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Marks Madness: University (Basketball) Trademarks and TV

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By: Angela Chung

Universities may be unhappy with how their brands are presented in television shows, but comparison and commentary does not necessarily produce consumer confusion. Where trademark law falls short, are there other legal avenues for universities to distance their marks from uses that are inconsistent with their values? 

Duke University recently criticized The White Lotus for depicting characters wearing Duke apparel in scenes involving suicidal ideation. Memes sprouting from these scenes in reference to Duke’s March Madness progression (and the later Final Four finish) prompted an official reply that the imagery “mistakenly suggests an endorsement or affiliation” with the show’s themes. This comes not long after Pepperdine University sued Netflix and Warner Bros. Entertainment for using “Waves” athletic branding in Mindy Kaling’s new show, Running Point. Pepperdine similarly asserted that the show’s depictions of identifiable branding created a false sense of endorsement by Pepperdine of the show’s suggestive themes, which are inconsistent with the university’s Christian values.

TV Does Not Dilute TMs

Trademark law is, at its core, intended to prevent consumer confusion. Facilitating distinctions and siloing off the rights to marks helps consumers and companies associate brand logos with particular values. For example, an Apple logo creates expectations of  sleek aesthetics and user interface while the Gucci logo communicates high status and product quality. When certain marks—like Apple or Gucci—are extremely well known, trademark law extends further protections for said ‘famous’ marks when they get linked to unsavory subject matter. This is called trademark dilution. Dilution can occur through blurring (chipping away at the distinction between brands in a way that harms brand reputation) or tarnishment (lowering brand reputation through association with subject matter or product quality in tension with actual values of mark owner). For instance, if a knockoff iPhone was being sold with glitchy and poor functionality, Apple may have a trademark dilution claim on the grounds that  the knockoff harms Apple’s reputation for creating smooth and reliable smartphones. 

At first glance, both universities appear to have an argument for trademark dilution, particularly via tarnishment. Associating university brand imagery with unsavory images that are contrary to university values could arguably imply inaccurate ideas about both schools. But the foundational goal of trademark law to prevent consumer confusion limits the protections these universities may seek. Context matters—seeing a particular university brand associated with products or services is very different from seeing that same brand within an expressive work on TV. 

Ultimately, viewers are unlikely to believe that university logos in creative works—like a TV show—indicate that the universities actually endorse ideas from the show itself. In fact, university branding can be a tool to express new commentary or criticism in themes across education, class, athletics, and more. Using a mark in a creative work fundamentally changes the way potential consumers view its associated ideas. Trademarks can therefore become independent vessels for communicating artistic expression, rather than identifiers of potential product or service origins.

Creative Expression > Commercial Identity

Trademark expressions in creative works are therefore explicitly protected through fair use exceptions to trademark infringement and dilution claims. The two-prong test from Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989) is used to determine if a trademark falls under fair use in a creative work. Under the Rogers test, courts assess if the use of a trademark (1) has artistic merit and (2) explicitly misleads a viewer as to the source of a work. Under 15 U.S.C. § 1125(c)(3)(A), if the mark has some artistic merit and does not mislead a user to believe the creative work originates from the trademark owner, there is no cause of action for trademark infringement. Ultimately, the Rogers test seeks to distinguish artistic expression from commercial products and protect free speech. Recent Supreme Court rulings have affirmed strong support for use of trademarks in creative / artistic works without permission from the mark owners.

Pepperdine’s temporary restraining order on Netflix was therefore denied because Netflix’s use of the Waves’ marks “does not explicitly mislead consumers as to the source of the work.” And Duke would not have a strong claim for trademark dilution because trademarks do “not give one control over how others reference one’s brand, including in critical ways.” (Duke Says ‘White Lotus’ Went ‘Too Far’ With School References – The New York Times). Under the Rogers test, the Duke logo likely has artistic merit for shaping out characters of the show, and does not explicitly mislead viewers into thinking The White Lotus is endorsed or produced by Duke. 

