Tiffany, blue

US IP blogs are abuzz with the Tiffany’s v. eBay case. It’s certainly a major victory for eBay, and by extension perhaps numerous other internet services. The nominative fair use determinations for eBay’s on-site banners and off-site search engine optimization are particularly welcome. The decision on secondary liability seems well-reasoned to me. Eric Goldman does a general reaction post that touches all the bases.

I do want to point out, however, just how much Tiffany’s got out of eBay by pressure, in particular eBay’s willingness to prohibit “Tiffany style” and “inspired by Tiffany” in ads (with, as best I can tell by searching on eBay’s site, an exception for a “Tiffany-style setting” for diamond rings). This is troubling because “Tiffany style” is in itself an acceptable nominative use for certain products that are like, but are not, Tiffany jewelry. The presence of the word “style” means that initial interest confusion, that despicable animal, is unlikely. And the possible claim that “Tiffany style,” while not confusing to the buyer, would lead to post-sale confusion depends on the argument that the design of every piece of the underlying jewelry is protected by trade dress, an argument Tiffany’s did not make in this case. Of course, it may well be the case that “style” was so often a signal of counterfeit status that a ban was in order, but the evidence recited by the district court didn’t go to that.

The lesson is that eBay, like other internet aggregators, is interested in its own welfare, not in the maximum efficiency of the competitive system or in justice. So it will fight overreaching trademark claims precisely to the extent that it makes business sense to do so, and no further, just as our beloved Google prohibits even nominative fair use of other parties’ trademarks in the text of sponsored ads. (Speaking of our beloved Google, Scott Westerfeld’s recent novel So Yesterday has a narrator who’s sworn off mentioning famous brands in order to fight their famousness, but even he makes an exception for Google, because, he says, his story wouldn’t get very far without the ability to use the verb—and the search engine. That’s brand power, and it’s also why genericide has functionally disappeared for fanciful marks.)

Now, a bit about dilution: (1) The court adopts the interpretation that dilution requires that a defendant to use the mark to identify its own goods or services, which eBay didn’t do. (2) I found it amusing that the court’s careful discussion of the potential divergence between state and federal dilution law created by the very different wording of the TDRA ends with the same time-saving conclusion as every other court: might as well consider them together! And really, who’d want to do two dilution tests? (Who’d want to do one?)

Last, because my niche is advertising law, a word about the false advertising claims: The argument was that eBay advertised the availability of Tiffany jewelry, but, given the high percentage of counterfeits for sale on the site, that was as false as advertising that a model of car gets 35 mpg when only 25% of the actual cars do so. The court rejected this argument, and the basic intuition is similar to the one that’s hampered post-Dastar claims about false attribution as false advertising: when one’s core claim sounds in trademark, §43(a)(1)(B) should not serve as an end run around the requirements of trademark law.

Since authentic Tiffany jewelry was for sale on eBay, the claims were not literally false even if a buyer was more likely than not to get a counterfeit piece. Comment: Were it not for the trademark overlap, I’d find this a dubious conclusion, given the car analogy above. But, as the court pointed out, it had already found that the use of “Tiffany” was a protected nominative use.

In terms of implicit falsity, the court held that Tiffany’s claim depended on eBay’s knowledge of high counterfeiting levels. Again, as false advertising doctrine, this is wrong—false advertising is strict liability. But it is common in §43(a)(1)(B) cases brought over threats of patent infringement to hold that only knowingly false claims made about patent rights can be false advertising, while sincere but wrong claims are not actionable. Intent/knowledge here play the role of boundary markers more than elements of a false advertising cause of action: these subjective elements manage the scope of patent rights, or trademark rights, and are not true measures of whether false advertising has occurred in the abstract.

Finally, the court found that the false advertising was sellers’ responsibility, not eBay’s. Again, I don’t think much of this, to the extent that eBay itself chose to advertise the term “Tiffany & Co.” However, insofar as the court was suggesting a secondary liability analysis for false advertising in the context of online auctions, that makes more sense—just as eBay is not directly liable for trademark infringement by counterfeiters, it’s not directly liable for false advertising by sellers of bad merchandise.

The conclusion “it cannot be said that eBay was misleading customers when eBay was diligently removing listings from the website that were purportedly counterfeit” sounds factual, but it’s actually normative: it is logically possible and even plausible that buyers were misled despite eBay’s policing (and perhaps in part because of it)—indeed, the record contained numerous emails from buyers complaining about counterfeit Tiffany sales that slipped through the screening; such buyers were materially misled by the listings’ claim to offer authentic Tiffany jewelry. Nonetheless, the court was unwilling to impose liability. One way to think about this might be materiality: given the availability of authentic Tiffany merchandise on the site, there wasn’t a sufficient connection between eBay’s general advertising that Tiffany items could be found on the site and any particular auction listing.

