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Case Closed: OpenAI Prevails on Secondary Meaning

by | Dec 5, 2024 |

The US Court of Appeals for the Ninth Circuit affirmed a district court’s grant of a preliminary injunction (PI) in a trademark action under the Lanham Act, stating that the district court’s ruling was not clearly erroneous based on its finding that the plaintiff had likely acquired secondary meaning in the mark. OpenAI, Inc. v. Open Artificial Intelligence, Inc., Guy Ravine, Case No. 24-1963 (9th Cir. Nov. 13, 2024) (Thomas, Owens, Collins, JJ.) (per curiam) (Collins, J., dissenting) (nonprecedential).

OpenAI is the founder of ChatGPT and other artificial intelligence tools. OpenAI has used the OPENAI (no space) mark extensively in association with its goods, services, website, social media, and marketing. OpenAI first attempted to register the mark with the US Patent & Trademark Office (PTO) in 2016, but the PTO rejected the mark as being merely descriptive and potentially confusing with Guy Ravine’s prior-filed application for the mark OPEN AI (with a space). Ravine claimed to have used the mark as early as 2015, which would have predated OpenAI’s use of its mark. However, the PTO also rejected Ravine’s application for registration on the Principal Register under a similar rationale, and the OPEN AI mark was only accepted for registration on the Supplemental Register in 2017. Neither mark is registered on the Principal Register.

OpenAI filed a trademark action under the Lanham Act against Ravine’s company, Open Artificial Intelligence, and sought a PI, which the district court granted after finding that OpenAI had established that it had acquired distinctiveness in the mark. Ravine appealed the denial of Open Artificial Intelligence’s motion under Fed. R. Civ. P. 59(e) and 60(b) to amend or vacate that injunction.

A PI is granted when a plaintiff establishes that:

  • It is likely to succeed on the merits.
  • It is likely to suffer irreparable harm.
  • The balance of equities tips in its favor.
  • An injunction is in the public interest.

The Ninth Circuit applies a sliding scale approach, where a stronger showing of one factor could offset a weaker showing of another factor. To succeed on a trademark infringement claim, a plaintiff must show that it has a protectible ownership interest in the mark and that the defendant’s use of the mark is likely to cause consumer confusion.

To evaluate the claims, the district court looked at each of the parties’ history and use of the disputed marks. The district court noted that OpenAI had used its mark in connection with its most widely used product, ChatGPT, resulting in the mark becoming a household name. The district court recognized that OpenAI’s trademark was one of the most recognized in artificial intelligence (AI) history. The district court noted that OpenAI’s website was one of the most visited websites, with almost 100 million monthly active users. In contrast, the district court found that Ravine had not established that he had used the mark in commerce prior to OpenAI’s use and even took issue with Ravine’s representations regarding his use of the mark. The district court granted [...]

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“Conquesting”: Use of Rival’s Name as Keyword Search Term Isn’t Actionable Under Lanham Act

by | Nov 7, 2024 |

Noting how rare it is for trademark infringement cases to be decided on summary judgment, the US Court of Appeals for the Ninth Circuit affirmed a district court’s grant of summary judgment finding that the plaintiff law firm failed to establish a likelihood of consumer confusion by virtue of the defendant’s purchase of a keyword search term. Lerner & Rowe PC v. Brown, Engstrand & Shely, LLC, et al., Case No. 23-16060 (9th Cir. Oct. 22, 2024) (Desai, de Alba, JJ.; Chen, Dist. J, sitting by designation) (Desai, J., concurring).

The parties in this matter are rival personal injury law firms based in Arizona. Lerner & Rowe, PC, is the larger of the two firms. It has 19 offices and has spent more than $100 million promoting its brand and trademarks in the state. Brown, Engstrand & Shely, LLC, does business as The Accident Law Group (ALG). From 2015 to 2021, ALG engaged in an internet advertising strategy called “conquesting,” whereby companies promote themselves to potential customers who search for a competitor on the internet. ALG purchased the term “Lerner & Rowe” as a keyword search term so that whenever someone searched for that term, ALG’s advertisements would appear near the top of the search results list. The ALG advertisements themselves never included the term “Lerner & Rowe.”