Ultimately, trademark laws protect companies where the use of their marks by others affect their commercial reputation and recognizability in the market. Trademarks do not protect brands from being referenced, criticized, or used as part of cultural /creative expression. So where can universities go from here if they sincerely wish to prevent the use of their logo in these shows? Does copyright or defamation law provide avenues for action?  

Probably not. 

Legal Limits of Brand Protection

Trademark law protects words, phrases, or designs used to identify goods and services. In order to help consumers identify the source of goods and services, mark owners are empowered to prevent others from using their marks without permission. Copyright law, on the other hand, prevents people from copying or reproducing a creative work without permission from the copyright holder. For brands, copyright law would only extend protections to creative elements of brand design, such as a logo illustration. But words, phrases, and common combinations of design are not protected because doing so would stump creativity. Because of this, copyright law would not block others from using the words “Waves” or “Duke,” for example.

A particular illustration of Duke’s mascot could be granted protections when reproduced or used in another copyrightable work, but protections over logo elements (like the combination of font styles with certain colors) would be very thin at best. In the case of Pepperdine, courts would be unlikely to prevent others from using a general combination of blue and orange with the word “Waves.” Even if Pepperdine could raise a claim for copyright infringement of their Waves logo imagery by showing substantial similarity between the show’s logo with Pepperdine’s , it probably would not entirely stop Running Point from using various brand design elements. Copyright therefore falls short of the more robust protections provided by trademark law over brand names and imagery. 

Defamation suits would not survive either. A defamation prima facie case requires a false statement about the defendant purporting to be fact and proof of damages or harm caused to the reputation of the defendant. Here, associating university brands with controversial subject matter in explicitly fictional shows does not qualify as false statements about those universities. Having a character wear a Duke sweater does not mean The White Lotus is factually stating that Duke supports or exacerbates suicide amongst its students or alum. In addition, neither Duke nor Pepperdine would likely be able to show actual damages or harm to their reputation as a result of their brand being used. While Pepperdine may dislike allusions to their sports logos alongside inappropriate scenes in Running Point, there is no evidence that the show’s airing reduced enrollment or otherwise affected the university’s reputation or funding. 

Legal action is generally sought in order to prevent or seek redress for harm. While unauthorized presentations of university brand logos in fictional shows may be strongly disliked by the respective universities,  it does not necessarily amount to harm under the law.  Further, the use does not harm viewers since there is no evidence that the use of university logos creates confusion about the show’s origins or misleads viewers into believing they are consuming something else. Creative contexts provide new meaning to protected marks outside of commercial identification, and fair use exceptions prioritize these expressive means. For now, where trademark law does not provide protections for distasteful themes in association with brand presentation, universities may just have to accept the discourse as is.

Studio Ghibli-Style AI Images and the Legal Questions They Raise

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By: Esha Kher

In recent weeks, AI-generated images mimicking the iconic look of Studio Ghibli have gone viral across platforms like X and Instagram, sparking controversy. Selfies, family portraits, and memes have been transformed into soft, pastel-hued depictions that echo the dreamlike aesthetic of the legendary Japanese animation studio. Founded in 1985 by Hayao Miyazaki, Isao Takahata, and Toshio Suzuki, Studio Ghibli is renowned for its rich storytelling and distinctive, heartwarming visual style—now replicated widely through AI.

The recent trend in which users generate AI images using the latest version of OpenAI’s GPT-4o, mimicking Studio Ghibli’s aesthetic, has gained immense traction on social media, even causing server overloads. This emerging trend has sparked considerable debate, dividing public opinion into two camps: AI enthusiasts and staunch critics of AI-generated art. Supporters view the phenomenon as a tribute to Studio Ghibli’s influence and a democratization of creative tools. Critics, however, find this trend to be both a hollow and inauthentic imitation of Hayao Miyazaki’s distinct style—devoid of creative soul or artistic merit. An old clip of Miyazaki himself resurfaced during the controversy, in which he vehemently denounced AI-generated imagery as “an insult to life itself”. 

