Friday, May 17, 2019

AARP endorsement of insurer doesn't inherently represent that AARP chose disinterestedly

Levay v. AARP, Inc., 2019 WL 2108124, No. 17-09041 DDP (PLAx) (C.D. Cal. May 14, 2019)

Plaintiffs are AARP members who allege to have “joined and paid to be AARP members” after being allegedly “induced ... through unlawful, misleading and/or unfair representations of products, services and endorsements by AARP and/or concealment of AARP’s unlawful ‘for profit’ business activities.” Specifically, they alleged reliance on “AARP’s misrepresentations that it protected seniors and that it put their interests first ahead of ‘for profit’ business ventures, and about its endorsements of insurance products.” Plaintiffs alleged that AARP’s stamp of approval was only a “stamp indicating the winner of [a] bidding war,” rather than a true endorsement on the merits. They brought California UCL and FAL claims.  The court found they failed to state a claim.

Initially, the court rejected the argument that the complaint didn’t allege any “statements by AARP, only advertisements run by United Healthcare and New York Life ....” The relevant representations were (1) solicitations and ads from AARP in which it represents its status and role as an advocate for seniors, and (2) AARP endorsements on United and New York Life insurance advertisements. “AARP does not dispute that it permits its name to appear on the advertisements and that AARP in fact endorses these products. Therefore, the endorsements constitute AARP’s representations even though they appear on United and New York Life advertisements.”

But was there an actionable misrepresentation?  Plaintiffs alleged that they “believed that AARP endorsed products and services, such as insurance products, were products and services that were the best for seniors.” But “best” was too vague ans subjective a promise of superiority, even if implied, to be actionable. By contrast, in Hanberry v. Hearst Corp., 276 Cal. App. 2d 680 (1969), the Hearst Good Housekeeping seal of approval could have deceived someone who bought defective shoes. The court held that “[i]mplicit in the seal and certification is the representation [that] respondent has taken reasonable steps to make an independent examination of the product endorsed, with some degree of expertise, and found it satisfactory.” But it was key that Good Housekeeping magazine stated: “ ‘This is Good Housekeeping’s Consumers’ Guaranty’ and ‘We satisfy ourselves that products advertised in Good Housekeeping are good ones and that the advertising claims made for them in our magazine are truthful.’ ” “The seal itself contained the promise, ‘If the product or performance is defective, Good Housekeeping guarantees replacement or refund to consumer.’ ” These express guarantees “made a consumer’s reliance on Good Housekeeping’s independent examination reasonable.”  And even if an implied promise of superiority was actionable, plaintiffs didn’t identify any defects in these insurance policies.

What about an implied representation that AARP had evaluated the insurance plans for suitability for seniors, “irrespective of profits”?  AARP wasn’t a fiduciary just because it was a nonprofit. Plaintiffs allegedly saw “solicitations and ads from AARP ... in which AARP represented its non-profit status and advocacy role for seniors and that it provide[d] endorsements for products and services as a benefit of membership, which [Plaintiffs] believed meant that AARP would [ ] make endorsements and stamps of approval based on what was best for seniors, rather than based on profits.”

“A representation that a product is selected irrespective of profits could be an actionable misrepresentation because it is sufficiently specific and objectively determinable such that a consumer could reasonably rely on such representation.” But the complaint didn’t sufficiently allege such a representation. Sample ads in the complaint said that United Healthcare and New York Life Insurance Companies “pay[ ] royalty fees to AARP for the use of its intellectual property.” “Therefore, it would not be reasonable for a consumer to believe that AARP was not engaged in revenue generating activities,” and there was no allegation of any representation that revenue concerns played no role in its endorsement decisions. “It would be foolish indeed for an enterprise, regardless of its status as a non or for-profit entity, to be blind, all other factors being substantially equal, to revenue generating opportunities. In short, there is nothing nefarious about AARP making endorsement decisions, or any other business decisions, based on generating maximum revenue that will be used to support its activities, absent some allegation that such decision resulted in articulable harm to its members.” It wasn’t enough to allege that AARP benefited.

Separately, the court found that plaintiffs didn’t plead with particularity the ads they relied on or when/how they became AARP members.

blog posts on company's site are "commercial advertising or promotion" under Lanham Act

Luminati Networks Ltd. v. BIScience Inc., 2019 WL 2084426, No. 18-CV-00483-JRG (E.D. Tex. May 13, 2019)

Mostly a jurisdictional challenge; the court found it had specific personal jurisdiction over Luminati’s claims for patent infringement and false advertising and supplemental jurisdiction over the remainder of Luminati’s claims, though it declined to exercise supplemental jurisdiction over Luminati’s claim for tortious interference with employment agreements, “as determination of that claim is best left to the judicial authority of the State of Israel.” There was personal jurisdiction because BIScience has sold its allegedly patent-infringing proxy service to at least 52 customers in Texas, and its service allowed customers all over the world to utilize residential proxy devices in ten Texas cities, which BIScience advertised (at least in terms of allowing them to use US addresses).

Luminati sufficiently alleged the falsity of blog posts on BIScience’s website stating: “Some proxy providers look great and fancy until you try to integrate them. Some—such as Luminati—are very difficult to integrate, as they require you to install complex proxy managers and to ultimately modify your entire solution.” Luminati sufficiently alleged falsity by alleging that its residential proxy service didn’t require installation of Luminati’s proxy manager.

BIScience argued that a blog post on its own site wasn’t “commercial advertising or promotion.” Yes, they were.  The blog posts were commercial speech by a company in commercial competition with Luminati, made for the purpose of influencing customers to use BIScience’s GeoSurf service. Shortly after the statements at issue, the blog posts continue: “In short, stay away from these proxies. Instead, go for easy-integration proxies that support whatever your needs may be. GeoSurf, for instance, takes less than 5 minutes to integrate....” Moreover, “while company blog posts may not be traditional ads, they are a quintessential type of informal promotion.” BIScience allegedly purchased search engine ads for terms like “luminati” so that potential customers would be directed to its website.  “Thus, Luminati has alleged that these blog posts are disseminated sufficiently to the relevant purchasing public.” [Note an emerging divergence on this: some courts would want evidence that lots of people landed on the blog posts, which I think is probably an issue of damages rather than “commercial advertising or promotion”; it’s still an ad even if everyone successfully avoids reading it.]

Tuesday, May 14, 2019

law firm alleging clients lost to competitor satisfies Lexmark, in part

Brave Law Firm, LLC v. Truck Accident Lawyers Group, Inc., No. 17-1156-EFM-JPO, 2019 WL 2073872 (D. Kan. May 10, 2019)

Brave, a personal injury firm, sued various parties for violating the Lanham Act and Kansas state law.  
It alleged that “from 2007 to at least 2017, Defendants created and disseminated false and misleading advertisements regarding the amount of money they obtained as settlements and jury verdicts for their clients.” For example, one ad claimed that they obtained a settlement of $9 million for a past client, but Brave alleged that they didn’t because they were fired by the client. They also allegedly falsely advertised gross recoveries of $4.1 million, $2.4 million, $2.1 million, $1.1 million, and $1.6 million.

Brave pled three specific examples of past clients who relied on the allegedly false advertising. One hired one of the defendants in 2011. “During mediation, the mediator told her that her case had a value of $360,000, but the highest settlement offer [defendant’s entity] AAPLO obtained was $225,000 in exchange for a full release to the tortfeasor. Consolver rejected that offer and terminated AAPLO as her legal counsel. …. Consolver then hired Brave, who pursued a different theory of recovery and obtained a settlement amount of $360,000.”  Defendants/their entities filed an attorney’s lien, reducing the amount of Brave’s fee.  The other examples were very roughly similar though more complicated.

The court rejected defendants’ arguments that the statute of limitations barred a Lanham Act claim relating to the first client and that it wasn’t sufficiently pled under Rule 9(b). On the limitations issue, the court borrowed the Kansas period for fraud, 2 years; Kansas uses a discovery rule, and Brave alleged that defendants’ injury-causing conduct wasn’t reasonably ascertainable until within the two-year period for filing.  Brave hadn’t pled itself out of court by alleging facts making it clear that a reasonably prudent person would have investigated Defendants’ actions in 2007 or 2012, when Consolver hired Brave.

