IP Law Daily, COPYRIGHT—E.D. Pa.: State law claims based on typeface are not preempted by copyright act, (Aug 30, 2022)

By Matthew Hersh, J.D.

The ruling is based on a narrow reading of Third Circuit doctrine and may not be applicable in other circuits.

State law claims such as unjust enrichment and breach of contract that arose out of a major drugstore chain’s allegedly unauthorized exploitation of an unlicensed typeface were not preempted by the Copyright Act because federal copyright protection does not extend to typefaces, the federal court for Philadelphia has held. The court’s ruling, which appears to be based on a narrow reading of Third Circuit doctrine, is not certain to apply in most other federal circuits, and sharpens what appears to be a brewing split of authority over the application of the preemption doctrine to content that is unprotected solely because it is an idea and not expression (Brand Design Co., Inc. v. Rite Aid Corp., August 26, 2022, Beetlestone, W.).

The lawsuit arose after Rite Aid announced, in early 2020, a business-wide rebranding that covered product packaging, in-store signage, store exteriors, and broadcast and TV advertising. As part of the rebranding, the drug store chain began using a new logo that showed the words “Rite Aid” in a typeface known as “Neutraface.” The typeface in question was designed by a graphic design company named Brand Design Company Inc. (doing business as House Industries).

The rebranding immediately drew the ire of the graphic design company, which sued Rite Aid as well as its advertising agencies for a number of federal and state law claims. According to the design company, while it had licensed Rite Aid to use the typeface only for certain print and digital advertising, it had not licensed all of the other uses Rite Aid made of the typeface. The graphic design company alleged breach of contract and unjust enrichment, false designation of origin under federal law, unfair competition and reverse passing off under Pennsylvania common law, and false or fraudulent registration under federal law.

Rite Aid and its advertising agencies moved to dismiss on a number of grounds, leading to this opinion.

Copyright Act preemption. The court found that the various state law claims—unjust enrichment, unfair competition, and breach of contract—were not preempted. Under the Copyright Act, any state law claim is preempted if it asserts any right equivalent to one of the rights protected by the Copyright Act in any work within the “subject matter” of that Act. Rite Aid and its advertising agencies argued that each of these claims was preempted because they asserted rights that were equivalent to those protected by the Copyright Act, namely the right to exploit a work of graphic art. The court disagreed.

Preemption did not apply, the court found, because typefaces—under longstanding judicial doctrine as well as federal regulations—were not deemed protected under the Copyright Act. As such, the court found, Third Circuit doctrine foreclosed preemption in this case. For example, the court noted, the Circuit held in Dun & Bradstreet Software Servs., Inc. v. Grace Consulting, Inc., 307 F.3d 197 (3d Cir. 2002) that a claim of misappropriation of trade secrets was not preempted because it involved an alleged theft of customer lists—and customer lists were not copyrightable. Under this and other circuit precedent, the court held, there could be no preemption.

False designation of origin. The court also refused to dismiss this claim, for similar reasons. Rite Aid argued that the false designation claim was barred by the Supreme Court’s decision in Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), which held that a plaintiff cannot re-purpose Section 43(a) of the Lanham Act to enjoin the unaccredited copying of a creative work—a matter for resolution under the Copyright Act. But Dastar did not apply, the court noted, because this case involved a typeface, which is “not a work subject to copyright.” Thus, the false designation of origin claim would survive.

False or fraudulent registration. The court dismissed this claim. Under the trademark law, there is a civil cause of action against any person who procures the registration of a mark by a false or fraudulent declaration or representation. Here, the only false statement at issue was Rite Aid’s claim, in its statement of use for each mark, that it was “the owner of the trademark/service mark sought to be registered.” But there was nothing false about such a statement, the court noted—as after all, the graphics design company did not claim to have any trademark rights in Rite Aid’s marks. Instead, the court noted, it sought to cancel the registration due to some “other allegedly illegal aspect of the registrant’s conduct”—namely the unauthorized use of its font. That was not sufficient to make out a claim under the Trademark Act.

Other claims. The court issued a mix set of rulings on the remainder of the grounds asserted for the motion to dismiss. The breach of contract claims against Rite Aid and one of its advertising agencies involved the interpretation of contract terms that were not unambiguous on their face; thus, this would present “a question for the jury.” As to another advertiser, however, there were no meaningful factual allegations that supported such a breach claim, and that claim was dismissed. The unjust enrichment claims were also permitted to move forward against Rite Aid and one of its advertising agencies, but not against the other.

The Case is No. 2:22-cv-01174-WB.

Attorneys: David Hosp (Orrick, Herrington & Sutcliffe LLP) for Brand Design Co., Inc. d/b/a House Industries. Elisa P. Mcenroe (Morgan Lewis Bockius LLP) for Rite Aid Corp., Name Rite, LLC and GA Communications, Inc. d/b/a Purered Creative, LLC.

Companies: Brand Design Co., Inc. d/b/a House Industries; Rite Aid Corp.; Name Rite, LLC; GA Communications, Inc. d/b/a Purered Creative, LLC

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