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Case Closed: OpenAI Prevails on Secondary Meaning

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 (per curiam) (Collins, J., dissenting) (nonprecedential).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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Chill Out: Request for Profit Disgorgement Isn’t Entitled to Jury Trial

The US Court of Appeals for the Eighth Circuit affirmed a district court ruling that a plaintiff was not entitled to a jury trial regarding its trade dress infringement claim and that the plaintiff failed to prove that its trade dress had acquired the required secondary meaning. National Presto Industries Inc. v. U.S. Merchants Financial Group Inc., Case No. 23-1493 (8th Cir. Nov. 12, 2024) (Loken, Erickson, Grasz, JJ.)

National Presto manufactures household appliances, including personal electric heaters sold under the brand name “HeatDish” since 1989. These heaters had “a parabolic design that looked like a satellite dish.” National Presto supplied HeatDish heaters to Costco for many years. However, amid slumping sales, Costco began exploring alternative options. In 2017, Costco requested a “parabolic electric heater that was UL approved, had high heat, and looked industrial and robust” from another supplier, U.S. Merchants Financial Group. U.S. Merchants began development of a heater named “The Heat Machine.” Costco requested modifications to the initial design, including “changes focused on a comparison with Presto’s HeatDish.” Costco began selling The Heat Machine in 2018.

In December 2018, National Presto filed suit against U.S. Merchants asserting trade dress infringement under the Lanham Act. National Presto requested both injunctive relief and that U.S. Merchants “be required, pursuant to 15 U.S.C. § 1117, to account to National Presto for any and all profits derived by them, either individually or jointly to be ordered to disgorge, and be ordered to pay all damages sustained by National Presto by reason of Defendant’s actions complained herein.”

National Presto sought a jury trial for its trade dress claim, but the district court ruled that National Presto was seeking equitable relief and thus was not entitled to a jury trial. The district court noted that under the Lanham Act, courts generally “find that a claim for disgorgement of an infringer’s profits is an equitable claim” and therefore the Seventh Amendment does not provide the right to a jury trial for such a claim. After a bench trial, the district court ruled that National Presto failed to prove infringement because its trade dress had not acquired secondary meaning. National Presto appealed.

The Eighth Circuit affirmed. Regarding the denial of a jury trial, which the Court reviewed de novo, National Presto argued that “disgorgement is considered a legal claim when the infringer’s profits serve as a ‘proxy’ for the plaintiff’s damages.” Although the district court did not reject that legal theory, it found that the facts National Presto presented were not sufficient to support a finding that the profits were in fact serving as a proxy. The Court rejected several of National Presto’s arguments, including that “Presto’s desired remedy was legal rather than equitable because its aim was compensation rather than disgorgement of unjust enrichment.”

Regarding the district court’s secondary meaning finding, which the Eighth Circuit reviewed for clear error, the Court noted that “the chief inquiry is whether in the consumer’s mind the mark has become associated with a particular source.” In rejecting National [...]

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What Makes a Trademark Case “Exceptional” in the Fifth Circuit?

The US Court of Appeals for the Fifth Circuit affirmed a senior party mark but found that the district court committed clear error in finding that a similar junior party mark was valid. The Fifth Circuit also found that the district court abused its discretion in awarding attorneys’ fees to the senior user. Appliance Liquidation Outlet, L.L.C. v. Axis Supply Corp., Case No. 23-50413 (5th Cir. June 21, 2024) (Smith, Haynes, Douglas, JJ.)

Appliance Liquidation Outlet (ALO), a decades-old appliance store in San Antonio, Texas, brought a trademark action under the Lanham Act and Texas law (which in all relevant aspects tracks the Lanham Act) against Axis Supply Corporation, another San Antonio appliance store that opened in 2021. Axis’s store and social media prominently featured the phrase “Appliance Liquidation”:

ALO noted that Axis’s opening happened to coincide with an influx of customers conflating ALO with Axis. ALO’s storefront had prominently displayed a banner reciting “Appliance Liquidation Outlet” for years:

Although ALO had never registered its mark, ALO had long engaged in a variety of promotional activities to raise brand recognition, including partnering with local sports teams and holding antique exhibitions and car shows.

Soon after Axis opened its store, ALO experienced a rush of customers who failed to differentiate between the stores and believed that ALO operated both. ALO requested that Axis stop using “Appliance Liquidation” and sued Axis in state court when Axis refused. Axis removed the dispute to the federal district court. After a bench trial, the district court held for ALO, enjoining Axis from using “Appliance Liquidation” and “Appliance Liquidation Outlet” and causing confusion between the two businesses. The district court also awarded attorneys’ fees under 15 U.S.C. § 1117(a) to ALO, finding that Axis’s decision to change its name only a week before trial (about 1.5 years into the dispute) amounted to litigating in an unreasonable manner. Axis appealed.