FTC prevails against false green tea claims

Federal Trade Commission v. Bronson Partners, LLC, -- F.Supp.2d --, 2008 WL 2698673 (D. Conn.)

The FTC brought an enforcement action against defendants for the claims made in their ads for Chinese Diet Tea and the Bio Slim Patch. Since defendants conceded liability on the Bio Slim Patch, the court only considered the ad claims made for Chinese Diet Tea, touting it as a weight-loss product. “[W]hen read objectively and in context,” the advertising “virtually guarantees the user that, by drinking the tea, the user will lose large quantities of weight in a relatively short period of time without dieting or exercising.”

The tea, however, is not materially different from any other green tea product on the market.

Defendants nonetheless advertised that the tea “SHEDS POUND AFTER POUND OF FAT-- FAST!” while allowing users to eat their favorite foods. The exemplar ad claimed that the tea “eliminates an amazing 91% of absorbed sugars[;] [p]revents 83% of fat absorption; [d]oubles your metabolic rate to burn calories fast”; et cetera. The ad went on to claim that “clinical trials” proved the weight loss claim (163 patients, all of whom lost between 18 and 75 pounds over 12 weeks) and to “guarantee[]” the weight loss. It offered “courses” of varying lengths, promising “You’ll lose up to 25 lbs” for the shortest and up to 75 pounds for the longest. There were also a number of testimonials claiming significant weight loss, including “After 10 weeks my weight was down to 104 lbs. I lost weight so fast my doctor ordered me to slow down” and “I have been on the program 6 weeks and have not religiously followed the schedule of a cup of tea after each meal. However, I have gone from 240 lbs. down to 210 lbs.”

Defendants, with the same bald-facedness that characterized the ads, argued that the ads didn’t make the false claims that the FTC alleged. First, they argued that some of the claims were “merely testimonial.” But that doesn’t render it weightless. Indeed, the FTC has long held that a testimonial is an implicit representation that the person providing it had a typical experience with the product. Nor does the case law (or common sense) suggest that consumers interpret testimonials with a more jaundiced eye than they do the rest of an ad.

Then, they argued that the FTC was required to provide extrinsic evidence of consumer perception. This was wrong on a number of levels. No extrinsic evidence is ever required when the claims at issue are express. (In a footnote, the court suggested that, as a matter of logic, all claims that are necessarily true if the express claims are true are necessarily implied by an express claim—thus, a claim that a car gets 30 mpg necessarily implies that the car gets “more than 10 mpg.” This seems to me true but not all that important, except insofar as defendants were ridiculously parsing the FTC’s expression of the claims made by their ads. It isn’t really what the doctrine of necessary implication in the Lanham Act covers; that doctrine is more about applying my favorite Gricean maxims of relevance, quality, etc.)

Moreover, even when claims are implied, the FTC is not necessarily required to submit extrinsic evidence of deceptiveness. The FTC can find that reasonably clear implied claims are conveyed to the audience by using common sense and administrative experience, as the Seventh Circuit held in its Kraft case. (I think this rule would make sense for some obvious implied claims in Lanham Act cases as well; in fact, that is some of what the necessary implication doctrine does—it adds common sense to the mix.)

And, regardless of one’s view of the law, the court had no doubt that the ad made the alleged claims: “The advertisement is not subtle. It does not employ innuendo, subliminal messages or hints to convey its message. It does not contain conflicting messages that are reasonably susceptible to different interpretations. It makes no meaningful qualifications. Instead, it is clear, stark and dramatic. Only four words in the entire advertisement do not relate to weight loss in some way: ‘makes great iced tea’” (footnote omitted).

Defendants argued that their “guarantee” was a “satisfaction” guarantee, not a weight loss guarantee, but “satisfaction” doesn’t appear anywhere in the ad, while weight loss claims do: e.g., “[a]ll participants lost between 18 lbs and 75 lbs over the 12 week period. If you do not lose similar amounts of weight we guarantee to refund your purchase price in full.” (Defendants never produced any evidence that any such clinical trial was conducted.) I should note that this is an instance in which easy cases might make bad law: even had the word “satisfaction” appeared in the ad, it would still have been a false representation of guaranteed weight loss.

To see what else the district court had to put up with, consider defendants’ argument that “SHED [ ] POUND AFTER POUND OF FAT--FAST!” only meant “at least two pounds,” since “pound” after “pound” makes two pounds. “Unreasonable,” the word the court used for this interpretation, seems charitable.

Defendants tried to highlight the ad’s statement that “drinking Chinese Green Diet Tea is not a license to gorge yourself.” But that isn’t close to the truth, which is that you’d still need to diet and/or exercise to lose weight. Even if it were true, “one true statement, in the presence of a mass of false and misleading statements, does not render an otherwise misleading advertisement non-misleading.”

