Thursday, September 22, 2016

Advertising question of the day

Does the following pose any advertising issues?  Does it matter whether the business sells non-organic food?
Thanks to James Grimmelmann for the photo.

"unique" and "innovative" are puffery

LoggerHead Tools, LLC v. Sears Holdings Corp., 2016 WL 5080028, No. 12-cv-9033 (N.D. Ill. Sept. 20, 2016)

LoggerHead sued Sears under the Lanham Act and Illinois state law for false advertising; the court granted summary judgment to Sears.  LoggerHead sells a hand tool, the Bionic Wrench, which Sears sold from 2009.  In 2012, Sears sought a Bionic Wrench replacement to be sold under the Sears Craftsman brand and sent LoggerHead’s patent to a patent lawyer, who identified another patented tool that could be used as a model for a replacement wrench and that (he opined) would not infringe.  In late 2012, Sears began retailing the Max Axess Locking Wrench (MALW).

In DTC ads for the MALW, Sears stated: “[i]f you want maximum versatility in a single wrench, then you’ll love the latest innovation from Craftsman, the Max Axess Locking Wrench.” The product packaging for the MALW shows a picture of the wrench, the term “Unique Design,” and, underneath that, the phrase “Adapts to a wide range of fastener sizes and grips fasteners on all sides to prevent rounding.” The packaging also contains a dotted line going from the writing to the picture of the wrench.  Sears issued a press release with similar claims.
Craftsman package
LoggerHead argued that, taken in context, these features were literally false: (1) the “Unique Design” statement, (2) “Adapts to a wide range of fastener sizes and grips fasteners on all sides to prevent rounding” statement, (3) the illustration of the MALW and (4) the white line connecting them.  First, because the MALW copied its design from the Bionic Wrench, it wasn’t unique. Second, the “unique” claim was connected to the claim, “Adapts to a wide range of fastener sizes and grips fasteners on all sides to prevent rounding,” also false as a uniqueness claim, as was the connection between the “unique” claim and the image of the MALW’s tool head.

The court found no literal falsity in the uniqueness claim “given that there are admitted differences between the MALW and the Bionic Wrench.”  Plus, “unique” has previously been deemed puffery.  Although “unique design” might not be literally false, it could be misleading, but LoggerHead didn’t provide any consumer perception evidence.

What about “latest innovation from Craftsman” in the ads?  Sears argued that this couldn’t be false advertising because of Dastar, but the Supreme Court did not “hold that a false claim of origin is the only way to violate [the Lanham Act].” Gensler v. Strabala, 764 F.3d 735, 736 (7th Cir. 2014). Still, this statement wasn’t literally false, since it didn’t say what the innovation was, and courts have also found “innovative” to be puffery.

As for the press release, LoggerHead argued that it falsely stated: “Despite some visual similarities to other tools on the market, Craftsman Max Axess Locking Wrench operates in a different way, using a mechanism design[ed] in the 1950s.” LoggerHead claimed literal falsity because the MALW uses a mechanism designed by LoggerHead, and also alleged that the press release falsely implied that the MALW is made in America, when it is made in China.

Sears argued that the press release wasn’t commercial advertising or promotion.  The court thought that the press release had characteristics of commercial speech (product references, economic motivation for the speech) despite not being in a traditional ad format, but there was no evidence that the press release was sufficiently disseminated to the relevant purchasing public, even though it was posted on Sears’ website.

As for falsity, the press release didn’t say that the MALW was made in America and LoggerHead didn’t explain why the release was misleading on that point. The phrase “operates in a different way” was subjective and not literally false, since the MALW concededly contains some features that the Bionic Wrench does not, such as a locking mechanism. 

Wednesday, September 21, 2016

How does race affect copyrightable expression?

Fulks v. Knowles-Carter, No. 16-Civ-4278 (S.D.N.Y. Sept. 12, 2016), contains an interesting bit about race and copyrightable expression:

[P]laintiff argues that the “race of the characters in the [Film] is irrelevant to the total concept and feel of a film about relationships.” Plaintiff would be correct if the Film were just about relationships. But it is not, and plaintiff’s say-so does not overwhelm the plain meaning of the work. The Film depicts the protagonist’s journey from a particular perspective: that of an African-American woman in a predominantly African-American community. The Film repeatedly references and dramatizes generations of African-American women, and in the background of one scene, the observer hears an excerpt from a speech by Malcolm X to the effect that the Black woman is the most “neglected” person in America. This all takes place against what defendants accurately characterize as a “Southern Gothic feel.” The settings transition between areas of New Orleans, the abandoned Fort Macomb, and an Antebellum plantation. These significant differences in characters, mood, and setting further distinguish the total concept and feel in the Film from that in Palinoia.

In an opinion that goes from Voltaire to Taylor Swift to Oscar Wilde to Andy Warhol (that last one is just showing off), the court rejects the claim of substantial similarity between plaintiff’s 7-minute film about the aftermath of a relationship and Beyoncé’s Lemonade film and trailer.  Here, enjoy some more references from the opinion:

Plaintiff also argues that because the works all “portray a struggle of a relationship; the reasons for such struggle are unclear and irrelevant.” This is like saying that Casablanca, Sleepless in Seattle, and Ghostbusters are substantially similar despite the different motivating forces behind the struggles there portrayed (Nazis, capitalism, and ghosts, respectively). But “all fictional plots, when abstracted to a sufficient level of generalization, can be described as similar to other plots,” and that is why the differences do in fact matter. 

Tuesday, September 20, 2016

Packaging trade dress needs specific design, not just color, to be inherently distinctive

Forney Industries, Inc. v. Daco of Missouri, Inc., --- F.3d ----, 2016 WL 4501941 (10th Cir.. Aug. 29, 2016)

Forney makes retail metalworking parts and accessories and claimed a protected trade dress in the coloration of its packaging, described as:

a combination and arrangement of colors defined by a red into yellow background with a black banner/header that includes white letters. More specifically, the Forney Color Mark includes red and yellow as the dominate [sic] background colors. Red typically starts at the bottom of the packaging, continues up the packaging and may form borders. Red may also be used in accents including but not limited to lettering. Yellow typically begins higher than the red and continues up the packaging. Yellow may also provide borders and be used in accents including but not limited to lettering. A black banner is positioned toward the top of the package label or backer card. Black may also be used in accents including but not limited to lettering. White is used in lettering and accents.

Here are five pictures of its packaging over the years, reproduced below with Forney’s caption for each:
Four Forney designs

one more Forney design

Forney alleged infringement by Daco, as shown here:
Allegedly infringing packages side by side with Forney
The court of appeals affirmed, holding that “Forney’s use of color, which was not associated with any particular shape, pattern, or design, was not adequately defined to be inherently distinctive,” and Forney failed to show secondary meaning.

The court noted that courts have generally struggled to find a test for inherent distinctiveness of non-word marks, given that Abercrombie doesn’t translate very well.  “[I]t may be useful to supplement that test with the test first introduced in Seabrook Foods, Inc. v. Bar–Well Foods Ltd., 568 F.2d 1342, 1344 (C.C.P.A. 1977)”: (1) “whether it was a ‘common’ basic shape or design,” (2) “whether it was unique or unusual in a particular field,” and (3) “whether it was a mere refinement of a commonly-adopted and well-known form of ornamentation for a particular class of goods viewed by the public as a dress or ornamentation for the goods.”  But the Supreme Court has never adopted a test; Taco Cabana explicitly noted that the question of whether the restaurant trade dress there was inherently distinctive was not before the Court. 

We do know that color alone and product design can’t ever be inherently distinctive, and Wal-Mart’s other statements about avoiding strike suits and preserving competition are instructive about “the need for clear rules about what can be inherently distinctive.”  Seabrook, the Court specifically noted, “would rarely provide the basis for summary disposition of an anticompetitive strike suit.”  The Court also pointed to the availability of copyright and design patent as a reason not to worry too much about protecting design, and told lower courts to err on the side of classifying ambiguities as product design, thus requiring secondary meaning.

