Supreme Court Justice Neil Gorsuch’s Views on Intellectual Property

12 Apr Supreme Court Justice Neil Gorsuch’s Views on Intellectual Property

On April 7th, 2017, the U.S. Senate confirmed the newest member of the Supreme Court, Neil Gorsuch. While much has been made of the controversial year-long series of events that led to Gorsuch’s nomination and confirmation, much of the public knows little about Neil Gorsuch or the legal views that he will soon bring with him to the bench.

In order to bring some clarity to his views, particularly his views on intellectual property, we have taken some time to compile an overview of rulings he issued on notable I.P. cases he heard during his 10 year stint on the U.S. Court of Appeals for the Tenth Circuit.

General Steel Domestic Sales, LLC v. Chumley

General Steel filed a lawsuit against a former employee, Ethan Chumley, for allegedly operating an online advertising campaign that targeted General Steel. Chumley had founded his own company, Armstrong Steel Corporation, and quickly developed a series of online ads and web pages that placed General Steel in a poor light.

General Steel sued Chumley and his company in a district court, alleging that Armstrong Steel had been misleading in its advertisements, and had made a number of false claims. Ultimately, the district court found in favor of Armstrong based on three particular statements it found to be false and in violation of the Lanham Act: In their ads, Armstrong claimed that it (1) sold “General Steel” prefabricated buildings, (2) fabricated its own steel, and (3) in a comparison between the two companies indicated that General Steel offered fewer options than Armstrong. Armstrong then appealed to the Tenth Circuit.

As Gorsuch explained in his opinion, “to win a false advertising claim under the Lanham Act, a plaintiff generally must establish among other things that the defendant’s commercial advertising contained a false or misleading representation of fact that was likely to cause confusion about the defendant’s products or services and that injured the plaintiff.”

Gorsuch went on to explain that for a statement to be false or misleading to the extent that the Lanham Act would apply, a statement must be shown to be either literally false, or constructed so that while it is at its basest level literally true or ambiguous, it is “implicitly false, misleading in context, or likely to deceive.”

The district court had found the three statements in question to be literally false, because (1) Armstrong didn’t sell General Steel’s buildings and wasn’t licensed to do so, (2) did not fabricate its own steel, and (3) didn’t offer features that it claimed to offer in its comparison.

In its appeal, Armstrong offered facile arguments against the court’s ruling on each of the three points. For instance, it alleged that in saying that it sold “General Steel buildings,” it in fact meant that it sold lower case “general steel buildings” (i.e. all-purpose buildings).

Gorsuch was not impressed by any of Armstrong’s arguments. Regarding the “General Steel” versus “general steel,” Gorsuch had this to say:

There’s no credible evidence in the record that the term “general steel” is used in the industry to describe steel buildings sold by anyone else. Armstrong’s ads, meanwhile, included side-by-side comparisons between its products and those offered by the General Steel company. They even used General Steel’s logo and sometimes capitalized “General Steel.” In this light, there’s just no doubt what Armstrong’s ads were talking about – or that they were literally false.

Gorsuch’s impatience with Armstrong’s arguments is evident throughout his opinion, and unsurprisingly, he agreed with his fellow judges in affirming the lower court’s decision. Based on this ruling, under the Lanham Act, General Steel is be entitled to a share of Armstrong’s profits.

What can be taken from this is that Gorsuch is not disposed to look at various pieces as being separate from one another, but instead looks at separate actions as part of a cohesive, coordinated whole. Gorsuch’s argument against the lower case interpretation of Armstrong’s use of “General Steel” was predicated upon specific references that Armstrong made to “General Steel” in other pieces of content that appeared on the same web page. The defense, as Gorsuch put it, wished to “cleave” these pieces of content from one another. Gorsuch failed to be impressed by this attempt at removing context, and likely won’t respond to any such attempts that are made in cases heard by the Supreme Court.

StorageCraft Tech. Corp. v. Kirby

In StorageCraft Technology Corporation v. Kirby, Gorsuch took a rather strong line on trade secret protection.

James Kirby, a cofounder and former director of StorageCraft, was accused of taking software code and providing it to a competitor of StorageCraft after a falling out with the company. StorageCraft sued Kirby for trade secret misappropriation, and was awarded a judgment of $2.92 million.

Kirby appealed to the Tenth Circuit, arguing that the jury award was too high because Kirby did not personally profit from the transaction, and because StorageCraft never attempted to prove that the competitor used the stolen data. While Kirby admitted to his actions, he argued that without proof that he or anyone else profited from those actions, that the award was inappropriately calculated based upon the notion of lost profits.

In Gorsuch’s opinion of the StorageCraft case, he noted, “the trouble is Utah law doesn’t distinguish between a misappropriator’s venial motives. When someone steals a trade secret and discloses it to a competitor he effectively assumes for himself an unrestricted license in the trade secret. And that bears its costs. After all, what value does a trade secret hold when it’s no longer a secret from the trade?”

