Wednesday, November 27, 2013

Lexmark post-argument panel at AU

American University Washington College of Law 
Program on Information Justice & Intellectual Property 
Presents
Supreme Court Series:
Lexmark International, Inc. v. 
Static Control Components, Inc.
Tuesday, December 3, 2013
4:00pm - 5:30pm
Reception to follow
 
Room 603
American University, Washington College of Law
4801 Massachusetts Ave NW Washington DC 20016 
 
For Registration, CLE info & Webcast (live and archived):
http://www.pijip.org/lexmark/

Issue: Whether the appropriate analytic framework for determining a party's standing to maintain an action for false advertising under the Lanham Act is (1) the factors set forth in Associated General Contractors of California, Inc. v. California State Council of Carpenters as adopted by the Third, Fifth, Eighth, and Eleventh Circuits; (2) the categorical test, permitting suits only by an actual competitor, employed by the Seventh, Ninth, and Tenth Circuits; or (3) a version of the more expansive "reasonable interest" test, either as applied by the Sixth Circuit in the case or as applied by the Second Circuit in prior cases.
Speakers:
Steven B. Loy - Stoll Keenon Ogden PLLC, representing Lexmark
Seth Greenstein - Constantine Cannon LLC, representing Static Control Components, Inc.
Rebecca Tushnet - Georgetown University Law Center, representing amicus curiae, Law Professors
Marc A. Goldman - Jenner & Block LLP, representing amicus curiae American Intellectual Property Association
Mary Massaron Ross - Immediate Past President of DRI - The Voice of the Defense Bar, representing amicus curiae, DRI
Moderated by: Christine Farley - American University Washington College of Law

Bike humor

Via Bikearlington on Twitter.  Hardly-Davidson "Born to be Mild" strikes me as a pretty good parody.

The work of art in an age of mechanical demolition?

Cohen v. G&M Realty L.P., No. 13-cv-05612 (E.D.N.Y. Nov. 20, 2013)

This VARA dispute makes some interesting moves on irreparable harm—it’s hard to see why courts are still stuck in “copyright/TM harm is irreparable” given what they’re doing elsewhere.

Plaintiffs sought to prevent the destruction of their graffiti art on the exterior of defendants’ buildings, which are scheduled for demolition.  The art has now been painted over; the opinion explains the court’s decision to deny a preliminary injunction against the destruction.

Because of the art, the buildings became a significant tourist attraction known as 5Pointz.  One of the pieces in question:

VARA protects against the destruction of works of visual art, but only if they are works of “recognized stature.” To figure out whether plaintiffs’ work qualified, the court went through the history of the art.  Cohen and Wolkoff, the effective owner of the buildings comprising 5Pointz, agreed that the buildings had become a place for distasteful graffiti.  To control the problem, Cohen approached Wolkoff in 2002 to become the curator, and Wolkoff agreed; Cohen was one of the principal contributors to the art and Wolkoff liked his work, though nothing was put in writing.

Under Cohen’s supervision, the quality of the art improved and the site “evolved into a mecca for high-end works by internationally recognized aerosol artists” and a “New York must-see.”  But Wolkoff planned to knock down the buildings to make room for two apartment complexes.  The planning commission required that defendants include 75 affordable housing units and 3,300 square feet of exterior art panels “to be used to maintain artist street wall art in the area.” There was no feasible way to incorporate the existing art into the new buildings.

The parties’ experts understandably disagreed about whether the 24 works at issue were of “recognized stature,” as required by VARA.  Much of the plaintiffs’ testimony “did not differentiate between these discrete words, and by and large assumed that if the work had artistic merit it was ipso facto of recognized stature.”  Defendants’ expert took a restrictive view, opining that a work of recognized stature should be at a level where scholars agree that it is “changing the history of art.”  (OK, I know there’s not much help in the legislative history, but I can’t imagine that’s the standard!)  The art at 5Pointz was not recognized by scholarly works.  Although the expert acknowledged 5Pointz’s recognition as a tourist attraction, she believed that this wouldn’t satisfy VARA unless visitors came to see a particular work, in which case it would be a work of recognized stature even without scholarly recognition. 

By contrast, plaintiff’s expert, whose testimony the court found credible, focused on the works’ quality.  He opined that “recognition” meant “there’s enough people that know what [the work] looks like, and feels like and what it’s trying to impart; that it would be, to me, if it was missing from the canon of art history, that it would be a loss.”  He testified that 5Pointz’s public exposure conferred the requisite stature, and pointed to a documentary he made featuring the site.  He also testified about the general reputation of the artists who contributed works, contending that their recognition conferred significance on any work they did.

The court then turned to the works’ ephemerality.  Wolkoff always told Cohen that he’d be knocking down the buildings, and there were numerous public statements by Cohen and other artists indicating that they knew the works were temporary.  Cohen allowed some works to be painted over; others he deemed “permanent,” meaning that they would last “[a]s long as [he was] there and the operation’s there.” He chose special places for them—mostly high up, and all around the building.  When a collapsed staircase was removed in 2009, the whole building was painted over with the exception of Lady Pink’s “Green Mother Earth.”  Since then, consistent with past years, about “1,000 new images” had been placed on the buildings each year.  At the preliminary injunction hearing, about 350 survived. 

Cohen said in an interview: “Anyone can paint. But not everyone’s art stays up for long. Some works last 12 hours; other pieces remain for two years.” Another artist, Danielle Mastrion, painted a celebrated portrait in July 2013, even though she had “been hearing for years that there’s always a chance that the building can come down,” and was “aware that [the owners] were obtaining approval to knock down the building at the time [she] put the piece on the building.”  Eighteen of the 24 works for which VARA protection was claimed were painted after 2010, and 8 were painted in September, weeks after the planning commission approved the development plan. Thus, “Cohen and his fellow plaintiffs undoubtedly understood that the nature of the exterior aerosol art on Wolkoff’s buildings was transient, and that all of the works that he allowed to be painted on the buildings would last only until they would be demolished to make room for Wolkoff’s housing project.” 

The court concluded that aerosol art can be visual art protected by VARA.  But VARA only protects a work.  There was no authority to preserve 5Pointz as a tourist site.  Thus, the court’s inquiry was limited to whether a particular work that was destroyed was one of “recognized stature.”  The court concluded that at least some of the 24 works, such as Lady Pink’s “Green Mother Earth,” could be shown to be of recognized stature, though that was for a full merits determination.

For preliminary injunctive relief, though, irreparable harm was required, including a showing that damages were inadequate.  And here the court gave short shrift to any nonmonetary interests, which might seem like an odd result in a moral rights case: “plaintiffs would be hard-pressed to contend that no amount of money would compensate them for their paintings; and VARA—which makes no distinction between temporary and permanent works of visual art—provides that significant monetary damages may be awarded for their wrongful destruction.”  Though the court emphasizes the temporary nature of this art, its reasons don’t seem so limited: “paintings generally are meant to be sold. Their value is invariably reflected in the money they command in the marketplace. Here, the works were painted for free, but surely the plaintiffs would gladly have accepted money from the defendants to acquire their works, albeit on a wall rather than on a canvas.”  In addition, the court found that “plaintiffs’ works can live on in other media,” specifically photography.  The works remained protected by copyright law “and could be marketed to the general public—even to those who had never been to 5Pointz.”

But, whether this was part of irreparable harm or of balancing hardships, “the ineluctable factor which precludes either preliminary or permanent injunctive relief was the transient nature of the plaintiffs’ works.”  Cohen always knew that the buildings were coming down “and that his paintings, as well as the others which he allowed to be placed on the walls, would be destroyed.”  The court was particularly distressed by the recent creation of many of the paintings, after the planning commission gave its final approval to the new construction.  “In a very real sense, plaintiffs have created their own hardships.”