Based on these considerations, the court of appeals here ruled that “the use of color in product packaging can be inherently distinctive (so that it is unnecessary to show secondary meaning) only if specific colors are used in combination with a well-defined shape, pattern, or other distinctive design.”  This rule is consistent with the case law; cases involving a color scheme or palette “in isolation” have turned on secondary meaning. E.g., Board of Supervisors for Louisiana State University Agricultural and Mechanical. College. v. Smack Apparel Co., 550 F.3d 465 (5th Cir. 2008).  McCarthy agrees: “whether color is confined to a defined design can determine whether inherent distinctiveness is a possible alternative to proving secondary meaning.”

Here, Forney was out of luck.  It didn’t sufficiently articulate the protectable elements of its claimed mark.  This is especially important for product lines where the features aren’t identical across products.  A “vaguely defined” trade dress shouldn’t be protected.  Such a trade dress would complicate litigation; “courts will be unable to evaluate how unique and unexpected the design elements are in the relevant market.” Moreover, if descriptions are vague, “jurors viewing the same line of products may conceive the trade dress in terms of different elements and features, so that the verdict may be based on inconsistent findings.” Nor would courts be able to shape narrowly-tailored relief without a clear definition.  Perhaps most important, if courts can’t identify infringing designs, competitors certainly wouldn’t be able to know what might draw a lawsuit.

Regardless, Forney’s description did not comport with the court’s requirement that the color scheme be used in combination with a well-defined shape, pattern, or other distinctive design. Forney used words like “typically” and “may” in its description, and that wasn’t due to lack of proper drafting by counsel. “It is probably the best that one could do, given the variety of packaging that Forney has used on its products over the years.”  Without a consistent shape, pattern, or design, “[p]articularly in light of the Supreme Court’s instruction to be cautious about applying vague, litigation-friendly tests for inherent distinctiveness, we conclude that Forney has failed to establish an inherently distinctive trade dress.”

Forney also didn’t have sufficient evidence of secondary meaning.  Its extensive promotional and advertising efforts weren’t probative because “advertising alone is typically unhelpful to prove secondary meaning when it is not directed at highlighting the trade dress.” Here the district court found that Forney’s advertising “utterly fails to mention the Color Mark, or to emphasize it in any fashion.”  Sales data were similarly unhelpful.  Testimony about exclusive use for twenty years also wasn’t enough to survive summary judgment, even though extensive exclusive use could support a finding of secondary meaning.  First, the testimony was conclusory, and didn’t even claim uniqueness, just that Forney’s products using the claimed mark “were uncontested, extensive and exclusive for 20 years.” Forney also submitted pictures of four packages from its “primary” competitors that use different colors.  But defendants submitted several pictures showing product packages in the retail-metalworking sector that bear a close resemblance to Forney’s product packaging.

More importantly, there wasn’t continuous exclusive use of a definable trade dress. Forney’s packaging changed significantly over 20 years. “How then is a consumer supposed to have come to associate the packaging with Forney?”

Using photos of competitor's product confers statutory Lanham Act standing on competitor

Joseph Paul Corp. v. Trademark Custom Homes, Inc., 2016 WL 4944370, No. 3:16-CV-1651 (N.D. Tex. Sept. 16, 2016)

JP Homes sued Trademark, its principal, and homeowners for alleged violations of the Lanham Act and copyright infringement.  JP Homes alleged that it designs and builds custom homes, and that defendants copied and improperly appropriated original elements of JP Homes’s copyrighted work in one such home design, The Martinique. Further, Trademark allegedly used photos of a house designed by JP Homes in advertising its own products. JP Homes sought to halt the construction of the homeowners’ in-progress house and have it torn down or modified sufficiently so as not to infringe.

The court first rejected defendants’ arguments that the court lacked jurisdiction/JP Homes lacked standing. The court determined that this was a statutory standing question, not an Article III question, and thus governed by Lexmark under Rule 12(b)(6). Although JP Homes alleged that it was in the Lanham Act’s zone of interests, Trademark argued that JP Homes failed to plead facts showing injury or proximate causation, and that its allegations were merely speculative. The court disagreed.  JP Homes alleged that Trademark wrongly received recognition as a good builder because of its copying; that the parties competed in the same area; and that the statements were likely to materially mislead consumers.  This was a classic false advertising claim, and the allegations that JP Homes suffered competitive or reputational injury as a result of Trademark’s conduct were not too remote. 

Further, while JP Homes didn’t specify an amount of actual loss, that wasn’t required. Lexmark says that “potential difficulty in ascertaining and apportioning damages is independent basis for denying standing where it is adequately alleged that a defendant’s conduct has proximately injured an interest of the plaintiff’s that the statute protects.” JP Homes might be entitled to injunctive relief or disgorgement of defendant’s profits even if it couldn’t quantify its losses with enough certainty to get damages.  

Turning to JP Homes’ motion for TRO/Preliminary Injunction, the court found that JP Homes failed to show irreparable injury.  JP Homes argued that likely success on a copyright claim raised a presumption of irreparable harm, but the Fifth Circuit never adopted that rule.  (No discussion of eBay v. MercExchange.)  JP Homes also argued that continuing infringement/construction of the house exposed it to the permanent loss of customers or lost goodwill. But JP Homes provided no evidence of this, only conclusory assertions.  JP Homes also didn’t explain why its damages would be unquantifiable or why money wouldn’t be adequate compensation.  JP Homes requested actual damages or statutory damages in its complaint, suggesting that it could develop a basis for a damage award.  (Careful about pleading in the alternative when it comes to irreparable harm.)

Reiterating its claims as arguments about damage to JP Homes’ “competitive position and brand” was unhelpful.  JP Homes didn’t allege wholesale copying of many of its key designs, but copying of a single work that wasn’t even identical copying.  Claims that harm to JP Homes in the community where that house was being built would spread elsewhere were “purely speculative.”  “While courts are willing to entertain a loss of customers or goodwill as a harm, the movant must come forward with evidence that such an injury is irreparable by showing that the loss cannot be measured in money damages and monetary damages would be inadequate.”

Arguments that JP Homes would be harmed if Trademark builds its designs at a lower price and quality, and that JP Homes’ reputation for uniqueness would be damaged because potential customers would see its designs as “common or run-of-the-mill” also failed. First, there was no evidencce that Trademark’s building was lower-quality.  Also, the alleged use of one design wasn’t enough to interfere with JP Homes’ “ability to market its designs and building services to potential customers for other architectural plans.”  Moreover, its claims that Trademark’s failure to attribute the design would cause JP Homes to lose business contradicted its argument that JP Homes would lose customers if people found out that Trademark was building a lower-quality version of the Martinique.

Finally, JP Homes’ delay in seeking relief weighed against an injunction.  As early as December 2015, an employee of JP Homes learned that the homeowners were not going to move forward with JP Homes building their home and had visited a real estate agent who refers customers to builders that often use architectural plans created by others.  She allegedly warned them (through their new real estate agent) to refrain from using any part of the architectural plan created by JP Homes. The agent allegedly responded by asking what percentage of the plan designed by JP Homes would have to be changed to not be considered the same plan. Nonetheless, JP Homes waited until June 2016 before filing suit and seeking injunctive relief, after construction on the McWhorters’ house was well underway.  Meanwhile, JP Homes submitted its registration materials for the Martinique to the Copyright Office, and threatened to take legal action in April 2016.  JP Homes’ “unexplained and undue delay of approximately six months strongly undercuts its claim of irreparable harm and contention regarding the need for urgent relief.”

