Phoenix Entertainment Partners v. Dannette Rumsey

In the
United States Court of Appeals
For the Seventh Circuit
No. 15-2844
PHOENIX ENTERTAINMENT PARTNERS,
LLC and SLEP-TONE ENTERTAINMENT
CORPORATION,
Plaintiffs-Appellants,
v.
DANNETTE RUMSEY and BASKET CASE
PUB, INCORPORATED,
Defendants-Appellees.
Appeal from the United States District Court for the
Central District of Illinois.
No. 1:15-cv-01009-JBM-JEH — Joe Billy McDade, Judge.
ARGUED FEBRUARY 12, 2016 — DECIDED JULY 21, 2016
Before WOOD, Chief Judge, ROVNER, Circuit Judge, and
BLAKEY, District Judge.*
*
The Honorable John Robert Blakey, of the Northern District of Illinois,
sitting by designation.
2 No. 15-2844
ROVNER, Circuit Judge. Slep-Tone Entertainment Corpora-
tion and its successor in interest, Phoenix Entertainment
Partners, LLC1 (collectively, “Slep-Tone”) contend in this
litigation that the defendants, a pub and its owner, committed
trademark infringement by passing off unauthorized digital
copies of Slep-Tone karaoke files as genuine Slep-Tone tracks.
See Bretford Mfg., Inc. v. Smith Sys. Mfg. Corp., 419 F.3d 576, 580
(7th Cir. 2005) (describing passing off and reverse passing off
cases). Because we agree with the district court that Slep-Tone
has not plausibly alleged that the defendants’ conduct results
in consumer confusion as to the source of any tangible good
sold in the marketplace, we affirm the dismissal of its com-
plaint.
I.
This suit is one of more than 150 that Slep-Tone has filed
throughout the country invoking the Lanham Act, 15 U.S.C.
§ 1051 et seq., to challenge the unauthorized copying and
performance of its commercial karaoke files as a form of
trademark infringement. For the better part of three decades,
Slep-Tone has produced and distributed karaoke accompani-
ment tracks under the trademark “Sound Choice.” These tracks
are designed for professional karaoke systems and include
both audio and graphic (visual) components. The audio
component is a re-recorded version of a popular song that
omits the lead vocals, as those will be performed by the
karaoke singer or singers. The graphic component displays the
1
Phoenix Entertainment Partners LLC purchased certain assets of Slep-
Tone Entertainment Corporation, including the trademarks and trade dress
at issue in this case, after this litigation commenced.
No. 15-2844 3
lyrics to the song as well as a variety of visual cues (including
color coding and various icons) that are synchronized with the
music in order to aid the singers. Slep-Tone has released over
16,500 karaoke versions of popular songs.
In addition to the Sound Choice trademark (which was
registered in 1995 and thereafter renewed), Slep-Tone also
claims ownership of a distinctive trade dress that distinguishes
its tracks from those of its competitors. This trade dress
includes the typeface, style, and visual arrangement of the
song lyrics displayed in the graphic component of the accom-
paniment tracks; a display version of the Sound Choice mark
(which has been separately registered since 1996) that is itself
typically shown with the song lyrics; and the style of entry cues
that are displayed for karaoke singers (including a series of
vanishing rectangles) to signal when they should begin to sing.
Slep-Tone alleges that it has used this trade dress for decades,
and that it is sufficiently recognizable to karaoke customers to
enable them to distinguish a track produced by Slep-Tone and
a track produced by a competitor even if the Sound Choice
mark itself were not displayed.
Slep-Tone sells its karaoke accompaniment tracks to
customers on both CD+G compact discs (with the +G referring
to the graphic component) and MP3+G media. Technology
now enables these tracks to be copied onto the hard drives of
karaoke equipment, such that one karaoke machine may host
hundreds or thousands of accompaniment tracks. Karaoke
4 No. 15-2844
singers and “jockeys”2 thus have many songs from which to
make their selections, and the accompaniment track for the
chosen song is immediately available without someone having
to physically insert a disc into the karaoke machine and wait
for the appropriate track to be “loaded” onto the system. The
process of copying the purchased CD+G or MP3+G version of
a track onto the hard drive of a karaoke system is known as
“media-shifting,” because the content is being shifted from one
medium to another, or “format-shifting,” because in the
copying process the content is being converted into a different
electronic format. Needless to say, the same technology that
enables a karaoke operator to make an authorized copy of a
track also makes possible the creation of unauthorized copies.
An operator may copy a legitimately-purchased track from its
original medium onto any number of hard drives; it may copy
a patron’s tracks onto its own hard drive; it may “swap” tracks
with other operators through file-sharing websites; it may
purchase a hard drive that someone else has preloaded with
tracks; and it may re-sell its original media to other operators
after it has copied the tracks onto its own hard drives.
In 2009, Slep-Tone adopted a media-shifting policy that
permits its customers to copy the tracks they have purchased,
so long as they comply with four conditions. First, there must
be a 1:1 correspondence between the tracks purchased and
copies made. In other words, for every track copied onto a
customer’s hard drive, the customer must own and maintain
the track on its original medium. So, if an operator wants to
2
Much like a disc jockey, a karaoke jockey is someone who manages,
plays, and introduces karaoke music at a venue or event.