Still, defendants shared some responsibility; Wolkoff “gave his blessings to Cohen and the aerosol artists to decorate the buildings, and he did not choose to protect himself from liability by requiring VARA waivers.”  Also, while he was a genuine art lover, he also benefited economically from all the attention to the site.  Since VARA protects even temporary works from discussion, the judge suggested that damages might ultimately be “significant” if a trial determined that the works were of recognized stature.

The public interest would be served by the new apartments, including affordable housing, and its aesthetic interests would be addressed by the new exterior surface available for art.  The court didn’t conceal its preference for defendants to do even more, presumably by way of settlement: “They can make much more space available, and give written permission to Cohen to continue to be the curator so that he may establish a large, permanent home for quality work by him and his acclaimed aerosol artists. For sure, the Court would look kindly on such largesse when it might be required to consider the issue of monetary damages; and 5Pointz, as reincarnated, would live.”

Tuesday, November 26, 2013

Hey Jude, WTH? Competitor plaintiff fails despite falsity and presumed harm

Berken v. Jude, No. 12–cv–02555, 2013 WL 6152347 (D. Colo. Nov. 22, 2013)

Berken alleged that Jude and his law firm, Jude Law, LLC (really?), falsely advertised in violation of the Lanham Act and the Colorado Consumer Protection Act (CCPA).  In a decision that seems to misconstrue the meaning of “presumption,” the court denied Berken any relief despite the apparently clear false advertising.

The parties compete as consumer bankruptcy attorneys in Denver.  Jude’s ads appeared “whenever someone googled information on Denver bankruptcy” (note use of “googled” as verb):

$500 Flat Fee Bankruptcy—No Hidden Fees—BBB Accredited

On the firm’s home page appeared this ad:

A similar ad ran in a local newspaper.

Berken lost several customers to Jude’s lower prices, though each testified by affidavit that they weren’t influenced by the pricing ad.  Berken established falsity and materiality, but the court held that he failed to show likely injury.  Recovering damages requires showing actual injury, and the consumer affidavits stated that the ads had nothing to do with their decision to defect from Berken, but rather they were dissatisfied with his rates and persuaded by Jude’s positive reviews.  So much for the damages claims.

But injunctive relief doesn’t require actual damages, only likely injury.  Courts may presume injury when the parties are “obvious competitors” with respect to the service being misrepresented.  Because they provided the same services in the same market, and because consumers use only one bankruptcy attorney at a time, Berken was entitled to a presumption of injury.  “However, Plaintiff has failed to support that presumption with any evidence of injury.”  He didn’t show that he lost specific clients or that he lost revenues generally, or show any consumer testimony, surveys, or market studies showing how Jude’s ads affect consumer behavior.  Thus, he failed to establish a reasonable basis for his claim of likely injury. This also killed the state-law false advertising claim.

Comment: buh?  I thought that those entitled to a presumption could rely on it, in the absence of rebuttal. Otherwise, what’s a presumption for?

Right of publicity question of the day

Does this mortgage broker's ad, quoting Mr. Rogers, violate any right?
Text: "If you could only sense how important you are to the lives of those you meet, how important you can be to the people you may never even dream of. There is something of yourself that you leave at every meeting with another person.--Fred Rogers."  What that has to do with home loans is left as an exercise for the reader.

ABA Journal Blawg 100

I’m on the ABA Journal’s Blawg 100, which is a real treat!  Check out the many worthy news sources there.

Monday, November 25, 2013

coincidental co-creation


Author’s note from William Pene du Bois, The Twenty-One Balloons (1947):

Just before publication of The Twenty-One Balloons, my publishers noted a strong resemblance between my book and a story by F. Scott Fitzgerald entitled “The Diamond as Big as the Ritz,” published by Charles Scribner’s Sons. I read this story immediately and discovered to my horror that it was not only quite similar as to general plot, but was also altogether a collection of very similar ideas. This was the first I had heard of the F. Scott Fitzgerald Story and I can only explain this embarrassing and, to me, maddening coincidence by a firm belief that the problem of making good use of the discovery of a fabulous amount of diamonds suggests but one obvious solution, which is secrecy. The fact that F. Scott Fitzgerald and I apparently would spend our billions in like ways right down to being dumped from bed into a bathtub is altogether, quite frankly, beyond my explanation.

Wikipedia notes that, as with many pairs of works with surprising similarities, there are also significant differences in tone, intended audience, and other events.

transformative work of the day

I Ship It, by notliterally—a hilarious parody of Icona Pop’s song that is also a love letter to fandom.

Reply brief in Lexmark v. Static Control

Lexmark's Reply Brief, to finish out the set.  Obviously I disagree, but I'll limit myself here to one argument I think is disingenuous to the point of misleadingness: the equation of antitrust treble damages and fees, which are mandatory and punitive ("shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee," 15 U.S.C. § 15) with Lanham Act damages and fees (which allow but do not require the court to increase a damage award up to three times over what the plaintiff proved as actual damages, as long as that's reflecting the court's assessment of the true damages and "not a penalty," and only provide for a fee award in "exceptional" cases, 15 U.S.C. § 1117).

Friday, November 22, 2013

Retailer's California claims against supplier proceed

TRC & Associates v. NuScience Corp., 2013 WL 6073004, No. 2:13–cv–6903 (C.D. Cal. Nov. 18, 2013)

TRC, a supplement retailer, sued NuScience and Lumina based on their sales to TRC of a dietary supplement, Cellfood.  TRC alleged that defendants misrepresented Cellfood’s ingredients, safety, and efficacy. Defendants allegedly actively concealed a key ingredient that poses a “severe health hazard” and misrepresented compliance with federal regulations.

The court found that TRC had Article III standing.  It allegedly bought more than $700,000 of Cellfood from Lumina (the distributor; NuScience is the manufacturer) in reliance on misrepresentations from both, leaving it with unsold product and potential liability for product already sold.  It also alleged damage to its reputation. 

The court declined to hold TRC’s claims barred by the FDCA at this point, despite Pom Wonderful and even though allegations in the complaint referred to defendants’ violations of the FDCA and an FDA warning letter to Lumina.  Most of the cases barring enforcement of the FDCA under another cause of action are Lanham Act cases, not common-law fraud cases like this one; the complaint here was based on alleged affirmative misrepresentations—the alleged fraudulent conduct was not the violation of the FDCA but what defendants allegedly told or failed to tell TRC.  But the court expressed willingness to revisit the issue later.

Also, TRC’s UCL and FAL claims didn’t attempt to apply California law extraterritorially.  TRC is a Nevada corporation with a principal place of business in Ohio; Lumina is incorporated and headquartered in Florida.  But NuScience is a California corporation with its principal place of business in California.   State remedies can be invoked by out of state parties who are harmed by wrongful conduct occurring in California.  Here, the allegedly fraudulent conduct occurred in California—the material misrepresentations originated with NuScience in California, traveled through Florida, and ended up in Ohio.  Cellfood is made in California.  The ingredients of Cellfood and the representations about it were at issue in the case.  Given the complaint’s allegations, the relationship between the defendants allowed a reasonable inference that Lumina had some role in the alleged California misconduct.

Posner likes trademarks, hates surveys

Kraft Foods Group Brands LLC v. Cracker Barrel Old Country Store, Inc., No. 132559 (7th Cir. Nov. 14, 2013)

This is a classic Posner trademark opinion, with a combination of skepticism and credulity (about his favored theory of trademark) whose inconsistency even more than its self-confidence/arrogance shows why Posner can drive critics up the wall.

