Wednesday, February 03, 2016

Empire down: Fox's series protected no matter how confused consumers are

Twentieth Century Fox Television, et al. v. Empire Distribution Inc., No. 15-2158 (C.D. Cal. Feb. 1, 2016)
 
Sometimes it’s nice to see the law work itself pure, as a court clears out some plaintiff-postulated ambiguities in Rogers v. Grimaldi.  Fox produces Empire, a TV show following a fictional entertainment industry family struggling for control of “Empire Enterprises.” Music features heavily on the show; Fox partners with Columbia to release the show’s songs, including a compilation for the season.  These are sold in record stores and online.  In connection with Empire, Fox also enters into contracts with artists, produces and releases music, and promotes the artists and their music at radio stations and live performances. 
 
Defendant Empire Distribution is a record label, music distributor, and publishing company founded in 2010.  It produces and distributes urban, hip hop, rap, and R&B music, and has released over 11,000 albums/singles, 6,000 music videos, and 85,000 songs, including multiple platinum and gold records and works by famous artists such as T.I., Snoop Dogg, Kendrick Lamar, and Gladys Knight.  It uses the trademarks “Empire,” “Empire Distribution,” “Empire Publishing,” and “Empire Recordings,” and has some pending registration applications.
 
Unsurprisingly, Empire Distribution alleged that Empire caused affiliation confusion.  Fox brought a declaratory judgment, and the court granted it summary judgment based on Rogers (which dealt with the federal dilution and state claims as well).
 
The Ninth Circuit follows Rogers, protecting artistic works unless their use of a mark has no artistic relevance to the underlying work whatsoever or, if there is artistic relevance, the use is explicitly misleading about source or content.  Sleekcraft’s multifactor test didn’t apply, despite Fox’s extensive use of Empire.  Moreover, contrary to what some past cases held, E.S.S. Entertainment 2000, Inc. v. Rock Star Videos, Inc., 547 F.3d 1095 (9th Cir. 2008), made clear that there’s no threshold test of whether the plaintiff’s mark is a cultural icon.  The threshold test is “whether the allegedly infringing use is contained in an expressive work.”  [Pause for obligatory note: not including an ad for a product, even though an ad is an expressive work.]
 
Artistic relevance: Um, yeah. The characters are “struggling for literal control over an entertainment company called ‘Empire Enterprises,’ and figurative control over the vast ‘empire’ that Lucious Lyon has built,” and it’s set in New York, the Empire State.  Empire Distribution argued that the use also had to be referential—that is, it had to refer to the trademark owner to trigger Rogers.  Some courts, mistakenly, have agreed with this argument.  Rogers simply requires that the junior user didn’t arbitrarily choose to use the mark just to exploit its publicity value. That doesn’t require the work to be “about” the trademark. A contrary rule could chill a lot of protected speech; Empire Distribution’s argument was essentially that “the common word ‘Empire’ cannot be used in an expressive work unless it is referencing Empire Distribution.”
 
All that’s left is explicit misleadingness.  As that prong of the test indicates, the proper inquiry is whether there’s an “explicit indication, overt claim, or explicit misstatement” as to the source of the work.  Empire Distribution wanted to apply Sleekcraft, but then Rogers wouldn’t be a defense at all.  Brown v. EA made crystal clear that evidence of consumer reaction, as opposed to evidence about what the user said, was irrelevant to Rogers; Brown involved “strong consumer survey evidence,” which the Ninth Circuit said was irrelevant:
 
Adding survey evidence changes nothing. The [second prong of the Rogers] test requires that the use be explicitly misleading to consumers. To be relevant, evidence must relate to the nature of the behavior of the identifying material’s user, not the impact of the use. Even if Brown could offer a survey demonstrating that consumers of the Madden NFL series believed that Brown endorsed the game, that would not support the claim that the use was explicitly misleading to consumers.
 
“Thus, it is clear that no amount of evidence showing only consumer confusion can satisfy the ‘explicitly misleading’ prong of the Rogers test because such evidence goes only to the ‘impact of the use’ on a consumer.”
 
Also, I'm glad to get the chance to use a Sisters of Mercy reference again.

Absurd "world record" claim isn't use of actual record-holder's identity

Martin v. Living Essentials, LLC, 2016 WL 374142, No. 15 C 01647 (N.D. Ill. Feb. 1, 2016)
 
Ted Martin, who holds the world record for most consecutive kicks in hacky sack (no knees, no partner) sued for invasion of privacy and false advertising based on a television commercial in which an actor claims to have accomplished a series of seemingly impossible feats, including mastering origami “while beating the record for Hacky Sack,” under the influence of an energy drink.  The court found that the ad “is clearly a comedic farce and in no way trades on Martin’s identity.”

The ad, apparently part of 5-hour ENERGY’s “The Last Five Hours” series, shows an actor claiming that “in the last 5 hours” he: disproved the theory of relativity; swam the English Channel and back; found Bigfoot; and mastered origami while beating “the record for Hacky Sack,” all because he took a 5hE shot.  Mouseprint at the bottom of the screen says, “For comedic purposes only. Not actual results[,]” and “Not proven to improve physical performance, dexterity or endurance.” Martin claimed that the hacky sack statement was a false representation of fact and an appropriation of his identity.
 
The court first found that the one-year statute of limitations for right of publicity claims in Illinois barred the claim, given the complaint’s statement that the ad came out soon after Nov. 16, 2012, and that the complaint was filed in February 2015.
 
Even if the claim weren’t time-barred, it couldn’t win.  Martin’s argument was that, by claiming that the record holder for hacky sack used 5hE to set the record, the ad said that Marin used 5hE.  Sadly, Illinois law covers the unauthorized use of “any attribute of an individual.”  But the court nonetheless found that “the record for Hacky Sack” was far too ambiguous to identify him.  There are many kinds of hacky sack records, and the ad shows a man kicking two hacky sacks, not one; the Guinness World Record book lists 14 different records, and the ad doesn’t claim any particular one. 
 
But all of this misses the more fundamental point. The Commercial is a joke, a comedic farce. The claims it makes are not intended to be taken as true—and to the extent that there could be any doubt on that score, the commercial includes a clear disclaimer advising the most gullible among us that these are “not actual results.” No one could watch the Commercial and reasonably conclude that the product spokesman actually holds “the record for Hacky Sack” ….
 
And anyway, the actor claimed to have done a number of other improbable things that didn’t identify Ted Martin. 
 
Martin neither claims to have done these other things nor explains why anyone would believe that, in addition to unrivaled skill at keeping a footbag aloft, he possesses genius surpassing that of Einstein, twice the endurance of Diana Nyad, and hunting skills so refined that he is able to locate even mythical creatures. The Commercial’s implication is to the contrary: whoever this remarkable human may be, he is someone other than Ted Martin (or Einstein, Nyad, or the biggest of big-game hunters, all of whom the Commercial portrays as being left in the wake of anyone who might consume a dose of 5HE).
 
