End of semester amusements

As I finish up writing this year's exams, I thought I'd post my favorite question from last year's trademark exam. Pictures are fun! I made some of these facts up, but not others.

Jones Soda is an upstart company known for its unusually named and decorated bottles. Flavors vary over time and seasonally, including Green Apple, Root Beer, Orange and Cream, and the Thanksgiving-themed Mashed Potato and Butter soda. But flavor isn’t the basic Jones Soda selling proposition. According to the company, “Jones Soda has been recognized and awarded for its unique packaging that features constantly changing labels that are generated and submitted by its consumers.”

Jones Soda Bottles:

Jones Soda Co. distributes sodas in skate, surf and snowboarding shops, tattoo and piercing parlors, as well as in individual fashion stores and national retail clothing and music stores. The company has now begun to achieve larger chain store listings with companies such as Starbucks, Panera Bread, Barnes & Noble, Safeway, Target, and 7-Eleven stores.

Jones Soda has hired a number of “extreme” sports stars to promote its brands. In addition, the Jones Soda RVs travel around the country handing out sodas and advertising the brands. One recent stop was the Motor City Music Conference in Detroit, where numerous local bands performed. The RVs have also shown up at various skateboarding events, public beaches, music venues, and Oscar parties.

Jones Soda RV.

MyJones Independent Music is another Jones Soda promotional tool. It allows independent musicians to upload their music for others to hear and includes message boards. Jones Soda also plans to sell music CDs through the site in the future.

In addition, as part of its “Be a Pop Star” promotion, Jones Soda features 20 music artists and/or bands each month on its soda labels. The selected labels, each of which are applied to 50,000 to 150,000 bottles, bear a band’s picture, name and website. Anyone, including a band, can also pay Jones Soda to produce labels with a customized picture and customized wording on the back of the label. Jones Soda requires that any recognizable individuals in a picture sign a release form allowing Jones Soda to use the photo on labels and any associated advertising.

Along with customized batches of soda, Jones Soda also sells Jones Soda merchandise, including T-shirts and other clothing, stickers, posters, patches, postcards, hats, and messenger bags.

Jones Soda has recently introduced a new flavor, Strawberry Manilow:

So far, the new flavor is selling briskly. One reviewer calls the flavor “More bubble-gum than strawberry, which is appropriate for a soda named after a singer of ‘bubble-gum pop.’”

Barry Manilow dominated the 1970s soft rock scene with a string of top ten hits and multi-platinum albums. “Mandy,” “I Write the Songs,” and “Copacabana.” He’s won Grammys, Emmys, American Music Awards, a Tony, and numerous other awards for his music and showmanship. Despite frequent barbs from critics and lampooning by comedians, Manilow's fans and music soldier on, as evidenced by the No. 1 debut of his 2002 greatest hits album Ultimate Manilow, and Rolling Stone’s accolade that Manilow is the "showman of our generation.” Manilow appeared as a guest judge on and arranged music for American Idol in 2004. Following the success of his popular 'Farewell' tour, Manilow opened a standing show in Las Vegas in 2005 at the Las Vegas Hilton. He also regularly appears on national news and entertainment shows, from Good Morning America to Oprah.

Manilow is the federal registrant of the incontestable mark BARRY MANILOW for entertainment services, clothing, backpacks and tote bags, posters, and jewelry. Licensed BARRY MANILOW merchandise currently available includes mugs, T-shirts and other casual clothing, books, jewelry, blankets, license plate holders, calendars, pins, stickers, posters, purses, magnets, stuffed animals (the “Barry Fanilow” bear), keychains, CDs, and DVDs.

Manilow had been negotiating with Ben & Jerry’s, the ice cream makers, for a licensed “Berry Manilow” flavor. (A “Copabanana” flavor was proposed as well.) Ben & Jerry’s, whose ice creams are sold in supermarkets, convenience stores, stand-alone ice cream stores, and restaurants, has previously partnered with musical celebrities for special ice cream flavors, most notably “Cherry Garcia” with The Grateful Dead’s Jerry Garcia and “Phish Food” with the band Phish. A week after Jones Soda released its new flavor, however, Ben & Jerry’s broke off negotiations, explaining that “We expect Jones Soda’s brand recognition to interfere with the uniqueness of the ‘Berry Manilow’ flavor; moreover, Jones Soda’s reputation for novelty and ironic ‘hipness’ is inconsistent with the Ben & Jerry’s focus on long-term quality and sincerity.”