The Fifth Circuit affirmed the district court’s holding that Axis had infringed ALO’s “Appliance Liquidation Outlet” mark but assigned clear error to the district court’s finding that “Appliance Liquidation” was valid mark. The Fifth Circuit also found that the district court had abused its discretion in awarding attorneys’ fees to ALO.

With respect to the marks’ validity, the Fifth Circuit noted that both marks were unregistered and thus were not presumptively valid. The Court found that the record did not support the conclusion that “Appliance Liquidation” was a source identifier and thus found that it was not a valid mark. However, the Fifth Circuit was satisfied that “Appliance Liquidation Outlet” served as a source identifier. The Court found that although “Appliance Liquidation Outlet” was descriptive, the evidence established that San Antonian consumers perceived the mark as conveying information about ALO, not merely reflecting a class of services or businesses, and [...]

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Sole Searching: Trade Dress Hopes Booted as Functional, Nondistinctive

The US Court of Appeals for the Fourth Circuit affirmed a district court’s summary judgment grant in a trademark dispute, finding that the district court did not err in concluding that a subset of design elements lacked distinctiveness in the public’s view. TBL Licensing, LLC v. Katherine Vidal, Director of the United States Patent and Trademark Office, Case No. 23-1150 (4th Cir. Apr. 15, 2024) (Quattlebaum, Gregory, Benjamin, JJ.)

TBL Licensing is commonly known as Timberland, the prominent footwear manufacturer. Timberland tried to register specific design elements of its popular boot as protected trade dress with the US Patent & Trademark Office (PTO). In its application, Timberland provided a detailed written description of the boot design elements it sought to register as protectable trade dress. Timberland also included a drawing of these design elements.

The PTO rejected Timberland’s application, finding that the design was functional and lacked distinctiveness. Timberland appealed to the Trademark Trial & Appeal Board, which affirmed. Timberland then challenged the Board’s decision in the US District Court for the Eastern District of Virginia. The district court granted summary judgment in favor of the PTO because Timberland’s design was functional and had not acquired distinctiveness. Timberland appealed.

Timberland argued that the district court improperly segmented the design during its functionality analysis. Timberland argued that the district court failed to meaningfully consider the design as a whole, and even if it did, the court erred in considering specific factors, including the availability of alternative designs and the design’s simplicity in manufacturing. The court also relied on inapposite patents and advertisements as evidence to support its functionality finding, an analysis that Timberland argued was improper.

The Fourth Circuit affirmed the district court’s decision. While acknowledging the potential error in the district court’s failure to analyze the design holistically, the Court ultimately found that the limited design elements Timberland sought to register lacked secondary meaning – a crucial element for trade dress protection. The Court employed a secondary meaning analysis to assess public perception of Timberland’s design and considered various factors, including advertising expenditures, consumer studies, sales success, unsolicited media coverage, attempts at imitation and length of exclusive use.

Applying each factor, the Fourth Circuit determined that the district court did not clearly err in finding that the design elements lacked distinctiveness. The Court explained that the district court highlighted flaws in Timberland’s consumer survey, noting suggestive questions and a lack of focus on the claimed design features. The district court also emphasized that Timberland’s advertising expenditures did not effectively link the claimed design features with Timberland in consumers’ minds. Timberland’s arguments regarding sales success, media coverage and attempts at plagiarism were also found insufficient to establish secondary meaning. Lastly, the presence of similar-looking boots from other manufacturers undermined Timberland’s claim of exclusivity in using the design.

Lacking direct consumer survey evidence, the Fourth Circuit determined that Timberland’s circumstantial evidence failed [...]

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Lanham Act Liability May Apply to Copyrighted Material

The US Court of Appeals for the Ninth Circuit found that liability under the Copyright Act and liability under the Lanham Act are not mutually exclusive and that liability under the Copyright Act does not negate trade dress damages under the Lanham Act. Jason Scott Collection, Inc. v. Trendily Furniture, LLC, Case No. 21-16978 (9th Cir. May 30, 2023) (Wardlaw, Bumatay, Schreier (sitting by designation), JJ.)

