On July 21, 2016, in Phoenix Entertainment Partners, LLC v. Rumsey, the US Court of Appeals for the Seventh Circuit affirmed the US District Court for the Central District of Illinois's dismissal of plaintiff Slep-Tone Entertainment Corp. and its successor Phoenix Entertainment Partners, LLC's (collectively Slep-Tone) complaint, holding that it could not support a claim under the Lanham Act because Slep-Tone had not plausibly alleged that the defendants, Dannette Rumsey and Basket Case Pub, Inc.'s (Rumsey) conduct would lead to consumer confusion about the source of any tangible good sold in the marketplace. ( (7th Cir. July 21, 2016)).

This case arose as one of more than 150 suits that Slep-Tone filed under Sections 32 and 43 of the Lanham Act to challenge the alleged unauthorized copying and performance of its commercial karaoke files (15 U.S.C. §§ 1114, 1125).

Slep-Tone produces and distributes karaoke accompaniment tracks for professional karaoke systems under the trademark SOUND CHOICE on various media having both audio and graphic components. Customers typically copy these tracks onto the karaoke systems' hard drives for easy access to the chosen track.

Slep-Tone does not own the copyrights on its tracks, and pays royalties to the copyright owners of the original musical works incorporated into the karaoke tracks.

In 2009, Slep-Tone adopted a media-shifting policy that permits its customers to copy the tracks they have purchased from Slep-Tone provided they comply with four conditions:

Subsequently, Slep-Tone brought this case against Rumsey asserting, among other things, trademark infringement and unfair competition under the Lanham Act based on Rumsey's violation of the media-shifting policy. Specifically, Slep-Tone alleged that:

The district court held in relevant part that Slep-Tone's Lanham Act claims failed to state a claim on which relief could be granted because the alleged facts did not plausibly suggest that Rumsey's activities were likely to cause confusion as to the source of any tangible good. Importantly, the district court concluded that when the pub patrons see and hear the intangible content of the karaoke tracks, they will neither see nor care about the physical medium from which those tracks are played. Therefore, any confusion is not about the source of the tangible good containing the karaoke tracks.

On appeal, the Seventh Circuit began its analysis by considering the US Supreme Court's Dastar Corp. v. Twentieth Century Fox Film Corp. (539 U.S. 23, 37 (2003)) decision, which established that trademark law cannot be invoked to assert what really is a copyright infringement claim. Specifically, the Seventh Circuit highlighted the Supreme Court's analysis of the Lanham Act's use of the terms "origin" and "goods" as referring to the producer of the tangible goods that are offered for sale in the marketplace, and not to the author of any idea, concept, or communication embodied in those goods. Continuing, the Seventh Circuit considered:

In this case, the good is the unauthorized digital copy of the SOUND CHOICE karaoke track. However, the pub patrons see only the performance of the creative content on the digital copy, and not the disc wrapped in Slep-Tone or SOUND CHOICE packaging. They have no interaction with the medium from which the tracks are played. Therefore, any confusion is not about the source of the tangible good sold in the marketplace.

The Seventh Circuit also noted that: