Allegedly false comparative ads trigger duty to defend against "disparagement"

E.piphany, Inc. v. St. Paul Fire & Marine Insurance Co., --- F.Supp.2d ----, 2008 WL 5396889 (N.D. Cal.)

E.piphany sued St. Paul alleging that it had a duty to defend E.piphany under the terms of E.piphany’s insurance policy. The underlying litigation involved false advertising claims against E.piphany by a competing software provider, Sigma.

The advertising injury policy at issue covered “disparagement.” The question was whether the underlying litigation alleged disparagement of Sigma’s products, when E.piphany basically just said nice stuff about itself and only disparaged Sigma’s products by implication. The underlying claim was that E.piphany falsely advertised its products as the “first” and “only” “all Java” and “fully J2EE” product suite (important characteristics) when they weren’t, and when other competitors’ products actually were.

The policy excluded injury caused by failure of E.piphany’s products to conform with advertised quality, but the court held that this wasn’t relevant. Sigma’s claims were based on comparative advertising; it’s irrelevant (at least to the duty to defend) whether E.piphany’s products did what E.piphany said. (It sure sounds like that was an important part of the underlying lawsuit—but the duty to defend is triggered when the allegations could support policy coverage, even if the plaintiff in the underlying case might ultimately win on something the policy doesn’t cover.)

Though state courts haven’t explicitly ruled on the issue, the case law suggests that disparagement by implication is actionable under California law. And other jurisdictions have found a duty to defend when superiority claims are allegedly false, even when the comparison didn’t name specific competitors. The necessary implication of superiority claims is to disparage competitors as inferior. Here, an allegedly false statement of being the “only” producer of “all Java” and “fully J2EE” software solutions was a prominent part of E.piphany’s ads. E.piphany claimed this was an “important differentiator” in the marketplace, giving it a lead of a couple of years on competitors. This disparaged the competition by implication. Thus, by refusing to defend in the underlying litigation, St. Paul breached its duty to defend.

Off-label promotion of drugs not inherently misleading

In re Epogen & Aranesp Off-Label Marketing & Sales Practices Litigation, --- F. Supp. 2d ----, 2008 WL 5335062 (C.D. Cal.)

The plaintiffs mostly provide health care benefits to various union workers and dependents, though one is a private third-party payor. They proposed to represent a class of everyone who paid any part of the purchase price of Epogen and Aranesp when prescribed for off-label use. These drugs simulate the production of red blood cells and are approved for treating anemia in certain patients with other serious medical problems.

Defendants are Amgen, a large pharmaco, and two providers of dialysis services. From 2002 until at least 2007, Amgen issued press releases touting clinical studies on off-label uses of Aranesp, but didn’t disclose that the studies were Amgen-funded. Amgen also funded third-party groups that pushed off-label uses of Aranesp to doctors through continuing medical education and other means, allegedly concealing or minimizing evidence of the drugs’ risks (heart attacks, strokes, tumor growth, and death). Amgen entered into supply contracts with the other defendants providing volume-based discounts and other incentives for increased IV use of the drugs. In early 2007, the FDA mandated a “black box” warning about off-label use of Aranesp, based on studies showing that its use shortened the time to tumor progression and increased the risk of death in certain classes of cancer patients.

The court dismissed plaintiffs’ RICO claims as being fundamentally based on the idea that merely promoting the drugs for off-label use was unlawful. This amounted to an attempt to enforce the FDCA, but the FDCA does not provide for a private cause of action. Similarly, the state-law false advertising/unfair competition claims were basically premised on the idea that off-label promotion was unlawful and therefore unfair and inherently fraudulent. Precedent holds that, in itself, off-label promotion is not inherently misleading. However, false advertising laws can be used to fight false pharmaceutical advertising even though there is overlap with FDA jurisdiction. FDA label regulations are designed to support the FDA’s authority to approve new drugs; without regulation of off-label promotion, there would be no incentive for companies to get approval for new uses. Thus, consumer protection objectives diverge from the more arbitrage-focused FDA regulations, and consumer protection laws have a separate role to play in regulating drug ads.

Some of plaintiffs’ claims--e.g., that defendants promoted the false belief that the drugs were safe for off-label uses at excessive doses and that they concealed adverse study results and selectively disclosed positive studies—could be repled as pure fraud/false advertising claims. The FDA lacks special expertise on whether the claims were likely to mislead or deceive the recipients of the ads. Thus, the plaintiffs were allowed leave to amend the complaint to allege specific misrepresentations, subject to the requirements of Rule 9(b) (note that this is a heavy burden; not all courts require false advertising claims to be pled with particularity, because fraudulent intent is not an element of most false advertising laws).

Punting to culture

Christopher Kelty, Two Bits: The Cultural Significance of Free Software: You can download the whole thing here. I liked Kelty’s essay on open source, Punt to Culture, which you can also read for free—I thought it provided an interesting theoretical context for the open source movement. This is Kelty’s larger project, and I had more trouble with it than I did with Punt to Culture. He focuses on free software and its contexts, arguing that free software is an instance of a “recursive public,” “a public that is vitally concerned with the material and practical maintenance and modification of the technical, legal, practical, and conceptual means of its own existence as a public; it is a collective independent of other forms of constituted power and is capable of speaking to existing forms of power through the production of actually existing alternatives.” I love the idea, because it fits in with what the Organization for Transformative Works is trying to do: owning the servers, writing the code that makes being fannishly creative easier.

But the meat of the book frustrated me, perhaps because I’m not familiar with anthropological writing of this sort. It felt like he half-told a bunch of stories: early development and forking of UNIX; the story of Apache; debates over the Linux kernel; the founding of an "open source" textbook/module project called Connexions; etc. But then at the end each story seemed to turn into generalities, or at least the absence of useful lessons. (This is the standard law professor's reaction: what's the payoff? What do you want me to do? And Kelty's specialty is understandably resistant to answering that question.)

There was a great story about UNIX, which at the relevant time was under relatively tight formal control by AT&T. A non-AT&T person wrote a commentary, which because of intellectual property concerns had a copyright notice and instructed people not to make copies. But, because access to actual code (not to mention access to actual computers) was very hard to come by, there was immense pressure to disseminate it. As one programmer wrote:

We soon came into possession of what looked like a fifth generation photocopy and someone who shall remain nameless spent all night in the copier room spawning a sixth, an act expressly forbidden by a carefully worded disclaimer on the first page. Four remarkable things were happening at the same time. One, we had discovered the first piece of software that would inspire rather than annoy us; two, we had acquired what amounted to a literary criticism of that computer software; three, we were making the single most significant advancement of our education in computer science by actually reading an entire operating system; and four, we were breaking the law.

Kelty points out that this generation of computer science students therefore learned the essentials of UNIX while also learning that AT&T was trying unsuccessfully to control the distribution of the commentary. Computer science already had, at the moment of its explosion, a fraught relationship with law and with copying, here photocopying. Kelty concludes:

This nascent recursive public not only understood itself as belonging to a technical elite which was constituted by its creation, understanding, and promotion of a particular technical tool, but also recognized itself as “breaking the law,” a community constituted in opposition to forms of power that governed the circulation, distribution, modification, and creation of the very tools they were learning to make as part of their vocation. The material connection shared around the world by UNIX-loving geeks to their source code is not a mere technical experience, but a social and legal one as well.

Going forward, he notes, intellectual property can be expected to remain central to the recursive public--a tool and a barrier--as participants try to reframe and rewrite that law and the social practices that undergird compliance with or resistance to law.

