Lynn’s Picks: Foresight’s Patent of the Week – US Granted Patent 9,601,033: Pop-Up Greeting Card with Tab Support of a Laser-Cut, Slice-From Pop-Up Element (LovePop)

Disclaimer: This blog was created for informational purposes only and does not represent Foresight’s or the author’s opinion regarding the validity, quality or enforceability of any particular patent covered in this blog.  Foresight is not a law firm and no portion of the information contained in this blog was intended to serve as legal opinion.

In honor of Valentine’s Day, the patent pick of the week is related to a trusted method of expressing your love and admiration to that special someone or secret admirer. This method of expression is rarely viewed through a technical, nor patent, lens; however, the use of written Valentine’s messages dates back to 1415 when the oldest known valentine poem was written by Charles, Duke of Orleans, to his wife while he was imprisoned in the Tower of London. Fast forward to 2024 and many of us view Valentine’s Day cards as an exercise of searching through rows of cards at the local grocery store in the hopes of finding one that captures a moment or provides a laugh, but what does this have to do with patents? This week’s pick is from a company that got its big break in 2015 when LovePop was selected to appear on Shark Tank and managed to secure an investment from Kevin O’Leary (aka Mr. Wonderful), who invested $300,000 for a 15% of the company. Since that investment, LovePop has sold over 55 million cards.

While you may not recognize the LovePop name, you will likely have seen their cards on display for every major holiday. The images below should refresh your memory of the unique design of these cards.

LovePop has built its business around 3 dimensional fold-flat cards, with designs covering every major holiday, event and even custom designs for large brands such as Marvel, Star Wars and even The Office. While LovePop can attribute some of its success to the exposure generated from Shark Tank, the reality of their lasting success and the reason you do not see an abundance of similar 3D cards is due to the intellectual property portfolio held by LovePop. The first application filed by LovePop occurred the same year as their Shark Tank debut, and since that date, the company has grown their portfolio annually with multiple applications filed and granted every year since 2015 for a total of 31 granted US patents as of the writing of this article. The patent that started it all for LovePop is the pick for this week, patent number 9,601,033. This patent was granted in 2017 from the 2015 filing mentioned above and is titled “Pop-up greeting car with tab support of a laser-cut, slide-form pop-up element.”

As seen in the images below, the patent relates to the process and article of creating and combining slice forms (combining 2D slices of an object to form a 3D final product) in a manner that would allow the card to lay flat when folded and open into the desired design when unfolded. The patent claims are primarily focused on the use of multiple slice forms, arranged in such a way and coupled to the card in such a way to create the 3D final form when unfolded.

This seemingly simple process has morphed into blank canvas onto which the only limitation is the creativity of the designer and the tolerances of the laser cutting machine. Next time you find yourself pacing the card aisle in the desperate, usually last minute, search for the perfect card, think about the combination of intellectual property on display. From patented pop-up cards, to trademarked cards from companies like Hallmark and copyrighted material from movies or famous artists, this relatively non-technical space found in every grocery store is a microcosm of intellectual property protection and monetization.

Have you come across any interesting patents you would like us to feature in future blogs or did you invent a technology you would like featured? Please send us an email at media@foresightvaluation.com or call our office at (650) 561-3374.

Impact of Warhol v. Goldsmith: Kat Von D and the Miles Davis Portrait

Following the Supreme Court decision in Andy Warhol Foundation for the Visual Arts v. Goldsmith in 2023, we published a blog titled “The Supreme Court’s Decision in Warhol v. Goldsmith: Interpreting Copyright Fair Use.” In that blog, we discussed the concept of Fair Use in the copyright context while also highlighting the key facts of the Warhol decision which we recommend reviewing prior to continuing to read this blog, if you need a refresher. We are revisiting this topic as a new case has been revived due to the precedent set by the Supreme Court, a case that involves a portrait of the acclaimed jazz musician, Miles Davis, which was taken by a Los Angeles-based photographer and used by a celebrity tattoo artist as the reference photo for a tattoo.