So, the ad made the functional equivalent of the claims as the FTC stated them: clinical proof of rapid and significant weight loss for all users, without increased physical activity or decreased caloric intake, and while consuming high-fat and high-calorie foods such as “sweet buns and chocolate” (mmm, chocolate), as well as a fat- and sugar-blocking effect.

Defendants then argued that these claims were not false or misleading, because green tea promotes weight loss. They retained a professor from the University of Wisconsin-Madison, Dr. Hasan Mukhtar. His expertise is primarily in dermatology and cancer research, and he has no significant nutrition-related education or experience. Nonetheless, he was offered as a leading expert on green tea.

Mukhtar’s report suggested that green tea could be a useful part of a weight-loss program; that green tea helps reduce sugar and fat absorption; and that green tea increases metabolic rates. He concluded that green tea consumption “could” lead to weight loss. He relied on studies showing potential effects on various metabolic processes, including studies performed on rats and mice. One study was actually a double-blind placebo test on 46 women; it found “modest weight loss” from green tea.

This was all very nice, but even if true (which was unclear at best), nothing in this report supported the claims actually made by the ad. At deposition, Mukhtar even said that the ad’s claims were too strong. The ad claims themselves were either completely unsubstantiated or patently false—there were no clinical trials, no evidence that green tea eliminated most sugar and fat absorption, and no evidence of fast and significant weight loss in people. As the FTC’s expert noted, the claims were simply beyond the realm of scientific plausibility.

Blatant lies can work on people desperate for solutions they haven’t found elsewhere; this is why we need consumer protection law.

The real story of the superheroes

This photo essay shows Mexican immigrants in well-known superhero costumes. Photographer Dulce Pinzón wanted to raise questions about our definitions of heroism and the invisibility of immigrant labor. The title, "The Real Story of the Superheroes," shows that when it comes to titles and other expressive uses of trademarked icons, only words as explicit as "authorized" and "official" ought to trigger any control by the trademark owner. Reality and truth are for all of us.

FCC notice of inquiry/proposed rulemaking on product placement

Full text here.

The main event is a proposed rule change "to make the current disclosure requirement more obvious to the consumer by requiring that sponsorship identification announcements 1) have lettering of a particular size and 2) air for a particular amount of time," with a related request for any other proposals along those lines. From Commissioner Adelstein's statement:

Many current practices make a mockery of our regulatory requirement that consumers have a right to “full and fair” disclosure. If it takes a magnifying glass to see a tiny acknowledgement whizzing by the screen at the end of a show, that is evading the spirit of the law. More clarification is clearly needed. The main accomplishment of this Notice is that it seeks to establish specific guidelines addressing the nature of the disclosure, including font size of the sponsorship credits and the amount of time they are aired.

The Commission also seeks comment on whether any change in children's programming-specific rules or cable-specific rules are required. And it invites "comment on issues raised by radio hosts’ personal, on-air endorsements of products or services that they may have been provided at little or no cost to them: should we presume that an 'exchange' of consideration for on-air mentions of the product or service has occurred, thus triggering the obligation to provide a sponsorship announcement; and does the 'obviousness' exception to the sponsorship announcement requirement apply to endorsements or favorable commentary by a radio host that are integrated into broadcast programming, i.e., made to sound like they are part of a radio host’s onair banter rather than an advertisement."

The FCC also noted possible First Amendment issues:

[W]e invite comment on the arguments raised by WLF [Washington Legal Foundation] and FAC [Freedom to Advertise Coalition] in response to Commercial Alert’s petition. Would the imposition of concurrent disclosure requirements or other regulations infringe on the artistic integrity of entertainment programming, as WLF argues? Would such a regulation be paramount to a ban on embedded advertising, as asserted by WLF and FAC? Does the apparently common existing practice of superimposing unrelated promotional material at the bottom of the screen during a running program belie WLF’s and FAC’s contention that concurrent identification would effectively preclude product integration as a form of commercial speech because it would “infringe on artistic integrity”? [Comment: a beautifully snarky leading question! Congrats to the drafters.] Are the government interests at stake here substantial enough to justify any such requirements? How can the Commission ensure that any modified regulations are no more extensive than necessary to serve these interests?

A couple of comments: of course, the WLF and FAC positions imply that the current sponsorship disclosure requirements are also unconstitutional, since it's not the font size or the noticeability that's the (alleged) problem. And the WLF and FAC positions also presuppose that failure to disclose commercial sponsorship does not make the sponsored programs into false or misleading commercial speech, since false or misleading commercial speech receives no First Amendment protection whatsoever.

