Sour Grapes: Attorney’s Oral Agreement Might Be Okay if Fair, Just, and Fully Advised
The US Court of Appeals for the Ninth Circuit found that a district court erred in declaring on summary judgment that an attorney had no ownership interest in a winery because the alleged agreement was made orally. The Ninth Circuit explained that there were triable issues of fact as to whether the attorney could rebut the presumption against oral agreements by showing that the transaction was fair and just and that the client was fully advised. Schrader Cellars, LLC v. Roach, Case Nos. 23-15862; -15990 (9th Cir. Feb. 21, 2025) (Smith, Bennett, Johnstone, JJ.)
Fred Schrader is the former owner of Schrader Cellars (Cellars). Robert Roach is a Texas attorney who claims to have entered into an oral agreement with Schrader regarding the creation of another company, RBS LLC, which Roach asserts has an ownership interest in Cellars. After Schrader sold Cellars in 2017, Roach sued Schrader in Texas state court, claiming that the sale was improper. In 2021, Cellars filed a lawsuit in the US District Court for the Northern District of California, seeking, among other things, a declaration that Roach did not have any ownership interest in Cellars. Roach asserted various counterclaims.
The district court granted summary judgment on Cellars’ request for declaratory relief and dismissed Roach’s counterclaims. The case proceeded to trial on Cellars’ remaining claim for breach of fiduciary duty. The district court instructed the jury that, as a matter of law, Roach had breached his fiduciary duties to Cellars, so the jury decided only the issue of harm. The jury found that Roach’s breach of fiduciary duty had harmed Cellars during the limitations period but did not award damages because of the “litigation privilege defense.” Roach appealed the summary judgment order.
The Ninth Circuit found that the district court erred in granting Cellars summary judgment. Roach argued that the district court erred in declaring that he had no ownership interest in Cellars via the purported RBS agreement. At summary judgment, Cellars argued that even if Roach’s version of the RBS oral agreement existed, Roach could not enforce it because it violated California Rules of Professional Responsibility, which require written advisories and disclosures. Relying on this provision, the district court concluded that even if an oral argument existed, it was unenforceable, and Roach therefore could not have any ownership interest in Cellars. The district court noted that although “[a]n attorney may rebut the presumption of undue influence by showing that ‘the dealing was fair and just,’ and ‘the client was fully advised[,]’ . . . Roach has made no such effort to rebut this presumption.”
The Ninth Circuit found that the district court erred because there were triable issues of fact concerning whether Roach rebutted the presumption regarding the alleged breach of his client duties. The Court explained that not only did Roach expressly argue fairness before the district court, but the basic facts of the case (when viewed in the light most favorable to Roach) demonstrated that the transaction was fair and just and that Schrader was fully advised. The Court explained that Roach had testified that:
RBS was Schrader’s idea
Schrader solicited a cash investment from Roach
Schrader required Roach to operate without a written agreement
Schrader dictated the terms of the oral RBS agreement.
The Ninth Circuit also noted that while Cellars is successful now, at the time Schrader sought Roach’s investment, Cellars was performing poorly. The Court found that this evidence sufficiently established there was at least a triable issue of fact on whether the alleged agreement was void under California ethical rules.
Guidance for Franchisors: Lessons from N.A.R., Inc. v. Eastern Outdoor Furnishings
A recent New Jersey appellate court decision provides valuable guidance for franchisors and their in-house legal teams on structuring and protecting franchise relationships. The court affirmed that a terminated retailer of custom outdoor kitchens was not in a franchise relationship with a manufacturer of outdoor grills and that the New Jersey Franchise Practices Act (NJFPA) did not apply to the retailer’s termination. This case underscores the importance of clearly defining franchise relationships through written agreements to avoid unintended legal consequences.
Background of the Case
In N.A.R., Inc. v. Eastern Outdoor Furnishings, 2025 WL 287497 (N.J. Super. Ct. App. Div. Jan. 24, 2025), Eastern Outdoor Furnishings, a retailer of custom outdoor kitchens, had been selling AMD Direct’s outdoor grills since 2010 under a wholesale distributorship arrangement. In 2019, AMD terminated Eastern Outdoor’s distributorship in favor of a competitor. At the time, Eastern Outdoor had AMD grills in its possession that it had ordered but not yet paid for.