Reading list: critiquing falsity by necessary implication

Sarah Samuelson, Note, True or False: The Expanding “False by Necessary Implication” Doctrine in Lanham Act False Advertising, and How a Revitalized Puffery Defense Can Solve This Problem, 30 Cardozo L. Rev. 317 (2008)

Summary:

This Note explains why the “false by necessary implication” doctrine is a harmful development in false advertising law and proposes a better way for courts to deal with tricky distinctions between truth and falsity. Part I will introduce Section 43(a) and describe the development of the “false by necessary implication” doctrine in greater detail. Using Time Warner Cable as a model, Part II will show that courts are expanding the doctrine too far and applying it inconsistently, often confusing its doctrinal underpinnings. Part II will also demonstrate that the expansion of 43(a) false advertising liability implicates the First Amendment's guarantee of free speech and may impede an open marketplace of information. In addition, it will explain that overregulation of false advertising underestimates the modern reality of consumer intelligence and ignores the technological resources available to debunk false advertisements. Finally, Part III will argue that courts should apply a new framework when deciding Section 43(a) false advertising cases. This new structure would redefine and expand the puffery doctrine, turning its application into a threshold inquiry instead of a defense. As a result, courts could eliminate trivial or non-credible claims at the outset and focus their attention on the type of false advertising that actually harms consumers.

I think it’s wrong in pretty much every respect, but I'm a big fan of falsity by necessary implication, and there’s a lot of stuff out there that’s not even wrong, so you might want to check it out if you’re interested in false advertising law.

Jazz hands: today's right of publicity question

Among our kids' Hanukah gifts this year were books from this series starring Duck Ellington (who inexplicably raps), also featuring Charlie Bird (plays sax), Ella the Elephant (she scats), Miles the Crocodile, Mingus Mouse, Louis Lion, and Philly Joe Giraffe (drums). Under what theories would you defend the publisher from right of publicity claims by (the estates of) the jazz greats referenced? Under White, at least, there's absolutely no reason that use of the entire name is required; in a jazz context, these first names and associated instruments clearly evoke certain identities. Artistic relevance?

Spiegel v. Spiegel: internet coexistence is possible

H. Jay Spiegel & Associates, P.C. v. Spiegel, 2008 WL 5211784 (E.D. Va.)

This local case caught my eye because of the unusual result: preliminary relief denied despite the court’s conclusion that consumer confusion was fairly likely.

Plaintiff, a law firm specializing in patents and trademarks, registered spiegelaw.com in 1999. The domain name was registered on the Supplemental Register in 2000, and plaintiff applied for registration on the Principal Register after five consecutive years of use; that registration issued in 2006.

In 2008, defendant, an attorney with a sole practice focusing on employment law, created a website at spiegellaw.com. Plaintiff sued and asked for a preliminary injunction shutting down the website.

You know the plaintiff has an uphill climb when the court starts out with a reminder that preliminary injunctions are extraordinary remedies, to be granted only sparingly and in limited circumstances. In trademark infringement cases, a presumption of irreparable injury is generally used when a plaintiff shows likely confusion. However, the balance of harms here favored the defendant, and the other elements of the preliminary injunction standard were uncertain. Even with irreparable injury, a court must still balance the harm to the defendant. An irreparable harm may be small.

The court assumed a likelihood of confusion, triggering a presumption of irreparable harm. Plaintiff argued that the harm was significant here because many people, including foreign clients, seek to reach it through its website, and defendant’s use threatened its goodwill. The court agreed that there was “some threat” to plaintiff’s goodwill, given that the names are nearly identical and that people searching for plaintiff could be misled or diverted to defendant’s site, especially if they were working from oral instructions to visit the site. There was evidence that at least one person was confused by defendant’s site, though that person was a fellow lawyer and not a potential client (apparently the lawyer cc’d defendant and plaintiff both, suggesting at least one typo).

However, the court determined that harm during the pendency of the litigation was not likely to be significant. Plaintiff’s practice is specialized; a search for a patent lawyer named Spiegel would not end with defendant’s site. And someone who heard the address given orally might just as easily visit spiegel-law.com, another website in use by a solo practitioner named Spiegel. “In other words, the online presence of Defendant does not pose a wholly novel threat to the ability of potential clients to locate Plaintiff's Website.” There may well be a likelihood of confusion, but not of serious harm. There was no evidence of any attempt to “poach” clients, which would be counterproductive for an employment lawyer. The single misdirected email was an isolated instance, not large-scale confusion among clients.

On the other side, enjoining spiegellaw.com would significantly harm defendant, who uses the site primarily in his capacity as class counsel in a civil rights class action lawsuit. Shutting the site down would disrupt defendant’s law practice and harm the interests of his clients. “The nature of a class action lawsuit puts a premium on the ability of counsel to communicate with individuals who may be geographically diverse and, indeed, may never meet their attorney in person. Disrupting a major line of communication and information sharing between class counsel and a class of plaintiffs poses a real threat to the ability of counsel to advocate in an effective and efficient manner.” Thus, the balance of harms favored defendant, requiring a stronger showing of likely success on the merits before a preliminary injunction could issue.

The court was uncertain whether plaintiff’s mark was protectable, making overall likelihood of success uncertain. Plaintiff argued that its mark was “stronger” than merely descriptive and “more likely than not suggestive,” given that spiegelaw.com could connote the provision of a variety of legal services via the internet. You know, I wouldn’t give a student much credit for making that argument on an exam: the mark, describing the provision of legal services by somebody named Spiegel, is descriptive. Deal with it.

The real argument here is acquired distinctiveness. The registration was prima facie evidence of validity, but defendant could challenge this. The evidence of secondary meaning was unclear at this stage. (Defendant also argued that any secondary meaning wouldn’t extend beyond IP lawyering, but that’s not an argument for unprotectability; that’s just an infringement consideration.) It’s not clear from the opinion what evidence, if any, defendant submitted here: it doesn’t seem likely that he could have overcome the prima facie validity of the registration from argument alone, but I’d have pointed to that spiegel-law.com site at least as evidence that plaintiff’s use wasn’t exclusive.

The public interest favors protecting valid trademarks, but also communication between lawyers and clients. It wasn’t any help here. On balance, plaintiff wasn’t entitled to a preliminary injunction.

I found it interesting how this issue was resolved without any overt reference to something that the common law would have considered quite important: defendant’s name really is Spiegel. Of course that factors into the mark’s descriptiveness, its protectability, and probably the likelihood of confusion, but that just shows that the law of personal names has been basically submerged into broader trademark doctrines.

MostChoice's brags succeed where its false leads don't

NetQuote, Inc. v. Byrd, 2008 WL 5225880 (D. Colo.)

Previous developments in this case of competitor sabotage, including a big damages award.

NetQuote moved for injunctive relief against MostChoice for false advertising. It identified three allegedly false statements: (1) that MostChoice's leads are "Better Than NetQuote Leads"; (2) that MostChoice's leads are "[f]rom a solid company ... [n]ot a 'fly by night' company like most lead companies"; and (3) that MostChoice's leads are better because they are subject to "Extensive Filtering for Highest Lead Quality."

The court found the statements had not been shown to be literally or implicitly false. The trial evidence tended to support the claim that MostChoice’s leads were better. NetQuote uses affiliate leads, and those tend to be poorer quality. By contrast, MostChoice’s leads during the relevant time period did not include affiliate leads, which the court saw as support for the “filtering” claim, because selecting the source of a lead can be viewed as a filtering process. Moreover, NetQuote sent each lead to a larger number of agents than MostChoice, diluting any single agent’s chance of closing a sale. The market price of MostChoice leads was higher, which the court also considered evidence that its leads were “better.”

As for the solid/fly-by-night claims, there was no evidence that MostChoice was a fly-by-night company, and even though NetQuote wasn’t either, that didn’t disprove MostChoice’s claim that “most” lead companies are fly-by-night. The court also considered this statement entitled to “leeway” because it was puffery.

The implicit falsity argument fared no better. NetQuote argued that, to the extent “Better Than NetQuote Leads” was true, it was only true because MostChoice deceptively submitted fake leads to NetQuote, and that undisclosed wrinkle made the claim misleading. However, NetQuote failed to prove that, but for the fake leads, MostChoice would not have been superior. Even before MostChoice began submitting fake leads, the indicators of greater quality identified by the court were present. (Which makes one wonder: what was MostChoice so afraid of? Perhaps low prices are a potent lure, even if they bring lower quality with them.) The false submissions also represented such a small percentage of NetQuote’s total leads that, though they were actionable for the harm they caused to specific agents, the court deemed it unlikely that they materially affected the overall quality of NetQuote’s leads.