There are two subissues here: (1) is it false or misleading to fail to disclose commercial sponsorship, and (2) does commercial sponsorship make a program commercial speech, at least for the limited purpose of requiring disclosure of such sponsorship? I think the FTC can reasonably answer (1) "yes," while (2) is a more complex question. Justice Stevens has, in recent years, sought to convert Central Hudson into an inquiry about the preservation of a fair bargaining process; commercial speech can, in his opinion, be regulated differently than other speech to the extent, and only to the extent, that it is bound up in commercial transactions.

Read that way, I think the answer to (2) is "yes." A movie full of product placement by BMW can be regulated as commercial speech to the extent that it is attempting to sell BMWs. The government can't regulate violence or sexuality or political content in that same movie without anything less than the full justification required for regulating purely noncommercial speech, because none of those things is tied to the advertising component. One virtue of this approach is that a reviewing court focuses on what behavior the regulation targets. If the regulation aims to ensure fairness in soliciting transactions, then it is allowed. We'll have a lot of debates about what counts as "fairness" and "soliciting transactions," but many of the crazy-making puzzles of defining commercial speech would be avoided. (And perhaps the legislature has greater leeway to define "fairness" and even "soliciting transactions" than it has to define "commercial speech.")

Insurance contract copying lawsuit proceeds

MDM Group Associates, Inc. v. Emerald Isle Realty, Inc., 2008 WL 2641271 (E.D.N.C.)

MDM, which sells insurance and other financial products and services, sued a number of North Carolina realty businesses. It alleged that it developed an “original product,” the “Peace of Mind Security Deposit Waiver Program.” It’s a type of insurance: Vacation renters would pay a small fee of $30-$50 instead of a much larger security deposit, and if damage occurs, they’d be protected up to $3000. To implement this, MDM drafted a form contract, and registered a copyright on the contract.

MDM alleged that some defendants did business with them, then stopped but kept using the contract, while other defendants copied the contract without ever having a business relationship with MDM.

The court denied defendants’ motion to dismiss the copyright infringement claim on grounds that it was inadequately pled, and their motion for a more definite statement. Allegations that defendants’ “marketing materials” infringe MDM’s copyright were sufficient to allow defendants to answer the complaint. Defendants’ motion to dismiss for lack of copyrightability was also premature—the complaint alleged originality, and the court can only consider a limited universe of documents and allegations on a motion to dismiss. Likewise, defendants’ merger argument was not appropriately resolved on a motion to dismiss. MDM’s civil conspiracy claim was also dismissed as preempted to the extent it relied on the copyright claims.

MDM’s Lanham Act claim fared worse. MDM alleged that defendants violated the Lanham Act and North Carolina law because their ads “inherently” include the representation that their products were “legal” insurance products, but the North Carolina Commissioner of Insurance had not approved those products. Sua sponte, the court declined to resolve defendants’ challenges to the claims, and ruled on an issue it considered dispositive: Under the Lanham Act, “neither an implied statement nor a failure to state constitutes a ‘description of fact’ or ‘representation of fact’” § 1125(a)(1).

This is, of course, entirely wrong. There is a rather large body of case law, in fact, devoted to analyzing when an implied statement violates the Lanham Act, and a smaller but robust cohort of cases discussing when the context of a statement creates implications that require disclosure of a relevant qualification in order to avoid misleadingness. (Perhaps the court’s egregious misstatement is simply evidence that courts would do better to ask the parties to brief issues that the judges believe are crucial even if the parties didn’t raise.)

There is, however, a more specific rationale here: For prudential reasons, courts have often refused to consider failure-to-disclose or implied falsity claims based on the theory that a regulator’s approval for a product or service was required but was not obtained, and that consumers inherently expect that advertisers will only advertise approved products or services. And it was to this rationale, mercifully, that the court turned.

Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130 (4th Cir.1993), held that an allegedly false implication that drugs were FDA-approved was not actionable. It was insufficient to allege that merely placing a drug on the market implies that the drug has been properly approved by the FDA. (I do not buy this rule as a statement about consumer expectations; it seems to me entirely reasonable for consumers to make precisely this inference. As a rule for managing the spheres of authority of the FDA and the courts, however, I see its place. I would simply call it what it is—an exclusion from the Lanham Act’s scope, rather than a conceptually problematic unrebuttable presumption of lack of deception.)

The court viewed MDM’s argument as identical to that in Mylan. The claim was that defendants put a product on the market without proper regulatory approval, and therefore falsely advertised its approval. Mylan precludes such a claim.

(In a footnote, the court discussed MDM’s original invocation of “false designation of origin,” which it apparently abandoned in the briefing—and properly so; as the court noted, Dastar was an insurmountable barrier to that theory.)

MDM also asserted a North Carolina Unfair and Deceptive Trade Practices Act claim. Its theory was the same—defendants sold unauthorized insurance products, which was “unfair and deceptive.” The court denied defendants’ motion to dismiss for lack of standing, though it noted that MDM’s UDTPA theory was somewhat unclear. I find it interesting that the court didn’t discuss the tension between sustaining MDM’s UDTPA claim and dismissing its Lanham Act claim. It’s certainly possible—maybe even likely—that North Carolina has chosen a different way of dividing responsibility between courts and regulators for insurance than Congress has for the FDA, but I would have thought the issue deserved a mention.