Kraft sued Cracker Barrel over Cracker Barrel’s introduction of food products to grocery stores.  The district court found that Cracker Barrel’s meat and other products would likely cause confusion with Kraft’s Cracker Barrel cheese brand if sold in grocery stores and granted an injunction. The court of appeals affirmed.


Identical marks can be nonconfusing if sold on different products through different sales channels; Kraft didn’t challenge Cracker Barrel’s right to sell food products under the name Cracker Barrel in its restaurants, the small “country stores” that adjoin the restaurants, or by mail order or on the web—only in grocery stores.

The court of appeals agreed that, even if the Kraft cheese and Cracker Barrel ham were displayed side by side, which would make consumers more likely to notice the differences, the use of the same words might lead them to think that both products came from Kraft.  “If on the other hand the Kraft cheeses and [Cracker Barrel] food products are at different locations in the store, some consumers might forget the difference between the logos and think all the products Kraft products. Even savvy consumers might be fooled, because they know that producers often vary the appearance of their trademarks.”  Name similarity and product similarity (low-cost packaged food) weren’t decisive, but those similarities coupled with the distribution channel and advertising channels were.  The court noted that, before the preliminary injunction was issued, “an online ad for Cracker Barrel Sliced Spiral Ham by a coupons firm provided a link to a coupon for Kraft’s Cracker Barrel cheeses.”  The products would likely appear in the same store ads, increasing the likelihood of consumer confusion “detrimental to Kraft.”  (Those three words are the key.) 

Plus, the products are inexpensive, increasing the likelihood of confusion.  “Generally only very costconscious consumers are apt to scrutinize carefully the labels of the less expensive items sold in a grocery store. Familiarity is likely to have made the name Cracker Barrel salient to grocery shoppers, and so any product bearing that name might be attributed to Kraft even if close scrutiny of the label would suggest that the product might well have a different origin.”

Now here’s the part that is pure trademark religion: “If a significant number of consumers confused the names and thought [Cracker Barrel’s] products were made by Kraft, Kraft could be badly hurt.”  A trademark’s value comes from its effects on search costs; a good reputation leads to more sales.  But inconsistent quality teaches consumers that the trademark isn’t helpful, and they stop being willing to pay more for the branded good.  If Cracker Barrel’s products are “inferior in any respect to what the consumer expects—if a consumer has a bad experience with a [Cracker Barrel] product and blames Kraft, thinking it the producer—Kraft’s sales of Cracker Barrel cheeses are likely to decline; for a consumer who thinks Kraft makes bad hams may decide it probably makes bad cheeses as well.” 

Notice what’s missing here: any empirics at all in the causal chain.  Are Kraft’s products high quality?  Do Cracker Barrel’s products diverge in quality from them?  Is there any risk that Cracker Barrel’s products will deteriorate in quality during the pendency of the litigation (since it is a preliminary injunction with which we are concerned)?  Is there in fact any reason to think that a consumer would use a bad experience with ham to conclude that cheese from the same source is not worth buying?  (As Mark McKenna and I, among others, have explained in detail, marketers know that this is in fact highly unlikely even with actual brand extensions, much less with confusion.)  Even Posner knows this is all “mays” and “mights,” but somehow this is “likely” harm.

Posner concedes there’s a countervailing consumer interest in product variety, but that’s super hard to weigh against confusion risks, especially at the preliminary injunction stage, and anyway Cracker Barrel has alternate routes to reach consumers, including the internet, “an alternative channel of ever greater significance in the electronic age.”  “The weighing and balancing of these competing interests with any precision are not feasible undertakings in a preliminaryinjunction proceeding, and probably not in a full trial either. Imponderables are likely to dominate.”

So we do what we can.  For a preliminary injunction, you also need irreparable harm, which was present here.  “The likelihood of confusion seems substantial and the risk to Kraft of the loss of valuable goodwill and control therefore palpable. … [I]rreparable harm is especially likely in a trademark case because of the difficulty of quantifying the likely effect on a brand of a nontrivial period of consumer confusion ….”  (Maybe it’s difficult to quantify because it rarely exists?)  Since Cracker Barrel wasn’t losing heavily as a result of not being able to sell through grocery stores, the preliminary injunction was justified.

However, “mainly for future reference we want to say something about the consumer survey that Kraft presented in support of its claim of confusion.”  Consumer surveys by parties’ expert witnesses are

prone to bias. There is such a wide choice of survey designs, none foolproof …. Among the problems identified by the academic literature are the following: when a consumer is a survey respondent, this changes the normal environment in which he or she encounters, compares, and reacts to trademarks; a survey that produces results contrary to the interest of the party that sponsored the survey may be suppressed and thus never become a part of the trial record; and the expert witnesses who conduct surveys in aid of litigation are likely to be biased in favor of the party that hired and is paying them, usually generously.

While judges and jurors “have their own biases and blind spots,” caution is required in screening “proposed experts.”  Here, Hal Poret emailed 300 consumers of whole-ham products photos of the Cracker Barrel ham and asked them whether the company that makes the ham also makes other products, and, if so, what products.  About 25% said cheese, but that didn’t necessarily mean much, since they may have “assumed that a company with a logo that does not specify a particular food product doesn’t make just sliced spiral ham,” then guessed.  A control group of 100 saw the same ham, labeled Smithfield, and none of them said cheese.  It was “plausible” that it was the name Cracker Barrel that made the difference, but Posner thought the relevance of that was “obscure,” because “Kraft’s concern is not that people will think that Cracker Barrel cheeses are made by [Cracker Barrel] but that they will think that [Cracker Barrel] ham is made by Kraft, in which event if they have a bad experience with the ham they’ll blame Kraft.”  (Hunh?  Why doesn’t the survey plausibly show that those 25% think that Cracker Barrel ham is made by Kraft, as the senior/familiar brand?)

Anyway, the context of a photo shown online in a survey is very different from actually choosing products in a grocery store, where the stakes are higher because real money is on the line.  Instead of surveys, maybe statistical data should be used, at least when the product is already on the market.  Some stores would carry both products and others wouldn’t.  “By examining the ‘lift’ (greater sales) if any that [Cracker Barrel] hams obtain by proximity to the Kraft Cracker Barrel label, an expert witness might be able to estimate the extent of consumer confusion. The greater the lift (and hence the greater the confusion) the greater the likelihood of a consumer’s blaming Kraft as the supposed maker of the [Cracker Barrel] hams if the consumer has a bad experience with the hams.”  (I don’t think Posner even realizes that he’s suggesting measuring something different.)  Here, of course, such a study wasn’t feasible because of the preliminary injunction, and anyway the court didn’t have enough confidence in the reliability of that kind of survey to deem it “an adequate basis for refusing to grant preliminary injunctions in trademark cases.”

Other types of expert testimony might help—“testimony by experts on retail food products about the buying habits and psychology of consumers of inexpensive food products.”  Courts haven’t made a real attempt to understand consumers’ mindsets, even though that’s supposedly central to trademark law.  Sometimes they describe consumers as smart, other times as dumb, but rarely do they look to any empirical evidence.  (Citing Thomas R. Lee, Glenn L. Christensen & Eric D. DeRosia, Trademarks, Consumer Psychology, and the Sophisticated Consumer, 57 Emory L.J. 575 (2008).)

In any event, the similarity of logos, products, channels of distribution, and advertising were enough to support the preliminary injunction even without the survey.