No. 15-2844 5
have copies of a particular track on two different hard drives,
it must purchase two discs with the original content. Second,
once a copy has been made, the purchased track on its original
medium must be kept “on the shelf” and not used for any
purpose. Third, upon making a copy, the operator must notify
Slep-Tone that it has media-shifted the track. And fourth, the
operator must submit to an audit to certify its compliance with
the media-shifting policy.
It should come as no surprise that not all operators comply
with Slep-Tone’s media-shifting policy. Slep-Tone alleges that
karaoke operators have engaged in widespread and unautho-
rized copying of its tracks. Whereas Slep-Tone pays royalties
to the copyright owners of the original musical works incorpo-
rated into its derivative karaoke accompaniment tracks, it is
repeatedly deprived of revenue when karaoke operators make
multiple, unauthorized copies of Slep-Tone’s Sound Choice
tracks.
The Basket Case Pub, Inc., one of the two defendants in this
case, is an Illinois corporation that operates an eating and
drinking establishing in Peoria, Illinois known as The Basket
Case. Dannette Rumsey, the other defendant, is the president
and sole owner of that corporation. Like most venues offering
karaoke entertainment, The Basket Case provides karaoke
services free of charge in order to attract patrons and encour-
age them to buy food and drinks. The defendants own one or
more hard drives containing copies of Sound Choice tracks.
However, those copies allegedly were made by or at the behest
of the defendants in violation of Slep-Tone’s media-shifting
policy. In other words, the defendants are allegedly playing
6 No. 15-2844
illegitimate “bootleg” copies instead of authorized copies
properly made from legitimately-acquired Slep-Tone media.
Slep-Tone’s second amended complaint asserts claims for
both trademark infringement and unfair competition under the
Lanham Act. Its theory, as we discuss in greater detail below,
is that when the defendants play unauthorized copies of Slep-
Tone karaoke tracks at the pub, customers see Slep-Tone’s
Sound Choice mark and trade dress and believe they are seeing
and hearing a legitimate, authentic Slep-Tone track, when in
fact they are seeing an unauthorized copy. Slep-Tone charac-
terizes the unauthorized copy of its track as a distinct good
which the defendants are improperly “passing off” as a
genuine Slep-Tone track. In addition to the two federal claims,
Slep-Tone’s complaint includes two pendant state law claims
for violation of the Illinois Uniform Deceptive Trade Practices
Act, 815 ILCS 510/1 et seq., and for common law unfair compe-
tition. For their part, the defendants have filed three counter-
claims seeking a declaration that the plaintiffs’ mark and trade
dress are invalid and unenforceable. After finding that Slep-
Tone’s two Lanham Act claims failed to state a claim on which
relief could be granted, the district court relinquished jurisdic-
tion over the state claims and dismissed the defendants’
counterclaims as moot. For purposes of this appeal, the
relevant portion of the district court’s decision is its analysis of
the Lanham Act claims.
Key to the district court’s decision to dismiss Slep-Tone’s
claims of trademark infringement was its conclusion that the
factual allegations of the complaint did not plausibly suggest
that the defendants’ unauthorized use of Slep-Tone’s trade-
mark and trade dress is likely to cause confusion among
No. 15-2844 7
customers of The Basket Case as to the source of any tangible
good containing the karaoke tracks they are seeing and
hearing. Such confusion, the court noted, is a prerequisite to
relief under either of the two sections of the Lanham Act on
which Slep-Tone’s claims were based. And as is clear from the
Supreme Court’s decision in Dastar Corp. v. Twentieth Century
Fox Film Corp., 539 U.S. 23, 37, 123 S. Ct. 2041, 2050 (2003), it is
consumer confusion about the source of a tangible good that a
defendant sells in the marketplace that matters for purposes of
trademark infringement. The defendants do not sell any such
tangible good. According to the complaint, the defendants
simply play unauthorized copies of Slep-Tone’s karaoke tracks
for their patrons. What pub patrons see and hear is the
intangible content of the karaoke tracks. They will see Slep-
Tone’s trademark and trade dress and believe, rightly, that
Slep-Tone is the source of that intangible content. But patrons
will neither see nor care about the physical medium from
which the karaoke tracks are played; consequently, any
confusion is not about the source of the tangible good contain-
ing the karaoke tracks. Slep-Tone’s real complaint, then, is one
about theft, piracy, and violation of Slep-Tone’s 1:1 media
policy rather than trademark infringement. R. 13.
II.
Phoenix’s two federal claims for trademark infringement
are brought under sections 32 and 43 of the Lanham Act.
15 U.S.C. §§ 1114, 1125. The Lanham Act “established a federal
right of action for trademark infringement to protect both
consumer confidence in the quality and source of goods and
businesses’ goodwill in their products.” CAE, Inc. v. Clean Air
Eng’g, Inc., 267 F.3d 660, 672 (7th Cir. 2001) (citing Peaches
8 No. 15-2844
Entm’t Corp. v. Entm’t Repertoire Assocs., Inc., 62 F.3d 690, 692
(5th Cir. 1995)). A trademark is any word, name, symbol, or
device, or any combination thereof, used to identify a person’s
good and to distinguish it from those goods manufactured or
sold by others. 15 U.S.C. § 1127. Section 32 specifies a cause of
action for the unauthorized use of a registered trademark. As
relevant here, that section renders a person liable in a civil suit
when he “use[s] in commerce any reproduction, counterfeit,
copy, or colorable imitation of a registered mark in connection
with the sale, offering for sale, distribution, or advertising of
any goods or services on or in connection with which such use
is likely to cause confusion, or to cause mistake, or to de-
ceive[.]” § 1114(a). More broadly, section 43(a) of the Act
creates a remedy against a person who engages in unfair
competition by, inter alia, falsely designating the origin of a
product. Section 43(a)(1), in relevant part, imposes liability on
“[a]ny person who, on or in connection with any goods or
services … uses in commerce any word, term, name, symbol,
or device, or any combination thereof, or any false designation
of origin, … which—(A) is likely to cause confusion, or to cause
mistake, or to deceive … as to the origin, sponsorship, or
approval of his or her goods, services, or commercial activities
by another person … .” § 1125(a)(1)(A). To prevail on either
type of claim, a plaintiff must be able to show (1) that its mark
is protectable, and (2) that the defendant’s use of that mark is
likely to cause confusion among consumers. CAE, 267 F.3d at
673-74 (collecting cases).
Slep-Tone is the owner of the Sound Choice trademark for
“pre-recorded magnetic audio cassette tapes and compact discs
containing musical compositions and compact discs containing
No. 15-2844 9
video related to musical compositions” along with the display
version of that mark. R. 20 at 7-8 ¶¶ 42, 43. It is also the owner
of distinctive and protectable trade dress associated with its
graphical displays. This trade dress includes (1) the use of a
particular typeface, style, and visual arrangement in displaying
the lyrics to a song, (2) the Sound Choice marks themselves,
and (3) the use of particular styles in displaying entry cues for
karaoke performers, specifically a series of vanishing rectan-
gles to indicate the cue. R. 20 at 8 ¶ 46. Slep-Tone has used this
trade dress continually and exclusively for a period of decades,
so much so that, as noted earlier, karaoke performers can
readily recognize a graphical display as one produced by Slep-
Tone wholly apart from the display of the Sound Choice mark
itself.
Slep-Tone’s theory of the case proceeds as follows. When a
person, without authorization from Slep-Tone, copies a Sound
Choice karaoke track onto a different medium (a computer
hard drive, for example) from the original CD+G or MP3+G
medium distributed by Slep-Tone, that person creates a new
good that is distinct from Slep-Tone’s product. But the copy,
when played, will still display both the registered Sound
Choice marks along with each of the other elements of the
trade dress we have described. Thus, when an unauthorized
copy is played at The Basket Case, patrons of the pub will
think that the copy is a genuine Sound Choice track that was
manufactured by Slep-Tone and purchased by or otherwise
licensed to the defendants. In fact, however, it is not a Sound
Choice product, but rather is being passed off as such by the
defendants. This amounts to trademark infringement under
section 32 and unfair competition under section 43(a) of the
10 No. 15-2844
Lanham Act, in plaintiffs’ view. Plaintiffs allege that the
unauthorized use of their trademark and trade dress is likely
to cause confusion or mistake among customers and patrons
who view the unauthorized copy, or to deceive such customers
and patrons, by leading them to believe that the track is a bona
fide Sound Choice track manufactured by Slep-Tone and sold
or licensed to the defendants. Viewers may also be led to
believe, mistakenly, that Slep-Tone has sponsored or otherwise
approved the defendants’ services and commercial activities.
The pathway between the defendants’ alleged trademark
infringement and Slep-Tone’s claimed injuries is indirect. Note
that the defendants do not compete with Slep-Tone in the
market for karaoke tracks, in that they do not sell karaoke
products or services to karaoke jockeys or other establishments
like The Basket Case. But Slep-Tone alleges that the defen-
dants, by not paying for genuine Sound Choice tracks and
instead using unauthorized copies, artificially lower their own
costs of doing business and thereby exert illegitimate and
unfair pressure on legitimate operators in the same region who
incur higher expenses for authorized karaoke tracks and
therefore must charge more to their customers in order to
recoup their expenses. For a comprehensive library of Slep-
Tone tracks, for example, a legitimate karaoke jockey or other
karaoke operator can expect to spend up to $40,000 on top of
the $25,000 cost of the karaoke system itself. To the extent the
unfair competition discourages legitimate operators from
paying for genuine Slep-Tone tracks, Slep-Tone is ultimately
deprived of sales.
Apart from that pecuniary injury, Slep-Tone suggests that
unauthorized copying may result in inferior knock-offs that
No. 15-2844 11
will injure its reputation for quality karaoke tracks. Typically,
the complaint alleges, a karaoke singer or observer will be
unable to discern whether the track being played resides on an
original disc or a copy, despite the inevitable step-down in
quality that occurs when a track is copied from its original
medium. Nonetheless, if the data is compressed excessively in
the duplication process, a bad copy may result, such that when
the copy is played, the sound and/or the graphics may be
inferior.3 A customer viewing such a copy may thus come to
associate the Sound Choice mark with a sub-par product. In
that way, unauthorized copying jeopardizes the reputation for
high-quality karaoke tracks that Slep-Tone has cultivated for
decades. Slep-Tone alleges that one of the goals of its 1:1
media-shifting policy, and the right to conduct an audit that
the policy reserves to Slep-Tone, is to assess the integrity of the
copies that its customers are making. Unauthorized copies,
such as those attributed to the defendants here, evade that
audit process.