Brave also identified specific allegedly false ads.  Although Brave didn’t allege which exactly Consolver viewed or when she viewed them, it was enough to allege that defendants “engaged in a false advertising scheme that exposed potential clients, such as Consolver, to numerous false advertisements over a period of time. The requirements of Rule 9(b) are relaxed when the alleged fraudulent acts are numerous and occur over an extended time period.  Here, it would be unduly burdensome to require Defendant to specify every false advertisement that Consolver relied upon and when she saw that advertisement.”

Brave also sufficiently alleged falsity by identifying specific claims about verdicts or settlements achieved by defendants and alleging that they were false. For example, ads reporting the $9 million settlement were allegedly “literally false” because “the person that actually reached the settlement had terminated [defendants/their entities] prior to any settlement being reached.” Defendants argued that the claim was true because they were able to assert an attorney’s lien against the former client when settlement was eventually reached and thus they contributed to the ultimate resolution.  The court wasn’t persuaded. The ad didn’t identify defendants as causally helping to obtain a settlement: it said that one of them did obtain it.

As to another client, defendants argued that the claim failed to satisfy Lexmark. The alleged “injury to a commercial interest in reputation or sales” was that because it had ended up embroiled in litigation about the attorney’s lien on that client’s recovery that (1) it “has been embroiled in litigation and forced to deal with the abandoned lien issue for years”; (2) it “has sustained injury to its reputation as well as been forced to spend considerable time and expense defending frivolous litigation”; (3) “the allegations that Brave Law Firm, LLC and its employees acted ‘illegally, unethically[,] and immorally’ have been disseminated far and wide and damaged its reputation both within the Kansas legal community and [with] potential clients.” Proximate cause ordinarily requires “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that occurs when deception of consumers causes them to withhold trade from the plaintiff.” Here, the allegations of injury were “simply too remote” from the false advertising.  Brave didn’t allege losses of fees from an attorney’s lien, but rather from losses due to fighting with defendants about the underlying case.

As for the third client, it was sufficent to allege that Brave “likely” would have been her first choice in the absence of advertising; it was not required to allege that she definitely would have been. This third client’s claim was dismissed, allegedly because of defendants’ missed deadlines, and allegedly would have resulted in a multimillion-dollar recovery. Defendants argued that it wasn’t plausible to conclude that Brave would have won, and won so big.  But it was enough to allege that the client’s “case would not be one that was particularly difficult to win and, if properly handled, would have generated a substantial attorneys’ fee upon successful resolution.”

However, Brave didn’t successfully plead tortious interference. Even if Brave pled the existence of a business relationship or expectancy with the clients, nothing indicated that defendants were aware of that when those clients initially hired defendants.

CopyrightX: Article 13

Panel Two: Online Service Providers, Automated Anti-piracy Systems, and Article 13 [like CDA 230, it may never lose the initial number even if it no longer fits the statutory numbering]

Moderator: Jennifer Esch

Giancarlo Frosio: Copyright and Article 13
Summary of current provisions.  Automated technology is the intended effect. Hard to see how that can be done without general monitoring of all contents of a platform for unlimited times.  Scarlett court made clear that fundamental rights are implicated—freedom of information and expression—and automated technologies are not proportional, especially given that they might jeopardize a business.  Limitations and exceptions also need to be accommodated somehow.

Ginka Hristova: The Effects of EU Article 11 and Article 13
Content ID is the prime example that people give of how it should be done but Content ID works badly—it’s not a good model.  [And the same content owners complain bitterly about Content ID not being good enough!]  Burden of proof is reversed from the Electronic Commerce Directive.  Now platforms will have to prove that they’re making enough efforts to avoid direct liability.  Collisions w/GDRP as well.  Especially when determining whether exceptions and limitations apply, much information will need to be collected.

Mohammed Iriqat: Copyright Piracy in the Arab World
Extensive unlicensed downloading of music, movies, software. 60% of software running in the Arab world is unlicensed.  Millions of DVDs.  Gov’t institutions and universities participate.  Microsoft Office $5 an unlicensed CD, compared to $70 authorized price.  $2 billion in calculated economic loss.  Possible solutions: collective management organizations, but there are just 5 Arab CMOs and 22 Arab countries. Raise awareness. 95% of Arab citizens don’t see a problem with illegal downloads.  Internet laws like DMCA, which are lacking in the Arab world.  Customs authorities: no control over entry of pirate CDs.  World Cup 2018: Four countries blockaded Qatar, which had the rights to broadcast; they made sites to distribute the World Cup w/o authority of the Qatari rightsowner. Intergovernmental conflict.  Qatar went to WIPO for arbitration, but WIPO hasn’t made a final decision.

Jordan Gimbel: Twitch and the Likely Effects of Article 13
Wide spectrum of online service providers and treatments of unauthorized use/debates w/ different rightsholders: music, film, gaming.  Twitch isn’t YouTube or Twitter; has some features but also Patreon-like.  You can live broadcast your gaming.

Streaming could infringe, but game publishers/developers often license streaming—an attractive complement to their titles.  Many license monetization by individual streamers. But we’re not immune from unauthorized works appearing.  We do see notices for (1) livestreaming sports; (2) violations of embargo conditions on new games; (3) user disputes over emotes (users who create designs for the overlay).  Twitch as complement: NBA brought its G-League (farm team) cames to Twitch, allowing others to costream it (add it to their own channel with their own overlays).  NFL selected a few costreamers who could stream it to their own audience w/their own commentary.

We process DMCA notices in minutes; suspend live broadcast for 24 hours. For VOD works we mute the songs—if you create an archive of a live broadcast, we scan & create audio fingerprints w/Audible Magic and mute portions for matches.  Some rightsholders have priority access—soccer leagues, game companies—to act w/o needing to send notice.

How does this change under Art. 17/13?  Obligation to license, notice and staydown: filters are the only option.  Reference files aren’t available for livestreams so that’s a challenge. This content is yet to be created.  And the overlays are different digital assets. We can scan the audio, but scanning images on overlays from multiple sources are a challenge. Scratching our heads.  Algorithmic tools are going to be needed; taking $ from other developments. Open Qs.  Mistakes in livestreams lead to suspension of channel, which impacts people’s livelihoods.  Filter’s false positives are therefore concerning. Crossborder implementation challenges: different rightsholders across Europe.  GEMA (German PRO) announced that it thought it should be given a larger negotiating power on behalf of images as well as music. That’s great, but only for Germany.

Q: what could gov’ts do/what are the missed opportunities?

Hristova: implementation legislation.

Q re real people depicted in games.

Gimbel: US-centric answer: right of publicity is what’s debated.

Q: where do you get the filters from? Google?

Gimble: question of market power.  Content ID has been around for a while and they’re set on approach. Compliance w/best efforts: we’re trying to figure out whether that means we can engage in licensing from a vendor, but may have to develop a filter that maps to your service using your reference materials. Open Q: does the law require us to build our own tech to do that because we have a different way in which we serve content, w/overlays that are different from other services. [One of my biggest questions about all this is how licensing is going to work for visual works—is there just going to be a wealth transfer from platforms to the small percentage of visual artists who are represented by PROs and to the PROs themselves based on the overall “value” of visual works?  Whereas music really does have a high percentage of covered material deliberately part of a PRO, visual works don’t and won’t.]

Terry Fisher: some suggestions about implementation: make platforms responsible for costs of wrongful blocking of noninfringing materials in order to incentivize balancing and use of mechanisms such as arbitration or option system to reduce social costs of this regime.

