Showing posts with label trade secrets. Show all posts
Showing posts with label trade secrets. Show all posts

Tuesday, March 11, 2014

IP in the UK

Sir Robin Jacob, Daniel Alexander QC, and Matthew Fisher, Guidebook to Intellectual Property (6th ed.): With dry humor, this book surveys British IP law for nonlawyers/business student types.  I’m not in a position to comment too much on substance.  In any event, the book repeatedly takes the position that when IP rights are at issue it’s often better to settle/go away than to fight even if the claimed right is of dubious validity, which is a position to which I am constitutionally opposed although I understand its practicalities (until you find out that there are no names left available for your business, anyway …).  According to the authors, limits on damages in UK law somewhat mitigate this risk, but this conclusion on patents is typical: “The great majority of patents go through their lives in peace, with nobody really convinced they are valid, but nobody prepared to take the risk of infringing them. Commercially they are just as useful as if they had been valid. Thus, even an invalid patent is often valuable enough to make it worthwhile keeping on bluffing until the bitter end. And there is a lot of truth in the old adage ‘a weak patent in strong hands is worth more than a strong patent in weak hands.’”  Gotta love a good chiasmus.

I appreciated the grace notes of the writing.  “Almost unbelievably, there are now two sorts of unregistered design right …. Unbelievably (again!) there are two sorts of registered design ….”  As for the moral right of paternity, “it may be thought that this is a physiologically and psychologically implausible term, as well as being sexist. Indeed, this is so.”  The following trenchant observations aren’t specific to UK/EU law: “as is coming to be more usual in IP legislation, the draftsman has been careful not to use words that mean anything very definite, either to a lawyer or to anyone else.”  And as for private drafters, “[i]t should in particular be assumed that any agreement drawn up by business people will prove difficult for lawyers (including judges) to sort out; for lawyers and business people have quite different ideas both as to the way they use language and as to the sort of things that agreements ought to provide for.”  Truer words indeed.

Monday, March 10, 2014

Comparisons and copying of business model aren't infringement or false advertising

Garden Catering-Hamilton Avenue, LLC v. Wally’s Chicken Coop, LLC, 2014 WL 810821, No. 3:11cv1892 (D. Conn. Feb. 28, 2014)

Garden Catering alleged that its former employee, Michael Natale, prepared to open a rival restaurant, Wally’s, while employed by Garden Catering, and therefore defendants breached Natale’s fiduciary duty; violated the Lanham Act, Connecticut common law on unfair competition, and Connecticut’s Unfair Trade Practices Act; and were unjustly enriched.

Garden Catering is a restaurant chain with multiple locations in Connecticut and New York.  While he worked at Garden Catering on an occasional part-time basis as a cashier, Natale started making plans to open his own restaurant, which included communicating with another Garden Catering employee about his interest and with Garden Catering’s food supplier. In a meeting with the supplier, Natale’s brother (also an occasional Garden Catering worker) said that Wally’s, which was opening in Storrs, would be “just like” Garden Catering. 

Garden Catering’s head fry cook then unexpectedly announced his intention to resign, allegedly because Natale offered him a higher wage and room and board (in what seems to have been a three-person apartment share) as an enticement.  (You know, there’s a fascinating labor story going on here.  This company apparently expects a lot of loyalty from workers it employed “occasionally” and part-time, when even the head fry cook’s wages were apparently low enough that getting housing with two roommates was a big enticement.)  When Garden Catering confronted Natale about this, he denied plans to open a competing business.

Garden Catering alleged that Wally’s infringed a number of marks, claiming common law rights in “Bits” (for chicken nuggets), “Cones” (for battered and fried mashed potato balls), “the Hotsy” (for various sandwiches topped with chili), “the Special” (a combination meal with half a pound of chicken nuggets, one side, and a soda), “the Junior Special,” “the Boss Special,” and the “Homerun Special.”  Wally’s referred to its chicken nuggets as “bits,” offered “puds,” which are identical to Garden Catering’s “Cones,” and offered two “Topsy” sandwiches, both topped with chili. Also, Wally’s offered several “combo” meals that tracked the Garden Catering “specials,” under the names “The Wally,” “The Mini,” “The Mongo,” and “The Husky.”  Wall’s pricing tiers corresponded with Garden Catering, and it served some orders in insulated bags similar to those used by Garden Catering. 

Garden Catering alleged that this caused confusion, evidenced by postings from Wally’s Facebook page linking the two.  E.g.: “Anyone who likes Garden Catering, or who is looking to eat some great food for a great price needs to check out Wally’s Chicken Coop” and “Thank god someone has brought the joy of GC to Storrs.” Defendants conceded that some customers referred to “Garden Catering” while at Wally’s, and Wally’s employees have told customers that some of the food served by Wally’s is similar to that served at Garden Catering. Shortly after Wally’s opened, a former Garden Catering employee visited Wally’s, and the fry cook told him that Wally’s was “like Garden Catering, but we’re better” and that the “Wally’s Special” was the same as Garden Catering’s “The Special.” Natale also said that “we are kinda like” Garden Catering.

Defendants argued that, because Wally’s is about 104 miles away from Garden Catering, and because plaintiffs didn’t have any patents or similar protection for their menu items, they hadn’t engaged in unfair competition.

The court granted defendants summary judgment on the Lanham Act claim.  As for “Garden Catering” and “Cones,” defendants didn’t directly use the marks; Garden Catering claimed that the infringement consisted of “creating a restaurant with the same overall impression as Garden Catering” plus marketing and statements such as the claim that Wally’s was “like Garden Catering, but we’re better.”  This was an overly broad view of the Lanham Act.  The confusion alleged wasn’t that consumers might believe that Garden Catering was the source of Wally’s.  Rather, it was confusion allegedly resulting from oral statements about similarity to Garden Catering, not connected to any particular use of a mark.  Garden Catering’s claims were based on defendants’ business practices, not trademark infringement, and that’s not actionable under the Lanham Act.

Similarly, Garden Catering’s claim to “bits” was overbroad.  There was no evidence that Garden Catering used “Bits” other than a broad and conclusory assertion by one principal that the term was in use.  This assertion was refuted by Garden Catering’s menu, which called its chicken pieces “nuggets.” No use, no trademark. 

“The Special” was generic for a combination platter of food with a main course, side dish, and soda.  And Wally’s didn’t even use the term generally, using “combos” instead. Nor did Garden Catering show that appending variations to “the Special,” such as “Junior,” “Big Boy,” and “Boss” made the terms sufficiently distinctive to warrant protection.  Also, Wally’s “The Wally” etc. marks weren’t shown to be confusingly similar.

As for the “Hotsy,” the parties disputed whether it was suggestive or descriptive. That line was for a jury to draw, but there wasn’t enough evidence to get to a jury on confusion between the “Hotsy” and the “Topsy.”  Garden Catering argued that consumers would be confused into thinking that the parties were affiliated.  It relied on evidence of consumers connecting Wally’s and Garden Catering, but this didn’t show that use of “Hotsy” had anything to do with that.  Plus, the evidence of affiliation confusion was anectodal, such as customers coming into Garden Catering asking for a “Wally’s Special” or saying that “it is great to hear that Garden Catering is up at UCCON.” Facebook and Twitter posts also suggested that consumers incorrectly concluded that the two restaurants were associated, such as “there’s a garden catering at uconn” and “Wally’s chicken coop=garden catering.”  This was insufficient, especially since a number of postings demonstrated lack of confusion, such as “Wally’s stole [Garden Catering’s] recipe,” “Wally coops is a knock off from them,” and “go to garden catering, it’s the same thing, that’s where Wally’s got the idea from.”

Garden Catering argued that defendants’ intentional copying of its business model gave rise to a presumption of confusion.  But this was outweighed by absence of evidence on the other confusion factors, especially the proximity of the products, which cut strongly against Garden Catering given the over 100-mile distance between them and lack of evidence that Garden Catering’s marks were distinctive in the local Storrs market.

The court noted that, though the Lanham Act protects trade dress, courts have required plaintiffs to be very specific and detailed about the allegedly protected elements.  This Garden Catering did not do.

The false advertising claims also failed.  Statements to customers that Wally’s was “just like” or “similar to” Garden Catering hadn’t been shown to be in “advertising or promotion”; there was no evidence that these statements were widespread, instead of isolated.  Plus, the statements weren’t false or misleading, “as the restaurants were indisputably similar, and the question of which restaurant was “better” was a statement of opinion.”

The court held on to the remaining state law claims given the developed stage of the case; the need for the parties, two small businesses, to resolve their dispute; and the non-novel state law questions at issue.

Breach of fiduciary duty: an employee is entitled to make preparations to compete with her current employer even before she resigns, as long as actual competition hasn’t yet begun, so summary judgment was granted based on claims based solely on Natale’s preparations to compete. However, there was a genuine dispute of material fact about the extent to which Garden Catering’s food preparation and other business information were trade secrets and whether Natale wrongfully used this information in his new venture. (This factual dispute also preserved the unjust enrichment claim.)  Summary judgment was also denied on whether Natale recruited Garden Catering employees to leave while he was still employed by Garden Catering, which would’ve breached his duty of loyalty.