A collection agency, N.A.R., Inc., acting as an assignee of the purported debt, sued Eastern Outdoor to recover payment. In response, Eastern Outdoor filed a third-party complaint against AMD, alleging that the termination violated its franchise rights under the NJFPA. AMD moved for summary judgment, seeking dismissal of the franchise-related claims.
Key Legal Issue: Was There a Franchise Relationship?
The central legal question was whether Eastern Outdoor could establish a franchise relationship under the NJFPA, which requires proof of:
A written agreement granting the use of a trade name, trademark, service mark, or related characteristics.
A community of interest in the marketing of goods or services.
The trial court granted summary judgment in favor of AMD, ruling that Eastern Outdoor could not prove the existence of a written agreement meeting the first element of the NJFPA test. Eastern Outdoor appealed this decision.
Appellate Court’s Analysis and Affirmation
The appellate court upheld the trial court’s decision, concluding that Eastern Outdoor failed to demonstrate a written agreement establishing a franchise. Key takeaways from the appellate court’s ruling include:
A Franchise Agreement Must Be Evidenced in Writing: Eastern Outdoor argued that the NJFPA does not require a formal contract, asserting that a series of writings could constitute a franchise agreement. While the appellate court acknowledged that multiple documents could collectively establish a franchise, they must explicitly grant a license to use a trade name, trademark, or related characteristics.
Insufficient Evidence of a Granted License: Eastern Outdoor submitted various documents to support its claim, including:
Invoices.
An email referring to AMD and Eastern Outdoor as “trusted partners.”
AMD’s website listings identifying Eastern Outdoor as a distributor or Director of Sales.
Marketing materials, such as AMD catalogs labeled “Summerset…by Eastern Outdoor.”
A letter referencing the “distributor arrangement.”
Despite these materials, the appellate court found that they merely reflected the history of the business relationship and did not constitute a written grant of a trademark license.
Trademark Use Alone Does Not Establish a Franchise: Eastern Outdoor had used AMD’s branding and logos in selling its products, but AMD never explicitly granted Eastern Outdoor a license to do so in writing. The absence of this written license was a decisive factor in the court’s ruling.
Key Takeaways for Franchisors and Legal Departments
This case highlights several critical lessons for franchisors and their in-house legal teams:
Ensure a Clearly Defined Franchise Agreement: If a company intends to create a franchise relationship, a formal, written agreement granting trademark or trade name rights is essential to comply with franchise laws like the NJFPA.
Avoid Unintentional Franchise Designations: Manufacturers and suppliers should carefully structure distributor relationships to prevent claims of franchise status. If franchise laws do not apply, agreements should explicitly state that no franchise relationship exists.
Trademark Licensing Must Be Explicit: Even if a distributor uses branding and marketing materials, courts require clear, written evidence that a franchisor has explicitly granted such rights.
Monitor Business Descriptions and Communications: Informal references to “partners,” “distributors,” or sales directors on websites, emails, and marketing materials can be used as evidence in legal disputes. Franchisors should ensure that all representations align with the intended business relationship.
Understand State-Specific Franchise Laws: The NJFPA, like other state franchise laws, has specific requirements that differ from federal franchise regulations. Franchisors must ensure compliance with state laws in jurisdictions where they operate.
Conclusion
The N.A.R., Inc. v. Eastern Outdoor Furnishings decision reinforces the necessity for franchisors to properly document and define their relationships with retailers and distributors. In-house legal teams should take proactive steps to draft clear agreements, explicitly grant (or withhold) trademark rights, and carefully manage how business relationships are portrayed. By doing so, franchisors can mitigate legal risks and prevent unintended franchise claims under state laws like the NJFPA.
District Court Dismisses Trade Secrets Claim Lacking Explicit Expectation of Privacy
On February 20, 2025, the U.S. District Court for the Western District of Pennsylvania dismissed a trade secret misappropriation claim for failing to identify explicit language establishing an expectation of privacy to the protected information.
Plaintiffs in Vertical Bridge REIT LLC v. Everest Infrastructure Partners Inc., Case No. 23-1017 (W.D. Pa. 2024), own and operate telecommunications towers and lease space on those towers to telecommunications tenants. These towers sit on leased property, and Plaintiffs contend that their ground-lease agreements with individual landlords are based on “[Plaintiffs’] proprietary financial model, and other similar financial information.”