In 2021 Lerner & Rowe filed a complaint alleging federal and state trademark infringement, unfair competition, and unjust enrichment claims. In 2023 the district court granted summary judgment in favor of ALG as to the trademark infringement and unjust enrichment claims but denied summary judgment on the unfair competition claims. ALG moved for reconsideration, and the district court subsequently granted summary judgment as to all the claims. Lerner & Rowe appealed.

Because there was no dispute that Lerner & Rowe had a protectable interest in its marks, the Ninth Circuit’s trademark infringement analysis focused on assessing the likelihood of consumer confusion. At issue here was “initial interest confusion,” confusion that arises when an alleged infringer uses a competitor’s mark to direct attention to its own product. The Ninth Circuit used the four-factor test articulated in its 2011 decision in Network Automation v. Advanced Sys. Concepts to analyze likelihood of confusion in a keyword advertising context:

  • Strength of the mark.
  • Evidence of actual confusion.
  • Type of goods and degree of care likely to be exercised by the purchaser.
  • Labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page.

Other less relevant factors include “the proximity of the goods, similarity of the marks, marketing channels used, defendant’s intent in selecting the mark, and likelihood of expansion of the product lines.”

The Ninth Circuit found, and ALG did not dispute, that Lerner & Rowe’s mark was strong, but the Court concluded that the other three factors favored ALG. As to evidence of actual confusion, Lerner & Rowe offered 236 phone calls received by ALG in which the caller mentioned Lerner & Rowe by name when asked [...]

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Some Post-Expiration Patent Royalty Payments May Be OK

by | Sep 5, 2024 |

The US Court of Appeals for the Ninth Circuit reversed a district court’s finding that a contract impermissibly allowed for patent royalties after the patent expired because the post-termination royalty payments were allocated to non-US patents. C.R. Bard, Inc. v. Atrium Med. Corp., Case No. 23-16020 (9th Cir. Aug. 23, 2024) (Friedland, Mendoza, Desai, JJ.) (per curiam).

C.R. Bard held one US and one Canadian patent covering a type of vascular graft. In 2011, Bard and Atrium entered a licensing agreement to settle a patent dispute. Under the terms of the agreement, Atrium agreed to pay Bard a 15% royalty on covered US sales until 2019 (when the US patent expired) and a 15% royalty on covered Canadian sales until 2024 (when the Canadian patent expired). The contract also included a quarterly royalty minimum. Through 2019, as the contract contemplated, Atrium paid royalties on its US and Canadian sales. Because of a US Food and Drug Administration delay, Atrium had lower than expected sales and never exceeded the quarterly minimum royalty.

Atrium eventually refused to continue making royalty payments, which after 2019 covered only Canadian sales (likewise never exceeding the quarterly minimum). Bard sued for breach of contract in 2021. Atrium argued that the royalty provision was unenforceable under Brulotte v. Thys, a 1964 US Supreme Court decision holding that collecting royalties for patent use after a patent’s expiration constitutes patent misuse. The district court determined that the “clear and primary purpose” of the parties’ contractual minimum royalty was to compensate Bard for US sales of the patented product. The district court therefore agreed with Atrium. Bard appealed.

The Ninth Circuit undertook to determine whether the terms of the parties’ contract constituted patent misuse under Brulotte. The Ninth Circuit first explained that in Brulotte, the Supreme Court considered a contract between the owner of multiple patents related to picking hops and farmers who made seasonal license payments to use machines incorporating those patents. The Supreme Court found patent misuse because the license amount did not decrease as patents incorporated into the machines expired, which indicated that the farmers were paying to use expired patents.