Unfair competition/CUTPA: An employee who acts outside the scope of her employment as a competitor can be subject to a CUTPA claim, so the conduct that could constitute a breach of fiduciary duty could also violate CUTPA’s ban on unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.

Monday, December 02, 2013

distributor's switch to direct sourcing leads to Lanham Act claim

Alpha Pro Tech, Inc. v. VWR Intern. LLC, No. 12–1615, 2013 WL 6179065 (E.D. Pa. Nov. 26, 2013)

One way to tell the story of this complaint: company decides to outsource production of a flagship product to China, gets burned when Chinese company appropriates its trade secrets, is now sad about that. Somehow I bet the Georgia workers who lost their work might have something to say about that.  I’ll skip the trade secret part of the case, but some of the trade secret-based claims do survive.

Plaintiff APT made Critical Cover protective apparel for use in scientific and medical settings; VWR was formerly its exclusive distributor.  Critical Cover’s protective coating was allegedly superior to competitors’, giving it a competitive advantage.  The distributorship agreement, among other things, licensed VWR to use the Critical Cover mark and bound it to identify APT as the manufacturer and warrantor of Critical Cover products.

In 2000, APT moved Critical Cover manufacturing from Georgia to China, where it entered into a relationship with another entity, XXPC, which became the manufacturer.  VWR allegedly induced XXPC to violate APT’s confidentiality restrictions and make similar coated products for VWR, at which point VWR terminated its relationship with APT.

VWR allegedly set out to market its new product lines as replacements for/continuations of Critical Cover product lines.  VWR allegedly got customers to believe that their well-liked Critical Cover products no longer existed and that they were “simply being transitioned into the same or similar products by another name.”  For example, VWR stated that “VWR Advanced and Maximum Protection apparel (the products formerly known under the VWR Critical Cover ComforTech™ and Microbreathe™ brands) will experience a change in raw materials,” but APT alleged that the products weren’t “formerly known” as Critical Cover, and also that this statement falsely led customers to believe that the products came from the same source.  The two types of false/misleading statements alleged were statements that caused consumers to believe that VWR’s products were Critical Cover products under another name (false because the manufacturer and the process had changed in that the process was no longer subject to APT’s quality control and warranties), and statements that misrepresented, at least by implication, that Critical Cover products had been discontinued.

The court first rejected VWR’s argument that APT wasn’t really the manufacturer of Critical Cover products; rather, XXPC was.  (You know what would really assist this discussion?  Dastar’s statement that “origin” can be stretched to the licensor.)  Just because APT partnered with XXPC didn’t mean that APT wasn’t also a manufacturer—the two weren’t mutually exclusive as manufacturers. 

Anyway, that argument missed the mark because APT also alleged that VWR’s statements caused consumers to believe that VWR’s products were Critical Cover products under another name.  Because Critical Cover is a valid mark, “any statements, even if true, that led customers to believe that VWR’s products were CRITICAL COVER® products would be actionable as false advertising.  Unless VWR were to concede it was infringing APT’s CRITICAL COVER® trademark—which, obviously, it does not do—the CRITICAL COVER® products are necessarily different from VWR’s own product line.”   

Also, APT alleged that the manufacturing process changed because APT’s quality controls and warranties were no longer present, and VWR’s trade secret argument seemed to suggest that VWR’s new line didn’t use the particulars of APT’s alleged trade secret.  VWR’s advertising allegedly convinced a substantial number of consumers that VWR’s products were Critical Cover products under a different brand name.  (Dastar protects the right to copy, which means the right to offer the “same” product under a different brand name; the court is about to recognize this.)

However, the court pointed out, passing a motion to dismiss isn’t a guarantee of success.  “In fact, a large and potentially dispositive issue of fact may be whether VWR’s products were identical, or even superior, to APT’s CRITICAL COVER® products.”  If they were, then the false advertising claim would probably fail because, although VWR products wouldn’t “technically” be not Critical Cover products because APT owned the trademark, they’d in fact be identical.  Also, the difference would likely be immaterial, citing Pernod Ricard and McCarthy.  But for right now, the argument that customers wouldn’t pay APT’s higher prices for identical products and therefore there was no nexus between VWR’s ads and APT’s harm was not appropriate on a motion to dismiss.

For similar reasons, the false designation of origin claim survived, though it had different elements. (But why? This court, like others, says §43(a)(1)(A) and (B) are basically the same, then applies different standards: “Unlike a false advertising claim, a false designation of origin/passing off claim requires not proof of actual confusion, but rather proof of likely confusion,” even though the likelihood language of the statute is identical.)  Passing off can be either express or implied—implied is “when an enterprise uses a competitor’s advertising material, or a sample or photograph of the competitor’s product, to impliedly represent that the product it is selling was produced by the competitor.”  This can occur through initial interest confusion.  Anyway, §43(a) doesn’t have rigid boundaries and the liability test should be adapted to the circumstances at hand.

As a result, the court rejected VWR’s argument that it hadn’t used any designations falsely but rather fairly and referentially.  There was a potential false designation of origin based on the Critical Cover trademark, though that would fail if VWR’s product line was the same as or superior to Critical Cover.  But if the allegations were proven true, that would constitute false designation of origin by likely confusing consumers about whether VWR’s new products were simply Critical Cover products by another name.  Section 43(a) covers this conduct, “because otherwise a defendant could escape liability for passing off simply by using another’s mark—a false designation of origin—to establish the equivalency of the other’s mark and the defendant’s new mark, and then shift to using only its new mark.”  This couldn’t be resolved at the motion to dismiss stage, because the statements from VWR’s marketing materials could be read as misleading.  Likelihood of confusion would require using the multifactor infringement test.  Although APT’s allegations weren’t perfect, it did allege specific statements that could create confusion:

“It is also worth noting that we have not changed the manufacturer, manufacturing location, or the manufacturing process for 95% of the products in our new line. For the majority of the portfolio, only the brand name and part numbers will change, and we will continue to make available the previous line of VWR Critical Cover products for a minimum of 30 days during this transition.”

“VWR Advanced and Maximum Protection apparel (the products formerly known under the VWR Critical Cover ComforTech™ and Microbreathe™ brands) will experience a change in raw materials.”

“As you are aware, VWR is transitioning our VWR Critical Cover® apparel line to our new line of VWR Protection apparel.... [W]e are writing this letter to certify that for 95% of the products involved in this transition, there will be no change in the manufacturer, manufacturing location, or manufacturing process.” and

A table, preceded by the text, “In addition to the above certification, below is a list of VWR Protection apparel products that will not experience a change in raw materials,” in which “Old Brand Name” trademarks were aligned with “New Brand Name” product lines.

These are really interesting statements from a nominative fair use perspective given that VWR was licensed to use the marks—apparently exclusively—but APT alleged that the products weren’t “formerly known” as Critical Cover.  Here's an exercise: formulate statements that would be protected by nominative fair use in truthfully disclosing the situation.

VWR argued that buyer sophistication would preclude confusion, and that APT’s harm wasn’t related to the trademark but rather to its failure to retain other distributors.  Those might both be true, but not on a motion to dismiss, even though APT’s allegations seemed to establish that its customers were sophisticated, e.g., allegations that the process of qualifying protective apparel for use can take significant time and resources.  (From what I infer, then, VWR’s statements were designed to minimize any need for requalification.)

Monday, October 22, 2012

Allegedly false claims of authorship not actionable false advertising

Blake v. Professional Coin Grading Service, --- F. Supp. 2d ---, 2012 WL 4903334 (D. Mass.)

Blake, a coin collector, allegedly invented a method for judging the “eye appeal” of coins, the “axial ultimate refractory angle of the coin” (“AURA System” or “AURA”).  He applied for a patent, and also sought to promote the AURA System with Professional Coin Grading Service (an unincorporated division of Collectors Universe, Inc.), and its competitor Numismatic Guaranty Corporation of America, both of which provide coin grading services. During initial talks with them, Blake communicated some marketing proposals that using the plus (+) symbol to promote the AURA System. The defendants weren’t interested, but instead launched an idea similar to the AURA System. Blake brought a number of trade secret and unfair competition-type claims, as well as contract-based claims against Numismatic.

Coin grading and labeling is important for determining value, and there is already “a plethora of grading systems and labels,” but Blake’s AURA proposes a new twist.  The patent posits that symbols can be used as labels for the “eye appeal” grade, and discloses a plus sign as one possibility for above average quality.  Before AURA, Numismatic already used a star next to a numerical grade to indicate above-average eye appeal, while Professional Grading also considered eye appeal in its “PQ” (Premium Quality) label.  Blake proposed to solve the coordination problem in the industry.  He alleged that as a result of defendants’ unfair acts he was unlawfully deprived of the opportunity to license the AURA System and lost expenses associated with his patent and trademark applications.