We may assume for purposes of our analysis that the
injuries as described are sufficiently connected with the
3
This is a suggestion that has been developed more in the briefing and
argument than in the complaint itself. The complaint does allege that
media-shifting usually results in a copy that is inferior in quality to the
original, although it also acknowledges that the difference is typically not
discernable to the patron of a bar or restaurant. R. 20 at 4-5 ¶¶ 22-23. The
complaint further alleges that one purpose of Slep-Tone’s 1:1 policy is to
help ensure the integrity of media-shifted tracks. R. 20 at 6 ¶ 32. But, as the
district court pointed out, there is no affirmative allegation that the
defendants or anyone else have made, or caused to be made, copies that a
consumer would recognize as inferior. R. 13 at 17 n.7.
12 No. 15-2844
defendants’ alleged violations of the Lanham Act to support
Slep-Tone’s claims, notwithstanding the defendants’ argu-
ments to the contrary. See Lexmark Int’l, Inc. v. Static Control
Components, Inc., 134 S. Ct. 1377, 1390 (2014) (“we generally
presume that a statutory cause of action is limited to plaintiffs
whose injuries are proximately caused by violations of the
statute”). Although the connection between the defendants’
actions and Slep-Tone’s pocketbook is, as we have said,
indirect, we may assume without deciding that it is not “‘too
remote’ from the [defendants’] unlawful conduct” to support
relief. Id.
It is significant, however, that what lies at the heart of the
defendants’ alleged wrongdoing is the unauthorized copying
of Slep-Tone’s karaoke tracks. It is undisputed that those
tracks, the audio and visual components of which were
arranged specifically for karaoke accompaniment, constitute
derivative works that enjoy protection under the Copyright
Act. See 17 U.S.C. §§ 102(a), 103; Palladium Music, Inc. v.
EatSleepMusic, Inc., 398 F.3d 1193, 1197-1200 (10th Cir. 2005).
The unauthorized copying of a creative work is typically the
province of copyright law. See 17 U.S.C. § 106 (granting to
copyright owner exclusive right to, inter alia, reproduce,
distribute, perform and display copyrighted work, and to
authorize such actions); Superior Form Builders, Inc. v. Dan Chase
Taxidermy Supply Co., 74 F.3d 488, 492 (4th Cir. 1996) (“The
copyright is the author’s right to prohibit the copying of the
author’s intellectual invention, i.e. the originality of an author’s
expression.”); see also, e.g., Hobbs v. John, 722 F.3d 1089, 1094
(7th Cir. 2013) (citing unauthorized copying as an essential
element of a claim for copyright infringement). And there is no
No. 15-2844 13
doubt that, on the facts alleged, Slep-Tone would have a
perfectly viable claim for copyright infringement against the
defendants, if Slep-Tone owned the copyright on these tracks.
We are told it does not. Slep-Tone does own the Sound Choice
trademarks and associated trade dress, which explains why
Slep-Tone has cast its lot with trademark rather than copyright
law. But the fit between Slep-Tone’s claims and trademark law
is imperfect. As we have discussed, Slep-Tone theorizes that
whenever someone copies one of its tracks onto a different
medium, he or she is creating a distinct product that, when
played, is being “passed off” as a genuine Slep-Tone product.
Apart from the fact that the defendants are not in the business
of selling karaoke tracks, one oddity of this theory is that it also
describes what a legitimate customer would do within the
constraints of Slep-Tone’s 1:1 policy. As we have already
discussed, a typical karaoke operator would want to make and
assemble copies of its karaoke tracks onto the hard drive of its
equipment for easy access rather than using the original media
it has purchased from vendors like Slep-Tone. So a Slep-Tone
customer who makes an authorized copy of a Sound Choice
track onto a computer hard drive would likewise be creating
a distinct good, and when that copy was played and the Sound
Choice mark is displayed among the graphics, viewers would
be led to believe, mistakenly, that this copy is a genuine Sound
Choice track, when in fact it is not. As Slep-Tone’s counsel
acknowledged at oral argument, all that distinguishes the
legitimate copy from the illegitimate copy is authorization to
make the copy—and that sounds much more like a claim of
copyright infringement than a claim of trademark infringe-
ment.
14 No. 15-2844
There are important distinctions between the two claims.
The aim of copyright is to foster creative works of authorship,
including literary, musical, cinematic, and architectural works.
It achieves that end by granting to the author a legal monopoly
over the performance and copying of the work for a substan-
tial, but nonetheless finite, period of time. See Sony Corp. of Am.
v. Universal City Studios, Inc., 464 U.S. 417, 429, 104 S. Ct. 774,
782 (1984).4 Once the copyright expires, the work enters the
public domain and is freely subject to copying and perfor-
mance without the owner’s permission. See Dastar, 539 U.S. at
33, 123 S. Ct. at 2048; TrafFix Devices, Inc. v. Mktg. Displays, Inc.,
532 U.S. 23, 29, 121 S. Ct. 1255, 1260 (2001). Patent law strikes
a similar bargain in the field of scientific and mechanical
invention: The inventor is given exclusive rights over his
creation for a specified period of time, after which the public is
free to use and copy the invention at will. See Kewanee Oil Co.
v. Bicron Corp., 416 U.S. 470, 480-81, 94 S. Ct. 1879, 1885-86
(1974).
