regime, it automatically gained copyright protection upon publication through 1954, and received an additional 28 years of protection because the copyright was renewed. The 1976 Copyright Act further extended Winnie-the-Pooh’s protection through 2001, and the 1998 Copyright Term Extension Act tacked an additional 20 years of subsequent protection. Since the 1998 Act was the final extension of copyright protection, the book’s copyright expired at the end of 2021, causing Winnie-the-Pooh and the characters contained within it to enter the public domain in January 2022.

While these copyright extensions are important, the more interesting aspect of Winnie-the-Pooh’s journey into the public domain pertains to copyright transferability. In 1930, Milne first took advantage of his ability to transfer his copyright protections by signing an agreement with Stephen Slesinger, a “television-film producer, creator of comic-book characters, and pioneer in the licensing of characters for children.” Milne granted Slesinger “exclusive merchandising and other rights on the Pooh works in the United States and Canada.” This license lasted for the entirety of Winnie-the-Pooh’s copyright, which at the time extended through 1982. Slesinger subsequently granted these rights to Walt Disney Productions in 1961, and Milne’s estate also entered into a separate agreement with Disney around the same time. Milne’s agreement with Disney gave Disney nearly all of Pooh’s remaining copyright protections. This left Disney with nearly unrestricted access to use and develop the Winnie-the-Pooh characters into the popular cartoon versions.

The 1976 Copyright Act gave Milne’s estate an opportunity to reevaluate its agreements with Slesinger and Disney, as the Act allowed an author (or his heirs) to terminate a licensing agreement made under the 1909 Act. However, instead of terminating the licensing agreements, Milne’s estate opted to renegotiate its agreement with Disney in 1983 to receive a larger portion of royalties. Other than the royalty payment provisions, the new agreement had nearly identical terms to the old agreement, so Disney retained its nearly exclusive and unrestricted access to Winnie-the-Pooh. The licensing agreement was set to expire when the work entered the public domain, which at the time was less than 20 years away.

However, Milne’s estate in 1983 was unaware that the 1998 Copyright Extension Act would later grant Winnie-the-Pooh an additional 20 years of protection, further extending the duration of the licensing agreement as well as Disney’s exclusive rights to the work. Milne’s estate attempted to terminate the licensing agreement after the 1998 Act took effect, but the language of the 1998 Act only allowed for the termination of licensing agreements made before 1978. Because Disney and Milne executed a new contract in 1983 after renegotiating its terms, Milne’s estate was unable to terminate the agreement and Disney retained nearly exclusive rights to Winnie-the-Pooh until the book entered the public domain in 2022.

What Does This Mean for Pooh?

Now that Milne’s 1926 book has entered the public domain, “the plot, dialogue, and settings in that book are open for future creators,” along with the “appearance and traits” of any characters appearing in that book. This includes Piglet, Eeyore, Rabbit, Kanga, Roo, Owl, and Christopher Robin. Tigger, on the other hand, did not appear until 1928 in The House at Pooh Corner, so he does not enter the public domain until 2024.

While entering the public domain allows “anyone [to] adapt the 1926 book into a play, musical, film, or write a prequel or sequel,” the public does not have free reign to use many of Pooh’s modern characteristics. Any adaptations that Disney made to the character under the licensing agreements, such as giving him his signature red shirt, are still protected as derivative works. As such, Disney can still prevent the public from using its modified, well-known versions of Pooh.

The horror film, Blood and Honey, serves as an example of how creators can take advantage of Pooh’s entry into the public domain. This film, set to be released in 2023, “follows Pooh and Piglet as they go on a rampage after Christopher Robin abandons them for college.” While this film uses characters like Pooh and Piglet and refers to Milne’s original settings, the film refrains from using Disney’s red-shirted, cartoon-like version of Pooh.

Other artists have used their depictions of Pooh to explain and poke fun at copyright’s boundaries. For example, artist Lukey McGarry recently created a comic strip where Pooh refers to Disney’s copyright and jokingly explains to Christopher Robin that, “as long as I don’t put a little red shirt on, I can do as I like.”

How Will Disney Respond?