The court ruled that the filed patent application disclosed the plus and the idea of the system and the use of the plus to indicate a coin’s grade was also well-known beforehand anyway.  In addition, Blake voluntarily disclosed the public aspects of the Aura System in a published book which he offered to a research director at Numismatic, who responded that he already had a copy.   However, Blake had sufficiently alleged the existence of confidential information about his marketing plan to promote the Aura System, which he disclosed to Numismatic under an expectation of confidentiality, to survive a motion to dismiss on the breach of contract/trade secrecy-related claims.  The marketing ideas included “a proposal to work jointly with other firms in the coin grading industry because the particularly fragmented nature of the industry makes it nearly impossible for any single enterprise to unilaterally standardize a labeling methodology for the eye appeal concept,” with the + as a marketing tool.  This was the same symbol the defendants allegedly introduced together, despite being competitors.  The fact that + overlapped with Numismatic’s existing use of the star symbol tended to substantiate Blake’s allegations.  Although Blake wasn’t actively using the alleged secret in connection with a business, he was at an entrepreneurial stage; the marketing plan “was created for use in connection with a business and was ready to be launched.”  He alleged that he was actively seeking partners, which was enough to count as use of the trade secret at this stage.  Most of his claimed damages came from the plus/system claims, though, so the suggestion was that his remaining claims might have minimal value.  (There was no allegation that defendants used the applied-for method.)

Blake couldn’t claim ownership of the + to indicate higher quality “because it is a symbol in the public domain and commonly used in the coin grading industry,” and also was an everyday word with a “generic character,” which doomed his trade secret claims at to the + and also bore on the Lanham Act claims.

Turning to the Lanham Act claims, the court found that Dastar barred Blake’s false designation of origin claim.  Blake argued that defendants impliedly represented that they created the + labeling methodology, but that’s communicative and flat-out nonactionable under Dastar.

Dastar left open false advertising as a possibility in dicta, but is authorship within the “nature, characteristic, or quality” language of the Lanham Act?  Other courts have said no.

Blake’s false advertising claims were based on (1) defendants’ alleged renaming of the AURA System as SecurePlus and its + labeling methodology, (2) alleged false description of SecurePlus and its methodology, and (3) alleged violations of a 1990 FTC consent decree, which permanently enjoins Professional Grading from claiming that its “grading is ‘objective,’ ‘consistent’ or ‘unbiased,’ if such representation is contrary to fact.”   

The first argument was just the Dastar-barred claim repackaged.  And it didn’t even fit Dastar’s dictum, which concerned a situation in which a communicative product’s ads gave consumers the impression that its product was “quite different” from the plaintiff’s.  But since Blake has never marketed AURA-labeled coins, the public couldn’t have been misled into believing that AURA was quite different from SecurePlus, and defendants’ ads never mentioned AURA.  Anyway, Blake claimed that the two systems were virtually identical.

The court concluded that “[t]he grading process does not change the nature, characteristics, or qualities of the coin.”  A graded coin has added value, but that comes “from the service provided by a reputable grading company,” especially since eye appeal “is a subjective measure dependent on the expertise of the grader.”  Innovation in grading should be rewarded by copyright or patent law, not the Lanham Act.  Thus, the authorship of a coin grading system does not bear on the “nature, characteristics, [or] qualities” of the labeled coins.  (That can easily be true without the first sentence in this paragraph being true: it seems quite clear that statements about the grading process can be true or false descriptions of the “nature, characteristics, [or] qualities” of the grading service, which defendants provide.)    Further, Blake didn’t adequately allege that defendants advertised in a way that falsely differentiated SecurePlus from AURA.

Blake also argued that Professional Grading agreed to a “naked license” of the + mark from Numismatic; naked licenses are inherently misleading, and also the public was allegedly misled that the two parties had equivalent grading standards for +.  But the complaint didn’t allege that Professional Grading licensed a mark, but rather that Numismatic “shared” + with Professional Grading.  Each company allegedly created its own mark, SecurePlus for Professional Grading and + for Numismatic, and each promoted its own respective label.  Blake failed to allege any written or implied license agreement, so the court didn’t decide whether Professional Grading could have breached its duty to control the quality of services bearing the + mark (if it can be a mark at all).

As to the argument about the FTC consent decree, the FTC hasn’t initiated any action against Professional Grading for a violation, and Blake lacked standing to enforce the decree.  To the extent that Blake alleged that the court ought to take the FTC decree as a reason to think that defendants violated the Lanham Act, he failed to allege that they exaggerated the reach of the methodology to AURA’s detriment.  Blake alleged that Professional Grading exaggerated the power of its methodology, misleadingly conveying that it could grade objectively and consistently.  “Even if Professional Grading used the term ‘consistent’ in violation of the FTC Decree, Blake simply has failed to allege that it exaggerated the reach of the methodology to the detriment of AURA,” since Blake himself claimed that AURA “objectively” and “systematically” assesses the eye appeal of coins.  I don’t understand this rationale: if AURA can truthfully claim to be the only objective/systematic system on the market, that seems a clear competitive advantage that would be negated by falsely advertising that a competing system was also objective and systematic.  That said, I agree that the consent decree isn’t important here.

Blake’s conversion claims failed because they related to intangible property, and Massachusetts doesn’t recognize a conversion claim in marketing plans, goodwill, copyrights, trademarks, or patents.  Even if a conversion claim could be brought, Blake failed to allege that he was the rightful owner of the property, given that AURA and the + designation were generally known to the industry. 

Wednesday, July 25, 2012

What does it take to plead copyright infringement?

Ritani, LLC v. Aghjayan, 2012 WL 2979058 (S.D.N.Y.)
Ritani, a high-end jewelry company, sued Harout Aghjayan (known to the trade as Harout Ritani), his wife, and several related companies (including Harout R, LLC and H. Ritani, Inc.).  Given the names, you can guess the basic backstory: Aghjayan’s wholly owned corporation used the Ritani mark, but then sold all its assets including IP and good will to Ritani, LLC.  He then worked for the LLC and had confidentiality and noncompete agreements.  Nonetheless, Ritani alleged, when he left he took trade secrets, including secret design files with CAD/CAM drawings for jewelry, and violated the noncompete agreement.  Ritani alleged that Aghjayan “tweaked” existing Ritani designs “to save time and money, rather than undertake the slow process of building jewelry designs from scratch.”  He allegedly used 84 CAD/CAM files identical or nearly identical to Ritani’s designs, including designs incorporating Ritani’s Three-Leaf trademark and as-yet-unpublished designs, that allowed him to create more than 200 styles.
Aghjayan allegedly mailed out around 7,000 flyers to all of Ritani's customers announcing the formation of Harout R.  The flyers emphasized that the “R” in Harout R stands for Ritani, and included Aghjayan’s statement that he was “previously known as Harout Ritani.” Ritani further alleged that someone told customers and potential customers that Aghjayan was the real “Harout Ritani.” In addition, Mrs. Aghjayan allegedly referred to herself as Shawndria Ritani and posted a picture of Aghjayan selling jewelry on her Flickr page, asking “Where is Harout Ritani now?”
Additionally, Ritani alleged that defendants sold copies of the Three-Leaf trademark in their Harout R jewelry line in a way that was likely to cause confusion, because the designs were “virtual copies” of Ritani’s designs.
This ruling is perhaps most notable for its dismissal (without prejudice) of the copyright claims for failure to satisfy the pleading requirements of Rule 8.  All that’s required at this stage is fair notice.  You might think that identifying the allegedly infringed works plus identifying the allegedly infringing designs would be enough, but here it was not.  First, though Ritani alleged that defendants collectively used Ritani’s designs to create their design portfolio, Ritani didn’t identify which defendants created that portfolio or allege specific facts supporting its claim that defendants used protected aspects of Ritani’s collections in creating that portfolio.  The complaint also lacked specification of what acts and what times the identified copyrights were infringed.  For example, the complaint alleged that a specific email included certain Harout R styles that were identical to a specific design that was part of Ritani’s copyrighted sketch book.  But, even assuming Aghjayan copied Ritani's work, the complaint failed to plead facts regarding how the rings were substantially similar, including identifying the protectable elements of the works.  Though substantial similarity is typically a question of fact, there are cases in which that question can be resolved as a matter of law because any similarity is only in noncopyrightable elements or because no reasonable jury could find substantial similarity.  (I take it that the court’s point is that this can only be done if the protectable elements are sufficiently well-identified, including by attaching the plaintiff’s and defendant’s works to the complaint.)
In jewelry cases, the court continued, courts have applied both an ordinary observer and a discerning observer test, the latter of which applies when a work contains both protectable and unprotectable elements.  Copyright doesn’t cover functional elements of jewelry (for example, presumably, the special “perfect fit” feature Ritani claimed as part of its trade secrets that allowed a wedding and engagement ring to fit together seamlessly) or the idea or concept of jewelry.  Functional elements include the location of the stone, type of shank, and how the prongs hold the main stone; even in the aggregate, they are ideas rather than expression.
In this case, the complaint didn’t specify particular protected elements of the rings, just generally alleged virtual copying/substantial similarity of the rings overall.  Assuming that there were both protectable and unprotectable elements, it was significant that Ritani’s complaint admitted that the rings differed (had been “tweak[ed]”).  There were no allegations of facts establishing substantial similarity, as required in this type of case.
Finally, Ritani couldn’t maintain a claim based on wax models allegedly produced by Aghjayan during his employment with Ritani; the court said that there was no allegation that the models were ever “copyrighted,” for which I will read “registered.”
Assume that images of both parties’ rings had been attached to the complaint.  Given the functionality and idea/expression concerns cited by the court, could images alone be enough to plead substantial similarity, or would the complaint also have to identify particular features?  (Compare the trend in unregistered trade dress cases of requiring a specification of the alleged trade dress in words.) 
Ritani did somewhat better on the rest of its claims.  Ritani had a registered mark in its Three-Leaf design (which apparently stated a claim based on the alleged incorporation of the design into the jewelry itself--is that inconsistent with the copyright ruling, given that the court didn't spend any time on the identification of the design?) and also pled sufficient facts to state a claim for confusion based on defendants’ use of Ritani/claim to be the “real” Harout Ritani.  The use of an identical mark in the same industry is likely to cause confusion so the claim was adequately pled.  (The court probably doesn’t really mean that the plaintiff must only show use of Ritani in competition with Ritani, regardless of other circumstances such as nominative fair use; I wonder whether it would be possible to do a summary judgment proceeding limited to nominative fair use, though if Ritani gets discovery into everything defendants have said about themselves that will probably not be very limited.)  