Thus, the court cautioned, “defectum humoris non curat lex—the law does not reward humorlessness.”  No reasonable person could find a use of Martin’s identity.  (Query: could a reasonable person find a use of Einstein’s identity?)
 
The Lanham Act claim failed for the same reason: it was a joke. Also, without any use of Martin’s identity, Martin failed the Lexmark test for statutory standing, though this was a non-jurisdictional argument that could be, and was, waived by defendant’s failure to raise it.
 
Living Essentials argued that its claim was ambiguous because it wasn’t clear which hacky sack record the actor claimed to have broken.  The court rejected this claim, and rightly so: whatever records there were, the actor had broken none of them; the claim was literally false in that sense.  But there was no way that a reasonable person could take that false claim literally; it was a humorous exaggeration posing no risk of consumer deception, “better described as farce than mere puffery.”  Martin thus couldn’t plausibly allege consumer confusion that injured him.  He didn’t identify lost endorsement opportunities (he had no such deals) and his emotional angst didn’t count.  Even if his record had commercial value, it would be among “Hacky Sack cognoscenti,” but Martin didn’t allege that those people would be misled.

Monday, February 01, 2016

Consumer protection fellowship for law students

The deadline for the ABA Section of Antitrust Law’s Janet Steiger Fellowship Program has been extended to Friday, February 5th. Steiger Fellows receive a $6,000 stipend for summer internships in the offices of 36 State Attorneys General where they’ll work primarily on consumer protection issues – debt collection, technology, privacy, false advertising, consumer credit, etc. Students may apply in their home states or with AGs’ offices from Vermont to Honolulu and everywhere in between. There’s even the possibility for a need-based housing or travel allowance. The Steiger Fellowship is also open to 1Ls, some of whom may not be thinking about summer employment yet. The application process is simple and it’s a great foot in the door.

Reading list: Hoofnagle on FTC Privacy Law


Review copy. The book will be available on Amazon Feb. 5.  This is a detailed, clearly written guide to the FTC, with specific attention to its privacy practices but including an extensive discussion of its overall history and jurisdiction, at least on the consumer protection side; the antitrust side receives much less attention, which is not a complaint (at least not from me!).  I learned a lot, and I’m going to recount some of the highlights.
 
Hoofnagle regards the FTC’s activities, mostly through settlements, as “the most important regulation of information privacy in the United States,” likely to be so for the near future given our choked-off political system.  Nor is rulemaking a possibility, given the special, non-APA legal regime that makes rulemaking incredibly difficult for the FTC.  And that incrementalism is not a bad thing: he thinks the FTC is well-positioned to meet the challenge, having “matured into a careful, bipartisan, strategic, and incrementalist policy actor.”  
 
Because its regulatory scope is so broad, it hasn’t been subject to capture by any particular industry, and has been able to target the biggest actors in relevant markets.  When it goes too far, it risks a Congressional backlash, but it is also constantly under pressure to prove its worth.  First by using its deception authority, and increasingly with unfairness, the FTC has pushed companies to improve privacy policies substantively, which is needed since mere disclosure, we know, doesn’t change a thing.  Hoofnagle regards the fact that the FTC isn’t constrained by common-law requirements like a specific harm to an identifiable person as its great strength, and rejects the idea that the FTC should have to follow common-law harm principles.  His emphasis on the desirability of a reasonably active regulator to protect well-behaved businesses against outliers in their own fields is welcome; business interests are not libertarian interests.
 
Hoofnagle goes into great detail about the structures of the FTC, with both practical and ideological effects.  He identifies a tension between “legal, more moralistic culture” of the Bureau of Consumer Protection and the economists—the former “view a misrepresentation as an inherent wrong,” while the latter want harm outside of that before the government should act.  He views the FTC’s history as one of continuity, arguing that the FTC has always been a technology agency responding to new developments in marketing and otherwise.
 
Not everything is perfect.  In the past decade, only about 25 percent of FTC judgments and settlements result in full payment, due to resistance by companies (one $16 million case required subpoenaing sixty-four different entities and getting thirty-five garnishments); lack of money remaining in the hands of fraudsters; and asset hiding.  This fact serves as a good reminder that the FTC goes after some truly bad actors, which is one reason that case law is generally so favorable to the FTC; the incorrigible/litigious respondents “create terrible precedents for other companies.”  At the same time, the FTC has trouble enforcing consent orders, because courts
require the FTC to prove by clear and convincing evidence that the respondent has violated an express and unequivocal command in order to find contempt.  Where the issue is something like privacy, it’s difficult to reach the right level of specificity: “respect consumer privacy and … secure data” are hard obligations to define.  Google, which is under 20 years of monitoring for its ill-fated Buzz initiative, promised to create a “comprehensive privacy program that is reasonably designed to address privacy risks related to the development and management of new and existing products and services for consumers.”  Hoofnagle points out that  this order could be complied with “substantially” and “still be inadequate to protect privacy in a meaningful way. … [A] weak or partial embrace of the duty may be practically difficult to police.”
 
When it comes to privacy, Hoofnagle argues that the FTC’s broad authority to police unfair and deceptive trade practices can take it very far.  Deception is available in at least some circumstances, where people are misled into a false sense of security.  Historically, he contends, the FTC has begun regulatory interventions with its deception authority, moving towards unfairness when market manipulations become more subtle and hard to deem deceptive, which is what is happening with privacy now.  The more companies write their contracts to excuse themselves from any constraints in the fine print, the more of a role unfairness, and generalized consumer expectations, will have to play in enforcing privacy protections.
 
One example of the use of deception is when, in part to stave off government action, industry engages in self-regulation.  Then, violations of self-regulatory rules can be enforced under the FTC’s deception authority.  Self-regulation also avoids First Amendment challenges and may be appealed to as reasonable standards of industry behavior when the FTC goes after outliers under its unfairness authority.  “Perhaps for these reasons, the FTC exhibits a kind of credulity when new groups appear claiming to represent entire industries and claiming a commit ment to a set of rules. To privacy advocates, this activity is galling and empty, but to the Commission the industry has just rested its foot in a trap.”
 
Hoofnagle makes the conventional arguments against disclosure as sufficient to protect privacy such as the failure of disclosures and the third-party problem of information collection/use by third parties with no relation to the consumer or reputational checks on their behavior (think collection agencies or the servicing agent for your mortgage).  He draws on Gordon Hull’s argument that current neoliberal ideas treat privacy as an individual economic choice, setting people up for failure (because self-management of privacy is impractical).  Individualization obscures the true social nature of the problem.
 
However, Hoofnagle doesn’t think that privacy law is the appropriate place to deal with discrimination in credit offers or pricing based on individualized targeting.  Price discrimination, he says, is about power, and information companies are natural monopolies. Therefore, competition policy, rather than privacy law, is the place to work on disturbing uses of data to discriminate on price.
 