As a quick refresher, the term Fair Use is often mentioned in relation to the use of portion of a copyrighted material for purposes such as criticism, comment, news report, teaching, scholarship or research. When used for such purposes, the court has generally held that unauthorized use of the copyrighted material is not considered infringement as long as the use does not fail the four-factor test described in more detail in our previous post. The most scrutinized factor of the four-factor test is commonly referred to as the transformative use test which seeks to determine whether the use of the copyrighted work in question transformed the purpose and character of the work into something else, such as parody or commentary. In the Warhol case, Andy Warhol was commissioned by Vanity Fair to create a cover for the magazine’s story on the artist Prince. Andy Warhol was given a portrait of Prince taken by a rock-and-roll photographer, Lynn Goldsmith, for use as a reference photo under a license between Lynn Goldsmith and Vanity Fair. The license stipulated that Andy Warhol could use the photo for one time only and Lynn Goldsmith was paid $400. Andy Warhol, without executing additional license agreements, created 15 additional works using the reference photo. Importantly, one of these works by Andy Warhol was later licensed to Conde Nast for the specific purpose of using the work in a magazine article about the artist Prince. This use of Andy Warhol’s Prince artistic work, was ultimately the basis for the Supreme Court’s determination that Fair Use was not applicable due to the lack of transformative use. The fact that Andy Warhol used his artistic abilities to alter the reference photo was not transformative because the purpose and character of the unauthorized use was identical to the original – authorized – use of the reference photo: depicting Prince in a magazine story about Prince.

The above summary was intended to refresh the Fair Use discussion in the context of a well-known artist as this fact pattern as once again emerged in the case of Jeffrey Sedlik v. Katherine Von Drachenberg (aka Kat Von D). The facts of this case are pretty straightforward: Sedlik is a professional photographer and a professor who created and owns the copyright to a photographic portrait of the famous jazz musician, Miles Davis, that was created in 1989 and first published in JAZZIZ magazine in that same year (copied below and used under the Fair Use exclusion of commentary). This photo has been featured in magazines around the world and was featured in Life magazine’s annual “Picture of the Year” issue. Sedlik has sold licenses to the portrait which authorized reproduction, distribution, and display of the portrait for commercial and non-commercial purposes since it was created.

The other party to this case, Kat Von D, is well known in certain circles as a world-renowned tattoo artist who has appeared in various reality TV shows and magazines which can be found on her personal website. According to the complaint, Kat Von D is also a recording artist, TV and film producer and owns and operates a tattoo parlor, an art gallery, a cosmetic company, a clothing company, and a shoe company, all of which have earned her 7.4 million followers on Instagram and 12 million followers on Facebook. In 2017, Kat Von D used the Miles Davis portrait, without Sedlik’s authorization, to create a reproduction of the image in the form of a tattoo on the arm of friend whom she did not charge for the service. She featured the portrait and her work tattooing the portrait on her social media channels which Sedlik claims was done to promote and solicit the sale of goods and services of Kat Von D and her various commercial brands, as seen in the image below which was taken from the complaint.

When the case was initially brough before the court, the Andy Warhol case was not yet decided and the judge initially ruled for Kat Von D in a summary judgement decision but paused the proceeding until the Supreme Court rendered its opinion on the Warhol matter. Following the Supreme Court holding, the stay was lifted and the lawsuit was set for trial based on the Supreme Court’s opinion on the transformative use, or lack thereof, in the Warhol case. The trial for this case is set to begin in early 2024 in the United States District Court for the Central District of California and poses a number of interesting questions about the reach of Fair Use under the new precedent established in the Warhol decision. While we will have to wait and see the final outcome of this case, there would be material impacts on various industries such as the tattoo industry, and perhaps even on generative AI. In the tattoo industry, use of copyrighted reference photos is common and has largely continued without disruption due to the costs of litigation compared to the typical damages for copyright infringement and the difficultly is placing a value on the personal display of an infringing work on the body of the person displaying said work. More broadly, when viewing this issue through the lens of visual works created through generative AI based on training models using copyrighted works without license, the growing body of legal decisions following the Warhol decision by the Supreme Court may pose a barrier to the field as these AI tools generate countless derivative works that may be violating the Fair Use conditions. We will keep a close eye on the trial in this case and provide an update to the blog series as the trial progresses.

Lynn’s Picks: Foresight’s Patent of the Week – US Granted Patent 11,861,255: Wearable Device for Facilitating Enhanced Interaction (Apple Inc.)

