Monday, June 30, 2008

The sweet smell of injunctive relief

Here's news on the latest round in the Splenda wars. The pictures above show infringing Giant packaging and noninfringing Safeway packaging.

McNeil Nutritionals, LLC v. Heartland Sweeteners LLC (E.D. Pa. June 26, 2008)

McNeil sued Heartland for making packaging for its generic sucralose that was too similar to McNeil’s Splenda packaging. The district court initially handed Heartland a comprehensive victory; the Third Circuit reversed in part, finding that as a matter of law the likelihood of confusion factors weighed in favor of McNeil as to certain versions of the private-label packages, so that on remand the district court would have to consider whether injunctive relief was appropriate as to those versions. The district court, following instructions, granted the requested relief, noting that the packages at issue have been redesigned to be less like the Splenda packaging but that substantial inventory ($340,000) of the old versions remains.

Given that McNeil had, by appellate mandate, a likelihood of confusion, the court only had to evaluate the other elements of the claim—starting with the distinctiveness of the trade dress at issue and its nonfunctionality. The images of sweetenable food and coffee on the packaging, the court held, were descriptive rather than suggestive, given that other producers use similar images to communicate the message that the product was a sweetener. However, the court also found persuasive Second Circuit precedent that packaging choices are almost unlimited, and thus typically packaging trade dress will be inherently distinctive. It’s the combination of standard and descriptive elements that is likely to be inherently distinctive overall.

Notably, though Wal-Mart distinguished packaging from product design, this rationale is exactly the same rationale as that provided for holding product designs inherently distinctive. I don’t think it holds up much better here. The outcome is that the inquiry will hinge, not on the protectability stage, but on the multifactor likelihood of confusion test, so that a packaging design with no secondary meaning might still sometimes prevail.

Anyway, Splenda’s trade dress—the combination of pictures, colors, labeling, and layout, including the product name’s prominent placement on the package surrounded by a distinctive white cloud—was therefore inherently distinctive. The court rejected Heartland’s arguments that the trade dress was merely a combination of standard design elements. It distinguished other cases finding trade dresses not inherently distinctive, because they were mere variations on customary designs, as fact-specific. Before Splenda, the particular color scheme at issue was not used in the sweetener marketplace.

In any event, McNeil showed secondary meaning because of Splenda’s spectacular success in the market. McNeil’s evidence of success was general, and Heartland argued that the advertising and promotion didn’t aim at increasing recognition of the packaging, as opposed to the brand name. But the court reasoned that it could consider more than only “look for” or other trade-dress-focused ads. “It seems illogical to conclude in the context of a product packaging trade dress case that just because McNeil’s advertisements do not contain language saying ‘Look for Splenda in this packaging,’ they are not probative of secondary meaning. … [A] Splenda package has been featured in nearly every Splenda television commercial and print advertisement.” In addition, other factors, including the length of use and the fact that Heartland copied Splenda’s packaging, supported a finding of secondary meaning.

Likewise, the packaging was nonfunctional. Heartland argued that the use of yellow, photos of food and beverages, and the size and shape of the packages were functional. But the trade dress was the overall appearance of the product, not individual elements. McNeil wasn’t arguing for a ban on the use of yellow, pictures of food and beverages, or a particular size and shape.

The context of this case, where the gestalt issue of likely confusion has been decided by a different decisionmaker than the one considering functionality, highlights the ways in which this "overall appearance" rule creates some interesting conceptual problems. Assuming that the color, photos, and size and shape are in fact functional, McNeil can’t stop anyone from using them. But it is inarguably the case that the confusing similarity here is largely—if not entirely—based on the combination of color, photos, and (probably to a lesser extent) the size and shape. That will regularly be the case when courts refuse to filter out functional elements of trade dress from their confusion analysis. So one who wishes to copy all the functional elements of the Splenda trade dress may have to stay further away from the nonfunctional elements of the trade dress, whatever they are. (What are they? The court doesn't say. The absence of other identifiable trade dress elements that Heartland copied is one reason, I suspect, the court focused so much in its earlier opinion on the presence of house marks on the Heartland products. The presence of a house mark is arguably all that's needed to prevent unfair competition when there's a right to copy the rest of a configuration.)

What about the other parts of the test for injunctive relief? Trademark infringement risks loss of control of reputation and potential damage to goodwill, which is regularly treated as irreparable injury, even without actual damage. Without considering eBay (and I’m not suggesting it should have!), the district court relied on 1950s Third Circuit precedent that likely confusion leads to the “inescapable conclusion” that there’s irreparable injury.

On hardship to Heartland, Heartland’s alleged lost sales would not constitute irreparable harm, because such losses are compensable by money damages and are taken into account by the bond posted by the plaintiff. The public interest is in not being confused, so essentially automatically favors the plaintiff who’s shown a likelihood of confusion. As a result, the injunction issued.

Propaganda: sauce for the goose edition

Michael Arrington, of TechCrunch, writes in The A.P. Has Violated My Copyright, And I Demand Justice:

As far as I can tell, the Associated Press is sticking by its ridiculous and unlawful assertion that "direct quotations, even short ones" are copyright infringements and result in lawsuit threats and DMCA takedown notices.

… [N]ow the A.P. has gone too far. They've quoted twenty-two words from one of our posts, in clear violation of their warped interpretation of copyright law. …

Am I being ridiculous? Absolutely. But the point is to illustrate that the A.P. is taking an absurd and indefensible position, too. So I've called my lawyers (really) and have asked them to deliver a DMCA takedown demand to the A.P. And I will also be sending them a bill for $12.50 with that letter, which is exactly what the A.P. would have charged me if I published a 22 word quote from one of their articles.

(I should probably note that I mean "propaganda" as a neutral term. Arrington's move is concededly not meant to assert actual legal rights, but rather to point out that the A.P. itself depends on the system of free quotation for news purposes. The move to claim rights over tiny quotes--and even the response that such use is fair use rather than not even rising to the level of copyright infringement--is dangerous for reasons Justin Hughes explores in Size Counts (or Should) in Copyright Law, 75 FORDHAM LAW REVIEW 575 (2005). I do wonder whether Arrington's lawyers can ethically file such a DMCA notice, under either the DMCA or general principles governing lawyers' conduct.)

Friday, June 27, 2008

230 protects another review site; Lanham Act claims also fail

Eric Goldman points to Nemet Chevrolet Ltd. v., Inc., 1:08CV254 (E.D. Va. June 18, 2008) and the related CMLP page with links to source documents. ConsumerAffairs is a website that hosts third-party consumer reviews of various products and services, including Nemet’s. Nemet sued ConsumerAffairs for defamation, tortious interference, and Lanham Act false advertising claims based on bad reviews posted by consumers. Section 230 got rid of the first two claims quite easily.