The opinion written by Gorsuch grants some insight into his personal feelings regarding the protection of intellectual property, as at times it becomes clear that he is genuinely disgusted with the defendant’s attempts at dissociating his personal actions from the corporate consequences they produced:

“He would have us equate him with a hypothetical misappropriator who stole a trade secret and then disclosed it only to his long since retired, seriously aged, and tight-lipped great-grandfather, someone who didn’t and couldn’t make use of the secret and who therefore couldn’t do serious damage to the trade secret or its rightful holder… Instead, the evidence at trial showed that Mr. Kirby took StorageCraft’s trade secret and intentionally disclosed it to NetJapan, aware that NetJapan was an able competitor, and aware that NetJapan could well use the secret to compete with StorageCraft.”

It should come as no surprise that Gorsuch upheld the jury award. Based on his ruling and the language of his opinion, it’s reasonable to assume that in similar cases where an individual was hit with massive civil penalties for unlawfully disseminating corporate intellectual property, it’s unlikely that Gorsuch would act to nullify those penalties.

Blehm v. Jacobs

In Blehm v. Jacobs, Gary Blehm brought a copyright infringement suit against Albert Jacobs, his brother John, and their company, The Life is Good Company.

The plaintiff had created a series of copyrighted posters featuring “Penmen,” stylized stick figures engaged in a wide range of activities, such as playing Frisbee, playing musical instruments, fishing, and more. Eventually, Blehm incorporated the characters into other pieces of merchandise, including t-shirts, a comic strip, and a book.

About five years after Blehm created the Penmen, the Jacobs brothers created a character they called “Jake,” with a red face and a big smile, who wore a beret and sunglasses. They began creating t-shirts featuring Jake in a variety of activities similar to those depicted in the Penman drawings.

In 2009, Blehm filed a lawsuit against the Jacobs, claiming they had infringed on his copyright. The case was dismissed, and Blehm appealed to the Tenth Circuit.

In their careful comparison of the characters, Judges Briscoe, Matheson, and Gorsuch (Briscoe wrote the opinion) engaged in a careful overview of what aspects of an intellectual creation are protected by copyright, and those that are not.

At one point, the opinion examines the two respective creations in similar poses, giving the ‘peace sign’:

Comparison of the two characters, taken from the court’s opinion.

Briscoe points out that “Because we must separate unprotected ideas from expression, our analysis does not consider that both drawings share the idea of a cartoon figure making a common hand gesture. But we do consider whether the Jake image is substantially similar to Mr. Blehm’s expression of this idea.”

Briscoe begins his examination by noting that Blehm indicated that there were key similarities between the two characters—in particular, their round heads, the proportions of their body parts, and most importantly, their large smiles.

In his analysis, Briscoe finds that in fact, the characters are different in many respects. Penman’s face is round, while Jake’s is an oval. Jake’s body (aside from his head) is relatively proportional, while the Penman has a very short torso, extremely long limbs, and large feet and hands. He notes that while there are certain similarities, “these similarities have important differences, or are not protectable expression. For example, Jake’s fingers appear stubbier. The choice to display the figures’ feet outward also naturally flows from the common idea of drawing a two-dimensional stick figure and is thus unprotected.”

The characters’ respective smiles are the last detail to be examined. While they are both large and crescent shaped, “the idea of a crescent-shaped smile is unprotected.” Thus, to show infringement, “the expression of the smiles must be substantially similar and important to the overall work.”

And here is where Blehm’s allegation fails on his last point. Because the faces of the two characters are so different in style—the Penman’s is a black blob separated from his body, while Jake’s head is white, connected to his body, has eyes covered by sunglasses, and is wearing a hat—the single similarity is lost in a sea of differences.

In the court’s conclusion, they explained that “Copying alone is not infringement.” It may well have been that the Jacobs’ brothers were in fact inspired by Blehm’s Penmen and their many extracurricular activities. However:

“The infringement determination depends on what is copied. Assuming Life is Good copied Penmen images when it produced Jake images, our substantial similarity analysis shows it copied ideas rather than expression, which would make Life is Good a copier but not an infringer under copyright law.”

Gorsuch and his fellow justices affirmed the ruling of the district court, holding that the Jacobs had not infringed upon Blehm’s copyright.

Gorsuch’s Respect for Rightsholders

In each case, Gorsuch ruled in favor of a rightsholder—to clarify, a rightsholder is anyone with intellectual property rights However, some rightsholders have strong, eminently enforceable rights.  You are in the strongest position to protect your I.P. when you are a strong rightsholder, and Gorsuch’s rulings—and his ascension to the SCOTUS—show that this trend is unlikely to change soon.

However, strong rights require a coordinated strategy to obtain and protect. The Law Office of Michael O’Brien can assist your company with arranging your intellectual property policies in order to be a strong, legally protected rightsholder.