Shortly thereafter, Manilow sued Jones Soda in federal court in California. (California Business and Professions Code Section 14330 provides that “Likelihood of injury to business reputation or of dilution of the distinctive quality of a mark registered under this chapter, or a mark valid at common law, or a trade name valid at common law, shall be a ground for injunctive relief notwithstanding the absence of competition between the parties or the absence of confusion as to the source of goods or services.”) Jurisdiction over Jones Soda is proper. Please discuss the various theories Manilow might assert and evaluate his chances of success on each.

How to get discovery into hospital review board proceedings

Ryan v. Staten Island University Hospital, 2006 WL 1025890 (E.D.N.Y.)

Plaintiff sought discovery to support her claims of fraud, medical malpractice, and violations of New York consumer protection and public health laws. She alleged that her terminally ill husband was lured into useless treatment by defendants’ false advertising, with misrepresentations that included a claim of a “95% success rate” for cancer treatment. This false advertising enticed her husband to leave his home in Florida, forego appropriate treatment, and subject himself to negligent and unnecessary treatment, which shortened his life.

She moved to compel production of information on the success rate of the medical treatment used on her husband, including information from defendant’s peer review committee reports. The hospital claimed privilege under state law protecting hospital internal review proceedings from discovery as part of a comprehensive scheme to prevent malpractice. The flaw here, as the court pointed out, is that plaintiff was alleging false advertising, and information about actual successes and failures was highly relevant to whether the hospital’s advertising was false. Courts have allowed discovery of peer review committee findings where the plaintiff’s claim is not based on malpractice and the underlying policy of improving medical care through free and open discussion was not implicated. The court held that the same considerations applied here, since what plaintiff was trying to show was not that the doctors had made mistakes in other cases but that, regardless of their care in performing the medical procedures, they hadn’t achieved the success rate they claimed. Sustaining the privilege claim, by contrast, would license the hospital to deceive consumers.

Bob Brauneis on geographic marks

Bob Brauneis, Geographic Marks and the Protection of Competitor Communications, GW IP Colloquium, Apr. 10, 2006

Professor Brauneis and his colleague Roger Schecter have written a paper that was the subject of his presentation, which, among other things, had great accompanying visuals. Marks with geographic components are everywhere – Nantucket Nectars, Philadelphia Cream Cheese, Casablanca Fans, Pepperidge Farm Geneva Cookies, California Pizza Kitchen, Wall St. Deli, Bank of America, Toyota Tacoma – the list goes on. There’s a trend to register these marks immediately, rather than requiring a secondary meaning showing, for example TRENTON for computers (New York owner), CHICAGO for water coolers (Canada), and SANTA FE for barbecue grills (Georgia). An ITU for SWISSCELL batteries (New Jersey) was allowed last December.

The central thesis: the liberal grant of immediate registration gives too little weight to competitors’ interest in communicating about where goods come from. Swissbatteries.com, for example, sells Swiss-made batteries and uses SWISSBATTERIES.COM as its brand. The basic problem is that we don’t want great similarity in marks, which increases consumer search costs and harms producers. At the same time we want comparison to be easy – we need to see certain goods/services as substitutes or partial substitutes for each other. If two producers make Swiss watches, they both need that term to communicate.

We could deal with the problem by adjusting rules about the scope of trademark or eligibility for trademark. One scope rule: descriptive fair use might protect the competitor’s communication. KP Permanent, though, held that the degree of confusion may be relevant to a fair use defense, so you can still have a problem – “Swiss made” prominently enough on the package could create enough likelihood of confusion with SWISSCELL that it would go to the jury, creating barriers to truthful competition.