Wednesday, November 20, 2013

Copyright talking points and the TPP

Mike Masnick has the story--which also qualifies for "transformative use of the day," since it involves reproducing the talking points (likely an unpublished work no less!) in full in order to rebut them.  I particularly like his deconstruction of "nothing in this draft can be understood/but it doesn't change US law for sure."

Tuesday, November 19, 2013

Name your own price, then pay more: Court upholds Priceline's model

Freeman v. Priceline.com, Inc., 2013 WL 5946069, B242653 (Cal. Ct. App. Nov. 7, 2013)

The court of appeals upheld a ruling getting Priceline off the hook for promising one price and delivering another, because the terms and conditions said that could happen. 

Freeman booked a hotel room at a Trump property and was charged a resort fee.  He sued over that, and over the service fee paid to Priceline.  Priceline allows customers to make travel arrangements through its website; it can’t require a hotel to make a room available at any particular rate.  Priceline’s Name Your Own Price service allows consumers to get deeply discounted rooms.  A NYOP booking starts when a customer selects dates of stay, general location, and quality/star rating of hotel, and names the price she’s willing to pay.  The resulting “Contract Page” displays the details of the request, with an amount designated as “Total Charges” at the bottom.  This is the offered price multiplied by the number of nights/rooms, plus “Taxes and Service Fees.”  The “Total Charges” are charged to the customer’s credit card if a hotel accepts the requested price. 

Directly below “Total Charges” is a large, bold, blue “Important Information.”  Five bullet points follow, of which the fourth is: “The reservation holder must present a valid photo ID and credit card at check-in. The credit card is required for any additional hotel specific service fees or incidental charges or fees that may be charged by the hotel to the customer at checkout. These charges may be mandatory (e.g., resort fees) or optional (parking, phone calls or minibar charges) and are not included in your offer price.”  In that bullet point, “charges” links to a page that reiterates: “Depending on the property you stay at, you may also be charged (i) certain mandatory hotel specific service fees, for example, resort fees (which typically apply to resort type destinations and, if applicable, may range from $10 to $40 per day), energy surcharges, newspaper delivery fees, in-room safe fees, tourism fees, or housekeeping fees and/or (ii) certain optional incidental fees  …. Please contact the hotel directly as to whether and which charges and service fees apply.”  Also, “Taxes and Service Fees” on the Contract Page leads to the same page, which also says that the credit card charge includes “an estimated amount to recover the amount we pay to the hotel in connection with your reservation for taxes owed by the hotel … The balance of the charge for Taxes and Fees is a fee we retain as part of the compensation for our services ….”  It specifies that the fees can vary by hotel—meaning what the consumer gains on the swings can be lost on the roundabouts.

Consumers have to initial a box on the Contract Page next to “I have read, accept and agree to abide by Priceline.com’s terms and conditions and privacy policy.” “[T]erms and conditions” also links to a page setting forth the same information.

Freeman made a reservation, reading the terms and conditions.  He offered $89 per night; the Trump Hotel accepted this price (standard room rate was $109 for the first night and $119 for the second).  He was charged a $15/night resort fee plus occupancy tax.

Freeman argued that Priceline’s TV ads were deceptive because they didn’t disclose that the price offered through NYOP wouldn’t be the total price for the room, and that the resort fee/service fee information was misleadingly buried deep in the process.  The trial court held that Priceline and Trump made sufficient disclosure that some hotel fees may be mandatory, with resort fees as just one example.  “It would be impossible for Priceline to notify a customer at the time of signing on whether a hotel will require any mandatory fee, including a resort fee, because neither Priceline, nor the customer, would know if any hotel meets the customer’s parameters until after the credit information is entered on the page following the Contract Page.”  (Ed. note: of course, with these charges, the hotel may well not meet the customer’s parameters.  How come Priceline couldn’t program its algorithm to include in the price used to assess NYOP compatibility any fees that are mandatory for every guest?  Priceline could certainly require hotels to provide this information in order to participate.  A mandatory “fee” is part of the price.)

Also, the Contract Page specifically included an estimate for Taxes and Service Fees, which disclosed that Priceline could charge an additional service fee.  These disclosures were clear and conspicuous as a matter of law, so there could be no deceptive omission.  The failure to disclose in the TV ads was immaterial given that “a Priceline customer would necessarily receive the multiple disclosures contained on Priceline’s Web site before making a reservation.” The TV ads, “each of which display scenarios that include elements of fantasy[,] contain limited information about Priceline’s services and in no way enable a customer to bypass or otherwise avoid the multiple disclosures on Priceline’s Web site.”  Also, the hyperlinks here conveyed adequate and unambiguous notice.  (This seems like a good candidate for regulatory action.  It may have been “unambiguous” that random fees could apply, but those fees could make the price promises illusory.)

Freeman argued that deceptiveness was a question of fact, but there was no triable issue here.

Nor was there unconscionability.  The disclosures were clear and conspicuous, and there was nothing substantively unconscionable.  Freeman could have avoided the problem by reserving a hotel room some other way, and nothing here shocked the conscience.

The same arguments that defeated the CLRA claim also doomed the UCL claim.  There was nothing unfair, judged by the standard: “(1) The consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided.”  Freeman could have avoided his injury because of the conspicuous disclosure and other alternate means to book a hotel room with some hotel that didn’t charge a resort fee.

possible internet, eBay sales into US insufficient for jurisdiction

Gibson Brands Inc. v. Viacom Intern. Inc., 2013 WL 5940826, No. CV 12–10870 (C.D. Cal. Nov. 5, 2013)

Gibson sued Viacom and JHS over a ukulele bearing the image of SpongeBob Squarepants formed in a V shape that allegedly infringed Gibson’s Flying V guitar body shape.  Viacom licensed the SpongeBob character to JHS, which made the ukulele; Viacom was dismissed from the case for failure to state a claim and JHS remained.

The alleged infringement principally took place on www.jhs.co.uk, www.worldwidemusic.co.uk, eBay, www.Strings.ie, www.rakuten.com, and hobgoblin.com.  JHS moved to dismiss for lack of subject matter jurisdiction, because all of the allegedly infringing activity occurred outside the US. The court agreed.

For the Lanham Act to reach infringing activity abroad, “first, there must be some effect on American foreign commerce; second, the effect must be sufficiently great to present a cognizable injury to plaintiffs under the federal statute; and third, the interests of and links to American foreign commerce must be sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority.” Gibson argued that there had been infringing activity in the US, because US consumers could buy the products from various online retailers.  The court disagreed. The only evidence of sales to US consumers came from seven ukuleles sold to plaintiffs’ counsel by companies other than JHS, with no direct sales from JHS or any authorized dealers to any US consumers. 

Gibson also didn’t provide evidence of an effect on American commerce.  “Although Gibson suggests that the availability of infringing items on websites hosted overseas could impact its business in a variety of countries around the world, it has not asserted any facts or proffered any evidence to show such an impact.”  Even if JHS could be held accountable for third party retailers’ activities, that wouldn’t support the exercise of jurisdiction. The third party retailers identified were all based overseas and/or directed to overseas consumers.  Strings.ie uses the slogan “Ireland’s No. 1 String Supplier,” while Rankuten.com identifies itself as “Japan’s # 1 shopping site” and charges in yen, and each ad on eBay listed prices in British pounds. “While a U.S. consumer actively seeking a product may be able to purchase it abroad and have it shipped to the United States, the overseas location and orientation of the online retailers tend to diminish the likely effect on U.S. commerce and therefore the appropriateness of exercising jurisdiction.”

Gibson argued that it would suffer harm in the US because consumers buying the product abroad would bring it into the US, resulting in confusion among US consumers, or that online resellers would sell to American consumers.  Both theories were too attenuated to be cognizable theories of injury, and Gibson had no evidence of them.

