Tulane IP conference, part 5

A popular meme: the enclosure movement in England is like the increasing rights granted by copyright. Why look at historical analogies? To gain useful information about the current problem. So we want to be sure we know what happened in the historical event and its normative value, in order to translate to a current prediction. E.g., the Munich analogy: negotiating with an expansionist dictator did not prevent WWII, therefore we should not negotiate with a current expansionist dictator.

The enclosure analogy: 15^th-18^th c. England. According to the standard analogy: there was a lot of land held in common by the public/village. Then large landowners, with the assistance of Parliament, appropriated these lands to themselves, forcing villagers off their lands to become industrial workers. Similarly, large copyright owners are expanding copyright ownership into the public domain, with bad results—the public is being unjustly deprived of public property.

Both sides of this analogy are mistaken. But if you fix both mistakes, there’s still an analogy to be made.

Starting with copyright: What is the public domain, and what does it mean to enclose it? Traditional view: whole works are like cows, either roaming the public domain or fenced in by owners. (I really don’t think this is the traditional view. Pam Samuelson has done a great job mapping the public domain in this sense.) Restoring foreign works does expand the fenced-in area. But that’s not a huge deal in the overall scheme of things, and it’s almost never cited as harm to the public domain. Anticircumvention, term extension, contracts, etc. take priority over harms in the standard account.

What about expanding the idea of enclosure to diversion? Works are newly born (like cows) and those that would in the past have been born into the public domain are instead born into enclosure. Similar to the idea that water is diverted from public use to private. Diversion at the front-end. New categories of protected works: architecture, boat hulls, semiconductor chips, software; also the elimination of formalities.

For the most part, the works poured into the enclosed area are not by large copyright owners; they always registered their works and observed the formalities. So these aren’t analogous to the property of large landowners. (And they would have been protected by common-law copyright pre-1978.) So there’s not much that’s been diverted as a result of decreased formalities. (Comment: Google would probably beg to differ, as would a number of other defendants.)

Term extension also prevents flow into the public domain on the back end. But that’s not like drying up the flow of water into a lake. Works don’t evaporate. (Comment: Unless they’re on fragile materials, like early films, or older books, or computer media that is now obsolete.) It’s just a failure of an expected benefit to materialize.

One response to his argument thus far: you’ve got the wrong definition of public domain. Scholars have proposed different definitions that don’t rely on whole works. But that doesn’t mesh well with the spatial analogy, because every part of every work is subject to a fair use claim, putting all works into the public domain. This makes the public domain no longer two-dimensional, but a mathematical set of uses that are not subject to copyright owner’s rights. Yochai Benkler: enclosure is a change in law that moves certain uses from public domain to owners’ rights. Defined this way, you have de jure and de facto (chilling effect) enclosure.

Basic point: these effects aren’t as big as they’re usually described, though you can definitely point to uses that are no longer legal. On balance, the case for enclosure is much weaker than the analogy typically portrays it. What’s really going on is a conflict over long-term practices carried out in the shadow of the law. Interestingly, the history of land enclosure turns out to be very similar. What happened in England was not an appropriation of land held by peasants in the name of large landowners. Land ownership didn’t change, but use rights disappeared. These use rights had never been recognized by law but had been exercised anyway. So he’d propose reorganizing the enclosure analogy, looking for causes rather than lessons. The English property system was reorganized because of technological advances making land more valuable to the landowners because food could be produced for export; similarly here, consumers’ uses now conflict with the realm in which large businesses are active.

Comment: You put a thumb on the scales by using 15^th-19^th centuries in England and then starting the copyright analysis in 1976, since the changes from original copyright were pretty strong by 1909.

A: He spends some time in the paper on the proper timeframe. 18^th-19^th centuries were when Parliament started helping large landowners out. For copyright, you have to limit the timeframe to avoid wrapping in other developments. Copyright didn’t exist in 1708, so anything greater than zero was a huge expansion. Likewise, if you start in 1909, you have lots of changes—new technology, the development of a mass consumer market that made copyright more valuable. (Comment: except that those are exactly the things Boyden says about land enclosure. They may not be reversible, but they don’t make the analogy any less analogous.)

Q: Why make analogies at all?

A: Taken up a bit in the paper. It’s always artificial; rhetorical value may exceed the payoff.

Elizabeth Winston, The Role of the Public in Enforcing Patent Law: Qui Tam Actions and False Marking

False marking has almost no legislative history. Its language has changed little since 1842. It’s the only qui tam action available under the patent law, and it’s punitive in its basis. Early decision: a quasi-criminal character, thus requiring strict construal. Very few cases about false marking since 1842.

The marking has to be false and done in order to deceive the public. The fine is $500 for each offense.

In order to be properly marked, it’s not enough to label something “patented.” You have to add the number of the patent. If it can’t be done on the article (e.g., method patents), you still have to affix to the packaging or use some other way to communicate patent status. False marking also requires that the patentee or someone under the patentee’s control did the marking.

How to be false? If the item doesn’t read on the patent. If a court later construes the patent so that the item doesn’t read, and you continue to mark, that’s false. One court even holds that marking after losing a Markman hearing can be false. You might have an application that didn’t mature and you optimistically label your product patented; such labeling is false. If the patent has expired—a Solo paper cup, currently being litigated in Virginia. If product is specifically marked patented, but it’s really the method of producing it that’s patented, that’s false. Sometimes when extraneous patents are present: company owns 15 patents and lists them on every item produced no matter what.

Biggest issue: is there an intent to deceive the public. Oversight isn’t sufficient. Given the abuse inherent in a qui tam action, where the plaintiff doesn’t need to have been harmed, we need some limits, and intent to deceive is the one we’ve chosen.

Why ban false marking? Allowing marking with expired patents would disrupt the balance between private and public rights. The public should be able to rely on patent numbers rather than having to examine whether a patent is expired (etc.). The false marking externalizes the risk of a determination of patent status, increasing the cost of determining what’s covered by patents and hindering progress.

So why so few actions? The caselaw is broken. The statutory language is open-ended, but courts don’t have a theory. It’s really hard to prove intent to deceive. And courts don’t award $500 per false marking. They simply don’t do it. So it’s economically inefficient to sue.

Interpretation could solve it. The statute says “per offense,” but doesn’t define an offense. Nor does it say who must prove bad intent.

First recommendation: shift the burden of production on intent. Go with an objective recklessness standard. Patent law has already done this in Recido (sp? I’m not a patent person). Impose a burden that’s shiftable. If you know your patent’s expired, you are likely to be engaging in false marking. If you decided to mark your unpatented item as patented, shift the burden to you to show no intent to deceive.

Second: per offense: Patent litigation takes $650,000 for a case worth less than a million; patent counsel bill at over $250/hour. Current law: base marking fine on number of decisions made to mark, which usually turns out to be one. We need to increase economic recovery. Her proposal: do it per article, but allow courts to reduce it based on the culpability of the false marker. Measure culpability by measuring materiality. If it’s a less experienced consumer, patents may have more of an effect; customers for a very expensive specialized machine are more likely to do the research. Look at the variety and the extent of the false marking, the extent of the potential harm, and the extent to which false marking can add to market-excluding power.

Q: Why would consumers care?

A: They may still be harmed—that’s why we have qui tam statutes. (Comment: this is why I think that materiality might not be helpful. False marking is a drag on the system overall, but it’s hard to find individual consumers, or even individual competitors, who are directly harmed. If it’s regulatory, then we should probably pay less attention to materiality than we do in false advertising.) The burden and the risk should be on the patentee; intent can control for things like uncertainties in the scope of the patent.

I ended up going to another panel, but I enjoyed the historical account of newspaper practices and economics given in the paper by Bob Brauneis, Transformation of Originality, which argues that newspapers contributed to the development of the exclusion of facts from copyright’s coverage due to strategic decisions at the time that some form of IP protection became desirable for them.