Nemet also brought claims under §43(a)(1)(A) and (B). The court held that Nemet lacked standing as a matter of law no matter how the Lanham Act claim was framed. Among other things, this follows the unfortunate trend of using “standing” as a catchall for failed claims, which is problematic because sometimes (though not here) it substitutes for actual factfinding. Here, the “standing” problem was that the parties weren’t in competition—what courts would formerly have called a failure to properly allege that the allegedly false claims appeared in “commercial advertising or promotion.”

Of course, you might be wondering, “Since when is competition a requirement for trademark infringement? That went out of style a century ago!” Or you might be wondering, “Doesn’t §230 also knock out the false advertising claim, which is not an intellectual property claim?” Good questions; sadly, the second isn’t answered by the opinion at all.

To answer the first question, it might help to know that the §43(a)(1)(A) claim was that the name “Consumer Affairs” diverts consumers by making them think that defendant is some sort of official or governmental body, which is also the basic gist of the §43(a)(1)(B) claim. So Nemet wasn’t making the standard false endorsement/affiliation trademark claim that disgruntled plaintiffs make against internet critics. It was just making a §43(a)(1)(B) claim that for some reason (§230?) it packaged as (a)(1)(A) as well. The court therefore held that the alleged harm is not the type of harm the Lanham Act seeks to prevent, given that the parties don’t compete. It applied the Conte Bros. standing test, and for once I don’t mind so much. The (a)(1)(A) problem is that Nemet doesn’t own any relevant marks or otherwise have any connection to any false association/affiliation with a consumer affairs agency. This is more of a real standing problem than most “standing” challenges these days.

Even if Nemet had standing, the court continued, its unfair competition claim would fail as a matter of law. Here the court proceeded as if Nemet had brought a false endorsement claim and relied on the unrelatedness of the parties’ goods and services, which is a bold move on a motion to dismiss. Unrelatedness can’t really justify dismissal as a matter of law without some other policy concern in play—here, protecting critics. At the very least, it’s not “unrelatedness” in general that justifies dismissal, but the unrelatedness of the specific service—providing consumer reviews—to any product or service reviewed.

Likewise, and getting to the better reason for dismissing the false advertising claim, the court found that even if Nemet had standing it couldn’t show the necessary competition to make defendants’ statements count as “commercial advertising or promotion.”

As for inquiry into whether §230 bars false advertising claims, that will have to await another day.

Thursday, June 26, 2008

Stealth marketing of medical services on YouTube

This NYT feature on doctors who give consumers incentives to post doctor-created ads as their own contributions to YouTube raises some important advertising law questions, intertwined with the ethical ones.

LAST September, Michelle Wilder left Dr. Emil W. Chynn of Park Avenue Laser armed with ... a DVD of her Lasek surgery ....

Her viewing pleasure was not Dr. Chynn’s only concern. He hoped Ms. Wilder would be so thrilled with her results that she would post the 10-minute video on YouTube, along with his credentials, a link to his Web site, and a rave review.

As an incentive, Dr. Chynn offered either a free Botox injection worth $400 or a $100 discount on the $5,000 Lasek operation ....

First of all, nothing in the article indicated that consumers actually produce the ads themselves. ("Some have been produced by marketing companies like Spore Medical or SalemGlobal Internet both of which began offering video packages in the last year, while others have been videotaped and edited by a staff member.") At the very least, the ads are subject to standard regulations on endorsements and testimonials, and they should be disclosed as ads. Moreover, some of the testimonials are actually false, in clear violation of the law (see sec. 255(a), "Endorsements must always reflect the honest opinions, findings, beliefs, or experience of the endorser"):

A Benjamin was enough to silence one dissatisfied patient, who asked to remain anonymous because he is still undergoing treatment for an operation he had done about six months ago. Never mind that the video went up almost immediately, before he had time to heal, he said. “Regardless of whether I’m happy — that’s not going to stop me from posting,” he said. “It’s money in my pocket.”

As it turns out, he isn’t satisfied with his results, but he hasn’t taken down his glowing endorsement.

An ethicist asks, “If a patient voluntarily surrendered their privacy by having their procedure filmed and posted in trade for a financial cut on a service, what’s wrong with that?” The FTC, however, takes a different view.

Tuesday, June 24, 2008

Lawyer's banquet

Everyone needs something to do when traveling; what I do is look for IP issues. This image of a Rolling Stones album and song name, along with the name of the Rolling Stones themselves, appears in an ad in the May 2008 issue of SkyMall. Given cases like Yeager, how much money would the makers of this iPod case have to spend to defend against a Lanham Act claim for false endorsement by the Rolling Stones? Let's not even start on the copyright claim over the album cover.

consumer confusion in the under-3 set?

An anecdote, for whatever it’s worth: when my 33-month-old son saw me take Goodnight Bush out of the mailer, he said, “That’s my book!” When I explained that it wasn’t Goodnight Moon and we compared the two side-by-side, he said, “They match!” Then he insisted that I read him Goodnight Bush, though he soon lost interest. I don’t think his reactions are all that significant in terms of consumer confusion, given that a kid familiar with Goodnight Moon is unlikely to (a) be the purchasing agent or (b) be in the market for a second copy.

(Keep an eye on the Georgetown IP Teaching Resources RSS feed for a couple of scans for comparison purposes. Also, the news & reviews section on the official site, linked above, appears carefully culled for litigation purposes, focusing on the repetition of “political” and “parody.” Here’s hoping it works!)

I found some of the “goodnights” bitterly funny—my favorite was the blank page “goodnight air” changed to “goodnight allies.” The Twin Towers are alphabet blocks; Jesus rides a toy dinosaur for “goodnight evolution.” All in all, it’s more satire than parody, to the extent that one can tell the difference, though it does highlight the surrealism of the original Goodnight Moon as well.

Monday, June 23, 2008

Authorship, authenticity, advertising and ownership

Societe Civile Succession Richard Guino v. Beseder Inc., 2008 WL 2463770 (D. Ariz.)

The Societe moved for reconsideration of the court’s earlier ruling awarding defendant Jean Emmanuel Renoir $45,000 in lost profits for its false advertising counterclaim. See earlier discussion here: basically, the Societe advertised some Renoir-Guino works as originals. The court sustained the jury’s verdict that they were inauthentic and/or unauthorized, and that this was false advertising.

The court considered the motion under Rule 59(e), as a motion to alter or amend the judgment. Such motions are rarely granted—only when something has unexpectedly changed or gone so badly wrong that a manifest and critical error needs correcting. The Societe argued that a dispositive element of a false advertising claim was missing—it didn’t own any of the falsely advertised sculptures at issue in the case.