Trademark, by contrast, is aimed not at promoting creativ-
ity and invention but rather at fostering fair competition. By
protecting source-identifying marks, and proscribing “the
deceptive and misleading use of [such] marks,” 15 U.S.C.
§ 1127, trademark achieves that end in two ways: (1) it simpli-
fies consumer choice, by enabling consumers to rely on a mark
that readily identifies a particular brand and producer, and (2)
4
The Constitution prohibits the renewal of copyrights in perpetuity. See
U.S. CONST. art. I, § 8, cl. 8 (restricting copyright ownership to a “limited
time[ ]”); Dastar, 539 U.S. at 37, 123 S. Ct. at 2050 (citing Eldred v. Ashcroft,
537 U.S. 186, 208, 123 S. Ct. 769, 783 (2003)).
No. 15-2844 15
it assures the producer of a particular good that it, and not an
imitating competitor, will reap the financial rewards of the
good’s (or the brand’s) reputation. See Dastar, 539 U.S. at 34,
123 S. Ct. at 2048 (quoting Qualitex Co. v. Jacobson Prods. Co.,
514 U.S. 159, 163-64, 115 S. Ct. 1300, 1303 (1995)); Ty Inc. v.
Perryman, 306 F.3d 509, 510 (7th Cir. 2002); see also Top Tobacco,
L.P. v. N. Atl. Operating Co., 509 F.3d 380, 381 (7th Cir. 2007).
And, unlike a copyright, a trademark can be renewed in
perpetuity. Qualitex, 514 U.S. at 165, 115 S. Ct. at 1304.
Although the rights protected by trademark and copyright
laws are distinct, it can in some cases be challenging to identify
which right is truly at issue when a claim of infringement is
asserted. Not infrequently, the owner of the trademark for a
particular good may not own the copyright on the expressive
content of that good, just as the owner of the mark on a good
subject to patents may not own the patent rights. That is true
of Slep-Tone, which controls the Sound Choice marks but does
not control the copyright on the creative elements of the
karaoke tracks. And where, as here, the protected mark
(including the trade dress) is embedded in the good’s creative
content, such that the mark is invariably displayed along with
the content, it can be particularly difficult to decide whether
the unauthorized copying of the good presents a claim of
trademark infringement or one of copyright infringement.
The Supreme Court’s decision in Dastar nonetheless makes
clear that the law of trademark cannot be invoked to assert
what in fact is really a claim of copyright infringement, so our
endeavor to decide into which camp Slep-Tone’s claim falls
must begin with that decision. The facts of Dastar are suffi-
16 No. 15-2844
ciently different from those at issue here that we do not regard
its holding as controlling the result in this case. Nonetheless,
Dastar informs our analysis and ultimately guides us to the
conclusion that Slep-Tone’s claimed injuries are not the result
of trademark infringement.
The plaintiff in Dastar was Twentieth Century Fox Film
Corporation (“Fox”), which in the late 1940s acquired the
television rights to then-General Eisenhower’s book, Crusade in
Europe—an account of the Allied Powers’ World War II
campaign in Europe—and produced a 26-part television series
by the same name. When the copyright on the series expired in
1977, Fox failed to renew it, and the series thus entered the
public domain. Although Fox had allowed the copyright on the
Crusade series to expire, it later re-acquired the television rights
to the Eisenhower book along with the exclusive right to
distribute the Crusade series on video and to license others to
do so. In 1995, with the 50th anniversary of the war’s end
approaching, defendant Dastar Corporation purchased a copy
of the original Crusade television series, condensed it, made
other relatively minor modifications, gave the revised series a
new title (World War II Campaigns in Europe), designed new
packaging, and marketed the revised Campaigns series on
videotape as its own product, with no credit to Fox. Fox in turn
sued for trademark infringement under section 43(a) of the
Lanham Act, charging Dastar with “reverse passing off,” i.e.,
holding out to the public what was really Fox’s product as
Dastar’s own product, and thereby falsely designating the
product’s origin.
No. 15-2844 17
The Supreme Court concluded that Dastar’s copying and
repackaging of the series was not actionable as trademark
infringement under section 43(a). The Court noted at the outset
that:
[T]he gravamen of [Fox’s] claim is that, in marketing
and selling Campaigns as its own product without
acknowledging its nearly wholesale reliance on the
Crusade television series, Dastar has made a “false
designation of origin, false or misleading description
of fact, or false or misleading representation of fact,
which … is likely to cause confusion … as to the
origin … of his or her goods.” § 43(a).
539 U.S. at 31, 123 S. Ct. at 2046 (italics ours). Given the nature
of Fox’s claim, the Court viewed the essential question as what
the Lanham Act means by “origin” of “goods.” If “origin” as
used in the statute refers only to the producer of the physical
goods (here, the videotapes), Dastar was the origin of those
goods (and had not misrepresented itself as such), but if
“origin” includes the creator of the underlying work, then Fox
might be the origin of the good, and Dastar might be culpable
for leading purchasers of its videotapes to believe otherwise.