Regardless of one’s stance on the debate, the trend raises important legal questions. Do AI models rely on copyrighted material to replicate distinct visual styles? And when these outputs resemble a studio’s recognizable aesthetic, like that of Studio Ghibli, do they risk infringing on copyright or trademark protections?

How ChatGPT Generates “Stylized” Images

GPT-4o uses an autoregressive algorithm to generate images by breaking them down into visual “tokens,” which function like words in a sentence. Just as ChatGPT predicts the most likely sequence of words in a sentence, generative image models predict and assemble these visual tokens to form coherent images. Through training on large datasets of images and text, the model learns to associate certain patterns, like color palettes or brushstrokes, with specific words, encoding them as abstract “styles” within its neural network. So when a user references “Studio Ghibli,” the model doesn’t retrieve frames from actual films but instead draws on a learned mathematical representation of the studio’s aesthetic (otherwise known as “Ghibli-ness”). This ability to isolate and apply visual features across new images is known as a “style engine”. 

Copyright Law Implications 

The use of style engines has raised entirely new questions about copyright law and creative ownership. U.S. copyright law doesn’t protect certain artistic styles, the law only protects the unique ways those styles are expressed or, in other words, original works of authorship. 

However, legal experts caution that this distinction may not be sufficient. While “style” in the abstract is not copyrightable, what people casually refer to as “style” may include recognizable, discrete elements of a work of art. Therefore, the blanket statement that an artistic style isn’t protectable under copyright law may not be absolute. Courts may still find infringement if generated images include elements that are original, expressive, and substantially similar to the copyrighted works.

This legal ambiguity is at the heart of Andersen v. Stability AI, a landmark lawsuit filed in 2022 by three visual artists against AI companies Stability AI, Midjourney, and DeviantArt. The artists allege that these companies used their copyrighted artworks without consent to train AI models like Stable Diffusion, which can generate images that imitate their distinctive styles. The plaintiffs argue that such outputs constitute derivative works, and even if the results aren’t direct copies, the unauthorized use of their works in training data alone may amount to copyright infringement. Similar concerns have surfaced in other lawsuits, including Huckabee v. Meta and Millette v. Nvidia, where creators claim that their content was scrapped and repurposed by generative AI platforms, raising serious questions about how copyright applies in the context of machine learning.

Further, there is growing concern that OpenAI may have used Studio Ghibli’s films and artwork to train its generative image model without prior consent from the animation studio. This could constitute copyright infringement if the works were repurposed in a way that exceeds the scope of what is allowed under the fair use doctrine. The fair use doctrine permits the use of copyrighted material for specific purposes, such as academic research or the creation of an entirely new invention. OpenAI maintains that training its models is fair use under copyright law, but this defense is largely untested. 

Trademark Law Implications

Beyond copyright law, Studio Ghibli could assert that OpenAI’s generation of “Ghibli-style” images infringes upon its trademark rights under the Lanham Act. While an animation style—such as Studio Ghibli’s distinctive visual aesthetic—is not independently protected by trademark law and does not trigger the traditional “likelihood of confusion” test used in trademark infringement claims, other aspects of trademark law may still apply. 

When there is no registered trademark involved, Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)) provides broader protection by prohibiting false endorsement, sponsorship, or affiliation. Under this provision, a claim can arise when: (1) a defendant uses elements closely associated with a person or brand, such as names, visual likenesses, or identifying characteristics, and (2) this use creates a false impression in the minds of consumers that there is a connection, endorsement, or affiliation with the original brand. 

In this context, while Studio Ghibli may not have a registered trademark on its animation “style” per se, OpenAI’s promotion of “Ghiblification” experiments—along with OpenAI employees sharing Ghibli-style portraits of themselves on social media—could potentially give rise to a false endorsement claim under § 43(a). This is especially true if such references imply to the public that Studio Ghibli has authorized or collaborated with OpenAI in developing these tools. Even allowing prompts such as “in the style of Studio Ghibli” could lead consumers to mistakenly believe that Studio Ghibli has endorsed or is affiliated with the image generation process. While this may not amount to traditional trademark infringement, it opens the door to a false association claim under the broader protections of the Lanham Act. 

