Friday, August 31, 2007

Client representation as PR

In the age of, it is vital to proceed as if your correspondence with outsiders could be read by anyone. In comments, several posters suggest that Take Two's counsel be sent a muffin basket for her pains -- given the general public image of lawyers, that's a pretty neat trick.

Thursday, August 30, 2007

If I did it, what are my moral rights?

OJ Simpson's interest in If I Did It has been transferred to the family of Ron Goldman, which has changed the cover to minimize the If and added a subtitle: Confessions of the Killer. (Slate story here.)

I am guessing that this would not fly in a moral rights jurisdiction, being somewhat prejudicial to Simpson's honor and reputation. Does it matter that Simpson used a ghostwriter -- whom he has blamed for some of the more explosive details? Does it matter if, in the judgement of critics such as Timothy Noah, that "[t]hese alterations are truer not only to the facts of the case but also to the manuscript itself"?

Noah points out that the Goldman family didn't edit the content of the copy he read, but it seems that it would have had the right to do so, creating derivative works at will, subject only to the constraints of defamation law.

Wednesday, August 29, 2007

As (not) seen on TV

Self-help against nominative use (or against trademark infringement/right of publicity violations, take your pick): Newspaper writer publishes book about Hurricane Katrina; Oprah calls to have writer speak on show about Katrina; writer rejoices, imagining the ching of the cash register; then the hammer drops.

If I as much as uttered the word "book," I soon found out, it would be edited out....

The reason for this is the aforementioned buying frenzy when Oprah says "book" because -- with apologies to Laura Bush -- along with many other job titles, Oprah is America's librarian, dispensing reading recommendations she believes will enlighten the masses. ("A Million Little Pieces," yes. "1 Dead in Attic," no.)

And if she casually mentions a book on the air, then publishers rush out full page ads in The New York Times that say AS SEEN ON OPRAH and it's construed as an endorsement even if it was just a passing reference and so, no talkie-talkie about bookie-bookie unless O deems it appropriate and O has apparently decided to let me rot in anonymity ....
The full article is worth reading, if only for the Charlize Theron analogy.

Tuesday, August 28, 2007

Law & Contemporary Problems: Cultural Environmentalism at 10

Law & Contemporary Problems has just published the symposium from last year's Cultural Environmentalism at 10 conference. The full issue is here; my contribution, Payment in Credit: Copyright Law and Subcultural Creativity, is here (html) and here (pdf).

Trademark in multiple choice

Vincent F. Chiappetta, Questions & Answers: Trademark & Unfair Competition: LexisNexis sent me a teacher's copy of this study guide. Trademark principles are set forth and tested through multiple choice and short answer questions.

The writing is generally clear and straightforward, and Chiappetta often offers both good and better answers to the multiple choice questions, which might help more in preparing for conventional law school exams than three wrong and one right answer. This first edition has some aggravating typos where the letter of the correct answer is wrong, but the right answer is generally apparent from context, because each answer includes an explanation of its reasoning. There are possible philosophical quibbles -- I'm a lot less reconciled to California Innovations, and to dilution and investment-protection rationales for trademark protection, but Chiappetta generally sets forth very clearly where opinions are likely to diverge.

I'm not sure that the marginal benefit over a casebook is high, but I would definitely recommend this to a nervous student looking for extra study material.

Monday, August 27, 2007

Regulating rent-to-own

Jim Hawkins, Renting the Good Life: Using behavioral economics and interviews with people from rent-to-own firms, Hawkins argues against aggressive regulation of the rent-to-own business, but identifies several measures that he argues would assist consumers without driving firms out of the market. I liked this piece; one interesting argument is that mandatory disclosures of annual APRs lead companies to abandon the rent-to-own business in favor of other models, mostly for legal reasons having to do with the odd position rent-to-own occupies between credit and lease. That mandatory disclosures impose costs is an important point, often overlooked by those who propose disclosures as the remedy for all sorts of problematic consumer transactions.

The piece would benefit from a better discussion of its methodology -- asking people on the rental side about the business naturally produces a rosier view of the costs & benefits of the industry for consumers. Why should we believe sellers who say they're only selling good products? To the extent that Hawkins's article complements an existing literature examining the rent-to-own transaction from the consumer side, as some of the footnotes suggested it does, I would have appreciated more attention to disagreements in the research. Nonetheless, the piece is informative and cleanly written, and recommended for those with an interest in consumer protection and credit markets.

Sunday, August 26, 2007

This was easy ...

Thanks to Zach Schrag. "Dummies" book cover generator here.

Trademark licensing strikeout

MLB licensee makes authorized Yankees gear with the distinctive colors and patterns of the Crips, the Bloods, and the Latin Kings. Counterfeit Chic has the story; no word yet on whether the gangs shared in the revenue of these dual-branded products.

Lemon-scented laundering

The NYT runs a story on cars repurchased under state lemon laws that are then sent out of state with clean titles, in part because of the lack of a national standard for reporting lemon status even though all the states have lemon laws -- and in larger part because it's just not in manufacturers' and dealers' interests to have lemon status recorded on a title.

Friday, August 24, 2007

Lawyers, rum, and money

I was gambling in Havana; I took a little risk: Pernod Ricard USA LLC v. Bacardi U.S.A., Inc., --- F.Supp.2d ----, 2007 WL 2381016 (D. Del.)

Pernod sued Bacardi for false advertising of Bacardi’s Havana Club brand rum. The parties are leading importers and distributors of spirits, and thus direct competitors – plaintiff is the third largest in the US by sales value, fourth by volume. Plaintiff owns half of Havana Club International (Cuba), and half of Havana Club Holding (Luxembourg), which owns the Havana Club mark in some countries outside the US, and is partners with the Cuban state enterprise Cubaexport, which formerly exported Cuban Havana Club rum primarily to Eastern Europe and the Soviet Union. Because of the US trade embargo, no Cuban Havana Club rum entered the US. Defendant distributes its own Havana Club brand rum, made in Puerto Rico. The parties are battling for control of the trademark in the US. (Much more background in Havana Club Holding, S.A. v. Galleon S.A., 203 F.3d 116 (2d Cir. 2000)).

Defendant’s marketing program includes assertions that it owns the rights to the Havana Club brand in the US, as the successor to a company that marketed Cuban Havana Club rum before 1960. Thus, it is positioning its Puerto Rico rum as a relaunch of the older Cuban rum. Plaintiff alleged false description of geographic origin and false claim of ownership of the mark, both of which caused it harm.