The alternative is restricting geographic marks through eligibility rules, but they’ve been getting progressively weaker. Brauneis reviewed the history since 1946, when geographic marks with secondary meaning were allowed registration by the Lanham Act. We moved first from the rule that a word generally recognized as a place name by the public could only be immediately registered if it was arbitrary as applied to the goods (delayed registration if the word could conceivably indicate geographic origin), to a rule that required a good-place association before immediate registration would be refused. Brauneis argued that this was already a mistake – we should look at what competitors, now or later, could communicate and might find more difficult to communicate if registration were granted.

How could there be a gap between a goods-place association and competitor interests? Certain shifts in consumer understanding are foreseeable and extremely easily accomplished. The foundational In re Nantucket case offers a good example – is it impossible to communicate that shirts were made in Nantucket by putting the term on a shirt? In other words, are consumers irrevocably commited to perceiving “Nantucket” as a metaphor for a tony summer resort? Brauneis said no; rather, lots of consumers aren’t ready to form an opinion.

This problem is tied to how things are produced and traded in an inpersonal global economy where we don’t generally know where our possessions were made. Consumers’ understanding is malleable. Geographic terms are often rich in metaphorical meaning, but one can communicate both metaphor and reality at once (SILICON VALLEY GRAPHICS indicating both actual location and the quality of being tied into the latest advances in computer imaging). So how easy would it be to convert a place name into a clear signal of geographic origin? NANTUCKET NECTARS is a convenient example; the bottle features a picture of an island and a map of same, along with a statement that the drinks were “born” in Nantucket and “embody the wholesome quality of the island.” The TTAB said that, in context, the mark was descriptive.

This possibility for meaning switch exists even without an applicant’s label; the SWISSCELL ITU application came without packaging. The TTAB allowed the application because there was no association of batteries with Switzerland. Then, after the registration issued, the packaging showed up, adding a Swiss flag and red color which increased the geographic linkage.

The authors' conclusion is that there should be no immedate registration if competitors exist in a location designated by applicant’s brand name, and the burden should be on the applicant to show this. If the applicant doesn’t, registration has to await secondary meaning.

But things got worse: In 1993, NAFTA implementation separated geographically descriptive from geographically deceptively misdescriptive marks, forever barring registration of the latter, and the Federal Circuit’s bizarre In re California Innovations decision said that therefore only materially deceptive marks could be considered geographically deceptively misdescriptive. Result: immediate registration for CALIFORNIA INNOVATIONS for bags not from California, whereas registration would have been delayed for California-made bags.

It’s easy to criticize California Innovations (yeah, easy because it’s a really bad decision!). Brauneis wants us to attend to the overall result. The current standard is that if a word is generally recognized as a place name, you get immediate registration if the examiner can’t prove a goods-place association or if there’s a false association the examiner can’t prove material; registration is delayed if there’s a true goods-place association; registration is forever denied if it’s a deceptive association.

NAFTA and TRIPS require parties to refuse registration of misleading geographic indications and to allow private parties to challenge their use, but GIs are a defined term. Only where the particular quality, reputation or other character of the goods is attributable to geographic origin is there a GI. States must ban misleading use (1) when you can trace a particular quality to the place named by the mark or (2) when the region has a reputation for the particular good in question, as with Swiss watches. This is close to a materiality standard, though there need be no showing of actual influence on consumer purchases. Some things that might influence consumers are excluded, such as a desire to support or boycott a particular regime.

The authors’ proposal would ban registration of terms generally recogizned as place names under the circumstances set out in the treaties and delay registration if applicants failed to show absence of competition in that place. The obvious question is why make “absence of competition” the standard rather than, say, “absence of potential future competition”? Afghanistan might get a semiconductor industry someday, even if it lacks one now, so why should AFGHAN SEMICONDUCTORS be registrable immediately (or at all)? I note in this regard that the web pages for Nantucket shirt stores Brauneis showed as part of his argument that the meaning of NANTUCKET for shirts can be geographic showed shirts sold in Nantucket, but made no representation that the shirts had been made there.

The presentation was very useful for me; though GIs are the hot topic right now, the appropriation of geographic terms by specific firms remains important, and has implications for how we should think about GIs too.

False advertising about illegal goods

United States v. Williams, --- F.3d ----, 2006 WL 871200 (11th Cir.)