Despite pushback, the Supreme Court refused to overturn Brulotte in 2015 when it decided Kimble v. Marvel. That case involved a patent holder’s license allowing Marvel to incorporate patented web-shooting technology into a Spiderman toy. In Kimble, the Ninth Circuit had ruled that the license agreement was invalid under Brulotte because it required Marvel to continue to pay a royalty fee after the patent expired. The Ninth Circuit noted, however, that an ongoing license after the expiration of a patent may be permissible if the license contemplates both patented and non-patented features, as long as the terms of the royalty adjust when the patent expires. For instance, a license covering both a patented invention and a trade secret may continue past the life of the patent, as long as the royalty rate diminishes after the patent expires. This reflects that the royalty is [...]

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Golden State of Mind: Anti-SLAPP Defense Versus Privacy Rights

by | Jul 18, 2024 |

The US Court of Appeals for the Ninth Circuit affirmed a district court’s denial of a motion to strike a putative class action suit brought under Section 425.16 of California’s anti-SLAPP statute, finding that the case fell under an exemption because it sought to enforce an important right under California law. Odette R. Batis v. Dun & Bradstreet Holdings, Inc., Case No. 23-15260 (9th Cir. July 8, 2024) (Clifton, Siler, Smith, JJ.)

Odette Batis filed a lawsuit against Dun & Bradstreet (D&B) arguing that their commercial use of her name and contact information in their searchable business-to-business database was a violation of her right of publicity and unfair competition laws and constituted tortious misappropriation of her name and likeness. Batis sought a declaration of infringement, injunctive relief, restitution and damages.

D&B moved to dismiss the lawsuit under California’s anti-SLAPP statute, which is intended to provide protection against “strategic lawsuits against public participation” and “lawsuits brought primarily to chill” the exercise of speech. The statute was enacted to protect nonprofit corporations and citizens from larger entities. D&B argued that Batis’s lawsuit arose from actions D&B took in furtherance of its right to free speech and thus should be struck. The district court concluded that Batis had a right to sue, and that D&B failed to establish that Batis’s lawsuit targeted protected speech. D&B appealed.

The Ninth Circuit upheld the district court’s decision, finding that the anti-SLAPP statute did not authorize a motion to strike the lawsuit. The Court found that Batis’s lawsuit fell under the public interest exemption contained in Section 425.17(b) of the California Code of Civil Procedure. The public interest exemption protects suits where:

  • The plaintiff does not seek relief different from the rest of any class of which they are a member;
  • The action would enforce an “important right affecting the public interest”;
  • And “private enforcement is necessary and places a disproportionate financial burden on the plaintiff.”

The Ninth Circuit found that Batis’s lawsuit met these criteria. First, Batis did not seek any remedy on the face of the complaint that all members of the putative class would not have been entitled to as well. Second, Batis’s lawsuit implicated her privacy rights and rights concerning her name and likeness, both of which are considered important to the public interest, especially in California. Third, Batis’s financial burden in bringing the suit could outweigh the damages she might be able to collect, and no public entity had brought an action against D&B enforcing her rights.

Finally, the Ninth Circuit affirmed that the public interest exemption applied against D&B’s database because the database was not a protected work of expression under Section 425.17(d) of the Anti-SLAPP Act, which protects “a newspaper, magazine, or other periodical publication.” The Court explained that this protection was intended to apply to those engaged in the “dissemination of ideas or expression” rather than a directory. Therefore, Batis’s suit was protected under the public interest exception and immune to D&B’s anti-SLAPP motion.



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Smart Choice: Survey Design Didn’t Render Survey Unreliable

by | Jul 18, 2024 |

Underscoring its faith in a jury’s competency to use its “common sense and experience” in evaluating evidence, the US Court of Appeals for the Ninth Circuit affirmed a district court’s judgment in favor of the defendants in a trademark infringement action following a trial, as well as its order partially denying the defendants’ motion for attorneys’ fees. BillFloat, Inc. v. Collins Cash, Inc., Case Nos. 23-15405; -15470 (9th Cir. July 1, 2024) (Thomas, McKeown, Christen, JJ.)