Defendant argued that plaintiff lacked standing to make a false advertising claim. (This is not a trademark case because of the cloud surrounding the trademark.) Constitutional standing was easy, but defendant invoked the Third Circuit’s Conte Brothers prudential standing test, which balances based on the following questions: (1) is this the type of injury Congress sought to redress through the Lanham Act? (2) Is the injury direct or indirect? (3) Is there an identifiable class of people whose self-interest would ordinarily motivate them to vindicate the public interest by suing? (4) Is the damages claim speculative? (5) How high is the risk of duplicative damages and the complexity of apportioning damages?

As it happens, the Second Circuit addressed standing on related claims in Havana Club: “Any rum producer selling its product in the United States can obtain standing to complain about Bacardi’s allegedly false designation of origin as long as it can demonstrate the commercial injury required for an action under section 43(a).” 203 F.3d at 134. Here, plaintiff alleged that defendant’s misleading advertisements would divert sales from its rum to defendant’s. That’s (1) the right type of injury, and (2) direct, because the parties are direct competitors. The court then treated the other factors as potentially countervailing, but in fact no obstacle. Plaintiff is (3) part of the class of self-interested entities motivated to sue on behalf of the public interest; it has sold its product in the US and allegedly (4) suffered damages particular to it, such that a lost sales and profits calculation could be introduced as evidence of damages; and (5) damages are assertable only by other US rum marketers.

The thing is, (1)-(5) all follow as a result of the parties’ status as direct competitors. Conte Brothers is a ritualistic exercise applied to direct competitors, marred only by the possibility of bollixing the ritual. There’s hints of that even here, where the court speaks of “[e]xpanding standing to parties like the plaintiff.” There’s no expansion – if plaintiff is in fact a direct competitor (and there could be a contest on that point, but the court resolved it in plaintiff’s favor for purposes of this motion) then it’s at the core of Lanham Act false advertising standing.

Separately, defendant argued that plaintiff failed to plead its second count of false advertising properly, because statements about its ownership rights in a trademark don’t concern the “nature, characteristics, qualities, or geographic origin” of its goods. Plaintiff responded that, given that a trademark exists only as a right appurtenant to a product or service, a trademark ownership claim is a statement about a key product characteristic. A trademark “identifies the product, distinguishes the product from rival brands, vouches for the product’s consistent quality and fixes the product in the public mind.” But in Monsanto Co. v. Syngenta Seeds, Inc., 443 F. Supp. 2d 648 (D. Del. 2006) (covered here), the court held that alleged misrepresentations regarding defendant’s status as an authorized trademark licensee didn’t concern “nature, characteristics, or qualities,” citing Dastar. A trademark may operate as a quality signal, but does not convey “actual information” about characteristics or qualities.

Commentary: What? Obviously a trademark conveys information about the characteristics known to be associated with that particular trademark; I guess the court means that it doesn’t convey non-trademark information. But that’s an odd thing to say about a geographic mark like Havana Club – descriptive marks do convey non-trademark information, which is why we have special rules making it harder to get exclusive rights in them and special exceptions allowing others to use descriptive terms for their own products even when the trademark owner has shown secondary meaning. Likewise, courts – including the Third Circuit in the BreathAsure case – have recognized that trademarks themselves can be deceptive, which necessarily implies that they can convey (falsifiable) information. I do understand the court’s desire to draw a line between trademark and false advertising claims and sort all trademark-related claims into the former category, but it might be more accurate to say that claims of ownership of a trademark – not ordinarily the focus of a marketing campaign – do not concern the qualities of the underlying product.

Thursday, August 23, 2007

This really is news for storage jars

Or diversion safes, anyway. Alert readers will recall that Pepsi recently won a case against a distributor of diversion safes. It now appears that Michael Vick, whose other troubles are well-known, was earlier caught in an airport with "a water bottle with a hidden compartment that smelled not of water." So I guess that drug association is more widespread than I had assumed. Fortunately for Pepsi, most of the reporting just says "water bottle," but The Smoking Gun reveals that, yes, it was a modified Aquafina bottle. Humorous picture here.

Pretending to be a consumer doesn't cause harm to the consuming public

NetQuote, Inc. v. Byrd, 2007 WL 2350089 (D. Colo.)

Previous coverage here. The parties compete to offer leads to insurance companies. NetQuote alleged that defendant MostChoice hired defendant Byrd to pretend to be hundreds of different individuals interested in insurance quotes, submitting inquiries to NetQuote’s website that were passed on to NetQuote’s clients even though they couldn’t lead to an insurance purchase. As a result, clients complained about the bad information and some stopped doing business with NetQuote. Then, MostChoice advertised itself as having better accuracy and reliability than NetQuote – pretty much defining “adding insult to injury.” The defendants admitted that Byrd submitted at least 394 false profiles, and also admitted that MostChoice promoted itself as “better than NetQuote,” but denied disparaging NetQuote as having bad information.

The court rejected NetQuote’s Colorado common law unfair competition claims, holding that unfair competition is really just common law trademark infringement in Colorado. Without confusion over source, there’s no cause of action. At most, there was deception about the quality or bona fides of the leads submitted to NetQuote, but that’s not analogous to traditional trademark, trade secret, or related claims. MostChoice didn’t attempt to have NetQuote’s tortious interference with business relations claims dismissed, and that’s the better description of the alleged conduct.

The Lanham Act analysis was different. NetQuote challenged MostChoice’s superiority claims, alleging that the targeted consumers understood them to mean that NetQuote’s leads “contain bad or false information whereas MostChoice's leads do not.” An ad on MostChoice’s website, for example, was headlined, “Better Than Leads,” and claimed that “All leads are ... customer requested. All leads have asked for a quote.”

MostChoice argued that this was mere puffing. While simple superiority claims are puffing, the court found that the “bulk” of MostChoice’s statements were factual and therefore falsifiable. The ads could fairly be read to imply that NetQuote’s leads were of poor quality – and the ads certainly didn’t disclose that the reason for this poor quality was MostChoice’s submission of false leads.

NetQuote’s Colorado Consumer Protection Act claims, however, failed because the conduct at issue didn’t have a significant impact on the “public,” as required by state law. The law aims to protect the general consuming public, which is in a relatively bad bargaining position, not large and sophisticated organizations with substantial resources engaged in personalized negotiations. So the harm to NetQuote’s relations with insurance companies didn’t count.

NetQuote also alleged that MostChoice’s acts harmed the individuals using its website to obtain insurance quotes. According to NetQuote, the false submissions included real people who had no interest in insurance quotes, and some of those “were greatly upset by the intrusion into their privacy from the contacts of NetQuote’s brokers.” But the court found that this wasn’t the consumer-related impact required by state law. The misrepresentations here were directed at insurance companies, not at the market generally. Likewise, the alleged consumer harm from the competitive impact of MostChoice’s deception – that consumers have a smaller pool of insurance agents and brokers competing for their business – was not a direct enough effect to count.