You won’t find much discussion of child pornography jurisprudence on this blog, though my former colleague Amy Adler has written about it (a piece cited by this case), but this case caught my eye because of its discussion of false advertising. Michael Williams was convicted of promoting child pornography under 18 U.S.C. § 2252A(a)(3)(B) and of possession of child pornography under 18 U.S.C. § 2252A(a)(5)(B). Though the possession sentence was affirmed, the court found (a)(3)(B) facially overbroad and unconstitutionally vague.

Williams bragged in an internet chat room about his collection of toddler pictures available for swapping with other collectors. He then swapped non-pornographic photographs of toddlers with a police investigator. After the initial photo exchange, Williams claimed he had nude photographs of his four-year-old daughter. Eventually, Williams posted actual child pornography, and a search of his home pursuant to a warrant revealed more.

Along with the possession charge, Williams was charged with one count of promoting, or "pandering," material "in a manner that reflects the belief, or that is intended to cause another to believe," that the material contains illegal child pornography.

Since child pornography is illegal, the government can ban speech that proposes its commercial sale. And, if a speaker doesn’t have illegal child porn but nonetheless offers it for sale, he’s engaged in false advertising, which the government may also ban and punish. But other laws already address this type of fraud. The court noted that the only person harmed by misleading speech is the seeker after child porn, who is “scarcely in a position to complain.” Also, the law punishes a false advertiser the same as an actual child pornographer, so selling Lilo and Stitch by making false claims about its content is a crime punishable by a minimum of 5 years in prison, a “decidedly disproportionate and draconian penalty.” Even so, since the First Amendment allows absolute bans on false advertising, the pandering provision would likely pass muster as a ban on unprotected commercial speech. However, since the law also covers noncommercial speech, the court went on to evaluate and accept Williams’ overbreadth and vagueness challenges.

The court discussed Congress’s rationale for banning pandering even without underlying illegal material: “even fraudulent offers to buy or sell unprotected child pornography help to sustain the illegal market for this material.” This rationale was rejected by the Supreme Court in Free Speech Coalition v. Ashcroft. What I find notable is that this rationale rejects the standard economic theory for punishing false advertising generally – the reason we ban false advertising is that it destroys markets, not that it sustains them.

What I suspect is going on here is a combination of two intuitions, neither of which fit the ordinary false advertising situation. The first is that advertising the existence of child porn helps legitimate desires for such materials, whether or not the advertiser has any to sell. The second, related one is that we don’t want pedophiles slavering over Lilo and Stitch or Romeo + Juliet – which is precisely the content-based regulation the Supreme Court has been loath to allow.

FDA preemption of Lanham Act claims: a change is in the water

Vermont Pure Holdings, Ltd. v. Nestlé Waters North America, Inc., 2006 WL 839486 (D. Mass.)

This case concerns claims about the source, nature, and purity of Poland Spring bottled water. FDA regulations define "spring water" as "water derived from an underground formation from which water flows naturally to the surface of the earth" and detail the method of extraction to be used for acquiring spring water.

Though Poland Spring has a long history of bottling spring water, Vermont Pure alleged that the “Poland Spring” water Nestlé began marketing in 1994 has never been extracted from the Poland Spring, and does not even come from the same aquifer as the original source. Instead, the ground or well water in Poland Spring comes not from "some of the most pristine and protected sources deep in the woods of Maine," as advertised, but from other sources, including, on occasion, water trucked in from out of state. Thus, Vermont Pure alleged that the very name was misleading.

With respect to the purity of Poland Spring water, Vermont Pure alleged that Nestlé's production well techniques and methods for withdrawing groundwater cause actual or potential contamination of ground and well water.

The court earlier dismissed plaintiff’s state-law false advertising claim that Poland Spring was not “spring water” because FDA regulations explicitly define the term, preempting any private cause of action since adjudicating Vermont Pure’s claim would require interpreting the regulations. The court allowed separate origin and purity claims to proceed. But, given the intervening Supreme Court decision in Bates v. Dow Agrosciences, the court granted reconsideration. Bates allowed a state law claim against a pesticide maker to proceed despite FIFRA’s preemption provision, on the theory that the state law claims would enforce the substantive standards set forth by FIFRA and thus would not violate FIFRA’s preemption provision. The FDCA’s preemption language is similar to that of FIFRA, barring states from establishing any requirement for a food subject to FDA-established standards that isn’t identical to the FDA’s requirements.