 

Disclaimer: This blog was created for informational purposes only and does not represent Foresight’s or the author’s opinion regarding the validity, quality or enforceability of any particular patent covered in this blog.  Foresight is not a law firm and no portion of the information contained in this blog was intended to serve as legal opinion.

In this week’s blog, we are following up on our first post in the series highlighting Rivian’s Spare Wheel Containers for a Vehicle (link to blog) patent application with a newly issued patent from Apple titled Wearable Device for Facilitating Enhanced Interaction. Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables and accessories worldwide and reported $383 billion in total revenues in fiscal year 2023, based on the company’s most recent annual report. In addition to the traditional offerings many of us use throughout our day, Apple is debuting a new form of content consumption, computer usage and productivity called the Vision Pro which is set to start accepting pre-orders on January 19th. The Vision Pro is a form of spatial computing that utilizes artificial intelligence and computer vision to combine virtual content with the physical world. Many will view this technology as the next step in Augmented Reality/Virtual Reality (AR/VR) and we have seen early forms of this technology in products such as Magic Leap or Oculus (now Meta Quest). While this blog is not an endorsement of the future of spatial computing, Apple’s participation in the market is a sign of market traction and likely growth in rollout of consumer products targeting the typical use of personal computers rather than being driven by gaming applications, which is the reason this patent was selected to be highlighted in this blog series.

As seen in the images below, the issued patent, which was filed in 2018, addresses the person to person interaction element that is anticipated when a user has a computing device covering the majority of their face. Given the intent of this device to be used in a similar manner in which our phones and computers are currently being used, there needs to be a way to allow personal interaction in a fashion that is not currently available in most VR or other head devices. To overcome this issue and to provide the user with awareness of and engagement with the real-world, the patent presents a system with internal and external cameras and displays to facilitate interaction between the wearer and another person or environment.

 

In order to allow the device to be a practical device for any number of targeted uses, isolating the wearer from the environment while also preventing those surrounding the user to interact with the user in a traditional way, requires the device to have the ability to show human expression which is a critical component of person to person interaction. One could easily argue that such a system is unnecessary but the same has been said about a myriad of technologies that have emerged over the past 10-20 years that we utilize every day, whether that is a personal assistant like Siri or a toaster with an interactive display. The inventive process should not be limited by current habit of the consumer, but rather, the inventive process should anticipate and nudge the consumer into seeing the value and purpose of the underlying inventive concept. This can be seen in other images from the patent copied below. Is it necessary to display the wearer’s facial expressions as if the wearer’s eyes were that of a lion? No, but it is a feature that consumers immediately understand due to the similarity to the endless number of filters we can apply to our faces during facetime or other video calls. Will this lead to enjoyable mishaps like the lawyer on a zoom conference in District Court that could not figure out how turn off the cat filter? It remains to be seen how the consumer interacts with the facial features of the Vision Pro and whether these features are “facilitating enhanced interaction” as the patent’s title says.

Have you come across any interesting patents you would like us to feature in future blogs or did you invent a technology you would like featured? Please send us an email at media@foresightvaluation.com or call our office at (650) 561-3374.

 

The SEC – Impact Theory Settlement: Are NFTs Considered a Security?

The SEC announced last week that it had reached a settlement with Impact Theory following the SEC’s first enforcement action against the sale of Non-Fungible Tokens (“NFTs”) which the SEC charged were unlicensed securities. The first step in attempting to understand the SEC’s position on this matter is to go back to the beginning where Impact Theory sold the NFTs that are the subject of this enforcement action. Between October and December of 2021, Impact Theory, a Los Angeles based media and entertainment startup, raised approximately $30 million worth of Ethereum through the sale of NFTs that Impact Theory named “Founder’s Keys”. Impact theory made certain statements related to the Founder’s Keys offering and the use of funds. These statements included that Impact Theory would deliver “tremendous value” to NFT purchasers and that they would use the proceeds for “development,” “bringing on more team,” and “creating more projects.” The SEC determined that Impact Theory was offering and sold these NFTs as investment contracts, and therefore they should be deemed as securities, based on the Howey test (see explanation below).  Since the purchasers of these NFTs had a reasonable expectation of obtaining a future profit based on Impact Theory’s managerial and entrepreneurial efforts, they qualify as ‘securities’ under the Howey test.