Ingenious legal arguments, but ultimately unsurprising conclusion, particularly on the last point. The argument that MostChoice’s deception harmed consumers by invading their privacy is interesting, and accepting it probably wouldn’t have led to a huge expansion of the scope of the law given the unusual facts here, but (at least for this plaintiff) the Lanham Act provides a remedy for the harm anyway. I wonder what claims, if any, the aggrieved consumers could make against MostChoice?

Violating a labeling regulation isn't equivalent to falsity

OMS Investments, Inc. v. TerraCycle, Inc., 2007 WL 2362597 (D.N.J.)

The PR war over the lawsuit between worm poop company TerraCycle and Scotts, the leading maker of chemical fertilizer for home gardeners, has produced its first opinion, dismissing two of TerraCycle’s false advertising counterclaims without prejudice.

TerraCycle alleged that several of Scotts’ claims were “per se” misleading because they violated California and Washington state regulations on product labeling. The court agreed with plaintiffs that alleging violation of a state or agency regulation on labeling was insufficient to state a Lanham Act claim (though it can, for example, constitute an unfair trade practice under California state law). This rule is consistent with the policy that agencies should interpret their own ambiguous regulations in the first instance. Thus, TerraCycle did not adequately plead falsity. Citing an earlier D.N.J. case, the court also held that the state-law unfair competition claim was inadequately pleaded because New Jersey state law was the “statutory equivalent of §43(a).”

Wednesday, August 22, 2007

Terroir alert

The Washington Post discovers terroir. (Sidebar explaining European categories, and another on differences in cheeses from different places.)

Monday, August 20, 2007

Greetings and salutations

This NYT story on revamped greeting cards says the makers want them to be more "relevant" and "topical." The pictures and anecdotes suggest that what this means is that the cards feature celebrities, both with and without permission. If there's a humorous Ellen line of greeting cards endorsed by Ellen DeGeneres, then Paris Hilton might have a claim against the unauthorized use of her likeness.

Here's the front of a Shoebox card, along with a bit of the first fold:
Initial interest confusion? The parodic elements -- note in particular the dig at his corporate sponsors -- only show up inside the card.

Saturday, August 18, 2007

Washington Post discovers fan music videos (and inducement)

This Washington Post story suggests readers check out a music video made by editing clips from Muppets DVDs (within the strictures of the DMCA? see here for the editor's mention of "technological bullshit" involved in creating the video). Inducement by the Post? Is the band liable to Jim Henson Inc. because their friend created the video for them?

I have to say, the Post column seems odd on many levels, not least because it contains no links -- not even in the online version, which highlights specific phrases for your within-Post searching convenience. But I didn't want to search the archives for stories on Jim Henson: I wanted to see the video already.

Friday, August 17, 2007

Trade undress

SG Servs. Inc. v. God's Girls Inc., 2007 WL 2315437 (C.D.Cal.): Suicide Girls, the popular alterna-porn website, sued God's Girls, a competitor with a similar business model. (One advantage of working in IP is that it means that many fewer things are Not Safe For Work.) The court denied SG's motion for a preliminary injunction for infringement and dilution of the respective word marks, logos, and trade dresses.

Of note: the court held that, even assuming that SG uses the phrase "they're the girl next door" and GG uses "the other girl next door," the word "other" clearly distinguishes the two. Moreover, reacting to the MySpace-influenced design of the sites, the court stated, "in the four website pages that the Court examined, all the phrases and slogans are in small font and barely distinguishable amidst the pictures, message boards, marks, and advertisements that otherwise clutter these pages. It is inconceivable that a viewer would zero in on the phrases strewn about these pages and consider them to be definitive markers of their respective brands." This raises a question about generation and market gaps -- is the court's reaction that of a typical consumer of this particular product? (It may well be -- most consumers are likely to filter out as much of the things they don't care about as they can, and I doubt they care much about the slogans.)

SG didn't try to claim protection in the type of models it uses, but I think that's mainly because it didn't really try to define its trade dress.

Thursday, August 16, 2007

CLE on mortgage fraud

I've been exploring the ABA's online CLE programs, which are generally high-quality. Many are free; others are free to ABA members. There are several ethics programs, including one I found very helpful on ethics and nonprofits. This month's CLE is on mortgage fraud. Related ABA Journal story here.

Wikipedia and attribution

This article on Wikipedia authors editing entries relevant to them made me think; I've edited my father's entry (though that was a while ago, and someone else has been at it since) and thought nothing of it, because I was in possession of better facts. But that's not the only question -- sometimes you want to know the source. Google News is in the news itself for soliciting reactions from subjects of stories, but at least it's clear who's speaking there. My thoughts on Wiki-attribution are unformed, but perhaps anonymity and neutral point of view cannot always coexist.

Wednesday, August 15, 2007

Sudden impact: falsity and trademark claims succeed

MSP Corp. v. Westech Instruments, Inc., --- F.Supp.2d ----, 2007 WL 2253473 (D. Minn.)

The parties compete in the market for impactors, devices that measure the size of aerosol particles in order to test inhalers. Pharmaceutical companies are the relevant consumers. Because of accuracy problems with older impactor technology, a consortium of 15 pharmacos, the Next Generation Impactor Consortium, funded R&D on a new impactor. The Consortium chose plaintiff MSP to develop it in 1998. In return for nearly a million dollars, MSP agreed that the new impactor design, called the Next Generation Impactor or NGI, would be published in peer-reviewed journals and/or the Pharmacopoeia, including specific design requirements and full dimension drawings. The contract also required MSP to use “its best commercial efforts to reduce the manufacturing cost and final price” of the NGI.

The contract required MSP, after selling its first 100 units “to make available all INTELLECTUAL PROPERTY resulting from [the contract] ... necessary for the manufacture of NGIs or further embodiments of the NGI for use or sale only in the pharmaceutical industry ... [and] to license upon reasonable terms and conditions [to] third parties reasonably able to manufacture NGIs to provide additional source(s) of NGIs for the [pharmaceutical] industry.” The licensing obligation survives contract termination.

In 2000, MSP introduced the Next Generation Impactor/NGI. The NGI has a puzzle-piece shape following the shape of the internal components, though MSP claimed that the shape could have been a rectangle or square without changing performance. The bottom of the NGI was royal blue, to match MSP’s company colors. MSP’s NGI now accounts for almost all sales of new impactors to pharmacos – MSP has sold more than 400 – even though there are other types of impactors on the market. Pharmacos are aware that multiple companies make and sell the same type of impactor.