CopyrightX: UGC panel

Panel One: User-generated Content, Digital Labor, and Collaborative Authorship

Moderator: Bethany Rabe

Rebecca Tushnet: Fanworks, Fair Use, and Self-Actualization Through Transformative Expression

Title assigned a few months ago is a little misleading because I actually wanted to take the opportunity to talk about the Copyright Office’s recent report on moral rights, though I’m happy to talk about anything fanwork related during the panel discussion and Q&A.  I was one of the founders of the nonprofit Organization for Transformative Works.  OTW runs the Archive of Our Own, which hosts noncommercial transformative works by fans of existing works, of people, or really of anything about which one might create new art. From our recent fact sheet I can tell you that we have over 1.2 million registered users and 4.7 million fanworks, as well as tens of millions of visits per week. “Our open-source code was built from the ground up by fans for fans…. Our users are fans of every sort—teenagers and grandparents, first-time writers and professional authors—from all around the world, creating fanworks” for nearly 32,000 different fandoms.  From the beginning, it was a priority to be ad-free and noncommercial, not under the control of advertisers.  Instead, the priority was authorial control: AO3 was designed to give creators the ability to post and edit their works flexibly, to orphan their own works to preserve access to them without connecting them to the author, and to exclude search engines or non-Archive users from reading.

One of the most distinctive features of the Archive is the curated folksonomy used to tag individual works: “Users are able to tag in whatever format is most useful or natural to them, and our team of over 350 tag wranglers link these tags together into easily searchable concepts.”  If you misspell Harry Potter’s name—or put it in kanji—we’ve got you covered.  Creators can use tags to allow other users to find exactly what they want to see—or to exclude exactly what they don’t. “[U]sers can easily create specific searches, including all Sherlock Holmes works posted in 2018 that are exactly 221 words long and Lord of The Rings/Game of Thrones crossovers that don't include either Frodo Baggins or Arya Stark.” “Related concepts are also linked: Space Opera and Space Battles are both found under the metatag Outer Space, along with other related terms like Astronauts, Spaceships, and even Space Whales.”

Fanworks provide incredible benefits in literacy, sexuality education, language learning, community building, and other good things that come from making something you love and sharing it with other people who might just love it too.

On the content v. tech distinction that Maria Strong made: we consider ourselves content folks who use tech.  But importantly, we rely on fair use: our basic purpose is to host transformative noncommercial works. Gives us a particular perspective on various copyright controversies.  For example, recent Copyright Office report on moral rights, which you’ve just heard about.  The Office did a lot of good work pulling together the legal background both internationally and in the US, covering many issues that go beyond copyright into other regimes that affect authors.  A moral right of integrity that would protect authors against uses of their works they found offensive would be incompatible with US fair use and the First Amendment and the Office didn’t suggest any basic changes to that system, to the Office’s great credit.

It is definitely true that norms of fairness matter a lot in authorship, including attribution in many circumstances—but not necessarily in the rigid categories formal law might use.  For example, fans regularly describe authors of books, but generally identify performers of songs rather than songwriters. More generally, attribution practices in and out of fandom are highly context specific—what works for one group might not work for another.  Hollywood screenwriters have an arbitration system for assigning credit that is often needed because fights regularly break out.  Similarly, the Office pointed out that, “in legal writing, attribution norms for academic articles are quite rigid, whereas practicing lawyers routinely copy without attribution ‘the form and language of legal instruments.’” Attribution turns out to be the kind of inquiry that isn’t well suited to the American legal system, because modern copyright statutes and regulations tend to make big, specific lists of required information.  The Office wisely recognized that antiplagiarism norms work about as well as anything can work, and that the context of attribution would be essentially impossible to write into law.

Nonetheless, and without showing that there was a noticeable unmet need for new protections, the Copyright Office has just suggested that the federal Lanham Act can & should be used against unattributed copying of digital works, in defiance of the Supreme Court’s decision in Dastar and its own stance on digital first sale.  [I should note I think the Office is completely right in saying (1) §43(a)(1)(B) claims should survive Dastar where false attributions are material to consumers and (2) Dastar applies to in-copyright works as well.  It’s just disingenuous at best in endorsing a distinction between nondigital and digital copies that does not make sense of the Supreme Court’s interpretation of “origin,” especially in light of the Office’s (correct) position in discussions of first sale that a digital copy stored on a computer is a reproduction.  The “origin” of a digital copy is the host computer, and maybe stretching it could be the sending computer, but there is a physical instantiation and that instantiation is what the Lanham Act covers in “origin” under Dastar.  Specifically, the origin of the creative work contained in that copy is not the same thing as the origin of the physical copy, no matter whether the copy is on a general-purpose computer, a videotape, or a DVD, and thus failure to attribute the origin of the creative content is not actionable under §43(a)(1)(A) per Dastar.]

It also stated that Congress might want to consider amending the Lanham Act to create new causes of action to cover false representations regarding authorship of expressive works, even without a showing of harm to consumers. The Office suggested amending the Copyright Act to provide damages when a defendant knowingly removed or altered copyright management information (“CMI”) with the intent to conceal an author’s attribution information even if there was no intent to conceal infringement, and possibly even adding a federal right of publicity.  In addition, the Office suggested some changes to the more limited Visual Artists Rights Act. 

Aside from the suggestions about VARA, the rest of the Office’s ideas are a classic case of proposing to use a missile against a gnat—likely to the detriment of small and noncommercial creators, who are the ones who can neither afford to bring claims nor fight claims brought against them.  And the specific suggestions lack exactly the kind of context sensitivity the Office acknowledged was needed—for example, the proposed CMI provision on its face makes it illegal for an app to remove identifying information of people submitting anonymous videos of police brutality—and if you think that enterprising prosecutors wouldn’t use this law against the ACLU, you haven’t been paying attention.  [The CO says that the intent requirement would mean that automated removal wouldn’t be actionable unless it was designed to remove authorship information … but anonymous reporting apps are designed to do that. And for what it’s worth, the complaints the CO reported receiving about removing authorship information were mostly about automated processes—the proposed remedy doesn’t even match the thing that’s being complained about.]

It’s also worth pointing out the solution that the Copyright Office didn’t suggest for congressional intervention: although its discussion of authors’ rights mentioned attribution and integrity rights secured by labor law and collective bargaining, both in the US and elsewhere, the Office didn’t suggest that strengthening authors’ positions could be achieved by strengthening the position of workers, even though the most vulnerable authors are labor and not management.   The problems the Office identified in securing attribution for certain groups, like freelancers, are labor problems—authors after all make copyrighted works, and we should not allow the concept of the “work” to disappear as if authors were mystical beings with no connection to other forms of labor, other forms of production, that do things in the world.  Our desire to highlight the process of creation was in fact one of the reasons that we called our nonprofit the Organization for Transformative Works: whether made for profit or not, creative works are the product of labor.  Remembering the inherent dignity of that labor, and its value whether or not there is a market for the resulting creativity, is a goal that the OTW shares with the Copyright Office.

Stacey Lantagne: Internet Memes, Fanworks, and Copyright’s Authorship Challenges

Memes regularly involve © works; one opinion expressed: the public “owns” the meme because the public authors the meme even if not the underlying photo.  Fox defended an infringement case juxtaposing 9/11 and WWII images—court didn’t like the fair use defense b/c didn’t see the transformativity, but it turns out that the range of “memes” is very broad.  Knowyourmeme has no definition.  When Trump (or a Trump fan) adds CNN’s logo to a clip of wrestling so that it looks like Trump is beating up “CNN,” that’s what’s adding the meaning especially after it’s been shared by Trump himself. Similarly, Pepe the Frog became a white nationalist symbol and created contests over ownership w/initial artist and those who altered it. Gab now uses a frog logo and claims that frogs have been symbols of free speech for a long time (narrator: they have not), and it’s a reference but not all that similar to Pepe.  Then the distracted boyfriend meme, which comes from a stock photo with a © owner, who is fine with most uses but not w/objectionable ones (which may be censorial).  As the distracted boyfriend meme develops, responses to it/reworkings of it are based on transforming the meme rather than on the photo alone, which has become subsumed into the meme and the idea of the meme. 

The internet thus exposes that the mastermind narrative of single creation is wrong. We knew that but dealt with it mostly by contract, and then we have this control test for noncontractual situations but it still wrongly assumes that there is a “boss” in control of everything. When you don’t have contracts, when you don’t have lawyers, we don’t know what we’re doing in terms of ownership. Garcia v. Google: opinions don’t make sense internally and are conflicting all over the place.