Conclusion

The rise of AI-generated art in the style of Studio Ghibli underscores the growing legal uncertainty surrounding copyright and trademark protections.​ As of now, Studio Ghibli has not initiated any legal action against OpenAI regarding the AI-generated images mimicking its distinctive animation style. Nonetheless, there might be grounds to pursue action under U.S. law. While U.S. copyright law does not formally protect artistic styles, the line becomes blurry when AI outputs closely resemble original works in expression and substance. At the same time, Studio Ghibli may have a claim under trademark law, particularly if the AI-generated images create consumer confusion or falsely present an endorsement by the studio. By capitalizing on Ghibli’s recognizable aesthetic, OpenAI risks infringing on the studio’s brand and artistic reputation. These unresolved legal questions underscore the need for updated legal frameworks that account for how AI systems produce and distribute creative content without prior consent from creators.

Competitive Cheer and Anticompetitive Practices: Varsity Spirit’s Antitrust Struggles

/ Washington Journal of Law, Technology & Arts / 1 Comment
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By: Hannah Gracedel

For decades, Varsity Spirit (“Varsity”) has been the undisputed champion of competitive cheerleading. They outfit teams, run camps, and, most importantly, control the biggest competitions in the industry. But while cheerleaders are trained to execute flawless routines, Varsity’s business decisions have drawn the attention of those who argue that its grip on the cheerleading world might be less about fair cheerleading competitions and more about unfairly dominating the competitive cheerleading market. Two recent class action suits, one in 2023 and another in 2024, claim that Varsity gained and maintained significant control of every aspect of the competitive genre, “All Star Cheer” through its anticompetitive practices. Both suits resulted in major settlements amounting to $126 million total.

What is All Star Cheerleading

Cheerleading has grown significantly since its inception in 1882, with an estimated 3.5 million athletes competing globally. While many Americans might be familiar with cheerleading, some might be surprised to learn about a subdivision called All Star Cheer. All Star Cheer focuses primarily on competition, whereas traditional school cheerleading involves crowd engagement, school spirit activities, as well as the option to compete. All Star teams are most often organized by private gyms, which form the teams based on skill and age level. At competitions, All Star Cheer teams perform a two and half minute routine composed of tumbling, stunting, pyramids, dance, and cheer segments. All Star Cheer is a notoriously expensive sport, where a full season can cost athletes around $8,000-$10,000 due to gym fees, uniform costs, travel expenses, competition fees, etc.

Who is Varsity Spirit

Varsity Spirit was founded in 1974 by Jeff Webb and started as a cheerleading camp company. The company later began manufacturing apparel for cheerleading teams, organizing competitions, and operating summer training camps. Today, Varsity runs the biggest and most prestigious cheerleading competitions and almost every single All Star Cheer competition as well. Varsity gained its dominant 90% share of the cheer competition market primarily by acquiring smaller competitors, including Jam Brands in 2015, Spirit Celebrations in 2016–2017, and Epic Brands in 2018. Essentially, if you are a competitive cheerleader, almost every competition you compete in is controlled by Varsity.

Antitrust Law

Varsity’s dominance in the competitive cheerleading industry has raised antitrust concerns. Antitrust law is about keeping the playing field fair by preventing businesses from using their power to stifle competition. Regulations like the Sherman Antitrust Act and the Clayton Act prohibit companies from monopolizing markets or using unfair practices, such as price-fixing, bid-rigging, or exclusive contracts, to restrict competition. The purpose of these laws is to safeguard consumers and other businesses from being coerced into bad agreements due to the excessive market power of a single company. However, not all monopolies are illegal. A company can gain dominance or a monopoly fairly by offering the best products or services at the best price, and that’s just healthy competition. But when a company reaches the top by stifling competition rather than fostering it, antitrust law will step in.