Defendant Westech created its own NGI with the help of Pfizer, a consortium member. It used the consortium-approved, published specifications. Westech’s NGI was “almost identical” in shape and color. Westech and MSP engaged in licensing negotiations, but didn’t complete them. Westech referred to its product as “our new NGI,” “Westech Next Generation Impactor,” and “Westech 7-Stage Impactor with Micro-Orifice Collector.”

The court found that the word marks “NGI” and “Next Generation” were suggestive, not descriptive, since they “require imagination” to connect them to the impactor. This seems misguided; “next generation” doesn’t specify much about the impactor, but it is something, and I can’t see how it differs from “new,” a plainly descriptive albeit vague term. After finding the word marks suggestive, the conclusion that Westech infringed followed readily despite lack of evidence of marketplace strength or actual confusion and despite a high degree of consumer sophistication. The court also found that MSP had not established secondary meaning in its royal blue color or the shape of the NGI.

MSP also charged Westech with false advertising; the court found that Westech’s use of “our new NGI” and “Westech Next Generation Impactor (WNGI)” was a false use of the Next Generation marks to identify its own product, duplicating the trademark holding. (Something is making me itch here about Dastar. Since Westech is clearly identified as the source of the physical product – unless there’s confusion about licensing, which is certainly a possibility – wouldn’t Dastar apply? If not, why not?)

Relatedly, MSP argued that Westech conveyed a false impression that the consortium had approved Westech’s NGI by stating, “The fifteen pharmaceutical companies were involved with design and qualification of the new instrument called the Next Generation Cascade Impactor (NGI).” While this is true, the court found that MSP would likely succeed on the merits because, again, the Next Generation marks are MSP’s. This should mean that all Westech has to do is change the name. (Also, this really looks like a misleadingess argument; where is the evidence of likely consumer deception?)

MSP also challenged Westech’s claim that its NGI was “validated”: “As another validated instrument for inhalation drug and devices testing, the NGI fulfills many needs in evaluations with advanced features.” This was a falsity-by-lack-of-substantiation claim, because MSP argued that “validated” meant some sort of approval or confirmation. Westech argued that, in the pharmaceutical industry, a “valid” instrument need only have measurements that comply with the relevant specifications, and that it validated its own NGI by measuring the NGI’s critical components and confirming it complied with the consortium specifications. The court, without explaining why it rejected Westech’s industry meaning argument, accepted MSP’s dictionary definitions and found a likelihood of success on literal falsity: there was no evidence that the consortium or anyone else approved Westech’s impactor, or even that Westech tested the impactor itself.

Separately, MSP alleged falsity by necessary implication because Westech juxtaposed information about the consortium with its description of its impactor, and also citing a peer-reviewed article that describes test results from MSP’s NGI, thus necessarily implying that Westech’s impactor was approved by the consortium and validated by research on the MSP impactor.

The court agreed that Westech’s citation of product characteristics based on an article testing the MSP NGI necessarily implied a falsehood. Reasonable consumers would think that the article described tests of Westech’s impactor. There is a missing link here: what is the evidence that the two impactors differ? I would think MSP would have alleged false claims of equivalence if the impactors were not, in fact, equivalent. If the impactors are the same, it is not false to rely on test data of one to explain the characteristics of the other, and it is not material that the tested impactor came from one supplier rather than another. Consider this: would it be false advertising for a generic drug maker to use test results achieved by the original producer when the drug was within its patent period? Of course not. Only if there were material differences between the drugs would false advertising come into play.

The result on the trademark claims clearly drove the result on all the false advertising claims; a name change and some clarifying language should be enough to allow Westech to continue competing – setting aside any other IP rights MSP might have.

Trivia: My college debate coach's father incorporated Impact, Texas so he could sell liquor (the name Six-Pack already having been taken).

Tuesday, August 14, 2007

Credit card late fees and the Constitution

A surprising juxtaposition, one might think. But Seana Shiffrin argues that the Supreme Court's punitive damages jurisprudence leads to the conclusion that such late fees are unconstitutional if they're too high, since they can only be imposed by legislative abrogations of the traditional rule against punitive damages in contract. So while others have decried the consumer protection implications of recent Supreme Court cases, she has turned the argument around against big business, much as some RIAA defendants have claimed that copyright's statutory damages provisions are unconstitutional under the same precedents.

Monday, August 13, 2007

Your Second Band Name?

Official Wilco T-shirts that rebrand the band as Wiilco in order to present the band members as Mii icons for the Nintendo Wii. No word yet on whether this is unauthorized or authorized tribute. Video games keep pushing the frontiers of sponsorship and relatedness of goods – and now bands may be pushing back.

Useful quotes on revisiting one's older works

Robert Browning: "When I wrote that, God and I knew what it meant; now God alone knows."

Baron Bramwell: "The matter does not appear to me now as it appears to have appeared to me then."

(The latter statement was borrowed by Justice Jackson, among others. Justice Souter quoted another of Jackson's changes of heart when he explained that, though he hadn't gained any further experience with nude dancing in the years since his first case on the topic, his further experience with First Amendment issues induced him to change his vote on the government's burden in regulating such dancing.)

Summer writing projects: not always as successful as we want them to be.

Battle of the consumers in trademark law

Michael Grynberg, Trademark Law as Consumer Conflict: this provocative draft article presented at the Intellectual Property Scholars Conference argues that, given that trademark law sees the trademark owner as a proxy for the interests of confused consumers, it should also view the infringement defendant as a proxy for the interests of nonconfused consumers. This won’t necessarily change many results, especially given the common rationale that a junior user can provide the same benefits to consumers by using some other, nonconfusing mark, but it allows a better articulation of the interests in limiting trademark’s expansion. I liked the piece a lot, especially its powerful critique of initial interest confusion from the consumer’s perspective: “A manufacturer of generic acetaminophen who pays to have his ad displayed as a sponsored link in response to my Google search for ‘Tylenol’ may be a free rider. But I am not.”

One comment: in answering the objection that the defendant’s interests aren’t completely aligned with nonconfused consumers’, Grynberg briefly points out that the flip side is also true: the plaintiff’s interests aren’t completely aligned with confused consumers’. But he doesn’t offer much in the way of explanation. Aside from the anticompetitive purposes for which plaintiffs can employ trademark law, I can think of another important divergence: quality control. Though trademark owners have good reasons to engage in quality control, they don’t forfeit their marks if the marked goods or services vary widely in quality. If they’re leaving the market or making substantial changes in the product, trademark owners can use the marks to deceive consumers, at least for a period of time.