In 2023, Plaintiffs filed suit claiming that Defendants misappropriated trade secrets protected by federal and state law by inducing landlords “to share [Plaintiffs’] valuable, proprietary, and confidential financial information in their ground leases” as part of an “illegitimate tower aggregation scheme” to “directly and wrongfully compete with [Plaintiffs].”
In May 2023, Judge W. Scott Hardy dismissed Plaintiffs’ trade secret claims without prejudice on the grounds that they “lacked sufficient detail to determine what information [Plaintiffs] sought to protect and whether they had been secretive enough with respect to such information to avail themselves of trade-secret protections.”
Seeking to cure these deficiencies, Plaintiffs filed a Second Amended Complaint on June 6, 2024, alleging that their trade-secret protected information “include[d] site-specific rent amounts, licensing fees, escalator amounts, and rent sharing from tower tenants, all of which is developed with the [] Plaintiffs’ proprietary financial model and is specific to a particular site.” Plaintiffs further alleged that they had taken reasonable measures to protect the secrecy of this information, demonstrated in most instances by non-disclosure/confidentiality provisions in their leases. However, the Court held that it would “not find a trade secret claim” where Plaintiffs “failed to include or add any explicit provision to leases reflecting an expectation of privacy.” This ruling raises questions about the extent to which a plaintiff must allege that it took reasonable measures to ensure the secrecy of their trade secrets.
Employment Law This Week: Trade Secrets in Hollywood – Lessons from Oscar-Nominated Films [Podcast] [Video]
As featured in #WorkforceWednesday: This week, on our Spilling Secrets podcast series, our panelists dig into trade secrets lessons employers can learn from hit movies.
In this episode, Epstein Becker Green attorneys Daniel R. Levy, Aime Dempsey, and George Carroll Whipple, III, explore trade secrets through the lens of Oscar-nominated films, offering insights into protecting sensitive information in today’s competitive landscape.
Whether looking at a magical spellbook from Wicked or groundbreaking architectural designs in The Brutalist, the discussion underscores how trade secrets intertwine with innovation, employee training, and organizational culture. Discover how Hollywood’s biggest stories offer practical lessons for safeguarding your business’s most valuable assets.
Navigating IP Challenges: A Guide for Startups
Introduction
Many startups are pioneering technologies that are transforming the way we live, learn, and work. However, with great innovation comes great competition, and having a solid intellectual property (IP) strategy can make or break these companies, especially when these companies are in their early stages and IP may not be on top of mind. To secure a competitive advantage and attract investors, it is crucial that these startups have a strong legal foundation early on to protect their assets and maximize the value of their IP portfolios. This article explores the IP opportunities that startups should consider and also outlines strategies for protecting their innovations.
Develop a Comprehensive IP Strategy
Startups should implement an IP strategy in parallel with research, development, and investment strategies. Before pursuing any kind of IP strategy, a startup should become familiar with the protections offered by different IP regimes. Robust strategies that include, for example, patents, trade secrets, and licensing can help companies develop an advantage in the increasingly competitive technology landscape. In general:
Patents can protect innovations
Copyrights can protect the expression of an idea and require the memorialization of the idea on a tangible medium
Trademarks can protect a brand in the form of logos and names
Trade secrets can protect anything that can be kept confidential or proprietary
Out-licensing, which allows external partners the right to produce and sell products, can be a strategy to enhance the strength of an IP portfolio, extend market presence, and provide a revenue stream for a company
In-licensing can help diversify and strengthen IP portfolios by obtaining rights where there may be gaps in your portfolio.
While these buckets of IP provide different scopes of protection, they may overlap in coverage. As such, it is important to understand the value add for each of these IP regimes. In addition to adequately protecting its assets with the appropriate IP regime, a company should clearly define its IP and have its employees properly assign IP ownership to the company. It is a best practice to seek the advice of an IP attorney to help navigate these questions.