The court believed that, whether or not the Societe owned the sculptures, false statements about them could ground a false advertising claim. But the Societe argued that “commercial advertising” under the Lanham Act requires that a statement must be made “for the purpose of influencing consumers to buy defendant’s goods or services.” Coastal Abstract Service, Inc. v. First Am. Title Ins. Co., 173 F.3d 725, 734-35 (9th Cir. 1999) (emphasis added). However, the district court held, this language was merely adopted from a Fifth Circuit case, not discussed, and there was no reason to think the 9th Circuit meant to restrict false advertising claims “solely to instances where false statements are made to influence consumers to buy the accused’s own products.” In fact, other 9th Circuit cases make clear that a false advertising claim may be based either on statements about one’s own products or about another’s products; it is sufficient if the statement is made for the purpose of influencing consumers not to buy a competitor’s products. Thus, there was no manifest error of law or fact, even if the Societe didn’t own the sculptures.

This seems like fancy footwork on everyone’s part. The court’s ruling is certainly reasonable given the procedural context, but it bucks the trend on standing, which is how these competition issues are usually resolved these days (rather than by the weird test for what counts as “commercial advertising”). For the same reasons, the Societe’s argument seems like a different way of making the same argument that it wasn’t in competition with the defendants that it already lost before.

Sunday, June 22, 2008

Yeager's publicity claim proceeds at Mach 1

Yeager v. Cingular Wireless , 2008 WL 2413167 (E.D. Cal.)

Chuck Yeager (wikipedia for the unofficial biography) is a man of many accomplishments, including becoming an “ace in a day” in WWII by downing five enemy fighters in one mission. He then became a test pilot, and flew the first plane to break the speed of sound (Mach 1). He’s made commercial use of his identity.

In 2006, defendants issued a press release (or, as the court said, an “advertising/promotional article (the ‘publication’) styled as a ‘Press Release’”) highlighting the reliability, durability and security of their cellular network. It focused on a new service for responding to disasters or emergencies and continuing to provide cell service. The press release states:

“Nearly 60 years ago, the legendary test pilot Chuck Yeager broke the sound barrier and achieved Mach 1. Today, Cingular is breaking another kind of barrier with our MACH 1 and MACH 2 mobile command centers, which will enable us to respond rapidly to hurricanes and minimize their impact on our customers.”

Yeager alleged that this reference harmed his ability to get sponsorship agreements with other phone providers. He sued for violations of the Lanham Act, California common law and statutory rights of publicity, unjust enrichment, and state-law false advertising.

Cingular argued that the First Amendment barred the claim, because the press release was news and addressed a matter of public interest. Yeager argued that the release was commercial speech and sought to capitalize on Yeager’s identity. Under California precedent, the First Amendment doesn’t protect commercial speech that uses a plaintiff’s identity without his or her consent to promote an unrelated product. Using identity as “illustrative” or “window-dressing” for a commercial theme isn’t protected by the First Amendment.

For purposes of the motion to dismiss, the court accepted Yeager’s allegation that the press release was an “advertising/promotional article,” and used his name and reputation to promote Cingular’s unrelated product. These allegations were not contradicted on their face by the text of the press release, though the court explicitly noted that a different result might obtain at a later stage. The court could not find as a matter of law that the press release was a “news release on emergency preparedness,” as Cingular argued.

Cingular also argued that Yeager’s achievement in breaking the sound barrier was within the public domain, so that reference to it could not sustain a Lanham Act claim. The Lanham Act claim requires Yeager to show that a false or misleading representation is likely to deceive consumers as to association, sponsorship or approval—in other words, that there was likely confusion over whether Yeager endorsed Cingular. In a court bound by White, Wendt, Abdul-Jabbar, and the like, you can guess the outcome. Yeager’s allegations were sufficient to state a claim. His interest in his name and identity was created by his own actions, and not in the public domain.

Cingular then argued that the use of Yeager’s name was merely incidental and was nominative fair use. The court agreed with Yeager that these defenses were premature—they should be addressed on summary judgment. On a motion to dismiss, where the court is limited to the pleadings and all reasonable inferences must be made in the plaintiff’s favor, it’s highly unusual to hold that a defendant has proven an affirmative defense.

An incidental use is one that has no commercial value, given the role it plays in the publication as a whole. The Restatement (Second) of Torts says in comments that “a plaintiff’s name is not appropriated by mere mention of it,” and that there’s no claim when a name is published “for purposes other than taking advantage of his reputation, prestige, or other value associated with him.” The court noted that this defense generally applies to the right of publicity, not necessarily to the confusion-based Lanham Act claims, but found it unnecessary to resolve the issue. Yeager properly alleged that the reference to him was made to use his reputation to benefit Cingular, in order to sell its products and services. That was enough.

As for nominative fair use, the usual interpretive issue arose (illustrating why putting the burden on the defendant to establish the defense is significant). The court didn’t address the first two elements, but they’re pretty easy: Yeager isn’t readily identifiable without using his name, and all Cingular did was use his name. It’s the third New Kids element that will kill you: “the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.” Naturally, Cingular argued that it only used Yeager’s name once, not in connection with any product or service it was selling, and not as a (conventional) ad. Thus, nothing suggested sponsorship or endorsement.

But what is this “nothing” that Cingular must (not) do? Is it “nothing else” other than use a mark as necessary to identify the subject of discussion? In that case, lots of things are nominative fair use. However, Abdul-Jabbar essentially held that mere presence of a celebrity’s name in a conventional 30-second car ad can itself be enough to defeat nominative fair use, because any celebrity appearance is generally understood as an endorsement in that context. That result suggests that “nothing” is a bit more conceptually tricky than it could be.

Because Yeager alleged that the press release was an “advertising/promotional article,” and that the reference to him was likely to cause confusion, the court held that it could not find “as a matter of law that defendant’s reference to plaintiff in the publication makes no suggestion of sponsorship or endorsement by plaintiff.” This only makes sense if we accept the idea that reference alone can be the necessary “something.”

I don’t think Abdul-Jabbar is crazy to say that the context of a comparison to a celebrity achievement in a 30-second car ad might be likely to suggest endorsement, though that conclusion makes the nominative fair use test a heck of a lot less useful and a lot more obviously a matter of judicial mind-reading of consumers. But even under Abdul-Jabbar, the fact that the ad was a conventional TV ad was the “something” for purposes of New Kids factor 3. A press release, even if it is commercial speech (which I think it is), does not carry the same consumer expectations—if being commercial speech is “something,” then nominative fair use is dead.

Thus, all of Yeager’s claims survived.