However, as to “Harout R,” Ritani didn’t allege any trademark in the unregistered, unstylized letter R, which was not inherently distinctive as a matter of law.  Thus, alleging the use of R was insufficient to allege likely confusion, though other facts in the complaint did suffice.  Defendants argued that the flyer identified Harout R as a new company and only mentioned Aghjayan’s previous association with Ritani: “[Aghjayan was] previously known as Harout Ritani, designer and founder of New York’s RITANI’S Fine Jewelry Brand. He is now launching his new company HAROUT R LLC. This collection is the most innovative to date, ... Harout observed that the opportunity for variety was limited and saw a need to introduce something that has not been done before.”  It also described Harout R as a new brand and included a biography of Aghjayan which identified him as Ritani’s founder, previously known as Harout Ritani and stated that he sold his interest and left Ritani in 2009.  Defendants argued that the flyer couldn’t make the distinction between the parties any clearer, an argument the court identified as descriptive fair use (though nominative fair use might also make sense).  The court found that this defense couldn’t be resolved on a motion to dismiss given the allegations: the complaint alleged that that Aghjayan “repeatedly identified himself to trade show participants as ‘Harout Ritani’ “ and “advis[ed] potential customers that he was the real ‘Ritani.’”  These comments “are not free from ambiguity and may potentially cause consumer confusion.”  Thus, these Lanham Act claims survived along with coordinate state law claims.
The state law false advertising claim was dismissed for failure to allege sufficiently consumer-oriented conduct.  Though consumers might be misled into believing that the parties were associated, there were no allegations describing the resulting injuries to Ritani or to the public.
The state law dilution claim also survived.  “Plaintiff has plausibly suggested that Harout R’s marketing materials, Aghjayan’s maintenance and continued registration of HR Corp. and HR LLC, and certain representations made by Aghjayan to customers may dilute the Plaintiff's business name and reputations.”
The trade secret misappropriation and breach of the duty of loyalty and fiduciary duty claims were also sufficient, though only against Aghjayan and his wife (also a former Ritani employee); breach of contract survived only against Aghjayan.  By contrast, the tortious interference claim failed.  The complaint named specific customers and alleged that Aghjayan’s actions led to “the breakdown of negotiations between Ritani LLC and Helzberg, which resulted in Helzberg’s placement of $2.8 million worth of orders with Defendant Companies,” and that but for Aghjayan’s actions, “it is likely that Ritani LLC would have obtained the financial benefit of Defendants’ initial contract with Helzberg, plus Defendants’ ongoing business from Helzberg and Blue Nile.”  I’m not quite sure what the problem is, but the court held that, nonetheless, Ritani failed to allege that “as a result of Aghjayan’s actions, … any of these customers did not buy from Ritani, or that any order was canceled or that it had an actual, legitimate expectation as to their further patronage.”  Instead, the complaint simply alleged that Helzberg and Blue Nile ordered from defendants and that “it is likely” that Ritani might have benefited from the contract.  In addition, Ritani failed to plead sufficient facts to show that Aghjayan acted “with a wrongful purpose ... motivated solely by malice and/or to inflict injury” to Ritani, as required. “In starting his new business ventures, Aghjayan set up meetings with vendors that he was familiar with and with whom he had previous relationships with.”
Ritani’s claim for breach of an implied covenant not to solicit business, based on Aghjayan’s previous sale of his business with its associated goodwill, was also dismissed.  Aghjayan individually didn’t sell his goodwill; it was assigned by an agreement to which Aghjayan wasn’t a party.  In any event, the parties to a sale can negotiate and narrow any implied covenant, which the parties did here: they negotiated a restrictive covenant for Aghjayan limited to a one-year non-compete, which was later modified, and permitted Aghjayan to sell to all current Ritani customers, listed on its website, after December 31, 2010.  It didn’t restrict who he could solicit, thereby modifying any implied restriction that might otherwise have existed.
Separately, Ritani didn’t plead improper solicitation, which requires something more than general ads and announcements to the public and competition with the business’s buyer.  “Nowhere in the marketing materials is there a suggestion that he is touting his goods over Ritani’s.”  The facts alleged over 7000 brochures sent to potential customers, and such broad advertising is allowed.

Tuesday, June 26, 2012

Glass House unbroken by Big Brother's copyright/trade secret claims

CBS Broadcasting, Inc. v. American Broadcasting Companies, Inc., 2:12-cv-04073-GAF-JEM (C.D. Cal. June 21, 2012)

CBS has aired the reality TV show Big Brother for 13 years.  It’s set in a sound stage built to resemble a house, with 12-14 participants live in front of cameras that record everything that happens.  Participants are eliminated through various means until the last one left wins some cash.  ABC developed The Glass House, a competing show in a similar setting with a similar number of contestants and a similar motivation. “As with Big Brother, cameras will record the interaction among contestants in the hope that, once thrown together in close quarters with no escape, drama will ensue.”

CBS sued for copyright infringement and misappropriation of trade secrets.  The court denied its motion for a TRO, concluding that CBS was unlikely to show that ABC copied protectable elements of Big Brother.  In addition, the alleged trade secrets were already known in the business, easily reverse engineered, or not adequately protected as trade secrets.

CBS argued that the similarities between Big Brother and Glass House were unsurprising because ABC hired numerous former Big Brother staff to work on Glass House, including the Glass House showrunner (responsible for day-to-day operations).  The showrunner admitted that he showed the Big Brother “Houseguest Manual,” a compilation of rules for Big Brother contestants, to a production coordinator on Glass House, and asked that its contents be re-typed and sent to in-house counsel at ABC.  He also consulted consulted an old “Master Control Room” schedule for Big Brother when determining how many “story positions” he would need to hire for Glass House.

CBS contended that Big Brother’s unique success was substantially due to its schedule, which required “recording, editing, and broadcasting episodes during the competition,

within 48 hours of the events actually happening.”  This quick turnaround depends on special filming, editing, and production techniques, including multiple production teams separately assigned to monitor major storylines and searchable databases that catalog all house activities; CBS argued that these were trade secrets.

The court turned first to the copyright claim.  Access was clear, and given the similarity of the concepts, there was no doubt that some copying occurred.  But the question was whether there was substantial similarity in protected elements.  Citing Swirsky v. Carey, CBS argued for an “inverse ratio” rule that required less proof of substantial similarity when access is shown, but that’s a really bad idea.  As the court noted, such a rule “stands logic on its head … [A]ccess says nothing about whether two works bear any similarity to each other which must be determined solely by a comparison of the elements of the two works.”

Copyright protects expression, not ideas, themes, concepts, or scenes a faire.  Nor does it protect “hard work, industriousness, persistence, perseverance, tenacity or resourcefulness.”  (Insert West Wing “you just said three things that all mean the same thing” reference here.)  Nor, as §102(b) states, does it extend to any “procedure, process, system, [or] method of operation.” 

The court began by identifying some of the last category, noting that CBS conflated the copyright and trade secret analysis in order to make the copyright argument appear stronger.  CBS identified various procedures, processes and techniques it used to create Big Brother that it argued were protectable by copyright, including: (1) the number and placement of cameras used to record the activities of the “cast” of the show; (2) the fact that the video streams live to the internet; (3) the fact that contestants are housebound for some or all of the period during which the show is shot; (4) the timing and scope of the post-production work; (5) the fact that the post-production does or does not involve editing of content; (6) the fact that shows commence airing before the final episode has been shot; (7) the size of the production crew and the array of positions that are held by crew members.  “While these various procedures and processes may ultimately have an impact on the expressive elements of the show, 17 U.S.C. § 102(b) establishes that they are not within the ambit of copyright protection.”  The court therefore disregarded them.

So what was the expression of Big Brother?  “CBS has attempted to fit the reality show square peg into the fictional round hole.”  It argued that there were similarities in “plot, themes, dialogue, mood, setting, pace, characters, and sequences of events” between the two shows, but “Big Brother does not, as a concept, readily exhibit any of these elements.”  Rather, “the ‘drama’ that occurs in the voyeuristic variant of reality television develops, by design, in an unpredictable way. Until the cameras begin to record, there is no plot, there is no dialog, there is no pace or sequence of events, and there are no fixed characters because there is no author.   There is a setting, which is hardly novel, and some general ideas regarding the structure of the show, but little else.”

