Monday, February 06, 2017

use of P's jewelry in D's ad is regular passing off, not reverse passing off

Brighton Collectible, LLC v. Believe Production, Inc., 2017 WL 440255, No. 15-cv-00579 (C.D. Cal. Jan. 30, 2017)

Brighton sued Believe for infringing Brighton’s copyright in a jewelry design and also engaging in false designation of origin/unfair competition.  In particular, Brighton alleged that Believe used photos of Brighton’s jewelry into the promotional materials for Believe’s lower-quality jewelry.  One Brighton collection includes a heart within a heart design, the Reno Heart.

Reno hearts from Brighton

Believe publishes product catalogues used in student fundraisers.  Brighton alleged that the infringing products were substantially similar to the Reno Heart earrings and bracelet, but lower quality and priced lower. Believe sold 5,414 of the bracelets (at $19.50) and 3,849 sets of the earrings (at $14), less than half the price of Brighton’s analogous items.
Believe promo image from opinion
Promo image, Brighton heart, Believe heart side by side

Defendant sought to exclude the testimony of Robert Wunderlich and Margaret Campbell regarding damages. Wunderlich was a principal at Discovery Economics, a professional services firm that consults on economic, financial, and accounting issues.  Wunderlich estimated Brighton’s lost profits, including his calculation that customers who purchased an item of jewelry from a Brighton retail outlet also bought an additional 1.27 other items, on average.  Campbell would opine regarding “the anticipated effects of knockoffs or imitation products on an authentic brand,” including on likely confusion and on lower willingness to pay for Brighton products.

The court allowed Wunderlich’s testimony, which indicated a decline in Reno Heart sales relative to Brighton’s other lines, even though Wunderlich failed to account for all the possible other sources of lost sales. He didn’t ignore something so central to the case as to make his opinion inadmissible.  Also, the court allowed him to testify about the 1.27 multiplier, which the jury might accept if it made its own findings about how many sales Brighton lost.

The court also allowed Campbell’s opinions about the damages she expected to follow from Believe’s alleged use of Brighton’s jewelry to sell lower-quality products and the relative prices of Believe and Brighton’s jewelry: lost sales and brand “dilution.” “Courts regularly permit marketing experts to testify to the role of branding, distinctiveness, and design in consumer behavior as well as what effects they would expect based upon the facts of any particular case.”  Here, Campbell’s opinion was sufficiently grounded in the evidence. Failure to conduct a consumer survey didn’t undermine the reliability of her opinion.  (The court doesn’t explicitly discuss her opinion on the likelihood of confusion.  If the court is really allowing expert opinion on likely confusion to substitute for a consumer survey, that’s an outlier.)

The court also found sufficient evidence of lost sales to allow Brighton to proceed on its claim for actual damages.  Where a party’s marketing is misleading, there may be “no need to require appellant to provide consumer surveys or reaction tests in order to prove entitlement to damages.”  To recover lost profits, “a plaintiff must make a ‘prima facie showing of reasonably forecast profits.’ ” Here,

There is evidence suggesting that Believe disseminated nearly 700,000 sales catalogues nationwide wherein Believe used photographs of Brighton products to sell similar, lower-quality jewelry for less than half the cost of Brighton’s analogous Reno Heart products. After Believe sold over 9,000 bracelets and earrings using photographs of Believe’s copyrighted design, Reno Heart Collection sales declined at a higher rate than Brighton’s other jewelry sales.

That was enough to create a material issue of fact. Plus, Believe’s allegedly infringing sales provided an upper range for an award of damages.

Believe argued that the unfair competition claim was preempted by the Copyright Act.  Reverse passing off—allegations that Believe sold Brighton jewelry as its own—would be preempted.  But this allegation was that “Believe’s sales of lower-quality, but confusingly similar products using pictures of Brighton products gave them an unfair advantage in the marketplace and constituted unfair competition.” That was regular palming off, and not preempted.  (Under Dastar, does the allegation relate to the origin of the physical objects, or the origin of the creative spark behind the objects?  Does the answer depend on whether consumers consider the bracelet they receive to be "the same" as the bracelet in the photo?)

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