NPR story on Chinese fansubs of US TV

The story contains an argument from a fansubber that his work is creative and worthwhile; it includes adding explanations of unfamiliar American cultural and historical references, and he maintains that it creates a bridge between cultures.

Educational fair use initiative at Harvard

Fair use-friendly best practices statements are gaining more adherents as people decide that some sort of coordination and theorization of existing practices is necessary to combat copyright owners' totalizing claims. Though they're no panacea, I've participated in one such project (about which more soon), and I consider my work with the Organization for Transformative Works to be in a similar vein.

Now Harvard's Berkman Center is working on educational fair use best practices. They have a discussion draft of the proposal up, and seek feedback. There may also be some job openings available, given that the project is planned to take several years.

Moral rights and the editing of history

There was an imbroglio over at BoingBoing over the removal of a number of posts related to a blogger, Violet Blue. The posts were removed for personal reasons by one of BoingBoing's editors, who was apparently the person who created the posts in the first place. In the resulting controversy about editing history, BoingBoing's principals discussed the moral claims of a creator to withdraw work that no longer reflects that creator's beliefs, as well as the countervailing interests of audiences who relied on the previous publication. While I think it makes sense for BoingBoing to be able to remove posts, I'm glad that they allow the previous versions to stay available through the Internet Archive--the closer a source is to a source of record, the more important it is to make corrections or changes visible, and BoingBoing's big enough for that to be a relevant consideration. And I don't think Xeni Jardin's analogy to an individual artist destroying works he no longer respects is right, given that in her analogy the artist had never disseminated the works to the public before deciding they were unfitted to survive.

False advertising claim over broadband speed stayed

Hart v. Comcast of Alameda, 2008 WL 2610787 (N.D. Cal.)

Hart sued Comcast for unfairly discriminating against peer-to-peer filesharing applications, in violation of the Computer Fraud & Abuse Act, California false advertising law, and other laws.

The court stayed the case using the primary jurisdiction doctrine, which applies when an initial decision should be made by a relevant agency rather than a court. The 9^th Circuit uses a four-factor test: “(1) the need to resolve an issue that; (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority; (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory scheme that; (4) requires expertise or uniformity in administration.”

The test was satisfied here—plaintiff’s complaint alleged that discrimination against P2P services violated FCC policy. The question of whether “network management” of this type is reasonable is within the FCC’s extensive jurisdiction over broadband. Two petitions on the matter are currently pending before the FCC, asking for specific rules on (1) discriminating against particular internet applications and (2) barring Comcast from “managing” P2P applications. The FCC has announced that it will investigate Comcast’s conduct and has sought public comment. These issues also require expertise and uniformity in administration.

The stay applied to all the claims, even though not all of them concerned the reasonableness of Comcast’s acts. The breach of contract and false advertising claims were “sufficiently interrelated” with the network management issue that the FCC’s conclusions could affect the resolution of those claims. If Comcast promoted and advertised fast speeds while severely limiting P2P speed, that might not be false advertising if it’s ok to limit P2P speed. (Comment: I squinted pretty hard at that. If it’s relevant to consumers, then there might be a need to disclose a qualification of a speed claim even if discrimination in speed is allowed by the FCC. The question, I would have thought, was whether reasonable consumers understood the speed claim to cover all services, not whether the law required Comcast to provide all services at equal speed. That said, if discrimination is not ok, then it becomes even more reasonable for consumers to expect equal speed—but again, it might be reasonable anyway.)

It's a bus, it's a boat, it's Super Duck!

Super Duck Tours can use that name, the First Circuit recently ruled, despite the existence of Boston Duck Tours, because “duck tours” is generic. Check out the Super Duck Tours site and consider whether the defendants might have other IP problems. (It might help to have the sound on.)

Disclosures as substantive regulation

I have argued that regulating commercial speech and regulating commercial conduct are often intertwined, making application of the full force of the First Amendment to commercial speech a mistake in a post-New Deal world. I think this is most evident when it comes to disclosures. Slate's take on New York's new requirement of calorie disclosure on fast food menus provides a good example:

The law may have the salutary effect of getting restaurants to change their ways. Nonas uses the example of Starbucks, which has reacted to the debate over menu labeling by switching its default milk from whole to 2 percent. Margo Wootan, director of nutrition policy for the Center for Science in the Public Interest, said getting restaurants to change what they serve can be just as important as getting customers to change what they order. "Maybe McDonald's will rethink whether a large shake really needs to have 1,200 calories," she said. "Could people be happy with a 900-calorie shake?"