Examples of statements that were made by Impact Theory in the run up to the sale of the NFTs include some of the following, which were selected by the SEC for inclusion in their public filing regarding the settlement of this matter:

  • Statement indicating that investors would profit from their purchases if Impact Theory was successful in their efforts
  • “If you’re paying 1.5 ETH, you’re going to get some massive amount more than that. So, no one is going to walk away saying, ‘Oh man, I don’t think I got value here.’ I’m freakishly bullish on that. I will do whatever it takes to make sure that this is true.”
  • “But yea, I will make sure that we do something that by any reasonable standard, people got a crushing, hilarious amount of value.”
  • “NFTs are the mechanism by which communities will be able to capture economic value from the growth of the company that they support.”

According to the SEC, the above statements, and others, led purchasers to believe that their purchases of the NFTs would enable the company to develop the various projects with the end result being the appreciation of value, over time, of their purchased NFTs. Ultimately, 13,921 NFTs were sold by Impact Theory to hundreds of investors, including investors in multiple US states. Additionally, these NFTs could be sold on the secondary market and Impact Theory would receive a 10% “royalty” on each secondary market sale. These secondary market sales generated nearly $1 million in royalty payments to Impact Theory.

Impact Theory entered into a settlement with the SEC that included approximately $6.1 million in disgorgement of profits and penalties, as well as the destruction of any NFTs in their possession and an update to the smart contract associated with the NFTs that would eliminate the 10% royalty on secondary market sales. While the facts of this case and the outcome are noteworthy due to it being the first time that the SEC has brought an enforcement action involving the sale of NFTs as unregistered securities, it is the potential impact of this action on the NFT market and the SEC’s broad interpretation of the Howey test that has the crypto community’s attention.

Under the Howey test, an ‘investment contract’ is any contract, transaction or scheme whereby a person (1) invests his/her money (2) in a common enterprise and (3) is led to expect profits (4) solely from the efforts of the promoter or a third party. Based on this definition, and its application to the Impact Theory NFTs, the logical conclusion is that many of NFTs being offered today would fall within the definition used to initiate an enforcement action against Impact Theory. A large percentage of NFTs purchased are not purchased for their collectible value but are instead purchased to provide some benefit to holders based on the efforts made by the company selling the NFTs. Those holder benefits are typically provided in the form of expectation of profits which can be derived from a multitude of options that are constantly changing.

Years ago, when profit driven NFTs began to be introduced into the market, those expectations of profits were through the marketing efforts of the NFT issuing company to continually drive up the value of the NFTs as well as collaborations that would provide NFT holders with access to partner NFTs for free or at a reduced price that would yield additional profits through the sale of those partner NFTs. The NFT and Crypto landscapes adapt extremely fast as one value driver trend peaks followed closely by the next value driver trend. Today, expectations of profit take the form of dividends from investment projects where the NFT sales are used to fund investment vehicles operated by entity selling the NFTs and each NFT represents a certain percentage of trading profits. Expectations of profit also take the form of higher yields from staking the NFT (as well as the connected cryptocurrency) where an NFT holder may receive 10% Annual Percentage Yield (“APY”) while the non-NFT holder is able to stake either underlying cryptocurrency for 5% APY. There are endless mechanisms through which current NFT issuers entice individuals to buy their NFTs based on the reputation or historical performance of the team selling the NFTs and these mechanisms change far faster than what is possible for the SEC to keep up with. A quick review of projects on Telegram or Discord will show the variety of mechanisms through which projects with no funding launch the sale of NFTs to fund the development of the project, which could range from creating a trading robot to launching a full video game, where there investor is taking the risk of early investment for the sole purpose of realizing profits in the future.

These issues are why two of the SEC Commissioners dissented to the application of the Howey test to the Impact Theory NFT sales. These Commissioners outlined 9 pending questions that they believe the SEC should have addressed and offered guidance long ago when NFTs started proliferating. A discussion of those 9 questions will be discussed in a later blog, but at a high level they address questions that go to the core of the SEC’s view of NFTs with the goal being for the SEC to issue guidance rather than enforce without guidance. While it is unlikely that a decentralized ecosystem with participants around the globe will adhere to the guidance provided by the SEC, projects that seek to raise millions through a US registered entity will greatly benefit from such a guidance. These projects that seek to adhere to rules and regulations will drive the next wave of blockchain innovation and it is imperative that the SEC provide a framework for this innovation to occur.

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