In the Court’s view, “the most natural understanding of the
‘origin’ of ‘goods’—the source of wares—is the producer of the
tangible product sold in the marketplace, in this case the
physical Campaigns videotape sold by Dastar.” Id. at 31,
123 S. Ct. at 2047 (italics ours).
“It could be argued, perhaps,” the Court acknowledged,
that there should be a broader understanding of the “origin of
goods” for communicative products like books or videos that
18 No. 15-2844
are valued primarily for their intellectual content rather than
for their physical qualities. Id. at 33, 123 S. Ct. at 2047. A more
expansive understanding might include not only the producer
of the physical good, but the creator of the content conveyed
by the good, as the “origin.” Id., 123 S. Ct. at 2047-48.
But the Court saw that argument as creating a “conflict
with the law of copyright, which addresses that subject
specifically.” Id., 123 S. Ct. at 2048. The Court noted that the
copyright holder’s rights “are part of ‘a carefully crafted
bargain,’” id., 123 S. Ct. at 2048 (quoting Bonito Boats, Inc. v.
Thunder Craft Boats, Inc., 489 U.S. 141, 150-51, 109 S. Ct. 971, 977
(1989)), balancing an author’s interest in exclusive control over
his creative work during the copyright period with the public’s
interest in having unfettered access to that work once the
copyright has expired. Trademark law was meant to protect a
different set of interests and, in contrast to copyright, does not
impose a sunset date on the rights it protects. Extending the
“origin of goods” to include the producer of creative content
conveyed by a book, video, or other physical good, so that a
false representation of the origin of the creative content
supports a claim of trademark infringement, would result in “a
species of mutant copyright law that limits the public’s federal
right to copy and use expired copyrights.” Id. at 34, 123 S. Ct.
at 2048 (internal quotation marks and citation omitted). See
Eastland Music Grp., LLC v. Lionsgate Entm’t, Inc., 707 F.3d 869,
872 (7th Cir. 2013) (“Dastar held that trademark law cannot be
used to obtain rights over the content of an artistic work; that
would amount to an indefinite extension of a copyright.”).
No. 15-2844 19
In short, considering the different scopes and ends of
trademark and copyright law, the Court read the “origin of
goods” as used in the Lanham Act to refer solely to “the
producer of the tangible goods that are offered for sale, and not
to the author of any idea, concept, or communication embod-
ied in those goods.” Dastar, 539 U.S. at 37, 123 S. Ct. at 2050. As
the producer of the tangible goods it offered for sale—the
videotapes themselves—Dastar, and not Fox, was the “origin“
of those goods and had made no false representations in that
regard. Dastar therefore bore no liability under the Lanham
Act. Id. at 38, 123 S. Ct. at 2050.
Dastar, as we have acknowledged, is not directly controlling
of the result in this case. The defendants are not accused of
putting their own mark on Slep-Tone’s product and presenting
it to the public as their own product, as was the charge in
Dastar. Instead, as we have discussed, the defendants are
accused of passing off their own “good”—the unauthorized
copy of Slep-Tone’s karaoke track—as Slep-Tone’s good.
Rather than removing the Sound Choice display mark from the
copied track, the defendants have allowed it to remain, so that
when the copy is played, customers will see the mark and
(erroneously) attribute the copy to Slep-Tone.
Despite the factual differences between Dastar and this case,
Dastar’s rationale informs our analysis in two important
respects. First, Dastar emphasizes the important distinctions
between copyright and trademark law, and cautions against
allowing a trademark claim to substitute for what in real terms
is a claim for copyright infringement. See Eastland Music Grp.,
707 F.3d at 872 (“Dastar tells us not to use trademark law to
20 No. 15-2844
achieve what copyright law forbids.”); see also EMI Catalogue
P’ship v. Hill, Holliday, Connors Cosmopulos Inc., 228 F.3d 56, 64
(2d Cir. 2000) (“cases involving trademark infringement should
be those alleging the appropriation of symbols or devices that
identify the composition or its source, not the appropriation or
copying or imitation of the composition itself”). Second, Dastar
considered and rejected a broader understanding of the “origin
of goods” for communicative products that consumers will
value more for the intellectual and creative content they
convey than for their physical form. 539 U.S. at 33, 123 S. Ct. at
2047-48. That category of goods includes, in addition to the
documentary videotapes at issue in Dastar, the karaoke tracks
at issue in this case. Even as to these types of communicative
goods, the Court made clear 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. 539 U.S. at 31, 123 S. Ct. at
2047; see Eastland Music Grp., 707 F.3d at 872 (“Only a confusion
about origin supports a trademark claim, and ‘origin’ for this
purpose means the ‘producer of the tangible product sold in
the marketplace.’”) (quoting Dastar, 539 U.S. at 31, 123 S. Ct. at
2047).
In evaluating Slep-Tone’s claims of trademark infringe-
ment, we must therefore ask ourselves what the tangible good
at issue is, and whether the unauthorized use of the plaintiffs’
marks (including trade dress) might cause consumers to be
confused about who produced that good. Or is the real
confusion, if any, about the source of the creative conduct
contained within that good? If the latter, the confusion is not
actionable under the Lanham Act.
