rebinding books doesn't create derivative works but may be actionable under Lanham Act

Steeplechase Arts & Productions, L.L.C. v. Wisdom Paths, Inc., 2023 WL 416080, No. 22-02031 (KM)(MAH) (D.N.J. Jan. 26, 2023)

In this pre-discovery summary judgment ruling, the court adopts the correct view of whether rebinding creates a derivative work (no) but finds that there could still be trademark infringement, in the process suggesting that a defendant might not be responsible if an online portal forces it to choose from condition descriptions, none of which quite fits. Defendant does business as Spiralverse; it bought lawfully made Steeplechase books and rebound them with spiral binding. (It tried to get “rebinding rights” but Steeplechase said no.)

Steeplechase has a copyright for the book, “Piano Book for Adult Beginners: Teach Yourself How to Play Famous Piano Songs, Read Music, Theory & Technique” and registered trademark rights in STEEPLECHASE ARTS & PRODUCTIONS for, among other things, music instruction books, including for the Piano Book. As initially produced, the Piano Book is paperback with glue binding. Spiralverse removed the original paperback glue bindings from the copies it purchased, punched holes in the pages, and installed spiral bindings. At least some of the spiralbound books have a front label, which states: “The original binding was removed and replaced with a spiral binding by Spiralverse.com.” Spiralverse listed its modified copies for sale on Amazon at prices of $29.99 and up—reflecting a markup from the prices at which it bought the paperbacks—and a large number of those books were sold to consumers. The Amazon listing indicated that (i) the condition of the books was “new,” (ii) the format was “spiralbound,” and (iii) the seller was either “Wisdom Paths,” “Wisdoms Paths,” or “Your Name Books.”

The rebinding leaves glue residue between the cover and the first page of the modified copies and obscures some of the printed matter, but the parties dispute how significant the obstruction is. It’s desirable for making it easier to turn pages for performance etc.

Copyright infringement: Rebinding doesn’t create a derivative work. A derivative work must involve an original work being “recast,” “transformed,” or “adapted,” and nothing like that took place here.

False advertising: Spiralverse allegedly falsely advertised its version of the Piano Book on Amazon as “new,” despite the rebinding, residue, and front labels. Was this literally false? According to the Amazon condition guidelines for books, “new” means “[a] brand-new copy with cover and original protective wrapping intact. Books with markings of any kind on the cover or pages, books marked as ‘Bargain’ or ‘Remainder,’ or with any other labels attached may not be listed as New condition.” But the only condition options aside from “new” are “used – like new;” “used – very good;” “used – good;” “used – acceptable;” and “unacceptable.” If “new” means “not used,” that’s the case here: “The books had not previously been used to perform or learn music, says Spiralverse, had no signs of wear, and therefore could permissibly be described as ‘new.’” “Modified” is not an option on Amazon.

On the current record, the court couldn’t conclude that Spiralverse’s Amazon listing was unambiguously false. Neither “new” nor “used” really fit a product that has not been used by a consumer, but has been altered by a third-party seller. “The Amazon condition guidelines are relevant, at least to the extent that consumers are aware of them, but there is no evidence either way as to whether they are.” Those guidelines suggested that previous use wasn’t the only thing that made a book not “new”—cosmetic defects  could count. “It is highly counterintuitive, for example, that a product, because it has not been used by a consumer, could be listed as ‘new’ despite being severely damaged.” Still, the extent of the modifications and their effects on consumers was disputed.  In a footnote, the court commented that, “[i]f Amazon did not require a seller to choose between a fixed set of options and instead allowed the seller to describe the condition of a book using words of the seller’s choosing, I would be more inclined to find that Spiralverse’s listing was unambiguous and literally false. The record does not conclusively establish whether a seller has any flexibility in this regard.”

Steeplechase also argued misleadingness, arguing that multiple consumer reviews on Amazon demonstrate that purchasers of the Spiralverse book did not receive what they expected. But ruling on that was premature before discovery.

False designation of origin: Spiralverse argued that its label notifies consumers that “[t]he original binding was removed and replaced with a spiral binding by Spiralverse.com.” Steeplechase argued that this didn’t alleviate confusion but instead creates the impression that Steeplechase authorized the rebinding, especially since Spiralverse lists its books as “new” on Amazon.

The court declined to rule on this at this time. “There is insufficient evidence in the record to demonstrate that consumers likely understood that the rebinding was done without the permission of Steeplechase, or that consumers were likely confused about who was responsible.” First sale defense: This requires resale of a genuine product, meaning that there are no material differences. Courts say a bunch of things about this, not noticing that they are in tension in terms of what needs to be proven; this court does much better than usual. While the “material differences” test is “a means to determine whether the allegedly infringing products are likely to injure the goodwill developed by the trademark owner in the trademark goods,” courts often don’t pay attention to the fact that lack of material differences is one reason that there might be no harm to the trademark owner.

Although there were material differences between the parties’ books, the court was sympathetic to the argument that there can be no liability

where the reseller clearly communicates to consumers any material alterations that the seller has made to the product. Although Spiralverse did not cite any cases in support of this argument, it has intuitive appeal. If a consumer understands that the reseller is responsible for any material differences between the resold and genuine product, then the owner’s goodwill in the trademarked product is unlikely to be damaged.

But it still wasn’t clear whether the label

alleviates all confusion about which entity is responsible for the rebinding, particularly in light of the fact that Spiralverse advertises its version of the Piano Book as ‘new.’” If consumers understand that Spiralverse modified the binding but believe that it did so with the permission of or in association with Steeplechase, the goodwill of the Steeplechase Mark could still be affected.

And here we get the fundamental overexpansiveness of modern trademark law: the court recognized that you should be looking for harm to goodwill for first sale, but skipped over that entirely for permission/association: in what way could it harm Steeplechase if consumers were mistaken about this? Anyway, to get first sale protection, Spiralverse apparently has to show that it has also disclaimed permission or association. Note that this reasoning also applies to resellers of unmodified used goods truthfully marked as used, as Chanel has asserted against Therealreal.