Later chapters discuss specific areas of privacy, such as children’s privacy/COPPA, where fears for children’s safety “caused Congress to build a framework with scant regard to how children might want to use interactive services.” COPPA created incentives to develop services that are one-way, television-like broadcasting services. Designers do this because interactivity triggers
legal duties under COPPA, but it makes the information environment less healthy. Children also learn to lie about their age in order to join fun, highly interactive services that are supposedly only used by adults.
 
There are good parts of COPPA, Hoofnagle contends, but they should be available to everyone, not just kids: “the allocation of privacy responsibilities for the behavior of vendors, such as third-party trackers, to the service; limitations on how data can be used; limitations on tracking; rules on how much data can be collected; a regulatory incentive for contextual advertising and against behavioral tracking; and ceilings on how long data can be retained.”  These non-consent related provisions, he concludes, provide much more protection for privacy than parental consent does.
 
Information security cases raise both deception and unfairness concerns.  Hoofnagle relies on Ross Anderson’s argument that, even in competitive markets, insecure products tend to drive out secure ones because of first-mover advantage. Consumers have trouble evaluating security, and don’t rank it highly when choosing products; it’s a latent safety defect.  Companies often build security into products “to transfer risk to others, or to enable differential pricing, or to cause customer lock-in, such as through digital rights management technologies.”  For example, for credit cards, issuers have successfully defined the problem of fraud as one of merchant security, putting a “Sisyphean” burden on merchants: keeping a widely shared number secret.  A more comprehensive approact to the structure of payment systems would define and deal with the problem differently.  Hoofnagle argues for a public health-type approach, dealing with insecurity as a collective action problem.
 
Anti-marketing laws, e.g., anti-spam laws: Here I learned of research by Brian Krebs asking why anyone buys from spammers.  He looked at records from a large online pharmaceutical sales network and interviewed 400 purchasers.  Many couldn’t afford the US prices of drugs—they could save hundreds of dollars per month to treat chronic conditions, and get Indian drugs that looked just the same as those from the local pharmacy (perhaps because most of those drugs are made in India too). Others were embarrassed to see a doctor; thought it was more convenient to self-diagnose and buy treatments online; or couldn’t get legal prescriptions because they were dependent on the drugs.  This too seems like a series of political problems.  But because spammers benefit, they impose huge externalities on the rest of us: $20 billion estimated annually, for revenue for spammers of $200 million a year.  This is apparently an externality ratio greater than that for auto theft.  Worse, techniques created to spread spam create an infrastructure for other malicious software.
 
Hoofnagle briefly addresses Eric Goldman’s arguments that we should like ad targeting because then we’d only see information useful to us.  Among other things, he makes the nice point that no commercial entity will have the incentive to develop such a filter, to which we provide input about our preferences, so long as data about us are readily available other ways and we have no legal means to stop that.  Goldman’s related critique that Do Not Call isn’t granular enough to let through calls people really would want is not persuasive—not only is it outrageously popular, suggesting a revealed preference for not getting the calls, the cost of erecting a screen and choosing which you might be interested in—even if you could really figure that out in advance—is itself a cost consumers don’t want to bear.
 
Hoofnagle also sounds the alarm about First Amendment constraints on regulation.  Since we don’t have to worry any more about paying for each email we receive, regulations may not seem justified under the strict standards the Court now applies, even if we don’t want all this spam.  I would have liked a bit more First Amendment analysis, fitting Hoofnagle’s policy arguments into the First Amendment scheme.
 
Financial privacy: I didn’t know that other countries, such as France and Australia, don’t have the kind of credit reporting we do, where all our transactions are tracked. They only create records when there’s nonpayment—and yet, Hoofnagle notes, France and Australia are modern markets.  The US, by contrast, uses a model of “total surveillance. It gives individuals incentives to pay bills on time – and to have them monitored by [Credit Reporting Agencies] – in order to have a report dominated by positive information.”  He doesn’t mention this, but that also puts priority on participating in the formal economy. 
 
He also notes the history of financial entities putting lots of people at risk because it paid them to do so, with prescreened credit offers that could be swiped out of people’s mailboxes.  To check your credit report/opt out of offers, you need to provide your Social Security number—but business users can search for you using your name alone, without that number. “This dynamic is typical for opt-out schemes – opting out is subjected to higher security requirements than the much riskier act of delivering a full consumer report to a business.”
 
Hoofnagle suggests that financial privacy laws could be protected somewhat against First Amendment challenges by tying immunity for credit report providers from tort suits to the burdens of the law—if they aren’t going to be required to protect consumers’ ability to access and contest credit reports, and to omit information that’s old or contested, then they shouldn’t get federal preemption of negligence and other tort claims.
 
International privacy efforts: Unfortunately, the US-EU Safe Harbor rules were invalidated just as this book was going to press, so most of it discusses the situation as if the Safe Harbor existed.  Hoofnagle sets out the different US and EU approaches, based on different history and values:
 
The atrocities committed during the Holocaust were assisted through information technology, and private companies were complicit in Nazi activities. Furthermore, the penetration of reliable census-taking activities is one explanation of why so many Dutch Jews were killed in the Holocaust while nearby countries with fewer information collection activities had higher rates of Jewish survival. Stasi and Communist tracking of individuals and their social networks, and citizens “informing” on others reinforced the lesson that information can become a tool of oppression.
 
But he cautions against understanding the European approach as simply fear-based.  Instead, European values of respect for private life and individual dignity reflect a positive view of the self as well.
 
I was particularly interested in his description of conflicting legal cultures: “US lawyers seek rules that will help bring clients into full legal compliance. But international rules are often stated as general, high-level principles for data handling. Read literally, these rules would be impossible to implement because they would regulate personal, inconsequential matters.”  E.g., data protection laws, on their plain terms, make many a Facebook post unlawful (and there’s at least one woman who was held liable for doing just that). So US lawyers, who often want to be within the law, look at European law and say it’s impossible, especially given national variations.  Mostly, he suggests, European regimes want “good enough” privacy, like “good enough” parenting, but that’s really hard to define in advance.  And the privacy version of the precautionary principle—delete data after a reasonable time, and don’t do new things with them without consent—conflict with the Silicon Valley approach of collecting information now and figuring out how it might be valuable later.
 
Turning to the future, Hoofnagle endorses the approach of David Vladeck (my colleague), who suggested that the FTC would include threats to individual dignity as one reason it might choose to pursue a case.  “Harm supporters reacted hysterically, labeling Vladeck’s views emotional, questionable, vague, nontraditional, and subjective…. In critiquing Vladeck, harms-based supporters almost always put dignity in quotes, as if it were some Germanism.”  But dignity, Hoofnagle notes, is a good way to describe why people seek privacy (and why they don’t generally poop in public).  Being spied on in your own home—as actually happened to some people in cases pursued by the FTC—isn’t primarily or measurably an economic invasion.
 
In his view,
 
the FTC’s case selection is causing American law to converge with some European norms. For instance, the FTC’s matters concerning malware reject traditional contract notions in favor of fairness principles that one would expect from European consumer protection efforts. Similarly, FTC actions against companies that collect information for one specified purpose and resell it for another reflect European ideals of purpose specification and limitation. Finally, the US–EU Safe Harbor Agreement itself, while only legally applicable to Europeans’ data, causes some companies to extend Continental-style protections to American consumers.
 