Monday, September 19, 2016

Celebrity spokesperson isn't directly liable under California consumer protection law

Luman v. Theismann, 647 Fed.Appx. 804 (9th Cir. 2016)

Plaintiffs sued NAC Marketing Company and Joe Theismann for their advertising statements about NAC’s Super Beta Prostate product, bringing warranty claims as well as the usual California statutory claims.  Because one plaintiff’s individual claim for monetary relief was unpaid when he joined the lawsuit, he satisfied the injury in fact requirement and had standing to sue under Campbell–Ewald Co. v. Gomez, –––U.S. ––––, 136 S.Ct. 663 (2016). This portion of the case was remanded for further proceedings, though plaintiffs lacked standing to pursue injunctive relief because they didn’t allege any intent to purchase the product in the future and couldn’t show a likelihood of future injury.

As for Theismann, he was “merely the celebrity spokesperson for NAC and not the seller of SBP,” the district court properly dismissed the claims against him, given the California Commercial Code’s definition of a seller as “a person who sells or contracts to sell goods” and a sale as “the passing of title from the seller to the buyer for a price”; Theismann never had or passed title to the product.

Query whether secondary liability could be appropriate in the right circumstances. What level of fault would be appropriate for a celebrity spokesperson?

No duty to disclose child labor production in California, court rules

Hodsdon v. Mars, Inc., 162 F.Supp.3d 1016  (N.D. Cal. 2016)

Mars sells chocolate, some of which comes from cocoa beans from Côte d’Ivoire, where trafficked children and forced laborers “wield dangerous tools, transport heavy loads, and face exposure to toxic substances….The working conditions on the farms are deplorable. Laborers often do not receive pay, sleep in locked quarters, and fear corporal punishment.”  Despite an agreement with other chocolate manufacturers in 2001, Mars and other signatories haven’t been able to implement certification procedures to eradicate the worst forms of child labor on cocoa farms. “According to the most recent reports, the number of children working on cocoa farms has increased since 2005. As of 2014, ‘[o]nly 36% of [Mars’s] cocoa was certified.’”

Most of Mars’ chocolate products don’t say anything about the supply chain, though the label for Dove chocolates says, “We buy cocoa from Rainforest Alliance Certified farms, traceable from the farms into our factory.” Hodsdon alleged that he “would not have purchased” or “paid as much for” Mars chocolate products had the labels included information about the labor practices of Mars’s cocoa suppliers.

The court found that these allegations properly alleged standing by alleging actual reliance and economic injury.  Hodsdon didn’t need to allege that he bought chocolate containing cocoa beans harvested by children or forced laborers; his alleged economic injury was sufficient.  Nor did he need to trace any of Mars’s chocolate to particular farms that use the objectionable labor practices.  His allegations clearly permitted the inference that he relied on the nondisclosure when buying.  “Hodsdon ties his harm to the lack of certainty about the source of the cocoa beans, not to consumption of cocoa products actually harvested by child and forced laborers. In so doing, he has established injury in fact.”

But do California’s consumer protection laws cover omissions?  The FAL bans “mak[ing] or disseminat[ing]...any statement...which is untrue or misleading, and which is known, or by the exercise of reasonable care should be known, to be untrue or misleading...” “with intent directly or indirectly to dispose of real or personal property.” Courts are divided on whether omissions can violate the FAL, but the court here held that the decisions could be harmonized by looking at whether the defendant made any statement at all about a subject; if it does, then it is responsible for material omissions made about that subject that render the affirmative statements misleading.  If it stays mum, however, there is no FAL liability.  That was the case here.

How about the CLRA and the UCL?  The CLRA bans “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer,” and prohibits conduct “likely to mislead a reasonable consumer,” The UCL prohibits “unfair competition” defined as “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising.” In order to prevail, Hodsdon needed to show that Mars had a duty to disclose the information.  Mars argued that there was no duty to dislose information unrelated to a safety issue or product defect. Hodsdon argued that such a duty arises when “the defendant had exclusive knowledge of material facts not known to the plaintiff.”

“California courts have generally rejected a broad obligation to disclose,” except for omissions that are “‘contrary to a representation actually made by the defendant, or...omission[s] of a fact the defendant was obligated to disclose.’” The California Court of Appeal has held that a defendant did not have a duty to disclose product defects that did not pose any risk of physical injury or safety concerns.  Another case said the duty to disclose exists when “(1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material fact.”  However, the overwhelming authority limited the duty to disclose in situation (2) to product design/safety issues.  As the court pointed out, “[t]he definition of a material omission has stunning breadth, and could leave manufacturers (chocolate or otherwise) little guidance about what information, if any, it must disclose to avoid CLRA or UCL liability.”  This took care of the UCL “unlawful” and “fraudulent” claims.

As for “unfair,” the definition of this under the UCL is in flux.  Many courts have found a business practice “unfair” when it “offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” This approach requires courts to “examine the practice’s ‘impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer.’ ” But this may well be too amorphous; the public policy test requires that the UCL claim be tethered to some specific constitutional, statutory, or regulatory provisions.”

The court found that Hodsdon couldn’t show that the failure to disclose was immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers. Information about Mars’ labor policies and supply chain is “readily available to consumers on Mars’s website,” so the absence of information on the packaging is not immoral even though the underlying labor practices are.  A broader formulation, which defendants are likely to quote: “Mars’s failure to disclose information it had no duty to disclose in the first place is not substantially injurious, immoral, or unethical.”  Likewise, Hodsdon’s alleged harm wasn’t tethered to any “specific constitutional, statutory, or regulatory provisions.”

Mars also argued that it was entitled to a safe harbor under the Supply Chains Act, Cal. Civ. Code § 1714.43. “To forestall an action under the unfair competition law, another provision must actually ‘bar’ the action or clearly permit the conduct.”  The court was dubious.  That law requires retailers and manufacturers that earn more than $1,000,000 in gross receipts to disclose their “efforts to eradicate slavery and human trafficking from [their] direct supply chain for tangible goods offered for sale.”  They must post on their website’s homepage “a conspicuous and easily understood link to the required information,” or provide “written disclosure within 30 days of receiving a written request for the disclosure from a consumer.”

First, the SCA was about and human trafficking, not child labor. “While the distinction between child labor and forced labor may be thin, the safe harbor doctrine cautions against creating safe harbors in the absence of ‘specific legislation.’” Plus, the court wasn’t convinced that the legislature “considered a situation and concluded no action should lie.” Here, legislative history was silent about whether the legislature considered disclosures on labels. Plus, if the court accepted the safe harbor reasoning, then big businesses would be exempt from a disclosure requirement that smaller businesses not subject to the SCA would have, which would be “anomalous.”

Ebony Elizabeth Thomas & Amy Stornaiuolo, Restorying the Self: Bending Toward Textual Justice, 86 Harv. Educ. Rev. 313 (2016)

Monday, September 12, 2016

Taking advantage of known consumer ignorance is deliberately false, 2d Circuit rules

Church & Dwight Co. v. SPD Swiss Precision Diagnostics, GMBH, No. 15-2411, 2016 WL 4708179, -- F.3d. – (2d Cir. Sept. 9, 2016)

Judge Leval deems this “an exceptionally well argued case,” noting the same thing I did: Paul Clement for plaintiff Church & Dwight, Seth Waxman for defendant SPD. (As someone else said, I guess that relative dearth of SCt cases is really wearing on them.) I previously discussed the district court decision finding SPD’s over-the-counter pregnancy test to be falsely advertised here. This decision happened fast, for the 2d Circuit—it was argued a few months ago.

SPD’s Clearblue Advanced Pregnancy Test with Weeks Estimator is the first OTC pregnancy test to also furnish information as to how long (how many weeks) a woman has been pregnant, which it does by measuring the amount of hCG in her urine.  But SPD used the number of weeks since ovulation, and for reasons both historical and practical the medical profession universally measures weeks since last menstrual period, not since ovulation—a two-week difference.  They do this even when IVF is the implantation method and when ultrasound is used to measure pregnancy duration.  The parties agreed that “when the Defendant’s Product and the woman’s doctor are in complete agreement in estimating how long the woman has been pregnant, the Product would announce a number of weeks that is about two weeks lower than what the doctor would say.”  The basic falsity claim is that Clearblue falsely communicated that it used the same metric and gives the same number of weeks of pregnancy as a medical professional would.