Act Early, Conduct an IP Audit
In the early stages of product development, time and resources are often poured into building business and marketing plans. However, startups should not overlook the importance of integrating IP strategies from the outset. For example, under the U.S. first-to-file patent system, the longer a company’s innovations go unprotected, the greater the opportunity for competitors to claim rights to similar inventions. A first step should be to conduct an IP audit, which will provide the startup with a comprehensive understanding of their existing IP assets and the competitive edge that each asset offers. Further, audits help identify areas of opportunity, along with gaps in protection and areas of risk.
What Can Be Patented?
When patent strategies are implemented effectively, they can provide broad protection for your inventions, covering almost any novel aspect of a company’s technology. For example, in the virtual reality/augmented reality (VR/AR), artificial intelligence (AI), or gaming spaces, a combination of design and utility patents can be issued to protect innovations including:
hardware, such as headsets, controllers, and display screens
software, including algorithms, applications, and machine learning architectures
interfaces and experiences that offer new ways of interacting with virtual environments
graphics and rendering techniques that improve visual effects
Patents not only cover new technologies – they can also be used to protect improvements or modifications to existing technology. For example, a startup developing a new AI chatbot could file for a patent that covers the chatbot’s architecture, and obtain additional patents as the technology evolves and different iterations of the chatbot are released.
Consider a Provisional Patent
For many startups where resources are at a premium, provisional patent applications can provide a more cost-effective option for protecting innovations. These applications can be quickly drafted, as they need not conform to any formatting requirements and generally cost between $1,500-$7,000, which is significantly less expensive than non-provisional applications, which can cost $10,000-$20,000, or more. Provisional patent applications allow companies to file earlier while deferring the more costly full applications by up to a year, leaving time to refine technology, explore market opportunities, and secure funding.
Trade Secret Protection
In many instances, trade secrets can protect IP assets when complemented by, or used as an alternative to, patents. Unlike patents, trade secrets are never publicly disclosed – a requirement that can make trade secret protection difficult to maintain. Once a trade secret is divulged, it is no longer protected. For example, in the VR/AR, AI, and gaming space, trade secrets can protect:
proprietary algorithms and code
hardware specifications, like manufacturing processes
user experience research and insights
machine learning models
business processes, operational insights, and marketing and launch plans
It should be noted that even technology that is available for purchase on the open market can be held as a trade secret, so long as such technology is not disclosed, cannot be discovered, and cannot be reverse engineered.
The matrix below provides considerations that can help in deciding when to pursue patent protection and when to keep an innovation a trade secret.*
Is technology susceptible to reverse engineering or independent discovery?
If yes, pursue patent protection.
If not, keep technology as a trade secret.
Is it easy to detect infringement and to enforce patented technology?
If easy, pursue patent protection.
If not, keep technology as a trade secret.
Is it difficult to maintain confidentiality of the technology?
If difficult, pursue patent protection.
If not, keep technology as a trade secret.
What is the life expectancy of the commercial value of the technology?
If short, pursue patent protection.
If long, keep technology as a trade secret.
* This information is for general informational purposes only and does not constitute legal advice. These assessments are fact-specific and should be made in consultation with a qualified legal professional.
Avoid Unintentional Loss of IP Rights
A common pitfall for startups is unintentionally disclosing innovations to the public too early. Any public disclosure can hinder the patent process, especially for companies seeking international patent applications. In most countries, the prior sale, prior use, or public disclosure of an invention may cause that invention to violate the patent filing requirement of novelty and/or non-obviousness.
Additionally, when an idea is disclosed to the public, there is a risk of waiving related trade secrets. As mentioned, trade secrets are only enforceable when steps have been taken to ensure that they are, in fact, a secret. Disclosing sensitive or proprietary information regarding not-yet-filed inventions can jeopardize the success of a startup, and can also reduce or eliminate its competitive advantage.
To manage confidential information and protect ownership of IP, a startup should always have the following documents in place:
An invention assignment agreement, which obligates the employees to transfer ownership rights in anything developed within the scope of their employment to the company.
Non-disclosure agreements, which can be used to maintain confidentiality if disclosure to third parties is necessary for business reasons.
Employee handbooks, which outline the expectations of employment, including the expectation that the company’s IP is not to be shared, disseminated, or stolen.