As for the US’s interest compared to those of other nations, the court found that asserting extraterritorial authority had the potential to create conflict with UK trademark law, since Gibson’s applications for UK trademarks in its V-styled body and headstock had been withdrawn.  “Given Gibson’s apparent interest in obtaining trademarks in the United Kingdom, an order by this court concerning use of the same designs in the UK creates a risk of conflict with further UK trademark proceedings on the designs.”  Also, JHS was a UK corporation without meaningful relevant operations in the US, and without Viacom in the case this factor weighed against extraterritorial jurisdiction.

Then the court examined the extent to which an order by a U.S. court can be expected to achieve compliance with the Lanham Act. Gibson’s principal concerns related not to JHS’s conduct but to that of online retailers selling allegedly infringing products, but Gibson didn’t show that JHS controlled them.  The only evidence was a communication from one internet retailer indicating that it wouldn’t ship the product because it had been warned by its supplier, presumably JHS, to limit sales to specific countries.  “[E]ven if the these retailers are engaging in infringing behavior, the court is not in a position to induce compliance by these companies.”

The relative significance of effects on US commerce as opposed to commerce elsewhere also weighed against exercising jurisdiction, as did the lack of evidence of any intent to harm US commerce—JHS’s license from Viacom specifically excluded US sales, indicating an intent to avoid US commerce.  In terms of foreseeability, it was arguable that JHS could foresee retailers selling products within the US, since many of these companies distribute globally, and Gibson sent JHS a C&D but JHS failed to act; that did weigh in favor of exercising jurisdiction. But that wasn’t enough.

Overall, there wasn’t sufficient reason to exercise jurisdiction.

I'm at io9

I did Ask a Law Professor Your Questions about Fan Fiction and Mash-ups at io9 yesterday.

Monday, November 18, 2013

defamation via Twitter, TM infringement via LinkedIn

AvePoint, Inc. v. Power Tools, Inc., 2013 WL 5963034, No. 7:13CV00035 (W.D. Va. Nov. 7, 2013)

AvePoint sued Power Tools (aka Axceler) and Burns (Axceler’s regional VP of sales for Western North America) for defamation, breach of contract, trademark infringement, false advertising, and violations of the Virginia Computer Crimes Act.  The parties compete to provide software for Microsoft SharePoint products.  The most interesting part of the case: Axceler allegedly created an account on LinkedIn pretending to be an AvePoint employee, deceiving even other AvePoint employees into believing that “Jim Chung” was a colleague, and the court holds that this could be trademark infringement.  Burns allegedly publicized Jim Chung’s profile, including by tweeting “# Axceler and Jim Chung are gonna rock Vegas” and “Just ran into jim chung from avePoint Good guy.” In response, Christian Buckley, Axceler’s Director of Product Evangelism (ed.: really?), tweeted: “@MICHAELBURNS Free Jimmy! # Axceler.”

Axceler also allegedly made up an email account to obtain a copy of the most recent version of one of AvePoint’s products, claiming to be Jill Wagner from “Kohl\ ’s Food Stores.”  This allegedly violated AvePoint’s website terms and conditions, which allowed use of material from AvePoint’s website “solely for personal and noncommercial use” (I don’t understand how this covers the trial copy of the software, since that wasn’t on the site).

The court refused to dismiss the claims, starting with the defamation claim.  The following claims were allegedly defamatory: (1) AvePoint was a Chinese company; (2) its software wasn’t developed, supported, or maintained in the United States; (3) its software was maintained in India; (4) Axceler’s product was Microsoft recommended over AvePoint; (5) AvePoint customers are “dumping out of 3 year deals in year 2 to buy Axceler’s Controlpoint”; and (6) Axceler uses its maintenance revenue to improve its customers’ existing product whereas AvePoint uses its maintenance revenue to develop new products to which its customers have no access.  These statements were made via Twitter (e.g., referring to AvePoint as the “Red Dragon” and “MADEINCHINA”) and in conversations.

Axceler argued that the first three statements weren’t defamatory as a matter of law.  The court didn’t agree.  While most Americans may no longer cling to ideas that Asian goods are inferior or that buying them is unpatriotic, AvePoint specifically alleged that these claims had a significant impact on customers’ willingness to buy, especially with federal government customers who are required to give domestic preferences.  Axceler’s tweets even said so: “Is where your #SharePoint products developed important to you? Government Answer; Absolutely! @Axceler #ControlPoint #MADEINTHEUSA”; “Ouch ... Another #Federal Deployment Finds Out Where the Competition is Developed. #SharePoint #RedDragon #Governance #FDCCI @Axceler.”

The Microsoft-recommended statement, Axceler argued, wasn’t necessarily harmful, since both products could be good. But on a motion to dismiss, it could still be defamatory per se.  The next, a tweet that “the Evil Avenue’s customers are dumping out of 3 year deals in year 2 to buy Axceler’s ControlPoint,” was also potentially defamatory and not just opinion.  (The case law on this is thin, but you can mark this court down as one that doesn’t discount for Twitter posting, as some courts have done for blog postings which they’ve considered almost inherently hyperbolic and nonfactual.)  Finally, the claim that AvePoint uses maintenance revenue to develop new products instead of improving existing products was also potentially defamatory, since it implies misuse of revenue from customers and allegedly caused AvePoint to lose a sale.

The court also refused to dismiss the breach of contract claim based on AvePoint’s browsewrap.  At this stage, AvePoint alleged an enforceable contract; though it was just a link at the bottom of the website, AvePoint plausibly alleged that Axceler had actual or constructive knowledge of the terms and conditions, given that Axceler “went to the trouble of creating a fictitious profile and email account in order to download the software,” and that it had a similar browsewrap agreement on its own site.

Next, the court found that it was plausibly trademark infringement (and false endorsement/false association/false designation of origin) to create a fictitious AvePoint representative on LinkedIn.  The allegations, if true, showed use in commerce, since LinkedIn is allegedly an instrumentality of interstate commerce used for advertising and promotion.  (In a footnote, the court declined to rule on whether “use in commerce” must be the same kind of use sufficient to register a mark, but said that this would qualify anyway.)  And this was use in connection with sale/advertising of goods or services, that is, commercial use. 

Allegedly, “defendants set up the fictitious LinkedIn account to fortify Axceler’s position in the marketplace and reap competitive, commercial benefits.”  The profile encouraged users to contact Jim Chung regarding “business deals” with AvePoint, “new ventures” with AvePoint, and “consulting offers” related to AvePoint products and services.  But contacts would unwittingly be directed to AvePoint’s primary competitor.  AvePoint alleged that defendants diverted business and profited from AvePoint’s goodwill by fielding customer inquiries through this account.  This wasn’t merely a parody website or a site promoting “opposing behaviors or ideas” (PETA, largely superseded by Lamparello), but rather an alleged masquerade by a direct competitor.

Defendants argued that Jim Chung’s profile was “best described as a resume for Chung, listing his experience, education and groups/associations,” and allegations to the contrary about business purposes “def[y] the very organization of LinkedIn.”  But that didn’t help at the motion to dismiss stage.

AvePoint also sufficiently alleged likely confusion; it alleged both an intent to confuse and resulting actual confusion among actual AvePoint employees and current and potential customers.  (Technically, the first category—AvePoint employees—isn’t subject to the kind of confusion the Lanham Act targets since they aren’t the relevant consumers.  Still, I see the relevance, even though the harm alleged, albeit “insidious,” isn’t Lanham Act harm but rather trade secret harm: “those employees unwittingly enabled Axceler to access other AvePoint customer and employee contacts—including those customer contacts associated with legitimate AvePoint employees’ profiles—and other competitive business information.”)  Defendants argued that the LinkedIn users were merely confused about whether they knew Jim Chung, but that wasn’t enough at this stage.