Jason Scott Collection (JSC) and Trendily Furniture are high-end furniture manufacturers that sell their products in the Texas market. In 2016, Trendily intentionally copied three unique furniture designs by JSC and sold them to Texas retailers. Both collections featured heavy carved wood pieces with detailed embellishments and metal elements. The record showed that Trendily’s collection had been based on photographs of the preexisting JSC collection. The Trendily pieces were so similar that even JSC had initially mistaken the furniture as its own when confronted by a retailer. After JSC filed suit, the district court granted summary judgment to JSC on its copyright claim. Following a bench trial, the district court held Trendily liable on the trade dress claim. On that claim, the district court awarded almost $133,000 in prospective lost annual profits over a period of three years, which amounted to about six times the almost $20,000 in retrospective gross profits awarded on JSC’s copyright claim. Trendily appealed.

To obtain a judgment for trade dress infringement, a plaintiff must prove that the claimed trade dress is nonfunctional, the claimed trade dress serves a source-identifying role because it is either inherently distinctive or has acquired a secondary meaning and the defendant’s product creates a likelihood of confusion. Trendily argued that JSC had not adequately established a secondary meaning (for trade dress the parties stipulated was not inherently distinctive) or likelihood of confusion. The Ninth Circuit, however, found that the district court found adequate evidence of secondary meaning through copying and through confusion by retailers and consumers in the high-end furniture market. The Ninth Circuit also found that the district court had correctly found likelihood of confusion, putting special emphasis on Trendily’s intentional and precise copying of the JSC pieces leading to retailer confusion.

Turning to the damages award, Trendily argued that because copying is a commercially acceptable and necessary act in terms of competition, Trendily should only be held liable under the Copyright Act, rather than for trade dress infringement under the Lanham Act. However, the Ninth Circuit affirmed that liability under the Copyright Act and liability under the Lanham Act are not mutually exclusive and that liability under the Copyright Act did not negate the judgment against Trendily for trade dress damages under the Lanham Act. The Court then affirmed the trade dress damages award, finding that the prospective damages incurred when one of JSC’s business relationships fell apart because of Trendily’s copied furniture were reasonably foreseeable and had been “satisfactorily demonstrated.” The Court emphasized that the law only required “crude measures of damages in cases of intentional infringement.”

Finally, the Ninth Circuit affirmed [...]

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On the Road Again: Alternative Designs May Impact Trade Dress Functionality Analysis

The US Court of Appeals for the Sixth Circuit reversed and remanded a summary judgment ruling, finding that there were genuine disputes of material fact regarding whether the plaintiff’s alleged trade dress was functional and therefore excluded from trade dress protection. DayCab Co., Inc. v. Prairie Tech., LLC, Case No. 22-5625 (6th Cir. May 11, 2023) (Moore, Clay, Stranch, JJ.)

DayCab manufactures conversion panels for tractor-trailer cabs. DayCab asserted Lanham Act and Tennessee Consumer Protection Act claims again Prairie Technology for trade dress infringement of its DayCab conversion kit. Prairie denied infringement and counterclaimed for declaratory judgment that DayCab’s trade dress was functional.

DayCab asserted that its product’s slant-back design, depth, rounded edges and gray color were protectable trade dress, explaining that it had carefully selected the angles, curves, tapers, lines, profile and appearance of the DayCab conversion kit. DayCab further argued that the 144-degree angle of the “slant-back” design, the dimensions of the depth and radius of the design, and the color were aesthetic and not functional. In support of its argument, DayCab presented competitor conversion kits to illustrate that there are many different appearances and ways to style conversion kits. DayCab attested that the only requirement for manufacturability is that the top of the fiberglass mold used for manufacturing the conversion kits must be slightly larger at the top than at the bottom. In response, Prairie presented expert testimony that the parties’ respective kits were not identical and that the panel’s depth, top body radius, lower body angle, flange/body radius and color were functional.

The parties filed cross motions for summary judgment. Prairie argued that DayCab could not prove that its trade dress was nonfunctional, had secondary meaning or that there was likelihood of confusion. The district court granted Prairie’s motion, finding that DayCab’s asserted trade dress was functional and therefore not protectable. The district court did not address secondary meaning or likelihood of confusion. DayCab appealed.

The Sixth Circuit reversed the district court’s summary judgment ruling, finding that the district court did not determine open questions about whether DayCab’s conversion kits’ slant-back design was functional. The Sixth Circuit further remanded because the district court did not consider whether Prairie’s kits infringed DayCab’s design. Regarding functionality of the conversion kit, the Court determined that existence of alternative designs and testimony from DayCab’s founder claiming that the design choices were aesthetic raised issues in the district court’s functionality ruling. The Court also noted that the existence of alternative designs was relevant to the functionality determination because they supported DayCab’s contentions that it designed the panel with aesthetic intent and that its resulting features were ornamental rather than functional.