I’m also not sure that the dual-consumer perspective does much to combat post-sale confusion, that doctrine used to condemn knockoffs that are obviously not the original at the point of sale. Grynberg argues that the customer is harder to condemn than the “counterfeiter,” but Susan Scafidi at Counterfeit Chic collects, and contributes to, many narratives about the crassness, misguidedness, and general lack of moral desert of knockoff buyers. The clothing design protection bill Scafidi supports comes out of these anti-knockoff-consumer narratives.

Grynberg’s overall point -- applications of trademark law that help some consumers hurt others – is an important one, and I recommend the piece. I’ve written about this in the First Amendment context, and Lilian BeVier has made similar points about false advertising law, though she argued – in my opinion, wrongly – that trademark law is largely immune to this criticism. See Lilian R. BeVier, Competitor Suits for False Advertising Under §43(a) of the Lanham Act: A Puzzle in the Law of Deception, 89 Va. L. Rev. 1 (1992). (Given developments over the last fifteen years, she might have a different view of trademark law now.)

Sunday, August 12, 2007

Student note on Michigan consumer protection law

Scott Thomas O’Neal, Note, Exempting the Protection Out of Michigan’s Consumer Protection Act: A Call for Returning Consumer Protection to the Act, 84 U. Det. Mercy L. Rev. 237 (2007): Michigan’s consumer protection law exempts conduct authorized by another statutory scheme. In 1999, the Michigan Supreme Court “shifted focus from whether the specific unfair conduct was ‘specifically authorized’ by law to whether the general business transaction was ‘specifically authorized’ by law” (emphasis added). The author argues that this was a mistake, and compares Michigan cases with those in numerous other states with similar exemptions.

Saturday, August 11, 2007

Speechwriting and attribution

Discussions of attribution in the legal literature often make special mention of speechwriting as an instance in which norms affirmatively resist attribution to the author, because the aim is to associate the speaker-politician with the words her speechwriter chose to articulate her positions. But in a highly individualistic (and exposure-driven) culture, can that norm survive? Slate's article on the recent charges of credit-hogging by a Bush speechwriter suggests that the norm we law professors take for granted is malleable, even as the author wishes it would stay put:
[S]peechwriting is supposed to be the opposite of what Gerson stands accused of doing. By definition, it's a profession based on self-denial, not self-promotion. Far from taking credit for the work of others, a speechwriter's job is to write words that others can stand to claim as their own. Most speechwriters soon learn the basic pleasure-pain principle of the craft: Satisfaction comes from finding words the boss can use, but taking credit for those words can only embarrass the very person you're supposed to be helping.

At times, it can feel slightly disingenuous to write words for someone else to deliver. But more often, the person you're writing for gives a far better speech than you wrote. For the speechwriter or any other White House aide, it is truly dishonorable to look for credit – even for words which (unlike Gerson) one has actually written.

Despite the condemnation, we still see stories about the speechwriters. The virtue of norms is they provide an alternative to law; but they are changeable and may not always provide the alternatives we like.

Friday, August 10, 2007

Falsity by necessary implication comes home

Time Warner Cable, Inc. v. DirecTV, Inc., --- F.3d ----, 2007 WL 2263932 (2nd Cir.)

District court proceedings discussed here. In partially affirming the preliminary injunction against certain DirecTV ads, the Second Circuit adopted the doctrine of falsity by necessary implication, which means that ads can be literally false – with all the presumptions of deception and harm that entails – even without “explicitly mak[ing] a false assertion, if the words or images, considered in context, necessarily and unambiguously imply a false message.”

Less significantly, the court held that puffery includes images that, though inaccurate, are “so grossly exaggerated that no reasonable consumer would rely on them in navigating the marketplace.” Finally, it held that irreparable harm may be presumed when a comparative ad is literally false and, “given the nature of the market, it would be obvious to the viewing audience that the advertisement is targeted at the plaintiff, even though the plaintiff is not identified by name.”

Background: Time Warner is the second-largest US cable company, and the franchisee in most of New York City. DirecTV doesn’t have the same franchise limitations, and is thus Time Warner’s greatest threat to market share. Time Warner offers both analog and digital signals, but DirecTV has only digital. Both offer high-definition (HD) service on a limited number of channels. The parties agreed that the HD services are equivalent in picture quality. For non-HD channels, digital is generally better than analog, because it resists interference. But Time Warner’s analog service meets FCC requirements for a signal that provides “enjoyable viewing with barely perceptible impairments.”

DirecTV began an ad campaign to educate consumers that, even with an HD TV set, one must also receive HD programming from the TV service provider in order to enjoy an HD picture. It thus began running a TV commercial in which Jessica Simpson says, “You’re just not gonna get the best picture out of some fancy big screen TV without DIRECTV.” The narrator concluded, “For picture quality that beats cable, you've got to get DIRECTV.” After Time Warner objected, DirecTV changed the concluding line to, “For an HD picture that can't be beat, get DIRECTV.” Another ad featured William Shatner as Captain Kirk, stating, “With what Starfleet just ponied up for this big screen TV, settling for cable would be illogical,” and the same ending taglines.

Likewise, DirecTV ran internet ads showing unwatchable TV images contrasted to sharp and clear images, labeled “Other TV” and “DirecTV,” and inviting consumers to “Find out why DirecTV’s picture beats cable.” An ad on its own website stated, “If you’re hooking up your high-definition TV to basic cable, you're not getting the best picture on every channel. For unparalleled clarity, you need DIRECTV HD.”

The district court granted injunctive relief. DirecTV argued on appeal that its commercials did not explicitly claim that its HD quality was superior to cable HD quality, and thus could not be literally false. The court found that the Simpson commercial did explicitly claim superiority – “You’re just not gonna get the best picture out of some fancy big screen TV without DIRECTV.” In fact, viewers can get the same “best picture” by ordering HD from cable.

The Shatner commercial required more analysis. In context, “settling for cable would be illogical” worked with Shatner’s opening praise of the “amazing picture quality” of DirecTV HD and the closing tagline about the unbeatable picture provided by DirecTV HD. Thus, the middle line also clearly referred to HD picture quality; and since it would only be illogical to settle for cable if cable were worse, that was literally false.

Reconciling past cases, the court adopted the doctrine of falsity by necessary implication, which was first identified by name in a SDNY case 20 years ago, Tambrands, Inc. v. Warner-Lambert Co., 673 F.Supp. 1190, 1193-94 (S.D.N.Y.1987). A claim that is, in context, unambiguous may be literally false. Here, the district court held that the claim in context was unambiguous: it refers to cable’s picture quality. The court of appeals found no clear error.