BillFloat and Collins Cash both provide financing to small businesses. In 2013, BillFloat began using SMARTBIZ as a trademark and registered the mark in 2014. That same year (2014), Collins Cash began using the mark SMART BUSINESS FUNDING, although it did not file an application to register the mark until 2020. Meanwhile, in 2018, BillFloat and Collins Cash entered into a partnership agreement under which Collins Cash would refer current and prospective customers to BillFloat in exchange for a referral fee. The parties’ agreement stated that “[i]f either Party employs attorneys to enforce any right arising out of or relating to this Agreement, the prevailing Party shall be entitled to recover reasonable attorneys’ fees.”

In 2020, upon learning of Collins Cash’s use of the SMART BUSINESS FUNDING mark, BillFloat brought claims for federal and state trademark infringement, breach of contract, unfair competition and unlawful business practices. The district court granted summary judgment to Collins Cash on the breach of contract claim and proceeded to trial on the trademark infringement claim.

Collins Cash engaged an expert to conduct a likelihood of confusion survey using the so-called “Squirt” methodology, which is used for lesser-known marks. BillFloat filed a motion to exclude the expert and his survey from trial, arguing that various errors made the survey unreliable and therefore inadmissible. The district court denied the motion and admitted the expert’s testimony and his survey. The district court also admitted testimony from BillFloat’s expert that challenged the survey. Both experts were cross-examined on their qualifications and on the merits of the survey.

The jury found that BillFloat had not established trademark infringement by a preponderance of the evidence. Post-trial, BillFloat moved for judgment as a matter of law and for a new trial, and Collins Cash moved for attorneys’ fees and non-taxable costs. The district court denied BillFloat’s motion and awarded Collins Cash attorneys’ fees under the partnership agreement for the breach of contract claim but declined to award Collins Cash attorneys’ fees for the trademark infringement claim or non-taxable costs for either claim. Both parties appealed.

BillFloat argued that the district court abused its discretion in admitting Collins Cash’s expert testimony and survey evidence. It also argued that the district court erred in declining to give BillFloat’s proposed jury instruction not to draw any inferences about the fact that BillFloat did not offer its own survey evidence.

The Ninth Circuit found no abuse of discretion on these issues. The Court pointed to the distinction between the admissibility of survey evidence as opposed to the relative weight a [...]

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ITU Applicants Beware: Federal Courts Have Jurisdiction Over Pending Trademark Applications

by | Apr 11, 2024 |

The US Court of Appeals for the Ninth Circuit affirmed in part a district court’s ruling in a trademark dispute, upholding its decision to invalidate trademark applications. The Ninth Circuit held that district courts have jurisdiction to alter or cancel trademark applications in an action properly brought under 15 U.S.C. § 1119, and that in the context of challenges to intent-to-use (ITU) applications, proof of a lack of bona fide intent can invalidate. BBK Tobacco & Foods LLP v. Central Coast Agriculture, Inc., Case Nos. 22-16190; -16281 (9th Cir. Apr. 1, 2024) (Hurwitz, Desai, JJ.) (Bumatay, J., dissenting).

BBK sells and distributes smoking-related products with BBK’s “RAW” branding. Central Coast Agriculture (CCA) sells cannabis products using “Raw Garden” branding. BBK filed a complaint against CCA including claims of trademark infringement and a petition to void several ITU trademark applications owned by CCA for lack of a bona fide intent to use the relevant trademarks in commerce. Instead of disputing the merits of BBK’s claims, CCA argued that the district court had no jurisdiction to adjudicate this issue. The district court granted summary judgment in favor of BBK on its claims to invalidate the trademark applications. CCA appealed.

The Ninth Circuit affirmed the summary judgment in favor of BBK on its claims to invalidate CCA’s trademark applications. The Court explained that “when an action involves a claim of infringement on a registered trademark, a district court also has jurisdiction to consider challenges to the trademark application of a party to the action.” The Lanham Act, at 15 U.S.C. § 1119, provides that “[i]n any action involving a registered mark the court may determine the right to registration, order the cancelation of registrations, . . . restore canceled registrations, and otherwise rectify the register with respect to the registrations of any party to the action.” The Lanham Act, at § 1051, defines an application for use of trademark as a “request for registration of a trademark on the principal register.” Because a challenge to an application affects the applicant’s right to the registration, the Court reasoned that § 1119 authorizes a district court to resolve disputes over trademark applications.