Tulane IP conference, part 4

Mary LaFrance, Lost in Translation: Comparing the Trademark Status of Abbreviations and Foreign Words

TM protection for abbreviations of generic or descriptive terms. What determines whether such abbreviations are protectable? Can they be inherently distinctive? 1997 case: WSI for Welding Services Inc., held generic when spelled out. So what about WSI? There are acronyms, which can be pronounced like words (e.g., LASIX), and mere initialisms, which aren’t. The vast majority of litigated cases involve initialisms.

In some circuits, the chances of getting TM protection are much better if your abbreviation has a meaning that is not necessarily connected to the products. POLY: held by 2d Circuit to be distinctive for polyethelene pitchers. Double entendre with a woman’s name: Poly Pitcher, which sounds like Molly Pitcher. Still, most of us would probably recognize Poly as short for polyester or something like that and consider it descriptive. BEARS: held arbitrary even though it’s an acronym for British European American Racing Series, a descriptive term for motorcycle racing; since it sounds like an animal, it’s arbitrary.

Most cases come from the CCPA, and they mostly make sense. Modern Optics: CV, standing for “continuous vision,” a type of trifocal lens. The term was highly descriptive, but CV isn’t itself descriptive, for lack of evidence that CV was a generally recognized term for the phrase. As a general rule, initials aren’t descriptive unless they’ve become generally understood as representing descriptive words such that they’re synonymous with the phrase. The burden is thus on the opposer. Example of term barred on this rationale: IM for instant messaging. (Query whether rise of netspeak makes lots more initialisms recognizable and thus descriptive.)

TTAB has pretty consistently followed this approach. Sometimes, though, they conflate the issue of genericism with that of secondary meaning, looking to whether an initialism has secondary meaning and then skipping genericism. Outside the TTAB and the Federal Circuit, analysis has been less clear-cut. SDNY: several courts have held initials inherently descriptive, because letters of the alphabet are available to everyone. But TMs don’t have to be original, and words from a dictionary can be arbitrary applied to particular goods/services. And yet that’s influenced courts in a number of other circuits. (I wouldn’t say it’s the dictionary that makes availability important—it’s the competitive need of others to use the initials, which they might do for convenience or shorthand.) The Ninth Circuit has said initials are inherently descriptive, especially when derived from a corporate name. Anheuser-Busch has had difficulty protecting the AB mark. (I think there’s something to this, considering the inherently limited number of short initials available—look at the competition to get an attractive three-letter code for the stock tickers, or the value of three-letter domain names. The concern isn’t so much that another business will want to use WSI, but perhaps Brown’s Welding Services Inc. will want to use BWSI, for perfectly good reasons.)

LA for low alcohol: the 7th Circuit rebuttably presumed the initials descriptive, because they stood for a descriptive phrase. That’s the opposite of the Modern Optics presumption. Almost the same facts in the 8th Circuit, which went the other way on LA for low alcohol, treating it as suggestive. (I think context is important here: this isn’t a TM on a business name or a full product name; TM protection is being used to sue other products bearing other house marks, e.g., Labatt’s LA. And that to me raises special competitive concerns.)

Foreign words raise similar issues of translation: how likely are ordinary consumers to translate the foreign word into its equivalent? Initialisms are also about translation: will a consumer think that WSI means “some company that provides welding services” rather than “a particular company that provides welding services.” Unfortunately, the foreign equivalents cases are also kind of confused, because people’s translation capacities and tendencies differ. Most courts ask whether an “appreciable number” of consumers would translate. Issues of international comity are also highly influential, but those policy considerations don’t affect initialisms.

Blue Ribbon & Cordon Bleu are not equivalent, because they convey a different commercial impression. Commercial impression is a potential way to navigate the abbreviation cases.

Bob Brauneis: Isn’t the issue one of assessing competitor need, esp. with new products or services in which the abbreviation may well become the new reference, but we’re not sure yet.

LaFrance: One court raised this possibility.

Brauneis: The concern is not whether a term is statically descriptive, but dynamic: descriptiveness provides a testing period of several years, precluding registration/protection very early on when we’re just uncertain about what will happen. So he’s partial to the 7th Circuit at least when a product is new. If you want TM protection, just prove secondary meaning—the rule is not a bar to TM protection.

Zahr Stauffer: In the TM relation, the abbreviation refers to the signifier. It’s a horizontal reference, not a reference to the signified. Is that the same as the foreign equivalents situation?

LaFrance: Increasingly, she thinks that foreign equivalents have little to offer, except for the idea of commercial impression.

Lisa Ramsey: This raises questions about the Abercrombie spectrum itself. Maybe Abercrombie just doesn’t cover the questions that we need to be asking. (Like product design, perhaps?) Courts may be concerned about control of language/letters. Given that rights extend beyond verbatim copying, treating these marks as inherently distinctive gives some pretty broad rights.

LaFrance: In that light, it’s really interesting that the TTAB standard is so applicant-favorable, since their treatment is what determines whether a mark can become incontestable, and incontestability gets rid of any future descriptiveness challenges.

Laura Heymann: This may be a way to explore ways in which consumers make meaning. The TM holder creates many initials, but IM is a term adopted, perhaps even created, by consumers. Compare: Coke, VW Bug, ACE, FedEx, Mickey D’s.

Brauneis: Also related are abbreviated prefixes/suffixes: iPod, eTrade.

Stauffer: Also ask whether the abbreviation replaces the original mark: Kentucky Fried Chicken is gone, replaced by KFC.

LaFrance: Very few cases seem to involve such an evolution.

Brauneis: Companies often move to initials in new countries: Kentucky Fried Chicken means nothing in China; Hennes & Mauritz sounds germanic, but H&M moved easily into new markets.

Lisa Ramsey, Free Speech and International Obligations to Protect Trademarks

The US and other nations can protect free expression without violating trade obligations, such as the Paris Convention and TRIPs. Those agreements have some built-in flexibilities and free speech protections. Moreover, nations deserve deference in balancing trademark and free expression.

In the US, courts protect speech by interpreting TM narrowly or interpreting exceptions broadly, and many people argue that courts should be even more active in doing so. Here’s the risk: someone would argue, as they have occasionally suggested with respect to copyright’s fair use, that these broad interpretations violate our obligations under the three-step test.

TRIPs: our obligations are much more flexible than you might think, especially in trademark. Members have discretion in implementation in all areas, as Dinwoodie has argued, and the TM-specific provisions provide extra flexibility. Dinwoodie has suggested a “new federalist” approach—the ability to experiment with different ways of protecting IP. There’s a general consensus that expression matters, even if there are different ways of thinking about free speech.

In close cases, therefore, WTO should defer to speech-protective standards. She doesn’t advocate WTO adoption of rules for when speech should trump trademark. Unlike national courts, the WTO is unlikely to come up with speech-protective standards on its own; panels are not necessarily representative of speech-protective backgrounds. So authority to make law should rest with the individual countries.

What about a law of user’s rights? Exemptions for news reporting, comparative advertising. The concern: if we have that, then panels will treat that as exclusive. So any move in that direction should specify that it’s a nonexclusive list.

Examples of specific changes: She’s argued that TM shouldn’t protect descriptive terms. The Paris Convention allows countries to protect descriptive terms, but doesn’t actually require it. What about dilution? It’s arguable that dilution protection isn’t required, because protection for well-known marks is different than dilution. There is a Joint Recommendation suggesting that dilution is required, but the WTO could treat that as non-binding. Moreover, the well-known marks requirement covers uses “in the course of trade,” which would allow a trademark or commercial use requirement. “In the course of trade” is a known phrase in Europe and other nations, and she’s investigating that now. A robust commercial/trademark use requirement could legitimately be used to protect speech.

TRIPs says members can provide limited exceptions, such as descriptive use of a mark, provided that such exceptions take into account the interests of the mark owner and third parties. This is much more flexible than the copyright exceptions provision. So even if you don’t believe that the provision for rights allows a TM use requirement, you could find it in the exceptions provision, because a TM use requirement respects the mark owner’s interest and benefits third parties.