Capitalism makes everything worse/more exploitatitve: Swedish company used distracted boyfriend meme for job searching and ad regulator called it sexist and said it couldn’t be used in ads. There is a pending case against a MAGA poster by Pepe’s original creator Matt Fury; there’s a fair use argument but also the defendant argues that Fury abandoned the © (which is not a thing).  There’s a lot of unsettled territory here.

Hilary Richardson: Google Open Source and Collaborative Authorship

Writing a casebook on open source legal issues: you can send us edits or additions in a GitHub pull request.  Current joint authorship standards give equal rights to all authors.  Some projects list all “authors” giving them shared control. Some may have 100% consensus, but for a growing project that can be unsustainable, and some institutions may not want the potential liability/disputes that comes from open source authors’ potential for contestation.  Current doctrine (Al-Muhammad etc.) looks for a mastermind—important contributions can still avoid being authorial. Court was concerned about discouraging future editing/feedback if joint authorship was a possible consequence. Creative control/direction mattered, versus value of contributions and impact on final version. Spike Lee had the control (although it was a work for hire) and the court found that determinative.  Other jurisdictions also use editorial control over final piece as part of the test, but with more focus on intent to be co-author.  Control can be evidence of intent, but intent could also be evidenced by, e.g., registering the © in a person’s name.

Clarity can come from legal agreements: two popular mechanisms, developers’ certificate of origin (Linux) which doesn’t say anything about retaining © but does grant an explicit license.  Is everyone a joint author?  Contributor license agreement: says that © stays with contributor but they grant a license.  That makes it clear that people aren’t considered joint authors.  More light-weight approaches: root license of a project is used to cover contributions. Can be used to imply effects on individual contributions; sometimes licenses say “if you contribute, you do it on these terms.”  The Stuff case about contributing special effects to a larger film: helps explain the effects of an implied license to use a contribution.

Katrina Geddes: Should User-Generated Content Be Compensated?

UGC: just about everything you find on the internet.  Childish Gambino’s This is America was a canrivalesque commentary on police brutality, fetishization of black performers, modern-day minstrelsy. People responded w/, e.g., This is Nigeria: commentary on police brutality, corruption, poverty, Boko Haram, and other Nigerian issues. Similar music and choreography but different lyrics (both set in warehouse).  Why do we value things like fan fiction?  People get to see themselves where they don’t get to see themselves in mainstream works: LGBTQ people, people of color. Challenge racial and social assumptions of mainstream works; challenge the monopoly on cultural production of large producers. Can also maintain the cultural relevance of works, such as maintaining interest in the Star Trek universe.  Satisfies demands for variation and personalization, rather than works manufactured for a huge audience. Democratizes creativity—authorship is diverse and diffuse.  Meme authorship can often be indeterminate. 

Content ID: used algorithmically mostly for commercial content.  400 hours to YouTube uploaded per minute. Fanmade videos for Harlem Shake were matched to the song, allowing the song © owner to generate millions of revenue with no allocation between the music and the video created by fan labor. Under 1% of Content ID matches are disputed.  Fair use can’t reliably be done by algorithms; Content ID is black box governance, unaccountable—even when the uses removed or monetized may be perfectly lawful.  Expands scope of © by making it difficult for users to rely on exceptions like fair use.

Locke and labor theory: just reward of labor should extend to fan creations that are monetized.  Eric Posner etc. have argued that not just UGC but our labor online, clicking and producing valuable data, should be understood as compensable.

Canadian UGC provision: protects UGC made by an individual, though there’s usually more than one author.  Also protects UGC only when © subsists, which bakes in originality.  Requires noncommerciality—no pro-rated advertising revenue.  Also bars anything with a vague, broad “adverse effect, financial or otherwise” on the © owner—that could include offending the original © owner.

Should users be compensated?  The labor of users should be recognized and respected, and possibly compensated. But commercialization is part of the fair use inquiry; it may weigh against fair use.  Commercialization may result in reduction in expressive diversity: anticipation of paid markets may affect content and willingness to participate/be spontaneous in creativity.  Distinguishing when compensation would be paid would require resources, negotiation in allocation between different owners. Right now it’s 100% to the original claimant, but other points on the spectrum are possible. Don’t just assume that everything with a match should be 100% monetized by the © owner.  We could ask users to categorize their works to claim a share; this would allow more information and an algorithm could at least look for percentages/set things up for human review.

Q: fair use is important; from litigator’s perspective, one downside is expense to determine.  Oh, the Places You’ll Boldly Go! was found to be fair use on summary judgment, but not at the MTD stage which was 1½ year earlier.  Is there a way to get to fair use faster?  Market harm may require discovery—that’s the most expensive part of most lawsuits.

RT: sadly, not a lot.  There are uses that are fair as a matter of law, including parodies.  Big data, purpose-transformation uses are for better or worse somewhat easier to identify as fair use as a matter of law.  Sometimes you are going to have to evaluate the transformativeness of an individual work.  [We can have rules that help, like the Second Circuit’s rule that you can’t avoid a fair use finding by offering  a license for something that is in fact transformative—that helps draw the sting of some market evidence.] Small claims: 40% of Americans can’t come up with $400 for an emergency.  A “small claims” court that allows $30,000 in statutory damages is not a small claims court. It’s just another way to harass individuals.  [I forgot to add: best practices in fair use for different fields—also very helpful.]

Lantagne: education, nonprofits like OTW/EFF.

Geddes: Canadian UGC exemption needs some time to develop.  Education is also important.  People want rules like “30 seconds is ok.”

Richardson: people do want rules: are 3 lines of code ok?  Depends on what the 3 lines are!

Kimberly Isbell: proposed 1202A.  The reason we made it a new provision is b/c it’s narrower and specifically exempts criminal enforcement.  The only person who could bring a claim would be the uploader. The ACLU has terms of use: if you provide content it will be anonymous.

RT: Disagree.  The statutory language is “any person injured by a violation,” and the police will say they’re injured by the inability to investigate the circumstances under which the video was taken further.  The injured person doesn’t have to be the author (or heirs) under this proposal.  There is a long tradition of (mis)using civil awards to silence speakers, e.g. NYT v. Sullivan.  The proposal does not exempt information submitted by someone who wants to be anonymous or who doesn’t know or care about stripping of metadata [nor does it limit enforcement to the author, which would also be a potential fix, though I still don’t see the evidence that an additional cause of action is needed].

Q: software should just be patentable, not copyrightable.

Richardson: the law says copyrightable and she’s ok with that.

Q: memes & defamatory content. There are a lot of really awful Helen Keller memes out there.  What should happen when there’s a historical figure & derogatory content.

Lantagne: a lot of times people bring © claims that should be more personal tort based.  She hasn’t come across non-© meme cases, but she wasn’t specifically looking for them.  Unless publicity rights outlast death, there are few remedies for the dead.

Richardson: revenge porn is an example of where © was deployed even though it wasn’t intended for those situations; you shouldn’t need to register an explicit photo to deal with the problem of revenge porn, and new laws and platform policies are recognizing that.

CopyrightX summit: Keynote by Maria Strong

CopyrightX summit
Keynote: Maria Strong, Director of Policy & International Affairs, U.S. Copyright Office

Update on elements of protection, exceptions/permissible uses.  Biggest news in 20 years: Music Moernization Act, including many recommendations from the CO.  Blanket license for digital music providers: new way for tech platforms and music providers to unite online. CLASSICS Act: pre-72 recordings partially into the federal © system, with some exceptions/limitations.  Requires a lot of rulemaking by CO, including exceptions for noncommercial use and designating licensing coordinators.  New spirit of cooperation and momentum in Washington.  Could this lead to more openness to action on things like felony streaming of infringing public performances?  That died along with SOPA but maybe there’s an appetite for it now, or for something on small © claims.  $350,000 is average © litigation.  New legislation was just introduced in House and Senate on small claims.