Home pregnancy tests are Class II medical devices subject to the requirements of § 510(k) of the FDCA.  This requires premarket notification to the FDA in order for the FDA to determine whether the device is “substantially equivalent” to an existing authorized device.  The FDA may, notwithstanding a substantial equivalence determination, require changes to the product’s labeling or promotional materials designed to discourage potential off-label use of the product that might cause harm to consumers.

The FDA initially issued a “hold letter” in August 2012, expressing a concern that the “weeks indicator feature may provide misleading information to lay population of users” because it would under-estimate gestational age by an average of 2 weeks, which users might misinterpret. The hold letter required SPD to remove the phrase “Also Tells you How Far Along you Are” from the proposed box.  Ultimately, the FDA issued a clearance letter in December 2012, but required SPD, among other things, to include a specific “conversion chart” explaining how a doctor would date the pregnancy compared to the product’s results, using language provided by the FDA. It also specified that the product’s results could not be expressed as “weeks pregnant,” but only as the number of weeks since ovulation.  In addition, the FDA required an additional statement that “[t]his test provides a different estimate that cannot be substituted for a doctor’s determination of gestational age.”  Finally, the clearance letter said that the “FDA’s issuance of a substantial equivalence determination does not mean that FDA has made a determination that your device complies with other requirements of the [FDCA] or any Federal statutes and regulations administered by other Federal agencies.” FDA approval is required to modify or remove anything on the package.
Original package

side panel

When the product was launched, it used its name—Clearblue Advanced Pregnancy Test with Weeks Estimator—in large font, along with four windows, designed to appear similar to the window that appeared on the product itself. One window showed the word “Pregnant” on the first line and “1-2 weeks” on the second; and so on.  The front and back of the package didn’t use the word “ovulation,” though one side panel had the full FDA-required language.  The initial TV ad had the dialogue:

Woman 1: I’m pregnant.
Woman 2: Really?
Woman 1: Two weeks.
Woman 2: You already went to the doctor?
Woman 1: Not yet, but I took this new Clearblue test. It’s like two tests in one.
Woman 2: Oh my God, I think I’m going to cry!

SPD’s website and other advertising was similar.  After C&D complained to the FDA, the FDA told SPD that it was marketing the product in violation of the limits imposed by the clearance letter.  The FDA told SPD to remove the word “weeks” from the product windows and replace it with “weeks along” outside the windows.
revised package
The revised package included a gray strip in the top right corner with the phrase “Only Test That Estimates Weeks Since Ovulation*”. The asterisk linked to the Indications for Use Statement on the side panel. SPD complied with the FDA’s instructions about the windows.  SPD pulled the TV commercial, but revised the ad for the internet to remove the discussion of a doctor and Woman 1’s declaration of how far along she was. SPD also modified its website accordingly.

On appeal, SPD argued FDCA preclusion, because its marketing materials had been reviewed and approved through the § 510(k) process. Pom Wonderful was to the contrary.  The court of appeals noted that the Pom Wonderful court rejected the government’s position as amicus that Lanham Act claims are not precluded by the mere fact that the FDCA covers a product generally, but are precluded in situations when the FDCA or the FDA, through its regulations, have “specifically require[d] or authorize[d]” a challenged aspect of a label.  Instead, the Court “rejected the proposition that the FDCA’s or FDA’s regulation of a label creates a ‘ceiling’ that precludes any further challenges to that label under other statutes.”  Such a result would “distort Congress’s intent to allow the Lanham Act and the FDCA to exist in tandem to serve the distinct interests each statute protects.”  Competitors have market expertise the FDA lacks.  And, as the court of appeals pointed out, the FDA explicitly warned SPD in its clearance letter that its approval didn’t constitute a determination of full compliance with the FDCA or other federal laws.

SPD relied on PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011), which found preemption of consumer lawsuits against generic drug manufacturers under state tort laws based on failure to warn, since FDA regulations require generic drug labels to be the same as their brand-name equivalents. The Court found conflict preemption even though the defendants could have requested permission from the FDA to change their labels so as to comply with the state laws.  It’s true that SPD will have to get the FDA’s permission to change its label, but this isn’t a preemption case, and preclusion involves different interests. “The uniformity concerns that drive preemption doctrine are not necessarily applicable when two federal statutes overlap.”

On to falsity. The district court found both falsity by necessary implication and implicit falsity. Although none of the materials expressly equated the product’s results with a doctor’s metric, in context, they unambiguously implied that false message.  (In other words, when there’s a standard definition of a term, you can’t avoid liability by redefining the word, whether that’s in mouseprint or by using terms that consumers won’t understand are modifying the usual meaning.  Here, it’s a bit unusual because consumers have no reason to think about the usual definition of pregnancy duration, and the usual definition is weird—you start out 2 weeks pregnant.  But there are lots of things we don’t know the details of—how MPG is calculated, for example—and just rely on the existence of a standard for.)

SPD argued that its materials were “susceptible to more than one reasonable interpretation” and thus not unambiguous. It claimed that a reasonable ordinary person in the market for a home pregnancy test could understand the claim to measure “weeks” as weeks-since-ovulation/fertilization “without forming a belief about whether that measure is the same or different from the convention used by doctors.”  (Because they wouldn’t know they needed to!)  The court of appeals was unpersuaded:

The issue is whether Defendant’s measurement of weeks would be understood by reasonable consumers to measure by a different metric than used by the medical profession. If an advertising message means something different from what reasonable consumers would understand it to mean, that message can be considered false.…The crucial point is that a reasonable consumer would have assumed from the text of the Launch Package, TV Commercial, and other associated advertising that the Product was not giving a different number than a medical professional would give.

The court of appeals pointed out that the package didn’t “indicate in any visible or clear way that the Product provides a different measurement from a doctor’s.”  The only mention of ovulation and of the difference in dating conventions was in the Indications for Use Statement on the side of the box, and the district court properly found that this “was too wordy and ‘minuscule’ to render ambiguous the Launch Package’s message that the Product provides an estimate of weeks-pregnant that is consistent with the measurement provided by doctors.”  So too with the other advertising.

Regardless, the district court also correctly found implied falsity, given actual evidence of consumer confusion and evidence of SPD’s intent to deceive.  SPD “recognized and understood that the Weeks Estimator’s result did not align with how doctors express pregnancy duration and that this misalignment could confuse consumers,” as extensively detailed by the record. 

Notably, the court of appeals singled out statements by Clearblue’s Brand Manager that, the district court found, indicated a deliberate attempt to evade FDA limits and convey a false message.  As the FTC says, don’t be cute.  When discussing promotional materials for CVS, the brand manager stated that “we can’t actually link together the weeks and pregnant in the way it was on the last couple. What you can say is the only test that estimates weeks, or the only test that also estimates weeks, then the consumer will see Pregnant 1-2 Weeks in the windows and put it together.” In another email, in response to a suggestion that an advertisement say “Find out how far along you are,” she wrote, “This is a tricky one, but the FDA doesn’t actually want us to say that. I think it can be phrased as a question ..., or we need to use the ‘estimate weeks’ language.”

This evidence of deceptive intent was sufficient to support a presumption of consumer confusion supporting a finding of implied falsity.

The revised package was still subject to the implied falsity finding, based on a consumer survey that tested the revised package and found that “16.0% or 17.3% of participants... answered both that the [P]roduct estimates the number of weeks a woman is pregnant and that the [P]roduct’s estimate of weeks is the same as a doctor’s estimate of weeks-pregnant.”  SPD’s best argument was that the survey was flawed because the survey didn’t test whether these beliefs came from respondents’ preexisting erroneous beliefs about the way pregnancy is measured.

But the truckload of evidence that SPD was “aware of this widespread consumer ignorance and took no effective steps to guard against misunderstanding of Defendant’s messages attributable to that ignorance” meant that it wasn’t error to rely on the survey.  Given such ignorance, SPD’s own messaging was deceptive insofar as it did nothing to tell consumers that what it measuredwas a different measurement from that used by doctors. “It makes no difference whether the widespread consumer ignorance predated the Defendant’s Revised Package or was caused by it.”  The revised package implied that medical professionals would measure pregnancy the same way.