The Class Action Settlements

In March 2023, Varsity Brands agreed to pay $43.5 million to resolve allegations that it abused its market dominance to artificially inflate prices for private gyms and spectators. This action was brought by direct purchasers, which are those who paid registration and associated fees directly to Varsity to participate in Varsity competitions. Two markets were identified where Varsity exercised its monopoly power: the “competition” market and the “cheer apparel” market. The plaintiffs alleged that Varsity dominated 80% of the All Star cheerleading competition market and 90% of the All Star apparel market through a series of “exclusionary schemes.”

The alleged “exclusionary schemes” were the exclusionary contracts offered to All Star Gyms that were incentivized by the promise of rebates. A rebate is a partial refund given to a buyer after a purchase, which is different from a discount where the price reduction is applied at the time of purchase. The process to receive a rebate typically involves customers paying full price for an item and later submitting proof of purchase to the retailer, who then sends the customer the refund in the form of cash or future discounts on products. 

Varsity offered two rebate programs, the Network Agreement and the Family Plan. The Network Agreement, offered to large prestigious gyms widely known at their competitions, required a commitment to attending at least 5 of Varsity’s All Star Competitions and spending at least $30,000 per year on registration fees. Once gyms met this threshold, they earned increasing rebates for every dollar spent beyond it, creating a strong financial incentive to stay within the Varsity system. For smaller gyms that could not meet the spending threshold, Varsity offered a modified version called the Family Plan, which required attendance at 6 Varsity competitions in order to start receiving rebates. The rebates here were in the form of “Varsity Fashion Dollars,” which could only be used on varsity apparel purchases.

Because gyms and their teams can only attend a limited number of competitions each season, these agreements strongly incentivized All Star gyms to participate in Varsity events and purchase Varsity apparel exclusively. Attending a non-Varsity competition meant forfeiting the chance to earn higher rebates, which teams could not afford to do, when that money could then be used on Varsity competition uniforms. Once gyms were locked into Varsity’s exploitative ecosystem, Varsity was able to inflate its prices, thus possibly furthering demand for their rebate programs.

In May 2024, Varsity Spirit agreed to an $82.5 million settlement to resolve another class-action lawsuit. Unlike the 2023 case, this lawsuit was brought on behalf of indirect purchasers – those who paid competition registration fees, camp fees, or bought apparel through a gym or school. The lawsuit covered all the same issues as the previous, such as unlawful acquisitions of rivals, anticompetitive exclusive dealing agreements, and Varsity overcharging consumers.

In addition to the monetary settlements, Varsity agreed to end any rebate or discount program related to their cheer competitions.

Conclusion

What makes Varsity’s antitrust issues particularly interesting is how long these practices went unnoticed. Unlike tech monopolies or pharmaceutical price-fixing, competitive cheerleading is a relatively niche industry that does not draw much regulatory attention. But the consequence of Varsity’s practices going unchecked for so long has driven many working-class participants out of the sport simply because it is no longer affordable. Although both recent cases settled before reaching trial, they highlight how antitrust law can play a crucial role in curbing corporate abuses in power, ultimately safeguarding consumers and promoting fair competition for businesses.

Technology, Law, and the Future: How Loper Bright v. Raimondo Could Impact Artificial Intelligence Governance

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By: Joseph Valcazar

The world was a very different place in 1984. Prince debuted his critically acclaimed Purple Rain album; The Terminator, Gremlins, and the Indiana Jones sequel dominated the box office; the future’s most popular video game, Tetris, was released; and, of course, the Supreme Court released its landmark Chevron v. Natural Resource Defense Council (Chevron) opinion. This case established the Chevron deference, a legal doctrine instrumental to the evolution of administrative law for over forty years. This doctrine was cited in more than 18,000 federal opinions. 