CBS was really trying to claim copyright in a format or template:

a voyeuristic reality show involving a group of 12 to 14 participants who compete for a grand prize while being subjected to round-the-clock observation while locked in a sound stage designed to give the appearance of a house.   To avoid the risk that the interactions among the participants becomes boring and uninteresting, the participants are given periodic challenges that earn privileges or cost them sanctions and, hopefully, create plot elements. As the season wears on, the drama intensifies as participants are voted off (“evicted”) by the other contestants until only one is left and declared the winner.  

This it could not do.  While the concept was more concrete than the broad abstraction “reality show,” it was still quite general and made of unprotectable elements.  A shared “voyeuristic” feel and “unscripted” character weren’t concrete expressive elements.  Nor were the components new or unique.  “[A]ccording to some sources, the idea of a voyeuristic television program depicting strangers thrown together in the same environment for an extended period of time while their interactions were recorded was pioneered in the 1991 Dutch television series ‘Nummer 28,’” then extended in MTV’s The Real World.  No prior show in the record kept the contestants housebound, “but that is more a procedure employed to induce interesting behavior than an

element of expression in and of itself.”  And most reality shows involve a contest for a grand prize; smaller competions along the way are a staple of reality programming “for obvious reasons – competition creates conflict; conflict creates drama; and drama (hopefully) creates interest, viewers and revenue.”  Competition and the risk of expulsion “are the life blood of reality programming.”

CBS’s expert argued that the “characters” were of “varied gender, age, and ethnicity.”  The court thought that they were people, not distinctly delineated characters deserving copyright protection.  The expert opined that some were “natural leaders and others . . . are natural whiners.”  The court was dubious: “Well, maybe it will work out that way, but no one can say for sure until the door closes, the cameras are turned on, and the producers watch to see what develops.  Moreover, the presence of leaders, followers and whiners is hardly an idea that would warrant copyright protection.”  The expert surmised that episodes would be about trust, betrayal, ambition, disappointment, bonding, competitiveness, and affection.”  The court: “But saying that is to say that anything can happen, and themes that are common to all literature for all time may arise during recording.”

CBS’s expert’s own language suggested dissimilarity: the characters were “varied,” the dialogue “improvised,” and, “most tellingly, the shows are aimed at eliciting nearly every human emotion that one might expect to find in anything resembling the dramatic arts.”  These were all generic tropes.  True, structural features gave rise to similarities—contestants on Glass House played kitchen bowling like those on Big Brother, but that real people found kitchen bowling worthwhile while they were locked up didn’t make the two works substantially similar.  (Interesting issue here about people playing out very specific cultural scripts they’ve picked up from existing reality TV.  See I’m not here to make friends.  Hmm, I wonder if you could get the cameras off you in one of these shows by speaking only in extended movie quotes and making the studio’s lawyers nervous?)

Courts dealing with reality show formats have unanimously denied copyright protection to them.  The court cited Survivor v. I’m a Celebrity, Get Me out of Here!, The Apprentice v. C.E.O., Rachael Ray v. Showbiz Chefs, and The Biggest Loser v. a prior treatment.  Even taking all the shared elements together, there wasn’t substantial similarity.  CBS argued that the key expressive features of Big Brother were “an unscripted house reality competition show whose voyeuristic feel depends on minimal interaction between cast and production, and viewer and production.”  But that didn’t identify any concrete, discernible and protectable plot, themes, or dialogue.  It’s not the case that any combination of unprotectable elements automatically qualifies for copyright protection.  (Or more precisely, CBS can get a copyright in its film of the Big Brother contestants interacting, and even its selection, coordination and arrangement of the film, but none of that gives it any rights to stop someone else from taking the same ideas and making their own film.)  It was reality TV’s “very aspiration towards the ‘real’” that doomed attempts to copyright reality TV concepts.  No matter how similarly contestants are selected or even forced to sleep, “the fundamental premise is to let ‘reality’ play its course.”  There’s no plot as the term is normally used in copyright cases.  Any “plot” emerges from the interaction of the contestants with the structure as the contestants begin to reveal their characters and assume specific roles. 

Two asides: (1) This sounds a bit like a video game; the video game designer may or may not have a lot more control over how the story develops. (2) I’m very interested in the concepts of “reality” suggested by these two phrases—people “reveal their characters” as if that were a fixed thing unrelated to circumstance, which is fundamental attribution error; but people may well “assume specific roles” because those roles are elicited from them, not least by their and others’ expectations about how people in X circumstance behave—often modified by demographic characteristics.

In any event, CBS’s ads touted Big Brother for these very emergent features, and the court found the ads more instructive than the legal argument.  “‘Reality,’ it turns out, is hard to copy.”

The court then turned to the trade secret claims.  Neither the Big Brother master control room schedule or House Guest manual, the two documents admittedly consulted by the showrunner, appeared to contain information that derived independent economic value from not being generally known to the public.  Even if such generic instructions could constitute trade secrets, it turns out that various versions of the House Guest manual are online, revealing many of the same instructions.  And the showrunner testified that he didn’t use the CBS schedule, “at least in the sense relevant to that document’s unique economic value, as his hiring practices revolved almost exclusively around budgetary considerations.”  “[T]he haphazard use of two generic documents” didn’t merit an injunction.

As for the remaining techniques, the court didn’t find either ownership or misappropriation.  Similar techniques are common for reality TV.  Nor did CBS show that Glass House actually used CBS’s procedures, citing only indirect evidence like media accounts calling Glass House a knockoff and Glass House’s hiring of Big Brother staffers.  This was plainly insufficient, especially given California’s public policy favoring employee mobility and freedom to use experience gained in prior employment.

For belt and suspenders, the court went on to find that even if CBS had shown likely success on the merits, it still wouldn’t be entitled to an injunction.  Irreparable harm isn’t presumed in copyright cases any more.  There was no evidence that Glass House “would in any way dull viewers’ appetites for Big Brother or similar reality television programs.”  Nor would loss of viewership be irreparable: CBS didn’t show that it couldn’t be compensated in money.

Furthermore, the balance of hardships tipped in defendants’ favor.  An injunction would disrupt the employment of more than 100 employees working on the show, as well as the contestants, who gave up their own employment opportunities to participate.  Defendants’ $20 million investment in Glass House would be rendered almost worthless.

Friday, May 11, 2012

"Paris shabby chic" not protectable trade dress

Vraiment Hospitality, LLC v. Binkowski, 2012 WL 1493737 (M.D. Fla.) (magistrate judge)

Vraiment owns two successful Amelie's Bakery & Café restaurants in North Carolina.  After a failed joint venture with defendants, Vraiment sued for trademark infringement and theft of trade secrets.  The parties settled and the court dismissed the case.  Alleging breach of the settlement, Vraiment sought enforcement, but since the case had simply been dismissed and the settlement wasn’t part of the dismissal, the court instead restarted the infringement case.  Because most of the allegedly infringing conduct ceased, and the plaintiff didn’t show a substantial likelihood of success on the remainder, the magistrate judge recommended that a preliminary injunction be denied.

Amelie’s interior décor is “an eclectic amalgamation of Francophile pieces, antique and replica furniture, and customized artwork,” or “Paris shabby chic.”  The Binkowskis were friends of Vraiment’s principal and wanted to open an Amelie’s in Tampa.  Vraiment’s designer created an interior décor that resembled the Charlotte Amelie’s, and the parties promoted the Tampa Amelie’s opening, including ameliesbakery.com created by the Binkowskis and a Facebook page.  Disagreements soon after opening broke up the collaboration, and defendants changed the name of their restaurant to Sophie’s French Bakery and Café.  They allegedly continued to use Amelie’s recipe and décor, and also used Amelie’s name online.

As part of the settlement, defendants agreed to return certain décor items to Vraiment, repaint the interior walls so as not to be alternating stripes of blue, re-name their salted caramel brownie, remove all references to Amelie's and the salted caramel brownie in metatags, and assign their rights in www.ameliesbakery.com to the plaintiff. 

Vraiment argued that this was akin to a franchise dispute, so that the court could presume confusion from continued use post-termination.  The magistrate judge disagreed: Vraiment first had to establish protectable trade dress, and likely confusion couldn’t be presumed because Amelie’s is not a well-known franchise. 

On the merits, Vraiment argued that, “[f]rom the custom built chandeliers and decoupage place settings, to the mixture of kitsch and traditional artwork, Amelie's [décor] is uncommon” and “more than a simple refinement of commonly adapted themes.”   It did not base its claim on secondary meaning.

Even assuming that Amelie’s trade dress as a whole was inherently distinctive, Sophie’s was substantially modified, and Vraiment failed to show that the portions of the trade dress that still appeared in Sophie’s were inherently distinctive and nonfunctional, and failed to show likely confusion.  Moreover, Vraiment’s request for an injunction barring the defendants from decorating in a way that copies “Amelie’s style” would be impermissibly vague and would inhibit lawful competition.  Vraiment has no interest in protecting a mere method and style of doing business.  In any event, “Paris shabby chic” isn’t exclusive to Amelie’s; other restaurants use it too.