In addition, NetQuote failed to show that consumers (insurance agents) were actually misled by the ads (as opposed to the fake leads). NetQuote argued that an intent to deceive justified a presumption of successful deception, but there was no evidence of deceptive intent with respect to the ad statements. Nor did NetQuote show actual or likely injury: it had no evidence that its customers ever visited MostChoice’s site. (I think this goes too far; suppose a credible consumer survey had shown extensive deception in likely consumers exposed to the ad. Asking the plaintiff to prove more than that serves very little purpose. Perhaps a defendant might be able to avoid monetary and even injunctive relief by showing that nobody ever saw the false claim at issue, but that’s the defendant’s problem at that point, not the plaintiff’s; the risk must be on the deceptive advertiser.)

Fake gripe sites

The Consumer Law & Policy blog discusses an instance of arguably deceptive advertising using the trademark owner's own mark, in a critical context, to draw searchers to an owner-run site that speaks favorably of the trademark owner. It's not preposterous to think that this could be false advertising--indeed, some trademark doctrines, like naked licensing, are concerned with false promises made by uses of marks. But I'm not sure that there is significant, extended consumer deception--clicking back will probably allow the interested consumer to find the actually critical sites--and I'd much prefer courts to hold every plaintiff, especially trademark owners, to a standard that requires a showing of more than brief clickthrough confusion.

Pipe dreams: mixed ruling on trademark and false advertising plumbing case

Falcon Stainless, Inc. v. Rino Companies, Inc., 2008 WL 5179037 (C.D. Cal.)

Falcon and Rino sell plumbing products. Falcon alleged that Rino (1) falsely advertised that its products meet American Society of Mechanical Engineers (ASME) A112.18.6 standards; (2) falsely advertised that its connectors exceeded the flow rate of Falcon connectors; (3) infringed Falcon’s marks by using on its connectors a numbering system confusingly similar to Falcon’s system; and (4) infringed Falcon’s marks by using on its connectors a square with ‘S’ inside that was confusingly similar to Falcon’s diamond with ‘F’ inside.

For the ASME claim, the court found as follows: The International Association of Plumbing and Mechanical Officials ("IAPMO") regulates and sets the standards for plumbing products in the United States, and the parties believe its approval is critical to business success. IAPMO verifies compliance with industry standards, including the relevant ASME standard, which specifies requirements for metallic water heater connector tubes. Both parties advertise IAPMO verification; pointing to IAPMO certification is standard in the industry, and Rino’s connectors are in fact certified. An IAPMO auditor tested a sample pipe and concluded that it complied with the ASME standard. Falcon, however, hired a third party to test the connectors, and the third party tester concluded that they were not ASME-compliant.

Under Ninth Circuit precedent, for a court to evaluate a claim that certification is false, there must be “a clear and unambiguous statement from the licensing body about [the relevant] regulations and certifications.” Rino’s claim of compliance was not literally false, since IAPMO was generally agreed to be a proper body to certify ASME compliance.

For the water flow claim, the court found that maximum water flow is a key characteristic for water connectors. Rino’s Chinese test lab showed a flow rate of 7.238 gallons per minute, based on 5.32 feet per second water velocity. Falcon’s test results used a water velocity of 5 feet per second, producing an advertised flow rate of 6.345 gallons/minute. It’s undisputed that higher velocity produces higher flow.

Rino’s ad claimed superiority, comparing 6.345 gallons/minute to its own 7.24 gallons/minute. Falcon hired a different lab to do a comparison test using standardized pressures, conditions, and times. In those tests, Falcon’s connectors had a flow rate marginally higher than Rino’s (though apparently the difference was not statistically significant). In other words, the tests showed that Falcon’s connectors were not inferior, and they didn’t substantiate Rino’s claimed flow rate from its Chinese test. Point to remember: comparative ads should compare the same things! For a head-to-head comparison, have head-to-head substantiation.

The court concluded that Falcon had successfully shown that (1) Rino’s Chinese test wasn’t a controlled comparative test, and (2) its own controlled test disproved Rino’s claim of faster flow. False comparative claims create a presumption of actual deception and reliance, as well as irreparable injury.

On the numbering system claim: Falcon doesn’t have a registered trademark on its numbering system. Indeed, I’m not sure one could register a trademark on a system; wouldn’t it be a phantom mark? Taco Cabana mentioned “sales techniques” as a type of protectable trade dress in passing, but I don’t think a numbering system would qualify. Especially here, where Falcon doesn’t use its numbering system in ads or on its website.

Both parties use numerical bar codes on their connectors to identify the diameter and length of the connectors. Falcon uses FF or SWC, followed by a space, as a prefix on flexible connectors, while Rino uses SWF, with no space. In three instances, the parties use identical numbers for certain products, deriving from the fact that they sell products of identical diameter and length. For other products, the numbers aren’t identical because Falcon adds a zero between the diameter and length numbers.

Most of the parties’ sales are made to sophisticated retailers and plumbing companies that know the industry well. The court concluded that the bar code is functional, and it’s also required by a significant buyer in the market. Thus, Rino couldn’t compete with Falcon for that buyer’s business without the system.

Falcon’s number system claim failed because it couldn’t meet its burden of showing nonfunctionality. The system is utilitarian because it identifies size and dimensions. Though alternative designs are available, that doesn’t change the fact that the system performs a function, and does so in response to consumer demand.

As for the geometric shape and letter combo, IAPMO requires certain identifying information on plumbing products. Falcon’s diamond F is a standard diamond shape and a capital F. Falcon has no registered trademark in the diamond F, and it doesn’t use it in advertising. Rino’s square S is a rotated square with an S inside, for Southsea Metal, the manufacturer. At least one other company also puts diamonds on its water connectors in the same place Falcon does. There was no evidence of customer confusion.

Falcon failed to show trademark rights in the diamond F mark. As a common basic shape and letter, the alleged mark wasn’t inherently distinctive. Falcon had insufficient evidence to show secondary meaning: no surveys or other customer evidence; no use in advertising or packaging; no use as a logo. It was just a physical design stamped on the connector itself. Falcon couldn’t even show exclusive use of the diamond.

As a result, the court granted a preliminary injunction on the water flow claims, but not on anything else. The court noted that Falcon was the larger, more established company. Three out of four claims in this case thus support the proposition that established companies use the Lanham Act to create barriers to market entry. But that fourth supports the proposition that new entrants, hungry for market share, may be overhasty in their claims.

Clash of the sculpted titans: Ninth Circuit affirms Renoir case

Societe Civile Succession Richard Guino v. Renoir, 2008 WL 5157719 (9th Cir.)

The district court’s rulings are discussed here and here: this is a wonderfully chewy case, but not much goes on in the appeal, even though the Societe appealed practically everything—the verdict against it on Renoir’s Lanham Act false advertising claim, the associated equitable relief, the fee awards on the Lanham Act claim and discovery sanctions, and the district court’s refusal to award prejudgment interest on the Societe’s successful copyright claim—and Renoir also appealed the finding of willful copyright infringement. (There’s a separate published opinion affirming the basic copyright infringement claim, which I haven’t read yet.)

The court found the jury’s verdict on false advertising was supported by substantial evidence that the Societe made a false statement in commercial advertising about its own or another’s product. The court of appeals also found the injunctive relief proper: in order to display the Societe’s Guino reproductions to the public, they had to be labeled as “unauthentic and/or unauthorized duplicates of original Renoir-Guino works.” (Any bets on which word the Societe might pick?) But this was limited relief: the Societe could still sell the sculptures if properly labeled. Defendant Renoir’s copyright infringement didn’t count as unclean hands disentitling him to equitable relief, because copyright and false advertising are different.