That was until 2024 when the current Supreme Court issued its opinion in Loper Bright Enterprises v. Raimondo (Loper Bright), effectively overruling Chevron. In an instant, the federal administrative state was turned on its head, leading to many questions about what the future holds for key administrative issues. And currently, there are few greater hot-button topics than artificial intelligence (AI).

What was Chevron Deference?

Chevron deference refers to a legal doctrine where courts afforded federal agencies, like the Food and Drug Administration or the Environmental Protection Agency (EPA), deference when interpreting ambiguous federal statutes. As long as these interpretations were deemed reasonable, courts would defer to the agency’s reasonable interpretation of the law, even when the courts may have preferred an alternative interpretation. 

For example, the dispute in the original Chevron case revolved around whether the term “source” in the Clean Air Act applied to individual equipment that emitted air pollution—such as smokestacks or boilers—or only to industrial plants on a whole as a source of pollution. The EPA interpreted “source” to cover the latter, allowing industrial plants to modify individual pieces of equipment without a permit so long as the total emissions of the plant did not increase. In a unanimous decision, the Supreme Court held the EPA’s interpretation to be reasonable, deferring to the agency and future agency interpretations and thus creating Chevron deference. 

This doctrine guided administrative action for forty years, influencing how Congress drafted its legislation. As Justice Kagan pointed out in her Loper Bright dissent, Congress would intentionally leave vague or ambiguous terms for agencies to resolve. Such as directing the Federal Aviation Administration to restore the “natural quiet” of the Grand Canyon National Park. 

Then Loper Bright happened. In one broad swoop, the Supreme Court overruled this long-standing precedent, or as Justice Gorsuch squarely put it, “[t]oday, the Court places a tombstone on Chevron no one can miss.” As a result, administrative law has entered a state of limbo. With deference removed, it is now up to the court’s independent judgment to decide when an agency has acted within its proper authority. There is no longer a barrier restricting courts from interjecting their own potentially conflicting interpretations of administrative statutes. Critics of Loper Bright express concerns that judges, who lack subject matter expertise on many complex matters, will create inconsistent rulings across jurisdictions. They worry this may lead to more confusion and uncertainty surrounding agencies’ authority. 

If true, these concerns have significant implications for an agency’s ability to react to novel technologies such as AI.

What’s the 101 on AI? 

To describe AI in simple terms, it is a form of technology that can perform advanced tasks and reach conclusions as a human would. This technology has experienced rapid growth in recent years. AI will seemingly touch every area of our lives. Whether it’s within your own home refining your Google search results, in healthcare as a tool to diagnose illness, or in business to automate key processes, AI is being widely adopted to reshape every aspect of our lives. This is not to say every use of A.I. is popular, or without its share of controversy. Examples, such as the use of AI in insurance denial claims, are just one of many reasons why some believe the ability to regulate AI is essential. Without proper governance of AI, privacy risks, system biases, and transparency concerns will exist, and what could be a net good could just as quickly become a net negative that abuses the public’s information. 

How Can Agencies Respond to Loper Bright?

With the complexity of AI, questions arise on how federal agencies should approach regulating such a novel technology. The answer is unclear in the wake of Loper Bright. Agencies may still interpret broad or ambiguous statutes; Loper Bright did not eliminate this power. However, actions related to AI and other hot-button issues will likely receive higher scrutiny from potential plaintiffs, leading to more litigation. Agencies may consider this fact when planning to issue new regulations. This could cause them to act more cautiously or strategically and thus respond less effectively to rapidly emerging issues.

Agencies may lean on issuing more guidance documents and statements that explain new regulations or clarify existing policy. However, these are not legally binding and non-enforceable. One advantage of this fact is that not every guidance document is currently subject to judicial review. Therefore, these guidance documents could be strategically utilized to advocate for specific policy positions without facing the scrutiny that a typical regulation would face. 