My general reaction: This is why the current right of publicity is a terrible, terrible thing. If some people think Yeager is somehow associated with Cingular because of this press release making a single textual comparison with a historical event, that’s because trademark owners have convinced people that ridiculous ownership claims must be okay. The law should not work to prevent this tenuous and immaterial confusion. Suppose Cingular had truthfully said “a test pilot” broke the sound barrier, and Yeager had alleged that the general public would recognize that this was a reference to him, which it undeniably is? What logic makes this motion come out any differently under those circumstances (at least under the Lanham Act and California common law, which have no “name” limit)? How much of history does Yeager own?

And I’m deeply worried that the search for an external limiting principle, which understandably has often been the First Amendment, will succeed in a way that harms advertising regulation overall. That is, while I hope that more courts will stand up against overreaching publicity claims, if they use the First Amendment to do so, I fear the doctrine they create will be applied in real false advertising cases, not just in cases where the only alleged harm stems from a right of publicity/endorsement claim.

Canvas on Demand and copyrightability

Patry's recent post on Meshwerks, which addressed the copyrightability of certain digital models of cars, came to mind when I came across an ad for Canvas on Demand, which takes photos and puts them on canvas, either in photorealistic fashion or with a brushstroke-like effect. The site explains:
PhotoRealistic™ Style
Our artists evaluate your image then balance and enhance the color, then adjust the sharpness and contrast levels accordingly. We repair minor imperfections and optimize for canvas. Choose this style when you want to maintain the integrity of the original, when the photo has a group of people and the faces will be small or for landscapes with fine detail that you wish to maintain.

BrushStrokes™ Style
We follow the same process as photorealistic, then, using a specialized tablet and stylus create brushstrokes by hand to give a beautiful painterly effect. Choose this when reproducing portrait style photo where the subject’s faces are prominent or anytime you wanted the look of a traditional oil painting.
(Side note: those are silly trademark claims for generic terms.)

There are interesting questions about whether Canvas on Demand produces copyrightable derivative works in either case. Both with photorealism and brushstroke effects, there are decisions to be made--the site positions them as artistic decisions--but there is also an attempt to achieve a certain result, and even if the process requires time and skill, that doesn't necessarily translate into copyrightability. I don't think the questions are very different as between photorealism and brushstrokes. There may be a greater concern with the photorealistic versions for interfering with others' ability to create their own photorealistic versions of the originals, but both are medium translations, and both processes might be used to create either copyrightable derivative works or uncopyrightable reproductions, depending on the specifics.

Sunday, June 15, 2008

HerbaQuit told to commit to quit suing

Natural Answers, Inc. v. SmithKline Beecham Corp., --- F.3d ----, 2008 WL 2390483 (11th Cir.)

Natural Answers (for a past interaction with the Lanham Act, see here) claimed that defendants (GSK, for GlaxoSmithKline) infringed its rights in the unregistered mark HerbaQuit Lozenges and falsely advertised Commit Lozenges as “the first and only stop smoking lozenge.” The district court granted GSK summary judgment, and the court of appeals affirmed.

From 2000 to 2002, Natural Answers sold HerbaQuit, which was designed to “help satisfy cravings related to the smoking habit,” particularly the “psychological and habitual aspects of smoking.” (Ah, the distinction between supplement and drug claims, how I despise you.) In March 2001, Natural Answers solicited GSK for a joint venture promoting HerbaQuit; GSK declined the next month. By early 2002, Natural Answers ceased selling the product because it lacked the ability and resources to do so, though it did unsuccessfully solicit Philip Morris for a joint venture in December 2003.

In November 2002, GSK launched Commit Lozenges as “the first and only stop smoking lozenge.” Commit is FDA-approved and, unlike HerbaQuit, contains nicotine to deal with withdrawal from smoking.

The district court granted summary judgment on the false advertising claims on the grounds that Natural Answers couldn’t show any injury, because the two lozenges were never marketed or sold at the same time. Moreover, the court found that the ads weren’t false, because under the applicable laws and regulations, Natural Answers couldn’t market HerbaQuit as a smoking cessation (“stop smoking”) product. On the trademark claims, the court held that no reasonable juror could find a likelihood of confusion between HerbaQuit and Commit.

Rather than starting the trademark analysis with the obvious lack of likely confusion, the court of appeals began with abandonment. Abandonment under the Lanham Act requires that a claimant cease use of the mark and have an intent not to resume use in the reasonably foreseeable future (which is not the same as an intent to abandon). Such intent can be inferred from circumstances. Nonuse for 3 years creates a rebuttable presumption of the requisite intent. GSK was entitled to this presumption, shifting the burden of production (though not persuasion) to Natural Answers. The court of appeals found that any reasonable factfinder would find abandonment. The assertions that Natural Answers intended to resume use if it could find funding and/or a partner were insufficient; if that was enough, “no trademark would ever be abandoned.”

The court then found that Natural Answers lacked prudential standing to bring a false advertising claim. Under the terrible Phoenix of Broward decision (as well as under more sensible rules), Natural Answers lacked a sufficient interest to justify standing. As readers may recall, there’s a 5-factor test: (1) is the injury of the type Congress sought to redress in the Lanham Act; (2) how direct/indirect is the injury; (3) how proximate is the plaintiff to the defendant’s harmful conduct; (4) how speculative is the damages claim; and (5) what are the risks of duplicative damages/complexity in apportioning damages? Because the parties weren’t ever in direct competition, this inquiry didn’t go well for Natural Answers, as one might imagine.

First, this isn’t the type of injury Congress sought to redress: commercial interests in avoiding a competitor’s false advertising and avoiding the appropriation of reputation and goodwill. Natural Answers couldn’t lose any customers or potential customers from GSK’s ads, because it didn’t have any at the relevant time. Second, there’s no direct relationship between the allegedly false claims and the claimed injury. All Natural Answers alleged was that the “first and only” claim influenced purchasing decisions, harming HerbaQuit’s brand value if and when HerbaQuit returns to the market, but that can’t have caused lost sales or market share or increased promotional costs, all of which were at zero. (It does seem to me that there’s a story to be told that the presence of Commit on the market made it difficult or even impossible for HerbaQuit to reenter—but that would probably be true no matter what the marketing slogan for Commit was. I don’t think that unique products should be able to make false claims to consumers without constraint, but the Lanham Act might not be the way to go; also, as the court suggested, companies with non-lozenge smoking cessation products actually on the market have an incentive to challenge GSK’s ads if they make false claims.)

Finally, the suit presented a risk of duplicative damages, because if Natural Answers had standing, “then any company that ever had, will have, or, possibly, may have a smoking cessation product whose associated trademark could potentially be ‘weakened’ would have prudential standing.”

This standing problem defeated the state-law claims as well. Lanham Act analysis applies to common law unfair competition claims. And the Florida Deceptive and Unfair Trade Practices Act requires that the plaintiff have been “aggrieved” by the defendant’s conduct. The court of appeals held that the same lack of injury/lack of competition doomed the FDUTPA claim.