DMCA: continue to work on policy study examining effectiveness of §512.  92,000 comments received and several roundtables.  Often oversimplified by 2 sides.  Content folks feel 512 is broken and tech feel its fine. Large content providers have different concerns than small providers, and so too with tech companies. Many different kinds of users.

Moral rights: 30 years since we joined Berne under a “patchwork” of moral rights. Tech changes, Dastar, state law changes, new int’l treaties chane things.  Did notice & comment.  Report identified key principles: maintain First Amendment & fair use, copyright’s limited term, importance of attribution to creators. US legal framework provides important protection, but there’s room for improvement if Congress wants.  Identifies several legislative paths: amending the Lanham Act; VARA fixes; §1202 copyright management tweaks in new 1202A; federal right of publicity.

Proposed changes to Compendium of office practices; currently seeking comments. Also post review letters for appeals from denial of registration.  And we’ve prepared a Fair Use index: summaries of over 200 fair use cases, searchable by court and type of work. 

Int’l: WIPO. Broadcasting Treaty negotiations, going on for more than 20 years at WIPO.  US supports a signal-based approach to the treaty. More guidance coming in October.  Second, IGC (intergovt’l committee) tackling connections b/t cultural identity and mobility. Current focus: distinction b/t traditional knowledge and traditional cultural expressions and possibility of different treatment of those.  Most important politically: decide on recommendation on scope of group’s mandate.

Activities related to exceptions/permissible uses: Marrakesh Treaty was adopted rapidly.  US amended law to comply, last October, just in effect on May 8.  From nondramatic literary works, expanded coverage. New 121A deals with export and import of accessible works by authorized entities.

1201: Policy study to streamline the process, which is long/arduous [co-signed!].  Proposed some streamlining for renewals of unopposed exemptions, which was implemented. Split process into looking at unopposed v. new proposals/data. Many of the new exemptions built on prior rulemaking. Recommended 9 classes for exemptions. 20% faster than previous. 329 pages this time versus 400+ last time.  It’s a fulltime yearlong process; we realize it’s challenging for participants.

MMA: permits unoncommercial uses of pre-72 sound recordings not being commercially exploited under certain circumstances.  CO now accepts Notices of Noncommercial Use: document users can file to become eligible for safe harbor. CO doesn’t verify information in NNU.  User has to conduct good faith, reasonable search & rightsowner must not object w/in 90 days of filing of NNU.  Detailed instructions for good faith search: example—for recordings of recognized Alaska Native or American Indian tribes, search must be done through contacting the relevant tribe, association, or holding institution.

Section 108: discussion document stating CO’s belief that 108 needs revision for libraries and archives.  Wanted a framework for further discussion among stakeholders and Congress: preservation, security.  CO provided model statutory language to jumpstart the discussion.

Working on better public access to records. Digitized over 41 million © card catalogs, 1870-1977. Now browsable. MMA outreach: we have tutorials, dedicated website, participation in events around the country.

Q re digitization: did you get everything?

A: we got all of one type of record, but there are 2 other types we’re digitizing.

Q: museum exceptions?

A: a major modification we’d like to make is to include museums specifically, not just libraries/archives.

Q: moving CO out of Library of Congress?

A: awkward Q! Two years ago, there was uncertainty when Register left and House passed a bill to make the Register a Senate appointed position. That didn’t pass and hasn’t been reintroduced. Near future: that issue is probably not going to be engaged.  [I think there’s a huge separation of powers issue in giving the CO rulemaking etc. powers as an entity in the legislative branch but that’s not a political or policy question in the ordinary sense and there’s no reason Strong needs to have a position on it.]

Wednesday, May 08, 2019

She don't lie, but the pharmaco might: cocaine false advertising case continues

Genus Lifesciences Inc. v. Lannett Company, Inc., 2019 WL 1981186, No. 18-cv-07603-WHO (N.D. Cal. May 3, 2019)

Genus competes with Lannett in the market for cocaine hydrochloride nasal spray. It sued Lannett for false advertising and maintaining a monopoly related to Lannett’s production of C-Topical, a cocaine hydrochloride solution that competes with Genus’ own cocaine hydrochloride solution, Goprelto. At its core, the complaint alleged that Lannett falsely advertised C-Topical as FDA-approved. Genus also sued First Databank, “a pricing list company that compares drug products and their prices so that wholesalers and customers can see all the alternatives available for a particular medication,” for false advertising and contributory false advertising. Here, Judge Orrick declined to dismiss all claims against Lannett, but kicked First Databank out because its challenged statement in the pricing list was not “commercial speech” and First Databank did not influence Lannett’s alleged false advertising.
In 2017, the FDA granted approval of Goprelto’s New Drug Application, which required five clinical trials and ten non-clinical trials involving over 700 human subjects. The FDA approved Goprelto “for the induction of local anesthesia of the mucous membranes when performing diagnostic procedures and surgeries on or through the nasal cavities in adults.” “As the first FDA approved cocaine product, Goprelto was awarded new chemical exclusivity, which bars any third-party applicant from seeking FDA approval until December 14, 2022.”  C-Topical and Goprelto have the same active ingredient, the same strength, and the same dosage form, and are interchangeable for certain medical uses, including Goprelto’s approved indicated use.

As the court explained, legal marketing of drugs in the US requires approval of an NDA or ANDA or exemption from the NDA requirement.  Exemptions include “grandfathered” drugs and drugs subject to an ongoing drug efficacy study implementation proceeding. A drug is grandfathered if, among other requirements, its composition and labelling have not changed since 1962. In 2006, the FDA stated that in cases where one drug was approved but had unapproved competitors, there would generally be a grace period of one year before the FDA initiated enforcement action against the unapproved drug, but the FDA hasn’t yet acted against Lannett.

C-Topical has been on the market at least since 2008, and Lannett was the sole supplier of cocaine hydrochloride solution products to ear, nose and throat doctors from 2012 until Genus’s launch of Goprelto. In 2015, the FDA rejected Lannett’s request that C-Topical be grandfathered. Despite that, Lannett claimed that C-Topical was grandfathered in a number of SEC filings and investor calls in 2017 and 2018. Lannett also allegedly advertised C-Topical as being legally marketed under a “preliminary new drug application” in a number of SEC filings, “a fictitious regulatory category.”

In addition Lannett’s meta description for its C-Topical webpage states, “Learn more about the facts and characteristics of the generic pharmaceutical C-Topical® Solution CII,” although C-Topical is not a generic pharmaceutical product because it does not have an approved ANDA.

Lannett also allegedly intentionally misled customers by making the product packaging look like an approved FDA drug, maintaining a website with the package insert information that looks like an FDA-approved insert, and registering a trademark for C-Topical. 

Lannett’s website also allegedly “identifies it as a generic pharmaceutical manufacturer whose leadership is committed to adherence to FDA standards and compliance with regulatory requirements,” as does its subsidiary Cody’s, but both sites list C-Topical as one of their products. In addition, Lannett advertised C-Topical as a “topical solution ... indicated for the introduction of local (topical) anesthesia of accessible mucous membranes of the oral, laryngeal, and nasal cavities.” This allegedly falsely implied that a cocaine hydrochloride solution product has been approved by FDA for oral or laryngeal uses, when no such product has ever been approved in that way. This allegedly further misled customers into believing that C-Topical had more uses than Goprelto, making it a more desirable and better product.

Lannett also allegedly provided incomplete or false information to third party intermediaries in the supply chain of pharmaceutical products. For example, Lannett sold C-Topical to McKesson Corp., a wholesaler whose website indicated that C-Topical is generic and does not state that it is unapproved by the FDA. Intermediaries rely on companies that aggregate third-party drug pricing information, such as First Databank. “These companies, including First Databank, assign unique identifying codes for each drug, allowing for price comparisons of equivalent products.” Because Lannett didn’t identify C-Topical as unapproved, intermediaries were allegedly unable to accurately describe it. Genus cited “a study that states that in a nationwide survey of pharmacists, 91% thought all products pharmacists dispense are FDA approved.” Customers were allegedly misled to believe that C-Topical is FDA approved and choose to purchase C-Topical over Goprelto on that basis.