The Bureau of Economics is, in Hoofnagle’s view, a barrier to more effective FTC policies on privacy.  The BE doesn’t generally see privacy violations as having an economic value, and “it perceives there to be no market for pro-privacy practices.”  Hoofnagle suggests ways that a more dynamic market for privacy might be encouraged and value.  For example, there is a “privacy differential” between the policies of free, consumer-oriented services and for-pay, business-oriented services, and the value of that differential to consumers could be studied. This could result in disgorgement and restitution penalties for violations of the FTCA.  More aggressively, the BE could help change the incentives of industry participants who lack incentives to protect privacy. Hoofnagle analogizes to the market for auto safety:
 
automakers once claimed that consumers did not really care about safety, that consumers chose cars based on appearance, and that auto safety was the domain of a small group of malcontents. In the 1950s, there was no ability to express a preference for safety, but once seat belts became an option, they proved tremendously popular. The BE could be part of a movement to create the “seat belt” for internet commerce.
 
I love analogies, but I’m not sure how exactly this would work, because understanding the options is probably always going to be difficult, by Hoofnagle’s own account of consumer decisionmaking.  But Hoofnagle has more practical suggestions, too.  He suggests drawing on methods used by the plaintiffs’ bar for measuring how consumers conceive of the value of personal information:
 
For instance, in one case involving illegal sale of driver record information, an economist polled citizens to explore what kind of discounts they would accept in renewing their driver’s license in exchange for this information being sold to marketers. While the market valued the information at $0.01 per record, 60 percent of respondents said they would reject an offer of a $50 discount on their license in exchange for allowing the sale of their name and address to marketers.
 
Most importantly, however, Hoofnagle advocates that the FTC should reject any return to the “common law,” which means limiting FTC action to addressing pecuniary injuries.  (As he points out, the common law also provides criminal punishment for frauds on the public, which the proponents of harm requirements don’t support.)  Affronts to dignity and violation of consumer expectations also deserve protection.  And this means a willingness to use the unfairness power to address inherent wrongs.  The FTC has begun to do this with awful behavior like revenge porn sites, and with spyware, and he contends it should do more.  For example, he considers Facebook to be an “information-age bait and switch.”  After consumers had become locked into the platform, it changed its privacy policies to make us far more exposed, relying on its market dominance to keep defections to a minimum.
 
As part of this regulatory attention, privacy advocates will have to hold their own in cost-benefit analyses.  Hoofnagle argues that deregulation advocates produce biased work that ignores the externalities of privacy intrusions, such as the disruption caused by telemarketing calls and the costs of developing technologies such as caller ID to fend them off.  Privacy-side work could provide a fuller picture of the externalities and transaction costs to consumers of ugly industry practices.
 

Right of publicity question of the day

Put someone's image on a playing card.  Violation of the right of publicity?  Newsworthy?  Transformative?  What if the image is on the cards in order to solve a cold case?  Please discuss!

Speech about a concluded, one-off auction isn't advertising or promotion

Reese v. Pook & Pook, LLC., 2016 WL 337022, No. 14-5715 (E.D. Pa. Jan. 27, 2016)
 
The Reeses collected antique toys, and filed for bankruptcy, at which point they were required to sell some of their collection. Defendant Pook & Pook, LLC was approved by the Bankruptcy Court as the auctioneer to sell the collection.  The Reeses alleged that the sale was conducted in a flawed and corrupt manner, so that it raised only $560,000, far less than it should have raised.  In particular, they alleged that “the staging of the sale was deliberately flawed to diminish the value of the toys: toys were presented in piles with no effort to match parts into complete toys, parts of various two– and three-part toys were not matched, allowing, for example, the front end of one horse-drawn toy to go in one box lot with the back end placed in a different lot.” Thus, online and phone bidders couldn’t know the contents.  Defendant Jay Lowe, however, allegedly knew where the mismatched parts were, bid accordingly, and put them back together for resale at a significant markup. Lowe allegedly previously disparaged their collection at the James Julia Auctions in Maine, where he worked on commission.  Moreover, the P&P catalogue of the Reese sale allegedly promoted fake antiques called “newtiques,” created by Lowe using original parts from antique toys and placing them on new toys, further disparaging the quality of toys in the Reese collection. P&P also allegedly sent an employee to the Reninger Antique Mall to criticize the collection as “junk.”
 
Defendant Lita Solis-Cohen, the senior editor of the Maine Antique Digest (MAD), wrote “Pook’s First Toy Auction.” Allegedly relying on information from Lowe, the article said that:
 
Everyone in the toy world seemed to know the major consignor was Carter Reese, a longtime collector who bought toys that he loved before collectors got hung up on condition. It didn’t matter to him if the toy had replaced figures, was repainted, or if much of the paint was missing. If the toy had charm and was cheap, he bought it.
 
It continued that “‘[t]he consensus was that many of the toys that Pook offered brought all they were worth...’ because, in the words of Jay Lowe, ‘condition is king.”’
 
The court dismissed the Lanham Act claims against MAD because its speech wasn’t “commercial advertising or promotion.”  Rather than (correctly) saying that MAD’s speech wasn’t commercial speech, the court ignored/was not directed to Lexmark and held that the parties had to be in competition, an element of the older “commercial advertising or promotion” that courts have generally acknowledged didn’t survive Lexmark.  More persuasively, the court noted that the article was published after the auction, and thus it was implausible that any alleged falsity could have damaged the Reeses by affecting the value of the collection.  The same reasoning defeated the common law unfair competition claim.
 
As for commercial disparagement and injurious falsehood, plaintiffs failed to plausibly plead actual malice or any actual pecuniary loss arising from the publication of the article. Regardless of whether the plaintiffs were public figures, the two torts clearly required actual malice.  (This is something that is less important today because of the constitutionalization of defamation, but here it clearly matters.)  They couldn’t plausibly plead disparagement and actual malice as a matter of law; the article was, if anything, critical only of P&P and its inexperience, concluding that its inclusion of too many lots in the auction may have resulted in “quite a few rarities sold under the money.”
 
The only references to the Reeses were that Carter bought toys “that he loved” rather than for their condition (i.e., investment potential) and that “if the toy had charm and was cheap he bought it.” The only reference to the quality of their collection is the quote from Lowe describing the sale as a “good test of the middle market” (as opposed, one would assume, to the high end of the collectible toy market).
 
There were no facts pled suggesting that a reasonable publisher would have been on notice of these statements’ falsity or that MAD acted with reckless disregard for truth.  This also doomed the plaintiffs’ false light claims; in addition, the content of the article wouldn’t be highly offensive to reasonable people in the Reeses’ position.
 
