IP Law Daily Karaoke track distributor’s Lanham Act claims precluded by Dastar
Thursday, January 19, 2017

Karaoke track distributor’s Lanham Act claims precluded by Dastar

By Cheryl Beise, J.D.

The federal district court in Phoenix did not err in holding that trademark infringement and unfair completion claims brought by karaoke music track producer Slep-Tone Entertainment against the operators of a Phoenix karaoke venue were barred by the Supreme Court’s Dastar decision, the U.S. Court of Appeals in San Francisco has decided. The Ninth Circuit joined the Seventh Circuit in holding that a venue’s use of unauthorized copies of tracks displaying Slep-Tone’s trademark does not cause consumer confusion over the origin of a tangible good in the marketplace (Slep-Tone Entertainment Corp. v. Wired for Sound Karaoke, January 18, 2017, per curiam).

Slep-Tone Entertainment Corp. (now known as Phoenix Entertainment Partners LLC) produces and markets Karaoke compact disc music tracks (in CD-G format) under the trademark "Sound Choice." Slep-Tone’s CDs are capable of being copied, or ripped, onto computer hard drives as digital files. In the past, Slep-Tone prohibited all such copying, but today it permits limited copying within the confines of its "media-shifting policy" requiring that users make only one digital copy per source CD-G; that the physical media used to create the digital files are kept "on the shelf" unused; that users notify Slep-Tone if they intend to create media-shifted copies; and that users submit to auditing for compliance with these conditions.

In 2009, Slep-Tone sued defendants Ernest Z. McCullar, his business, Wired for Sound Karaoke, and DJ Services, LLC, after leaning they were performing karaoke shows using unauthorized media-shifted files instead of Slep-Tone’s original CD-Gs. The parties entered into a settlement agreement in 2010. Slep-Tone filed a second suit against the defendants for performing karaoke shows using unauthorized media-shifted files. The district court dismissed Slep-Tone’s Lanham Act trademark infringement and unfair competition claims. The court later granted summary judgment to the defendants on Slep-Tone’s claim for breach of the settlement agreement. Slep-Tone appealed both rulings.

Regarding its Lanham Act claims, Slep-Tone argued that consumer confusion was likely because the media-shifted files played by the defendants during their shows displayed Slep-Tone’s registered Sound Choice trademarks and its unregistered trade dress. Slep-Tone contended consumers would be confused about the origin of the tracks, believing that they originated with Slep-Tone, rather than with the defendants.

The problem with Slep-Tone’s theory, according to the Ninth Circuit, was that it did not allege consumer confusion about the source of an appropriate "good," but rather alleged possible confusion over the source of content. In Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 37 (2003), the Supreme Court held that the statutory phrase "origin of goods" must "refer[] to the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods."

Slep-Tone’s argument that the digital copies constituted the relevant "goods" under the Lanham Act was not persuasive. The Ninth Circuit instead agreed with the Seventh Circuit, which—in rejecting nearly identical claims Slep-Tone brought against another karaoke venue operator—held that "the ‘good’ whose ‘origin’ is material for purposes of a trademark infringement claim is the ‘tangible product sold in the marketplace’ rather than the creative content of that product." Phoenix. Entm’t Partners v. Rumsey , 829 F.3d 817, 828 (7th Cir. 2016).

The Ninth Circuit, like the Seventh, did not believe that the defendants’ customers, when viewing Slep-Tone’s media-shifted karaoke tracks, would be confused about the source of a tangible good sold in the marketplace. "Consumers never see the digital files and Defendants neither sell them nor make representations about their source medium," the court said. Instead, the defendants made allegedly unauthorized use of the content of Slep-Tone’s karaoke tracks, an action Dastar precludes as a trademark claim. As the Dastar Court admonished, "[t]he words of the Lanham Act should not be stretched to cover matters that are typically of no consequence to purchasers" Dastar, 539 U.S. at 32–33.

The Ninth Circuit accordingly affirmed the dismissal of Slep-Tone’s claims under Sections 32 and 43(a) of the Lanham Act for failure to plausibly allege the likelihood of "consumer confusion over the origin of a good properly cognizable in a claim of trademark infringement."

The case is No. 14-17229.

Attorneys: James M. Harrington (Harrington Law P.C.) for Slep-Tone Entertainment Corp.; Phoenix Entertainment Partners LLC. Lorraine Morey (Morey Law PLLC) for Ernest Z. McCullar, Wired for Sound Karaoke, and DJ Services, LLC.

Companies: Slep-Tone Entertainment Corp.; Phoenix Entertainment Partners LLC; Wired for Sound Karaoke; DJ Services, LLC

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