Materiality: I thought the Second Circuit was well-settled that its “inherent quality or characteristic” language was just materiality, but SPD argued that the district court found only the former. Accepting that the issue was somewhat unsettled, the court of appeals found that, even if it required an additional showing that deception was “likely to influence [consumer] purchasing decisions,” the district court’s findings of likely harm to C&D satisfied that requirement.  “While the materiality of the falsity and the likelihood of injury to the plaintiff resulting from the defendant’s falsity are separate essential elements, in many cases the evidence and the findings by the court that a plaintiff has been injured or is likely to suffer injury will satisfy the materiality standard—especially where the defendant and plaintiff are competitors in the same market and the falsity of the defendant’s advertising is likely to lead consumers to prefer the defendant’s product over the plaintiff’s.”

Here, the district court expressly found that C&D lost sales from SPD’s false advertising.  “If consumers, faced with the choice to purchase either the plaintiff’s product or the defendant’s, are likely to prefer the defendant’s product by reason of the defendant’s false advertising, the falsity of the defendant’s advertising is material to the plaintiff’s Lanham Act claim.”  [Query: how does this square with puffery doctrine? Can you show that a statement isn’t puffery by showing that it’s material?]

The court of appeals found it “entirely reasonable to expect that, for a significant number of women interested in learning whether they are pregnant—especially those who have not previously been pregnant or are otherwise ignorant of the details of the reproductive cycle—the information that Defendant’s Product will tell them something different from what a doctor would provide would make them less likely to trust Defendant’s Product, and more likely to purchase from Plaintiff, Defendant’s closest competitor.” Indeed, the evidence indicated that this was “precisely the risk that motivated Defendant to avoid making clear to consumers that its Weeks Estimator gave information different from what a doctor would give.”

SPD argued that C&D’s lost market share wasn’t due to falsity, but rather to the important new feature SPD introduced into the market.  Even if that was somewhat true, though, the evidence that concealing the truth improved SPD’s market share was sufficient; the court hadn’t awarded damages, in any event.  Also, deliberate deception in a two-player market makes a presumption of injury appropriate, and here the parties were direct competitors in a “sparsely populated market” in which other brands (manufactured by a co-owner of C&D) represent only a small portion of the market.

Finally, SPD challenged the scope of the injunction.  Among other things, the injunction required SPD to include with the test a specified forty-one-word statement clarifying the difference in the estimates, in a particular position and font size; prohibited SPD from using several phrases in its advertising, such as “weeks pregnant,” “weeks along,” or “Weeks Estimator”; required SPD to deliver a corrective notice to all retailers and distributors with a copy of the injunction; required SPD to publish Internet banner advertising prominently displaying its logo and stating that a federal court has determined that SPD “engaged in false advertising”; and required SPD to produce a video explaining the difference between its product’s and standard pregnancy length estimates and stating that “a federal court found the manufacturer ... to have engaged in false advertising,” and to make it prominently available on Defendant’s webpages, YouTube channels, and Facebook page.

SPD argued that the corrective notices were excessively harsh.  But, especially given the intentional deception findings, the court of appeals declined to say that the injunction was more than curative.  Further, SPD argued that the district court abused its discretion in the sweeping scope of the relief it ordered, especially in view of such factors as the relatively brief time the public was exposed to the deceptive materials and the time passed since their withdrawal. “Although Defendant’s argument is not unreasonable, and less intrusive requirements might well have sufficed, we cannot say the court’s orders constituted an abuse of the court’s wide discretion to fashion the terms of injunctive relief.”

Plumb disappointing: 9th Circuit reinstates 2D-to-3D copyright claim

Direct Technologies, LLC v. Electronic Arts, Inc., Nos. 14-56266/14-56745 (9th Cir. Sept. 6, 2016)

Electronic Arts makes the game The Sims, and contracted with a production company, Lithomania, to produce a USB flash drive shaped like a “PlumbBob,” a gem-shaped icon from The Sims to promote a “Collector’s Edition.” Lithomania in turn contracted with Direct Technologies to produce a prototype, then shipped that prototype to a company in China to make essentially the same flash drives for $0.50 cheaper per unit than DT proposed, while lying to DT about the fact that it had been cut out of the deal, apparently in order to get it to sign agreements including IP licenses. Lithomania told EA that it had received a vendor agreement from DT, “so IP’s are all protected.” EA responded, “Great. . . . Protect us all.”
PlumbBob icon

USB drive

DT ultimately settled breach of contract claims with Lithomania, then sued EA under the federal Copyright Act and the California Uniform Trade Secrets Act. Here, the court of appeals reverses summary judgment for EA on copyrightability, in my opinion mistakenly, and affirms summary judgment for EA on trade secrets given that the design at issue did not derive independent economic value from being kept secret. EA couldn’t get attorneys’ fees on the trade secret claim, though.

Background: When a player controls a specific character, the PlumbBob appears over the character’s head, which is “an iconic symbol of The Sims.” According to the court, EA has a copyright in the PlumbBob (separately registered?).  Thus, the question was whether the USB flash drive had enough independent creativity to be a copyrightable derivative work.  DT alleged two creative aspects: (1) the USB drive had 12 equal sides, whereas the icon had 20 unequal sides; and (2) DT designed the USB drive to fit into the PlumbBob with a “futuristic cut away look . . . at a unique angle.”
USB design
Protection requires nonfunctionality, separability, more than trivial originality, and lack of any effect on the scope of copyright in the preexisting material.

DT argued that the fit of the flash drive had a “futuristic cut away look . . . at a unique angle” which was nonfunctional. The court found that there was a genuine issue of fact about whether the design was merely functional or utilitarian. The “mere feature of having a USB flash drive that can be removed from the PlumbBob object” wasn’t copyrightable.  But the manner in which the USB drive was “cut away” was potentially non-functional. [This is the exact kind of reasoning our brief in Varsity Brands argues shouldn’t ever constitute separability: the choice, however aesthetic it might be, is coextensive with the fact that it is for an object containing a USB drive, and thus is not separable from the utilitarian aspects.]

The record showed that DT considered four other designs, and the designer submitted a sworn declaration explaining that his ultimate choice was made “for aesthetic reasons.”  A jury could find that this design feature was “truly ‘artistic.’”

Alternative designs

As for originality, having 12 or 20 sides wasn’t an original choice, since EA’s versions of the PlumbBob already included both as the icon changed over time. “Even assuming that DT’s version has a slightly different shape than the drawing presented by EA, we have held that a character’s copyright encompasses its ‘distinctive character traits and attributes, even if the character does not maintain the same physical appearance in every context.’”  However, there was a genuine issue of material fact about whether “the manner in which DT designed the USB drive to fit into the PlumbBob object” was sufficiently original to merit protection.  [Again, note how this framing makes clear the inseparability of the aesthetic choice from the fact that the choice is about how to design the useful object.]

EA argued that the design was so similar to the PlumbBob that if it were copyrightable, DT would have “a monopoly on all USB[ drives] shaped like the PlumbBob, and perhaps even any other 3-D embodiment of the PlumbBob.”   The court of appeals disagreed: DT would only have “a copyright in its unique contribution—the artistic manner in which it designed the USB flash drive to fit into the PlumbBob object.” DT’s copyright “would obviously not preclude others from making a 3-D PlumbBob without a flash drive.” [If this is true, again, then there’s no separability—if the only originality comes from a choice that can’t be replicated without also putting a USB drive in the object, then the utilitarian design isn’t separable.]

A jury could also find that EA wasn’t a joint author, but only in a position to offer suggestions, and that DT’s design had “audience appeal” (one factor in the 9th Circuit’s joint authorship inquiry). Moreover, as to the IP license in the vendor agreement with Lithomania, a jury could find that, “if the contract was fraudulently induced, such that it was invalid from the beginning, there would be no valid contract for EA to enforce.” 