First Databank allegedly assigned a unique clinical formulation ID (CFI) to drugs based on ingredients, strength, dosage form, and route of administration. Drugs with the same attributes were assigned the same CFI and “linked” so that a search for one would produce the other as a substantive alternative. But, since C-Topical’s route of administration is listed as “topical” and Goprelto’s is listed as “intranasal,” the two drugs are given different CFI numbers. Consumers would allegedly be misled into thinking that C-Topical is the only cocaine hydrochloride drug available on the market. Genus allegedly notified First Databank about the misleading advertisement, providing First Databank with knowledge.

Genus also alleged anticompetitive conduct in the market for cocaine hydrochloride solution, which is allegedly unique because it is the only nasal product that is both a vasoconstrictor and local anesthetic, unlike any other drugs on the market. Lannett allegedly schemed to use a different CFI number to prevent the parties from competing on price. “But because the CFI numbers are different, and C-Topical had a monopoly on the market for a number of years, customers are generally not aware that Goprelto exists and will not find it when searching for or reordering C-Topical.” Between June 2018 and September 2018, Genus sold only 544 bottles of Goprelto while Lannett sold over 45,000 bottles of C-Topical, despite Goprelto’s lower price.

“Lannett’s core argument is that absent an affirmative representation of approval, marketing an unapproved drug is not actionable under the Lanham Act.” It’s not enough to put an unapproved drug on the market with a FDA-ish package insert, according to Mylan Labs., Inc. v. Matkari, 7 F.3d 1130 (4th Cir. 1993). Genus pointed out that the Lanham Act covers more than affirmative, literally false statements. Par Sterile Prod., LLC v. Fresenius Kabi USA LLC, No. 14-cv-3349, 2015 WL 1263041, at *4 (N.D. Ill. Mar. 17, 2015), agreed that mere alleged implication that a drug was approved by the FDA was insufficient to state a Lanham Act claim, but also found that the implication was enough when combined with allegations that (i) buyers believe all prescribed drugs identified on the Price Lists are FDA approved and (ii) that in some surveys 91% of pharmacists are actually confused about whether all drugs that appear on industry price lists are approved. This was enough to survive a motion to dismiss, though not necessarily to survive summary judgment.

What about the false statements in SEC filings and investor calls?  [As Matt Levine of Money Stuff says, sounds like securities fraud because everything is securities fraud.]  That didn’t seem like “commercial advertising or promotion.” Genus failed to allege “that the SEC statements and investor calls were made for the purpose of influencing consumers to buy its goods or services, or that they were disseminated sufficiently to pharmacists, doctors, and hospital groups.”

And the cases were on Lannett’s side. For example, Sigma Dynamics, Inc. v. E. Piphany, Inc., No. 04-cv-0569-MJJ, 2004 WL 2648370 (N.D. Cal. June 25, 2004), held that in order for statements on the investor calls to be actionable, “plaintiffs would need to allege that consumers attended the investor conference calls and that the purpose of the investor calls was to influence customers to buy defendant’s goods or services.” Sigma did hold that statements on websites and in press releases available to the public were commercial speech for purposes of a motion to dismiss, but Judge Orrick disagreed [he didn’t really disagree, he just thought that commercial speech was a broader category than “commercial advertising or promotion”]: “in order to be actionable, the statements must be accompanied by specific allegations that they were made for the purpose of influencing the customers of cocaine hydrochloride solutions to buy C-Topical, or were disseminated sufficiently to the relevant purchasing public (pharmacists, hospitals, and doctors) to constitute ‘advertising’ or ‘promotion’ within the pharmaceutical industry.”

Alleged falsity of labeling for oral, laryngeal, or nasal administration: Lannett argued that the mere fact of broader labeling than Genus wasn’t actionable, and that there were no false comparative statements.  But the FDA says that a “topical” route is “[a]dministration to a particular spot on the outer surface of the body[.]” Lannett’s label states that C-Topical is “indicated for the introduction of local (topical) anesthesia of accessible mucous membranes of the oral, laryngeal and nasal cavities.” Mucous membranes are not the outer surface of the skin; this affirmative misrepresentation allegedly harmed Genus by inducing customers to believe that C-Topical is different and superior to Goprelto because of its additional routes of administration. The court agreed that this was sufficiently pled.

Failure to affirmatively disclose unapproved status to third parties and intermediaries: Lannett argued that it had no duty of disclosure under the Lanham Act. It also argued that the materials it sent to the third party intermediaries explicitly state that C-Topical lacks FDA approval and the product information on First Databank and other price lists made this clear as well.

Genus didn’t state a claim for false advertising to price lists and other third party intermediaries because there are weren’t supporting allegations, such as the surveys Genus cited for pharmacists. The court commented that an allegedly “buried” disclosure would “support a finding that Lannett has correctly informed the price lists,” which I don’t quite get—is it not plausible that price list operators would miss fine print?  Seems like an odd thing to say on a motion to dismiss, but perhaps the court just wanted that spelled out in the allegations.

Website statements: Lannett argued that the meta description on its C-Topical website describing the drug as generic wasn’t misleading, read in context with Lannett’s landing page that states that the FDA has not approved C-Topical. But Genus alleged that the landing page didn’t say that. Instead, one had to click on a “package insert” link.  While initial interest confusion cases say that a landing page can dispel potential trademark confusion, Lannett’s landing page “would not disabuse a consumer of the notion that C-Topical is generic based on the meta description.” Thus, the allegedly false statement in its website’s meta description could be the basis for a false advertising claim under the Lanham Act. [The court doesn’t discuss whether the description was visible in search results—for what it’s worth, when I searched Lannett’s current page didn’t use the term “generic.”]

General statements on Lannett’s websites about FDA compliance: Lannett argued that its statements weren’t specific to C-Topical and that compliance with FDA requirements was within the FDA’s primary jurisdiction. Genus responded that Lannett’s website makes no carveout for C-Topical and that because the FDA denied Lannett’s application to grandfather C-Topical, Lannett’s statement of legal compliance was false.  The court found that Genus’s argument stretched the FDA’s denial too far. The FDA rejection didn’t explicitly say that C-Topical couldn’t be marketed, only that it couldn’t be described as “grandfathered.”

The court turned to statements about making compliant, generic products, e.g., “[i]t’s important to remember that generic medicines are made to meet the same standards, as provided by FDA, as brand name medicines. Customers may rest assured that generic pharmaceuticals are produced with the same active ingredients and attention to quality as branded versions.” Those weren’t false, and Genus didn’t plausibly allege that the statements actually conveyed the implied message that C-Topical was grandfathered or sold with FDA approval, and deceived a significant portion of recipients.

However, on subsidiary Cody’s website, the statements that “Cody Laboratories is committed to compliance with all Local, State, and Federal requirements and regulations governing our business, especially FDA, DEA ...” and that Cody’s “active pharmaceutical ingredients are used in FDA approved commercial drug products,” combined with its identification of “Cocaine Hydrochloride USP” as one of those ingredients plausibly added up to an affirmatively false or misleading statement. Genus sufficiently alleged materiality: “FDA approval status of a prescription drug is material to customers because approved drugs provide customers assurance as to the quality of the product not afforded to unapproved prescription drugs.”

Appearance and content of C-Topical’s labeling and packaging: Resembling FDA-approved drug packaging wasn’t enough to plausibly allege deception. There weren’t sufficient allegations of intentional deception.  “[W]hen the alleged representation is not an overt false statement but is merely misleading in context as it is here, the pleading standard is higher and allegations that the advertising actually conveyed the implied message and deceived a significant portion of recipients is required.” Genus made only conclusory statements such as, “On information and belief, Lannett’s and Cody’s packaging and packaging insert deceives, or has the capacity to deceive, a substantial segment of customers, including pharmacists, into believing that Lannett’s and Cody’s C-Topical has FDA approval.” More specific allegations were mandatory without an affirmative misstatement.