Though both the horror film and comic strip appear to be staying within the permissible boundaries of public domain, only time will tell if these works and others like them can escape intellectual property challenges brought by Disney. On one hand, Disney might actually benefit from the widespread renewed interest in Milne’s characters and, as a result, may refrain from challenging public use of Pooh. However, given Disney’s longstanding monopoly on Milne’s works, Disney may have trouble relinquishing its control over the characters. As a result, I presume that Disney’s last attempt to retain control over Pooh and his friends is yet to come.

Elisabeth Bruckner is a second-year law student at Northwestern Pritzker School of Law.

Introduction

The Supreme Court’s ruling in Dobbs v. Jackson Women’s Health Organization granted state legislatures the authority to regulate abortion. The Court’s decision quickly led states, such as Texas and Arkansas, to enact trigger bans for the procedure. Prior to the Court’s ruling, data brokers had already begun selling location data for individuals visiting abortion facilities through ordinary apps. This data often provided details to where the individual traveled from and how long they stayed at the facility.

In the wake of Dobbs, concerns have come to light regarding the potential misuse of sensitive personal health data originating from period tracking apps. Questions have arisen concerning whether “femtech” app data can be used to identify and prosecute individuals violating abortion laws. Due to lax federal laws and regulations in the United States, the onus falls on femtech companies to immediately and proactively find ways to protect users’ sensitive health data.

What is “Femtech’?

The term “femtech” was coined in 2016 by Ida Tin, the CEO and co-founder of period tracking app Clue. Femtech refers to health technology directed at supporting reproductive and menstrual healthcare. The femtech industry is currently estimated to have a market size between $500 million and $1 billion. Femtech apps are widely used with popular period-tracking app Flo Health touting more than 200 million downloads and 48 million monthly users.

Apps like Clue, Flo Health, and Stardust allow individuals to record and track their menstrual cycle to receive personalized predictions on their next period or their ovulation cycle. Although femtech apps collect highly sensitive health data, they are largely unregulated in the United States and there is a growing push for a comprehensive framework to protect sensitive health data that the apps collect from being sold or provided to third parties and law enforcement.

Current Regulatory Framework

Three federal agencies have regulatory authority over femtech apps – the Federal Trade Commission (“FTC”), United States Food and Drug Administration (“FDA”), and the Department of Health and Human Services (“HHS”). Their authority over femtech data privacy is limited in scope. Furthermore, while the FDA can clear the apps for contraceptive use, greater focus has been put on the FTC and HHS in regulating femtech. The Health Insurance Portability and Accountability Act (HIPAA), administered by the HHS, fails to protect sensitive health data from being collected and sold, and femtech apps are not covered under the Act. The FTC is currently exploring rules on harmful commercial surveillance and lax data security practices following President Joe Biden’s July 2022 executive order that encourages the FTC to “consider actions . . . to protect consumers’ privacy when seeking information about and provision of reproductive health care services.” The executive order’s definition of “reproductive healthcare services” does not, however, seem to include femtech apps. Thus, a massive gap remains in protecting sensitive health data consumers willingly provide to femtech app who may sell or provide such data to law enforcement or third parties. Femtech apps generally have free and paid versions for users, which makes the issue all the more immediate.

The unease based on potential misuse of health data collected by “femtech” apps heightened following the FTC’s complaint against Flo. The agency alleged the app violated Section 5 of the Federal Trade Commission Act (“FTCA”) by misleading consumers on how it handled sensitive health data. While the app promised to keep sensitive health data private, the FTC found the app was instead sharing this data with marketing and analytics firms, including Facebook and Google. Flo ultimately settled with the FTC, but the app refused to admit any wrongdoing.

FTC Commissioners Rohit Chopra and Rebecca Kelly Slaughter issued a joint statement following the settlement stating that, in addition to misleading consumers, they believed the app also violated the FTC’s Health Breach Notification Rule (“Rule”), which requires “vendors of unsecured health information . . . to notify users and the FTC if there has been an unauthorized disclosure.” The FTC refused to apply the Rule against Flo as such enforcement would have been “novel.” Such disclosures will help users navigate the post-Dobbs digital landscape, especially in light of news reports that law enforcement in certain states has begun to issue search warrants and subpoenas in abortion cases.