Another court finds that injury from fake "sale" prices is redressable

Le v. Kohls Department Stores, Inc., 160 F. Supp. 3d 1096 (E.D. Wisc. 2016)

Le sued under various state consumer protection statutes (and unjust enrichment), alleging that Kohls falsely advertised “sale” or “discount” prices off of the “regular” or “original” item prices, which were not in fact regular. As a graph from Consumers’ Checkbook/Center for the Study of Services, an independent, nonprofit consumer organization, indicates, “at Kohl’s, the sales often never end”:
CC graph
Le alleged that Kohls’ marketing tactics are economically harmful because they deceive consumers to: (1) buy products that they would not have bought “but for” the illusory “sale”; or (2) pay more for products than they would have paid had they been fully informed of the actual “item price.”

Kohls moved to dismiss, arguing that Le didn’t offer a legally cognizable method of calculating his claimed restitution.  Kohls argued that restitution would require proving a difference between the value of the products Le bought and the price he paid.  He didn’t allege any such difference.

The court, however, concluded that California’s UCL and CLRA didn’t confine restitutionary relief to that available under the price-to-value method.  The appropriate measure of recovery depends on the circumstances.  Furthermore, determining the proper calculation would be inappropriate at the pleading stage, and the court reserved questions about how to factor in the value of the products that Le received.  The measure of his harm, as alleged, was that he bought a product that he paid more for than he would’ve been willing to pay if he’d known the truth, which is a measure the 9th Circuit has endorsed.  Likewise, the court allowed Le’s claims for injunctive relief to continue.  Although he was aware of the alleged scheme, that wasn’t enough, because to use that as a reason to preclude injunctive relief would vitiate the intent of California’s consumer protection law.  Le properly alleged the likelihood of continued harm because he alleged that the pervasive, ongoing scheme made it impossible for any consumer to tell what the true price was.  Given that Le wasn’t complaining about a specific product but a broad practice,

the Court is unclear just exactly what Le would be expected to be “aware” of in order to avoid future harm from Kohls. For example, should Le be “aware” that housewares are deceptively priced, while men’s apparel is not? Should Le be “aware” that Kohls’ holiday sales are more egregiously deceptive than their day-to-day offers? These hypothetical questions underscore the point that discovery is necessary to parse out the salient facts in relation to Le’s claim for relief.

The court also allowed Le to claim on behalf of a multi-state class of consumers, at least under Article III at this point in the case; choice of law issues remained to be decided.  The court acknowledged Kohls’ “prudential” concerns about the effects of this kind of claim—presumably settlement pressure—it pointed out that, via CAFA, Congress “authorize[d] federal judges to resolve big-stakes, multi-state class actions.”

The Wisconsin Deceptive Trade Practices Act claim survived because, though it required statements “made” or “disseminated” in Wisconsin, Le adequately pled that Kohls’ principal place of business was in Wisconsin and that its “acts, practices and policies pertaining to the advertising, marketing, and sale of merchandise...were established and emanated from Wisconsin.” Even if Le “saw” Kohls’ allegedly deceptive statements in California, the ads at issue were “made,” and then “disseminated,” by Kohls from its Wisconsin headquarters.

Unjust enrichment claims also survived in the alternative.

Saturday, September 10, 2016

Stanford Sociology and Psychology of IP

Session 5: Fairness, efficiency, and distributive justice

Discussion leaders: Stephanie Bair: Concepts of ownership/justice in ownership may be universals—studies of children across cultures.  Purpose of IP as understood to be to prevent plagiarism—asking for permission is sufficient, though, in many of these lay understandings. Organizational context studies: Also a distributional component to fairness. Contributors to project: rewards distributed unequally = offended sense of justice.   Creators perceive work environment as fair if there’s respect and trust. A procedural aspect: more likely to think distributional outcomes are fair if the procedures used to determine outcomes are non-arbitrary or otherwise perceived as fair.

Psych literature can link efficiency and fairness. Fromer proposed: moral rights are incentives for creators b/c creators really care about them.  Silbey’s interviews w/creators found much the same. Organizational behavior literature backs this up.  In companies, people choose voluntary creative behaviors more often when they perceive the work environment as more fair; they experience more intrinsic motivation.  Leads to objectively more creative outcomes.  Might be important to pay attention to fairness to continue intrinsic motivation.

We think more innovation is good; if asked why, we might say it contributes to economic growth/social welfare. If you had distributional concerns, you might think we could use tax to deal w/distribution. But there are people who take issue w/the idea that economic growth is necessarily a good thing or the best way to measure welfare. Maybe we should be using measures of happiness or subjective well-being (Buccafusco), or a capabilities approach as Sunder has argued.  How/to what extent should IP be promoting these alternative visions of social welfare?

Rob Merges: W/studies you can say that policy implications are unclear; if you reveal an instinct, that doesn’t mean that instinct should be driving policy, since some of our instincts need to be controlled. But it’s a good case study: we tend to interpret empirical work in a way consistent w/our normative starting points.  Consumer of literature on natural instincts, so needs to be careful.  Still thinks there’s something powerful in the idea: when empirical work lines up with philosophical theories about the right or need for ownership, that’s two different methodologies pointing in the same direction.

Strongest finding across methodologies: sense that we don’t give enough respect for attribution in the US.  US is deficient in reflecting intuition that attribution is important. That’s low-hanging fruit—people will take attribution rights in place of extra compensation. Almost all the studies—experimental, interview, theory—show that it’s something we really should care about. Policy insights would say: we probably got Dastar wrong, and we need some kind of more formal attribution right in US IP.

When we look at how important design is in the modern economy—our theories about TM are running into empirical evidence.  There’s this sense that design is important and we want to encourage it but our TM theory is stuck in consumer protection mode and we’re having trouble adapting it.  If theory tells us that all this solicitude for designers isn’t what TM is about, one response is to kick it out; but if we want to respect design work, maybe we should look at the existence of the design profession exploring new ways of being creative and adjust our TM theory rather than adjusting that evidence.  There are also other areas where theory is out of step w/empirics; need to be more flexible.

Case about how we interpret the studies we used. In the MRI studies, associations around brands light up same part of brain that responds to religious icons.  It’s easy to criticize that; materialist might say religions are very old brands, or might say that brand designers have tapped into something very deep, which takes a lot of talent, and that means it’s worthy of protection [the protection we grant to religions to bar other people from using their icons?  Herein of “if value, then right.”]

Innovation w/o IP versus IP without IP.  IP as exception rather than rule (older version); IP in context (becoming more modest about role of formal IP rights; willing to substitute with tax policy, credits, etc. if it can do the job better). Related to negative space, but broader policy canvas: contextualizing IP as a modest part of a big set of social norms and a big set of policies. Requires some humility in our field.  Private initiatives like the movie title registry MPAA runs; agreements not to sue (smaller scale)—that’s transactional efficiency in the presence of IP. Strong form of IP w/o IP is where it doesn’t exist or has been replaced by informal norms. Entertainment industry is intermediate b/t complete stranger to stranger interactions and very close-knit organizations like roller derby.  Spectrum from anonymity to somewhat shared interest to close-knit; IP plays into norms differently in those situations b/c social distance is a fundamental idea in sociology.

We have to be careful about areas where IP seems to have been displaced: don’t extrapolate close-knit groups to other areas like intermediate or anonymous. Norms only work where there is social proximity and the prospect of some sort of sanction.  Book on licensing samples by Peter DiCola: ethnography of that little part of the music industry, but we need a lot more like that to sort out the role IP plays.

Property instinct literature: I see that IP w/o IP reflects intuition about credit/attribution that need not be formal IP; the fact that people reinvent something like IP when IP doesn’t work indicates it’s in sync w/people’s basic instincts.  When we see IP intruding into these spaces, we have to be careful—won’t always displace norms; formal IP may be useful in final period problem when people are leaving the community/won’t be repeat players. Case law in those contexts won’t be representative and won’t displace social norms, but it’s a special situation.