One pitfall of this strategy is that guidance documents are relatively limited in scope. In Appalachian Power Co. v. Environmental Protection Agency (EPA) (2000), the D.C. Circuit Court held that the EPA had improperly issued a guidance document because the guidance had the effect of a binding ruling on private and state actors. This case highlights how courts often do not enjoy attempts to evade judicial review. If agencies rely more on issuing guidance documents going forward, a likely outcome is courts choosing to exercise greater scrutiny over these documents to reduce any apparent workaround of Loper Bright. 

Conclusion

It’s unclear right now how agency actions will evolve in a post-Chevron world. The only thing that appears certain is that litigation will follow. The power paradigm between the judicial and executive branches has rapidly and significantly shifted. At a time when the private sector has just announced a $500 billion investment in AI, there are no signs that this emerging technology has any plans of slowing down. The next few years of governance will be critical in determining Loper Bright’s long-term effect on AI regulation. 

While this blog has focused primarily on the administrative state and its ability (or now lack thereof) to regulate this novel technology, agencies are not the only mechanism of governance that exists. As always, the legislature can draft and pass legislation regulating AI and its implementation. However, given Congress’s recent and current inefficiency, meaningful legislation around AI seems slim.

How Trademark Lawsuits Are Tackling Fake Merchandise

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By: Teagan Raffenbeul

Counterfeit products have existed for thousands of centuries, with counterfeit currency dating back to 3300-2000 BC. Over time, counterfeiting has grown significantly, with its economic cost estimated to exceed trillions of dollars. As e-commerce has grown, so too has the availability of counterfeit products, including fake merchandise claiming to be endorsed by musical artists. Online marketplaces like Amazon and Etsy have enabled individuals to create and sell products using images of or related to famous individuals. 

In 2023, a fan of country singer Luke Combs created and sold tumblers adorned with Comb’s face on Amazon. The fan, Nicol Harness, sold eighteen of her Combs-themed tumblers, earning only $380. Nonetheless, she was included in a mass lawsuit filed against more than 200 online entities selling unauthorized Combs merchandise. Harness was ordered to pay $250,000 in damages, and her Amazon account was frozen – all before she had notice of the anti-counterfeiting lawsuit. Regardless of whether Harness knew she was infringing on Combs’ intellectual property rights, the products were still counterfeit and could be subject to lawsuits for violating an artist’s intellectual property rights. 

Anti-Counterfeiting Enforcement

Two federal statutes primarily govern anti-counterfeiting enforcement in the United States. The Lanham Act provides civil remedies, while the Trademark Counterfeiting Act of 1984 imposes criminal penalties for violations of the anti-counterfeiting provisions in the Lanham Act. Due to various impracticalities of criminal enforcement, such as timing constraints, trademark owners typically turn to civil trademark infringement lawsuits for relief. 

Counterfeit merchandise is deemed “counterfeit” because it infringes on a valid, registered trademark owned by an artist or another party. A trademark is a symbol that indicates the source of a product to purchasers. Trademarks may present themselves in the form of names, logos, colors, or symbols. For musical artists, their trademarks signal to fans that they endorse the product and officially license it. When an artist’s trademark appears on products they did not create or endorse, it can mislead and confuse fans and consumers into believing the artist is the actual source of the product, even when they are not. Even if a product contains a disclaimer stating the merchandise is merely inspired by the artist, it does not automatically protect the merchandise from receiving a cease-and-desist letter or facing a counterfeit lawsuit. Artists will often strategically choose which cases to litigate, balancing the negative publicity from suing fan-made merchandise against the necessity of taking action against enough infringing products to protect their trademark rights. Factors such as the similarity of names and products, as well as how well-known the infringed trademark is, are usually considered, with direct copies of artists’ own merchandise often purposely targeted.

Anti-counterfeiting lawsuits have a higher standard than the “likelihood of confusion” standard used in traditional trademark infringement cases. The Lanham Act defines a counterfeit mark as “a spurious mark which is identical to or substantially indistinguishable from a registered mark.” This requires a higher degree of similarity, with marks needing to be “identical” to be successful in a counterfeit lawsuit. 