Friday, June 13, 2008

New article: User-generated Discontent

User-Generated Discontent: Transformation in Practice, 31 COLUM. J.L. & ARTS 110 (2008) (PDF). Using fanworks as a core example of transformativeness, I argue that creators' theories of fair use should inform fair use doctrine. In particular, I argue that there's a relationship between noncommerciality and fair use: investment in creating new works out of existing ones simply for the nonmonetary benefits of sharing those new works with others is a signal that transformative purpose is present, even if it lacks the traditional signals of transformativeness in commercial works like obvious parody. This also has implications for third-party hosts like YouTube.

Thursday, June 12, 2008

Stephen Colbert on the perils of IP overenforcement

On May 28, the Word featured Major League Baseball's attempts to bar Little League teams from using team names that emulate major-league teams without paying for more expensive, licensed uniforms. Colbert suggested that the appropriate response might be to stop referring to any MLB trademarks at all, and just talk about basketball and soccer. Like the Girl Scouts, Little Leaguers are not great targets. (And if teams wearing unlicensed jerseys are likely to cause confusion over source or sponsorship, but MLB-licensed jerseys can be purchased by anyone with the right amount of cash in hand, doesn't that mean that MLB is engaged in naked licensing and has lost its rights?)

Supplemental complaint: internet resale case survives summary judgment

Standard Process, Inc. v. Total Health Discount, Inc., 2008 WL 2337279 (E.D.Wis.)

Hey, an internet resale-of-goods case that isn’t entirely about ridiculous metatag/initial interest confusion claims! Yet somehow they take pride of place anyway. Standard Process sells dietary supplements through resellers; Total Health Discount resells them, but is not an authorized reseller. Standard Process bars authorized resellers from selling to any other health care professionals or businesses; selling via e-commerce including the internet; and selling Standard Process via retail directly to the general public, except behind-the-counter sales from pharmacies or health clinics.

Nonetheless, Total Health carries Standard Process products as one of its over 350 brands. Standard Process terminated one reseller after discovering his connection to Total Health, and sent Total Health a threat letter about its use of the Standard Process logo and pictures of Standard Process supplements on its website. As a result, Total Health removed the logo and the pictures (note: removing the pictures, while understandable, was caving to bullying; that’s an unwarranted demand), but continued to use the Standard Process name and product names in plain type. It also added this disclaimer at the top of its Standard Process page: “Total Health is not an authorized seller of Standard Process, Inc., products. Total Health purchases Standard Process supplements from authorized third parties for resale, and is in no way affiliated with, authorized, sponsored or related to Standard Process, Inc.”

The court denied summary judgment on Total Health’s first sale defense, because Total Health made other statements suggesting an affiliation with Standard Process: it referred to Standard Process’s 75th anniversary and described its accomplishments using the first-person pronouns “we” and “our.” In addition (and this really shouldn’t have counted, since it’s no evidence of affiliation), Total Health pays to show up in search results for “standard process.” Citing the terrible 10th Circuit Australian Gold decision, the court found that the undisputed facts didn’t establish that Total Health’s conduct was protected by first sale.

The same result applied to the nominative fair use defense. Given (1) the payment for display in search engine results, and (2) the use of “we” and “our,” the court couldn’t determine on summary judgment that Total Health satisfied the third prong of the New Kids test, which requires that the user “do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.” Again, (1) is ridiculous; first of all, buying the mark as a keyword isn’t a use “in conjunction” with the mark—at most, it’s use of the mark itself. And even if we make all inferences in favor of the nonmoving party, where’s a scintilla of evidence to suggest that buying keywords suggests sponsorship or endorsement? Nonetheless, the court cited Australian Gold and Promatek to the effect that the search engine purchases could cause initial interest confusion about whether Total Health was “favored or authorized.”

Standard Process also argued that Total Health engaged in false advertising under Wisconsin state law and the Lanham Act because the statement “Total Health purchases Standard Process supplements from authorized third parties for resale” is literally false. Standard Process claimed that, in fact, Total Health buys its supplements directly from Standard Process by using fictitious shell accounts in the names of individuals who opened accounts with Standard Process at the behest of Total Health. This, it argued, harmed its brand and goodwill because Total Health’s statements suggest that Standard Process doesn’t enforce its resale policy, leading to “hundreds” of calls and emails from end users and resellers asking whether Total Health is authorized and why Total Health is selling Standard Process products on the internet. (And this is a consumer harm because …?)

Total Health responded that its conduct caused no harm, and could only increase revenue. Moreover, it argued that its disclaimer is not literally false, since it buys Standard Process products from third party accounts who have authorized Total Health to place orders as their agent. And the “evidence” of confusion is actually from Standard Process account holders complaining about competition, not from consumers. Nor is any confusion material.

The court found that genuine issues of material fact precluded summary judgment here as well. A factfinder could conclude that the statement isn’t literally false, or that it is confusing to consumers who conclude that Standard Process has “changed its philosophy” that its products must be “provided within the context of an ongoing relationship” between an end user and an authorized retailer. (On the latter, really? I’d love to see the evidence that consumers think anything about whether Standard Process enforces its resale policy—I doubt they have any beliefs at all, whether correct or mistaken—my suspicion is that the issue is so immaterial that it never even rises to consciousness.) Moreover, a reasonable factfinder could conclude that the statement is literally false because Total Health is effectively buying for itself, which would mean that Standard Process wouldn’t be required to prove actual confusion. And the statement might be material because it induces consumers to buy the supplements without the advice of a health care professional. (Query: wouldn’t the appropriate remedy be a reformulated disclaimer, to the effect that these are legitimate Standard Process products, but Total Health isn’t an authorized Standard Process reseller?)

There was also an interesting dispute over Standard Process’s claim of intentional interference with contractual relations. Total Health designated the list of customers from whom it purchases Standard Process products as confidential and only for the eyes of Standard Process’s outside counsel. Standard Process claimed that it couldn’t make its case without sharing that information with the business side. But, since it wasn’t clear that the list was necessary to establish whether Standard Process used an enforceable contract, and it was undisputed that Standard Process would terminate every account on that list, causing Total Health to lose 18% of its business, the court refused to remove the confidentiality designation. “Under the circumstances of this case, it is understandable that Standard Process would like to control the sales and marketing of its own products and prevent Total Health from obtaining its products for resale. However, the court is not inclined to grant such relief in a discovery motion.”

Moreover, Standard Process didn’t submit evidence that there was a binding contract. Its unilateral resale policy didn’t establish a contractual relationship with its account holders. “Indeed, in return for account holders’ promises not to sell to other businesses, sell via the Internet, or sell in a retail setting directly to the general public, Standard Process commits to nothing.” It merely retained the option to stop doing business with account holders who act against its interest. That’s not a contract.