Q: It’s important to distinguish between international lawmaking and lawmaking by WTO panels; shares your concerns about WTO panels, which are focused on trade and not speech. That makes incorporation of the Paris Convention into TRIPs problematic, because Paris was directed at different concerns. But it’s also important to remember that the US fetishizes speech.

Australia, for example, has no explicit dilution protection; it protects speech differently, by more narrowly defining the scope of the rights. Australia does have a TM use requirement.

Ramsey: That divergence is particularly true with respect to commercial speech. But there are a variety of ways even in the US to take speech interests into account, narrow definition being one of them. (My take on this: the US fetishizes free speech in part because we’re litigious; the First Amendment defense is often useful in fighting a case that should never have been brought and likely wouldn’t have been in other countries.)

Comment: Thinks it unlikely that WTO panels want to make rules; they will avoid making rules as much as they can and try to limit the number of issues they resolve. The members wouldn’t tolerate much activism of that sort by the panels. There’s also been some discussion of free speech issues in the context of GI protection. The US and Australia are not happy with European demands over GIs, and free speech has been one of the arguments. Even if marks aren’t generic, the ways in which Europe is proposing to regulate would harm free speech. (I’m guessing she’s talking about bans on using terms such as ‘like’ and ‘style’ and comparative advertising restrictions.)

McGeveran: You’re not theoretically opposed to international rules; your argument is practical: good rules are unlikely to emerge from the WTO from this configuration of national interests.

Ramsey: Yes, she believes rules are better than standards at the national level, but not at the international level if they’re likely to be restrictive. She’s concerned about the likelihood that any rule-like exceptions will be interpreted to exclude other limitations.

Comment: It’s also much easier to change a national list of enumerated exceptions than an international list. But a list of enumerated exceptions, plus a catch-all that’s drafted to make clear that the provision is actually a standard with a list of representative examples, could be a good idea.

Tulane IP conference, part 3

Michael Grynberg, Things are Worse than We Think: Trademark Defenses in a Formalistic Age

Underlying premise: more TM defenses would be good. But courts have less leeway than you might think. People who don’t do TM say that the Lanham Act specifies defenses and you can’t just add them. People who do TM refer to TM’s rich common-law history and point out that courts make stuff up all the time (e.g., DMCA elements of circumvention like “assisting somehow with infringement”).

Congress allowed courts to run with ambiguous language in the Lanham Act and amended it to endorse broad interpretations of TM rights. Meanwhile, formalism has become dominant as a matter of judicial, especially Supreme Court, interpretation. Moseley and KP Permanent relied on the statutory language; Dastar went about defining “origin” with reference to the statute.

Well, what about Wal-Mart? Isn’t that the epitome of results-oriented reasoning? This is a harder case. But it can be fit into a formalist narrative as a contextualist ruling: modern textualists are no longer strict constructionists; it’s always appropriate to look to a broader legal context. They derive a rule based on the surrounding context of §43(a), from the treatment of non-inherently distinctive marks. Then they make a judgment call, after having taken the text as far as they can.

Incontestability defenses are largely closed; Congress has ratified that understanding by amending §33(b) to add defenses.

More interesting: §43(a) defenses. As a matter of practice, new defenses are occasionally recognized. But how? When courts apply interstitial reasoning, they borrow from state law or use principles of general law. You rarely see federal courts just making stuff up.

So what’s the result? Definitional moves—nominative fair use is about uses that are definitionally unlikely to cause confusion; product designs are about uses that are presumptively unlikely to identify source. It’s largely a move to work within the likelihood of confusion standard.

But then the 3rd Circuit gets nominative fair use in Century 21, where they say that nominative fair use is a true defense. But on what ground did they say that? There’s no basis for them to say that it is a true defense. The Third Circuit took conduct that, in its terms, was statutorily enjoinable but refused to find liability. That’s the difficulty with any attempt to create a new affirmative defense.

He likes materiality as a possible defense. There might be no Article III standing if there’s no injury in fact from materiality.

Inherent problem with his approach: it’s very hard to get around a materiality claim on pleadings or summary judgment. You can imagine that good lawyers can construct arguments that the confusion does matter (the claim would be that a use harms brand value—e.g., Balducci, where the court credits consumer survey evidence stating that consumers might be less likely to purchase Michelob). Plaintiffs can get around defensive doctrines based on likelihood of confusion.

Rebecca Tushnet, Running the Gamut from A to B: Federal Trademark and False Advertising Law

I gave a bit of a retread of an earlier presentation. I added in some discussion of what TM should learn from false advertising, in particular that implications matter. In nominative fair use and other situations, courts and commentators often argue that they are making an empirical judgment: consumers can’t be confused by a truthful statement of the relationship between the parties.

This is a conceptual mistake, neglecting implicature. Example from Richard Craswell: you ask me for the nearest gas station. I give you an address. My answer implies, because we assume that I’m being truthful, complete, and helpful, that (I believe that) the station there is actually open, because unless you have specified otherwise I ought to infer that you would like to buy some gas for your car.

There are good reasons to deny the relevance of some implications, especially when they will not be received by or important to many members of the audience, but it is analytically insufficient to stop at the dictionary meanings of a string of words. False advertising law says that clever use of innuendo doesn’t protect a false advertiser; we protect consumers precisely when they need it most, when it would require a lot of effort to discern that what appears to be promised isn’t. Examples: save “up to 85%” on home heating when that would basically only be true if your house had big holes knocked in the side. Mylanta Night Time Strength, which didn’t explicitly say that it lasted all night but sold millions of bottles because that’s how people understood it; etc.

We can endorse nominative fair use and other defenses, but not because of the formalist divide between explicit and implicit meaning. We should think of them in terms of policy objectives and because of error costs: certain kinds of implications are so unlikely, and so outweighed by the value of other explicit or implicit information conveyed by the same statement, that we should just have a rule allowing such statements and not conduct an individualized inquiry into confusion.

Eric Goldman, Economics of Reputational Information (Oversupply Problems)

Reputational information is info about an actor’s past performance that helps predict future performance: unmediated (recommendation letters, student evaluations, word of mouth) and mediated (credit scores, GPAs, investment ratings, consumer ratings on Amazon). We’re awash in reputational info, and the trend line is up.

Unmediated reputation is idiosyncratic: my taste in movies will affect how likely it is I’ll like a particular movie; it’s often based on small data sets (I’ve seen a relatively small number of movies); it has high transaction costs to find and transmit. And it’s hard to police against shills. There are few boundaries for how we write recommendation letters. Most job reference letters are negotiated with employees; we don’t know what deal underlies each one.

Therefore, there’s a trend for mediated reputation, which solves a number of these problems. A mediator can aggregate opinions and individual ones will average out. Editorial filtering can manage the information glut. And the mediator may have incentives to manage the database and engage in data-correction. (I’m not sure Goldman is right about this—it might not be worth it to sort it out if so much of the pile is okay. In fact, that’s often the premise of aggregation, see Everything is Miscellaneous. Google does not go back and fix badly scanned pages from its Book Project.)

Problems with mediated reputation: People may misinterpret data as possessing faux precision/may ignore the margin of error. Outputs may be insufficiently granular, one-size-fits-all. US News & World Report scores offer generic rankings, but they don’t help determine what’s right for a particular student. We have no idea what’s under the hood—the editorial filtering/algorithm may be opaque: Google’s PageRank; credit score calculations. Data sources may not be credible, or credibility may be hard to assess, as when users are shills. People try to game known algorithms, like people merging their credit reports with others with higher scores. People attack review systems, e.g. Spore on Amazon. There’s a risk the mediator may move to pay-for-play, selling more favorable treatment. And error-correction can distort the database.

There are wildly divergent regulatory approaches: sometimes people can complain and remove information (credit reports) and sometimes there’s no way to force a mediator to act (§230). If errors are easy to report, negative information will be wrongly purged; if they’re hard to remove, then negative information will wrongly remain.