Address Ownership Issues
A crucial aspect in the success of any venture is ownership of the IP created on its behalf. Ownership of the IP, in general, can be shared, transferred, or licensed. While sharing ownership can foster collaboration, it can also lead to disputes if IP protection fails to account for all individuals who contributed to the conception of the invention. Companies entering into a collaboration or partnership should establish, from the outset, ownership rights by each party including ownership rights subsequent to the termination of the relationship. Establishing ownership rights at the onset can minimize the chances of disputes in the future.
When entering into a collaboration or partnership, participating parties have several options for addressing ownership of jointly developed products. The IP may be assigned and jointly owned, giving each party the right to sell or transfer rights to the invention without consent. Alternatively, one company may own the IP and then grant the other party an exclusive or non-exclusive license to the IP in exchange for an agreed upon value or benefit. Under an exclusive license, the licensee may have the exclusive right to use and/or sub-license the patented invention. On the other hand, a non-exclusive license can define the terms and scope under which the licensee can use the invention, while the licensor retains title and all other rights to it. Addressing ownership of jointly developed IP before product development can minimize the potential of costly disputes in the future.
Conclusion
IP protection is essential to the success of many startups. As companies develop their products and processes, and seek commercial applications for their inventions, managing and securing protection is vital to their long-term survival. Engaging an experienced patent attorney early on and developing a strong IP strategy that includes patent, trade secret, and licensing protection can provide these startups with the edge they need to succeed against competition.
First Solar Files Lawsuit Against JinkoSolar for TOPCon Patent Infringement
First Solar’s Legal Action Against JinkoSolar First Solar Inc. has filed a lawsuit against JinkoSolar Holding Co. Ltd. for allegedly infringing its TOPCon technology patent. The legal action was lodged in a US federal court in Delaware, with the Arizona-based solar manufacturer accusing its Chinese rival of violating its Tunnel Oxide Passivated Contact (TOPCon) patent. […]
CNIPA Rejects 63 Attempts to Maliciously Register DeepSeek Trademarks
On February 24, 2025, China’s National Intellectual Property Administration (CNIPA) announced that it rejected 63 trademark applications attempting to maliciously register DeepSeek and graphic. CNIPA stated that, “some agencies are suspected of providing illegal services, with obvious intentions of ‘riding the wave’ and seeking improper benefits. CNIPA resolutely cracked down on such malicious applications.”
China has previously rejected en masse applications and ex-officio cancelled trademarks that have been maliciously applied for and registered, respectively. For example, in 2022, CNIPA cancelled trademarks for Olympic mascots and athletes for “infringing on the personality rights and other legitimate rights and interests of others, has caused significant adverse social impact, and damaged the good image of China’s strict protection of intellectual property rights.” CNIPA rejected 429 trademark applications, including those for Eileen Gu (谷爱凌 and homonyms). CNIPA also cancelled, ex-officio, 43 trademarks, 20 of which were for Eileen Gu.
The original announcement and full list of rejected applications is available here (Chinese only).
Indian Music Industry Enters the Global Copyright Debate Over AI
The legal battles surrounding generative AI and copyright continue to escalate with prominent players in the Indian music industry now seeking to join an existing lawsuit against OpenAI, the creator of ChatGPT. On February 13, 2025, industry giants such as Saregama, T-Series, and the Indian Music Industry (IMI) presented their concerns in a New Delhi court, arguing that OpenAI’s methods for training its AI models involve extracting protected song lyrics, music compositions, and recordings without proper licensing or compensation. This development follows a broader trend of copyright holders challenging generative AI companies, as evidenced by similar claims in the U.S. and Europe.
This case was originally filed by Asian News International (ANI), a leading Indian news agency, which alleged that OpenAI had used its copyrighted content without permission to train its AI models. Since then, the lawsuit has drawn interest from music companies, book publishers, and news organizations, all highlighting the alleged economic harm and intellectual property concerns stemming from these practices in India. The proceedings emerge amid a global backlash against the use of copyrighted materials in AI training. In November 2024, GEMA, Germany’s music licensing body, filed a lawsuit against OpenAI, alleging that the company reproduced protected lyrics without authorization. In parallel, lawsuits from authors and publishers in the U.S. have accused OpenAI and other AI platforms of improperly using copyrighted materials as training data.