Cryptoxin, one of my favorite cultural analysts, linked to this post about Oliver Laric’s green-screened “remix” of Mariah Carey’s video for Touch My Body, in which everything except Carey has been edited out, apparently inviting other people to add a background in—much like Stephen Colbert’s green-screen challenges. Is this transformation by subtraction, like Garfield Minus Garfield? FourFour speculates that the video might be a comment on egocentrism or phoniness—I take it that the argument would be something like: Carey is supposedly inviting someone to touch her body, but it’s really all about viewing her, and the green-screen reveals the fundamental emptiness and lack of human relation in her proposition. Rhizome’s Marisa Olson has further analysis:

[Carey] sings, "If there's a camera up in here then it's gonna leave with me when I do. If there's a camera up in here then I best not catch this flick on YouTube." Naturally, this is exactly what Laric is hoping will happen--and no doubt Carey herself. ... The key point made by removing the superfluous imagery from the video's 5,000 frames is that, with her "come hither" gestures and the invitation "touch my body," Carey's certainly asking for it.

The comments take up the sexual-assault implications of “asking for it.” While I agree that Olson’s take has troubling politics—it invokes the trope that a woman who chooses to be sexually active with one man is therefore public property for anyone else—that’s nothing new in transformative fair use.

But what’s the “it” Carey is asking for? Here we have to deal with the distinction between image and body—no matter what strange or degrading things people do with the green-screen footage, they won’t be making Carey herself do anything. I must disagree with the Rhizome commenter that celebrities can control their public presentation and reception in the ways that they, and all other human beings, are entitled to control their physical bodies.

Here’s a portion of Olson’s response to the initial criticism:

I do think that Carey's lyrics (and video) invite sexual fantasy, but my article doesn't say that she is asking to be violated, it says that she's asking to be remixed. Of course, the slippage between the two that you identify is what's so interesting.

In an interview with Laric, he told me that he noticed that the video takes-on an increased sexual tone when all but Carey is masked out. He was interested in how this first-person invitation to "touch my body" could be construed as an invitation to remix the visage of her body (and/or the voice emitted from it), particularly given (a) the implicit link to digital culture embodied by both the lyrics and video, and (b) the fact that the remix is now such an important part of the media ecology of pop culture.

…. Discussions of why a remix is or isn't violent are interesting, as they get to questions of the status of the digital reproduction. Are we remixing a person or "just" her image, and what's the difference ... ? Carey's image was already manipulated before it came to us. In the interview with Laric, he pointed to a segment in the original video in which the shape of a cup becomes distorted as a result of distorting the footage to make the singer standing behind the cup appear slimmer. So this is already not her. If you listen closely, I believe there is also a question as to whether all of the voiced parts of the song are her, so the audio issue adds another layer to the phenomenological question of the brute force of the remix.

The original commenter responded that, while remix might be legitimate, it was especially problematic to blame Carey for the remix, as if she were doing something that was a special invitation here. This is something I find very interesting in certain discussions of transformative fair use, such as the rationale the Court of Appeals gave in the Wind Done Gone case, where transformation comes from bringing out something that “really was” present in the original all along. The commenter suggested that the remix, rather than challenging the construction and exploitation of celebrity, merely participated in it—a charge that can often be laid against unauthorized transformations. This is part of why it’s so dangerous for courts to assess literary and artistic merit. Reasonable people can readily disagree about the critical direction of a reworking, and about the line between exploitation and criticism.

It's a cookbook!

I’ve been thinking about Gricean implicature—I think more people should use Gricean analysis in interpreting advertising claims. For example, Pirate’s Booty uses the slogan “Good for You.” The founder claims that the phrase “Good for You” on a bag of Tings (eight grams fat) isn’t “so much a claim as a congratulation: ‘You bought this bag — well, good for you!’ In [conversation with NYT columnist Rob Walker], he stuck with this, pointing out that the product contains no MSG and no preservatives, and therefore the buyer deserves a pat on the back for choosing a snack that’s not so bad ….”

As Walker’s commentary indicates, this “explanation” doesn’t pass the laugh test. It’s a slimy equivocation, and I suspect that better attention to Grice would help more people appreciate why.

Post title courtesy of Zachary Schrag; explanation here.

Auto-replace and derivative works

Apparently some subscribers to AP's news feeds use auto-replace on the stories for ideological reasons before publishing them, for example changing "Democratic Party" to "Democrat Party." This is dangerous when the automatic substitutions convert "gay" to "homosexual." Well, dangerous or hilarious. Visual evidence here. But I had to wonder whether these changes violated the American Family Association's contract with AP. I couldn't find a public version of AP's contract, but given the history of AP wires and their dissemination to multiple news outlets, I imagine that some modifications are allowed. Independent of the contract, I doubt that auto-replace creates a derivative work, because the automatic nature of the changes lacks the necessary creativity. Is it too much to analogize to Judge Kozinski's pink-screener?