The court also affirmed the fee award related to Societe’s Lanham Act claims. The Societe never tried to prove those claims, but waited until trial to abandon them, without having any evidence of the basic elements of confusion or damages. It should have dismissed the claim earlier; fees were properly awarded. Likewise with the discovery sanctions.

Prejudgment interest on the Societe’s successful copyright infringement claim was properly denied. Prejudgment interest may be awarded where infringement is undisputed, to discourage delay and compensate the owner for the time value of money. But this wasn’t a case of indisputable copyright infringement because of confusion surrounding the legal standard for whether the works at issue were in the public domain in the US. Defendants relied on Copyright Office circulars and treatises to show that the works were in the public domain. While their arguments failed, there was no abuse of discretion in denying prejudgment interest.

At the same time, the jury could properly have found willful copyright infringement. (In other words, on these facts, there was a lot of room for disagreement when it comes to things that will increase or decrease an award. The judge apparently found the copyright claim reasonably disputable, even as the jury found the conduct willful.) Willful here means knowing that one’s conduct is infringing; one who believes reasonably and in good faith that conduct is not infringing does not act willfully. Renoir, however, identified no evidence in the record of his belief that the sculptures were in the public domain in the US, so the court of appeals held his argument waived. (Why not rely on the Copyright Office circulars and treatises? If evidence of his belief in those is also required, does that mean he’s likely to have to waive attorney-client privilege to show lack of willfulness?) Anyway, there was substantial evidence of willfulness, including a French judgment against Renoir for violating Societe’s rights in the sculptures. Renoir testified that he knew about the judgment yet still sold molds and castings for the sculptures. A previous judge in the case had stated that applying the relevant 9^th Circuit case to the sculptures was “unreasonable” and that there were “substantial grounds for difference of opinion” on copyright status. But the presiding judge refused to allow those statements to be given to the jury, and the court of appeals found no abuse of discretion: the judge’s statements would simply be improper testimony on issues of law. (This makes more sense: the question is what Renoir thought at the time he took the allegedly infringing acts at issue, and the judge’s statements aren’t good evidence of that.)

Freedom of the press: Lanham Act claim against reseller fails

St. Croix Printing Equipment, Inc. v. Sexton, 578 F. Supp. 2d 1195 (D. Minn. 2008)

Plaintiff St. Croix (St. Croix Minnesota) sells used printing presses, including used Shinohara presses, but is not an authorized Shinohara dealer. Defendant Sexton used to be in business with one of St. Croix’s principals. Sexton opened her own business, St. Croix Printing Equipment Imports, Ltd., and “after a bit of litigation, the parties apparently agreed to live and let live.” Sexton’s business (St. Croix Iowa) is an authorized dealer for new printing presses made by the Japanese parent company of defendant Shinohara USA.

St. Croix Minnesota sued for unfair trade practices. Specifically, St. Croix Minnesota claimed that defendants approached its customers and told them false and misleading things about St. Croix Minnesota and its products, causing customers to break their contracts. Shinohara counterclaimed in mirror image: it argued that St. Croix Minnesota was engaging in trademark infringement, false designation of origin, and coordinate state-law claims.

Because Shinohara sought money damages, circuit precedent required proof of actual confusion, intent to cause confusion, and a causal connection between confusion and harm. Shinohara alleged as follows: until November 2007, plaintiff’s website used Shinohara’s logo and trademark; the website contained false representations about plaintiff’s inventory, warehouse space, years in business, and availability of “factory trained technicians” on staff; plaintiff tells customers that it sells Shinohara presses and can get anything they need from Shinohara, including parts for a used press, and pretends to be an official Shinohara representative; plaintiff copied software from English-language Shinohara presses to Japanese-language Shinohara presses; plaintiff tried to sell a damaged press without disclosing that it was likely unusable; and plaintiff’s contract with at least one customer spoke of “delivery, installation and training by Shinohara with print and register warranty” (emphasis added).

The court considered these allegations largely irrelevant to the legal claims. Copying software, for example, isn’t relevant to whether customers are confused about origin. (Sounds like Shinohara should have hit harder on the line of cases about genuine goods: a variance in language might well be sufficient to make grey-market Shinohara presses count as infringing. Of course, if Shinohara sells Japanese-language presses in the US as well, that line of cases would be no help.) Likewise, the court didn’t see how the allegedly false statements on plaintiff’s website violated the Lanham Act, “which prohibits the misuse of trademarks.”

§43(a)(1)(B) allows a civil action against “(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which-… (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities ….” It may well be the case that Shinohara can’t make out all the requisite elements; standing, for example, is likely to be a problem in the current climate. But the Lanham Act covers false advertising, and has done so for a very long time. I can’t speak to Minnesota state law, but I’m going to guess that it probably does too.

Anyway, the court only looked at the claims relating to (1) use of the Shinohara logo and trademark; (2) the allegation that plaintiff told potential customers that it had access to “everything Shinohara”; (3) statements to one customer that gave an impression of a direct relationship with Shinohara; and (4) the language in the contract indicating that Shinohara would provide services.

As to the website, plaintiff removed Shinohara’s logo and mark from its site shortly after Shinohara demanded that it do so. Shinohara failed to show any damages, even assuming that this violated the Lanham Act. As to the general claims that plaintiff feigned a direct relationship with Shinohara, the court found the supporting testimony too general: an installer thought that plaintiff’s principal “tries to make it sound like he is a dealer and that there's some type of connection.” This testimony, however, might well have been about confusion between St. Croix Minnesota and St. Croix Iowa, which apparently (and understandably) confused a lot of consumers, but was irrelevant to Shinohara’s claims. This was insufficient to show actual confusion.

One of plaintiff’s potential customers testifed that plaintiff told him that it could get parts directly from Shinohara in Japan, quoted him “the official factory response,” and otherwise “gave a definite impression” of a direct relationship with Shinohara. But the customer also said that he simply assumed that plaintiff was an authorized dealer because plaintiff told him that it would sell him and support the Shinohara press. Even if this created a genuine issue of material fact on confusion and intent to confuse, there was no evidence of injury: the customer ultimately bought a new Shinohara press from St. Croix Iowa.

The final instance is pretty clearly the worst for plaintiff: in May 2006, a printer named Schuster contracted to buy a Shinohara press from plaintiff. The press was cracked (though genuine), and the contract contained a phrase promising services from Shinohara. For purposes of the motion, plaintiff conceded confusion. After Schuster signed the contract, Sexton visited him and told him that the press was cracked and that Shinohara wouldn’t warranty it. (How did she know? There are such layers of drama encoded into this apparently bitter dispute.) Schuster cancelled the purchase agreement and bought a new Shinohara press from St. Croix Iowa. Once again, Shinohara couldn’t show damages.

Practice pointer: it can be really hard to go for damages-only Lanham Act claims. If you aren’t looking for injunctive relief, the client needs to think very hard about whether the game is worth the candle. Of course, the calculus may be different in cases like this one, where the issue is whether to bring a counterclaim. But I still wonder whether this was a good use of litigation resources.

Hunt for Red October: first sale protects competing candy sales

Krasnyi Oktyabr, Inc. v. Trilini Imports, 578 F. Supp. 2d 455 (S.D.N.Y. 2008)

Plaintiff, aka Red October, says it has an exclusive license from a Russian manufacturer to import Russian candies into the US for sale to the Russian ethnic market. Defendants nonetheless began importing the same candies, claiming to have obtained them from third parties. Plaintiff sued under the Lanham Act and state law unfair competition claims.

Plaintiff has an exclusive license from the unrelated Russian entity that produces the candy, which I am calling Red October Moscow, allowing plaintiff to use Red October trademarks (in Cyrillic, but we’ll call them Red October marks) in the US. Plaintiff obtained US trademark registrations for the word mark and for the logo, but then assigned them, including all potential infringement claims, to Red October Moscow.