The unfolding litigation raises critical questions about the boundaries and applicability of ‘fair use’ within the context of AI in the digital age. While OpenAI maintains that its reliance on publicly available data falls within fair use principles, commentators warn that a ruling against the tech giant could set a precedent that reshapes AI training practices not only in India but worldwide—given the global nature of AI development and jurisdiction-specific nuances of copyright law. As courts grapple with these complex issues, both creative industries and the broader tech community are watching closely to understand how emerging precedent and legal frameworks around the world might influence future AI development and deployment.
As legal challenges mount globally, this litigation is another reminder for businesses developing AI models or integrating AI technologies to proactively assess data privacy and sourcing practices, secure appropriate licenses for copyrighted content, and thoroughly review existing agreements and rights to identify any issues or ambiguities regarding the scope of permitted AI use cases. Beyond obtaining necessary licenses, companies should implement targeted risk mitigation strategies, such as maintaining comprehensive records of data sources and corresponding licenses, establishing internal and (where appropriate) external policies that define acceptable AI use and development, and conducting regular audits to ensure compliance. For any company seeking to unlock AI solutions and monetization opportunities while safeguarding its business interests, engaging qualified local legal counsel early in the process is essential for effectively navigating the evolving global patchwork of fair use, intellectual property laws, and other relevant regulations.
President Trump’s Artificial Intelligence (AI) Action Plan Takes Shape as NSF, OSTP Seek Comments
On January 23, 2025, as one of the first actions of his second term, President Trump signed Executive Order (EO) 14179, “Removing Barriers to American Leadership in Artificial Intelligence,” making good on a campaign promise to rescind Executive Order 14110 (known colloquially as the Biden AI EO).
It is not surprising that AI was at the top of the agenda for President Trump’s second term. In his first term, Trump was the first president to issue an EO on AI. On February 11, 2019, he issued Executive Order 13859, Maintaining American Leadership in Artificial Intelligence. This was a first-of-its-kind EO to specifically address AI, recognizing the importance of AI to the economic and national security of the United States. In it, the Trump Administration laid the foundation for investment in the future of AI by committing federal funds to double investment in AI research, establishing national AI research institutes, and issuing regulatory guidance for AI development in the private sector. The first Trump Administration later established guidance for federal agency adoption of AI within the government.
The current EO gives the Assistant to the President for Science and Technology, the Special Advisor for AI and Crypto, and the Assistant to the President for National Security Affairs, in coordination with agency heads they deem relevant, 180 days—until July 22, 2025—to prepare an AI Action Plan to replace the policies that have been rescinded from the Biden Administration.
OSTP/NSF RFI
To develop an AI Action Plan within that deadline, the National Science Foundation’s Networking and Information Technology Research and Development (NITRD) National Coordination Office (NCO)—on behalf of the Office of Science and Technology Policy (OSTP)—has issued a Request for Information (RFI) on the Development of an Artificial Intelligence (AI) Action Plan. Comments are due by March 15, 2025.
This is a unique opportunity to provide the second Trump Administration with important real-world, on-the-ground feedback. As the RFI states, this administration intends to use these comments to “define the priority policy actions needed to sustain and enhance America’s AI dominance, and to ensure that unnecessarily burdensome requirements do not hamper private sector AI innovation.
Epstein Becker Green and its Artificial Intelligence practice group, along with its health care, employment, and regulatory teams, are closely monitoring how the administration will address the regulation of health care AI and workplace AI in this plan. During President Trump’s first term, the administration focused its AI policy primarily around national security. Given the great expansion of the types and uses of AI tools since President Trump’s first term, we anticipate the Trump Administration will broaden its regulatory reach during this term—with the aim of “enhancing America’s global AI dominance.”
We have seen an explosion of AI tools adopted by our clients within health care—both clinical and administrative—as well as for employment decision-making. We work closely with clients to manage enterprise risk and drive strategic edge through AI innovation and look forward to helping shape the current administration’s AI policies through this and other opportunities for engagement with federal policymakers.
Submission Guidelines
OSTP seeks input on the highest priority policy actions that should be in the new AI Action Plan. Responses can address any relevant AI policy topic, including but not limited to: hardware and chips, data centers, energy consumption and efficiency, model development, open source development, application and use (either in the private sector or by government), explainability and assurance of AI model outputs, cybersecurity, data privacy and security throughout the lifecycle of AI system development and deployment (to include security against AI model attacks), risks, regulation and governance, technical and safety standards, national security and defense, research and development, education and workforce, innovation and competition, intellectual property, procurement, international collaboration, and export controls.