The antitrust claims failed because they were antitrust claims. Specifically for the false advertising part, even though Genus adequately alleged that the statements were (1) clearly false, (2) clearly material, (3) clearly likely to induce reasonable reliance, and (4) made to buyers without knowledge of the subject matter, that’s not enough to avoid a presumption that the effect on competition was de minimis.  The false advertising must also have (5) continued for prolonged periods, and (6) not have been readily susceptible to neutralization or other offset by rivals, and Genus didn’t allege those. It wasn’t enough to allege that “Lannett makes it prohibitively difficult for customers to find a competing product,” and that “customers” tend to repeat their last order or search directly for [C-Topical],” making it difficult to rebut the false promotions. It also alleged that “[w]holesalers, GPOs, and IDNs use, or rely upon, First Databank’s CFI codes to compare products” making other marketing methods less useful.  “But these allegations do not show why other efforts to promote its product, other than its attempt to get First Databank to change C-Topical’s CFI number, have failed or would not be successful,” e.g., an ad campaign touting Goprelto as the only FDA approved cocaine hydrochloride product, or efforts to educate customers that C-Topical is unapproved or that its route of administration is misleading.

California FAL and UCL claims survived because the Lanham Act claim did.

First Databank: Genus sued for false advertising of C-Topical as having a “topical” route of administration and for contributory false advertising based on Lannett’s primary conduct.

Direct false advertising: this wasn’t commercial advertising or promotion as to First Databank because the price list wasn’t meant to influence purchasers to buy First Databank’s goods or services; it was what First Databank sold. Although the Gordon & Breach test for “commercial advertising or promotion” likely needed modification after Lexmark to remove the requirement of speech by a competitor, that didn’t affect the outcome here.

Genus argued that First Databank wasn’t a “mere reference database” because it derives millions of dollars from licensees to access the pricing list and that it failed to identify any statements of public importance that would make the pricing list non-commercial speech. Customers allegedly relied on pricing lists for the purely commercial purpose of comparing products and prices. Still, under Bolger, First Databank’s pricing list didn’t propose a commercial transaction between First Databank and customers of cocaine hydrochloride. Genus didn’t allege that First Databank had a monetary interest in whether customers chose C-Topical over Goprelto. Though Genus argued that “First Databank’s business involves a quid pro quo in which information is provided to First Databank in exchange for First Databank utilizing the data, including assigning its own CFI codes, and targeting and distributing it to the relevant consumers,” that “would be true for every drug listed on the pricing database, including Goprelto, and cannot reasonably be characterized as a quid pro quo relationship for the purposes of this case.” Although First Databank allegedly had an economic motivation to make representations about specific drugs in order to maintain its market position in the pharmaceutical supply chain, that didn’t show a profit motive in any particular representation.

Contributory false advertising: Genus argued that First Databank contributed to Lannett’s alleged false advertising by knowingly and materially participating in it. The court thought that contributory false advertising couldn’t apply to non-commercial speech in any context because “the Lanham Act, as a whole, applies only to commercial speech.”  [Side note: hotly contested or just wrong on the TM side of the Lanham Act!  But to the extent that we’re talking about contributory liability, we may be talking about acts that are not even commercial speech, like ordinary contractual language or other economic activity carried out through speech.]

Out of an abundance of caution (and perhaps an eye for interesting arguments), the court analyzed contributory false advertising without reference to commercial speech. In Duty Free Ams., Inc. v. Estée Lauder Cos., 797 F.3d 1248 (11th Cir. 2015), the Eleventh Circuit held that contributory false advertising requires a showing of (1) direct false advertising by a third party and (2) defendant’s contribution to that conduct “either by knowingly inducing or causing the conduct, or by materially participating in it.” Genus satisfied (1) but not (2). 

Material participation, analogizing from trademark, can occur where a defendant directly controlled or monitored the third party’s false advertising, or maybe even when the defendant provides a necessary product or service without which the false advertising would not be possible. The Eleventh Circuit suggested looking at “the nature and extent of the communication” between the third party and the defendant regarding the false advertising; “whether or not the [defendant] explicitly or implicitly encouraged” the false advertising; whether the false advertising “is serious and widespread,” making it more likely that the defendant “kn[ew] about and condone[d] the acts”; and whether the defendant engaged in “bad faith refusal to exercise a clear contractual power to halt” the false advertising. Genus’s allegations didn’t meet this standard. “The allegations in the complaint do not suggest that First Databank’s conduct was persuasive in inducing Lannett to do what it did.”

First Databank pointed to the test used in ADT Sec. Servs., Inc. v. Sec. One Int’l, Inc., No. 11-cv-05149-YGR, 2012 WL 4068632 (N.D. Cal. Sept. 14, 2012), which held that a claim for contributory false advertising requires that the defendant: “(1) intentionally induced the primary Lanham Act violation; or (2) continued to supply an infringing product to an infringer with knowledge that the infringer is mislabeling the particular product supplied.” Under that test, Genus’s claims also failed.  The tests were different, but they had the same theory: “the party accused of contributorily infringing essentially drives the infringing party’s conduct.” Genus’s theory was the opposite. Its contributory false advertising claim against First Databank was dismissed with prejudice.

Patent grants and gender bias

Spotted via Colleen Chien, on patents and gender bias:

The researchers found that women inventors with common names had an 8.2% lower chance of getting their patents approved. But the difference in probability of approval fell to 2.8% for those with rare names, where it would be tougher for an examiner to guess the applicant’s gender.

When it came to future citations, patents that listed common female names were cited 30% less frequently than those held by people with common male names. That disparity did not simply vanish for women with rare names; it actually reversed. Their patents were cited approximately 20% more frequently than patents listing rare male names.

Journal article merited better disclosure of affiliation w/competing group, not a lawsuit

Board of Forensic Document Examiners, Inc. v. American Bar Ass’n, --- F.3d ----, 2019 WL 1930310, No. 18-2653 (7th Cir. May 1, 2019)

The Board of Forensic Document Examiners is a non-profit organization that certifies forensic document examiners (currently about 12), who analyze and compare handwriting and provide expert testimony in judicial proceedings. Thomas Vastrick, a forensic document examiner certified by a different, much larger organization (the American Board of Forensic Document Examiners), wrote an article in The Judges’ Journal, a peer-reviewed scholarly journal published by the ABA. Vastrick’s article offered guidance for judges in evaluating the qualifications and credentials of handwriting experts. He urged judges to look for experts certified by the American Board and warned judges to “be wary of other certifying bodies.” His biography identified him as a “board certified forensic document examiner out of Orlando, Florida, with over 37 years of experience,” including service as chairman of the “Questioned Documents Section of the American Academy of Forensic Sciences” and participation in a handwriting study funded by the National Institute of Justice.

The Board asserted claims of defamation per se and invasion of privacy on behalf of all of its members, as well as civil conspiracy, false advertising under the Lanham Act, and violations of state competition laws.  The specifically challenged statements:

“An appropriately trained forensic document examiner will have completed a full-time, in-residence training program lasting a minimum of 24 months per the professional published standard for training. Judges need to be vigilant of this issue. There are large numbers of practitioners who do not meet the training standard.” “The American Board of Forensic Document Examiners ... is the only certification board recognized by the broader forensic science community, law enforcement, and courts for maintaining principles and training requirements concurrent with the published training standards. Be wary of other certifying bodies.” The article cautioned judges “to look out for” examiners “[c]ertified by [a] board other than the American Board of Forensic Document Examiners.” The article also cautioned against any “[m]ember of American Academy of Forensic Sciences but not the Questioned Document Section.”

The Board alleged that these statements misled readers about the qualifications of its certified examiners. First, the professional standards allegedly require only the equivalent of a 24-month full-time training program, not a full-time, in-residence program as such. The second and third statements, which identified the American Board of Forensic Document Examiners as the only reputable certifying body, allegedly falsely implied that the plaintiff’s members were unqualified, even though, like the American Board, the Board is accredited by the Forensic Specialties Accreditation Board. And Vastrick allegedly harmed one person in particular by warning judges about forensic examiners who are members of the American Academy of Forensic Sciences generally but not the American Academy’s Questioned Document Section specifically; this person apparently is the only examiner who fits this description.

