No Second Opinion From Register of Copyrights Buries Court's Registration Invalidation: Seventh Circuit | Practical Law

No Second Opinion From Register of Copyrights Buries Court's Registration Invalidation: Seventh Circuit | Practical Law

On October 7, 2013, in DeliverMed Holdings, LLC v. Schaltenbrand, the US Court of Appeals for the Seventh Circuit reversed and remanded the US District Court for the Southern District of Illinois's declaratory judgment invalidating DeliverMed's copyright registration. The Seventh Circuit determined that the district court committed legal error by failing to obtain the Register of Copyrights's advice concerning whether it would have refused DeliverMed's application had it known the application contained misrepresented information.

No Second Opinion From Register of Copyrights Buries Court's Registration Invalidation: Seventh Circuit

by Practical Law Intellectual Property & Technology
Published on 09 Oct 2013USA (National/Federal)
On October 7, 2013, in DeliverMed Holdings, LLC v. Schaltenbrand, the US Court of Appeals for the Seventh Circuit reversed and remanded the US District Court for the Southern District of Illinois's declaratory judgment invalidating DeliverMed's copyright registration. The Seventh Circuit determined that the district court committed legal error by failing to obtain the Register of Copyrights's advice concerning whether it would have refused DeliverMed's application had it known the application contained misrepresented information.
On October 7, 2013, the US Court of Appeals for the Seventh Circuit issued an opinion in DeliverMed Holdings, LLC v. Schaltenbrand, reversing and remanding the US District Court for the Southern District of Illinois's declaratory judgment invalidating DeliverMed's copyright registration. The Seventh Circuit concluded that although the district court was correct in finding that the copyright registration applicant had misrepresented a material fact in the application, it erred by not consulting the Register of Copyrights about the significance of the inaccurate information. Specifically, the district court should have obtained the Register of Copyrights's input on whether it would have refused the registration if it had known the inaccurate information.
Mark Swift, the owner of DeliverMed Holdings, LLC, a marketing firm that specialized in helping pharmacies find new customers for their mail-order pharmacy services, partnered with, among other people, Michael Schaltenbrand, president and owner of Medicate Pharmacy, Inc., a retail pharmacy company, to deliver mail-order services to customers identified by DeliverMed.
In 2008, Swift retained Deeter Associates, an advertising company, for help in designing a logo to be used in conjunction with the partnership. Linda Deeter, executive vice president of Deeter Associates, entered into an oral agreement with an independent graphic designer to design a logo featuring a graphic depiction of a house and a pestle (the "logo"). Medicate subsequently began using the logo to identify the mail-order services it provided on behalf of the partnership.
As a result of a business dispute between Swift and Schaltenbrand concerning the partnership, DeliverMed, Linda Deeter and Deeter Associates filed suit against Schaltenbrand, Medicate and others (Schaltenbrand) alleging, among other things, trademark infringement arising out of Medicate's use of the DeliverMed name and the logo.
Sometime after the suit was filed, DeliverMed, at Swift's direction, submitted an application to register a copyright in the logo. The application stated that Linda Deeter was the logo's author and that she transferred her copyright to DeliverMed in a written agreement. However, Swift knew that no such agreement existed at the time of the application fling, although Linda Deeter did sign a transfer of ownership agreement one week after Swift filed DeliverMed's registration application.
Thereafter, the Copyright Office issued a certificate of registration for the logo listing DeliverMed as the copyright owner. DeliverMed then amended its complaint to add a claim for copyright infringement. In response, Schaltenbrand filed a counterclaim seeking a declaratory judgment invalidating DeliverMed's copyright registration.
After a 14-day bench trial, the district court found against DeliverMed on all causes of action, including the claim for copyright infringement. The district court also invalidated DeliverMed's copyright registration for the logo:
  • Finding that Swift had made knowing material misrepresentations to the Copyright Office in the registration application.
  • Assuming that the Copyright Office would have rejected the application had the application contained the correct information concerning copyright ownership.
On appeal, although the Seventh Circuit agreed with the district court's finding that Swift misrepresented a material fact in the registration application, it held that the district court committed legal error when it invalidated DeliverMed's copyright registration because:
  • The Copyright Act requires that, in any case where a party alleges that a copyright registration should be invalidated because the registrant obtained the registration by knowingly misrepresenting information in the application, the court must request the Register of Copyrights to advise the court whether the inaccurate information, if known, would have caused the Register of Copyrights to refuse registration.
  • The district court relied on its own speculation that the Copyright Office would have rejected DeliverMed's application had it contained the truth about the logo's ownership.
Although the parties did not raise this issue at trial, the Seventh Circuit decided to address this issue because ignoring this requirement would:
  • Defeat the purpose of the Copyright Act.
  • Deprive the Register of Copyrights its right to provide its input on this issue.
However, the Seventh Circuit cautioned that input from the Register of Copyrights need not be sought immediately after a party makes a claim that a registration should be invalidated because of fraud on the Copyright Office. Instead, the Register of Copyrights should only be questioned where the litigant first demonstrates that:
  • The registration application included inaccurate information .
  • The registrant knowingly included this information in the registration application.
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