The internet ads raised a different issue. DirecTV didn’t dispute that the highly pixelated images it used in its internet ads were inaccurate depictions of cable picture quality, whether digital or analog. Thus, the internet ads were explicitly and literally false. But DirecTV argued that they were also so exaggerated that no reasonable buyer would believe them – negative puffery. Time Warner agreed that negative puffery would not support a Lanham Act claim (at least not a false advertising claim; dilution would cover it). But, according to Time Warner, DirecTV’s own rationale for running the ads – that consumers are highly confused about HD technology – was reason to think that consumers might rely on the ads.

The court of appeals observed that prior puffery cases about terms such as “thorough research” don’t offer good principles for evaluating images. “Unlike words, images cannot be vague or broad.” While one standard definition of puffery – general claims of superiority that are so vague as to be meaningless – fits images badly, the other – “an exaggerated, blustering, and boasting statement upon which no reasonable buyer would be justified in relying,” Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489, 497 (5th Cir. 2000), can be applied.

The court of appeals found that the district court clearly erred in accepting Time Warner’s argument about consumer uncertainty. The “other TV” images in the internet ads are so bad – “unwatchably blurry, distorted, and pixelated, and ... nothing like the images a customer would ordinarily see using Time Warner Cable’s cable service,” according to Time Warner’s senior network engineer. Indeed, the pixelation is “not the type of disruption[] that could naturally happen to an analog or non-HD digital cable picture.” Thus, the ads are not even remotely realistic, and the court found it difficult to imagine that any consumer, no matter how unsophisticated, could be fooled into thinking cable’s picture quality would be that bad. The court accepted DirecTV’s argument that even a person who didn’t know anything about cable would know that Time Warner couldn’t supply an unwatchable signal and still survive in the market. (Gee, I really wish someone would tell my cellphone company – which also happens to be a cable provider – that.) Moreover, the internet ads don’t claim that the “Other TV” is an HD TV image, or that they represent what happens when an HD TV is connected to basic cable. They simply compare DirecTV picture quality to basic cable picture quality, and that’s so “obviously hyperbolic” that no reasonable buyer would be justified in relying on it.

It seems to me the court of appeals missed the point Time Warner was making about a transitioning market. A new HD customer – and almost all of them are new, because the tech is new and expensive – knows that “ordinarily” her cable won’t be anything near that bad. But does she know what it will look like when she attaches an analog cable feed to her spiffy new HD TV? Is it so unreasonable to think that there might be a mismatch that would degrade analog quality? Perhaps, given the court’s arguments about what “other TV” represents, this is an implicit falsity case turning on whether consumers understood the comparison to show pictures on an HD TV specifically. But I’m not sure it’s just puffery.

Unsurprisingly, the court of appeals did agree with the district court that a presumption of irreparable harm applied for the false TV ads, even though they didn’t mention Time Warner by name. Since Time Warner is essentially a monopolist where it has a franchise, any reference to “cable” necessarily refers to Time Warner in those areas and harms it there. The revised Simpson ad doesn’t even say “cable.” But 90% of households have either satellite or cable. With this “nearly binary” market structure, consumers would obviously understand that DirecTV’s claims target cable.

NYT on product packaging trade dress

It's changing fast. If consumers really do respond well to changes in packaging dress, then the need for protecting a stable trade dress seems lessened, or at least irrelevant; one might even speculate that recent judicial hostility to packaging trade dress protection encouraged marketers to find some other way to make trade dress work for them. This also raises the interesting question whether variation could constitute a protectable trade dress. (I considered ordering some customized Kleenex with pictures of the kids -- what a way to turn a commodity into a splurge good.)

Thursday, August 09, 2007

Best law review title of the year

At least, an early contender: Jim Chen's Beyond Food and Evil, about the regulation of genetically modified foods.

I always like hearing about good law review titles. Unfortunately, I fear I peaked with my student note, Rules of Engagement (law governing engagement rings when an engagement is broken). Sean P. Madden's student note, Will the CERCLA be Unbroken?, provides continuing inspiration, however. And I can't ignore Mark Tushnet, Darkness on the Edge of Town: The Contributions of John Hart Ely to Constitutional Theory.

Two great tastes ...

Hi Superman, I'm a Lawyer: A Guide to Attorneys (& Other Legal Professionals) Portrayed in American Comic Books: 1910-2007. Thanks to the Legal Theory Blog for the tip.

Trademark Law as Commercial Speech Regulation

New publication: Trademark Law as Commercial Speech Regulation, 58 S. CAR. L. REV. 737 (2007). Identical SSRN copy here. Identical BEPress copy here. I would really prefer monopoly control of the market! Georgetown is also adding a faculty page with links to every professor's scholarship, which is great in theory but difficult to integrate with the website I already operate, and for the moment will just involve more duplication of effort for me. But I'm not really the target professor, so my pique should carry little weight.

Intellectual Property Scholars Conference

Unfortunately, I'm missing the conference, but many papers and abstracts are available on the site. I'm only about halfway through my downloads; there are a number of interesting papers available. Some trends: copyright misuse is big, as is trademark use, and there are a fair number of papers comparing copyright and patent and arguing that one field should borrow something from the other.

David Levine will be liveblogging.

Tuesday, August 07, 2007

More perils of targeted advertising

The study showing that exposure to Baby Einstein-type videos correlates with decreased word comprehension in infants and young toddlers is getting lots of news play -- and lots of Google-served ads. What do you suppose the ads are trying to sell? Sometimes word-based targeting alone is not the smartest idea. Interestingly, the ads at the US News story were not hawking Baby Einstein videos when I visited, even though the content was the same. I wonder if there's something additional about the site that changes the targeting.

Monday, August 06, 2007

Further stonerware TM puzzles

The site mentioned in the previous entry also sells beer can covers that imitate soda cans. Presumably the use is to smuggle beer into venues whose rules prohibit alcohol but allow soda. The covers themselves make a gesture at parody -- Dr. Papper, 7 OP, and Diet Pipsi -- but the ad copy uses the conventional spellings. The misspelling might be enough to dispel point of purchase confusion, and perhaps even confusion over licensing, but what about post-sale confusion?

The problem for the trademark owner is that the usual harms from post-sale confusion seem unlikely, since only if an observer notices a difference from regular cans is she likely to pay any attention at all. I suppose it's possible that someone might grab a friend's "Dr. Papper" and end up with a mouthful of beer, but the chances she'd blame Pepsi for that, instead of the jerk who snuck a beer into a beer-free place, seem extremely low. What this reminds me of is the practice of filling actors' beers with nonalcoholic drinks so they don't get drunk over multiple takes, which is an unobjectionable use of a branded product even if it falsely suggests the contents of the beverage.