The closest Vraiment came to identifying what specifically it claimed was: “alternating light blue and dark blue vertical stripes on the interior walls, together with mis-matched furniture, custom chandeliers, eclectic wall art, the Amelie's name and logo, and other features ... constitute a unique and protectable trade dress.”   This was inadequate because it included features Vraiment couldn’t monopolize (mismatched furniture) and failed to identify the “other features” and “eclectic wall art.”  And anyway Sophie’s didn’t use the Amelie’s name and logo.  Though Vraiment provided a specific list of items in its original motion, most of those had been removed and returned to it.  Any allegedly infringing conduct had therefore ceased and was unlikely to recur.  The remaining items were couches, furniture, drapes, and chalk board menus, but these were functional at that level of generality.  “For example, couches and tables, even with an artistic [flair], are functional, as they provide a place to consume food and beverages.  Further, the plaintiff acknowledges the functionality of this décor, as it asserts that its business model encourages patrons to stay as long as they wish.”  Blue-on-blue interior stripes were also not unique and couldn’t on their own constitute trade dress.

Separately, Vraiment failed to show likely confusion.  “[D]ue to the distance between the establishments, the customers are unlikely to know of both restaurants and therefore would be unaware of any similarity in trade dress that could cause confusion.”  With a descriptive or at most suggestive design, the fact that other restaurants use “shabby chic” weakened the trade dress’s distinctiveness.  The overall impression of the restaurants and the types of products sold were similar.  It was dissimilarity of retail outlets and purchasers that was key; the restaurants were separated by hundreds of miles.  Neither party had a well-known brand, and so confusion of an appreciable number of reasonably prudent buyers was unlikely.  The parties’ internet marketing was “completely separate and distinct,” so common use of the internet and social media was unlikely to cause confusion.  Once defendants significantly modified Sophie’s appearance, the intent factor provided little support for Vraiment’s claim.

On actual confusion, Vraiment presented evidence from two former North Carolina residents who patronized Amelie's and Sophie's.  One visited Sophie’s because she heard that Amelie’s was opening a Tampa restaurant and found the Hyde Park restaurant using Google.  She said she thought it was Amelie’s until an employee told her it was Sophie’s.  Another visited the restaurant when it was still Amelie’s and said it had the principal attributes of the Charlotte Amelie’s, though when he visited again after it became Sophie's he noted that much of the artwork was gone and the restaurant had a different “vibe.”  These isolated incidents didn’t show likely confusion.  The two people weren’t Tampa residents and there was no showing they were typical patrons.  Moreover, Sophie’s changed since their initial visits, as the second patron’s reaction confirmed.

The magistrate judge also recommended a rejection of the trade secret claim based on Amelie’s salted caramel brownie recipe.  Vraiment argued that its brownie had a unique combination of ingredients including a “secret ingredient,” and that it required employees to execute confidentiality agreements.  Vraiment argued that Sophie’s was misappropriating the recipe because its chef tasted both and opined that they looked and tasted the same and had the same “unique” texture.  The judge was not impressed by Vraiment’s argument that, because defendants sought to buy/license Vraiment’s overall know-how, this was evidence that the recipe was in fact a trade secret.  Defendants argued that it wasn’t a trade secret because Vraiment allowed the recipe to be published in Charlotte Magazine, but Vraiment responded that it omitted a key secret ingredient (which seems to make the recipe a misrepresentation, I must say).  Vraiment identified this “secret ingredient,” the apparent key to trade secret protection, and the magistrate judge was “unimpressed by the purported uniqueness of this ingredient in a brownie.”  The ingredient was included in a caramel brownie recipe on epicurious.com.  Moreover, defendants’ executive chef averred that he didn’t use Amelie’s recipe, but rather relied on independent research and his more than twenty years of experience.  He submitted his recipe, stating that it was not the same, and Vraiment failed to submit its own recipe for comparison.  On this record, Vraiment didn’t show a substantial likelihood of success.