Plaintiff alleged that, though defendants’ candy originated from Red October Moscow factories, its own candy has been selected for export and has been subjected to higher quality control standards. It relied on a 2001 declaration from the director of exports at Red October Moscow, submitted in a different case. It also alleged that its own contract with Red October Moscow obliges it to follow strict quality control standards for transport and storage that don’t apply to defendants, meaning defendants might sell expired or stale candy. However, the court noted that plaintiff didn’t explain what the quality control standards require. Defendants argued that there was no difference between domestic and export candy, and that their candy quality control standards conformed to industry norms and was the same quality as plaintiff’s.

Defendants challenged plaintiff’s standing to bring claims for infringement of registered marks, given that Red October Moscow was the real party in interest. The court accepted this, holding that plaintiff could be the legal representative of Red October Moscow, but would have to show that Red October Moscow had suffered damages, whereas plaintiff’s only evidence of damages went to its own losses. Indeed, defendants apparently paid more for the candies than plaintiff would have paid for the same amounts (making one wonder how exactly defendants undercut plaintiff). Nor could plaintiff show why Red October Moscow couldn’t have protected its own rights and joined the litigation. The court’s concern here was tied into the idea that Red October Moscow had been protected against discovery by not participating, and that plaintiff might really need to sue Red October Moscow for breach of the exclusivity portions of the license agreement.

Plaintiff was, however, allowed to assert its own claims under Section 43, because the allegedly false designation of origin at issue was likely to cause plaintiff to lose sales.

Given all the sturm und drang over standing for Section 32, the differences between a Section 32 and Section 43 case are fairly minor; plaintiff needed to show a valid mark rather than being afforded a presumption of validity, but the defendants didn’t dispute validity.

So now we’re at the core of the case: unauthorized resale of genuine products isn’t infringing because it isn’t confusing. Differences in quality control can be sufficient to make goods not genuine; quality control is one of a trademark owner’s most valuable rights. However, plaintiff failed to meet its burden to show that quality control standards differed as between its products and defendants’, either by showing actual differences or material differences in quality control at the factory. The evidence of quality control differences in candy intended for export was both old and too general.

As a result, the state-law claims, including a state-law dilution claim, collapsed as well.

Defendants counterclaimed for cancellation of the Red October marks based on fraud on the PTO, as well as some other things. Defendants argued that plaintiff falsely represented that it had the exclusive right to use the Red October marks in commerce in the US. But defendants lacked standing; they have no commercial interest in the marks and no basis for thinking they’re harmed by the registration. Nor were they able to show that plaintiff knew its statement to the PTO was false; indeed, the license agreement with Red October Moscow supports the truth of plaintiff’s statement. Defendants’ argument for cancellation on grounds of use of the mark to violate antitrust law also failed, since there was no defined product market. The Russian premium candy market is not a defined market; even if it were, there was no evidence plaintiff dominated it.

Now spit: Dental appeal fails

American Association of Orthodontists v. Yellow Book USA, Inc., --- S.W.3d ----, 2008 WL 5145441 (Mo. App. E.D.)

Yellow Book listed general dentists as orthodontists in its directories, and AAO, an orthodontists’ trade group, sued, alleging that the listings lacked statutorily required disclaimers that general dentists lack specialized training and certification as orthodontists. AAO had previously sued in federal court under the Lanham Act, but lost on standing grounds as well as failure to state a claim. Am. Ass'n of Orthodontists v. Yellow Book USA, Inc., 434 F.3d 1100 (8th Cir. 2006). The state court of appeals affirmed a verdict for Yellow Book.

Regulatory background: The Missouri Dental Board can suspend or revoke a dentist’s license if s/he engages in false, misleading or deceptive advertising. The regulations define this to include announcing or advertising recognized specialty practices, unless the announcement includes a specific disclaimer of each dentist not licensed as a specialist in Missouri.

AAO sued for state-law unfair competition, arguing that Yellow Book’s inclusion of general dentists in listings for “Orthodontists” without the disclaimer was false and misleading. After an unsuccessful attempt to remove, Yellow Book moved to dismiss on various grounds, including a First Amendment defense. Unfortunately, the trial court didn’t explain why it granted Yellow Book’s motion to dismiss.

The court of appeals found that the complaint didn’t state a claim. Yellow Book argued that there was no private right of action to enforce the dental regulations. AAO responded that it was not seeking to enforce the dental regulations, but rather to stop unfair competition. Thus, the court focused on whether AAO stated a claim for unfair competition.

The court agreed that deception was at the core of common-law unfair competition, but noted that case law generally focused on the use of a trade name or other (?) confidential information. Here, the complaint was based on “the use of a general term describing a particular type of service provided by dentists.” AAO argued that if use of the term deceived consumers, then unfair competition would be shown.

The dental regulations ban the types of ads at issue here, but commit enforcement to the Dental Board. The AAO argued that the legislature’s determination of what constitutes false advertising can be the foundation of an unfair competition claim. (I would add that the regulations can also shape public understanding: if the public believes that people calling themselves orthodontists have special training because ad regulations mean that only people with special training can call themselves orthodontists, then breaking the regulation is likely to deceive people relying on background norms, not because of the law itself but because of the effects of the law on expectations.)

However, the court of appeals determined that the directory listings aren’t misleading to the consuming public. (Nice to be able to know that by reading the pleadings and without consulting evidence, I must say.) A general dentist may legally provide orthodontic services regardless of whether s/he has specialized training. Though advertising a service that one is unable to provide (whether through reasons of inability or legal prohibition) is misleading, advertising a service that one may legally provide is fine.

This seems to me to miss the point of the claim, which seems properly framed as one that the public expects people calling themselves orthodontists to have special training, not simply to be able to perform the basic underlying services. If, as the court said, “[d]eception is the true test of unfair competition,” why don’t we look at the evidence of what consumers expect?

The court further held that the directory listings did not constitute unfair competition because they did not conflict with public policy, despite the dental regulations. Yellow Book wasn’t within the class of persons regulated by the dental laws.

Steamed: literal falsity dooms cleaner infomercial

Euro-Pro Operating LLC v. Euroflex Americas, 2008 WL 5137060 (S.D.N.Y.)

The parties compete to sell portable handheld steam cleaners. Euro-Pro (seller of the Shark Steam Blaster and the Steam Mop) alleged that certain claims in Euroflex infomercials touting the handheld Monster 1200 violated the Lanham Act and New York consumer protection law. While Euro-Pro’s and other steam cleaners clean with steam only, the Monster 1200 allows users to combine steam with disinfectant cleaning solution, “Clean Blast.” Euroflex claimed that this “exclusive technology” made the Monster 1200 more effective than “ordinary steamers.” Clean Blast is a version of a broad spectrum cleaning solution registered with the EPA.

Euro-Pro challenged four general types of claims: “(1) the ‘EPA Tested and Approved Claims,’ such as ‘EPA tested and approved so you know it's safe;’ (2) the ‘Efficacy Claims’ or ‘Sanitizes on Contact Claims’ such as ‘kills 99.99% of all germs and bacteria on contact’ and ‘truly sanitizes on contact;’ (3) the ‘Superiority Claims’ such as ‘kills all the germs and bacteria that it comes in contact with, and regular steam just doesn't do that’ and ‘this is the only one of its kind; it’s the only one that can sanitize’; and (4) the ‘Safety Claims’ such as claims the Monster 1200 is ‘completely safe’ and ‘harmless.’”

Initially, the court concluded that Euro-Pro was entitled to a presumption of irreparable harm because the infomercial at issue was a comparative ad, even though it didn’t mention Euro-Pro by name. Euro-Pro was an “obvious” competitor, the market leader, and its products resemble those shown in the infomercial as examples of “ordinary steam cleaners.”

On the EPA Tested and Approved Claims, Euro-Flex argued literal falsity because the EPA doesn’t test consumer products and didn’t approve the Monster 1200, only approved the registration of Clean Blast disinfectant as an antimicrobial pesticide regulated by FIFRA. Euroflex argued that the infomercial made clear that the EPA claims only applied to the disinfectant solution.