Don't do the Dew to divert

PepsiCo, Inc. v. # 1 Wholesale, LLC., 2007 WL 2142294 (N.D. Ga.) – thanks to Seattle Trademark Lawyer for pointing out this case, which raised a variant on a concept I’ve been pondering – conditional or situational functionality.

Pepsi sued defendants (“Sahni”) for selling bottle and can safes made from actual containers, including cans of Pepsi, Diet Pepsi, Mountain Dew, Sierra Mist, Aquafina, Cheetos, Doritos, and Fritos, all of which are Pepsi brands. The court accepted that these were all famous trademarks. (Sierra Mist and Aquafina? Really?) Pepsi licenses its marks for use on many products, including novelty and promotional merchandise, and maintains strict quality and “good taste” standards. For more on the merchandising right, see Stacey Dogan & Mark Lemley, The Merchandising Right: Fragile Theory or Fait Accompli?, 54 Emory L.J. 461 (2005).

The point of the safes is to look and even feel like ordinary Pepsi products, and the court found that Sahni had achieved this goal. In order to make the Pepsi bottle safes, Sahni used “unidentified liquids” to simulate the look of Pepsi drinks. Some of the bottle safes have removable caps, so one could mistakenly drink from them. The court found that consumers who do so are likely to believe that Pepsi is responsible. By contrast, Sahni doesn’t remove the snack foods from their canisters. As a result, the court found, consumers might eat the remaining stale snack food and mistakenly blame Pepsi for their “foul taste.” (Oh, come on. Unless Sahni modifies the “sell by” date, this is a silly argument.) Moreover, Sahni’s modification process creates sharp edges where can safe lids screw into the can bodies. Nor does Sahni use Pepsi’s “thorough rinsing process to guard against contamination and ensure product safety.”

After listing the confusion factors, the court concluded that consumers would mistakenly believe either that Pepsi was the source of the safes or that Pepsi authorized them. “Even remotely connected products” may generate sponsorship confusion. Moreover, confusion was likely not only among safe purchasers (who are actually least vulnerable, especially if Sahni were to add a disclaimer), but among people exposed to the post-sale product. I presume, however, that deceived burglars were not in the relevant consumer class, since their confusion could not harm Pepsi.

The court also found Sahni liable for federal and state dilution because “Sahni uses the marks on goods commonly associated with the concealment of illicit narcotics.” I had no idea; when I went surfing, the sellers, even the ones who sold other drug-related merchandise, uniformly emphasized that most burglars only spend a few minutes in a house, and so the safes are useful for protecting money and jewelry. Pepsi's allegations are, however, supported by the fact that this site put the safes under "Stonerware Pot Items," along with herb grinders, digital pocket scales, and pot leaf-shaped cookie cutters.

The court found Pepsi entitled to treble damages and attorneys’ fees because this was an exceptional case, though it didn’t explain why. The parties apparently agreed that Sahni should pay $15,000.

This does not seem to have been an aggressively litigated case on the defendants’ behalf, and Pepsi has prevailed in other actions against similar safe makers. As a professor, I have the advantage of being able to speculate, and here I wondered whether there might not be a type of functionality at work: the safes, to be effective, must appear to be ordinary objects. Making up a fake brand of soda, aside from posing surprisingly difficult name clearance issues, would make the safe less credible and more easily found out. Especially security-conscious people might not want to have just one bottle or can, to avoid having it stand out, so being able to put the safe with other unaltered goods could improve the quality of the product (though also improving the chances a guest might inadvertently attempt to drink it). If that’s true, the use of an actual branded product might in this case be functional. (Other possible soda bottle functionality discussed here.) The best answer, it seems to me, is that it is possible to make so-called diversion safes in a variety of configurations, including non-branded ones like sugar canisters, candles, and wall outlets – though genuine branded goods seem more prevalent at the security-product websites I visited.

As a side note, I wonder whether a book safe made by cutting a hole in an actual book would infringe the derivative works right under the 9th Circuit’s rule. For a book transformed by deletions, see A Humument.

Saturday, August 04, 2007

Writing customer support and cc'ing the internet

That's what one disgruntled consumer did when she felt deceived by the packaging of Nature's Path cereal.

Origin of services claims covered by Dastar

Thomas Publishing Co., LLC v. Technology Evaluation Centers, Inc., 2007 WL 2193964 (S.D.N.Y.)

Plaintiff publishes a directory for software products, apparently via a website. It sued defendant for copying, either wholesale or with superficial changes, substantial portions of its directory, and for misrepresenting that defendant developed, created or owned the directory and that defendant’s directory was unique or original. Thus the claims: copyright infringement, false designation of origin and false advertising under the Lanham Act, and common law unfair competition.

The district court granted defendant’s motion to dismiss the Lanham Act claims, following Dastar, and the common law unfair competition claims as preempted by § 301. Plaintiff vainly tried to distinguish Dastar by arguing that, here, the issue was the origin of a “service,” and customers don’t receive a tangible product. In effect, plaintiff argued, defendant “‘bought some of [plaintiff’s] videotapes and merely repackaged them as its own,’” (quoting Dastar, 539 U.S. at 32). But the essential holding of Dastar, the court reasoned, was that the origin of ideas and concepts is not the “origin” of which §43(a)(1)(A) speaks. This applies equally to “service” claims.

As for the false advertising claim, defendant argued that it was another disguised copyright infringement claim; all the alleged misrepresentations were about origin or authorship. Plaintiff responded that its allegations went beyond infringement, because its claim was that defendant “affirmatively and falsely represented in commercial advertising and promotional materials that [it] originated the works containing the Copyrighted Materials … and that those works are unique to [it].” The court agreed with defendant that all that was alleged was a failure to attribute authorship to plaintiff, and that was precluded by Dastar.

Maybe this could be resolved by the advertising itself, if it was attached to the complaint, but as I’ve said before I am troubled by the vigor with which courts have applied Dastar to false advertising claims. A claim that a product is “unique and proprietary” can harm consumers by making them think that they have no choice but to get the product (or service) from the advertiser. And this really has very little to do with the misattributions of authorship that the Court thought should be dealt with, if at all, through copyright. Origin and uniqueness are not the same things, though they may be related in cases of alleged copying.