There is additional concern regarding femtech app’s potential location tracking falling into the hands of data brokers. The FTC recently charged Kochava, a data brokerage firm, with unfair trade practice under Section 5 of the FTCA for selling consumers’ precise geolocation data at abortion clinics. While Kochava’s data is not linked to femtech, in light of the FTC’s settlement with Flo, concerns of sensitive reproductive health data from femtech apps being sold is not out of the realm of possibility. Despite the FTC announcement on exploring new rules for commercial surveillance and lax data security, experts have expressed concern on whether such rulemaking is best done through the FTC or Congress. This is because the FTC’s rules are “typically more changeable than a law passed by Congress.”

As noted, most femtech apps are not covered under HIPAA nor are they required to comply. HIPAA encompasses three main rules under Title II: the Security Rule, the Privacy Rule, and the Breach Notification Rule. HIPAA is not a privacy bill, but it has grown to “provide expansive privacy protections for [protected health information] (“PHI”).” Due to the narrow definition of covered entity, there is little protection that can be provided to femtech app users under the current structure of HIPAA even though these apps collect health data that is “individually identifiable.”    

Momentum for HIPAA to be amended so femtech may fall within the scope of covered entities may still fall short since HIPAA’s Privacy Rule permits covered entities to disclose protected health information (“PHI”) for law enforcement purposes through a subpoena or court-ordered warrant. While it does not require covered entities to disclose PHI, this permission could be troublesome in states hostile to abortion. Even if HIPAA’s definition of covered entities is expanded, it would still be up to the company to decide whether to disclose PHI to law enforcement. Some femtech companies, though, may be more willing to protect user data and have already begun to do so.

Future Outlook and What Apps Are Doing Post-Dobbs

In September 2022, Flo announced in an email to users that it was moving its data controller from the United States to the United Kingdom. The company wrote that this change meant their “data is handled subject to the UK Data Protection Act and the [General Data Protection Regulation].” Their privacy policy makes it clear that, despite this change, personal data collected is transferred and processed in the United States where it is governed by United States law. While Flo does not sell identifiable user health data to third parties, the company’s privacy policy states it may still share user’s personal data “in response to subpoenas, court orders or legal processes . . . .” While the GDPR is one of the strongest international data privacy laws, it still does not provide United States users with much protection.

In the same update, Flo introduced “anonymous mode” letting users access the app without providing their name, email, or any technical identifiers. Flo said this decision was made “in an effort to further protect sensitive reproductive health information in a post-Roe America.” The FTC, however, states that claims of anonymized data are often deceptive and that the data is easily traceable. Users may still be at risk of potentially having their sensitive health data handed over to law enforcement. Further, research shows femtech apps often have significant shortcomings with respect to making privacy policies easy to read and that users are often unaware of what their consent means.     

 While femtech has the potential to provide much-needed attention to a group often under-researched and underrepresented in medicine, the need to enhance current data privacy standards should be at the forefront for developers, legislators, and regulators. Although femtech companies may be incentivized to sell sensitive health data, their resources may be better spent lobbying for the passage of legislation like the American Data Privacy and Protection Act (“ADPPA”) and My Body, My Data Act otherwise the lack of data privacy measures may turn users away from femtech altogether. While no current reports show that menstruating individuals are turning away from femtech apps, it may be too soon to tell the effects post-Dobbs.

 The ADPPA is a bipartisan bill that would be the “first comprehensive information privacy legislation” and would charge the FTC with the authority to administer the Act. The ADPPA would regulate “sensitive covered data” including “any information that describes or reveals the past, present, or future physical health, mental health, disability, diagnosis, or healthcare condition or treatment of an individual” as well as “precise geolocation information.” ADPAA’s scope would extend beyond covered providers as defined by HIPAA and would encompass femtech apps. The ADPPA would reduce the amount of data available through commercial sources that is available to law enforcement and give consumers more rights to control their data. The Act, however, is not perfect, and some legislators have argued that it would make it more difficult for individuals to bring forth claims against privacy violations. While it is unlikely that Congress will pass or consider ADPAA before it convenes in January 2023, it marks a start to long-awaited federal privacy law discussions.