Distributive justice: seems to me that lots of what we’ve been talking about takes the form of worrying about old tradeoff b/t consumers and rightsholders.  Need for fairness leads him to talk about proportionality; details of IP rights are important b/c they’re where we carry out the job of recognizing the property instinct and the need to limit it.  Property instinct = not libertarian strong form; people’s intuitions are that property should exist but also that it should be limited.

Meta-points: care in mining the literature.  Mindful about what’s trendy. Brain studies = materialist moment. Be careful about making big jumps from study to policy conclusions.  Studies aren’t designed to tell us anything about IP policy: interpretation of those studies/parts of brain lighting up has to be careful.  We have our own group dynamic and we’re not immune from the phenomena we study.

Commentators: Mark Lemley: If fairness matters to production, that needs to be part of our incentive theory. But you can overstate the degree of what’s learned v. social. Fairness is socially constructed and defined. Many things we view as fair today would be viewed as unfair 100 years ago and vice versa.  People 100 years ago would probably take 100 years’ ago’s IP laws as largely fair, with perhaps some outliers; same today. 

People care less about money and more about credit than the law does. That’s a lever point for change in multiple different directions.  One solution: stronger attribution right, but probably not by reversing Dastar. Also suggests low-hanging fruit to reduce social costs by reducing economic control that we give to reduce deadweight loss w/o reducing incentives.

Also consider fairness to consumers. Easier to think about fairness to creators, or fairness as between early and late creators, but consumers have to think they’re getting a fair deal too. Instinctive moral reaction to 6x price increase in Epipen that kills kids; same thing seen in internet piracy cases, where personal justifications for filesharing are about price & greedy people, and some are about ability to have access to information.

Fairness maps differently to patent rules than to the rest of IP, b/c patent rules are so far removed from our instinctive reaction. 95-98% of patent lawsuits outside pharma are against independent innovators, not even alleged copiers; this doesn’t align fairness instincts. We tend to align instincts by telling implausible stories about “theft.”  Either we need to think about why rules are different and realign them, or come up with a story why this should be treated as fair.  There’s a perfectly good economic story in which it’s hard to administer an independent invention defense.

Distributive justice: I resist this even more than fairness as an economist, not b/c it’s not important but b/c economist’s instinct is to first think about expanding the pie and then separately thinking about expanding it. Literature indicates that people generally aren’t willing to think that way and are upset about expanding pie if it’s sufficiently unfair (e.g., dictator game and rejection of beneficial deal).  That said, enlarging the pie is generally a much better idea in the long run—modern tech v. equally distributed 18th century tech.  Average person here is better off than richest people in the world in 18th c.

IP mostly hurts rather than helps distributive justice. Increases costs of things to poor people, decreases access. Also it is very strongly oriented towards winner take all system: music, movies, tech.  Maybe we compensate for that by having outside-IP systems, but badly enforced IP might also be the best of all worlds: people who can afford to pay for music pay for music, but poor people who otherwise might not have access get access for free through “piracy.” May not be a sustainable equilibrium, but consider when infringement promotes distributive justice.

Contracting around IP/IP-free zones.  Important to consider what we should put into the legal rules and what we can rely on the non-positive law to do. People take strong IP regimes and contract down; people take weak IP regimes and contract up. It doesn’t follow that we should have strong or weak rights. It may be that baseline legal entitlement matters somewhat less if people are free to move regimes to a happier place.

Greg Mandel: Policy justifications for IP are richly contested.  Somewhat of a cultural debate; very hard to resolve, see Lemley’s discussion of “Faith-Based IP.”  Attributions sounds good to people of various backgrounds: natural rights, fairness, efficiency: a cheap right to provide in terms of social costs while providing incentives. We should think about these overdetermined policies that can mean something different to different people and may be easier to agree on.  Very hard to move the needle in people’s beliefs. Patent attys tend to believe overwhelmingly in the incentive theory, but we’re never going to give everybody that experience. His guess: many policymakers, judges lean more towards the lay side of the camp and have more disparate views about justifications than experts. 

We still have to worry about lots of distributional concerns and other norms of fairness; there’s agreement among people from different perspectives that IP at a minimum shouldn’t inhibit creativity and innovation, and should support it.

RT: case against attribution rights.  Try and write it!  I did, and I ended up concluding that I couldn’t.  Lemley’s point: Some fairness rules can’t be written into law, at least not law as the US system knows it (maybe civil law, but I don’t think they’ve obviously done a bang-up job either, and even if you did think that the differences in systems are so great that I don’t think we could project success in US).  This debate was had in family law (divorce, ok reasons for) and 1A (defamation, often too bad so sad) and we generally decided it was a better idea not to try to match fairness norms exactly because of the systematic biases in who’s making decisions and information/administration costs borne by the system. Family law’s embrace of no-fault divorce: Makes the system look bad to be constantly judging fairness w/in private relations.  I urge everyone who thinks this is worth exploring to sit down and explore it: draft what you think should be done.

McKenna: What we make of the attribution desire: is that a claim that we aren’t currently getting enough output? Is it a claim that we should give credit regardless b/c it’s right?  The practical difficulties are enormous. To what would it attach? Anything w/snippet/substantial similarity?  It guarantees repeated conflicts b/t TM and ©; attribution of things other than physical entities; every time TM law has encountered that, it’s struggled to find a meaningful answer.  It’s not clear we’re all talking about the same thing—authorship, ownership, © concept, TM concept?

Buccafusco: There’s nothing about IP that makes us welfarists, Kantians, etc.; nothing intrinsic to IP will decide that.  We still need to distinguish preferences and welfare.  You could think satisfying preferences is always conducive to welfare, but I don’t think so; we need to talk about why that might be. Anxious about idea that concerns about fairness are valuable corrective to economic accounts of IP; that people value stuff is not evidence that it is good for them in the absence of other evidence. These intuitions are likely to be weak proxies, esp. where strength of preferences can be manipulated by framing of question.  Hard to say anything useful about welfare effects—my guess is that music is good for welfare, but all 18-25-year-olds are likely to like the music they’re given; no matter what’s popular, it will be popular.  Lemley says: think instead about enlarging the pie.  But he’s not confident we can do that either.  At what point do we have “enough” movies?  Not clear as a matter of © law, or on the consumer side, even though we might think that we can judge producer side welfare.  Sometimes creating is good for people and they get pleasure for it, and that’s a value that counts. But it might be easier to say things about consumer side benefits of patent law.  Length of their lives matters.

MacCoun: working on a computational account of distributive justice. There’s a remarkable consensus about what procedural justice is. Distributive justice is quite different.  You need to define your version.  Allocation by need—there are different ways of interpreting that; same as to allocation proportional to contribution; Pareto-type rules of making no one worse off; equality (minimizing difference, maximizing joint gain), and so on.  You recognize these all. 

Sprigman: Sprigman, Buccafusco & Burns on what’s a name worth: there’s a puzzle at the heart illustrating difficulties w/attribution. We ran a photo contest w/real money. They could choose $ or less $ plus attribution. We showed they valued attribution.  Second experiment, which varied the baseline: we told them once that they had the right but website might want to buy your attribution right; once that they didn’t have the right but could buy it. 4 to 1 difference in valuation: when people had the right they wanted 4x as much as they were willing to pay to get it. Default rule really constructed the valuation. What do you take from that?  Previous experimental work showed valuation gap in transactions—authors demanded more than buyers were WTP.  Default rule of no attribution right will tend to push the parties closer together; European rule will drive them further apart.  Seller will value the right higher, reducing the number of transactions, all else being equal.  Upshot to us: well, it’s hard to know, but there will be a cost associated w/attribution: you might satisfy preferences endogenous on the rule themselves but drive down a market that will clear at a lower rate of output.  If you’re Candide, everything happens for the best, but he thinks that a preference so heavily endogenous on the legal rule should be treated differently than a less manipulable preference.