Courts have allowed false advertising claims to go forward based on allegedly false claims about patent status, because of the potential harm to the consumer. If Dastar really is as expansive as courts have said, though, I don’t see why false patent claims survive it any more than false authorship claims. (Or, to take an example from another recent case, what if an advertiser claimed that its drug had unique properties, but in fact it was the same as other, cheaper drugs?) If, in order to enforce Dastar and kick cases out on the pleadings without parsing exactly what was said, we want to bar false advertising claims when the allegedly false claim concerns uniqueness, then that’s fine. But we should be conscious of where we’re setting the boundaries.

Likewise, the state law claim lacked the additional element that would save it from preemption under §301. Plaintiff argued that the additional elements were misappropriation (obviously insufficient), misrepresentation of authorship (also insufficient), and likely confusion (sometimes an extra element, but not here where the alleged confusion was over origin, not sponsorship). Conflict preemption would also have worked, by the logic of Dastar; compare Dastar’s reasoning to that of one of the cases relied upon by the district court, Daley v. Firetree, Ltd., 2006 WL 148879, at *5 (M.D.Pa. Jan. 19, 2006) (“The fact that patients may have been misled as to the author of the literary works does not make the unfair competition claim qualitatively different from the copyright claim; both rest squarely on the unauthorized act of copying and distributing.”).

Wednesday, August 01, 2007

Short-term insurance policy, long-term lawsuit

Ticconi v. Blue Shield of California Life & Health Ins. Co., --- Cal.Rptr.3d ----, 2007 WL 2171556 (Cal.App. 2 Dist.)

The trial court denied plaintiff’s motion to certify a proposed class. Ticconi sued Blue Shield under California’s Unfair Competition Law for violating the insurance code “by failing to attach his application to or endorse it on the insurance policy when issued, and later rescinding the policy on the ground plaintiff had made misrepresentations in that application.” (UCL claims can be, and often are, based on the violation of some other law.) The trial court found that Blue Shield’s fraud and unclean hands defenses raised individual issues that predominated over common issues.

The court of appeals reversed on the ground that equitable defenses can’t be used to defeat a UCL claim. Moreover, Blue Shield couldn’t raise a fraud defense based on insureds’ statements in applications when the applications were neither attached to nor endorsed on the policy as issued, in violation of the insurance law. Thus, on remand the trial court needed to consider whether plaintiff would be an adequate and typical class representative.

Facts: Ticconi alleged that he applied for a short-term policy, which was marketed as a temporary tide-over for people such as college students who need insurance while they’re waiting for permanent coverage. He further alleged that he filled out the policy application truthfully, and was issued a one-year policy. His application was neither attached to the policy nor endorsed into it, and he paid his monthly premiums. During the policy period, he incurred health care bills over $100,000, but Blue Shield rescinded his policy when he submitted those bills to it. Blue Shield justified its action on the ground that Ticconi had made material misrepresentations on his application; Ticconi denied this and alleged that a reasonable investigation would have cleared him.

Relevant California insurance law forbids the incorporation of any material into an insurance policy by reference. Policies are deemed to constitute the entire contract between the parties, and every statement by the insured, in the absence of fraud, is a representation and not a warranty; these requirements cannot be waived. As a result, Ticconi alleged that – though he didn’t make any misrepresentations – he wasn’t bound by any statement in his application; California law specifically provides that insureds aren’t bound by application statements unless a copy is attached to or endorsed on the policy when issued. He further alleged that Blue Shield had followed the same practice many times in the past four years, rescinding policies that didn’t have attached/endorsed applications. This, he alleged, was an unfair and unlawful business practice. (Plaintiff’s proposed class covered all California residents whose policies were rescinded based on alleged misrepresentations in their applications, but excluded any policyholders whose policies were covered by ERISA.)

Blue Shield indicated that short-term policies are wholly underwritten through the application questions. During the relevant period, it issued almost 250,000 short-term health insurance policies and rescinded 207 of them for misrepresentation. It argued that there was no community of interest, because the proposed class included people whose hands varied in cleanliness. Moreover, not every class member was injured by recission.

The court of appeals began by noting that California law flatly prohibits “postclaim” underwriting of health insurance, quoting a commentator who explained that insurers may rationally choose not to investigate every application, especially for low-limit policies, but may simply wait to see if there are any claims and then check the insured’s application for inaccuracy. The law bans insurers from rescinding a policy due to the insurer’s failure to “resolve all reasonable questions arising from written information submitted on or with an application before issuing the policy or certificate.” (It’s for this reason, I imagine, that short-term Blue Shield policies only issue if the applicant answers “no” to every question.)

The insured isn’t bound by statements on an application unless the application is attached to or endorsed on the policy; in other words, the insurer can’t rely on a misrepresentation defense based on statements in an application that wasn’t attached/endorsed. Moreover, failure to attach/endorse and later “engaging in postclaims underwriting by holding the insureds to statements in those unattached and unendorsed applications” is clearly unlawful and supports a UCL claim. The court also thought that Ticconi’s allegations, if true, would demonstrate an unfair business practice as well as an unlawful one. The factual and legal issues going to liability applied to all class members, and would predominate, thus supporting class certification.

The court of appeals then cited numerous precedents establishing that the unclean hands defense is unavailable in a UCL action based on violation of a separate statute, such as the insurance code. Courts will not aid defendants in acts declared by the legislature to be against public policy. The California Supreme Court has held that equitable defenses can be considered in formulating UCL remedies, but not in rejecting the cause of action.

Likewise, fraud was unavailable as a defense, for the obvious reason that, if the facts are as Ticconi alleged, the statute precludes Blue Shield from holding its insureds to their statements on their applications – and it specifically bars any waiver of its provisions. Blue Shield complained that this interpretation would leave it without any fraud-based defenses, but the court could use the insureds’ nondisclosure or misrepresentations in its consideration of appropriate equitable remedies. Thus, the diverse individual circumstances of the putative class members – who had all uniformly answered “no” to every question on the application – were “not to be factored in.” Legal and factual issues going only to remedies could not outweigh the common liability issues.

There were still issues of adequacy and typicality, since Blue Shield reinstated Ticconi’s policy and paid his outstanding medical bills. On remand, the trial court would have to determine whether Ticconi was still damaged. Because the UCL allows only equitable remedies, he might still adequately represent the class for those purposes. Moreover, defendants aren’t allowed to pick off prospective class representatives one by one; the record suggested that Ticconi had standing when he sued but was then paid some money. The court of appeals noted that Ticconi had announced his desire to keep going with the case to combat Blue Shield’s public claim that he was a fraudster.

News you can use

BNA headline that might have been phrased better: "Online Exploitation of Children Requires Coordinated Effort Across Multiple Sectors."