No. 15-2844 21
Here, the good that Slep-Tone alleges the defendants are
improperly passing off as a Slep-Tone product is the unautho-
rized digital copy of the Sound Choice karaoke track (dupli-
cated from the original CD+G compact disc or MP3+G media
supplied by Slep-Tone) made (or obtained from others) by the
defendants. We shall assume, perhaps counter-intuitively, that
a digital file counts as a tangible good for purposes of the
trademark analysis. See Slep-Tone Entm’t Corp. v. Sellis Enters.,
Inc., 87 F. Supp. 3d 897, 905 n.4 (N.D. Ill. 2015) (citing Cvent,
Inc. v. Eventbrite, Inc., 739 F. Supp. 2d 927, 936 (E.D. Va. 2010),
and 37 C.F.R. § 6.1(9)). Any number of communicative
products—books, music, movies, computer software—are now
bought and sold in digital form, many of them exclusively so.
But the question for our purposes is what, if any, tangible
“good” the consumer sees, and whether the use of the plain-
tiffs’ trademark leads to confusion about the source of that
particular good.
Recall that the defendants are not alleged to be in the
business of selling copies of karaoke tracks, as they might be if
their customers were other karaoke operators looking to
assemble their own libraries of karaoke tracks, for example.
The defendants instead are alleged to play the unauthorized
copies for their bar patrons to encourage alcohol and food
sales. So what the pub patrons see is the performance of the
creative work contained on the copies: they hear the musical
accompaniment and they see the corresponding lyrics and
graphics.
It is not alleged, nor does the briefing suggest, that the
patrons see the physical good in question—the digital file that
presumably resides on the hard drive of the bar’s karaoke
22 No. 15-2844
system. Even if a patron might be aware that there is such a
file, she does not see that file or the medium on which it
resides, as she might if she were purchasing a karaoke track on
a compact disc from a dealer or as a download from an internet
website, for example. The patron sees only the performance of
the creative content of the digital file. So far as the patron is
concerned, the content could be played from a compact disc,
the pub’s karaoke hard drive, or from an internet streaming
source. Whatever the source, the consumer sees and hears the
same content and her perception of that content will be
essentially the same.5
It is true that the pub patron will see the Sound Choice
mark and trade dress whenever the graphical component of
the karaoke tracks is displayed. This, according to the plain-
tiffs, is what gives rise to confusion as to the source of the good
containing those tracks: Patrons may assume it is a genuine,
authorized Slep-Tone product when in fact it is a bootleg copy.
But about what exactly is the patron confused? On seeing the
Sound Choice mark, a patron may believe that she is seeing
and hearing content that was created by Slep-Tone. And she is.
Compare Harbour v. Farquhar, 245 F. App’x 582 (9th Cir. 2007)
(nonprecedential decision) (individual defendant and his
production company falsely represented himself as author of
digitalized musical compositions licensed to television and film
producers). But what Dastar makes clear is that a consumer’s
5
See Second Amended Complaint, R. 20 at 5 ¶ 23 (“In a typical bar or
restaurant environment, patrons are often unable to distinguish the
imitation from the original, provided the compression is not too aggressive,
because the goal is to produce an acceptable digital substitute.”).
No. 15-2844 23
confusion must be confusion as to the source of the tangible
good sold in the marketplace. Fortress Grand Corp. v. Warner
Bros. Entm’t Inc., 763 F.3d 696, 701 (7th Cir. 2014), cert. denied,
135 S. Ct. 981 (2015); Eastland Music Grp., 707 F.3d at 872;
Bretford Mfg., Inc. v. Smith Sys. Mfg. Corp., supra, 419 F.3d at 580;
cf. Harbour, 245 F. App’x 582 (for purposes of section 43(a)
false-designation-of-origin claim, completed films and televi-
sion programs were relevant goods as opposed to musical
compositions embodied within those goods).
A consumer of karaoke services like a patron of The Basket
Case never sees a disc that is wrapped in Slep-Tone or Sound
Choice packaging. He never sees a website offering downloads
of Sound Choice tracks. As we have said, the defendants’
patrons are not direct purchasers of karaoke tracks. They
simply see and hear the karaoke tracks that The Basket Case
plays for them. They have no interaction with the medium
from which the tracks are played, in the way that a karaoke
jockey might. Any confusion, in short, is not about the source
of the tangible good sold in the marketplace, as Dastar requires.
That the Sound Choice mark is embedded in the creative
content of the karaoke track and is visible to the public
whenever the track is played does not falsely suggest that Slep-
Tone is endorsing the performance, as the plaintiffs have
alleged. The producers of communicative goods often embed
their marks not only on the packaging of the good but in its
content. Cinematic films, for example, typically display the
mark of the studio that made the film in the opening and/or
closing credits—think of Metro- Goldwyn-Mayer Studios’
roaring lion. When the copyright on such a creative work
24 No. 15-2844
expires, enabling any member of the public to copy and use the
work without license, it is not a trademark violation simply to
display the work without first deleting the mark that was
inserted into its content. Thus, as the district court pointed out
in Slep-Tone Entm’t Corp. v. Canton-Phoenix Inc., a movie theater
may freely exhibit a copy of Universal Studios’ 1925 silent film,
The Phantom of the Opera, which is now in the public domain,
without fear of committing trademark infringement simply
because Universal’s registered trademark will be displayed
when the film is played. 2014 WL 5824787, at *11 (D. Ore. Sep.