In addition, there was no evidence that Total Health interfered with a contractual relationsihp, or caused harm to Standard Process. The sales generated by Total Health could “easily” be a benefit to Standard Process, not an injury. (Isn’t this inconsistent with the reasoning on the false advertising claims?) Thus, Total Health received summary judgment in its favor on this claim.

Wednesday, June 11, 2008

Jaz hands: Joseph Abboud loses name to company he sold

Background from Counterfeit Chic here.
JA Apparel Corp. v. Abboud, 2008 WL 2329533 (S.D.N.Y.)

In a long and thorough decision, the magistrate judge concluded that noted fashion designer Joseph Abboud had transferred all rights to use his name in a commercial manner to JA Apparel, a menswear label he launched in 1987. He sold the label in 2000 for $65.5 million, along with the associated names, trademarks, etc., including “Joseph Abboud,” “designed by Joseph Abboud, “JOE,” “JA,” and similar or derivative terms. There was also a non-compete agreement lasting until mid-July 2007. Before that time, Abboud engaged in a number of activities preparatory to launching a new menswear line, “jaz,” though the launch itself was not during the restricted period. He presented the new line to manufacturers and negotiated (though did not execute) licensing agreements. Shortly after the restricted period expired, a trade publication identified the new line as coming out in Fall 2008 and showed pictures of the line. Abboud told the publication that he was free to use his name on marketing or advertising materials; his position was that he could use his name “in an informational way” to indicate that he was the designer of jaz, and that the only use prohibited by the transfer agreement was “trademark use.” Proposed ads used the phrase “by the award-winning designer Joseph Abboud.”

The basic problem was that Abboud’s reputation was built in building plaintiff’s goodwill; they grew up together. Having parted, would JA the person or JA the business get the goodwill associated with the name? For purposes of the litigation, Abboud conceded that he wasn’t seeking to use his name on clothes, labels, or hang tags, and plaintiff conceded that Abboud could be in the fashion business and could personally present jaz to prospective purchasers such as Bloomingdale’s. So the issue was whether Abboud could use his name in advertising or marketing materials.

As a matter of contract interpretation, the court agreed with plaintiffs that the agreement transferred more than “trademark use,” and instead granted “the exclusive right to use [Abboud’s] name in connection with goods and services” or “for commercial purposes.” Abboud retains the right to be himself and to make media appearances as himself, or as a fashion expert, but not to use his name and make media appearances to promote competing goods and services.

As a result, the use of phrases like “a new composition by designer Joseph Abboud” and “by the award-winning designer Joseph Abboud” for jaz would breach the parties’ contract, irrespective of trademark use or infringement.

On the trademark infringement claims, Abboud argued that his proposed use of his name was fair use and protected commercial speech under the First Amendment. The court largely declined to resolve the infringement claims, since the contract forecloses what might otherwise be permissible under the Lanham Act. However, the court indicated its opinion that Abboud’s proposed uses would infringe JA’s trademark rights, based largely on the strength of the marks, the proximity of the goods, and evidence of some actual confusion in the industry even before jaz entered the market.

Though fair use under §33(b) allows some level of confusion, it requires that a term be used descriptively and not as a mark, as well as good faith. Abboud’s proposed uses would serve as a mark in that his name would be an indicator of source. Indeed, the PTO regularly grants trademarks in the form “designed by X.” Moreover, Abboud’s name is not descriptive of some aspect of the product itself—the “ingredients, quality or composition”—but rather of the source of the product. Finally, the court couldn’t ignore the contract when assessing whether Abboud was acting in good faith. The contract expressly covered terms like those Abboud proposed to use. As if that weren’t enough, the court also noted the high level of likely confusion as another strike against fair use, as allowed by KP Permanent. “It is patently obvious that consumers seeing JA Apparel’s products, marked or advertised as ‘Joseph Abboud’ or ‘by Joseph Abboud,’ would be utterly confused as to whether the ‘jaz’ products advertised as ‘by designer Joseph Abboud,’ were derived from the same source.”

As for the First Amendment, parties can privately contract to give up what would otherwise be free speech rights. (If not for the contract, this would be an extremely tough claim: this would be an example of truthful speech that is probably not “inherently” misleading under the Supreme Court’s commercial speech jurisprudence, though I can see the case for claiming that confusing use of the name is “inherently” misleading.)

In the end, the court saw this case as an illustration of the inherent risks to the seller of a transaction of this type. “After Abboud began designing and marketing clothes under his personal name, with great and deserved success, the name ‘Joseph Abboud’ became closely associated with a brand of clothing, and the personal nature of his name naturally lost some of its identity.” The goodwill associated with his name and the goodwill associated with the trademark was “blurred” in consumers’ eyes, and in cases of conflict, the trademark prevails. In a modern economy, almost everything is alienable—including identity. The alternative would be to say that there are some things that can’t be sold, no matter how much money is offered—moral rights. This case illustrates the American position.

JA was entitled to a permanent injunction against Abboud, barring him from using his name to market (advertise, promote, etc.) any goods or services to the consuming public. Though personal name injunctions must be carefully assessed, the fact that Abboud sold his name and goodwill to JA makes a sweeping injunction more tolerable. This does not bar personal appearances to the trade or public appearances at events or on TV as, “for example, a philanthropist or fashion commentator, if those appearances are unrelated to the promotion or sale of goods and services.” (Notably, the goodwill—or even tarnishment—generated by those appearances will likely accrue to JA, as the entity making commercial use of the Joseph Abboud name, since it will be unlikely that consumers will learn that Abboud and JA have parted ways.)

The court also found that Abboud’s preparations for jaz had breached the “extraordinarily broad” noncompete agreement. Given the broad terms here, including a ban on working with any entity that “proposes to engage” in competition with JA, it was a breach for Abboud to basically take over, through complex financial maneuvers, a competing shirt manufacturer, and likewise to complete sample products shown to future business partners and the media.

JA sought injunctive relief extending the noncompete obligation for the amount of time that Abboud was in breach, but the court declined to do so. Abboud didn’t actually compete by selling any clothes during the period of the agreement, and JA didn’t show harm resulting from the breach. JA argued that Abboud’s acts allowed him to sell clothes a full season earlier than he could have without the breach, but it didn’t show that a Fall 2008 launch was impossible from a mid-July 2007 start. The harm to third parties who’ve now contracted for jaz clothes outweighs any speculative injury to JA. JA also sought half a million dollars in damages, allegedly representing the profits of one of Abboud’s partners during the noncompete period. The court was likewise dubious, viewing the request for money as inconsistent with the demand for an injunction, which assumes that legal remedies are inadequate; the agreement itself provided for injunctive relief, not monetary damages. Moreover, the evidence at trial was that the partner lost money (its nearness to bankruptcy was why Abboud invested during the noncompete period; he’d been informed that the company would go out of business if he didn’t act before mid-July 2007), so there were no profits to award.