The Ninth Circuit held that a “lack of bona fide intent to use a mark in commerce is a valid basis to challenge a trademark application,” aligning with decisions in sister circuits and the Trademark Trial & Appeal Board. An applicant can seek to register a mark if the mark is already being used in commerce or if the applicant has a bona fide intention, under circumstances showing the good faith of such person, to use a trademark in commerce. While applicants filing under the ITU provisions may begin the registration process based on a bona fide intent to later use the mark in commerce, the Lanham Act requires such applicants to either subsequently file a verified statement of actual use of the mark or convert their application into a use application. As a result, the Ninth Circuit affirmed the district court’s ruling [...]

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Google It: Federal Copyright Law Preempts California Causes of Action

by | Feb 1, 2024 |

Addressing a state law-based challenge to the way search results are displayed on copies of websites, the US Court of Appeals for the Ninth Circuit held that copyright preemption precluded a website owner from invoking state law to control how the websites are displayed. Best Carpet Values, Inc. v. Google LLC, Case No. 22-15899 (9th Cir. Jan. 11, 2024) (Wallace, Thomas, Forrest, JJ.)

Best Carpet Values filed a class action against Google asserting California state law claims for trespass to chattels, implied-in-law contract and unjust enrichment based on the way Google’s search app displayed their websites on Android phones. If an Android user used the search app to navigate to a website, the app delivered a copy of the website, which was displayed with a frame at the bottom of the page saying, for example, “VIEW 15 RELATED PAGES” and which allowed the user to click a button to expand the frame to display half-page banners advertising related websites. For Best Carpet (the class representative), these displayed results included websites for its direct competitors and even news stories about Best Carpet’s owner. Best Carpet argued that Google thereby occupied valuable space on Best Carpet’s websites, obtaining all the benefits of advertising from its use of that space without paying for such advertising.

Google moved to dismiss the complaint for failure to state a claim upon which relief could be granted. After the district court denied the motion to dismiss, Google moved to certify the order for interlocutory appeal. The district court granted Google’s motion and certified four questions for interlocutory review that it believed were potentially dispositive. The Ninth Circuit found that only two of the interlocutory questions were dispositive:

  • Whether prior Ninth Circuit authority, Kremen (2003), should be extended to protect as chattel the copies of websites displayed on a user’s screen
  • Whether preemption under copyright law precluded state law from controlling how websites are displayed on a user’s screen.

On the issue of whether a website display can be protected as chattel, the Ninth Circuit agreed with the district court that the “chattels” at issue were copies of Best Carpet’s websites. The Ninth Circuit reasoned, however, that they could not serve as the basis for a trespass claim because Best Carpet had no cognizable property interest in the website copies on an app user’s Android phone. The Court reasoned that website copies – unlike a website’s domain name – were not “capable of precise definition” or “capable of exclusive control,” and there was no “legitimate claim to exclusivity” over the website copies (citing Kremen).

As for the copyright preemption issue, the Ninth Circuit considered the two-part test for determining whether the Copyright Act preempted the state law claims. The first prong assesses whether the subject matter of the state law claim falls within the subject matter of the relevant provisions of the Copyright Act. Here, the parties agreed that commercial websites are copyrightable, and after considering the body of precedent interpreting the relevant provisions of the [...]

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Scattered Disclosures May Not Lead to Inference of Fraud in FCA Claim

by | Feb 1, 2024 |

The US Court of Appeals for the Ninth Circuit denied a petition for panel rehearing and rehearing en banc and issued an amended opinion that reversed a district court’s decision regarding the False Claims Act’s (FCA) public disclosure bar. Silbersher v. Valeant Pharm. Int’l, Inc., Case No. 20-16176 (9th Cir. Aug. 3, 2023; amended Jan. 5, 2024) (Schroeder, Sanchez, Antoon, JJ.)