FIFRA requires pesticide sellers to register with the EPA, submitting all clais to be made for the pesticide as well as a description of the tests on which such claims are based. The EPA will only register a pesticide if it determines that the pesticide won’t cause “unreasonable adverse effects on the environment.” But registration isn’t a performance standard, and the EPA conducts no independent tests or studies. EPA approval isn’t an endorsement or a safety finding.

The court determined that any claims that the Monster 1200 or Clean Blast were “EPA tested” were literally false. The “EPA approved” claims were also literally false, even though onscreen text stated “EPA approval applies to Clean Blast only.” A disclaimer or contradictory claim can’t remedy a facially misleading claim when the disclaimer is in small text or is difficult to read, as here. In context, the EPA approval claims necessarily implied a false message of approval of safety and efficacy of Clean Blast used in conjunction with the Monster 1200. For example, a spokesperson stated “And the great thing is, it's U.S. EPA tested and approved so you know it's safe,” while the Monster 1200 was shown cleaning outdoor cooking equipment.

On the efficacy claims, the parties disputed the literal falsity of the claims “kills 99.99% of germs on contact” and “sanitizes on contact,” which the court interpreted to mean “almost instantly.” Even though there are formal definitions of “sanitization” for EPA-registered disinfectants, consumers’ interpretations govern. General claims like “sanitizes” are subject to more than one reasonable interpretation about when “cleaning” becomes “sanitizing” and thus can’t be literally false. (Though this strikes me as the right result in context, I think “can’t be literally false” is probably an overstatement; a product made of dog spit probably doesn’t “sanitize,” though I’m willing to be surprised.)

The court determined that the efficacy claims were establishment claims, even though they didn’t use the words “tests prove.” At the outset of the infomercial, the spokesperson said, “our engineers have put the Monster through hundreds of tests.” Moreover, Euroflex did conduct tests before putting out a revised version of the ad, which is relevant to whether the infomercial impliedly stated that its claims were based on tests. (I’m willing to go with this, because it indicates an awareness on Euroflex’s part that the claims being made were of the type that consumers only expect to be made when there are tests to back them up.) Finally, in context, the “Sanitizes on Contact” claims were implied establishment claims because they were joined with superiority claims; included references to specific bacteria such as mehticillin resistant staphyloccus aureus noroviris, necessarily implying scientific testing; were asserted by a spokesperson in a white lab coat in a room identified by onscreen text as the “Euroflex Testing Lab”; and were graphically depicted with animations and diagrams of the sanitizing process.

Thus, Euro-Pro could win its claims by showing that the tests at issue were unreliable as well as by showing direct falsity. It did both. Euro-Pro’s expert criticized the tests, but her criticisms fell short of showing unreliability. Euro-Pro’s own tests purported to show that the Monster 1200 couldn’t kill 99.9% of bacteria under slightly more rigorous test conditions, but didn’t provide sufficient information on the percentage of bacteria actually killed. Thus, the court refused to enjoin these claims on the current record, though it promised further scrutiny at trial. The court was dubious of the “sanitize on contact” claims as overstating the Monster 1200’s capabilities, but it also found Euro-Pro’s failure to submit timely, detailed test results of its own troubling.

Likewise, Euro-Pro failed to establish that the superiority claims were literally false. They were by and large paired with general claims of sanitizing capability, such as “you can truly sanitize your entire bathroom--no other steam cleaner in the world can make that claim.” Because of the unfixed meaning of “sanitize,” Euro-Pro needed evidence that other steam cleaners could “sanitize” according to the definition used by consumers

Finally, Euro-Pro argued that the infomercial’s claims that the Monster 1200 was “completely safe” and “harmless” were literally false. The label of the disinfectant solution cautions that the substance is “HAZARDOUS TO HUMANS & DOMESTIC ANIMALS,” and Euroflex’s own evidence showed that tests submitted to the EPA revealed mild skin and eye irritation in animals. Defendant’s expert concluded that “prudent use” of the Monster 1200 posed “relatively low risk” to consumers.

Euroflex’s evidence showed that the Monster 1200 was relatively safe, but not “completely safe and harmless for children as well as pets,” so the court enjoined Euroflex from claiming that the Monster 1200 was “absolutely,” “completely,” or “entirely” safe. The court also noted that the infomercial was disingenuous in distinguishing between the “safe” Monster 1200 and “harmful chemical cleaners,” since the cleaning solution was also a chemical solution; moreover, the infomercial’s depiction of the Monster 1200 being sprayed “casually overhead” was inconsistent with “responsible use of a product that uses a known eye irritant.” However, those claims and depictions were misleading at most, and to enjoin them would require evidence of consumer perception. (Not quite sure about the overhead spraying part of that—I might go with falsity by necessary implication.)

If I were Euroflex, I’d be pretty careful redoing the infomercial, given the court’s caution here.

Myths and legends of copyright

Here's a new one for me: "if it's your camera, it's your copyright." From an article in New York magazine about how to get compensated when you've been wronged:

A Jilted Ex Puts Nude Photos of You, With Your Name, on an Amateur Porn Site
... To get the photos taken down, find out your ex’s Internet-service provider, as well as the Website’s hosting company and domain registrant by going to whois .net. Call the contact numbers for all three and say, “The images were obtained without my knowledge or consent, are being used in bad faith, and this is a violation of federal copyright law.” (For future reference, all risqué pics should be shot with your own camera, so you can claim copyright.) Ben Butler, director of network abuse for GoDaddy .com, responds to 30 women with unwanted photos each week, and takes them down if they break federal copyright rule.

I'm incredibly sympathetic to the victims here, but what's described is probably going to be an abuse of copyright claims; it is highly unlikely that the subject of the pictures owns the copyright therein, unless you want to revisit theories of authorship to a pretty extreme degree. The procedure described may work, but if so it works because of sympathy for the victims, and the site's editorial decisions are protected by 230. A real copyright claim, by the way, can probably be better made by using the DMCA's notice and takedown provisions, which aren't satisfied by a phone call.

False advertising over legality of gambling devices

FortuNet, Inc. v. GameTech Arizona Corp., 2008 WL 5083812 (D. Nev.)

FortuNet, a Nevada corporation that is involved in the development and manufacture of electronic gambling devices such as bingo games, sued competitor GameTech, a Delaware corporation, for RICO and false advertising violations. (Intriguing side note: the court found that the state unfair competition claims were preempted by Nevada gaming law.) GameTech allegedly falsely advertised it was Nevada-licensed when it had no Nevada gaming license, required to manufacture, sell, or distribute the devices from Nevada.

There are actually two defendants, a parent company located in Nevada, and a wholly-owned subsidiary with no employees of its own, located in California, that developed the gaming devices at issue, which GameTech wasn’t licensed to develop in Nevada. GameTech went through some serious contortions to do large portions of the work in the California facility, making clear that its motives were to arbitrage legal differences. Its website, which covered both the parent and the subsidiary, used a disclaimer that “Some or all of our products may not be legal in your jurisdiction.” Many key development activities actually took place in Nevada; GameTech has since secured a Nevada gaming license for its subsidiary and discontinued using California.

Plaintiffs had no evidence of actual deception. Though courts may presume deception from literal or intentional falsity, plaintiffs may not recover damages without other proof of damages, unless the defendant engaged in direct comparative advertising or the market is essentially a duopoly. Once injury is established, however, the amount of damages need not be precisely shown and the plaintiff can recover the defendant’s profits.

FortuNet argued that GameTech’s website, which lists the Nevada parent as the contact entity, necessarily implied that all devices sold on the site were licensed in Nevada, as did ads distributed at trade shows with similar statements. But the court determined that the listing was literally true, and would be misleading, if at all, only in context. FortuNet was thus required to present evidence that the website or the ads actually conveyed the implied message, but there was no evidence that any consumer received that message.

FortuNet also claimed falsity in GameTech’s ads which identified the subsidiary, rather than the parent, as the owner of the registered trademark for one of the devices. The court agreed that this could be literally false, but noted that there was no evidence that a misstatement of trademark ownership as between a parent and subsidiary would be material to consumers or injure FortuNet.