Abboud counterclaimed for false endorsement, false advertising, state-law right of publicity violations, and general unfair competition for using slogans such as “Hey Joseph, What Should I Wear?” “Do You Know Joe?” and “Ask Joseph Abboud,” which allegedly implied a continuing connection. The state-law right of publicity claim was easy: JA had written consent to use Abboud’s name. More generally, almost all the claims were defeated because JA bought the exclusive right to commercially use the Joseph Abboud name in connection with goods and services. The court noted in a footnote that there were misleading ways JA could act—at the extreme, it would violate Abboud’s rights to falsely claim that “Joseph Abboud, the designer, will be at Bloomingdale’s to present JA Apparel's new fall line of menswear.” But that hadn’t happened here. There was no evidence that consumers understood JA’s slogans to indicate an association with Abboud the individual, as opposed to Abboud the brand.

Abboud alleged false advertising under §43(a)(1)(B) based on the idea that JA’s ads created the false impression that Abboud was still associated with JA, and that JA thus benefits from Abboud’s unique reputation as a designer. The court found no explicit falsity—JA just used the Abboud marks and names it owned. Even assuming implicit falsity, there was no showing of confusion. In addition, Abboud’s state-law deceptive practices claims failed because he failed to show harm to consumers at large.

Friday, June 06, 2008

Unfair competition and copyright preemption

Rutledge v. High Point Regional Health System, -- F.Supp.2d --, 2008 WL 2264239 (M.D.N.C.)

Plaintiff is a doctor who developed a surgical weight loss procedure, the Mini Gastric Bypass, and various materials for use with the procedure. He registered copyrights for these materials, including a patient information form, a patient consent form, and various manuals. He licenses other doctors to use the materials. The individual defendants are doctors who worked for a health care company with whom Rutledge contracted, and they had access to the copyrighted materials and performed the MGB procedure. In May 2006, the contract with Rutledge ended, but defendants allegedly continue to reproduce, distribute, and display the copyrighted materials on their website and perform the surgery. Rutledge sued for copyright infringement and violation of the North Carolina Unfair and Deceptive Trade Practices Act.

Defendants moved to dismiss the UDTPA count on the ground of §301 copyright preemption. This requires that the state-law rights at issue cover a work within the subject matter of copyright and be equivalent to a right protected by copyright, without any extra element. Everyone agreed that the materials were within the subject matter of copyright.

The key question was whether the UDTPA created rights “equivalent to” copyright rights. If an extra element is required instead of or in addition to reproduction, distribution, or display, etc., there’s no preemption. The extra element must change the nature of the claim, making it qualitatively different from copyright.

The court noted that, when an extra element in an unfair competition claim is found, there’s usually a separate allegation of some specific act of unfair competition (breach of trust, fraud). Usually, courts should look at the required elements of the state claim, but sometimes they have to look at the underlying allegations. Such deeper analysis may be required for UDTPA claims, since the UDTPA is such a broad regulation of unfair and deceptive conduct. Stating a claim under the UDTPA requires an allegation of (1) an unfair or deceptive act or practice, (2) in or affecting commerce, (3) that injured the plaintiff. (2) and (3) aren’t going to be extra elements, and so the question is whether (1) is different from what the Copyright Act covers. Sometimes that will be true, and other times it won’t be.

Rutledge argued that misrepresentation and deception were extra elements that distinguished the state-law cause of action: (1) misrepresentation of the materials as defendants’ own; (2) alteration of the materials; (3) “surreptitious” posting of the originals on the internet; and (4) unauthorized use of the materials. The court found that, to survive preemption, the definition of what constitutes unfairness and deception needed to rest on alleged misconduct separate from acts governed by the Copyright Act.

The misrepresentation claim was nothing more than reverse passing off, “the natural consequences of a Copyright Act violation.” With no separate statement or half-truth, there was no extra element. Alteration, too, was merely an alleged violation of either the derivative works right or, more likely, the reproduction right via substantial similarity. “Surreptitious” posting, however sneakily done in the middle of the night, was also just a copyright violation. Unauthorized “use” requires a pause—“use” is not a copyright right, but to the extent plaintiff meant reproduction, distribution, and display, that’s again just a copyright claim. Plaintiff also alleged use of the materials to perform medical treatment. The court treated this as an allegation of use of the ideas, rather than the expression. The Copyright Act bars protection for ideas, and as part of that preempts idea claims like this where no contractual violation is alleged. (Depending on the claims, “use” could also mean simply consulting the materials, which implicates no copyright rights but is allowed by the first sale doctrine.)

Today's propaganda coup

How best to illustrate the claim that copyright owners' use of the DMCA is poorly targeted? Get DMCA notices sent to printers by making their IP addresses visible using BitTorrent. Well played, U Wash programmers; well played. I have yet to read the full report, but I do wonder how often the problem of a user apparently requesting a file but not actually downloading it -- which seems to be why the printers got their notices -- causes false positives, and why we should care (that's at least an attempt to download, in the ordinary case EDITED: absent deliberate misidentification, which was what was involved here) compared to the problem of dynamically assigned IP addresses. The report indicates that the dynamic assignment issue is, at least in theory, a source of false positives that has nothing to do with an attempted download by the person accused or a deliberate attempt to frame a particular IP address. Completely accidental misidentification strikes me as a potentially serious enforcement problem.

Thursday, June 05, 2008

TracFone wins another DMCA round

Tracfone Wireless, Inc. v. GSM Group, Inc., --- F. Supp. 2d --, 2008 WL 2215059 (S.D. Fla.) (magistrate)

Following the lead of an earlier case, the court held that buying plaintiff’s prepaid wireless phones, then reconfiguring them so they could be used on networks outside the US, violated the DMCA. Phones are sold below cost in order to sell the airtime cards, and defendants’ practices mean that phone buyers don’t need to buy the airtime cards. The procedure allegedly involves the “alteration, erasure or removal” of TracFone’s software.

Tracfone sued for breach of contract, trademark infringement, unfair competition, copyright infringement, circumvention, trafficking in circumvention technology, false advertising, and generic state torts.

Defendants argued that the Librarian’s §1201 rulemaking provided them with an exemption for circumvention that enables wireless handsets to connect to a wireless network, when circumvention has the “sole purpose” of lawfully connecting to a wireless network. The magistrate, following the earlier—uncontested—case, held that since defendants sold the handsets for profit, they didn’t have the “sole purpose” of connecting to a network. As I said before, I call shenanigans; the exemption only has meaning if it allows people to open the phones and resell them, because otherwise the exemption is useless. “Sole purpose” should refer to whether there’s any relationship to copyright infringement—see also the Lexmark and Chamberlain cases.