Disclosure, affirmative misrepresentation, and preemption

New York v. Applied Card Systems, Inc., --- N.E.2d ----, 2008 WL 2519797 (N.Y.)

New York’s AG sued various credit card providers for violations of New York’s consumer protection laws. Defendants argued that the federal Truth-in-Lending Act (TILA) preempted the claims that they engaged in fraudulent and deceptive credit card offers. The NY Court of Appeals (New York’s highest court) disagreed, though it held that res judicata from a prior nationwide class action settlement precluded the AG from recovering certain restitution.

Defendants targeted consumers with sub-prime credit. Basically, the AG argued that they misrepresented the credit limits that consumers could obtain from it and failed to disclose the effect its origination and annual fees had on available credit. They told consumers they were preapproved for a credit limit “up to” $2500 or $1000, though disclosed that the actual limit could be as low as $350—the average limit was $400. They explained that upon approval clients would incur a $100 account origination fee and a $50 annual fee, but their explanation that this would reduce available credit was, in the court’s words, “oblique.” These initial charges depleted the available credit for some consumers by 40% or more.

There were similar problems with marketing “secured cards” (secured by savings accounts, with a $10 monthly maintenance fee) with “no late fees*” and “no collections calls*,” where the asterisks were pretty significant. Likewise, defendants promoted a credit insurance program that didn’t deliver the promised benefits in New York and its $35 yearly cost was hard to avoid because the opt-out was confusing and hard to find. Defendants also marketed a “re-aging” service, which allowed banks to avoid writing off delinquent accounts by agreeing on a series of payments, but they didn’t explain that overlimit fees would continue to accrue, and those fees and previously imposed late fees would be due at the end of the re-aging process.

Moreover, the AG’s petition also discussed defendants’ late fees, finance charges, balance calculation method, and lack of any grace period for payments. TILA requires these all to be disclosed in any credit card solicitation, but the AG claimed that many consumers were unaware of how charges and penalties based on these terms were assessed, trapping unwary consumers in a “vicious cycle of pyramiding debt.”

In the Allec case, the California Superior Court approved a nationwide class action settlement for conduct predating January 1, 2002—only 12 New York members of the class opted out. The New York trial court applied res judicata to those claims, but rejected the TILA preemption argument. Based on evidence including more than 200 complaints and affidavits from defendants’ former collection employees, it found that defendants “repeatedly and persistently” engaged in fraud, deception, and false advertising. It enjoined defendants from such acts in the future and awarded over $9 million in restitution, damages, and penalties, an amount reduced somewhat on appeal.

The Court of Appeals affirmed. Applying a presumption against preemption, it held that New York could regulate false advertising without running afoul of TILA’s preemption provision relating to credit card applications and solicitations: “The provisions of [portions of] this title shall supersede any provision of the law of any State relating to the disclosure of information in any credit or charge card application or solicitation which is subject to the requirements of section 1637(c) of this title or any renewal notice which is subject to the requirements of section 1637(d) of this title, except that any State may employ or establish State laws for the purpose of enforcing the requirements of such sections.” 15 USC § 1610 [e].

The defendants argued that §1610(e) preempts every state law relating to the disclosure of information in any credit card solicitation. The AG responded that its claims were based on affirmative deception, not disclosure. The Court of Appeals agreed. TILA doesn’t preempt any state law that “could potentially touch upon any credit information that respondents might choose to include in their credit card applications and solicitations.” Rather, it preempts state laws relating to “disclosure of information” in applications and solicitations “subject to the requirements of section 1637(c).” Thus, preemption is limited to laws that “purport to alter the format, content, and manner of the TILA-required disclosures and those that require credit issuers to affirmatively disclose specific credit term information not embraced by TILA or Regulation Z [implementing TILA].” Because New York’s consumer protection law doesn’t require any disclosure, but does require businesses to refrain from fraud and false advertising, it’s not preempted.

Specifically, the misleading statements about potential credit limits, initially available credit, secured card benefits, credit insurance coverage, the benefits of re-aging, and the like were not disclosures “subject to the requirements of 1637(c),” which only requires the disclosure of APR, grace period, balance calculation methods, and certain fees. “Section 1610(e) preempts only those state laws that relate to the format, content, manner, or substance of the TILA-required disclosures.” The AG’s petition did refer to consumers’ unawareness of the information contained in the disclosures, but the AG didn’t contest the adequacy of defendants’ TILA disclosures and obtained no relief relating to those terms. Nor did the deceptive material “relat[e] to” the disclosure of such information sufficiently to trigger preemption. Defendants are only barred from affirmative misrepresentations about credit terms that currently aren’t regulated by TILA or Regulation Z.