Which of these weaknesses can be left to market solutions, and which deserve regulatory intervention? Goldman is struck by regulatory divergence, and asks whether we can learn from differences. His bias is always the market, because of incentives to correct bad data.

Bill McGeveran, Endorsement, Identity, and Social Marketing

Background: word of mouth is the holy grail of marketing. Social networks are big and exciting. They still don’t make any money, though, and nobody knows how they will make the expected giant buckets.

Thus, the introduction of Facebook ads, particularly Beacon. People didn’t like the disclosure; it’s creepy and even seriously invasive for friends to learn about your purchasing/rating information. A guy whose significant other found out via Facebook feed that he’d bought a diamond ring on Overstock is the lead plaintiff in one of two class action suits. But these suits are hard to plead.

Information quality is a consideration: we don’t know why people buy products (for themselves, for others). Also spamification: each individual message may have an impact, but an ocean compromises the usefulness of all such marketing messages and even swamps the good stuff from the wealth of networks. Third, a Warren & Brandeis discomfort over loss of control. But American privacy law is so focused on sensitive information that mostly it doesn’t help here.

What about TM/false advertising claims? There’s an advertising message of endorsement. But that’s also hard to sustain. Most people have no TM rights. Consumer protection/regulatory responses might be appropriate. What about right of publicity? Seems like there’s a claim. The chief privacy officer of Facebook disagrees; and neither pending lawsuit makes an appropriation claim. Why not? Because Facebook argued consent. (I don’t think that would help with NY law, at least, and I’d think a NY class would be appropriate.)

Within 5-6 weeks, Facebook moved to opt-in: “tell your friends” option.

Without a European data privacy model, privacy won’t help. But publicity rights might be useful with a careful enough understanding of consent. We do want “tell a friend” to be available.

Counterarguments against regulation: is it too much propertization? Are there free speech objections? It’s commercial speech, so that shouldn’t be a problem. (Comment: I am dubious. If it’s truthful speech, it has a lot of protection unless we appeal to concepts of property; privacy isn’t going to cut it these days.)

Bernstein: Beacon was visible, which allowed the market to react. But regulation may be more important when the effects don’t slap you in the face.

McGeveran: agrees, but there are many things that Facebook could do that would be less transparent.

Comment for Goldman: there’s also an adverse selection problem: people who care lots may be more likely to comment (whether lovers or haters). With recommendation letters, it may be that nice professors get more recommendation requests.

Goldman: Statistics show that love/hate are more common than the nuanced middle, but it’s not clear whether love is a better or worse spur than hate.

Q for Goldman: How do you count individual blogs, etc.—is that mediated/unmediated? They don’t necessarily expect people they don’t know to be interested.

Goldman: Blogs are a great example of where a search engine may act as a mediator, but for other people the interaction may be unmediated (subscribers). Facebook and MySpace are aggressive editors of their sites, like credit reporting agencies manage their databases. They may allow lots of choices but they’re not passive technology providers.

Q for Goldman: Some situations you discuss don’t fit neatly into your description of reputation info (predicting past performance). Movie reviews aren’t about future performance, but about potential reactions to encountering that very same product. Evidence law struggles with the extent to which past performance can indicate future action. Would like to see clearer definition of the categories; movie reviews are easier to use because we know the variables and the performance is over. There’s more uncertainty in evaluating future performance based on grades, or a grade.

Seltzer: The information may not be transparent, because consumers aren’t thinking about motivations for ratings. Could we try to flush out more information about ratings before regulation?

Goldman: eBay has its own incentives to make the feedback form useful, and those incentives have worked really well. People trust the data enough to make purchases.

Tulane IP conference, part 2

Chris Ridder, The Role of Copyright Policy in the Enforcement of Copyright Licenses, Information Contracts and Technological Protection Measures

Copyright owners often have unfettered discretion to choose how to structure contracts. Scope restrictions: copy but not distribute; sell in US but not America. Relatively well understood in contract law, but can be used in interesting ways. A scope restriction can be: can’t disseminate without the copyright notice on the copy.

Contractual covenant: an exchange of copyright rights for some promised performance. Generally, not preempted by Copyright Act. Remedies: contract. One exception: automatic revocation/recission clauses: you can get copyright remedies for breach.

Conditions precedent: found by the Federal Circuit in a recent case on open source licenses. A conditional promise: you can use the work provided that you do this thing; failure means copyright rights don’t vest and you’re an infringer when you fail to satisfy the condition. Conditions precedent are usually disfavored in contract law, but if they’re explicit enough they will be honored. Failure to pay royalties is usually a breach of a covenant, but courts often say that they could be structured to be conditions precedent. Federal Circuit approved strategy of binding downstream uses by forcing the contract to travel with copies of the work.

Is there any limit on what copyright owners can get copyright remedies for?

In general, copyright policy would be a useful guide. Many courts have praised attribution, which as part of contracts can be contrasted to bans on fair use.

Contracts plus TPM provide a huge amount of flexibility for copyright owners who are paying attention; he is looking for some constraints. Conflict preemption is his leading candidate, but courts like to talk about preemption more than they like to apply it.

Ned Snow, Burdens of Fair Use

Who should bear the burden of proof in a fair use claim? Fair use is currently understood as an affirmative defense, burden on the defendant (with a small qualification perhaps in Campbell). It doesn’t have to be: §107 defines fair use as “not an infringement,” which suggests that the party asserting infringement ought to have to disprove fair use, and Congress expressly called it a “right” in §108. One sentence in the 1966 House Report has led courts to conclude that Congress structured fair use as an affirmative defense: “the Committee believes that any special statutory provision placing the burden of proving fair use on one side or another would be unfair and undesirable.” Obviously, this sentence doesn’t do what the courts say it does. It doesn’t make sense to say there should be no burden of proof; Congress here is at most punting to the courts. The Supreme Court fumbled by not deciding, just tossing off a line.

Going back to precedent, if fair use grew out of Folsom v. Marsh, then it was bound up in the initial question of infringement, which again suggests a definitional question making lack of fair use part of the plaintiff’s burden. There also appears to have been a misunderstanding of the term “privilege,” with modern courts treating the fair use “privilege” used in older cases as analogous to a privilege in real property, which is an affirmative defense.

The burden of proof increases copyright’s chilling effect on fair uses. If Eldred is right that fair use is important for First Amendment concerns, this mandates at least a shift in the burden of proof, as Joe Liu has argued, drawing on defamation law. The party suppressing the speech must show that the speech is not protected, which has a bias towards broadening the marketplace of ideas.

First, let’s make lack of fair use definitional for infringement; the copyright holder has the burden to prove the facts that fair use isn’t present. Aside from free speech, the copyright holder has best access to relevant facts, particularly facts about markets. He thinks courts can manage the burden on the plaintiff; but if that’s too much, he proposes to split the burden, putting a burden of production on the defendant to show it’s in the grey area, and then the copyright owner would have the burden of persuasion. We do that already in first sale: if the defendant raises a scintilla of evidence that first sale applies, the burden shifts to the plaintiff.

Burden splitting would make sense out of Campbell, which spoke of 2 Live Crew’s failure to produce evidence on market harm, but then suggested that 2 Live Crew’s nonverbatim copying seemed likely to be fair use. All 2 Live Crew should need to do is show evidence on one fair use factor, and then the burden of persuasion should shift.

Julie Cromer Young, From the Mouths of Babes: Protecting Infant Authors from Themselves

Minors are entering into lots of contracts, e.g. online. Their agreements may be voidable. If all agreements with minors, doesn’t this diminish their copyright interest? Perhaps there is an implied license running to the parents. But does that square with children’s rights as authors?

The licenses on Facebook, MySpace, Disney’s Club Penguin, etc. are really extreme, granting perpetual, royalty-free, nonexclusive licenses to do anything with user-supplied content, even though millions of the submissions come from minors.

