Friday, August 22, 2014

Lexmark applied to false association claims under 43(a)(1)(A)

Lundgren v. Ameristar Credit Solutions, Inc., 2014 WL 4079962, No. 3:12–263 (W.D. Pa. Aug. 18, 2014)

Ameristar is a “debt settlement and tax resolution business,” while Lundgren “was previously in the mortgage service industry and began offering tax resolution services in July 2010.”  (There is an untold story here about the economic crisis and eating all the parts of the pig up to and including the squeal.)  Lundgren is an enrolled agent with the IRS, which makes him authorized to represent taxpayers before the IRS.  Before his Ameristar employment, he was employed by another tax relief firm.  He signed an at-will employment agreement and a covenant not to compete for or solicit any of Ameristar’s customers, clients, or accounts either dirctly or indirectly.  Lundgren alleged that this wasn’t the entire agreement, because he had his own tax relief business with 6-8 clients before he joined; he maintained that Ameristar agreed that he could continue to serve these clients, though Ameristar disagreed and said he was just allowed to finish up a few clients.

When Lundgren began at Ameristar, he was the only enrolled agent, though others were then added, along with case workers.  At one point he had responsibility for 183 case files; files were expected to close within 12 months though that could vary.  Lundgren agreed to participate in Ameristar’s advertising and executed a “Talent Release Form” allowing Ameristar to use his name, title, likeness, image, and voice for a TV ad, though his ad was, according to Ameristar, not that successful.

Lundgren’s employment was terminated in 2012.  He sued for violations of the Lanham Act, state law privacy rights, wrongful termination, and breach of an implied contract for employment.  The court declined to exercise jurisdiction over the state law claims because it dismissed the Lanham Act claims.

Lundgren alleged both false association under §43(a)(1)(A) and false advertising: Ameristar allegedly misrepresented that he was an employee after he was terminated and used his name and likeness in an ad endorsing Ameristar’s services.  Under Lexmark, “a plaintiff must plead (and ultimately prove) an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.”  The court assumed, without deciding, that Lexmark stated the proper standard for both parts of §43(a), and that Lundgren’s claims failed.  (I’m not a civil procedure expert, but how can this really be true?  If Lexmark doesn’t provide the proper standard for false association claims, on what basis does the court kick Lundgren’s out?  The court also noted that Conte Bros. said there was no difference between the two prongs for standing purposes, and that part of the Third Circuit’s holding wasn’t addressed by Lexmark.)

The only damages Lundgren alleged with any specificity related to his wrongful termination, not from a Lanham Act violation.  In his deposition, he testified that his injury as the result of the ads was to “my reputation, particularly the guy here in Johnstown who saw me and was questioning me about that. Other people, colleagues who saw me. It just seems to … impede or whatever my image and who my alliance is with…. [It i]nfluences whether or not they can trust, I believe, what I say if they see me in other places, yet I’m practicing or trying to practice on my own.”  The court found these claims for “damage to his reputation” and/or “lost reputation and goodwill” vague and conclusory.  (And yet, how much do these statements differ from what courts routinely say about goodwill in trademark cases?)  He also cited no evidence that the ads featuring him were successful or affected Ameristar’s receipts positively.  Thus, at the summary judgment stage, he didn’t provide evidence raising a material issue of fact as to injury to a commercial interest in his reputation or sales.

Dastar-ing about architecture: 7th Circuit reverses dismissal of credit claim

M. Arthur Gensler Jr. & Associates, Inc. v. Strabala, No. 12-2256 (7th Cir. Aug. 21, 2014)

Previous coverage, wherein I was not enthusiastic about the district court decision finding that there couldn’t be a §43(a) claim based on an allegedly false claim to have designed a building.  Here, the Seventh Circuit reverses in an opinion by Judge Easterbrook, but I’m not sure it gives us a better view of Dastar, because it avoids the head of liability the Supreme Court told everyone to use in such cases (that no one uses), §43(a)(1)(B) false advertising.  The real issue I see in this case is Rule 9(b): is the application of Rule 9(b) to §43(a)(1)(A) claims supposed to be standard now?  Most courts don’t do that, and it would be useful to be clear about the answer to this question.

Strabala left Gensler, where he’d been a Design Director, to open his own architectural firm, 2Define Architecture.  He stated (either on the firm’s website or on his personal Flickr or both) that he’d designed five projects for which Gensler is the architect of record: Shanghai Tower, Hess Tower, Three Eldridge Place, the Houston Ballet Center for Dance, and the headquarters of Tesoro Corporation.  Gensler alleged that this was reverse passing off, and the district court dismissed the complaint on the ground that Strabala didn’t claim to have provided the physical origin of the structures (Dastar).