OSTP encourages respondents to suggest concrete AI policy actions needed to address the topics raised. Comments may be submitted by email to [email protected] or by mail at the address on page 2 of the RFI. Email submissions should be machine-readable, not copy-protected, and include “AI Action Plan” in the subject heading. Additional guidelines, including font and page limits, appear on page 2.
Guangdong Higher People’s Court: 107 Million RMB Settlement in Pokémon Copyright and Unfair Competition Case
On February 21, 2025, Guangdong’s Higher People’s Court announced a settlement of 107 million RMB in favor of The Pokémon Company for copyright infringement and unfair competition. Pokémon had sued Guangzhou Mai Network Technology Co., Ltd., Huo Network Technology Co., Ltd. and others for copyright infringement and unfair competition disputes over the game “Pokémon: Remastered” in December 2021. Pokémon requested 500 million RMB and was awarded 107 million RMB in the first instance at the Shenzhen Intermediate People’s Court. The Guangdong High People’s Court then mediated an appeal to reach the current settlement.
The Shenzhen Intermediate People’s Court held in the first instance that the core elements of the Pokémon characters, game protagonists, maps, etc. in the accused game correspond one-to-one and are similar to the corresponding elements of the Pokémon Company’s games. The multiple element systems formed by the combination of game elements are highly similar or even completely consistent, and many numerical system designs are the same. Therefore, the specific story expressions of the accused game and the Pokémon Company’s games are substantially similar. The accused game infringes the copyright of the Pokémon Company’s games (including the reproduction rights, information network dissemination rights and adaptation rights stipulated in Article 10, paragraph 1, items 5, 12 and 14 of the Copyright Law).
In addition, the Court also determined that the operation and promotion of the game in question violated Article 2 and Article 8, Paragraph 1 of the Anti-Unfair Competition Law, and constituted unfair competition.
The Guangdong Higher People’s Court stated:
Under the current background of various industrial policies to help Chinese games go global and strengthen the export of Chinese culture, equal protection of the intellectual property rights of digital entertainment products of Chinese and foreign parties in accordance with the law is an important aspect of adhering to cultural self-confidence and self-reliance and promoting the construction of a strong country in intellectual property rights. This case involves the rights protection lawsuit of the world’s top game and animation IP “Pokemon”, which has a high level of social attention, a large amount of compensation in the first instance, and an open trial in the second instance, which has educational and guiding significance for the innovation and standardized development of related industries.
…
In addition, it is necessary to remind relevant industries and practitioners that copying other people’s game products to gain attraction and influence among relevant player groups, thereby obtaining undeserved commercial benefits, may infringe copyright and other intellectual property rights, and may also constitute unfair competition. Competition in the game product market cannot stop at “copying”, but must innovate and deeply empower elements such as game play, which can truly benefit the healthy and long-term development of the game industry.
The full text of announcement is available here (Chinese only).
Navigating Changes at the USPTO: Impact of New Government Cost-Reduction Initiatives
The new presidential Administration’s cost-reduction initiatives, including a hiring freeze and return-to-office mandate for federal employees, are poised to impact the efficiency of the US Patent and Trademark Office (USPTO), potentially affecting patent examination timelines and strategies.
The new presidential Administration’s focus on reducing government spending has resulted in a number of cost reducing initiatives, including several that have a direct effect on the USPTO. These initiatives include implementing a hiring freeze across the federal government and a return to office mandate coupled with a buyout option for federal employees. The hiring freeze has resulted in a cancellation of USPTO job advertisements and rescinded offers of employment to new patent examiners, while the return to office mandate coupled with a buyout option for federal employees has the potential to affect a significant number of USPTO employees, including many senior examiners and Patent Trial and Appeal Board (PTAB) judges. Moreover, the recent resignation of Commissioner for Patents, Vaishali Udupa, is sure to affect the course and policies of the USPTO as it navigates these significant changes.