The Board argued that these statements were defamatory per se because they falsely imply that its experts do not meet the published professional training standards for forensic examiners. “But not all statements that doubt or impugn an individual’s professional abilities are actionable.” Opinions are nonactionable, even if they concern the topics covered by defamation per se.

Context showed that the statements were opinion, not verifiable facts. The article appeared in a scholarly law journal, in an issue devoted to “Forensic Sciences—Judges as Gatekeepers.” Anyone who read it would understand that this was “but one practicing expert’s view on how judges should attend to their gatekeeping obligations.” “Nobody reading the article in this context could reasonably have seen Vastrick’s statements as assertions of fact subject to falsification.”  This is especially reasonable because the Journal warned readers that “[a]rticles represent the opinions of the authors alone” and “provide opposing views” for readers to consider. Vastrick also used the language of opinion: “I, as a practicing forensic document examiner, would like to respectfully suggest ways to differentiate between the true professional and the lesser-qualified practitioners.” A label isn’t enough, but it helps the context.

Breaking down the statements also revealed their opinion status.  For example, Vastrick discussed the qualifications of “an appropriately trained forensic document examiner.” “This express qualification—'appropriately trained’—signaled that Vastrick was offering his own view on adequate qualifications for a forensic examiner, not describing factual, objective standards for qualifications.” The assertion that the American Board “is the only certification board recognized by the broader forensic science community, law enforcement, and courts,” “likewise reflects the expression of a viewpoint, as the statement is so broad as to lack objective, verifiable meaning.”  It’s true that Vastrick should in a moral sense have disclosed his affiliation with the American Board in the article, but that didn’t make his statements defamatory.

This conclusion also disposed of the Lanham Act claim.

Monday, May 06, 2019

Copying before-and-after surgical photos can be false advertising despite Dastar

Aesthetic Associates, Inc. v. Key West Institute for Plastic Surgery, Inc., No. 18-10059-CIV-MARTINEZ-OTAZO-REYES, 2019 WL 1922854 (S.D. Fla. Feb. 5, 2019)

Plaintiff, whose principal is Dr. Portuese, sued defendants for copyright infringement, removal of CMI and false advertising in passing off Dr. Portuese’s surgical results as their own. A patient consented to before-and-after pictures of a rhinoplasty, to be posted on Portuese’s websites; plaintiff registered the copyright.

Defendants allegedly posted the same before-and-after patient photographs on their social media accounts in a manner that attempts to pass off Portuese’s surgical results as those of defendants.

Defendants said Dastar barred the claim; the court disagreed.  Plaintiffs alleged the use of copyright photos with false representations of fact “in a manner likely to cause confusion and deceive the public into believing Dr. Loessin performed the surgery depicted in the before-and-after patient photographs and that he can obtain those results.”  That was enough to state a claim for reverse passing off.  It wasn’t just a restated copyright claim.  [Less convincingly, the court distinguishes Dastar because the copyright here isn’t expired—irrelevant—and because defendants didn’t “manufacture” the photo at issue, but of course they did “manufacture” their copy; the whole point is that they made an unauthorized copy, but didn’t “make” the expressive content of their copy.  The court should have rested on its better reasons.]

court rejects contributory false advertising under Lanham Act

Telebrands Corp. v. My Pillow, Inc., 2019 WL 1923410, No. 18-CV-06318 (N.D. Ill. Apr. 30, 2019)

Telebrands sued My Pillow (maker of a “patented pillow product,” which I’m so tempted to call PPP) for breach of contract, breach of implied contract, tortious interference with business expectancy, unjust enrichment, and quantum meruit. My Pillow counterclaimed for false advertising in violation of the Lanham Act, violations of the Illinois Uniform Deceptive Trade Practice Act (IUDTPA) and the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), unfair competition, fraud, and breach of contract. Here, the court dismisses some of the counterclaims.

The counterclaim alleged that My Pillow and Telebrands entered into a License Agreement under which My Pillow had the right to market its pillows directly to consumers and Telebrands had the exclusive right to “advertise, promote, market, distribute, and sell” the My Pillow pillows in certain stores. The License Agreement required Telebrands to comply with all applicable laws in performing under the License Agreement, including the FTC Act. It automatically terminated by its terms in 2014, but the parties continued their business relationship through a series of purchase orders.

After that time, Telebrands allegedly agreed not to engage in false advertising of the My Pillow product and to prevent its retail clients from engaging in false advertising, but didn’t.  For example, in September 2018, allegedly listed My Pillow’s product as “Telebrands My Pillow” and showed a box image that contained an endorsement of the product as “National Sleep Foundation Official Pillow.” But My Pillow was, at the time, subject to a consent decree that prohibited My Pillow from making any health claims about its product or advertising it as an “official” product of any organization. Although it informed Telebrands of the decree, and Telebrands agreed to ensure that its retail clients remove from its advertisements all health claims and/or statements that My Pillow is the “official” pillow, Telebrands allegedly failed to monitor its retail clients’ advertisements to ensure the retailers complied with My Pillow’s directives. My Pillow’s CEO allegedly met with a Telebrands representative and showed them examples of false advertising from Telebrands’ retailers. The rep then offered to indemnify My Pillow for any damages incurred from the false advertising.

Telebrands also allegedly agreed to prohibit and prevent its retail clients from purchasing “ad words” on Google and other search search engines, but didn’t.

The court applied Rule 9(b) to all the counterclaims as grounded in fraud.

Telebrands argued that My Pillow’s Lanham Act claim failed because it was based entirely on statements appearing on the websites of third-party retailers. My Pillow argued that Telebrands is subject to contributory liability.  The court disagreed.  Under Lexmark, My Pillow had to plead and prove “economic or reputational injury flowing directly from the deception wrought by [Telebrands’] advertising.” [That alteration is doing a lot of work used to defeat a contributory liability theory.]

Duty Free Americas, Inc. v. Estee Lauder Companies, Inc., 797 F.3d 1248 (11th Cir. 2015), held that a plaintiff could assert a claim for contributory false advertising, analogizing to contributory trademark infrignement. Under that standard, the “plaintiff must show that a third party in fact directly engaged in false advertising that injured the plaintiff” and that the “defendant contributed to that conduct either by knowingly inducing or causing the conduct, or by materially participating in it.”

But the Seventh Circuit hasn’t recognized contributory false advertising. “[S]uch a claim would be inconsistent with Lexmark’s proximate cause formulation.”  [No it wouldn’t!  It would just identify the primary false advertiser.  Lexmark didn’t address secondary liability.] Anyway, the court rejected the claim even assuming the DFA standard applied, because My Pillow didn’t allege that Telebrands engaged in the alleged false advertising by inducing, causing, or materially participating in the conduct.

[Courts recognize contributory trademark infringement all the time; the relevant statutory language supporting this type of liability, or lack thereof, is the same.  Say it’s not sufficiently pled, that’s fine, but it’s no surprise that the court doesn’t give any reason that trademark and false advertising ought to be treated differently.]

Because the IUDTPA, ICFA, and unfair competition claims were the same as the Lanham Act, they also failed.  [I often wonder why people don’t make more out of statutory differences.  While what constitutes deceptive advertising might and probably should be consistent across the statutes, they often don’t have the same language for things like primary v. secondary liability.  The precedents linking Lanham Act and state law claims are about the core issue of falsity/materiality/damage.]

Finally, My Pillow did meet the Rule 9(b) particularity requirements for fraud with regards to indemnification for/policing of false advertisements based on the CEO’s meeting with a specific Telebrands rep, but failed to allege sufficient details regarding AdWords, including which words should be covered, the content of ads, the identity of the relevant retail clients, or when or where the allegedly violative ads appeared.

Breach of contract failed; it was just a reassertion of the failed alleged violations of the Lanham Act, the IUDTPA, and the ICFA as a breach of the compliance-with-law clause of the contract. The only other specific statute that My Pillow identified was the FTC Act, but it didn’t allege any specifics that support that claim.