After Bates, the preemption test is not whether plaintiff’s claim would require interpreting FDA regulations but whether the state-law standard differs from the FDA standard. At least six states whose laws Vermont Pure alleged were violated incorporate the FDA definition of “spring water” into their laws, so the court allowed the claim to proceed under the relevant state laws, despite Nestlé’s argument that they were implicitly preempted.

The court recognized that following Bates “arguably threatens the goal of uniform interpretation,” since judges and juries in 50 states may interpret the FDA’s definition differently. But, the court reasoned, Congress and the FDA have made a conscious choice to allow state regulation of bottled water so long as state standards are identical to FDA standards, which allows additional resources to be allocated to consumer protection. This careful and useful discussion of FDA preemption of state consumer protection law post-Bates, the first of its kind of which I’m aware, will undoubtedly be of use to other courts.

Vermont Pure’s other quality claims proceeded under the Lanham Act. Allegedly, Nestlé falsely or misleadingly markets Poland Spring water as “pure,” “pristine,” “straight from nature” and “unspoiled” even though it’s aware of actual and potential contamination. Test samples of Poland Spring revealed excessive levels of HPC bacteria (though the significance of that is debated) and other contaminants.

These claims, which did not require interpreting the FDCA – indeed, the FDA expressly declined to define “pure” – were not preempted either, despite Nestlé’s field preemption arguments.

The other legal holding of note in the case was that disgorgement of profits is an available remedy in a non-comparative false advertising case, as long as disgorgement is consistent with principles of equity and the discretion of the court, which, under First Circuit precedent, allows disgorgement in the presence of (1) actual harm and direct competition or (2) fraudulent conduct, unjust enrichment, or willful misconduct in need of deterrence. Vermont Pure adequately alleged (1) and could proceed even though the advertising at issue didn’t mention Vermont Pure.

The Norton Anthology

Right of publicity issue (and, I suppose, trademark issue over the name of the show). Many other interesting pieces of art at the site, including Special Valentine Unit.

The is and the ought in fair use get further apart

Or maybe in this context it's the will and the won't. Fair use presumes that copyright owners won't authorize critical, transformative or parodic uses of their works. But increasingly, they will, as this ad for the Lord of the Rings trilogy (available at YouTube as well) makes clear. "Secret Lovers" directly challenges the Eleventh Circuit's conclusion that copyright owners won't allow reworkings of default-heterosexual texts into queer ones.

Does this mean that Lord of the Rings slash is no longer transformative fair use? Obviously I think the answer is no, but current fair use doctrine needs to figure out why.

(It's possible that TBS exceeded the scope of its license in creating these ads, but I wouldn't bet on it.)

False marking and false advertising of exercise machines

Icon Health & Fitness, Inc., v. The Nautilus Group, Inc., 2006 WL 753002 (D. Utah)

Previous opinion discussed here. For over a decade Nautilus claimed that the Power Rods, part of its marquee product, the BowFlex machine, were patented. The Power Rods were not patented or made with patented technology. In fact, they were made of nylon, though Nautilus called it “Poly-Hexamethanline-Adipamide.” The jury had little trouble concluding that Nautilus violated the Patent Act’s prohibition on falsely marking an unpatented article as patented.

The main issue was how many false marking offenses Nautilus committed. The court previously concluded that the issue was one of law for the court rather than fact for the jury. Counting every decision to spend money on advertising separately, plaintiff’s expert found thousands of offenses; defendant’s expert, unsurprisingly, found one long-lasting offense. There was little precedent to guide the court, and none in which the false marking had lasted through ten years and multiple nationwide ad campaigns. There were 23 different instances of the false claim in the record in 4 different media (print, TV, DVD/video kits, and the Internet), each of which had been disseminated widely. The court, essentially splitting the difference between the parties’ positions, found that Nautilus committed one new offense each week, or 650 separate offenses. That produced a $350,000 fine.