The court of appeals characterized the district court’s opinion as limiting §43(a) to false designations of goods’ origin (which I think is an odd characterization), and thus as holding that Gensler couldn’t invoke the Lanham Act because its claim concerned services.  This, Judge Easterbrook said, misread Dastar, which didn’t read “services” out of the Lanham Act.  Nor did Dastar hold that false designation of origin is the only way to violate §43(a); if it had done so, Pom Wonderful would have come out the other way.  (The weirdest thing about this statement about Pom is its complete failure to acknowledge §43(a)(1)(B), or the words (nature, qualities, characteristics) that are important in providing Pom’s claim but aren’t included in §43(a)(1)(A).)

In Dastar, the court of appeals continued, Fox didn’t contend that Dastar falsely identified itself as the videos’ creator “or made any other false claim.”  (Actually, yes, that is exactly what Fox contended; the Supreme Court just determined that what Dastar said couldn’t count as false.)  Here, by contrast, Gensler did assert there’d been a false claim of origin.  (As did Fox.)  But the claim here was for false designation of origin of services, not of goods.  (This doesn’t seem to deal with Dastar’s definition of “origin” as physical origin—which for services would mean the physical provision of the services.)  Gensler’s allegation was that Strabala falsely claimed to have been the creator of intellectual property: the building designs.  “Architects’ success in winning clients depends on what they have accomplished; Gensler has a strong interest in defending its reputation for creativity and preventing a false claim that someone else did the design work.”  (True.  But also true of authors of other creative works, and the Court explicitly said that the materiality of authorship to audiences didn’t matter in Dastar because the statute didn’t cover this conduct in §43(a)(1)(A).)

So, the court of appeals concluded, “Gensler contends that Strabala made a ‘false or misleading representation of fact’ (his role in designing the five buildings) that is ‘likely to … deceive as to the … connection[] or association of such person [Strabala] with another person [Gensler]’ and to deceive clients about the ‘origin’ of the designs. Nothing in Dastar forecloses such a claim.”  (Except for Dastar’s holding about what “origin” means.  I don’t see why you can’t replace “role in designing” with “putting its name on the cassettes” and get [Dastar] and [Fox] exactly here.  I think this failure of understanding might have something to do with the Seventh Circuit’s extremely confused understanding of what it means for something to be implicitly false.) 

There was no copyright claim implicated here—Strabala didn’t make any copies of plans in which Gensler claimed copyright.  “A false claim of authorship, without the making of copies (or some other act covered by 17 U.S.C. §106), is outside the scope of copyright law. Gensler’s only plausible federal claim rests on §43(a).”  (We are in complete agreement here!)

Now, the court of appeals continued, the question was whether Gensler had a tenable claim:

It charges Strabala with a form of fraud, so we would expect its complaint to allege with particularity the nature of the grievance—what Strabala said and why it is false. See Fed. R. Civ. P. 9(b). Yet the complaint contains only a few quotations and does little to explain what part of each is false. For example, it quotes this from Strabala’s Flickr site: “Shanghai Tower was designed by American architect Marshall Strabala.” But it does not say why the statement that he “designed” the building is false.

For all that this case thinks it’s about Dastar, this is the most significant part of the holding.  Because the court is writing about §43(a)(1)(A), the reference to Rule 9(b) is in fact extremely unusual, as most courts refuse to require trademark plaintiffs to plead with particularity.  (They’re more willing to require it of false advertising plaintiffs, even though there’s no warrant in the statutory language for the difference; the problem is that most courts don’t even seem to realize that there is any question, whether they’re applying Rule 8 or Rule 9(b), and don’t cite contrary cases.)

Back to the specifics: the court of appeals could think of three ways in which an architect’s claim to have designed a building could be false: (1) the architect didn’t work on the project at all; (2) the architect worked on the project but overstated his/her role (designed the details, but not basic appearance or attributes); or (3) the architect “worked on the project and contributed some or even all important features, but the project was so complex that no one person bore full responsibility.”  (Pause for obligatory acknowledgement that §43(a)(1)(B) jurisprudence has many cases dealing with similar questions as matters of puffery and materiality.)  Gensler’s complaint didn’t allege (1) or (2), but apparently relied on (3): “that big buildings are team jobs that no one designs.”  The complaint alleged, for example, that the Shanghai Tower team included approximately 100 people, and Strabala was only one of many members, making Gensler and not Strabala the source of the architectural and design services at issue.