Monday, April 16, 2012

Intellectual Property at the Edge part 2


Trade Secrets
Jeannie Fromer
Trade secret and patent are not as absolute as we imagine them in terms of disclosure/openness.  Quite a bit of disclosure in trade secret, and secrecy in patent.
Benjamin Tabor invented a successful rotary pump for thick liquids.  To commercialize it, he needed to make precise patterns.  He said he spent a long time doing this through trial and error.  Tabor said a patternmaker working in the same building, sometimes alongside Tabor’s machinist, measured and copied Tabor’s patterns.  He did so because another guy, William Hoffman, wanted to make the pumps too and Tabor alleged he wanted to avoid the necessary trial and error.
Hoffman says no, he didn’t tell the patternmaker how to make the patterns; they just happened to be in the patternmaker’s possession.  When we found out Tabor objected we went and measured from the pumps themselves. It’s not that much work to measure the pumps themselves.
Hoffman argues that patent law precluded the suit: there was an expired patent on a rotary pump, giving him the right to use the patterns to make a competing pump. Tabor’s response: that was a different pump.  The court infers that because Hoffman needed the patterns it must be a different pump.
Court ruled for Tabor overall.  Hoffman is free to make a pump, but not with Tabor’s patterns. Tabor worked very hard on the patterns!  Theme of unfair competition.  Hoffman has expert testimony that there are known rules for reverse engineering pumps pretty easily, though Tabor wasn’t trained in them. Trial court finds that reverse engineering is possible, but enjoins Hoffman anyway.  Affirmed on appeal, and by NY Ct of Appeal.
Court was willing to call it a secret even though the information was readily available.  This echoes in modern trade secret law—do we want to call it misappropriation when they used improper means to discover something discoverable by proper means.  Courts are willing to stop improper means, but they’re uncomfortable calling it a true secret if it would be simple to figure out.  In patent, we call very limited uses “public,” and it’s awkward to say that public uses are really secret. Why make people spend time/money on reverse engineering, then?  May sound in fairness; may also be about incentives to first movers.  (Evidentiary?  We don’t have to worry about which side is right about ease of reverse engineering?)
Tabor was allowed to share the info with certain people and it was still considered secret.  Compare to patent disclosure, which makes you broadcast to the public.
Maybe Tabor took advantage of both patent and trade secret.  He doesn’t reveal very much about how to make the patented pump.
Lionel Bently
Dr. James’ Powder for Fevers: multiple medical claims (1750).  Patent granted; action to revoke it because material was already in public domain. Privy Council held the patent valid.
Newbery, producer, was required to keep ingredients secret; was renewed for decades.  Ex-employee of Dr. James tried to set up as making the powder; big public scuffle over whether he was really capable of doing so.  Strong seller until 1810s and beyond—George III used the powders.  At some point, grandson of James decides he’s done with the deal and will change distributors.  Newbery brings an action for specific performance and to bar disclosure of the formula.
Ex parte TRO equivalent; then an inter partes proceeding, at which injunctive relief is refused. The report of the decision is terrible.  Why was relief refused?  Court does say that quack products of this kind don’t deserve protection, but that’s probably not the whole explanation.  He couldn’t possibly have been confident that it was a quack remedy in 1817.  A number of papers explicitly discussed the powder and deemed it a great benefit. In truth, major component was antimony (poison), that made you sweat and have a fever, so it felt like it was doing something.
Further reasoning: The patent should have revealed how to make the powders, so how could it be secret? Judge’s reasoning doesn’t quite add up, because everyone knew that the 1747 patent was insufficient to provide the person skilled in the art the means for making the medicine.  (Constructively not a trade secret?)
Patent specifications come in around 1710, obligatory from 1734, and courts hadn’t yet developed a doctrine of sufficiency; function of specification was being debated. Judge likely thought it wasn’t really a secret; the same papers that called the powder a great remedy also investigate what it’s made of, showing a wide public discourse examining its constituents.  Reputable people think they’ve IDed its ingredients.
Ginsburg: if the judge didn’t grant the injunction, the publisher can’t keep the heir in business with him.  Did that mean that Newbery could himself continue to distribute the medicine?
Bently: Not clear.
Dreyfuss: in South America, TM/the maker is the key to generics.  Neither one alone might have been able to make an equally valuable product.
Sichelman: Venetian patent system history: essentially no specification from mid-15th century until fall of republic in 1788.  Incentive system; disclosure wasn’t considered an important function.
Patent should never trump trade secret; maybe the patent was invalid and wrongly granted, but that shouldn’t be used against me down the road because my rights might not have been enforceable.
Fromer: estoppel argument—not right to say that you’ve sufficiently disclosed and then turn around and say that your work represents effort that needs to be replicated.
Sichelman: but if you tried to disclose, that seems like pretty heavy punishment.
Jacob: not even with best mode do you need to provide a blueprint.
Dreyfuss: but a PHOSITA is supposed to be able to make it without undue experimentation.  (So what is the measurement of “undue” experimentation?  The same amount of time it took the inventor?  “Undue” has to be less than that, right?)  Seems to be a regime overlap issue.
Strandburg: is there/should there be any relationship between undue experimentation and enablement and public accessibility under trade secret.
Jacob: in Venetian days, you expected the patent to cover a device, and you had to expect that others would learn about it.
Sichelman: yes, and there was no expectation that the document would convey the info.
Strandburg: incentive to invent and incentive to disclose are not aimed at the same inventions.  If you only include stuff in the patent system that is about taking care of free riding, then you don’t worry too much.
Stacy Dogan: on the problem of leaving the old distributor, James might have thought he could maintain rights over “Dr. James.”  Thus he’d get most if not all of the money.
Fromer: the person who originated the secret is dead and the descendant wants to share the secret.  Maybe affects the equities.
Bently: the only obligation of secrecy in the agreement was on Newbery. 
Open innovation
Kathy Strandburg
Physicians as user innovators.  Why do physicians resist patents?  Why is the statute not litigated over physician uses, even though it’s very ambiguous?  Pallin v. Singer: Setting is controversial uses of patents in areas where patents are controversial for other reasons, like biotech and reproductive rights.  For a long time, Patent Office took the position that medical/surgical procedures were unpatentable, but this was reversed in the mid-20th century.  Sense from responses to Pallin is that doctors didn’t think it was happening until around when this case arose, 1990s.  Doctors were starting to assert patents against other doctors and this was troubling.
Pallin involved cataract surgery: what shape of incision should you make when going into the eye to pull out the lens with the cataract and put in a new lens.  It was getting easier to do this with smaller incisions.  Sutureless surgery considered to be a big deal, because sutures risk distorting the eyeball.  Pallin’s invention: went to a meeting where there was a lot of buzz about sutureless surgery; one guy reported he’d developed a method, and another reported a different method and had shown a movie of it. These meetings apparently feature such movies as a standard and important feature.  Three people, at least, come up with the idea that the best way to do the surgery would be to have an incision with a v-shape.  Pallin calls it the chevron and Singer calls it the frown.  Dr. Gill also comes up with it.
Pallin claimed he wouldn’t have filed for the patent if he hadn’t been rejected by his colleagues.  This appears not to be true.  In the court proceedings, he says he filed at around the same time he attempted to publish.  Then he decided to start litigating.  He did eventually publish, and his was the first article about sutureless surgery in that journal.  He basically submitted three days after he did his first one, and the other people who do it do 500 before they try to publish.  He also gets some coverage in news updates.  Strandburg thinks that, as time went on and he wasn’t getting credit, he felt slighted.
Tried to donate his patent to different opthalmology associations, and they wouldn’t take it.  Then he starts suing: Singer, associated with Dartmouth.  They fight as a “patents on medical procedures are bad” issue.  Lawsuit is therefore surrounded by huge outcry.  Singer and Dartmouth take their position to the press, medical association meetings, etc.  General reaction favors Singer.  Pallin says this is a patent just like any other, appropriately issued and enforced.  Asking only a reasonable royalty.  Medical associations start lobbying Congress.  Biotech industry beats back “no patents on medical procedures,” and they end up with “no remedies against doctors for certain procedures.”
Why so much resistance when there’s no resistance to device & drug patents now?  Plausible story from user innovator community perspective.  Physician community of people who innovate have a system for publishing and sharing; reputational rewards. They view patents as a disruption to this functioning system. Devices are different; physicians need device manufacturers to be able to innovate and make devices; need partners outside the community. Patenting serves a role of crossing that boundary.  Role of patents in norms-based/governance-based systems—patents come in when they need to interact with someone outside; but patents will also cause problems within the group. 
A few guesses about similar scenarios: device innovation by physicians may have norms about when it’s ok to patent and when not, related to complexity of device.  May be norms about patenting new uses of drugs, which also seems internal to the community. 
Stephan Bechtold
[missed some] Europe has a narrow exception for physicians doing procedures as well.  Trying to protect communication within a narrow community; once it crosses to device manufacturers there is no more exception.
How does this relate to traditional justifications of patent?  European perspective: this is about protecting fundamental rights/health care.  How could we study this empirically?  Is this just a retelling of the story of social norms in biotech and whether patent should enter the field?
Ginsburg: A group of innovators getting together to ensure there isn’t property—compare to the story about the group of innovators getting together to ensure there is.  This is the bridge between emerging rights and emerging exceptions.
Frankel: despite this, the US is now negotiating in the TPP to get rid of exemptions. 
Strandburg: in fact, this was part of industry pushback: we already didn’t manage to hold the line on exceptions in TRIPS. If we allow any exceptions, who knows what exceptions other people will push!
Dreyfuss: Exceptions and scope turn out to be negative images: when you focus on scope, you start to talk about exceptions, and vice versa.  Tax strategies are also excluded—maybe a nice parallel story.  287(c) is an interesting boundary-spanning provision because it leaves partners liable while exempting the community itself—is this a template for further changes?  (17 USC § 512 seems like the obvious comparator; though it’s just a damages limitation but that makes no practical difference.)
Strandburg: 287(c) leaves secondary liability in place.  Mayo v. Prometheus is in fact a secondary liability case, but the doctors are still unhappy about it.  Tentatively: not everything that requires you to reach across the boundary requires collaboration on the innovation across the boundary.  So they can still rely on their own norms.  Why is 287(c) never limited?  Well, physicians haven’t sued other physicians.  The norm is broader than the exemption. The one case involves telemedicine, and the defendant is the company providing the IT.
Jacob: new uses of drugs is a huge issue for pharma.  Doctor prescriptions are excluded from coverage; the consequence is huge: artificial ways of getting around that limitation.  We have a new rule in Europe that a product for a particular purpose is treated as new even if the product is old.  (This interacts with drug approval.)
Hemphill: how much of the new uses come from physicians versus the drug companies, and how does that intersect with patenting practices and FDA approval?
Strandburg: one article showing a reasonably large fraction comes from doctors.  There’s not much evidence, but what there is shows a lot of physician innovation.  There are different compendia of recommended off-label uses, etc.  Physicians do communicate about these things.  Should we be trying to make that more effective?  If it turns out that doctors are probably not going to patent new uses, and drug companies probably are, it becomes important to know when the drug company will put it through the FDA approval process.
Ginsburg: Expense of infrastructure to produce drugs/devices may drive patenting.  Innovative community can afford not to have exclusive rights.  Generalizing: is the reason open source software is a community of sharers because that product doesn’t require investment in hard goods?
Strandburg: two things going on.  Maybe one dominates. One: investment.  Easier to have a community when it doesn’t require a huge amount of money. Historically, a number of user innovation communities have formed with commercial players with lots of money to invest that still shared.  Separate issue: needing to collaborate across a boundary, which doesn’t necessarily have to do with the amount of money needed.  Could look at patenting across the 3 FDA categories as the expense of approval goes up.