 On a state level, California moved quickly to enact two bills that would strengthen privacy protections for individuals seeking abortion, including prohibiting cooperation with out-of-state law enforcement regardless of whether the individual is a California resident. Although California is working to become an abortion safe haven, abortion access is costly and individuals most impacted by the Supreme Court’s decision will likely not be able to fund trips to the state to take advantage of the strong privacy laws.

As menstruating individuals continue to navigate the post-Dobbs landscape, transparency from femtech companies should be provided to consumers with regard to how their reproductive health data is being collected and how it may be shared, especially when it comes to a growing healthcare service that individuals are exploring online ­- abortion pills.

Angela Petkovic is a second-year law student at Northwestern Pritzker School of Law.

In August 2022, over two and a half years after the start of the Covid-19 pandemic, Moderna sued Pfizer and BioNTech for patent infringement. Specifically, Moderna claimed that Pfizer and BioNTech used its patented mRNA technology to develop their Covid-19 vaccine. Covid’s swift, widespread, and devastating effects and the urgent need for a vaccine accelerated a typically years-long research and development process into one short year. Although public health and humanitarian aid were undoubtedly at the forefront of vaccine developers’ minds, intellectual property (IP) rights and their economic incentives were a significant factor as well.

In the United States, IP laws regarding patent protection are largely based on utilitarian and economic theories. The monopolistic rights given to patentholders and the typical damages for patent infringement reflect these theoretical foundations. In its complaint, Moderna seeks “fair compensation” for Pfizer’s use of the mRNA technology, essentially a cut of Pfizer’s profits, which could potentially amount to billions of dollars from a period of only two to three years. Despite the billion-dollar vaccine industry, the strong economic bases of patent protection are potentially at odds with promoting scientific innovation. The critical need for worldwide Covid vaccines to save potentially millions of lives underscored whether utilitarianism and economics are always the best rationales for IP. Public policy considerations, including public health and humanitarian aid, may justify at least partial waiver of IP rights in certain circumstances. Even Moderna acknowledged this, professing in its complaint its “belief that intellectual property should never be a barrier” to the vaccine. The company initially pledged not to assert its Covid-19 patent rights against fellow Covid vaccine developers to reduce barriers to global vaccine access. However, billions of dollars in competitors’ profits and an amended pledge later, the biotech industry is now watching an imminent IP battle between pharmaceutical giants. This current situation is unique in many respects, due to not only the scientific, economic, and social significance of the patents at stake, but also the companies’ global reputations as leading medical innovators.

Moderna’s complaint alleges that Pfizer and BioNTech infringed Moderna’s patents on mRNA technology used between 2011 and 2016 in other vaccines. In the company’s press release, Moderna’s CEO also emphasized its prominence in the field of RNA technology and the substantial time and resources used to develop the technology that Pfizer copied. The infringement focuses on the chemical modifications Moderna introduced to mRNA to improve immune system evasion and the lipid nanoparticle formulation used to deliver the modified mRNA.

Like most patent infringement plaintiffs, Moderna has financial stakes as a top priority. Moderna ultimately seeks a portion of Pfizer’s profits from its Covid vaccine, citing Pfizer’s unjust “substantial financial windfall” from its allegedly unauthorized use of Moderna’s technology. Pfizer’s 2021 revenue from its Covid vaccine totaled over $36 billion, and it expects another $32 billion in 2022. Moderna also seeks enhanced treble damages, suggesting willful or bad faith infringement from Pfizer. These are bold claims coming from Moderna, a relatively young company founded in 2010, against the nearly two-century-old industry giant, Pfizer.

This lawsuit demonstrates the utilitarian and economic theories of IP law, particularly patent law, in the United States. Under these theories, patent protection incentivizes invention and innovation by giving the inventor a temporary but strong monopoly on their invention. This monopoly allows the inventor to exclude others from using their information and knowledge without authorization. Information is non-rivalrous and non-excludible and would otherwise fall victim to public goods problems. For example, free riders can wait for someone else to create the invention, and then replicate the invention at a much lower cost. The original inventor would thus be disincentivized to disclose their invention for fear of losing valuable profits in a market saturated with copycats. Patent rights prevent these detriments of information as a public good by giving the inventor legal control over dissemination of the information. Applying this theory here, Moderna would argue that its previous patents represented a tradeoff that the company would publicly disclose its valuable information on mRNA technology. In return, Moderna would receive a legally protected right to exclude others, including Pfizer, from using the information.