The court of appeals wasn’t impressed.  “It is as if Warner Bros. wanted Michael Curtiz, who directed Casablanca, to keep silent about his role because the film could not have succeeded without Humphrey Bogart’s and Ingrid Bergman’s acting, Max Steiner’s music, Arthur Edeson’s cinematography, Murray Burnett’s and Joan Alison’s play, Julius and Philip Epstein’s screenplay, and the contributions of a hundred others—or at least to append to any claim of directorship something along the lines of ‘many persons in addition to directors bear credit for a film’s success or blame for its failure.’”  The court of appeals thought Gensler sought to make the auteur approach “legally impermissible” in architecture.

But if Gensler was really contending that “big projects require big teams, … where’s the falsity?”  Maybe if Strabala designed houses for unsophisticated clients, there might be a problem, though Gensler would have trouble proving damages.  But the parties’ websites and the complaint indicated that both parties specialized in large products with sophisticated clients. “People who pay millions for substantial projects (Shanghai Tower will cost more than $4 billion by the time it is finished in 2015) know full well that it takes an architectural team to design and execute the plans. They also know that teams have leaders—and Gensler has not alleged that Strabala said anything false by implying that he was the (or a) leader of the teams on these five projects.”  (I suppose it’s futile to say anything about appellate factfinding in the Seventh or Ninth Circuits particularly; Twiqbal at least provides some cover for this kind of plausibility determination, as the court will suggest below.)

Indeed, if sophisticated clients wouldn’t be misled, then Gensler is not just wrong but in the wrong: attempting to conceal the fact that a designer of big projects has flown the coop.  “[I]f Gensler wins this case other architects who leave will be required to keep mum about their accomplishments—and then it will be Gensler, not the departing architect, that is in a position to make a misleading presentation to a future client.”  If no real person designs a building, then Gensler never loses from the departure of talented designers.  The lawsuit could also be understood “as an effort to impair competition by imposing costs on a departing architect, even though setting up a new firm does not violate any contract (and the old employer does not allege a theft of trade secrets).”  But competition by “people who leave large firms to set up small rivals” is good for consumers.  (Given what the Seventh Circuit has said about awarding attorneys’ fees to defendants in cases brought for anticompetitive reasons, this commentary should make Gensler quite nervous.) 

As a result, the court of appeals was tempted to affirm the district court on alternate grounds, but Strabala hadn’t argued Rule 9(b) or Twiqbal.  “Nor does Gensler’s complaint rule out the possibility that it competes with Strabala to build some smaller projects with less sophisticated clients.”  The possibility that a tenable legal theory might fail on the facts was for the parties to argue at the district court in the first instance.

Today in parody shirts

I just acquired the Black Labour, White Guilt T-shirt from the Laugh It Off case, and I'm taking the opportunity to share some other parody shirts as well.
Black Labour, White Guilt
From my vacation:
Spider-Moose, New Hampshire
Then, continuing the moose theme:
John Moose, Calgary Canada, with moose in John Deere pose
Which let me, through a series of joke T-shirts, to:
"She wants the D" T-shirts with Disney D
That's probably the most offensive variant I saw; the others were all sports teams.  My search also took me to:
Just Shoot It shirt with Nike logo curving into duck head
That one was, in my opinion, the most artistically successful of the Just Shoot It shirts, with the Nike logo curving nicely into the duck's head.

Thursday, August 21, 2014

When should TM claimants use the Madrid system?

Also via Lexology, Baker & McKenzie has an article setting out the pros and cons.  Highlights include the information that central attack leads to 2% of international registrations being withdrawn, and a handy checklist to determine whether Madrid is a good option (for marks central to a business or new marks not variants on old one, they recommend no).

News for storage jars, Thai military coup edition

Via Lexology, Rouse Legal penned The IP Upside of Thailand's Military Coup.  Law enforcement priorities!