4, 2014) (report & recommendation), adopted as modified, 2014
WL 5817903 (D. Ore. Nov. 7, 2014), appeal pending (9th Cir.)
(No. 14-36018). So long as Universal’s mark is not overtly used
to market the performance, there is no risk that a theater
patron might think that Universal is sponsoring or endorsing
the performance. Id. Likewise, another media company is free
to make and sell copies of the film without deleting Universal’s
mark from the credits (or obtaining a license from Universal),
so long as the packaging and advertisement of the tangible
good on which the copy is fixed and offered to the consumer
(a DVD or blu-ray disc, for example) does not use Universal’s
mark and thereby suggest that it is a Universal-produced or -
endorsed copy. Id.; see also Comedy III Prods., Inc. v. New Line
Cinema, 200 F.3d 593, 596 (9th Cir. 2000) (unauthorized use of
clip from The Three Stooges’ film in another motion picture did
not constitute unfair competition under Lanham Act notwith-
standing plaintiff’s contention that clip contained elements that
amounted to trademark; in contrast, had defendant used a
likeness of The Three Stooges on t-shirts it was selling, there
might be arguable claim of trademark violation); cf. Societe
No. 15-2844 25
Comptoir de L’Industrie Cotonniere Etablissements Boussac v.
Alexander’s Dep’t Stores, Inc., 299 F.2d 33, 36 (2d Cir. 1962) (“The
Lanham Act does not prohibit a commercial rival’s truthfully
denominating his goods a copy of a design in the public
domain, though he uses the name of the designer to do so.
Indeed it is difficult to see any other means that might be
employed to inform the consuming public of the true origin of
the design. [By contrast,] [t]hose cases involving sponsorship,
whether trademark infringement or unfair competition,
protecting the owner of the mark, are based upon a finding
that the defendant’s goods are likely to be thought to have
originated with, or to have been sponsored by, the true owner
of the mark.”) (citations omitted); Pebble Beach Co. v. Tour 18 I
Ltd., 155 F.3d 526, 545-46 (5th Cir. 1998) (distinguishing
permissible, nominative use of rival’s trademark as discussed
in Societe Comptoir and similar cases from impermissible use
that gives rise to confusion as to source, sponsorship, or
approval of good), abrogated on other grounds by TrafFix Devices,
supra, 532 U.S. 23, 121 S. Ct. 1225. Because the creative content
of the karaoke tracks at issue in this case presumably remains
subject to copyright protection, the unauthorized display and
performance of those tracks may well present an actionable
claim of copyright violation, as we have said. But the routine
display of Slep-Tone’s embedded trademark during the
performance of the tracks does not, without more, support a
claim of trademark infringement or unfair competition under
the Lanham Act.
Here, there is no allegation nor suggestion in the briefing
that The Basket Case promotes itself as offering Sound Choice
karaoke products—in its advertising or in its karaoke menus,
26 No. 15-2844
for example. There is, consequently, no reason to believe that
its patrons will think that Slep-Tone is sponsoring the perfor-
mance of the copied karaoke tracks. And because patrons see
only the creative content of the tracks rather than the particular
medium from which the tracks are played, there is no reason
to think that they believe that the digital file, wherever it
resides, was itself produced or approved by Slep-Tone.6
We have considered Slep-Tone’s concern that if the data
contained on one of its products is compressed excessively
during the duplication process, the quality of an unauthorized
copy may be poor and, when played, may lead viewers to
think Slep-Tone products are of inferior quality. (Although the
same danger may be present when a Slep-Tone customer
makes an authorized copy, we shall assume that the auditing
process referred to in the complaint takes care of this.) Quality
is always a concern in passing-off cases: Not only is the
trademark holder deprived of sales, but the counterfeit goods
sold under its trademark place the holder’s goodwill at risk to
the extent the goods are of inferior quality. See, e.g., Coca-Cola
Co. v. Stewart, 621 F.2d 287, 291 (8th Cir. 1980). But the problem
for Slep-Tone, apart from the fact that it does not affirmatively
allege that the defendants’ copies are noticeably inferior to
their patrons, see n.3, supra, is that the defendants are not
passing off a tangible good sold in the marketplace as a Slep-
Tone good. As we have discussed, the defendants are not
selling compact discs with karaoke tracks and billing them as
6
We have little doubt if The Basket Case removed the Sound Choice mark
from its copies of the karaoke tracks before playing them for its patrons, the
plaintiffs would be here on a different kind of complaint.
No. 15-2844 27
genuine Slep-Tone tracks, in the way that a street vendor might
hawk knock-off Yves Saint Laurent bags or Rolex watches to
passers-by. Whatever wrong the defendants may have commit-
ted by making (or causing to be made) unauthorized copies of
Slep-Tone’s tracks, they are not alleged to have held out a
tangible good sold in the marketplace as a Slep-Tone product.
Consequently, the defendants’ alleged conduct is not action-
able as trademark infringement.
III.
For all of the reasons we have discussed, we AFFIRM the
dismissal of Slep-Tone’s complaint.