Doctrine: contracts are voidable at the minor’s will once they attain majority, if they act within a reasonable time. The question: do we care that this should apply? There’s been a movement for the doctrine not to apply.

What do you do when the child is a bad actor? That creates pushback against the doctrine. Why not say that a child who is capable of entering into a contract should have to abide by it?

The turnitin.com case: turnitin.com demanded that students agree to the license allowing archiving as part of submitting papers for plagiarism detection, and their schools required them to use turnitin. The court refused to allow disaffirmation. They received the benefit of a grade from using the service, and also they received the benefit of standing. She thinks this is nuts. Williston: the child can’t disaffirm when he’s received a benefit, but only if the benefit is one that he can return. (Right, what I don’t get is that the alleged infringement is ongoing, so the past benefit can’t count or all contracts that aren’t essentially slavery will be outside the scope of the rule allowing minors to disaffirm.)

Other implications: how we view the service of distributing content—is it a benefit? Does a benefit received from a third party count? If we don’t want to reward bad child actors, we need to find a reason that focuses on their badness rather than what the court in the Turnitin case did.

Goldman, for Young: Even if there was permission for copyright, that wouldn’t allow recycling for marketing—there are privacy and publicity rights available. If the contracts fail with minors, then wouldn’t they also fail for other purposes, like disclaimer of warranty, making Facebook subject to warranty obligations, or arbitration provisions, etc.? This is why there’s pressure to find these contracts valid. (I agree, but that just means that contracts with kids are now more common than they used to be; maybe that’s something Facebook has to live with. Also the “received a benefit” distinction may make some of the non-copyright issues different, if all the alleged harm happened pre-majority.) COPPA says you must disclose privacy policies to those 12 and under. What about kids 13 and up? The law contemplates bad privacy policies for those kids, so in another sphere we’ve changed definitions of who needs protection.

Goldman, for Snow: 9^th Circuit’s Perfect 10 v. Amazon did some fancy footwork with preliminary injunction standards flipping the burden of proof, then amended the opinion to erase that result.

Karl: Look at child actor laws—it might be that they cover transfer of IP. Companies haven’t really tried to use these stupid provisions in their contracts. Maybe they’re useless legally too. Or perhaps you could argue for an extension of these laws for this situation (though that might run into preemption problems).

Karl, for Snow: Title VII burden-shifting seems like exactly the right analogy. She’d like to see fair use in declaratory judgment actions—what happens then? Look also at notice and takedown, and the recent decision in Lenz. There’s also possibly relevant precedent in damages and profits caselaw in infringement.

Q for Snow: Same issue arises in Australia in fair dealing cases. The old English cases are interesting because they treat it more as a limit on the right than an affirmative defense. It only becomes an affirmative defense once codified. Australia would immediately think of Berne’s 3-step test—is there any international issue in shifting the burden of proof? There’s been a big debate about the scope of defenses post-TRIPs.

Lunney, for Snow: Both Sony and Harper & Row put the burden on the plaintiff. (Snow: you can read Sony either way—if noncommercial, burden on plaintiff; if commercial, burden on defendant.) Lunney: at oral argument, 2 Live Crew’s counsel conceded that defendants had the burden of proof, making Campbell dicta. We also talk about plenty of things as affirmative defenses that aren’t: independent creation is called an affirmative defense, but there’s no burden of proof shift because copying is part of the plaintiff’s burden.

Lunney, for Ridder: Consider the doctrine of efficient breach. Sometimes breach is good. Sometimes we might not want to go to copyright remedies because that would limit the opportunity for efficient breach.

Bob Brauneis, for Snow: Burden of proof seems to matter most where evidence is scarce. Only on factor 4 does there tend to be an absence of evidence; it’s easier to know what the type of use is, how much was used, etc. (I’d think that factor 1 transformativeness will also be affected, at the margin, and courts do like to find things marginally transformative.)

Snow: He agrees that a strong counterargument is that burden of proof will rarely matter. But as a legal realist, he thinks a court confronting a new standard would put a finger on the scales in closer cases.

David Levine: Can something as technocratic as a burden of proof solve the chilling effect by shaping perceptions about people engaged in expressive activity. “Fair use as a right” is something that may be easier to internalize, and maybe burden of proof is a road to change that gut-level reaction.

Sixth Annual Works in Progress Intellectual Property Colloquium at Tulane

Elizabeth Townsend Gard presented Tulane’s Durationator project, part of the Usable Past Copyright Project. Designed to automate determinations of copyright duration given relevant facts. It will ultimately include foreign laws. It seems like a very promising project, though many of the facts will require a lot of information about the work and sometimes a legal judgment (e.g, was the work subject to general or limited publication), which is sometimes not available. The project’s aim is to require people to have to answer as few questions as possible.

First Session:

Gaia Bernstein, The User as an Inhibitor of Technological Progress

Increasing attention to users as innovators, but users are much more important as consumers: people deciding whether or not to adopt a technology. Technological adoption is often delayed by years because of user resistance. Thus, we should consider increasing regulation of user resistance.

Current literature: recognizing the user as designer, especially where capabilities are enhanced by digital technology and the internet. This doesn’t go far enough. Users have much broader roles: the couch potato means a huge amount to technological diffusion, deciding whether or not to adopt new tech. If innovation is to promote progress, it must be adopted.

What does user resistance mean? Often we think of active resistance, like protest against nuclear power. But there’s also avoidance, like consumers who won’t buy GMO food or writers who won’t exchange typewriters for computers. Resistance can be partial.

Case studies: artificial insemination (AI) in humans, email, videotext (Minitel)—technologies that were ultimately successful, but took many years to be accepted. First report of successful AI was the end of the 18th century. 1930s-40s: first significant use; delay due to social norms. 1950s: legal uncertainty (is it adultery? Is a resulting child illegitimate?). 1960s: court decisions and statutes legitimizing the use, specifying that the child is not illegitimate. Controversies continue with respect to use outside the husband-wife dyad, but the basic tech is accepted.

Email: the first email was 1971. The last technical milestone was achieved by the early 1980s. Why did it take so long to become widely adopted? Hypothesis: Social issues: critical mass required. (Lessons from the history of the telephone? There were lots of debates over adoption and a lot of propaganda on the part of telephone companies.)

Videotext/Minitel: French had this by early 1980s. Enabled shopping, travel reservations, chat, etc. Marketed worldwide, but rejected except in France. You need a critical mass, and the French government distributed free terminals.

Conclusion: there is need for more regulation of users’ adoption decisions to promote technological diffusion. How? Context-specific: earlier statutes might have helped diffusion. Email and Minitel: critical mass issues might be important.

My Qs: Look at digital television for an example of government attempts to regulate. How do you know which technologies to bet on?

A: The Office of Technological Assessment, which has been shut down, would be a good place to start.

Eric Goldman: We need the market, not the government, to pick technologies. He’d have the opposite conclusion: we should be reluctant to intervene when we don’t know what the long-run impacts are. E.g., 95% of P2P traffic is infringing today, but it might be different in ten years.

A: She doesn’t think there’s a blanket answer. Not intervening is a decision. (Yes, this is why I didn’t frame my question the way Goldman did, though we both had the same basic question!)

Deven Desai: This sounds like an account of technological path-dependence. Japan picks a technology, and when it works it really works, but the US advantage is that there are a bunch of options.

Wendy Seltzer: Maybe network-dependence is a divider of when government should intervene. AI: the utility of the tech depends less on how many others are already using it. Regulation might involve standardization, to promote a single network.

A: She’s working on these issues. AI is definitely distinct in terms of helpful regulation, but there may be some commonalities.

Q: Taxonomy of user resistance? Kinds of resistance: moral, practical (laziness/inertia), economic, social (are others using it), and philosophical. A taxonomy may help us decide when government intervention is appropriate.

Adam Candeub: 1996 Telecom Act: Schools & libraries program—billions of dollars subsidizing internet access. One reason why we want it is to create a market for innovative computer education applications. Identifying market-creating situations for government intervention could be useful.