Additionally, when filing a civil counterfeiting case, most plaintiffs will request an ex parte temporary restraining order (TRO). These TROs may be granted without prior notice to the alleged counterfeiter and they immediately remove the counterfeit items from the market. The TROs also prevent the alleged counterfeiters from disposing of or destroying evidence of the counterfeit items.

“SAD Schemes”

Due to the increase of e-commerce in the last decade, an influx of counterfeit merchandise has become easily accessible online. In response, several U.S. law firms, particularly in Chicago, have begun initiating mass anti-counterfeiting trademark lawsuits, targeting hundreds of merchandise sellers simultaneously. The uniformity found between anti-counterfeiting enforcement suits has led to these types of lawsuits being labeled by some people as “SAD Schemes.”

These mass lawsuits have been coined “SAD Schemes” or “Schedule A Defendants” schemes because plaintiffs typically file the complaint separately from a sealed Schedule A attachment. The plaintiff usually identifies a group of online vendors whose listed products infringe on their intellectual property rights and includes them on a Schedule A attachment. The complaint refers to these vendors as “defendants listed on a Schedule A,” and the judge then seals the Schedule A, keeping the defendants’ identities anonymous. The complaint itself generally includes a few factual allegations that are not particularized to any one defendant. Following this, plaintiffs frequently request an ex parte TRO to freeze the defendants’ assets and activity in the marketplace. 

These lawsuits are often filed by large brands such as Nike and Ray-Ban, however recently they have increasingly been applied to fight counterfeit merchandise. In 2022, the rock band Nirvana sued approximately 200 different sites for selling counterfeit products. The following year, pop artist Harry Styles filed a massive Schedule A trademark suit to combat the increasing quantity of counterfeit merchandise populating online stores. 

Downsides of “SAD Schemes” 

SAD Schemes are often filed under the presumption that the “counterfeiters” are difficult to locate and trace due to the nature of e-commerce. As a result, judges frequently permit email service. This provides plaintiffs a significant advantage, as many defendants are often not aware they have been legally served. Many defendants never see the email, as was the case in the Combs lawsuit, where the email was sent to the fan’s junk mail. Some defendants have said they have mistaken it for spam mail or an extortion attempt, and therefore disregard the email. Due to issues such as these, judges generally do not permit email service in ordinary cases. However, in SAD Schemes, when cases are filed under the presumption the alleged counterfeiters are anonymous online merchants who are difficult to track down, judges allow it. As a result, defendants’ funds are often frozen, and many default judgments have been rendered without any opposition from the defendants.

Lawyers utilizing SAD Schemes typically follow a standardized template with minimal factual allegations allowing them to easily “clone-and-revise” the complaint for future lawsuits. This streamlined approach, combined with the ability to target hundreds of defendants at once, saves plaintiffs significant time and money while also enabling lawyers to quickly process multiple cases. SAD Schemes can unfold in just a few days, resulting in a somewhat lucrative business for intellectual property firms. By leveraging Schedule A forms that keep defendants’ identities hidden and relying on the fact that most alleged counterfeiters are either unaware of the lawsuit or unwilling to fight back due to the expensive and time-consuming nature of the lawsuits, these lawyers and law firms have begun to turn it into a volume business. Over the past decade, this field has seen the number of Schedule A anti-counterfeiting trademark lawsuits rise from 105 to 938, with over 600,000 defendants having been sued.

SAD Schemes are a relatively new type of lawsuit. There is limited precedent, and district courts have taken various approaches in interpreting the statutory language and applying relevant terminology such as “counterfeit” and “counterfeiting.” This has resulted in some inconsistencies and confusion among existing case law. In the future, we can likely expect to see a continued rise in counterfeit merchandise and a rise in lawsuits by these artists to protect their intellectual property rights, hopefully providing more clarity and information on how anti-counterfeiting enforcement is executed.