The FCA imposes civil liability on those who knowingly present a fraudulent claim for payment to the federal government and allows “relators” to bring fraud claims on behalf of the government.

Valeant owns a set of patents that cover a delayed-release formula for a medication prescribed to treat ulcerative colitis. In 2015, a generic drug manufacturer, GeneriCo, challenged one of Valeant’s patents in an inter partes review (IPR) proceeding. Ultimately, the Patent Trial & Appeal Board found Valeant’s patent unpatentable based on two articles co-authored by Valeant’s head of research.

Silbersher was GeneriCo’s lawyer in the IPR proceeding. He discovered that three years before applying for the challenged patent, Valeant had applied for another patent that disclosed the exact opposite of what Valeant would claim in the challenged patent. Silbersher brought an FCA action alleging that Valeant failed to disclose this information in the IPR proceeding. In response, Valeant argued that the public disclosure bar applied. The district court decided that an IPR qualified as an “other Federal hearing” under channel (ii) of the public disclosure bar and dismissed Silbersher’s action. Silbersher appealed.

On appeal, the Ninth Circuit reversed the district court. Valeant filed a petition for panel rehearing and rehearing en banc. The Court issued an amended decision that refocused on its analysis under its 2016 decision in Mateski v. Raytheon. Under Mateski, the public disclosure bar applies when “the disclosure at issue occurred through one of the channels specified in the statute; the disclosure was ‘public;’ and the relator’s actions are ‘based upon’ the allegations or transactions publicly disclosed.”

The Ninth Circuit discussed whether Valeant’s disclosures revealed “substantially the same allegations or transactions” as Silbersher’s qui tam action. As discussed in the original decision, this was a first for this court, which had not yet “interpreted substantially the same prong of the public disclosure bar” under the 2010 Congress amendments. Mateski explained that to disclose a public fraudulent transaction according to the formulation X+Y=Z (where Z is the fraud allegation and X and Y are the essential elements), “the combination of X and Y must be revealed from which readers or listeners may infer Z, the conclusion that fraud has been committed.”

The Ninth Circuit then applied the Mateski framework to conclude that the qualifying public disclosures here did not collectively disclose a combination of facts sufficient to permit a reasonable inference of fraud. It explained that although “scattered disclosures when viewed together possibly reveal some of these true and misrepresented facts,” fraud could not reasonably be inferred from the combinations. Neither Valeant’s patent prosecutions nor disclosures revealed the critical information necessary to support [...]

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First Amendment Bowled Over by Lanham Act – Again

by | Jan 25, 2024 |

In response to the Supreme Court of the United States’ ruling in Jack Daniel’s, the US Court of Appeals for the Ninth Circuit reconsidered its 2022 decision in Punchbowl v. AJ Press and determined that Jack Daniel’s reset prior Ninth Circuit precedents regarding the interaction of First Amendment rights and the Lanham Act. The Ninth Circuit reversed its original decision and remanded the case to the district court to conduct a likelihood of confusion analysis under Lanham Act precedent. Punchbowl, Inc. v. AJ Press, LLC, Case No. 21-55881 (9th Cir. Jan. 12, 2024) (Owens, Bress, Fitzwater, JJ.)

The Ninth Circuit had previously held that despite use of the PUNCHBOWL trademark for a news service covering politics, AJ Press was not subject to liability under the Lanham Act. The PUNCHBOWL mark was registered by Punchbowl, Inc., a website specializing in online communications “with a focus on celebrations, holidays, events and memory making.” The Ninth Circuit’s original decision was based on the Court’s understanding of the Rogers test, which protected creative use of trademarks if the defendant could “make a threshold legal showing that its allegedly infringing use is part of an expressive work protected by the First Amendment.” This test was easily met if the artistic relevance of the trademark’s use was “above zero.” Shortly after the Ninth Circuit issued its initial decision, the Supreme Court granted certiorari in Jack Daniel’s Properties v. VIP Products, a case that addressed the same basic underlying precedent.