My final comment: AI is a good example because it helps make the point that government is never “absent”: these kids exist; how will they be treated? Whether the government ought to apply special rules, or how general rules ought to be applied to a specific case, will often be in question.

Adam Candeub, Network Neutrality and Network Transparency

Network neutrality is about preventing certain abuses, in particular blocking content from unaffiliated or competitive sources. Example: Verizon blocks Vonage phone service. The central insight: we can’t assess the credibility of any of the arguments because we understand so little about actual network market relationships governing interconnection. Thus, disclosure of these relations is a first step before deciding on regulation and also is likely to serve beneficial goals in itself.

Discrimination happens all the time on the internet; we have to distinguish good (spam, phishing) and bad discrimination. Critics of network neutrality talk about property rights, market efficiency, and MATH! But if you crank through the models, they have key question-begging assumptions. And the models are vastly too simplified in terms of how the consumer relates to the backbone relates to the content provider, particularly in the peering and transit arrangements between various backbone providers. So what to do?

The claims made by law & econ types require more information about interconnection. Thus we should initially aim for transparency, not neutrality. Disclosure has served two roles: historically consumers or regulators. Internet disclosure won’t help consumers. There aren’t competitive markets for ISPs; most people aren’t competent to evaluate the information; and single-provider information isn’t helpful, because aggregate network info is what’s key. What about helping regulators? The FCC in its Bittorrent order has failed to set forth any understandable rule for what’s fair network discrimination and what’s unfair.

Now we should target the “internet vanguard,” people capable of understanding the complex interconnections at issue, tracking the incentives that motivate open software collaborations. Certain groups are trying to figure out the network structure. Kaminsky is a guy trying to figure this out, and the EFF’s switzerland project is similar. Technical tracking is being done by various projects. By requiring disclosure, these audiences would get useful information and either circumvent discrimination or at least fully inform public policy.

Q: Doesn’t the Bittorrent order have some disclosure elements?

A: They explicitly rejected a general disclosure requirement. Comcast’s act was well-known. What’s the rule for good/bad discrimination offered by the order? Spam, malware, virus controls could be equally suspect. (Not sure I buy this, unless you add in Zittrain’s analysis of the use of security threats to exert control over a network.)

Seltzer: Crowdsourcing investigation sounds great. Where does the crowd go when it finds a smoking gun or some disturbing practice?

A: If the agreements were public, Verizon would be less willing to engage in price discrimination, and less successful in doing so. Disclosure itself would often provide relief, even though we still wouldn’t have competition.

(This answer feeds my intuition that the perspective here is fundamentally anti-regulatory. Nothing wrong with that, but combined with his insistence that we need a way to distinguish good & bad discrimination that is predictive and extremely hard to capture, I’m skeptical that we’d find a regulation satisfying those constraints. And that is an argument against regulation, I agree, but I’m a little more willing to allow regulators to define good & bad discrimination as new kinds pop up.)

Lucille Ponte, Preserving Creativity from the Problem of Endless Digital Exploitation: Has the Time Come for the New Concept of Copyright Dilution

How can the US start protecting moral rights? Copyright dilution builds off of the notion of trademark dilution. The US has focused on economic rights as incentive; moral rights looks as a work as a commodity, but also as an embodiment of a person. In the US, copyright often goes to a big company. (I’ve been thinking about labor value; Marx would say that all products of labor (ought to) embody personhood, making creative works nothing special in that regard.) The most important moral rights: (1) attribution/paternity; (2) integrity (prevent destruction, distortion, alteration, derogatory presentation). Without integrity rights, a songwriter/performer who’s transferred his copyright couldn’t prevent the use of his song in The Prince of Tides during the scene involving the rape of a child (two children, actually).

Why protect moral rights? Infringement alone won’t prevent harm to the creator. Tom Waits therefore is very active in Europe to prevent uses of songs mimicking his voice and style in ads. He wants to protect his brand, and he was able to do that in the EU, but not here (comment: except for the Waits case in which he did win a publicity claim.) Our artists can get protection in Europe, but we’ve ignored our international obligations. Technology breaks down national barriers and digital tools make manipulation and copying easier, making attribution even more vital. People create for internal, creative impulses; people want control over a creative product once it leaves their hands. Moral rights promote future creativity and expand consumer choice.

VARA is a pathetic attempt to meet our obligations: narrow, waiver-friendly, and not often successful in court. Obstacles to expansion of moral rights: fear of chilling effects on owners of economic rights; fear of increased censorship; fear of disruption of preexisting contractual rights; lobbying by media groups; congressional passivity.

The paper suggests adoption of trademark dilution for copyright, which balances the interests at issue in a different way. (I’m not sure that trademark dilution created any costs with respect to the owners of economic rights/existing contractual rights, because by definition those were already within the control of the trademark owners, so that strikes me as an initial problem with the analogy.)

Her proposal: copyright blurring would be like the right of paternity. Without attribution your style would no longer be distinctive, so the user needs to give credit to the creator. (I don’t buy it: in many cases attribution comes from mere quotation, especially if you’re using an audio or visual clip. If it’s distinctive, it tends to stay distinctive in quotation or reference.)

Tarnishment would be the right of integrity.

She’d apply the right to the same works for the same duration as copyright. Limitations: apply the rule only prospectively, so that it wouldn’t harm existing contractual relations. Fair use, public domain, and works made for hire would stay the same. Rights would require reasonableness, as in France. Limited waivers for specific uses would be allowed, not blanket waivers. Like trademark dilution, relief would be injunctive only except in cases of willfulness.

Introductory notes: As you’d expect, my reaction to this proposal can’t be anything but negative. In that sense, most of my criticisms are probably irrelevant to the project internally. A couple of comments that might be more useful: Ponte needs to explain the relationship between the derivative works right/substantial similarity and a right against blurring; my reading suggests that she thinks blurring goes beyond substantial similarity (she says that her proposal makes it possible that the result in Newton v. Diamond would be different) but I’m not clear how far, e.g., competing reality TV formats; books attempting to cash in on the popularity of The DaVinci Code or Harry Potter, etc.

Likewise, her proposal to borrow trademark dilution principles wholesale seems underthought with respect to “noncommerciality” in particular. It is clear that trademark dilution “noncommercial” is First Amendment “noncommercial,” and thus a much, much broader category than copyright “noncommercial.” Trademark dilution claims against the use of a song during a rape scene in a movie and against a sample of a song in another song—two examples she gives of how her proposed law might well allow the original performer to suppress the second work—would fail at the beginning because neither are invitations to engage in commercial transactions. So she actually wants to import trademark dilution, except for trademark’s definition of commerciality. This requires some revision of her discussion of the remaining free speech safeguards in a copyright dilution law.

Relatedly, her proposal seems to contemplate a distinctiveness requirement—only works with a certain amount of “inherent” or “acquired” distinctiveness may be protected against dilution, but any consideration of the merits of that proposal needs to discuss (1) why a fame requirement should be rejected and (2) what “distinctiveness” might mean with respect to copyrighted works, for which we generally only discuss “originality.” If not all original works are inherently distinctive, how would we know which ones were? In trademark, distinctiveness serves a very different function than originality: it is how we know that a signifier is connected to a signified. Here the work appears to be both signifier and signified in the analysis; so we need to ask, distinctive of what?

Brandy Karl: So what do you mean by distinctiveness?

A: A registry, possibly. An expert could testify to distinctive style.

Karl: That’s a reason why TM litigation is so expensive as compared to copyright. Operationally: how does blurring interact with independent creation? I could independently hit on a style, which copyright would not protect now but trademark would (intent being irrelevant). Separately, does tarnishment provide any protection above and beyond the scope of fair use? The Prince of Tides case suggests a commentary on child rape.

A: On blurring: if you’re the earlier creator, you’d have the right to prevent blurring but only based on copying. Tarnishment cases won’t all be clear-cut in favor of the creator.

Bernstein: Why won’t the same political constraints apply to adoption of copyright dilution?