The Sixth Circuit found that it was for the jury to determine secondary meaning and whether Prairie intentionally copied DayCab’s design. The Court also found that likelihood of confusion needed to be determined by a jury because of conflicting evidence: DayCab presented evidence that consumers inquired about ordering Prairie’s kits from DayCab because the products were similarly named and indistinguishable on [...]

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Not So Clean: Federal Circuit Upholds Trade Dress Preliminary Injunction, Finds Defenses Improperly Plead

The US Court of Appeals for the Federal Circuit upheld a “narrow” preliminary injunction in a trade dress case, finding that the opponent of a registered configuration mark failed to prove its lack of secondary meaning and functionality defenses. SoClean, Inc. v. Sunset Healthcare Solutions, Inc., Case No. 21-2311 (Fed. Cir. Nov. 9, 2022) (Newman, Lourie, Prost, JJ.)

SoClean manufactures Continuous Positive Airway Pressure (CPAP) machines. SoClean sued Sunset—a former distributor of SoClean products—for patent infringement and later added trademark infringement claims. At issue in this appeal was a single SoClean mark “for the configuration of replacement filters for its sanitizing devices.”

SoClean requested a preliminary injunction to stop Sunset from making or selling allegedly infringing CPAP filters. The district court granted the injunction but narrowly tailored the injunction to only enjoin Sunset from selling its filter cartridges without Sunset’s own brand name attached to the filter drawing so that customers would not falsely believe they were buying SoClean products. Sunset appealed.

While a party seeking preliminary injunction must prove all four eBay elements, this appeal focused on just one: “likelihood of success on the merits.” Sunset argued that the district court abused its discretion in finding that SoClean would likely defeat Sunset’s lack of secondary meaning defense and its functionality defense.

After noting that the parties agreed that SoClean’s trade dress was protectable only upon a showing that it had obtained secondary meaning, the Federal Circuit divided the secondary meaning issue into two subparts:

  1. Whether the district court should have questioned the validity of SoClean’s registration in light of Sunset’s evidence
  2. Whether the district court held Sunset to an improperly high standard of proof.

As to the first issue, the Court noted that federal registration is prima facie evidence of a mark’s validity. When, as here, the challenged mark was registered fewer than five years prior, the burden shifts from plaintiff to defendant, such that the defendant must rebut the presumption of validity. Sunset acknowledged that it had this burden, but its arguments to the district court focused only on the US Patent & Trademark Office’s decision to grant SoClean’s registration. The Court rebuffed that argument, noting that “scrutinizing the application process and deciding whether the trademark examiner was correct to issue the registration in the first place is the opposite” of the statutory presumption of validity.

Next, the Federal Circuit addressed Sunset’s standard of proof argument. The Court acknowledged that the district court misstated the law by suggesting that there was a “vigorous evidentiary requirement” on the challenging party, instead of simply a “preponderance of the evidence.” However, the Court also noted that the district court considered Sunset’s lack of secondary meaning evidence to be “equivocal, at best,” which “plainly fails to satisfy a preponderance-of-the-evidence standard.” Therefore, the Court judged the error to be harmless.

The Federal Circuit thus affirmed the finding that SoClean would likely defeat Sunset’s secondary meaning challenges.

The Federal Circuit next [...]

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Secondary Meaning: Consumers Connect Product with Single Anonymous Source

Reversing and remanding a district court’s grant of summary judgment in favor of an accused trade dress infringer, the US Court of Appeals for the Ninth Circuit explained that trade dress does not need to be linked to a particular company. If consumers link the trade dress to any single (even anonymous) source or company, that is enough to constitute secondary meaning. P and P Imports LLC v. Johnson Enterprises LLC, DBA Tailgating Pros, Case Nos. 21-55013; -55323 (9th Cir. Aug. 24, 2022) (Tashima, Lee, Cardone, JJ.)

P&P makes and sells a jumbo red-white-and-blue Connect 4 game. Johnson sells a game almost identical in color, style and size. P&P sought to block Johnson from selling its game and sued for trade dress infringement under Lanham Act § 43(a) and unfair competition. During the district court proceeding, P&P’s expert submitted a consumer survey showing that most consumers associated P&P’s trade dress with a single source or company. He also submitted evidence of intentional copying and noted P&P’s advertising efforts as support for secondary meaning. The district court granted summary judgment for Johnson, ruling that P&P failed to present sufficient evidence of secondary meaning. The district court relied on the Ninth Circuit’s 2011 decision in Fleischer Studios v. A.V.E.L.A. to dismiss the survey evidence as irrelevant because the results showed a belief that P&P’s product is from a single source or company but did not show that trade dress was associated with P&P itself. P&P appealed.