The Reeses also sued Lowe,who argued that his speech to MAD recounting the events of the auction after it occurred couldn’t be commercial advertising or promotion; the court agreed (though I would caution that his speech might plausibly be commercial under some circumstances even if it wasn’t commercial with respect to the entities that reported it).  Perhaps especially relevant was that his comments went to the quality of the toys sold, not the quality of toys remaining in the Reeses’ collection or the quality of his own inventory of toys.  Related claims also failed.

Friday, January 29, 2016

Beware of Greeks bearing yogurt claims

General Mills, Inc. v. Chobani, LLC, No. 16-CV-58 (N.D.N.Y. Jan. 29, 2016)

GM also sued Chobani, and received an almost identical preliminary injunction, accompanied by an almost identical opinion, as that in Dannon’s case, reported earlier.  Yoplait Greek 100 was the other target of Chobani’s campaign.  The key difference is the video ad, which “opens with a woman seated behind the wheel of a vintage convertible, examining a cup of peach Yoplait Greek 100 yogurt.”  Narrator: “Yoplait Greek 100 actually uses preservatives like potassium sorbate.  Potassium sorbate? Really? That stuff is used to kill bugs!”  The woman scrunches her face in disgust and tosses the Yoplait, replacing it with Chobani “as the details of a roadside stand packed with fresh racks of produce become visible in the background.”  Voiceover: “Now, there’s Chobani Simply 100. It’s the only 100 calorie light Greek yogurt with zero preservatives.”  Happy woman consumes Chobani; camera pans to “reveal a happy child returning to the vehicle with a bag of produce in hand.” The  final shot includes a hashtag:  #NOBADSTUFF.

In the digital content, the Yoplait image is presented with several ingredients identified as “artificial” in large, red font.  Beneath the Yoplait image, the Chobani website describes potassium sorbate as both “an allowable chemical preservative for foods” as well as an “allowable minimum risk pesticide product.”

Potassium sorbate is generally recognized as safe by the FDA.  According to the U.S. Department of Agriculture, “few substances have had the kind of extensive, rigorous, long-term testing that sorbic acid and its salts [like potassium sorbate] have had.  It has been found it be non-toxic even when taken in large quantities, and breaks down in the body into water and carbon dioxide.”  In food products, it works to inhibit the growth of mold and yeast, and has been used widely and safely for decades in food products.  It’s also found in various pesticide products classified as “Minimum Risk” by the EPA and exempted from certain regulatory requirements.   

GM argued that the statement “that stuff is used to kill bugs” conveyed the literally false by necessary implication message that the potassium sorbate used in Yoplait Greek 100 rendered it unsafe to eat.  Chobani argued that its claims were literally true, and the rest of its claims were puffery. In context, however, the claims were literally false.  In the context of “no bad stuff” and the like, the ads painted GM’s yogurt as a safety risk because it contains potassium sorbate.

Presumption of irreparable harm from literally false comparative claim applied; even without a presumption, the inference of irreparable harm was easily made from the same circumstances, especially given the difficulties of quantifying the harm caused. 

Note: After I posted about Dannon’s victory against Chobani, I got a request from a Chobani PR person to update my story with Chobani’s “statement and social media post.”  In writing about legal cases, I try to confine myself to what’s in the opinion and, occasionally, the papers or other publicly accessible sources.  When I read the statement/social media post, I didn’t see any disagreement with the law or the facts, so I don’t think there’s any reason for me to include Chobani’s press release.

It's all Greek to me: chlorine claims over yogurt enjoined

Chobani, LLC v. Dannon Co., No. 16-CV-30 (N.D.N.Y. Jan. 29, 2016)

Chobani sued for a declaratory judgment that it wasn’t falsely advertising about Dannon; Dannon immediately filed its answer and counterclaims, and the court a bit over two weeks later granted a preliminary injunction against Chobani.
 
Dannon Light & Fit is the leading brand of light yogurt in the US, and Dannon’s top seller.  Dannon added Light & Fit Greek as an eighty-calorie Greek nonfat yogurt.  Dannon alleged that its highest proportion of light yogurt sales routinely occurs during the first three months of the year, “as this is the time when most American consumers resolve to make positive changes relating to weight loss, fitness, and overall health and diet.”  It’s also the time of year when consumers experiment with new yogurt products, making marketing and sales efforts during each year’s first quarter crucial.
 
Chobani, meanwhile, actively seeks to differentiate itself from its competitors in the Greek yogurt market by emphasizing its commitment to “natural, non-GMO ingredients” and “environmental sustainability practices.”  Its latest offering, Chobani Simply 100 Greek Yogurt, has “100 calories per serving with no preservatives or artificial sweeteners.”  Its January 2016 campaign included a TV ad, a print ad, and digital/social media content, all on the same theme.
 
The video ad’s opening shot focuses on a cup of Dannon Light & Fit Greek Yogurt sitting on a table, which is immediately picked up by a young woman lounging in a pool chair. As she scrutinizes the ingredients label, a voiceover proclaims:  “Dannon Light & Fit Greek actually uses artificial sweeteners like sucralose.  Sucralose? Why? That stuff has chlorine added to it!”  The woman scrunches her face in disgust and tosses away the cup of Dannon yogurt.  She then chooses Chobani Simply 100 Greek Yogurt, which is sitting on a table to her right, as a swimming pool becomes visible in the background.   Voiceover: “Now, there's Chobani Simply 100. It's the only 100 calorie light yogurt sweetened naturally.” “As she tears open the packaging, the Commercial pans to a wide shot of the swimming pool, where a child jumps in, making a big splash.  The camera returns to the woman, now smiling contentedly, before finishing with a wide shot.”  The final shot includes a hashtag: #NOBADSTUFF.
 
The print ad’s headline is “Did You Know Not All Yogurts Are Equally Good For You?”  It continues, “[y]ou think you are doing something good for yourself and your family [b]y buying yogurt and instead of bad stuff [a]nd then you find that the bad stuff* [i]s in your yogurt!” The asterisk refers to a mouseprint footnote explaining that “bad stuff” means “Artificial Ingredients.” The text above and below the Dannon product displayed is the same as that in the ad. Further:  “If you want to do healthy things, know what’s in your cup. Chobani Simply 100 is the only 100-[c]alorie Greek Yogurt without a trace of any artificial sweeteners or artificial preservatives.”
 
Print ad
The digital content is similar.  The website asks “Do You Know What’s In Your Cup? . . . . Scroll over to compare our ingredients with those in other light yogurts to see what’s really inside[.]”  Ingredients of Dannon’s product are identified as “artificial,” and the site has a link to the print ad.
 
Digital content
Sucralose, which Dannon uses, has been approved by the FDA since 1999, and Dannon provided evidence that the FDA reviewed more than 110 safety studies in connection with its use as a general purpose sweetener for food.  Sucralose is a molecule with twelve carbon, nineteen hydrogen, eight oxygen, and three chlorine atoms linked together in a stable form that is safe to consume.  It’s made through a process in which three atoms of chlorine are substituted for three hydrogen-oxygen groups on a sucrose molecule.  This trio of chlorine atoms is known as a chloride, that is, a compound of chlorine that is bound to another element or group. Chlorides are found in many natural food sources, from table salt to cow’s milk.
 