Dastar and karaoke

Slep-Tone Entertainment Corp. v. America’s Bar & Grill, LLC, No. 13 C 8526, 2014 WL 4057442 (N.D. Ill. Aug. 15, 2014)

Slep-Tone sued defendants for violations of the Lanham Act.  Slep-Tone makes karaoke accompaniment tracks sold under the trademark “SOUND CHOICE.” It also alleged a distinctive and protectable trade dress, which includes (a) the use of a particular typeface, style, and visual arrangement in displaying lyrics; (b) the Sound Choice marks; and (c) the use of particular styles in displaying entry cues for singers, namely a series of vanishing rectangles to indicate the cue. [As an aside, I would be interested to see the proof of these allegations with respect to karaoke audiences, as opposed to operators of establishments that host karaoke, who are the alleged wrongdoers in these cases and thus presumably unconfused.]

Slep-Tone originally released CDs encoded in a special format known as “CD+G” (“compact disc [audio] plus graphics”) allowing for synchronized playback of audio and video suitable for prompting singers with lyrics cues. These tracks can now easily be ripped to a computer hard drive and format-shifted to MP3+G or WAV+G.  Slep-Tone’s media-shifting policy attempts to impose rules on media-shifting karaoke operators.

Defendants provide  karaoke services through karaoke accompaniment tracks, stored on hard drives.  Slep-Tone alleged that they used “counterfeit” tracks displaying the Sound Choice marks and trade dress without authorization, likely causing users [who?] to believe that Slep-Tone created the tracks or authorized the services.  [We’ll hear more about Dastar below, but since our focus has to be on physical origin, I wonder whether consumers would have any opinion at all about physical origin here.]

Defendants argued that Dastar barred these claims, since Slep-Tone’s marks and trade dress were inherent, indivisible parts of its copyrightable karaoke tracks.  Thus, allowing Slep-Tone’s claims would improperly create a “species of mutant copyright law.”  Slep-Tone alleged that the marks and trade dress were completely separable from the copyrightable content.  A prior case, Zuffa v., rejected a trademark claim by an organizer of pay-per-view MMA fighting against a website that allowed users to upload and share video streams.  The trademark claim was based on the defendant’s display of trademarks, including the eightsided ring where championship bouts took place, when the video was streamed from defendant’s site.  Zuffa held that extending protection over marks inherent to the video, such as the ring, would prevent display of the video even after the copyright expired.  However, the court didn’t dismiss claims relating to the display of trademarks which were not an inherent part of the video broadcast.

At this stage, the court found that Slep-Tone adequately alleged that it was not impossible to display the copyrightable material without the mark.  [I think this is an interesting attempt to make Dastar work, but I’m not sure it succeeds.  Much depends on the facts; arguably this is just the “Scylla and Charybdis” problem discussed in Dastar, where the Supreme Court attempted to solve the problem by removing Scylla (no liability for nonattribution) but not necessarily removing Charybdis (possible liability for attribution, where attribution consists of something more than copying the expressive work).  Consider: the title of a work alone is uncopyrightable.  That implies that work-title = work for copyright purposes. But it must be the case that a trademark claimant can’t require a copier of a public domain work to use a different title for it.  Is the work separable from its title for Dastar purposes?  An additional wrinkle is that Slep-Tone isn’t claiming copyright infringement because, as I understand it, it doesn’t have the rights to do so; under other circumstances, its selection, coordination, and arrangement of the visuals might well themselves qualify as a copyrightable derivative work of the lyrics.  The Dastar problem, then, could be much deeper.]

Defendants also argued that first sale protected them because media-shifted tracks weren’t materially different from the original.  This is a version of my question about what consumers would think about source, though I wouldn’t frame it as first sale—and neither would this court.  While defendants argued that there was “no discernable difference in the bar patron’s experience in seeing, hearing, and perhaps singing along to a media-shifted karaoke track within the bar’s premises,” Slep-Tone alleged that the media-shifted tracks were unlawful counterfeit copies.  First sale doesn’t include copied items “merely because they may ‘pass’ for the original item,” and Slep-Tone alleged more than resale of original goods.

Trademark question of the day

Timesify makes any website look like the New York Times, so that your neighbors don’t know you’re reading something junky.  “In a matter of seconds, the article on how ‘Miley Cyrus Peed on a Tree’ will appear on a page that looks like The New York Times — and with a headline and photo from a bonafide, recent New York Times piece, like ‘Iraqi Relief Flights Rescue Dozens, but Leave Thousands Behind.’” What are the trademark implications?  Dilution?  There’s no sale, so can there be post-sale confusion?  Post-browse confusion?  Or should that be Times-browse confusion?  (I couldn’t help myself.)  There are even internet classic copyright issues: the pictures on the original site are swapped out for Times pictures—it’s not clear whether this is done through direct image linking or some other way.