The "safe harbor" provision in the DMCA allows eBay to ignore the rights of the sellers in order to avoid potential lawsuits over the auction listings. eBay prefers the "safe" approach and really doesn't care about anything except eBay's bottom line. We had a to-do with Sean Chafin of the Bay VeRO Team in 2003 when eBay unveiled their trademark approach claiming they were complying with the "takedown provisions" in the Lanham Act. Sean didn't take kindly to being called a liar because there are NO takedown provisions in the Lanham Act. It was just the eBay legal department playing CYI (cover your ass) by "zealously" advancing a legal theory that they pulled out of their collective asses.

Copyright Infringement

As pertains to copyright law, a "derivative work" is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A musical arrangement that is a "derivative work" is protectible by copyright. In Woods v. Bourne Co., 841 F. Supp. 118 (1994), the court held that to qualify as a derivative work, there must be such things as unusual vocal treatment, additional lyrics of consequence, unusual altered harmonics, novel sequential uses of themes, or something of substance added which makes the piece to some extent a new work.

A VeRO member may claim that you are selling a derivative of their product. The test for a derivative is very simple: will the item qualify for a copyright on its own? For example, if you were using John Deere fabric to make an apron, would that apron qualify for a copyright? No. The apron itself is a useful item and therefore cannot be copyrighted and the fabric pattern is already copyrighted, so it does not qualify.

In Precious Moments v. La Infantil, 971 F.Supp. 66, 69 (1st Dist P.R.) the First Circuit Court specifically rejected the copyright claim where La Infantil was being accused with unauthorized use of copyrighted fabric, saying that “bedding items manufactured with lawfully acquired, authentic fabric with copyrighted designs were not infringing derivative works.”
“Applying the proper standard to the case at bar, the Court finds that the necessary element of originality is absent from the items manufactured for La Infantil from the Precious Moments fabric. They therefore do not constitute 'derivative works' infringing on Precious Moments' copyright”. Id. At 69.

The issue of whether a work is a parody is a question of law, not a matter of public majority opinion. See Campbell, 510 U.S. at 582-83;

In Mattel Inc. v. Walking Mountain Productions, 353 F.3d 792 (9th Cir. 2003), when Mattel offered a survey to rebut the copyright fair use argument that the Food Chain series was parodic, the court rebuffed it, ruling that a work's parodic character is objectively determined, that public perception is irrelevant. ("The issue of whether a work is a parody is a question of law, not a matter of public majority opinion."). Id. at 801.

Parody “has an obvious claim to transformative value” and may claim fair use. Campbell, 510 U.S. at 579.

Trademark Infringement

In Westchester Media v. PRL USA Holdings, Inc., 214 F.3d 658, United States Court of Appeals for the Firth Circuit, 2000, under Remedies the court stated: “One obvious mode of accommodation is a disclaimer that will officially dissociate the junior user of the mark from the senior user's product. Disclaimers have frequently been approved by this court and others when trademark and First Amendment interests intersect.”

It is a fundamental principle marking an outer boundary of the trademark monopoly that, although trademark rights may be acquired in a word or image with descriptive qualities, the acquisition of such rights will not prevent others from using the word or image in good faith in its descriptive sense, and not as a trademark. See Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 12-13 (2d Cir. 1976); Sunmark, Inc. v. Ocean Spray Cranberries, Inc., 64 F.3d 1055, 1058 (7th Cir. 1995); United States Shoe Corp. v. Brown Group, Inc., 740 F. Supp. 196, 198-99 (S.D.N.Y. 1990); Holzwarth v. Hulse, 14 N.Y.S.2d 181, 181 (Sup. Ct. 1939); Johnson & Johnson v. Seabury & Johnson, 67 A. 36, 38 (N.J. 1907); Restatement (Third) of Unfair Competition § 28 (1995); 3A Louis Altman, Callmann on Unfair Competition, Trademarks and Monopolies § 21.24 (4th ed. 1983); Margreth Barrett, Intellectual Property 760-61 (1995).

As Justice Holmes clarified,

"A trade mark[sic] only gives the right to prohibit the use of it so far as to protect the owner's good will against the sale of another's product as his. . . . When the mark is used in a way that does not deceive the public we see no such sanctity in the word as to prevent its being used to tell the truth. It is not taboo."

"The whole point of the first sale doctrine is that once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution." Quality King Distributors, Inc. v. Lanza Research Int., 523 U.S. 135 (1998)

Congress enacted § 512(f) as part of the Digital Millennium Copyright Act's (“DMCA”) so-called “safe harbor” provisions, which shield certain online service providers like eBay from monetary damages for copyright infringement, so long as they respond expeditiously to notices of infringement sent by copyright owners. See 17 U.S.C. § 512(c); Hendrickson v. eBay Inc., 165 F. Supp. 2d 1082, 1088-89 (C.D. Cal. 2001); see generally 3 Nimmer § 12B.01[C]. In order to prevent abuses of this statutory “notice-and-takedown” mechanism, Congress enacted § 512(f) “to deter knowingly false allegations to service providers in recognition that such misrepresentations are detrimental to rights holders, service providers, and Internet users.” S. Rep. 105-190 at 49 (1998); see generally 3 Nimmer § 12B.08.

The DMCA requires that service providers reasonably implement “a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider's system or network who are repeat infringers.” 17 U.S.C. § 512(i). (emphasis added)

Under § 512(f) the law imposes liability where a party “knowingly” and “materially” misrepresents that copyright infringement has occurred. “'Knowingly' means that a party actually knew, or should have known if it acted with reasonable care or diligence, or would have had no substantial doubt had it been acting in good faith, that it was making misrepresentations.” Online Policy Group v. Diebold, 337 F. Supp. 2d at 1204. “'Material' means that the misrepresentation affected the [service provider's] response to a DMCA letter.” Id.

New Kids on the Block addressed using another's trademark for profit. The Federal Court in New Kids on the Block v. News America Publishing, Inc., 971 F.2d 302 (9th Cir. 1992) stated: “We reject this argument. While the New Kids have a limited property right in their name, that right does not entitle them to control their fans' use of their own money. Where, as here, the use does not imply sponsorship or endorsement, the fact that it is carried on for profit and in competition with the trademark holder's business is beside the point. See e.g., Universal City Studios, Inc. v. Ideal Publishing Corp., 195 U.S.P.Q. 761 (S.D.N.Y.1977).

“Voting for their favorite New Kid may be, as plaintiffs point out, a way for fans to articulate their loyalty to the group, and this may diminish the resources available for products and services they sponsor. But the trademark laws do not give the New Kids the right to channel their fans' enthusiasm (and dolls) into items licensed or authorized by them. See International Order of Job's Daughters v. Lindeburg & Co., 633 F.2d 912 (9th Cir.1990)”.

Judge Waterman of the Second Circuit Court of Appeals, said that under the Lanham Act “One can capitalize on a market or fad created by another provided that it is not accomplished by confusing the public into mistakenly purchasing the product in the belief that the product is the product of the competitor.” American Footwear Corp v. General Footwear Co. Ltd., 609 F.2nd 655, 662 (2nd Cir. 1979), cert. denied, 445 U.S. 951, 100 S. Ct. 1601, 63 L. Ed. 2d 787 (1980) (finding that the manufacturer of a “Bionic Boot” did not infringe on the trademark of the producers of the “Bionic Woman” television program).