Wednesday, April 08, 2015

court declines to dismiss hashtag infringement claim

Fraternity Collection, LLC v. Fargnoli, 2015 WL 1486375, No. 3:13–CV–664 (S.D. Miss. Mar. 31, 2015)
Fraternity Collection designs and sells shirt, including the “Pocket Shirt,” a custom article of clothing in which customers pick a particular style of shirt and then select one of almost 200 designs to be the shirt pocket.  Fraternity Collection collaborated with Elise Fargnoli, a clothing designer who runs the “Francesca Joy” brand, to design two new series of Pocket Shirts: one called “Francesca Joy” and another containing sorority themes (using unlicensed sorority images). Fraternity Collection thought it would be the exclusive seller of these designs; the first line was sold beginning in 2012, while the second was only ever designed.  In 2013, Fraternity Collection learned that Fargnoli was selling her Francesca Joy designs to a competitor, despite promised exclusivity. While their business relationship was ongoing, Fraternity Collection got a license to sell products containing fraternity and sorority logos and hired a graphic artist to design sorority-themed Pocket Shirts. In June 2013, Fraternity Collection stopped doing business with Fargnoli and claimed to have paid her all her royalties.

By September 2013, Fargnoli returned to selling her clothing at Fraternity Collection’s competitor, Fashion Greek (finding these items sent me to a side of Tumblr I’d never seen). She used the terms “#fratcollection” and “#fraternitycollection” in her social media accounts to promote those designs.  She also sent Fraternity Collection a cease and desist letter demanding that it stop selling the Francesca Joy line of Pocket Shirts and Fraternity Collection’s new sorority-themed Pocket Shirts. Fraternity Collection responded with its own demand that Fargnoli stop implying a relationship with Fraternity Collection on social media. “Among other things, Fargnoli is mad about Fraternity Collection advertisements which contain the Francesca Joy line of Pocket Shirts, while Fraternity Collection is mad that Fargnoli’s ‘Francesca Joy’ Facebook page contains an album of models wearing Fraternity Collection merchandise.”
Fraternity Collection sued for a declaratory judgment that its advertisements can contain Fargnoli-designed Pocket Shirts since they were properly licensed at the time of their manufacture and are no longer for sale and that its own sorority-themed Pocket Shirts are not a knockoff of Fargnoli’s sorority-themed Pocket Shirts. Further, it sought damages for Fargnoli’s allegedly infringing use of the terms “#fratcollection” and “#fraternitycollection” on social media.
Fargnoli counterclaimed, alleging that Fraternity Collection’s advertising of the Francesca Joy line and use of its own sorority-themed designs on Pocket Shirts constituted reverse passing off, false advertising, false designation of origin, unfair competition, trademark infringement, copyright infringement, breach of contract, intentional interference with existing business relations, and breach of the covenant of good faith and fair dealing, as well as vicarious copyright infringement by Fraternity’s resellers.  (One gets the sense that the district court was not enthused about this hairball, and really, this does seem to be a failure on both sides to walk away tall.)
Fargnoli argued that the Lanham Act allegations failed to state a claim for false advertising, but it did.  “The Court accepts for present purposes the notion that hashtagging a competitor’s name or product in social media posts could, in certain circumstances, deceive consumers.”  General factual allegations of injury can suffice on a motion to dismiss. This also preserved state-law trademark infringement claims.
Meanwhile, the court did dismiss Fargnoli’s claims for reverse passing off, false advertising, false designation of origin, unfair competition, and trademark infringement, all of which relied on Fraternity Collection’s failure to attribute Fargnoli’s incorporated pocket designs to her.  Dastar controlled: Fargnoli did not produce the tangible goods offered for sale, and thus the Lanham Act didn’t permit her to sue Fraternity Collection for not attributing its incorporated designs to her. “Fraternity Collection’s descriptions were not false and did not cause consumer confusion because it was the producer of the goods in question.”  Moreover, she could not reframe a mere authorship claim as a §43(a)(1)(B) claim, because authorship isn’t a covered “nature, characteristic, or quality” under those sections. 
And here’s a wrinkle I’ve long wondered about, raised but not very well addressed: Fraternity Collection argued that this also required dismissal of equivalent state law claims. Fargnoli disagreed, but had no authority for her disagreement, so the court went ahead and dismissed the state law claims too.  For “authorship” claims in particular, copyright preemption (as informed by Dastar) seems to dictate this result, but why would the state courts necessarily change other aspects of their law as interpretations of the meaning of “origin” in the federal statute changed?
Copyright: Fraternity Collection argued that the copyright claims failed in part because she had no attribution right, the shirts were useful articles, and there could be no vicarious/contributory infringement under first sale.  To summarize, Fargnoli argued that Fraternity Collection made unauthorized reproductions, distributions, and public displays of her original designs, and that its sorority designs were unauthorized reproductions, derivative works, distributions, and public displays; she further alleged vicarious and contributory liability for ads from Fraternity Collection’s marketing and sales partners containing her original works and Fraternity Collection’s sorority line.
There’s no right of attribution in the Copyright Act, but that didn’t matter.  As for useful articles, 17 U.S.C. §113(c) provides that
In the case of a work lawfully reproduced in useful articles that have been offered for sale or other distribution to the public, copyright does not include any right to prevent the making, distribution, or display of pictures or photographs of such articles in connection with advertisements or commentaries related to the distribution or display of such articles, or in connection with news reports.
And here the court just struck out, conflating whether the designs here are separable and thus copyrightable (obviously yes) with whether §113(c)’s limits, which are only necessary once there is a separable copyrightable work embedded in the useful article, would apply (also obviously yes!).  The court observed that separability can be a fact-intensive endeavor, and thus determined that the issue should wait until evidence has been gathered. But absolutely no evidence is required here as to the Francesca Joy designs: Fargnoli pled that the infringing acts were reproduction, distribution, and display of the copyrighted works as they were embodied in the clothing.  The whole point of §113(c) is to allow people dealing with lawfully made copies embodied in useful articles to take and use pictures of those useful articles, necessarily including the copyrighted work.  The claims about the allegedly infringing derivative work sorority designs do require more evidence, but not the Francesca Joy designs.
Also, the vicarious and contributory infringement claims were too fact-specific for a motion to dismiss. The breach of contract/duty of good faith and fair dealing claims also survived, but not intentional interference. There was no allegation about how Fraternity Collection interfered with other business relationships; questions about exclusivity would be dealt with in other counts.  Fargnoli’s complaints about “theft” of her intellectual property were copyright claims.

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