In its Jack Daniel’s decision, the Supreme Court held that the Rogers test exception to the Lanham Act did not apply when the expressive mark was used as a mark. The Supreme Court therefore drew a line between VIP’s use of “Bad Spaniels,” a direct play on “Jack Daniel’s” that was an expressive use of a mark as a mark, and use of a mark that was expressive but not used as a trademark. The Supreme Court’s ruling prompted the Ninth Circuit to reconsider its original decision in Punchbowl.

In its new decision, the Ninth Circuit, applying the rule of Jack Daniel’s, held that the Rogers test did not apply and that AJ Press’s use of the mark “Punchbowl” was not excepted from the Lanham Act as protected First Amendment expression. Rather, AJ Press’s use of “Punchbowl” was as a mark identifying its news service.

The Ninth Circuit stressed that this was not an automatic victory for Punchbowl, however. The Ninth Circuit instructed the district court on remand to proceed with a likelihood-of-confusion analysis test under the Lanham Act – an analysis that would consider many of the factors (such as the expressive nature of the trademark’s use) that had been relevant to the application of the Rogers test.



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A Step Forward for Choreography and Copyright

by | Nov 16, 2023 |

In a rare ruling on infringement of a copyright on choreography, the US Court of Appeals for the Ninth Circuit reversed the dismissal of a copyright infringement action, holding that the district court erred in its application of the substantial similarity standard in terms of the line between animation and choreography, and remanded for further proceedings. Hanagami v. Epic Games, Inc., Case No. 22-55890 (9th Cir. Nov. 1, 2023) (Murguia, C.J.; Paez, Nguyen, JJ.)

Kyle Hanagami, a Los Angeles-based choreographer with a substantial social media following, brought this action against Epic Games, creator of the blockbuster video game Fortnite. Hanagami alleged that Epic infringed his copyrighted choreography by incorporating a portion of his dance work into a virtual animation, known as an “emote,” that players can purchase for video game avatars to perform. Hanagami has created choreography for famous pop stars and globally recognized brands. The five-minute choreographic work at issue in this action was originally published on YouTube in November 2017 and had received almost 36 million views as of Hanagami’s original March 2022 complaint.

In August 2020, Epic released a version of Fortnite that included a new emote called “It’s Complicated.” The allegedly copied choreography consisted of a two-second combination of eight bodily movements set to four beats of movement, which Hanagami alleged “contain[ed] the most recognizable portion” of his choreography. Hanagami brought federal claims alleging direct and contributory infringement of a copyright, as well as a state law unfair competition claim.

The district court granted Epic’s motion to dismiss wherein Epic asserted that Hanagami had not plausibly alleged that the Fortnite emote displayed “substantial similarity” to his choreographic work. Hanagami appealed.

At issue in this appeal was whether the district court had properly applied the Ninth Circuit’s two-part test for substantial similarity in assessing Hanagami’s infringement allegations. The first part, called the “extrinsic test,” focuses only on the protectable elements of the plaintiff’s expression and assesses the objective similarities between the original and the allegedly infringing work. The second part, referred to as the “intrinsic test,” gauges similarity of expression from the perspective of the ordinary reasonable observer and is reserved for the trier of fact. Hence, at the pleadings stage, only the extrinsic test is applied.

The Ninth Circuit concluded that the district court erred in its application of the extrinsic test in two ways. First, the district court incorrectly analyzed Hanagami’s choreography as a series of unprotectable “poses,” rather than as a movement sequence that includes expressive elements such as body position, timing, use of space, energy, pauses and repetition. The Court explained that when a dance work is properly analyzed as a selection and arrangement of movements, Hanagami “plausibly alleged that the creative choices he made in selecting and arranging elements . . . are substantially similar to the choices Epic made in creating the emote.” Second, the district court erred in dismissing Hanagami’s claim because the choreography in the emote was “short” and a “small component” of the original work. The Ninth Circuit [...]

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