Although it accepted that basis for false designation of origin, the court didn’t agree that misrepresenting AvePoint as a Chinese company could be a false designation of origin under §43(a)(1)(A), which speaks to the origin of the defendant’s own goods or services; that’s a §43(a)(1)(B) false advertising claim.  As you might expect, though, the false advertising claim also survived.  AvePoint plausibly alleged at least some conduct amounting to commercial advertising or promotion under Gordon & Breach: the messages on Twitter.  Though these posts didn’t mention AvePoint by name, that wasn’t required: statements about the “Red Dragon” and “SinkingREDShip” could be fairly understood to refer to AvePoint and its products and services. They were also plausibly “advertising,” since AvePoint alleged that Twitter was “a commonly-used means of advertising in the software industry,” and that the messages “were published and republished to hundreds of customers, potential customers, and other members of the Microsoft SharePoint community.” Axceler allegedly used certain hashtags to link the messages to the US Army Twitter community and other federal customers.  Thus, Axceler allegedly misrepresented the geographic origin and quality of AvePoint’s products and services.  (Similar state law claims also survived; Virginia state law requires “non-oral” ads causing “actual injury.”)

In addition, in a decision that ought to worry people who worry about the CFAA, AvePoint stated a claim under the Virginia Computer Crimes Act by allegedly obtaining a trial copy of AvePoint’s program for competitive purposes. The VCCA provides that “[a]ny person who uses a computer or computer network, without authority and ... [o]btains property or services by false pretenses ... is guilty of the crime of computer fraud.”

PTO/NTIA comments: remix

Comments submitted to NTIA/PTO: I’m not going to cover all of them or the non-remix parts like the discussions of digital first sale.  For remix, along with the Organization for Transformative Works’ comment there are these:  

ASCAP: Current doctrine is fine (except for that pesky consent decree and also there should be no compulsory licensing).  

Association of American Publishers: Fair use exists, but licensing now exists to fill in the gaps and “micro-licensing” is the future.  “[I]t is neither necessary nor appropriate to attempt to eliminate such legal uncertainty by creating a statutory compulsory license or specific statutory exception authorizing such combination works when there is clear evidence that content and technology companies are working together on this issue to create market solutions, such as YouTube’s Content ID system.”  Which is interesting as a rhetorical strategy, because I’m pretty sure that the AAP doesn’t have much content that could be recognized by Content ID.  Anyhow, the AAP insists there’s certainly no need for a new safe harbor or exemption.  The derivative works right is the rule and fair use is the exception.  Maybe the Copyright Office could issue guidance on what “remixes” and “mashups” are and how they relate to compilations/derivative works. 

Center for Democracy and Technology: Reforming statutory damages is an important part of removing uncertainty around remix; they’re too high, and their availability encourages copyright trolls to roll the dice regardless of the strength of a fair use defense.  Remixes are also vulnerable to automated systems like Content ID; such systems should protect fair use by, for example, requiring excerpts of a certain length or percentage before declaring a content match. 

Computer and Communications Industry Association: DMCA uncertainties and statutory damages issues affect the production and distribution of remixes.  

Consumer Electronics Association: “Code-like approaches can raise questions or implications about areas not covered, and can also give rise to dissatisfaction, by both content owners and users, as technologies or circumstances change. Therefore, valuable initiatives like Creative Commons and Google’s Content ID System should be viewed as complements rather than alternatives to fair use.”  

Copyright Clearance Center: Celestial jukebox!  It has a new branding now, the “Copyright Hub.”  There should be a comprehensive registry and everyone should pay per use.  (Reference to fair use: “licensing only comes into play beyond the statutory authorization provided by fair use and other exceptions in the law.…[I]f you do get rights right, the market then changes.”  By which the CCC apparently means, fair use dies.)

Creative Commons: CC licenses don’t interfere with fair use, and licensing can’t substitute for fair use.  Emerging licenses aren’t interoperable, and they aren’t suited for the many low-value transactions online, for which freedom is a better solution. 

DeviantART: (Ed. note: hi, DeviantART! Nice to see some remix-friendly hosts other than Google, which has many irons in the fire.  The presence of DeviantART and Wattpad, noted below, reminds us that “intermediary” doesn’t mean “Google.”  Small and innovative sites—including the ones that didn’t show up to these proceedings because they haven’t been invented yet—need consideration too.)  DeviantART believes it’s the largest art website in existence: “Increasingly the visual arts and the businesses reliant on the visual arts are populated with people who were first introduced to the arts through this platform.”  Remixes are unduly deterred by existing law, in which fair use is unpredictable, and the DMCA doesn’t provide sufficient protection for fair use for average people, who don’t have access to lawyers.  Reform should consider social norms, not just law.  Blanket licensing is not a solution.  Most sites can’t afford the investment required to create a Content ID system, especially given the scale of visuals which is much greater than the scale of video/audio.  “In the music businesses, the one sector of copyrighted content headed to this model [of identifying and licensing everything], they are far from perfecting it despite nearly a century of good work towards it.” 

Future of Music Coalition: there should be a PRO for licensing music remix.  

Google: NTIA/PTO specifically mentioned Content ID in its questions; Content ID allows content owners to monetize remixes. However, it has limits and isn’t a substitute for fair use. “Content ID cannot categorically separate remixes that qualify as fair uses (and thus require no licensing) from remixes that are infringing in the absence of a license.” This can result in overblocking or the particularly galling result of an entity making money from a work it has no right to make money from. Rightsholder best practices could avoid misuse of Content ID.   

Independent Film & Television Alliance: While commercial filmmakers have lawyers, ordinary people can’t be trusted to identify when they’re making fair uses.  Instead of changing the law, we should educate people and develop further guidelines, “as has been done in the arena of higher education and documentaries.”  (Comments: Um, what?  Yay for alluding to the best practices for documentaries, but, as it happens, the very same people already put out a statement of best practices for user-generated video.  Also, while it’s certainly true that most nonlawyers—and even most non-copyright lawyers—can’t get the intricacies of copyright law right, that’s a far cry from being unable to draw a line between noncommercial transformative work and wholesale copying.  From what I see empirically, that line is intuitive.)  IFTA also doesn’t want any sort of blanket licensing, because face to face transactions are the current, and therefore correct, business model.  

Institute for Policy Innovation: We pay too much attention to remixes, since they’re not as creative as real works (which we all know spring fully formed from the head of the author-Zeus).  (Okay, I really shouldn’t even try, but consider the view of human existence – I can’t call it dignity or flourishing – entailed by this from the IPI:

Almost everything in a civil society requires either overt or implied consent or permission. I require permission to pull my car out onto the public roads. I require permission to hold consumer credit, or even to have access to the Internet. Permission from several different sources is required for me to hold a job, to say nothing of the permission my employer requires in order to employ me. Where did we ever get the idea that innovation might be “permission less?” At best it is a na├»ve concept, and at worse it is, ironically, permission to trample over property rights.

(1) What a long way from “free as the air to common use,” which is perhaps no surprise given the progressiveness of the source of that latter sentiment. (2) But wow, libertarians have an IP problem.  Consider also the following quote from the IPI comment, presented as justification, not contradiction, of the IPI’s preceding claim: “We must remember that control is inherent in ownership. If you can’t exert control, you don’t own. If you can’t exclude, you don’t own.” So, apparently, I own neither my car nor my bank account.  Overall, it’s pretty bold of the IPI to denigrate government in favor of “property rights” while also asking government to change the scope of those rights.)