These economic theories are based on patent rights’ essential function to tightly control information use; however, free dissemination of information is critical for scientific research, including vaccine development. The utilitarian foundations of U.S. IP law may not align with vaccine research goals, particularly in urgent pandemic circumstances. In these time-sensitive situations, allowing simultaneous inventors access to each other’s research developments may best serve the public interest. Some critics even argue that patents and economic incentives are entirely unneeded for vaccine research and development. The highly specialized technical know-how required and the complex regulatory framework for entering the vaccine market naturally weed out copycat competitors and create a monopoly position without patent rights. Further, vaccine manufacturers are in a favorable position selling a product whose demand reliably far outstrips supply.

Despite this view, patent rights will likely still play a role in pandemic vaccine development. However, this role may be more detrimental than beneficial to inventors and ultimately consumers. Although an inventor would prefer to keep a tightly guarded monopoly on their lucrative vaccine technology, this economically driven IP strategy may exacerbate the pandemic. Research responses to pandemics may require inventors to relinquish potential profits from strong information monopolies in exchange for rapid information sharing to encourage life-saving follow-on innovation. Enforcing pandemic research patent rights can significantly limit advancements in vaccine development, the opposite of the intended goal to serve public health.

Moderna recognized this dilemma and in October of 2020, it initially pledged to not enforce its IP rights related to Covid-19 vaccines during the pandemic. Considering the myriad economic benefits of IP rights, this pledge may have seemed financially counterproductive for Moderna. However, it demonstrated that Moderna also knew of the unprecedented public health and policy concerns at stake and did not want to deter other researchers from simultaneously developing Covid vaccines. However, in March 2022, Moderna updated its IP pledge, instead committing to never enforcing its Covid-19 patents against 92 middle- and low-income countries, thus making this lawsuit possible. It remains a question whether the original October 2020 pledge caused any parties to reasonably rely on Moderna’s assurance and whether there may be legal contract obligations to Pfizer or other vaccine developers. Regardless of potential contract law disputes, the urgent pandemic needs for Covid vaccines drove Moderna to its “Global Commitment to Intellectual Property Never Being a Barrier to COVID-19 Vaccine Access” cited in its complaint. Money and economic benefits are a significant motivating factor in the lawsuit, but the public health and humanitarian considerations underly the policy concerns of the claim.

The Covid pandemic forced the IP field, the scientific community, and the global public health sector to reconsider the role of economic and utilitarian theories in patent rights. Although innovators deserve financial rewards for being the first to develop and license their vaccines, the intended widespread benefit of this biotechnology can be significantly limited with overly restrictive information monopolies. Due to the scope and effects of Covid, vaccines have taken a new meaning, representing the potential return to the pre-pandemic “normal” and restoring society and the economy. Thus, the patent rights for Covid vaccines might have more than just economic value; they also bring reputational influence of goodwill and societal stabilization. Other areas of IP, such as copyright and trademark law, are less rooted in utilitarianism and are partly based on the personhood theory, which relates the IP to the creator’s sense of self and identity. Patent law is less concerned with traditional expressive elements of creation. However, the humanitarian nature of Covid vaccine development and distribution may implicate some personhood concerns of distributive justice and fairness. During such global health crises, reducing some of IP’s economic barriers to information and focusing on the personal effects on vaccine distribution may better serve the public interest.

Overall, IP scholars and policymakers should consider how non-economic theories may be, at times, better suited for IP protection and can help shape a more dynamic patent law system. While patent law should still strive to incentivize innovation and creation, policies must also acknowledge the effects of purely economic motivations on patient health and global health disparities. The Moderna v. Pfizer lawsuit illustrates the mismatches between economic foundations of patent law, biotechnological and pharmaceutical innovation, and emergency or pandemic situations.

Shelby Yuan is a second-year JD-PhD student at the Northwestern Pritzker School of Law.