The question before the Ninth Circuit was whether a manufacturer’s red-white-and-blue jumbo rendition of Connect 4 qualified as a protectable trade dress. This required the Court to determine whether P&P’s trade dress had acquired secondary meaning. Secondary meaning exists when “in the minds of the public, the primary significance of [the trade dress] is to identify the source of the product rather than the product itself.”

The Ninth Circuit concluded that the district court applied an incorrect legal standard for determining secondary meaning and that P&P presented sufficient evidence to survive summary judgment. The Court explained that many factors determine whether secondary meaning exists, including “direct consumer testimony; survey evidence; exclusivity, manner, and length of use of a mark; amount and manner of advertising; amount of sales and number of customers; established place in the market; and proof of intentional copying by the defendant.” The Court also noted that in the past it had found the presence of intentional copying and survey evidence sufficient to survive summary judgment.

Turning to the evidence presented by P&P, the Ninth Circuit explained that the district court’s analysis (which required consumers to both recognize P&P’s trade dress and be able to name P&P as the source) conflicted with the Court’s “long-established precedent[] requiring association with only a single—even anonymous—source,” and thus the district court erred by requiring evidence of specific association for secondary meaning. The Court also found strong suggestions that Johnson intentionally copied the P&P game, including the fact that Johnson conducted market research, ordered a copy of the [...]

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Tableware Designer Gets Heavenly Results on Its Pearly Plates

The US Court of Appeals for the Fifth Circuit reversed a district court decision, reversing the dismissal of a copyright claim based on lack of standing and finding ownership of the copyright in the claimant based on an assignment of that claim. The Fifth Circuit also found that the plaintiff had a protectible trade dress under the Lanham Act based on secondary meaning. Beatriz Ball, LLC v. Barbagallo Co., LLC, Case No. 21-30029 (5th Cir. July 12, 2022) (Jones, Haynes, Costa, JJ.) (per curiam).

Beatriz Ball, the founder of Beatriz Ball, LLC, alleged that Pampa Bay was marketing and distributing products that infringed on Ms. Ball’s registered copyrights and unregistered trade dress for its “Organic Pearl” line of tableware. Ms. Ball brought suit against Pampa Bay in Louisiana federal court, asserting claims for copyright infringement under the Copyright Act and unfair competition under § 43 of the Lanham Act.

Pampa Bay has marketed and distributed products similar to the Organic Pearl collection but made with cheaper materials since 2016. Ms. Ball alleged that Pampa Bay infringed upon her copyright and its unregistered trade dress because the products are confusingly similar and look and feel like the Organic Pearl trade dress in every way. The district court ruled against Ms. Ball, finding that it had not established that its unregistered trade dress acquired “secondary meaning” as is required for protection of an unregistered trade dress under the Lanham Act. The district court further held that Ms. Ball lacked standing to bring the copyright claims as a result of a lack of legal interest because when “Beatriz Ball Collection” transferred ownership in the copyrights to “Beatriz Ball, LLC,” the language of the assignment did not specifically transfer the right to a cause of action for prior infringements predating the assignment. The assignment clause in issue read:

Assignment. Assignor [Beatriz Ball and Beatriz Ball Collection] hereby irrevocably conveys, transfers, and assigns to Assignee [Beatriz Ball, LLC], and Assignee hereby accepts, all of Assignor’s right, title and interest in and to any and all copyrights, whether registered or not and whether or not applications have been filed with the United States Copyright Office or any other governmental body. This assignment expressly includes any and all rights associated with those copyrights.

The district court found that because the assignment did not specifically transfer the assignor’s right to causes of action for prior infringements, the LLC lacked standing to challenge infringements pre-dating the assignment. The district court therefore never reached the merits of the copyright claim.

On appeal, the Fifth Circuit first reviewed the standing issue to determine if the LLC owned the copyrights at the time of the alleged infringement or if the right to vindicate prior infringements had been effectively assigned to Ms. Ball. Reversing the district court’s ruling, the Court concluded that the LLC had standing to bring the suit as the actual copyright holder. The Court reasoned that § 411(b)(1), which provides that a registration with “inaccurate information” can support an infringement action [...]

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