Pool chlorine, by contrast, is a lay term for calcium hypochlorite, “a powerful bleach and disinfectant that is harmful if added to food or ingested.” It’s distinct chemically and practically from the chlorine atoms found in sucralose, and it’s not in, or used to manufacture, any of Dannon’s products.
 
First, the court ruled that Dannon sought a prohibitory injunction to return the parties to the status quo ante, rather than a mandatory injunction requiring affirmative acts by Chobani.  Thus, the standard was no higher than that applied as a result of Winter/eBay.
 
Likely success on the merits: Chobani argued that it was literally true that sucralose had chlorine added to it, and that the other challenged messages about “good” or “bad stuff” were mere puffery.  Nope.  Although “no bad stuff” might be puffery if it weren’t tethered to a comparative claim about Dannon, here Chobani used that phrase in connection with statements and images that portrayed Dannon’s yogurt as a safety risk because it contains sucralose.  Some of the digital content didn’t give the full comparison, but it did include a link to the full print ad.
 
Even if Chobani’s statements about “chlorine” were literally true, there could still be literal falsity if the clear meaning, in context, was false.  (The court wasn’t so sure about literal truth.  The statement that chlorine was “added to” sucralose was inaccurate, if sucralose is created by adding chlorine to a precursor compound; sucralose doesn’t exist until the chlorine is combined with the precursor, and adding additional chlorine to a stable sucralose compound would likely have no effect.  Chobani’s own expert claimed that it was scientifically accurate to say “chlorine has been added to form sucralose.”  A factfinder is likely to conclude that the campaign unambiguously conveys the literally false message that Dannon’s product contains sucralose and is therefore unsafe to consume. Chobani argued that sucralose’s safety was the subject of legitimate scientific debate, but the record didn’t support that claim: “the balance of record evidence reflects that sucralose is an unusually well-studied compound repeatedly determined to be safe for ordinary consumption.”  While some research suggested that high doses could be toxic, that’s also true of salt and water.  Further, it was “telling” that Chobani’s own products contained the same type of “chlorine”—the chloride found in all-natural, non-GMO milk, but Chobani made no mention of that fact.
 
Dannon was entitled to a presumption of irreparable harm given the literally false direct comparative advertising at issue.  Even if such presumptions are illegitimate because “categorical” in a way precluded by eBay, Dannon still showed irreparable harm.  Given the difficulty of showing how many sales or how much goodwill would be lost, it was enough to show (1) competition in the relevant market and (2) a logical causal connection between the alleged false advertising and the claimaint’s own sales position.  That’s a no-brainer here.
 
The balance of hardships also favored relief, since Chobani has no protectable interest in advertising falsely.  And barring false advertising is in the public interest, especially when it comes to serious issues like food safety.
 
The parties agreed on a $1 million bond, which the court accepted. The injunction blocked the existing ads, as well as similar claims related to chlorine content, healthfulness because of the presence or absence of chlorine, the presence of pool chlorine in Dannon yogurt, the danger of sucralose, the lack of safety of Dannon products, or “bad stuff” in connection with Dannon products.

Thursday, January 28, 2016

USPTO white paper on remix, first sale, and statutory damages

Here.  No love for an exception for noncommercial user-generated content (Canada's YouTube exception), but at least some support for the viability and importance of fair use, including discussion of the OTW's contributions.  What is a bit aggravating is the apparent belief that, because the noncommercial/commercial barrier is permeable, it is therefore of little significance to policy--after all, some noncommercial users might grow up to be professional artists in the field in which they first made noncommercial remix, meaning ... what, exactly?  That art students copying Picassos in the art museum should be licensed and paid-for, because it encourages the development of capabilities that are later employed in for-profit endeavors?  That the person who writes Star Wars fan fiction and later writes NYT-best selling novels about dragons should kick back some money to Disney?  Look, even my alma mater recognizes that it's only entitled to ask for some of my earnings now, despite its contributions to my capacities (such as they are).  That is, the observation "the noncommercial/commercial barrier is permeable," mostly with respect to creators but occasionally with respect to specific works, doesn't entail any inability to identify when a particular activity is commercial or noncommercial, or any reason to disregard that status.  And there's a lot of reason to treat activities that are noncommercial differently because of the different ways that people behave, reason, and learn in noncommercial spaces, even if some of them later take the skills they developed and make commercial art. 

(The White Paper does formally disavow any value judgment as between amateurs/professionals, but its implicit assumption that the natural arc of the amateur is to aspire to professionalism is understandable only in a context that expects or demands monetization to identify value.  I imagine all the drafters have some hobby or other that they engage in--singing in a choir, knitting for friends, telling stories to children--that they never plan to monetize.  Is their development stunted?  Or are they making choices about pleasure and nonmonetizable value that law should do its best not to squelch?  I know where my money, so to speak, is.)

Tuesday, January 26, 2016

Lexmark gives some non-TM owners standing to sue for infringement

Innovation Ventures, LLC v. NVE, Inc., 2016 WL 266396, No. 08-11867 (E.D. Mich. Jan. 21, 2016)
 
This long-lived dispute goes another round of various motions in limine.  Innovation sued NVE for trademark infringement; NVE counterclaimed for false advertising.  Here, the court applies Lexmark to resolve disputed questions around trademark ownership, and decides that the jury will hear all the evidence and render an advisory verdict about the equitable issues, because the false advertising counterclaim and unclean hands defense to trademark infringement are so intertwined.
 
NVE sought to present its unclean hands defense to the jury; Innovation sought to prevent NVE from presenting evidence about unclean hands to the jury and to bifurcate the trial.  The unclean hands evidence was: (1) Innovation’s allegedly improper registration of domain names using NVE’s 6 Hour POWER name, including www.sixhourpower.com and www.6hourpower.com; (2) Innovation’s alleged efforts to keep NVE’s products off the retail shelves; (3) Innovation’s alleged opposition to NVE’s application to register “6 Hour POWER” with the PTO; and (4) Innovation’s publication and distribution of a “Legal Notice” which NVE claims mislead retailers into removing NVE’s products from the shelves because it over-broadly identified the products against which Innovation had obtained an injunction. (Similarly named products from a different producer.)
 
Innovation wanted to try its trademark infringement claim to the jury first, without allowing the jury to hear any evidence about false advertising or unclean hands.  Innovation argued that the false advertising claim would be moot if Innovation won because NVE would have had no legal right to sell an infringing 6 Hour POWER product in the first place. And if Innovation lost, any  unclean hands evidence would be irrelevant, though a second trial could be held on false advertising.  NVE pointed out that this would let Innovation put its best case forward, and not allow NVE to provide a full defense. 
 
