Back in February, I reported with alarm that the 9th Circuit rejected a trademark infringement claim by the purported owners of the BETTY BOOP cartoon character, issuing an opinion resting on an interpretation of aesthetic functionality doctrine that was so broad that it posed a substantial threat to the ability of pro sports, college, and character licensing companies to stop counterfeiters on the entire West Coast.
On rehearing, and after receiving amicus briefs from INTA, the Motion Picture Association of America, and the companies that license all major pro sports and collegiate trademarks, the Ninth Circuit withdrew the opinion, and substituted a ruling based on narrower grounds that eliminates the commercial and enforcement problems of the original opinion.
The case is now remanded to district court to determine whether the plaintiff can prove secondary meaning in light of the "fractured ownership" of Betty Boop rights among possibly several companies.
UPDATE: Many people I've talked to about the case have asked whether, procedurally, this was an unusual step for the court to take. Yes and no. Frequently losing parties ask for rehearings based on things they think the appeals court overlooked or got wrong. In most cases, the court can address the substance of the rehearing petition by adding a paragraph or a footnote, or making some minor changes to, the opinion. On that basis, they'll deny the rehearing and simply substitute a new opinion containing those minor changes. While the court used this procedure here, the changes it made were major, and that, in my experience, is unusual.
The prior opinion went astray when the appeals court decided the trademark claim on a basis no party raised or briefed. While an appeals court can affirm a case on any basis supported by the record (i.e., not necessarily the basis on which the district court decided the case), appeals courts typically do so only when the appellee actually BRIEFS those other possible bases, and the appellant has an opportunity to reply. It circumvents the adversarial process when the appeals court affirms on a merits-related basis that neither party ever raised. In the superseding opinion, the 9th Circuit panel completely fails to acknowledge both its mistake in deciding the case on a merits-related basis neither party raised or addressed and the fact that it got the law wrong on that unbriefed issue (probably because it was embarrassed). It would have been gutsier to acknowledge its errors.