A: We recognize harm beyond infringement in one area, and that gives us a model for recognizing it in copyright. Not saying it’s an easy sell.

Goldman: Christina Bohannon gave a talk on copyright dilution, you might want to look at that. Not clear how blurring would apply in style: the Satava/glass jellyfish case (won by the defendant/copier) is all about style. In general, Goldman is uncomfortable with the paper overall: Santa Clara’s TM dilution conference (scroll down) brought together dozens of people who were uniformly concerned by dilution. This seems like propagating a bad meme in a new place.

Desai: Descendability is an issue: if it’s so tied to the individual, why should it be descendable? This is an example of a broader issue of translation: copyright and TM are different, and we need to examine those differences before importing one concept from one area to the other. These arguments are increasingly common, and thus Ponte is on to something felt strongly, so it’s worth investigating, but not necessarily worth acting on.

Comment: Perhaps there’s increased attention to attribution because of the transition to a gift economy where attribution seems like the only thing a lot of people can get.

Goldman: Might also consider §1202 as a moral rights provision already existing in copyright law; might do enough to create an attribution right already.

Resale confusion?

Hyundai Construction Equipment U.S.A., Inc. v. Chris Johnson Equipment, Inc., 2008 WL 4210785 (N.D. Ill.)

This case is a good non-internet example of how concepts of direct trademark liability have expanded over the years. Plaintiff, a wholly owned subsidiary of the South Korean company Hyundai, is the exclusive distributor of new Hyundai heavy construction equipment in the US. Defendant Johnson is a heavy machinery broker specializing in construction equipment. Johnson buys equipment in various ways, including at auctions, job sites, and foreign locations. He bought “gray market” new and used Hyundai equipment manufactured in Korea for the Korean and Chinese markets; he imported 23 in total. Hyundai alleged material differences between the gray market versions and the US versions.

Setting aside a dispute over standing, Johnson’s main defense to Hyundai’s unfair competition/dilution claims was that there was no consumer confusion. All the buyers were sophisticated; all knew that the machines were intended for foreign markets; all knew there were differences from the US versions; all knew there was no Hyundai warranty; all knew that Johnson was not an authorized Hyundai dealer; and all bought based on Johnson’s lower prices. Every one of his customers who was deposed agreed with these propositions, though not all were deposed.

Hyundai’s response, which seems weak to me, was simply that consumer confusion is presumed when gray market goods have material differences. Johnson’s evidence, I would think, should have sufficed to rebut that presumption; I was not aware that such a presumption was irrebuttable. The court recast the rule as one that the Lanham Act bars importation and sale of genuine goods if the foreign products are materially different, which they were. This rule makes confusion irrelevant, which I think is inconsistent with the text and history of the Lanham Act, and indeed the court went on as if confusion were still important. It then characterized Johnson’s argument as one that Hyundai must prove actual confusion and rejected that argument, holding that the question is whether there is a “potential to mislead or confuse.” I think a much fairer reading of Johnson’s position is that an average consumer of these expensive and specialized goods is unlikely to be confused, a contention supported by evidence from actual consumers. Also, potential confusion is not the standard; likely confusion is.

And here’s the really interesting bit: “While it may have been Johnson's intention to warn all of his customers that they were buying the Korean version of the equipment this would not protect subsequent customers who may purchase the equipment from Johnson’s customers” (emphasis added). Not post-sale confusion; resale confusion. Contributory infringement would have been the better analysis here, because resale is a classic contributory infringement situation: you supply a product to someone who might engage in trademark infringement. Given the wealth of legitimate uses for the products here, I think a contributory infringement analysis would have taken defendant off the hook.

Final oddities: since plaintiff didn’t own the Hyundai trademark, its pure trademark claims failed, including its dilution claim, since §1125(c) limits relief to “the owner of a famous mark.”

Finally, the court rejected Hyundai’s fee request. There was no bad faith: “Johnson took apparent pains to inform his customers that they were getting exactly what they were getting: a Hyundai product without a warranty that had been purchased overseas.” So, while consumer confusion can be “presumed” (again, hunh?), there’s no actual confusion, thus avoiding the exceptional circumstances necessary for a fee award.

We all float: single letter suffices for 43(a) in small industry

International Technologies Consultants, Inc. v. Stewart, 2008 WL 4378095 (E.D. Mich.)

The parties compete in a small industry, float glass (a type of flat glass with alleged advantages over plate and sheet glass). Nearly twenty years ago, they signed an accord with a confidentiality agreement, the scope of which became a matter of dispute over time, and a key element of which—a list of specific confidential information—has been lost. Defendants argued that the agreement covered all technical information dealing with float glass, including that which was generally known in the industry; plaintiff (and the court) disagreed; for purposes of the preliminary injunction motion here, at least, the agreement was a nullity. There were also a couple of other relevant instances of cooperation, in which plaintiff’s records tended to show that plaintiff had complied with all relevant conditions and owned the necessary technology, while defendant couldn’t produce contradictory documentary or testimonial evidence.

The parties competed for a job with the Arabian United Float Glass Company; the plaintiff won the contract. Defendants sent a nasty letter to Arabian about plaintiff, questioning plaintiff’s reliability and its ownership of relevant float glass technology rights. They sent a similar letter to the financing company for the project. Plaintiff sued for unfair competition, intentional interference, and trade libel.

The court found that preliminary relief on the false advertising claim was justified. The claim in the letter was false. Plaintiff’s “damage control” expenses sufficed as harm. Moreover, the letter (here, two letters if you count the one to the financing company; the court did, though I’m not sure that counts as advertising or promotion, because defendants weren’t seeking to divert purchases by the financing company) was sufficient to count as “commercial advertising or promotion.” A single letter can violate the Lanham Act in cases of direct competition in very small industries such as this one; defendants were clearly trying to get Arabian to terminate its business relationship with plaintiff.

Likewise, plaintiff succeeded in showing a likelihood of success on its tortious interference claim because of the attempt to disrupt an existing business relationship; Michigan law does not require that a breach actually occur for a tortious interference claim to succeed.

In Michigan, trade libel requires fairly blatant falsity, whether explicitly, by “direct[]” implication, or by “selective omission of crucial relevant facts.” Here, the only factual assertion concerned ownership of the technology. The court found that plaintiff could prove all the necessary elements, including that defendants were at least negligent.

The question was whether all this constituted irreparable harm. Given that plaintiff had to do damage control when Arabian forwarded the letter to it, the court found that the aspersions on its business integrity were damaging enough to constitute irreparable harm. There was also, however, a question of harm to the defendants, who have consistently argued that they are justified in expressing their concerns over technology ownership, and that an inability to state their position would cause them competitive harm. They argued that they didn’t send the letter to Arabian in order to induce a breach, but merely to “raise its awareness” and “urge it to take certain precautions against imprudent business decisions.” They claimed to be defending “‘float bath industry as a whole, such that its reputation is not torpedoed by the bad actions of a single participant [in] the industry outlined in the letter.’” The court was unimpressed by defendants’ supposed altruism, and found that defendants wouldn’t suffer harm from a perliminary injunction.

As a result, the court preliminarily enjoined defendants from communicating with any nonparties who have or may have an actual or prospective business relationship with plaintiff about the ownership of float glass technology. Plaintiff’s request for an order that defendants retract their earlier letters, however, was rejected as premature.

Copying as parody

I've written before about how copying can be an exercise of free speech. Recently an instance in which pure copying is deployed for critical purposes has been much in the news: Tina Fey playing Sarah Palin, delivering Palin's interview answers with the same wording and even the same inflections. This is a great subject for performance theorists: words that mean one thing in the original speaker's mouth have very different meaning in another's.

Thomas and Tommy

This weekend's haul at the local kid's stuff sale included this T-shirt, front and back:


Blurring? If Tommy Hilfiger has a non-childlike image, could it be tarnishment?