FortuNet also argued that one of the devices was falsely advertised as a Class II gaming device, when it was really a Class III device that requires greater regulation and licensing. The Indian Gaming Regulatory Act distinguishes gaming devices using physical, tangible media (Class II) from electronic gaming devices (Class III). GameTech argued that its device was Class II because it could be played in a tangible paper medium. The court, looking at a number of other cases about the proper classification of similar games, found a genuine issue of material fact about whether the ads were false. However, FortuNet failed to show injury sufficient to entitle it to damages. There was no comparative advertising, and no other evidence of harm to FortuNet in particular given that there were several competitors in the market. Injunctive relief on this claim remained available, but the parties didn’t brief it, so the court ordered further briefing.

Perils of collecting IP memorabilia

Your kids may decide that the Fartman doll you finally scored off of eBay is there for their entertainment. (The oldest also misidentified Fartman as Batman, showing a distinct lack of brand discrimination.) Since the plaintiff's lawyer kindly sent me a Pull My Finger Fred, expect some nice color pictures comparing the two to show up in the Georgetown IP Database soon.

Pissing contest: urine removal lawsuit continues

Medallion Products, Inc. v. McAlister, 2008 WL 5046055 (N.D. Ill.)

Some previous reporting; there are a lot of parties and I have ignored a large number of claims; the post title is actually pretty appropriate.

Interestingly, the parties agreed that Lanham Act standing requirements applied to the Illinois UTPA and Consumer Fraud Act claims, which I’m not sure is established law. In any event, the defendants argued that plaintiffs lacked standing because they never sold a pet stain product directly to consumers, as defendants did. Rather, they sell only to distributors, who ultimately sell to retailers and consumers. The court noted other cases requiring the plaintiff to show that it competes at the same level of business as the defendant. I’m not sure this makes sense, depending on the composition of the market—if the causal chain of injury is pretty obvious, I’m not sure why plaintiffs need a retailer on their side; the retailer may lack sufficient incentive to sue given its multiple sources of revenue, while the individual product manufacturer may be in the best position. Moreover, the parties appear to be dealing with different levels of business in part because of the somewhat unusual nature of the “as seen on TV” market, where products are sold via infomercials and fulfillment is accomplished through complicated business arrangements.

The court, however, found that there was no competition for sales and thus no standing. In any event, plaintiffs couldn’t show actual reliance on the allegedly false representations at issue.

Medallion also sued defendant Harriet Carter, a mail-order company, for defamation per se, for falsely telling dissatisfied customers that the urine removal product was manufactured by Medallion. The court granted summary judgment because this statement was not defamatory per se. Medallion’s only evidence was that Harriet Carter referred dissatisfied customers to Medallion. The court found that this didn’t count as uttering an actionable defamatory statement. I think the necessary implication that the bad product was Medallion’s fault could plainly be defamatory, but the court held that it didn’t fall into the five categories of defamation per se under Illinois law.

For reasons I don’t quite understand, the court denied summary judgment on a very similar claim against another defendant, who allegedly gave test results to a Fox news reporter, identifying them as results from tests performed on Medallion’s product, knowing that the product wasn’t actually made by Medallion. Since the tests showed minimal levels of enzyme activity, contrary to the product’s ad promises, the natural result was harm to Medallion’s reputation. The court found that this was not defamation per se because of the lack of an explicit statement, but there were enough factual issues that it might constitute defamation per quod. Maybe defamation law needs the Lanham Act’s doctrine of falsity by necessary implication?

Medallion did better with a defamation per se claim against defendant NPI, which told some of the other defendants that it was looking for a new supplier for the urine removal product because it was having problems with its current supplier (Medallion), including failure to deliver product on time, poor-quality product and inability to make orders. Medallion alleged that these statements were false. NPI argued that it didn’t identify Medallion by name and that it didn’t make the statement to one of Medallion’s competitors, both of which would be necessary for defamation. The court, unsurprisingly, disagreed. There was evidence in the record to create a triable issue that the other defendants knew who NPI was talking about; also, given that the other defendants could supply the product, they were competitors (not sure why that matters for defamation anyway). Summary judgment was denied.

The court also denied summary judgment on defendants’ counterclaims for trade libel and defamation based on plaintiffs’ complaints to the FTC and to third parties. There were material issues of fact on plaintiffs’ defense of absolute privilege (which would require a pending FTC investigation) and qualified privilege (as to which there’s a fact issue on plaintiffs’ good faith). Moreover, plaintiffs’ statements that defendants lied about having enzymes in their product and that the product didn’t work as advertised aren’t, as a matter of law, subject to an “innocent construction” sufficient to avoid liability for defamation per se.

The awful truth: "degrading" but true statements ok

Goldic Technology, Inc. v. Maxmile Corp., 2008 WL 5096866 (Cal.App. 2 Dist.)

Here’s a quirky little case: Goldic sued Maxmile for, among other things, breach of a settlement agreement that barred communications that “defame, libel, slander or degrade” Goldic’s products, based on a flyer that contined “true but unflattering” statements about Goldic’s products. The trial court ruled that truth did not degrade; Goldic appealed.

The parties compete to sell electronic Chinese/English dictionaries. Goldic sued a bunch of defendants, including Maxmile, in 1997; in 1999 the parties settled. Their agreement contained the language quoted above.

In 2005, Goldic introduced a new electronic dictionary. Maxmile distributed a Chinese-language flyer in its stores saying that Goldic’s new product “Makes Mistakes in its own Example Sentences!” The flyer listed 12 examples, and went on: “Erroneous machine translation, misleading the children, misleading other people and hurting business!” It concluded: “Please note that [Goldic] does not guarantee the accuracy of translation, and it specifies that the manufacturer shall not be held responsible for ‘any and all disputes or legal responsibilities’ resulted [sic] from the result of translation!”

The trial court entered a preliminary injunction, ruling that these statements, even if true, could reasonably be interpreted as degrading in violation of the contract; any harm to Maxmile’s freedom speech came from a voluntarily incurred obligation. At trial, the only remaining cause of action was breach of contract, and the parties agreed to have a bench trial on contract interpretation.

At trial, Maxmile’s principal testifed that “erroneous machine translation,” “the machine will also mislead the children,” and “the machine will mislead people,” were his opinions. Goldic’s president testified that the alleged erroneous translations were accurately reported, and he notified his software company of the problems.

After trial, the court found that the contract was not ambiguous, and that “degrade” did not cover true statements. The evidence established that Maxmile’s statements were accurate; there were only two competitors in the Chinese electronic dictionary market; and that Goldic’s own ads touting its products’ advantages could be interpreted as drawing unflattering comparisons with Maxmile, and thus would violate the settlement agreement under Goldic’s definition. The court found it significant that the original cause of action was based on false statements. Thus, it ruled that the parties had not intended to make “degrade” cover truth.

The court of appeals agreed. The parties provided guidance to their intentions by incorporating Goldic’s allegations of false advertising into the settlement agreement. This context trumped the dictionary meaning of “degrade.”

Comment: this is why lawyers like to use terms that have hardened into concrete over time, even if it leaves us with a lot of meaningless leftovers.

criticizing other women's pleasures

Beyond the valley of the doilies: Salon’s Joy Press did an interview with Jessica Helfand, a design critic/graphic designer who teaches at Yale, about her book on scrapbooking. In the interview, Helfand says a lot of interesting things about gender, pleasure, and creativity, three things that are rarely recognized as being bound together. Helfand is a firm believer in a certain kind of elite standard—“It's at once horrifying and fascinating to witness the degree to which design is being discussed online by people whose concept of innovation is measured by novel ways to tie bows,” she wrote—but she also found herself more sympathetic to scrapbookers than she expected.