Internet Association: The threat of statutory damages deters remix creators and discourages the development of fair use law, including for remixes.   

Derek Khanna and John Tehranian: There should be no statutory damages for remix, only a payment of licensing fees set by a court in case of disagreement, though they seemingly contemplate that all remix will be commercial and thus produce revenues to share.  

Library Copyright Alliance: Don’t use licensing to substitute for fair use.   

MPAA: The government should give us property rights and then get out of the way. “Indeed, the marketplace is responding to the advent of video-editing tools and user-generated-content web sites by facilitating within current law the creation and dissemination of fan-made works. Although calling a work a ‘remix’ does not automatically make it legal, the sheer volume of such works and the business models growing around them indicates that the creation of remixes is not being unacceptably impeded and that legal change is unnecessary. Put simply, the copyright laws are operating as intended: as technologies and consumer desires change, the marketplace is responding, for the most part without undue friction.”  (Just a quick reaction: That’s not what you said at the §1201 hearings, but I’m gonna remember this for next time!  I’m sure you guys included the noncommercial remix exemptions under your definition of “current law,” right?)  Content ID, Kindle Worlds and other services let copyright owners make money from remixes, which makes the MPAA happy.  The MPAA also wins my “fair is foul” award, which is for only mentioning fair use once, in the phrase “where fair use does not apply.”

National Music Publishers Association: Music remixes are different from other remixes.  All music remixes (with the very rare exception of fair uses/true parodies, which don’t usually exist) are derivative works that should always be controlled by musical work and sound recording copyright owners because there’s a licensing market for them.  After all, the hip-hop sampling market works great, and publishers have licensed YouTube to allow some kinds of user-generated content.  Copyright is a property right/moral right, not an economic right. 

New Media Rights: Remixes are awesome.  However, the DMCA is overbroad, § 1201 is a problem, orphan works issues abound, copyright duration is too long, and the small claims court proposal needs more protections for small-scale users.  “The vast majority of cases involving content bullying we see involve content holders taking down remixes of their work, even when those remixes are probably fair use.”  §512(f) needs to be fixed to provide a real deterrent to copyright abuse.  Content ID is not a true licensing system, it’s just a monetization system that doesn’t lead to a license to the original user even when the content is “allowed.”

RIAA: Remix means a bunch of different things; we want to control essentially all of them, except for “certain” criticism and scholarship that doesn’t require licenses.  (How will you know whether yours qualifies?  You should probably ask for a license.)  There definitely shouldn’t be a broad category of protected remix.  Instead, the moral right of integrity should influence the rules, and licensing through Content ID and the like can take care of remix; as long as you use approved music in an approved way and are willing to have YouTube host and monetize your remix, you’re golden (or whatever the unpaid version of golden is). 

Public Knowledge: Too much legal uncertainty surrounds remixes; remixers shouldn’t be second-class citizens including in commercial markets.  Remix, mashups, and samples should be distinguished as cultural practices with different copyright implications—sampling, for example, rarely creates a derivative work of the original.  

Stanford Center for Internet & Society (also the EFF): Licensing is no substitute for fair use, and the DMCA risks censorship of fair use.  They don’t endorse a safe harbor for particular uses, as we suggest ought to be explored, preferring instead to advocate for robust fair use.  

Thomas D. Sydnor II: Google is evil and fair use isn’t worth protecting, except possibly uses of news footage by political candidates.

University of Michigan Library: We need more protection for remix, and against misapplication of the DMCA to take down remixes.  

Wattpad (another host like DeviantART): While much of the conversation focuses on audio and video remix, there are other kinds of remix.  Fan fiction is fair use that has important expressive and literacy-improvement benefits.  “Novelists like Meg Cabot candidly discuss writing fanfic for films like Star Wars in their younger days (before there was an internet to post on) and TV stars like Darren Criss of Glee become famous for writing and/or performing in fanworks based on the Harry Potter series.”  As Orlando Jones of Sleepy Hollow said, “Those fans [writing fan fiction] are artists too, I’m not more or less of an artist than the people who are writing that, or drawing fan art.” But there are those out there who don’t believe in fair use.  Fair use should be reaffirmed and statutory damages made unavailable when a work is arguably transformative.  Platforms should also be protected from unsustainable damages when they reasonably believe a work is transformative fair use.  Wattpad wants to be able to highlight/recommend good fan fiction to help its users, but fears the DMCA consequences.

P.S. Despite my goggling at the sheer incoherence of the IPI, my “best contradiction” award goes to BMI, which manages to argue both that “making available” is the best way to conceptualize copyright’s rights (a position I’ve come to agree with, though I believe in private use and technologies that enable private use, unlike BMI) and also that it should get to double-dip by collecting performance rights royalties when someone downloads a ringtone or a song from iTunes. 

Big picture: the comments include many powerful arguments—almost every interest brings its A game, though for the life of me I can't see why there shouldn't be a general public performance right for sound recordings subject to the same exceptions as for musical works—along with the expected naked self-interest.

It’s a cookbook!

50 Shades of Chicken.  (If you got the title of my post, you are my people.)

Foreign Policy covers fanworks

Foreign Policy asks: Why is the Chinese Internet obsessed with writing gay Sherlock Holmes fanfiction? I answer: because the Chinese are people?  People who sometimes go to jail for loving slash.  (Though a commenter claims that the problem was that the jailed guy was selling “porn”; not clear whether it’s the selling or the “porn” that’s allegedly the problem.)  Meanwhile, a Chinese John/Sherlock vid has over 70,000 views.  Sadly, the article doesn’t actually address “why Sherlock as opposed to some other productive source?” though the answer there may just be “timing.”

Friday, November 15, 2013

Some days Starbucks gets the bear, some days the bear gets Starbucks

Starbucks Corp. v. Wolfe’s Borough Coffee, Inc., No. 12364cv (2d Cir. Nov. 15, 2013)

The district court found that defendant’s Mister Charbucks and Charbucks Blend coffee wasn’t likely to dilute Starbucks’ mark. The court of appeals affirmed on the third trip to the court of appeals, in what I choose to believe is a hopeful sign that the idiocy of dilution is again being recognized.  The court found no reversible error in the district court’s factual findings, and, balancing the statutory dilution factors de novo because that’s a legal determination, agreed that Starbucks failed to prove likely dilution.

Starbucks famously sells coffee.  So, unfamously, does defendant (doing business as Black Bear), and it called its dark roast blend “Charbucks Blend,” now “Mister Charbucks.”  One of the reasons for the name was the public perception that Starbucks roasts its beans unusually dark. 

Starbucks submitted a consumer survey: a phone poll of 600 participants.  When asked “What is the first thing that comes to your mind when you hear the name ‘Charbucks,’ spelled CHARBU CKS?,” 30.5 percent of participants answered “Starbucks,” while percent answered “coffee.”  Other common responses included “barbeque” or “charcoal” (7.9 percent); “restaurant” or “grill” (7.5 percent); “meat,” “steak,” or “hamburger” (4.6 percent); and “money” (3.9 percent).  When the participants were asked, “Can you name any company or store that you think might offer a product called ‘Charbucks’?,” 3.1 percent responded “Starbucks,” and another 1.3 percent responded “coffee house.”  However, other, more popular responses included: “grocery store” (18.3 percent); “discount store” (16.9 percent); “restaurant” (7.0 percent); “department store” (4.8 percent); and “hardware store” or “home improvement store” (3.7 percent).  The expert concluded that the number one association of Charbucks was with Starbucks, but that it was impossible to measure the reaction to visual cues with a phone survey.