The court decided that all the legal and equitable issues would be presented to the same jury, and the jury would be instructed to return advisory verdicts on the factual questions related to the equitable claims, with the final decision on the equitable issues being reserved to the Court.  While Innovation argued that unclean hands evidence would be unduly prejudicial, many factual questions were common to the legal and equitable claims, requiring their presentation to the jury.  The unclean hands evidence largely overlapped with the false advertising counterclaim.  Moreover, the jury would be aided by a “full presentation of the real circumstances that surrounded how these parties acted in competition with one another.” Evidence of Innovation’s alleged efforts to get retailers to remove NVE’s products from store shelves “could indicate a concerted effort on behalf of Plaintiff to drive Defendant out of the market.”
 
Innovation’s concerns about prejudice were not dispositive because some of the evidence—that relevant to false advertising—“is rightfully before the jury and prejudice arising therefrom cannot be considered unfair prejudice.” Any additional risk of prejudice from the less serious unclean hands evidence could be avoided by carefully instructing the jury, and didn’t outweigh NVE’s right to a jury trial and the needs of judicial efficiency.
 
Innovation did win confirmation of its standing.  Previously, NVE argued that Innovation didn’t own the underlying trademark when it sued.  NVE argued that it learned during discovery that a separate company may have owned the 5 Hour ENERGY trademark when the case was filed, and the court agreed that it appeared that, at some point in time, this separate entity was in fact the owner, and Innovation had only a nonexclusive license.
 
However, Innovation sued under §43(a), and argued that it didn’t need to own a mark to pursue its claims as long as it showed it was likely to be harmed by infringement.  (It also argued that, by subsequent agreement with the third party, it became the owner nunc pro tunc of the trademark, but the court didn’t reach that argument.)  The court agreed that Innovation adequately alleged sufficient commercial interest in the mark to have standing under Lexmark.  (Sorry, Justice Scalia. Until you give us another simple name for it, it’s standing.)
 
Under § 43(a), “any person who believes that he or she is or is likely to be damaged” may bring a claim for infringement resulting from false association or false advertising, “without regard to any ownership interest the plaintiff may have in the trademark.”  This means that manufacturers, competitors, distributors, and others may have standing if they satisfy Lexmark, which the court characterized as setting the standard for “whether a non-owner plaintiff has standing to raise a claim under § 43(a).” 
 
Innovation fell within the zone of interests protected by the Lanham Act—its interests were those of a person engaged in commerce, with commercial interests in reputation or sales at stake, and not those of a mere deceived consumer.  NVE couldn’t defend by arguing that a third party had superior rights; such a jus tertii defense is disfavored in trademark law.  Moreover, Innovation alleged proximate cause: that the introduction of NVE’s allegedly infringing product resulted in lost sales and association with a competing product.

Monday, January 25, 2016

Court rejects Zippo jurisdiction test but allows suit over alleged copying

Kindig It Design, Inc. v. Creative Controls, Inc., --- F. Supp. 3d ----, 2016 WL 247574,  No. 2:14-cv-00867 (D. Utah Jan. 20, 2016)
 
Mostly a personal jurisdiction ruling in this copyright/patent infringement/false advertising case brought by Kindig, which customizes hot rods.  Creative Controls, which customizes vehicles for accessibility purposes, is a Michigan corporation with no place of business, property, employees, etc. in Utah.  Creative Controls did have a website allowing Utah residents to order; it donated a custom parking brake for use on a car Kindig was customizing in Utah; it sold a single door handle to a Utah customer; and it allegedly copied photographs and contents from Kindig’s Utah-based website.  (In return for the donated brake, Kindig sent Creative Controls a disk with photos of the finished car, and a letter indicating that it could use the photos for promotional purposes; these are among the allegedly copied photos at issue.)   The door handle was ordered by a Kindig employee’s relative, and the parties agreed that personal jurisdiction could not be based on this plaintiff-generated contact.
 
The court found that it didn’t have personal jurisdiction over Kindig’s patent claims, but did have personal jurisdiction over copyright and related claims.  The court further held that the patent claims weren’t so related as to justify the exercise of pendent personal jurisdiction.  Among other things, the court rejected the Zippo website jurisdiction test as incompatible with modern internet practices, holding that traditional tests were readily applicable to internet-based conduct.  As the court pointed out, many now-ubiquitous interactive features didn’t exist in 1997 when Zippo was decided, and also the presence of intermediaries such as Facebook makes it hard to figure out how to judge the “interactivity” of something like a Facebook page related to the defendant’s own activity.  Moreover, the traditional purposeful availment test doesn’t require that the purposeful availment be for commercial purposes; without that limit, pretty much everybody looks like they’re personally availing themselves of pretty much any jurisdiction under Zippo.
 
The allegedly infringing copying of Kindig’s photos from its Utah website, however, gave rise to personal jurisdiction over Creative Controls on all claims related to the alleged copying.  Kindig sufficiently identified the works at issue by including copyright registration information and date of first publication.  By alleging that Creative Controls’ website “contains photographs of customized automobiles which [sic] are nearly identical to [the copyrighted] photographs of customized automobiles found on the Kindig website,” the complaint provided sufficient notice of the allegedly infringing works, even if it didn’t otherwise identified them.
 
Likewise, Kindig sufficiently pled false advertising/deceptive trade practices.  Creative Controls argued that the claims should be dismissed because the photos weren’t materially misleading: it was implausible that any differences in door handles displayed in photos of cars and actual Creative Controls door handles would be material to consumers, given the small size of the photos.  But the court found that it was plausible that consumers would be influenced by the photos.  “Indeed, the reasonable inference is that Creative Controls included the photographs of the unique customized cars with the very intent of influencing potential customers.”
 
Nor would the court dismiss unjust enrichment or conversion claims as preempted at this stage.  And here the court just errs: it said that, because some of the photo copyrights might be invalid, unjust enrichment and conversion claims might not be preempted if based on invalid copyrights.  But that’s backwards under §301, which was specifically designed to prevent claims replicating the subject matter of copyright, whether or not the work (or idea/fact) at issue was copyrightable.  It should be immediately evident that §301 applies to an unjust enrichment/conversion claim based on copying a work in the public domain due to expiration of federal copyright protection; so too here.  (And that’s setting aside the issue that, even if a registration is invalid for some reason, the copyright still exists if the work is copyrightable.  Only the details of federal jurisdiction/availability of certain remedies turn on the validity of the registration.)
 
The court did hold that Kindig failed to state a claim for fraud.  There were no facts indicating Creative Controls defrauded Kindig; a fraud on the public at large didn’t allow Kindig to sue, and Kindig didn’t allege it acted in reliance on Creative Controls’ misrepresentations.

Showing irreparable harm isn't easy

Pruvit Ventures, Inc. v. ForeverGreen International LLC, --- F.Supp.3d ----, 2015 WL 9876952 No. 15-CV-571 (E.D. Tex. Dec. 23, 2015) (magistrate judge)
 
Defendants moved for a preliminary injunction on their counterclaims involving dietary suppplements.  Defendant Axcess is the exclusive licensee of patented technology relating to
appetite suppression and weight loss.  Defendants alleged that a prospective sub-license to Pruvit never became effective, while Pruvit argued that it was approved.  Pruvit went to market with a supplement called KETO//OS1, allegedly using defendants’ patent and trade secrets, while defendant ForeverGreen then launched a competing supplement, KetonX.  Pruvit sued defendants for breach of contract, disparagement, and related claims.  Defendants counterclaimed for, among other things, trade secret misappropriation, patent infringement, and false advertising.  Defendants sought a preliminary injunction, and the court analyzed irreparable harm in detail, assuming arguendo that they’d shown likely success on the merits.
 
