Saturday, June 02, 2007

A ghoulish false advertising ruling

Allen v. The Ghoulish Gallery, 2007 WL 1555739 (S.D. Cal.)

Plaintiff/counterdefendant Edward Allen filed this copyright lawsuit in February 2006. Defendants/counterclaimants Ghoulish Gallery and individuals associated with it, including Tim Turner, filed counterclaims in April 2006.

According to defendants, Turner is a Hollywood effects artist in the “haunt industry.” “In the early 1990s he created a changing portrait through lenticular lens array technology, which allows a viewer to perceive, from the same portrait, both an antique photographic portrait and a gruesome, scary version of the same portrait, by adjusting the viewer's line of sight.” For health reasons, he stopped work on the changing portraits from 1996 to 2002.

Allen and Turner allegedly met in 1992 at a haunted house where Turner was displaying his work. In 2003, Allen launched a website selling changing portraits using technology similar to Turner’s. Turner alleges that Allen has falsely advertised that his changing portraits are the “original works” and that his portraits are “award-winning.” Further, he alleges that Allen copied his website and created several portraits that are confusingly similar to Turner portraits. Moreover, he claims that Allen contacted at least two of his customers to tell them Turner was a thief and a liar; Allen claims these were his own former customers. Not content to stop there, Turner alleges, Allen contacted many haunt industry professionals to disparage him.

After the initial filings, parties spent the next several months in negotiations that failed. In March 2007, defendants sought a preliminary injunction preventing Allen from making disparaging comments about them or this litigation on the internet, over the phone, at tradeshows, at conventions, etc.; contacting any of their customers; or advertising that Allen originated the changing portrait. At the hearing, Allen represented that he had removed the comments available on the internet to which Turner had objected.

The court denied injunctive relief on the ground that defamatory statements cannot be restrained before a final adjudication that they are defamatory. The proposed injunction would be a prior restraint in violation of the First Amendment, and defendants have legal remedies in the law of trade libel, defamation and intentional interference with prospective economic advantage.

This is a troubling mistake, at least from the perspective of false advertising law. Many of the other statements – by a direct competitor, to prospective customers – should have been considered under standard Lanham Act principles, though it may well be the case that many of them were statements of opinion or otherwise unverifiable and thus not subject to prohibition under the Lanham Act. Surprisingly, the court even expresses uncertainty about the commercial speech status of the statements on Allen’s website that he has “The Original Line of Spooky Changing Portraits” and that “[b]ack in April 2003, I originated the concept of using antique photographic images to create spooky changing portraits.” If the statements aren’t commercial speech, the court reasoned, the First Amendment bars an injunction, and the plaintiffs have remedies in false advertising and unfair competition law. (Comment: …? In my legal cosmology, false advertising and unfair competition law regulate commercial speech, not noncommercial speech.) If they are, then defendants didn’t meet the standards for preliminary relief, because they couldn’t identify any customers who avoided defendants because of the statements. (What about the concepts of literal falsity, direct competition, and materiality, which, if all proven, should show likely success on the merits?) Moreover, any inference of irreparable harm was rebutted by the fact that defendants waited nearly a year to move for a preliminary injunction. Even though negotiations are always to be encouraged, defendants waited over ten months to file after first expressing concerns about Allen’s behavior.

Some of the defendants’ proposed relief might have been overreaching, but the court used the First Amendment like a blunderbuss here, and false advertising law took a beating.

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