The court of appeals in a previous opinion upheld the district court’s finding that the marks had minimal similarity, because the context of the Charbucks Marks on Black Bear’s packaging, on its website, and in the phrases “Charbucks Blend” and “Mister Charbucks” differentiated them from the famous marks.  But it remanded because the district court erroneously required substantial similarity between the marks, and similarity was only one of six factors in the blurring test (though one would think it’d be a damned important one, since most of the others just go to the fame of the plaintiff’s mark!).  Also, the initial district court TDRA opinion erred by requiring bad faith before intent to associate the marks could favor the plaintiff, and erred by relying on lack of actual confusion, which doesn’t directly matter for dilution.

On remand, the district court found that Starbucks’ distinctiveness, exclusive use, and fame favored Starbucks.  But minimal similarity between the marks in context still favored Black Bear.  And it discounted the survey results for looking for associations only from the isolated word Charbucks, and not in their full context.  Here, only 30.5% of repsondents associated the two, while other dilution cases featured higher percentages.  Thus, the actual association factor weighed no more than minimally in Starbucks’ favor.  Overall, the court found association and similarity to be important factors, given the statutory definition of blurring as “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark” (emphasis added).  Thus, Starbucks failed to carry its burden of showing likely dilution.

The court of appeals ran through the history of federal dilution law, noting but not explicitly highlighting the fact that dilution’s proponents always emphasized the idea that dilution protected the use of famous marks on noncompeting goods.  E.g., Sen. Judiciary Comm. Rep. on S. 1883, S. Rep. No. 100515 (the law was “specifically intended” to come into play “where the unauthorized use by others, on dissimilar products for which the trademark is not registered, dilutes the distinctiveness of [a] famous work.”).  (This is, in fact, worth highlighting: as here, if a plaintiff can’t show infringement when the goods directly compete, there’s very little justification for allowing it a bite at the dilution apple.) 

The court of appeals also nodded to the Chewy Vuiton case: “we need not consider all six statutory factors listed in U.S.C. § 1125(c)(2)(B)(i)–(vi) if some are irrelevant to the ultimate question; nor are we limited to those six factors. See Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC, 507 F.3d 252, 266 (4th Cir. 2007).”  Instead, citing pre-TDRA law, the court of appeals endorsed a “cautious and gradual approach,” “which favors the development of a nonexclusive list of trademark dilution factors over time.”

Starbucks challenged the minimal similarity and weak association factual findings, but the court of appeals found no clear error.  The first finding had already been affirmed in the previous appeal because of the distinct packaging and the addition of other terms to “Charbucks.”
As to a weak showing of actual association, Starbucks argued that Black Bear’s admitted intent to create an association triggered a presumption of association, or at least was strong evidence of actual association.  But intent is a separate factor under the TDRA, not per se evidence that actual association weighs in the plaintiff’s favor.  McCarthy, and Federal Express Corp. v. Federal Espresso, Inc., 201 F.3d 168 (2d Cir. 2000), say that intent can be evidence of successful association, and the intent factor is indeed important.  But to avoid making any clause superfluous, the court declined to merge the intent to associate and actual association factors.  So there was no clear error in finding that testimony about the origins of the Charbucks marks wasn’t an admission of actual association or proof thereof.

Comment: Fancy footwork indeed.  Perhaps this could be done more rationally: blurring isn’t just association; it’s association that harms the distinctiveness of the famous mark—whatever that means.  Thus, just as many circuits now recognize that intent to copy is not itself evidence of likely confusion, though intent to confuse would be, we could say, consistent with many confusion cases, that intent to associate isn’t itself particularly weighty, unless it’s intent to harm the distinctiveness of the famous mark.  Maybe that intent will be rare—but let’s face it, how many Buick Aspirins do you see?

Turning to the survey, the court of appeals also found that the district court didn’t err when it discounted the survey because it only tested “Charbucks,” rather than the whole marks in context and because the 30.5% association was relatively small.  Surveys should try to approach marketplace conditions.  The Lanham Act covers the defendant’s “use of a mark . . . in commerce that is likely to cause dilution by blurring,” so “the way the defendant’s mark is used in commerce is central to the dilution inquiry.”  Starbucks presented no record evidence that “Charbucks” is ever read or heard in isolation—though “Mr. Charbucks” was presented in plain text on at least one page of Black Bear’s website, all other record uses of the Charbucks marks used Black Bear’s distinct color scheme, font, and layout.  It wasn’t clearly erroneous to find that prefixes or suffixes lessened the similarity between the marks.

Starbucks argued that 30.5% wasn’t small.  While the court deemed “What is the FIRST THING that comes to your mind when you hear the name ‘Charbucks,’ spelled CHARBUCKS?” to be the question “most probative of actual association,” it was notable that the next question, “Can you name any company or store that you think might offer a product called ‘Charbucks’?” produced much tinier numbers—only 3.1% answered “Starbucks” and 1.3% answered “coffee house.” Those percentages showed minimal actual association.  This question tested source confusion, which can be probative of association, because confusion requires that Charbucks call Starbucks to mind.  Some of the other answers could be consistent with an association with Starbucks (e.g., grocery store, restaurant), but they’re also consistent with other things, such as meat or a charcoal grilling product, as 38.5% said.  Thus, the district court didn’t clearly err when it evaluated the actual association factor as weighing only minimally in Starbucks’ favor.  If the survey had presented the Charbucks mark in commerce, the court of appeals might well have found clear error, but it didn’t.

Engaging in de novo balancing, the court also concluded that Starbucks didn’t meet its burden.  “[T]he ultimate question is whether the Charbucks Marks are likely to cause an association arising from their similarity to the Starbucks Marks, which impairs the Starbucks Marks’ tendency to identify the source of Starbucks products in a unique way.”  In a ridiculous overstatement, the court doubled down on its earlier holding: “Certainly, a plaintiff may show a likelihood of dilution notwithstanding only minimal similarity.”  But in this case, “minimal similarity strongly suggests a relatively low likelihood of an association diluting the senior mark.”  Indeed, the statute itself emphasizes similarity in its definition of dilution by blurring as association arising from similarity that impairs distinctiveness.  While there’s no threshold of substantial similarity, a finding of minimal similarity can be highly probative.

The next three factors—the degree of distinctiveness, exclusive use, and recognition—“are features of the senior mark itself that do not depend on the use of the junior mark.”  Distinctiveness makes the plaintiff’s rights bigger and thus more likely to be impaired by a junior use (of course, that conclusion doesn’t follow at all, since more famous marks are more likely to resist dilution because consumers have such a strong conception of their meaning, but whatever!).  The more important factors are similarity of marks and actual association, as the district court held.  (You mean, the factors that the district court found to be important the first time around?  Given that the Second Circuit says that weighing the factors is done de novo, remind me why this had to go back to the district court?)  Viewed in light of Starbucks’ fame, “the fact that more survey participants did not think of ‘Starbucks’ upon hearing ‘Charbucks’ reinforces the District Court’s finding that the marks are only minimally similar, and therefore unlikely to prompt an association that impairs the Starbucks Marks.”

As for intent, the court of appeals gave it “moderate” significance.  Black Bear was capitalizing on an historic connection between the word “Charbucks” and “Starbucks,” which arose out of the socalled “coffeewars” in Boston.  This favored a finding of likely dilution. 

But actual association was highly relevant, though evidence thereof is not required to prevail.  The survey evidence was weak at best.  Given that Starbucks bore the burden of showing entitlement to injunctive relief, the district court was affirmed.