Speculation isn’t enough to show irreparable harm.  The movant must show that monetary damages are an insufficient remedy and that their alleged harms are not just possible, but likely. The judge reviewed six theories of harm, none of which worked.
 
Price erosion: Pruvit’s product allegedly caused price erosion in the relevant supplement market, and defendants might be forced to drop the price of KetonX to compete.  Further, customers would resist future price increases, so ForeverGreen wouldn’t then be able to raise the price without destroying goodwill.  Price erosion isn’t irreparable harm; money damages can compensate for it.  Plus, the testimony was merely speculative, with no economics expert or other expert testifying to it.
 
Reputational harm: although this can be irreparable harm, “the showing of reputational harm must be concrete and corroborated, not merely speculative.” Defendants argued that Pruvit’s supplement had negative side effects, such as headaches, diarrhea, and nervous system issues, and that such problems were likely to be attributed to KetonX or ketosis supplements generally because the products are seen as alternatives.  But they failed to show that the established negative side effects of Pruvit’s KETO//OS were causing customers to turn away from KetonX and/or the ketosis supplement market, or that KetonX didn’t also cause the side effects alleged.  The court agreed that “[i]t is difficult to imagine under what extraordinary set of circumstances the introduction of a product with a ‘lower reputation for quality’ would, instead of highlighting the higher quality of its competitors, reflect adversely upon the field as a whole.” Moreover, the Fifth Circuit previously held that “[t]he lost goodwill of a business operated over a short period of time is usually compensable in money damages,” and both products had only been on the market for about six months.
 
Harm to shareholder value: There were other explanations for a decline in share value, like ForeverGreen’s losses in 9 out of 12 fiscal years, and mere speculation wasn’t enough, nor was alleged temporal proximity between Pruvit’s launch and the decrease in value.
 
Lost market share/first-to-market advantages: Defendants argued that, in the multilevel marketing model both parties used, being first to market was extremely important, because a new product launch creates significant interest in the industry and attracts distributors excited to take the new product to market, maintaining a larger market share than would otherwise exist. Moreover, Pruvit’s presence in the market also limited the supply of raw materials necessary to manufacture KetonX, prevented defendants from making important industry contacts/acquiring important distributors, and deceived consumers through false labeling.
 
Lost market share/lost sales aren’t irreparable harm in themselves.  Moreover, lost market share must be substantiated, and here all defendants did was claim that they must have lost market share, without quantifying it or establishing that it had happened. “[N]either the difficulty of calculating losses in market share, nor speculation that such losses might occur, amount to proof of special circumstances justifying the extraordinary relief of an injunction prior to trial.”
 
Lost opportunities to obtain raw materials: there was no evidence that Pruvit’s supplier was the only supplier.  Nor did the evidence show that Pruvit was to blame for lost distributors, or that Pruvit’s labeling had turned customers away from the ketosis supplement market as a whole.
 
Lost profits: these are readily quantifiable and thus not irreparable.
 
Lost right to exclude: Also not irreparable, especially given that defendant Axcess, at least initially, voluntarily began a sublicense agreement.
 
Defendants’ five-month delay in seeking relief also weighed against a finding of irreparable harm; they even delayed two months after Pruvit sued them to counterclaim, weighing heavily against a finding of irreparable harm.

NYT throws hissy-fit, sues over use of thumbnails in critical book

David Shields recently published War Is Beautiful: The New York Times Pictorial Guide to the Glamour of Armed Conflict.  The argument of the book is that the images chosen by the Times to decorate its front pages glamorize and glorify war.  Agree or not, it is at least an argument, and Shields even licensed the full-size pictures in the book from the Times.  However, the endpapers of the book as published show thumbnail images of the front pages of the editions from which the full-size photos come, and the publisher didn't license the front pages.  The Times has, quite unwisely, sued over this textbook (coffee-table book?) fair use.

Endpapers to War is Beautiful

Let's review: Factor one, purpose of the use: images contextualizing the main argument of the book, which involves the overall aim of the Times, not just the photos in isolation but their presentation by the paper.  That's classic historicization and commentary: transformative use under Dorling Kindersley.  Nature of the work: already published, favoring fair use; news photos and news stories, even if creative, are highly factual, though that doesn't matter much in transformativeness cases.  Amount taken: The Times apparently claims a copyright in the layout of the front page, but really the work would have to be that day's print edition, meaning that the book reproduces a fraction of the work, although qualitatively perhaps more important than an average page.  But the real kicker, of course, is size.  Much more than in Dorling Kindersley, where you could at least read most of the text in the images, there's no way anyone could read the chunks of news stories at issue here.  Size cuts decisively in favor of fair use.  Market effect: the Times isn't entitled to any market for transformative uses, even if there were some market for unreadable thumbnails.

It's hard not to look at this lawsuit as the reaction of a paper embarrassed at having licensed photos for what turned out to be a work of harsh criticism.  Whether that criticism is justified or not (and whether licenses were even required, or sought only to avoid a legal battle), the once-Grey Lady looks unappealingly thin-skinned.  I would point out that fees are available to prevailing copyright defendants, and no matter what happens in Kirtsaeng the law is clear enough here that this is a good case for such an award.

My Other Bag seeks fees from TM bully LV

Public Citizen supports My Other Bag in its motion for attorneys’ fees against fashionable trademark bully Louis Vuitton.  As usual, cogent and vigorous argument. 

Friday, January 22, 2016

reverse passing off still actionable as false advertising, court reminds us

OTR Wheel Engineering, Inc. v. West Worldwide Services, Inc., 2016 WL 236231, No. CV-14-085 (E.D. Wash. Jan. 20, 2016)

Interesting little case that doesn’t mention Dastar, but is a rare application of the Dastar principle that reverse passing off can be actionable as false advertising under appropriate circumstances, which these might be. Plaintiff alleged both trademark infringement and false advertising based on its contention that its Outrigger word mark was “buffed off” of test tires used by defendant in China. The court correctly granted reconsideration of its initial holding that this allegation raised a genuine issue of material fact as to infringement. The word mark was allegedly removed before the goods were shipped in commerce (which wouldn’t matter anyway, under Dastar). Moreover, a reference to “Outrigger” in email wasn’t infringement. However, there was a genuine issue of material fact whether defendants falsely represented to a customer that the test tires were their own tires when in fact, they were Outrigger tires, in order to get the customer to choose defendant over plaintiff. As a result, there was a viable false advertising claim even without an infringement claim. (“Commercial advertising or promotion” might be the big remaining barrier.)