Bechtold: suppose a doctor invents a new device without needing anyone else. What’s the norm?
Strandburg: not sure.  Maybe they do go out and patent.
Sichelman: the norm he is aware of is to patent, in part because you need FDA approval.
Bently: boundary-spanning argument—artistic copyright: artists generally don’t mind appropriation by each other; object to those outside the community doing so. 
Ginsburg: lowbrow artists really mind being ripped off by high end artists.
Limitations: parody, nominative use
Rebecca Tushnet
Barbie’s marketplace success, and her ability to represent multiple overlapping and occasionally contradictory meanings, makes her a useful embodiment of some key exceptions to copyright and trademark law.  Mattel attempted to use both copyright and trademark to control the meaning of Barbie, reflecting a trend towards such overlapping claims and throwing copyright and trademark defenses into contrast. 
American copyright law has a number of highly detailed and even baroque limitations for particular types of uses and then a general fair use defense, which has often been decried for its vagueness and uncertainty.  American trademark law, by contrast, is largely judge-made, with the occasional statutory defense or limitation.  Likely confusion, the core of trademark infringement, now now has a multifactor test in every circuit, though it can be modified or substituted in certain circumstances, such as for keyword uses for competitive advertising (in some circuits) or what courts have come to call nominative fair use.  Notably, legislative as well as judicial complexity has increased over time; just as new copyright provisions tend to be complex and reticulated, the relatively recent trademark dilution law and its subsequent revision added a number of multifactor tests and multistep exemptions, instead of creating a general prohibition on dilution similar to the prohibition on confusion.  American judges have not been shy about adding further multifactor tests even to dilution, and the tendency of the law to become more complex over time has significant costs, especially for defendants who find their potential defenses turned into a confusing maze of overlapping but differently defined concepts.   Comparing trademark defenses to copyright fair use, copyright’s vagueness starts to look a little better.   Perhaps because of the four-factor fair use test codified in the 1976 Copyright Act, courts have been less likely to add new elements defendants must satisfy in order to qualify for fair use, though at the same time each individual factor remains highly manipulable to accord with a judge’s view of the equities.
Copyright: Copyright fair use as separating into uses about the body and uses about technology.  Dungeon Doll case: Pitt prompted a highly sympathetic fair use analysis from a judge on behalf of a pro se defendant.  The case involved what might well have looked like bullying, which may well have influenced the fair use outcome: Susanne Pitt agreed to remove the challenged pictures from the internet but Mattel pursued the case anyway.  Moreover, she was a resident of the United Kingdom, being forced to defend herself without counsel in an unfamiliar legal system.  (Given the absence of a general fair use defense in many jurisdictions, being sued in the United States may well have ultimately worked in Pitt’s favor once the case got to the point of a judicial resolution—but it is notable that a multinational company still chose to sue in the United States, most likely because of the statutory damages provisions that allowed Mattel to threaten the defendant with hundreds of thousands of dollars in alleged damages at the outset.)  Thus, Pitt, a case that precedes the key Ninth Circuit cases in time, introduces many of the relevant themes, from sexuality to the practical utility of defenses to small producers facing large corporations.
Transformation: the court commented that, to its knowledge, “there is no Mattel line of ‘S & M’ Barbie.”  (The court did not have the benefit of Mattel’s Catwoman Barbie, created in connection with the unsuccessful Halle Berry Catwoman movie, which while lacking nipples and genitalia at least suggests a gesture towards non-vanilla sensibilities.)
This transformation, the court concluded, sufficiently commented on Barbie herself rather than simply constituting general social criticism.  This distinction is typical in fair use cases, even though there is no real historical or market-based justification for distinguishing “parody” from “satire,” and even though drawing such a line regularly forces courts into the ill-fitting position of art critic.   Here, however, the court was readily persuaded that Barbie was at least in part the target of the transformation.  Pitt wanted to resurrect the “original idea of the female figure she claims inspired Barbie,” Lilli, who was a character of easy virtue and not a toy.  As a result of this origin, she suggested, sex was inherent in the doll, and she was “ simply revealing this sexual nature by placing Barbie in a ‘modern erotic context.’” 
This explanation reveals some of the inherent tensions in transformativeness analysis.  In theory, a successful defendant should add meaning that “transforms” the original with new meaning or purpose.  Yet courts are more likely to find that the original work is, at least in part, the “target” of the transformation if they can perceive the seeds of the transformation in the original; otherwise there seems to be no organic and justified connection between the original and the accused work.   So transformation in fact means revealing or exaggerating what is already there, rather than adding “something new,” even though the latter phrase is what courts use to explain what transformation is.
[MCA] Trademark only.  Nominative fair use; Rogers v. Grimaldi; problem of complex and overlapping multifactor defenses; note that the Fourth Circuit just suggested both that it would recognize 9th Circuit nominative fair use and that it was adding a good faith requirement to the Ninth Circuit formulation—
but the statutory defense for dilution is not much better; Louis Vuitton court interpreted it as requiring multiple steps and implemented a parody/satire distinction that makes even less sense for TM.
Walking Mountain: Nominative fair use expands again to cover images—turns into a reasonable use requirement instead of using only the minimum semantic unit.  This isn’t reflected in the test, of course, so matters are still unpredictable and confusing. 
Transformation as ineffable: you don’t have to explain what’s critical about these pictures in words.  Transformation as independent of survey evidence: Mattel’s survey rejected.  Basic idea: Copyright claim having failed, the TM claim must do so as well.
It’s common to point to a different area of law to look for a fix to problems in your own. Because law is fractal, often hard to recognize that things in that other area are actually just as incoherent and ill-justified as the problems you’ve identified in your own.  TM and copyright historically were judge made and legislatively made, but now may have switched positions. What’s the best way to deal with uses that should be protected against infringement or dilution liability?  Old common law—not adding factors but more rules of reason—looks increasingly attractive compared to either judicial or legislative creation of multifactor tests hyperspecialized for particular situations
Recently, norm entrepreneurs like Peter Jaszi and Patricia Aufderheide have vigorously argued that Larry Lessig’s famous claim that copyright fair use is “the right to hire a lawyer”  is overstated to the detriment of fair use.  Instead, they suggest, most fair use determinations—certainly most determinations of the kind that an individual creator or an educational institution is likely to be making—can be made by paying attention to context, norms of fair practice, and the statutory fair use factors (primarily the nature of the use).  Arguably this should also be true for TM as well.
A key question for limitations and exceptions to trademark and copyright, then, is how they will shape behavior on the ground.  The early critical uses of Barbie, including Dungeon Dolls, are often gone from the internet, but they were quickly replaced.  A fee award against Mattel (as in the Food Chain Barbie case) has some deterrent effect, but more significant might be the larger culture that empowers people to create responses to corporate productions, and then at least sometimes to resist threats when they materialize.
Robin Jacob
Cleopatra came out with a painting of Elizabeth Taylor as the poster.  A year later came Carry On Cleo, a uniquely British production.  Nothing like the Cleopatra movie, but the poster is arranged similarly. Judge found infringement because it was likely to call to mind the original—of course it was, though that shouldn’t make it infringing—and there was no parody defense.  Similar cases followed. Nadia Plesner v. Louis Vuitton.  These run from TM to copyright to community design right—the rightsholder doesn’t care what the basis is. LV behaved oppressively, going ex parte; eventually Dutch court dissolved the injunction on free speech grounds. 
We need an exception and are allowed to do so for caricature, parody, pastiche.  Government has now consulted on this 3 times and aren’t done yet.  We may have it by implication if some comes to be covered by our nearest equivalent to the US First Amendment, art. 10 of the convention on human rights.
Evidence-based: the British gov’t managed to ask: do you agree that a parody exception could create new opportunities for economic growth? What is the market for parodies in the UK and globally?  What would be the costs and benefits of such an exception?  Someone offered an answer but he thinks that’s rubbish. 
Has offered a draft exception: cannot be defined except to say “fair parody, caricature or pastiche.”  French allow it “according to the laws of the genre.” This is gibberish.  Idea that copyright is the most important thing in the world is nonsense.
Moral right as barrier to making fun of people, and there are a lot of silly folks at big companies, from Mattel to Carling beer; Warner Bros. (who wrote to Groucho Marx complaining about Casablanca).  You can’t rely on people to behave sensibly, so you have to have defenses.
Dogan: fair use has turned so much to transformativeness, but parody and commentary are a subspecies of transformativeness. Court favors commentary on copyright holder.
RT: I think that generally involves exactly the artistic judgment that courts should be avoiding in distinguishing between commentary on copyrighted work and commentary on something else. (The choice of the copyrighted work brings it into the commentary.)
Kur: droit moral does not prohibit parodies.  European Greenpeace/Esso and other cases generally come out right—Carling case (South Africa) would probably have come out the same way under our law. Still, would be good to make that positively clear in the law.  There is general agreement that parody is good and that if necessary a free speech argument can & should be interposed against liability; France used its own constitution.  Key questions: how explicit and how narrow should it be?  Do we need a framework of factors that may be difficult to apply in certain cases, or should we go to a more open analysis.
Jacob: this is the old dilemma.  It’s hopeless to list factors other than most general sort of thing you would take into account. 
Kur: cutting through all types of IP rights?
Jacob: absolutely!  Even if a patent if it were somehow in issue.
Ginsburg: institutional question—should it be codified?  How so?  French explicit exception for parody within the boundaries of the genre is one you made fun of; never been a judicial determination of what those are. There may be some gratuitousness threshold but it’s never been tested.  French don’t distinguish between copying the work to make fun of something else and copying the work to make fun of the work—famous case about making fun of the singer of a song; that came under the parody exception.
Gervais: look at the Canadian Mattel case: threw the brick at a Montreal restaurant called Barbie’s, generic name for barbeque—claimed copyright infringement, TM infringement, depreciation of goodwill.  Mattel has 6 lawyers at the argument including the 2 most expensive IP lawyers in Canada.  Restaurant has pro bono 29-year-old lawyer, clearly very nervous.  Judge: are you telling me the average Canadian will think this restaurant is operated by Mattel?  Mattel never recovered. Footnote on why Mattel believes it has the right to keep people from talking about it.
Fromer: do courts really distinguish parody and satire?
RT: not that often: Dr. Seuss and Salinger, when they want the defendant to lose.
Bently: Note that Plesner was still enjoined in France.
Hemphill: vivid facts plus overreaching.  Is Mattel ultimately a force for good through its overreaching?  On the one hand, people who are threatened may be deterred; on the other hand the courts get an opportunity to do a smackdown.
RT: Depends on norm entrepreneurs going out to explain that and what you can actually see going on around you.
Beebe: Leval, TM: The Champion of Free Speech, in Columbia-VLA.  He celebrates the common law aspects of the Lanham Act.
RT: so do I! I just don’t like adding a new factor for the defendant to satisfy on every go round.
Dinwoodie: Cases increasingly include design, copyright, and TM claims.  The holes in each cause of action are not the same holes.  If you want to protect a use, you need some trans-substantive defense.  Ginsburg suggested that eventually you may find copyright fair use migrating to TM, and even in more narrow form the dilution defenses.  Which should go where?  If it’s permissible exhaustion by the TM directive in Europe, we don’t let you use copyright to go around that, though the US hasn’t taken that position (though note the remand lets Costco keep on).
(RT: I think of right of publicity and of §230 in this context, pointing in different directions.)
Jacob: you could allow parody that wasn’t defamatory maybe
Strandburg: would it make more sense to go directly to free speech?  Won’t cover everything, but it is very strong rhetorically.
RT: I have a paper on this.  Short answer: I worry about that as insufficient.
Gangjee: Doesn’t work as well outside the US either because of the speech v. property debate and because of lower protection to non-political speech than the US allows.