Standing and advertising/promotion in a SLAPP suit

Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 564 F. Supp. 2d 544 (E.D. Va. 2008)

Consumers posted negative reviews of Nemet on defendant’s website. Nemet sued for defamation, tortious interference, and Lanham Act violations. Eric Goldman gave a good summary. The CDA proved an insurmountable barrier to the claims.

As Goldman noted, the court mushed together trademark and false advertising considerations in evaluating the apparently confused Lanham Act claims. Treating Nemet as mainly making false advertising arguments, it held that there was no standing, as the parties didn’t compete. But, in the alternative (which, under the circumstances, must mean: if Nemet was actually making a trademark claim; the court seemed to think that Nemet wasn’t really trying to do so), it held that the complaint should still be dismissed because the parties’ goods are unrelated as a matter of law and there could be no sales diversion.

Goldman thinks this is in tension with the main line of trademark cases, which wouldn’t accept this argument on a motion to dismiss, but it’s so clearly the correct result that we should embrace it. Factfinding won’t make a SLAPP suit like this any more credible as a trademark claim. To the extent that some courts have found that a false endorsement claim must be allowed to proceed merely because plaintiffs allege that consumers might believe that a website requires permission from a trademark owner to talk about the trademark owner, those cases are rotten at the core; if a claim can only succeed if the plaintiff proves such a belief on consumers’ part, then it should be dismissed at the pleading stage.

There is an interesting false advertising issue lurking here: Nemet apparently argued that the website name, consumeraffairs.com, misled consumers into thinking that the site had some official governmental connection. In that, this case has some resemblance to the DMV.org case. Unfortunately for Nemet, its focus on how this name “divert[ed]” consumers only highlighted the standing problem, because it didn’t divert consumers from Nemet.

In an extra ruling that coincided with the standing determination, the court further found that the consumeraffairs.com domain name didn’t count as “commercial advertising and promotion” because it wasn’t commercial speech by a defendant in commercial competition with Nemet. Thus, the court held, even if Nemet had standing, its claim would fail.

The court’s belt-and-suspenders approach highlights the way in which “advertising and promotion” caselaw has developed in illogical isolation from the surge in standing caselaw. In assessing whether something counts as “advertising and promotion,” direct competition has always been a requirement—both necessary and sufficient to satisfy one part of the standard four-prong test. One could easily argue that whether a defendant competes with a plaintiff has nothing to do with whether a particular statement is “advertising” or “promotion.” Indeed, the standard test leads to the facially illogical result that statements are advertising with respect to some people (competitors) but not with respect to others (noncompetitors).

The notable point is that “advertising and promotion” caselaw was, before recent cases like Phoenix of Broward, the primary way in which standing questions were navigated in false advertising law. Given the standing revolution now going on in Lanham Act caselaw, it’s time to rationalize the doctrine and either remove direct competition from the test for whether something is “advertising” (the logically superior alternative) or at a minimum use the same definition of acceptable standing for both, such that a plaintiff with “standing” would also satisfy the “competition” prong of the advertising and promotion test.

Shining light on false advertising allegations

Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC, 2008 WL 4367554 (S.D. Ind.)

Anodyne has the rights to an infrared lamp that is supposed to relieve pain and improve circulation—light-emitting diodes are placed in direct contact with a patient’s skin. (Comment: I find this freaky in the extreme, but then I dislike sunlight.) Anodyne made a professional model, the 480, marketed to health-care providers such as doctors and nursing homes, as well as a home model, the 120. The 120 had fewer LED-containing pads, a lower energy level than the 480, and non-adjustable power levels. Anodyne marketed the 120 indirectly, through health-care providers who used the 480.

The lamp is a Class III medical device and thus required premarket approval from the FDA, which it received “for relief of minor muscle and joint pain and improvement of superficial circulation” in 1994. Sometime after the turn of the century, Anodyne began marketing the device as a treatment for peripheral neuropathy and other conditions, including wound care. Peripheral neuropathy is a painful condition involving decreased circulation.

In 2004, Nightingale bought four 480 lamps. Anodyne’s statements are in dispute, but at least it represented that the lamp treated peripheral neuropathy; that the lamp was FDA-approved; and that Anodyne was working on getting Medicare to reimburse for the device. Nightingale actively marketed and promoted the lamp to its patients and the general public, and had good experiences with using the lamp to treat peripheral neuropathy, so it bought more units.

Then the FDA sent a warning letter to Anodyne about its marketing, noting that the lamp was only approved for minor conditions and that Anodyne’s promotion for unapproved uses rendered the device “adulterated.” Anodyne revised its marketing, but didn’t tell Nightingale, instead running a special promotion to sell more lamps. Nightingale didn’t find out (from another source) until it had bought 4 or 5 more lamps. Then Medicare ruled that the lamp wouldn’t be covered; Anodyne had to change its marketing materials, which included statements that Medicare reimbursement codes had been assigned, that some reimbursements had been made, and that Anodyne was actively working towards coverage.

Nightingale sued, arguing that Anodyne’s misrepresentations left it stuck with a number of machines for which it could never receive reimbursement.

Anodyne argued that Nightingale lacks standing, because it’s a consumer and not a competitor. Nightingale responded that it and Anodyne compete for the same dollars for treatment of peripheral neuropathy; every sale of a 120 to an individual costs Nightingale sales of its more comprehensive in-home services for treatment of peripheral neuropathy. Anodyne countered that Nightingale promoted Anodyne’s lamp and could still use it to treat peripheral neuropathy even though it legally couldn’t be promoted for that purpose.

The court noted that Anodyne didn’t provide statistics or studies on lost sales, and it seemed likely that such an impact would be small, but its basic argument was reasonable and the Lanham Act doesn’t seem to have a threshold for the amount of competitive injury. Thus, Nightingale had standing.

However, Nightingale couldn’t show a false statement of fact. It focused on two alleged statements: (1) that the lamp treats peripheral neuropathy, and (2) that the FDA approved the device for such treatment. First, statement (2) wasn’t made in commercial advertising, only in a statement from Anodyne’s sales rep to Nightingale. (Case law suggests that a consistent practice of sales reps of saying this would indeed count as “advertising or promotion,” but it doesn’t seem like the lawyers in this case spent a lot of time citing Lanham Act precedents.) Second, statement (1) is not false, according to the court. Nightingale’s falsity argument depended on the fact that the lamp isn’t FDA-approved to treat peripheral neuropathy and that it provides only symptomatic relief, rather than treatment or cure.

The court found that Nightingale misunderstood the role of FDA premarket approval for Class III devices. Premarket approval requires a statement of the disease or condition at which the device is aimed and the patient population for which it is intended; approval will be denied if there’s no showing that the device is safe and effective under the proposed conditions of use. Premarket clearance, therefore, covers only the indications declared by the applicant. Here, the lamp’s approval was limited to “relief of minor muscle and joint pain and improvement of superficial circulation,” which set the boundaries of permissible marketing for the lamp. But that doesn’t mean that the lamp is ineffective or dangerous for treating peripheral neuropathy. Anodyne violated FDA rules on promoting its device, but health care providers can prescribe or administer any legally marketed device to any patient without violating FDA rules. There’s simply no evidence that the lamp was not safe and effective for peripheral neuropathy. And “treatment” can include mere symptomatic relief, so it might be the case that the lamp "treats" peripheral neuropathy.

Comment: here, the court’s relative lack of reliance on Lanham Act precedent served it quite well. Courts often get tangled up in hair-splitting and pin-dancing about preemption, when the question of the relationship between the FDCA and the Lanham Act can be better navigated by asking whether failure to comply with the FDCA or FDA rules means that an ad claim is false, without more evidence, or whether the plaintiff ought to be required to submit independent evidence of falsity.

For similar reasons, Nightingale’s breach of contract claim largely failed, though its allegation of breach of warranty that the lamps were FDA-approved to treat peripheral neuropathy proceeded. Nightingale’s fraudulent misrepresentation claims regarding what Anodyne said about Medicare reimbursement also survived because of factual disputes.