The court denied attorney’s fees on the ground that Nautilus’s conduct was not exceptional. Though the jury found that Nautilus willfully infringed Icon’s Soft Strider trademark and deliberately engaged in false advertising and false marking, the court did not find by clear and convincing evidence that Nautilus’s behavior was exceptionally egregious.

It seems that the court, while not doubting that the jury’s vertict was sustainable, thought that Nautilus’s conduct wasn’t all that awful – there was significant record evidence that the false claims to patent protection did not cause much consumer harm. Moreover, though the jury found willfullness by a preponderance of the evidence, the court suggested that the people at Nautilus may have made a stupid mistake about the patent claim, which, one surmises, just got carried over into ad after ad without anyone going back to check. Two Nautilus witnesses testified that they believed the statements were accurate because the Power Rods were part of the BowFlex, on which Nautilus holds two patents. Moreover, the Power Rods are made for Nautilus using a unique, though unpatented, process. Finally, they testified, Nautilus used the term “Poly-Hexamethanline-Adipamide” in lieu of nylon not to mislead but because that’s the term their Power Rod supplier used.

Similar uncertainties about Nautilus's good faith led the court to deny attorney's fees on Icon's successful trademark infringement and false advertising claims.

A model of how not to succeed under California law

Bezuszka v. L.A. Models, Inc., 2006 WL 770526 (S.D.N.Y.)

Even juicy allegations about young models won’t always help in court. Plaintiffs alleged that defendants offered them lucrative modeling contracts based on their performance in defendants’ heavily advertised modeling contests and then failed to pay or help plaintiffs land modeling jobs, resulting in large damages.

Though plaintiffs’ breach of contract claims survived a motion to dismiss, their fraud and intentional misrepresentation claims failed because they couldn’t plead fraud to get damages unavailable for a breach of contract. Relatedly, they couldn’t state a claim under New York false advertising law because the defendants’ practices didn’t have a broader impact on consumers at large; private contract disputes unique to the parties don’t fall within the New York statute’s scope. (Unlike many other modeling contests, the defendants’ didn’t charge an entry fee to each contestant; possibly the result would have been different if there had been a fee.) Similarly, plaintiffs’ California law claims were dismissed because an Unfair Competition Law action isn’t a substitute for a garden-variety contract claim and there was no harm to the general public.

Another reason I'm not fond of the Copyright Clearance Center

Resnick v. Copyright Clearance Center, Inc., 2006 WL 721535 (D. Mass.)

Plaintiffs are freelance photographers who registered copyrights in images that appear in articles managed by defendant CCC. They alleged that CCC facilitated and encouraged infringement of their copyrights, charging CCC with contributory and vicarious copyright infringement and false advertising under state and federal law.

After class certification was denied and discovery conducted, plaintiffs attempted to amend their complaint to allege that CCC violated state unfair competition law by “authorizing its customers to make photocopies,” “unjustly enriching itself by licensing Plaintiffs' copyrighted materials,” and “undercutting and interfering with the Plaintiffs' efforts and ability to license their respective copyrights.”

The reason for this attempted amendment, the court thought, was clear: in Venegas-Hernandez v. Sonolux (1^st Cr. 2004), the First Circuit held that a publisher’s unauthorized grant of a license to a third party to copy is not itself an infringing act, without further proof that the third party infringed. Though the panel concluded that wrongful authorization of infringement did not create a federal claim, it believed that state law created remedies: if the authorizing entity collected a flat payment regardless of copying, a state claim for unjust enrichment might lie, and if the authorization undercut the true owner’s licensing efforts, a state claim for interference with economic relationships might exist.

The Resnick court, however, believed that Venegas-Hernandez said nothing about state-law false advertising claims, which, moreover, were barred by undue delay and futility. Amendment would be futile because CCC’s actions did not have the level of “rascality” required under Massachusetts state law, which requires conduct that is unscrupulous, intolerable, and unethical. The court found evidence

(1) that CCC is aware that a copyright problem exists when a photographer holds a copyright to a photograph that appears in a printed work to which CCC holds copying rights, (2) that CCC is interested in creating a licensing system for such photographs and has asked various photographer associations to participate, and (3) that, based on the information that CCC receives from the publishers who assign it copyrights, CCC is unable to determine whether those publishers or the original photographers hold the copyrights to any photographs that appear in the published works.