Defendants argued that Congress intended to create a uniform system of disclosure in credit card applications. But the AG’s victory here doesn’t force them to change their disclosures or to affirmatively disclose any additional credit terms. Any indirect economic influence on their solicitation practices isn’t enough to overcome the presumption against preemption. Defendants’ position “assumes that Congress intended the TILA disclosures to provide consumers’ sole protection against credit card companies’ fraudulent and deceptive marketing practices.” The Court of Appeals believed that the limited nature of the preemption provision, and the legislative history, refuted that position. The Conference Report, for example, contemplated that state enforcement agencies could obtain settlements requiring disclosures beyond those required by TILA, which “stands in marked contrast” to the dissent’s claim that Congress intended to “cut off and fully supplant” all state regulation. More broadly, the legislative history was clear that state unfair competition and deceptive practices statutes would still apply to credit card solicitations and applications.

Proposed amendments to Regulation Z would require disclosure relating to some of the practices challenged by the AG here, such as the effect of fees and security deposits on an applicant’s credit limit. And proposed Regulation AA would simply prohibit some of the substantive practices at issue here, such as charging fees and security deposits that constitute a majority of a consumer’s credit limit. Since those amendments aren’t yet enacted, they have no preemptive effect, but they do justify the inference that TILA and Regulation Z don’t currently cover these practices.

Turning to res judicata, the court determined that the AG was in effect in privity with the consumers bound by the California class action settlement, even though the AG had not received notice and even though the AG (and 30 states’ AGs as amici) argued that this was an example of class action abuse—a class action settled at rock-bottom prices to preclude further, more properly valued claims. To the extent that the AG sought relief in the form of restitution for pre-January 1, 2002 claims, he was covering ground already covered by the settlement, which was a final and binding judgment and which had been determined to satisfy consumers’ claims. Though restitution is about making consumers whole, settlement class members “have already compromised their entitlement to a full-measure of make-whole relief in a proper judicial forum.” Respect for the validly entered judgments of other states required application of res judicata.

However, the AG could still seek restitution for people not bound by the settlement and for time periods not covered. And the claims for injunctive relief, civil penalties, and costs were untouched. Moreover, the AG might be able to obtain disgorgement, which is a remedy distinct from restitution.

Justice Read dissented, arguing that the history of TILA amendments revealed an ever-increasing scope of preemption, and that the majority’s interpretation returned to an earlier version of TILA in which only “inconsistent” state regulations, rather than all state regulations, were preempted. In other words, Read argued that TILA occupied the field, except that states could bring proceedings to enforce TILA.

The textual argument focused on §1610(e)’s language “The provisions of [TILA] shall supersede any provision of the law of any State relating to the disclosure of information in any credit or charge card application or solicitation which is subject to the requirements of section 1637(c) or any renewal notice which is subject to the requirements of section 1637(d).” Read argued that “which is subject to the requirements of section 1637(c)” modified “credit or charge card application or solicitation,” not “disclosure of information” as the majority seemed to believe.

However, the majority’s analysis doesn’t depend on what “which is subject …” modifies. The question is whether New York’s consumer protection law “relat[es] to the disclosure of information” in a solicitation or application. If it is true that there is a relevant difference between affirmative misrepresentation and disclosure, or failure to disclose, then New York’s law doesn’t relate to the disclosure of information and isn’t preempted.

Read also recounted the evolution of TILA over time, arguing that Congress ultimately abandoned a ban on requirements inconsistent with TILA in favor of a comprehensive system of requirements so that difference, rather than inconsistency, was enough to find preemption of a state regulation. A state may simply not use its consumer protection laws “to impose additional or different cost-of-credit disclosure on a creditor.” The majority, Read argued, allowed a “patchwork scheme” that ignored potential federal policy reasons not to mandate a particular disclosure that a state considers beneficial.

Again, this doesn’t address head-on the majority’s claim that affirmative misrepresentations are relevantly different. As to that, Read argued that the distinction was evanescent, especially given that TILA preempts state regulations that “relate to” disclosures, and “relate to” is a broad term. The only way for defendants to “dispel the complained-about ‘overall impression’” and comply with the injunction would be to change the form and content of its solicitations—that is, to make different disclosures. Neither the AG nor the majority explained how else defendants might eliminate the misrepresentations. (They could, of course, choose to stop offering such terms—given the intertwined concerns of form and substance here, as recognized in proposed Regulation AA, that might be the right result.)

In the end, Read concluded, “Congress essentially decided that the benefits from a uniform, nationwide regime for disclosure under the aegis of the Board outweighed any loss of protection to consumers under state law.” Thus, the AG’s good intentions, and the federal government’s arguable poor stewardship under TILA, were insufficient to override the Supremacy Clause’s mandate.

Note: for excellent continuing coverage of consumer credit issues, the Credit Slips blog is the place to go.