These changes are likely to affect the efficiency and speed of patent examinations, appeals, and trials at the PTAB, and could increase pendency of applications and other matters under the purview of the USPTO. Our Intellectual Property (IP) practice group at AFS understands the importance that timely processing of patent applications has on our clients’ business operations and IP strategies. Accordingly, we are committed to minimizing any adverse effects that these changes may have on our clients. We will continue to closely monitor the situation and adapt our strategies to ensure that your patent applications are processed with as little delay as possible.
Who Owns a Vibe? Content Creators Battle Over Aesthetics of Social Media Posts
Even before modern-day social media, aesthetic trends or so called “vibes” were pervasive online and in real life. Tumblr Girls in the mid-2000s, grunge fashion and metalheads in the 90s, and the mods and rockers of 1960s England dominated the media of their respective eras. It was not so long ago that the “Bieber Haircut” trumped the German-influenced Beatles Cut. As vibes come and go, evolving with cultural influences, these aesthetics impact not only people’s looks, but also the way they live. The question remains: who owns a vibe?
That issue is squarely presented in a very modern setting by the case of Gifford v. Sheil, in which two influencers with competing “clean girl” vibes battle over whether the plaintiff, influencer Sydney Nicole Gifford and her LLC (“Gifford”), can enforce her rights in her Amazon store front, Instagram posts, and Tik Tok videos against another influencer, Alyssa Sheil and her LLC (“Sheil”). Gifford contends that Sheil infringed copyright in the content Gifford posted. Gifford also contends that Sheil misattributed that content to herself rather than to Gifford under a provision of the Digital Millennium Copyright Act (“DMCA”), which prohibits alteration of Copyright Management Information (so called “CMI”). Finally, Gifford claims trade dress infringement – or a copying of the “total image and overall appearance” that can attach to décor such as a restaurant, the layout and appearance of a mail-order catalog, and even the look and appearance of a website.
For some context of what the parties’ posts looked like, see below for an example of some of Gifford’s images included in the Complaint (photos posted by Gifford on TikTok):
Some of the allegedly infringing images posted by Sheil, also on TikTok and included in the Complaint, are reproduced below:
To be sure, there are similarities between the two influencers’ posts and both promote the sale of similar goods (in this case minimalist furnishings and accessories). The Complaint alleges that Sheil posted content “containing styling, themes, camera shots and angles, and text captions, among other elements, copying those of [Gifford’s] posts.” But with respect to Gifford’s copyright infringement claim, it remains to be seen whether original creative expression, rather than a mere idea (or style) arguably pervasive on social media, was appropriated by Sheil. Third-party goods shown in the posts cannot be claimed as part of Gifford’s copyrightable expression because they were not created by the photographer (Gifford), but merely included in the photographs (although, to be sure, the angles, positioning and arrangement of the items might be copyrightable expression).
To prevail on the trade dress infringement claim, Gifford faces the hard task of proving that a pervasive aesthetic style is associated exclusively with her, and therefore, that she has trade dress rights in her content. For trade dress to exist, consumers must associate that trade dress with a single source (here Gifford). It will also be challenging to establish that those trade dress elements associated with Gifford’s posts are constant and unchanging, given the many different products she photographs and posts. A Starbucks coffee shop or an In-N-Out Burger is generally characterized by unchanging elements that are instantly recognizable and associated with a single source, but is an ever-changing array of social media posts featuring different items for sale as readily identified with a single source?
Even if Gifford can establish she has trade dress rights, she must also prove an appreciable number of consumers are likely to be confused as to whether Sheil’s content originates with or was endorsed by Gifford. Gifford alleges anecdotal evidence of actual consumer confusion (that is, the mistaken belief that Sheil’s content was endorsed, produced, or in some way associated with Gifford). Gifford also pleads that consumer confusion is further exacerbated by social media algorithms that feed its users content similar to that previously viewed by those users. A likelihood of confusion is the sine qua non of trade dress infringement. A few instances of actual confusion can be probative, but not dispositive, of that issue. The results of a consumer survey designed for the lawsuit will likely have to be considered in assessing likelihood of confusion.
And as to the CMI claim under the DMCA, is the respective parties’ content different enough to show that Sheil’s attribution of her content to herself rather than to Gifford is unlawful? We will follow the case closely and keep you posted on these and other issues.
As the Creative Economy becomes more popular for influencers and content creators, we’re likely to see guidance on copyright and other intellectual property law emerge.