CCC authorized reproductions only where a rightsholder, usually the publisher, authorized CCC to do so. (Except they don’t hold these particular rights; from the photographers’ point of view, publishers bought limited rights but are profiting as if they’d bought all rights to the photos). CCC relies on the assurances of those rightsholders regarding their ability to authorize CCC to license, and those rightsholders are generally sophisticated businesses, so CCC is entitled to rely on those representations.

Even assuming CCC knew which pages some of its customers copied, the court held, that knowledge wouldn’t have let CCC know that its customers were infringing plaintiffs' rights. Further, though plaintiffs told CCC representatives to stop infringing their rights, CCC wasn’t required to believe that plaintiffs’ rights were actually being violated. (Shouldn’t they at least have taken the relevant pages out of their licensing catalogs? Though that wouldn’t have helped on the blanket licenses CCC sells.)

Because plaintiffs had no evidence of direct infringement by any third party, their contributory and vicarious infringement claims failed.

Plaintiffs’ false advertising claims were founded on CCC’s representations that it could “allow[]all your U.S. employees to legally make unlimited copies ... from nearly two million registered titles without the administrative hassle and expense of individual permissions,” and give licensees “a green light to duplicate from CCC's repertory of copyrighted works as often as needed.”

As a side note, I wonder whether plaintiffs and CCC are competitors? Does it matter whether they have an operational licensing scheme? If no one would ever find them to seek permission to copy the relevant images, they might not be competitors for Lanham Act false advertising purposes.

Anyway, the court found there was no material issue as to the falsity of CCC’s statements. Plaintiffs’ theory was that CCC’s statements falsely reassured customers that CCC licenses would allow them to copy without infringing. But, the court held, this statement is only false if in fact customers couldn’t copy without infringing. In other words, to find CCC’s statements false, plaintiffs would have had to show that licensees had infringed, which they couldn’t.

I find several weak points in this reasoning. First of all, CCC’s licenses aren’t a “green light” if they don’t cover all the works they claim to – it’s a green light that might turn out to be red, depending on what a licensee copied and on whether a photographer discovered the copying. A licensee might find it highly material that CCC’s rights don’t extend to all the images in its catalog, and that CCC can’t even identify which images are covered by its license. Given the marketplace context of licensees attempting to manage risks (risks that, by the way, CCC has had a big part in creating), the possibility that a licensee will still be found infringing should suffice for falsity. “Buy a license and you won’t infringe” is not the same as “buy a license and you probably won’t infringe, and anyway it will be hard to prove that you did.” It’s possible that this should be a claim of misleadingness and maybe plaintiffs needed to offer some licensee testimony on this point, but at least they should have been allowed to try.

Second and relatedly, although class certification was denied, evidence of copying other photographers’ images to which CCC lacked rights would be evidence that CCC’s claims were false, and there’s a lot more of that copying than just of the plaintiffs’ photos.

The thing that irritates me here is CCC’s hypocrisy – everyone else has to take a license from CCC, but they don’t have to worry about little copyright holders because it’s too hard to find them. If it’s too hard to find them, maybe you shouldn’t be selling licenses to copy their works. (I’ve long felt that CCC’s claims about its ability to license are vastly overstated and deceptive to licensees, as well as corrosive to fair use doctrine.) Presumably, though, on the First Circuit’s reasoning, future plaintiffs should be able to recover against either CCC or their publishers based on the blanket licenses CCC offers.

Fit as a filter

The Holmes Group, Inc. v. RPS Products, Inc., --- F.Supp.2d ----, 2006 WL 785056 (D. Mass.)

Replacement filters for portable air purifiers were at issue in this case. The court rejected plaintiff’s patent infringement claims, leaving trademark, false advertising, and unfair competition claims. Effective filters have to form a seal that prevents air from bypassing the filter; plaintiff claims that its filter was easier for consumers to put into position, thus avoiding problems of misinstallation. Moreover, while prior filters had to be configured specially for each air filter on the market, the Holmes product could be configured in multiple ways to fit many air filters, reducing inventory requirements substantially.