Silbey: attribution is a place where norms play effective and strong role; communities police them very well. It’s a place where shaming works well. Although I see the anxiety a lot, and the feeling of violation, private ordering has grown up around those misalignments w/law that have been very effective.

Discomfort w/fuzziness of fairness and distributive justice—but efficiency is a social construct too. It’s just dominant (among us).  That doesn’t mean we should align whatever the dominant fairness mechanism is today with our IP system.  When there is profound misalignment, for example in the piracy context—we have a rule of law problem that’s profound. We shouldn’t just accept that we have “pirates.”  Illegal aliensàundocumented immigrantsànew policies. You can imagine a reframing around infringement, a new word that might start changing the fairness construct to make it look no longer like an infringement.  Misalignment can be a canary in the coalmine about disruption of categories that are necessary to the rule of law. ,”We can’t have a system that depends on the existence of rule-breakers.  [It’s called “how many municipalities fund their systems,” which is not to say I disagree with the normative conclusion!]

Pedraza-Farina: Huge emphasis on attribution with oncofertility coalition (boundary crossing organization). How do you deal with patents?  Informant said that she wanted to be on patent to get credit, but she also didn’t want patients to think she was conflicted w/them, profiting from their illness—credit had good and bad features. Attribution is related to patents, but there’s a dark side.

Lemley: there’s attribution litigation even when the economic rights are assigned; people have even tried to litigate about the order of names on the patent, and a few have tried to get their names off patents.

Burk: If attribution is fairness, maybe we don’t try to draft amendment to copyright law, but maybe we have to try to create conditions where people can bargain into the rules that make sense for them—labor law as the solution, or employment law, or some other form of law.  Maybe © and TM and patent are all different situations. Germany has a required royalty sharing agreement with inventors.  Other forms of law.

Ben Depoorter: fabled double distortion argument: if you use law for distribution you get inadvertent effects on allocative decisions w/r/t that activity. W/IP the assessment is even more difficult b/c we understand so little about incentives.  Maybe it doesn’t matter at all, according to our research, but that’s a hurdle.  Ex ante, if you have a notion about inadvertent effects, that’s why you get so much pushback about attempts to change distribution in IP.  If we don’t know what promotes creativity, we also don’t know what distorts it.

Greg Mandel: Attribution as a concrete potential suggestion.  Push back against critiques: I hardly think it’s a panacea, but we’re starting to see potential.  Re: challenge of drafting, might be true but that’s b/c your standards are higher than those for ordinary statutory drafting.  The fact that would be highly imperfect isn’t necessarily a reason not to do it. [I think it’s a reason an attribution right codified into law is likely to turn out to be more trouble than it’s worth.]  Sprigman & Buccafusco seem to describe an endowment effect. All IP rights will do that. If our goal is to make rights transfer easer, any reduction in rights would accomplish that goal.

MacCoun: it’s 2x as large as the standard endowment effect.

Buccafusco: when people own stuff, they may value it in ways conducive to welfare/consistent w/preferences, or they may not; different sorts of people differ in their reactions.  If I as mug owner am differently reactive to endowment effect, it might be less good as a proxy for my welfare than it would be in other hands. We’re anxious that the people given these attribution rights are subject to higher levels of bias.  When you’re trying to use WTP/WTA as measure of welfare and they differ, you need a story about which one to use. Sometimes there are pretty good stories.  Our other studies: Valuation anomaly in creativity studies comes mostly from overoptimism; that’s just a bias leaving money on the table. If the higher valuation is just “this is special to me” we are more likely to say that’s not really a bias. 

Mandel: we could provide a very weak remedy to deal w/this.

Fagundes: what do we do about knowing people’s intuitions about IP?  Normative and descriptive must be sorted.  But you can still say something: (1) be aware of preferences/intuitions as a constraint in the same way you’re aware of gravity; if you aren’t paying attention it will screw up what you want to do, without having normative force. (2) proxy for empirical evidence of actual preferences, but it’s still a descriptive project that constrains normative arguments you might want to make.  My paper was called IP norms in roller derby, but it was really about property norms, not patent or TM.  We might identify different norms in each realm; what constitutes welfare in one domain might not translate into another, for example technical innovation v. artistic creation.  Keep profound differences in mind.

Peter Lee: Universities in patent licensing often reserve rights for nonprofit research, and for use in the developing world: private actor working to increase distributive justice. Do we want access to IP, or to fruits thereof? Do we want communities to have their own IP?

Mark Suchman: Robin Hood loophole: idea that rich will pay for the rule and the poor, judgment-proof, get the benefit of breaking it—redistributive role for the judgment-proof. But there is this other story about how the rules affect the legal and illegal, which is much more symbolic. The rule that creates those who can pay as legal and those who can’t pay as illegal has broader effects.  Later in life, the judgment-proof college student may be stigmatized by past history.  On one hand, I like the flexibility that gives you in crafting policy, but there is a symbolic dark side.  [Consider who gets prosecuted for other “lifestyle crimes” like walking in the street instead of on the sidewalk.] 

Lemley: if system is only working b/c we turn a blind eye to all these acts = need to change the law.

Suchman: consider disparate effects of Prohibition on certain ethnic groups.

Silbey: Tim Wu’s argument about tolerated uses—traceable nature of digital use means there’s less opportunity for obscurity, which is another reason to be concerned.

Sunder: written about composer of “The Lion Sleeps Tonight,” Solomon Linda, whose identity was erased as the music circulated.  His style was considered traditional and “born” to the public domain, even though it was unique/unusual. Implicit biases, global inequalities should affect our consideration of attribution.  See it also w/jazz and race issues around patent/who’s an inventor.

RT: Robin Hood: also social effects on rights holders of constructing it as a right: we see them conscripting intermediaries, including our universities, and arguing that technology needs to be deployed to do the enforcement work that law can’t do.  Imagined plaintiffs play a huge role in these debates: the big owners who come to Congress say they’d never sue really sympathetic plaintiffs, and largely but not entirely that’s right, but they’re not the only ones who’d use the rights they’re asking for.  We need stories to match their stories, because anecdotes end up making policy.  And we need our anecdotes to reflect reality.

McKenna: People who create are often erased in favor of corporate statements of authorship, which no one has highlighted—in many contexts we’re totally willing to have the humans erased. Intangible = special.  Barton Beebe would say: Why is it that people who put together this computer have no ability to be reflected in any way?  Maybe the TM answer is that people know their work will be merged into the corporation, but why not the same thing with ©.

Buccafusco: Hammer and nail: as IP lawyers, when we see distributional inequalities we look for IP to fix it. But there are other policies to deal w/distributional issues.

Silbey: interesting feature of contemporary culture that IP is more a feature of cultural conversation today than 20 years ago. Maybe we can’t talk about tax politically.

Burk: Labor law is decidedly less part of public discourse.

Silbey: challenge is to frame debate in way that has political purchase. Everyone can be an author is a very powerful frame.

Suchman: The other thing to remember is that we’re not just talking about economic redistribution. Dignity, free speech, identity formation—there may be other bodies of law that go after that too, but it’s harder to say there are clearer policy levers. Some of these things are distributive in some sense but very close to IP.

Silbey: you see this a lot in equality debates: does giving someone more equality give someone less? Not normally, but in IP if it’s framed as a money transfer then you get that characteristic.

Pedraza-Farina: we stop short of explaining what we mean by “access.”  Meaningful ability to engage w/it and use it in subsequent acts of creativity/productive recombination. The ability to do that requires some things outside of IP: labor law, education, knowledge infrastructures (Frischmann).

Fromer: Fair use can have this sort of effect if it’s structured right; lack of clarity can be a problem, but it is often trying to implement redistributive justice, e.g., for education. Productive access can come by putting things in the right place in the law.

Suchman: Mandatory licensing can also have some of these effects: owner has no right to exclude, but right to money.  Beyond that it’s fair use; then beyond that it’s public domain; but beyond that it’s public domain with publicly supported dissemination structures.  Policy levers are inside & outside IP.