The interviewer describes scrapbooks as often “cheesy and sentimental and generic,” but also “hands-on design as practiced by regular people rather than artists -- an attempt to represent everyday experience through visual culture.” Why are professional writers always so shocked to find out that many, many people want to recognize the creative potentials in their own lives? Of course most of the results are bad; that’s just Sturgeon’s law. But we sing to our kids even though we’re not good at it (I know I’m not); being good isn’t the point.

Anyway, Helfand calls scrapbooks “the original open-source technology, a unique form of self-expression that celebrated visual sampling, culture mixing, and the appropriation and redistribution of existing media.” Apparently the Gutenberg parenthesis had some parenthetical interventions of its own.

I’m interested in scrapbooks because of the way they employ copying, or physical appropriation, in the service of self-production: scrapbookers define themselves by what they take from the rest of the world. As, in the end, we all do, but the scrapbook foregrounds the materiality and creativity of the project of self-construction from found objects.

Helfand discussed the pleasure that people—mainly women—find in scrapbooking, and her discomfort with the $2.6 billion industry that, she argues, talks down to them: “Why are women targeted in this treat-them-like-13-year-olds way? I went to one of these scrapbooking retreats, and it's all these women in their pajamas with snacks -- Hostess Twinkies everywhere! There's something about junk food being part of this. It's like, no husbands, I'm going to let myself go and look at pictures of my family and eat Twinkies.” She references a study called “Making Me Time,” “about the creative crisis of the stay-at-home mom who needs to feel she's doing something with her day. The physicality of putting pen to paper and grease pencil to word fetti is making them feel they're doing something.” I’m reminded of Janice Radway’s Reading the Romance: one thing a romance-reading hobby does is give a busy woman an excuse to turn away from her family and spend some time on self-care. Should the fact that Harlequin profits from this disturb us? Or are some kinds of profit more acceptable than others?

The answer, at least for scrapbooking, might lie in how much the premade materials enable creativity and how much they constrain it. Helfand likes messy scrapbooks, not stereotyped ones. Though I should admit that this too is a design preference with a particular cultural and class background: she points out in the interview that many scrapbookers like premade stickers because they don’t trust their own handwriting and spelling; maybe the ultimate solution is to convince them that their writing is worthwhile anyway, but that’s going to be a hard sell—it really will make the scrapbooks harder to show other people. It’s hard to condemn someone who wants her scrapbook to be a better version of herself.

At the same time, there’s something of value lost in that we now seem to be performing ourselves even in the most intimate aspects of our lives. As Helfand says, “I have a theory that contemporary scrapbooking is a little bit of a reflection of reality TV. … People want to gussy themselves up. … So you take this scrapbooker, and she's thinking, I'm overweight and I don't want a picture of myself in the scrapbook, but I do want to show off my cute kids and pretty pink ribbons. It's this externalizing idea of, I want this to look good for everyone else so if I ever get famous my scrapbooks will show that I'm perfect. But the whole purpose [of scrapbooks originally] was to celebrate the everyday.” Being famous to fifteen people, as opposed to being friends with fifteen people, changes our relationships to them and to ourselves. Abercrombie and Longhurst’s Audiences: A Sociological Theory of Performance and Imagination gets into this (as does Veronica Mars, in a different way).

DMCA Circumvention Exemption Requests

List here. I am especially interested in the EFF's, which requests (along with a cellphone unlocking exemption) an exemption for circumvention that results in the creation of noncommercial videos using clips that qualify as fair use. This comes on the heels of Peter Decherney's success last time, which he is attempting to repeat, in getting the Copyright Office to recognize classes of uses/users defined by fair use. The idea is that the noncommercial clipping exemption would piggyback on a fair use determination, so that fair uses would not be deterred by the threat of DMCA liability, but there would not be a blanket exemption for clipping. Given the widespread practice of making fan videos, this is an exemption of particular interest to media fans.

Further evidence that the brain has no use in commerce requirement

Which is part of what makes dilution such a useless and misguided concept:

Guy #1: I think I'm going to go to Fortunoff's after work tomorrow to get the ring.
Guy #2: Why don't you just go to that place around the corner? You know, uh... Stephanie's!
Guy #1: You mean Tiffany's?
Guy #2: Yeah! Tiffany's!

--Financial District

From Overheard in New York

Chippendale's costume registration

The TTABlog notes that a hearing on the appeal of the denial of the registration of this design is coming up. Further from Likelihood of Confusion and the Las Vegas Trademark Attorney.

According to the application, "The mark consists of a three-dimensional human torso with cuffs around the wrists and neck collar comprising of a bow tie. The dotted lines in the drawing indicate placement of the mark. The matter shown by the dotted lines is not claimed as a part of the mark and serves only to show the position of the mark." PTO practice is not my specialty, but I'm not sure this actually makes sense: If the fact that the torso wearing the collar and bow tie is unclothed is not part of the mark, then any man in an outfit with cuffs and a bow tie is copying the Chippendale's mark. One might respond that lack of confusion will generally avoid infringement, but is that really how we want to think about it? I also note that the design codes include three referencing the underlying/underclothed man, which suggests that the torso is indeed part of the mark:
02.01.19 - Athletes (men); Golfer; Men, athletes, strongmen; Strongmen
02.01.31 - Men, stylized, including men depicted in caricature form
02.01.39 - Bathing suits, men wearing; Nude men, men wearing underclothes, bathing suits or brief attire; Underwear, men wearing

There's probably something here worth analyzing in terms of trademark and gender, but I'm not prepared to do it right now.

Repost: thoughts on taking my exams

I wrote a post here that still accurately describes my general attitudes towards exams. Previous copyright and trademark exams are also available at my website.

Dan Solove and Eric Goldman on 230 issues

Via Doug Lichtman: IP Colloquium is his podcast site, where you can find, currently, his opening interview with the EFF's Fred von Lohmann, a discussion of Bilski, and most recently a pair of discussions with Dan Solove and Eric Goldman focusing on 230's protections and its limitations from a policy perspective. If you regularly read this blog, then the discussions are probably not targeted at you (though you can get free CLE credit in California and New York, and apparently other jurisdictions are coming soon), but if you know generalists who want to learn more about IP issues, this could be a painless way for them to do so. The podcast will be a regular thing, and you can subscribe in iTunes.

Semi-falsity: California law rejects Lanham Act implicit/explicit divide

Silicon Image, Inc. v. Analogix Semiconductor, Inc., 2008 WL 4974325 (N.D. Cal.)

Silicon sued Analogix for copyright infringement, trade secret misappropriation, and unfair competition/false advertising. The false advertising was that Analogix allegedly promoted its microchip as “drop-in replaceable” with Silicon Image’s chip, misleading customers to think that they could use Silicon Image’s configuration software with Analogix chips even though Silicon Image’s software license agreement prohibits such use.

Silicon Image conceded that Analogix’s source code was not substantially similar to its own. The copyright infringement claim was thus based on a single email between Analogix employees containing Silicon Image source code. Analogix argued that this could not support an award of injunctive relief or damages. (Statutory damages were unavailable for want of timely registration.) The court held that, under the circumstances—where Silicon Image had alleged that Analogix went to great lengths to misappropriate confidential Silicon Image information—a past infringement could support an injunction against future infringements of different copyrights. (It remains to be seen whether there was actually an infringement under US law—the email was sent between two employees in China, though the email was stored on a server in the US; under the “volition” test for direct infringement, server storage may be insufficient. Without any actionable infringement at all, presumably there's no basis for injunctive relief even if the court determines that Analogix is a bad actor.)

Analogix argued that there was no extrinsic evidence that consumers had been deceived by its allegedly false advertising. Silicon Image had evidence that Analogix chips weren’t software-compatible even though they were pin-compatible and register-compatible, and that this divergence prevented them from being truly “drop-in replaceable.” Silicon Image’s claim was brought under California state law, which doesn’t make the explicit/implicit distinction found in Lanham Act jurisprudence. Thus, all Silicon Image needed to establish was that the ad claims were likely to deceive a reasonable consumer, and it need not provide survey or other evidence of actual deception. The meaning of “drop-in replaceable” to a reasonable target consumer was a trial issue.