Holmes also makes a line of air purifiers. RPS made and sold its own replacement filter for use in Holmes purifiers. The court found that the revised RPS filter fit into all Holmes purifiers, though the original version would not. According to tests performed using generally accepted standards, the cleaning power of RPS filters in Holmes purifiers is less than the cleaning power of Holmes filters. Holmes contended that consumers would not know enough to blame the filter for the lower performance, but would blame the entire machine. RPS countered that it never represented that its replacement filters met the original specifications, and that its customers are generally satisfied.

Individual RPS boxes carry the RPS label and the statement, “Fits Holmes® HEPA Air Cleaners.” Filters are sent to retailers, and at to least one individual customer, in a master shipping carton, on which is printed “HOLMES HEPA FILTER” and “HOLMES FILTER.” Underneath that is RPS’s name and location. At the RPS website, its replacement air filter page states that all its filters are made by RPS, that other company names are used for identification purposes only, and that RPS isn’t affiliated with the other companies named. However, for several years, the website description of the filters at issue said “Holmes air filter for HEPA models,” until it was changed to “HEPA Air filter fits Holmes model …”

Holmes argued that the claim that RPS’s filter “fits” Holmes purifiers is false and misleading because (1) the original RPS filter didn’t physically fit one model, (2) RPS filters don’t hang properly in another model (and even fall out if not held in place until the door is closed), and (3) the filters don’t work as well as Holmes filters.

The court ruled that a jury could find that “fits” necessarily implies a secure fit and a normal installation that doesn’t require undue dexterity. Thus it denied RPS’s motion for summary judgment on theories (1) and (2). Commiting the question to the jury, which is not a result unique to this case, seems to me to represent an expansion of falsity by necessary implication, which was originally used by courts where a statement could practically have only one meaning and no reasonable person would think otherwise. Letting a jury decide whether something is necessarily implied or not opens up further ground for debate. Whether the fit really was secure, by contrast, is a classic fact for the jury to find.

The court did reject theory (3), that “fit” means “perform to Holmes’s original specifications.” Replacement parts manufacturers have a right to advertise that their parts fit in a competitor’s device, even if they don’t perform exactly the same way, to avoid giving the original producer a monopoly on parts for its own machine. (As usual, I’ll ask whether this result could be defeated by a properly conducted consumer survey, in this case one showing that consumers believe that “fit” means “fit Holmes’s purifiers as well as Holmes filters.”) The court pointed out that “fit” implies some minimum level of suitability; if the replacement filter literally “fit” into the machine, but were made of solid plastic, the “fit” claim would be false. But here the claim is only that the product doesn’t work quite as well as the original.

The court distinguished In re Emergency Beacon Corporation, 13 Bankr.Rep. 773 (S.D.N.Y.1981), which found a “fit” claim false when the original company made emergency locator transponders for locating crashed airplanes. The competitor made battery packs to replace the original battery packs and said they’d “fit” all transponders, but, though they did fit in the transponders, they weren’t water or stress resistant and thus would fail in a crash at sea or on impact (which pretty much covers the waterfront, so to speak, of airplane crashes). The product wouldn’t perform in accordance with its intended design – ever – so the replacement didn’t really “fit.”

A jury could find trademark infringement based on the earlier version of the website, which described the filters as “Holmes filters” rather than lookalike or similar products. The disclaimer, on a different page than the Holmes filter page, wasn’t close enough that any reasonable consumer would have seen it. Because the page now says the RPS filter “fits Holmes [purifiers],” the court said the question is whether that statement is true, and since there’s a genuine issue of material fact, Holmes’s trademark infringement claim based on the revised webpage also survives. This is plain error; the revised claim may be false, but that doesn’t make it false as to source, affiliation, or anything trademark law protects.

The court also refused to dismiss the trademark infringement claims based on RPS shipping cartons marked “HOLMES HEPA FILTER” and “HOLMES FILTER.” Though the individual filters in the cartons have disclaimers, a jury could find that these were ineffective to eliminate confusion arising from the use of the mark on the master shipping carton. This ruling makes much more sense, though the decision would have benefited from some discussion of the relevant consumers’ (mostly retailers’) sophistication and of post-sale confusion, since the shipping cartons don’t seem to have been part of RPS’s sales pitch.