The court also refused to dismiss the state-law deceptive and unfair trade practices claims. The argument was that buying TracFone phones in bulk, removing the software, then reselling the phones as new was a deceptive trade practice. The court found that trademark infringement is an unfair and deceptive trade practice that triggers state law. (Let me get this straight: removing restrictions on the phones, so they’re more useful to consumers, is an unfair trade practice. Look, I’m all for consumer protection, but TracFone’s practices don’t protect consumers, they protect its business model. To the extent that defendants’ practices invalidate the warranty, that needs to be disclosed to avoid trademark infringement and consumer deception, but I’d sure like to know how many warranty claims defendants’ customers are likely to make. I think the motion to dismiss was properly denied, but unless there are some other facts present I wouldn’t think this would survive summary judgment.)

Imagine a Wonderful World: transformation in purpose and form

Bill Patry has posted on the recent, correct fair use finding in the lawsuit Yoko Ono brought against the producers of the anti-evolution movie Expelled. This is the core of the finding that the use was transformative, though the song and the recording themselves were copied: Defendants “put the song to a different purpose, selected an excerpt containing the ideas they wanted to critique, paired the music and lyrics with images that contrast with the song’s utopian expression, and placed the excerpt in the context of a debate about the role of religion in public life.” That is, by showing images of totalitarian societies along with lyrics expressing a utopian desire to see religion removed from public life, the movie suggests that the utopia of Imagine is, in fact, a dystopia.

What interests me is that there is precedent from the SDNY—albeit in dicta—that such ironic contrasts are not fair use because a licensing market exists for them. In Abilene Music Inc. v. Sony Music Entertainment, Inc., the court stated,

it bears emphasis that The Forest's alteration of the tone, lyrics and musical features of Wonderful World makes clear that the song itself is a target of parodic criticism, and that the creators of The Forest are not merely using the original song as an ironic or satirical device to comment on what they view as a less than wonderful world. The latter kind of use, which typically requires licensing, can be illustrated by the song's use in certain films. For example, in Terry Gilliam's 12 Monkeys, the Armstrong recording of Wonderful World is played over the final credits, ironically contrasted with the film's depiction of a distinctly dystopian science fiction future, and in Barry Levinson's Good Morning, Vietnam, the song is played on the sound track accompanying scenes of wartime violence and destruction. In these cases, the original song itself is used (essentially in its entirety) to comment on negative aspects of the real or imagined worlds depicted by the filmmakers, but the song itself is not parodied.

Though the court in the Expelled case says that it’s not influenced by the filmmakers’ explanation of their intent to criticize John Lennon’s Imagine, it is hard to see what the difference is, in themselves, between Expelled and 12 Monkeys in their use of a utopian song contrasting with a dystopia, both of which can easily be read as commentary on the naivete of the original songs. One is more specific—Imagine critiques religion, while Wonderful World just says life is beautiful—but both express sentiments that are legitimate targets of criticism. Yes, literary critics could probably distinguish the two uses, but is that what we want our courts to do? As literary critics, courts are often excellent lawyers.

The Abilene Music court seems to want “transformation” to take place on the music and lyrics of the song itself, while the Ono court accepts, as the Second Circuit latterly held, that transformation is actually a matter of purpose and not a matter of creating a derivative work. Tony Reese’s forthcoming piece on this shift in the meaning of transformativeness proved prescient in this case. While helping with the problem of the transformative/derivative line, transformation-as-purpose foregrounds a different problem: How do you know what the appropriate purpose of the original is? John Lennon's purpose can, perhaps, be defined as the promotion of the message in the original, but there are many other copyright owners whose purpose could credibly be: make as much money, by licensing as many variants, as possible. The original work, like a Swiss Army knife, could be multipurpose.

Wednesday, June 04, 2008

Total Recut

Total Recut is a website focusing on video remixes, with many embedded YouTube videos it offers as good examples of various forms. The music video category is, to my eye, woefully populated, given the incredible wealth of fanvids out there. There's a contest for creating a What is Remix Culture? video running now; the deadline has been extended. Unfortunately, the guidelines discourage using more than a short music clip, even though that's not all that fair use will allow under appropriate circumstances. But the site is worth exploring.

I find the disclaimer particularly interesting:
None of the audio/visual content is hosted on this site. All media is embedded from other sites such as Google Video, YouTube, DailyMotion etc. Therefore; this site has no control over the copyright issues of the streaming media.
I'm all about fair use, and I think that a good-faith belief in the fair use status of the works should excuse any contributory infringement claim. But ultimately, the risk-reducing strategy of embedding YouTube videos puts the burden on YouTube and the other commercial sites of defending fair use rights. And, as non-evil as Google may be, its interests are not the same as those of its users. We need noncommercial sites to host remix videos, and we will need them more as filtering reaches more and more of YouTube and the like.

Overlawyered: prevailing defendant gets reduced fee award

Spalding Laboratories, Inc. v. Arizona Biological Control, Inc., 2008 WL 2227501 (C.D. Cal.)

Spalding sued defendant (ARBICO) for false advertising of its fly control products under the Lanham Act. The case went to a jury; the court allowed Spalding to re-open its case to address evidentiary holes. After Spalding rested, the court granted judgment as a matter of law to ARBICO. ARBICO moved for attorneys’ fees, which the court granted in part. (ARBICO asked for over $800,000, and the court granted $95,000.)

The Lanham Act allows a fee award in exceptional circumstances, which can occur when a plaintiff’s case is groundless, unreasonable, vexatious, or pursued in bad faith. Spalding had a good faith basis for making its claims at first. However, after the court excluded all the key elements of Spalding’s case, “doom[ing]” its claims, Spalding’s insistence on pursuing the case for 10 days in front of a jury became exceptional. Its evidence of literal falsity was excluded, and it had no survey evidence showing that a significant portion of the relevant consuming public was misled, but it made “empty promises” of such survey evidence and “afforded no time in proving liability,” focusing instead on “self-serving damages calculations.”

As a result, ARBICO was entitled to fees from the first day of trial through the motion for fees. ARBICO’s billing records showed over $220,000 in fees for that period, but the court adjusted downwards to account for the attorneys’ block billing, as well as some duplication, mistakes, and excesses. “While the Court does not contend that ARBICO’s attorneys intended to ‘pad’ their bills, it surmises that ARBICO’s attorneys (and paralegals) often acted with a degree of zeal and thoroughness beyond that which would have been exercised by a reasonable attorney.” Attorneys and paralegals who billed 13-17 hours a day for attending and preparing for trial, when trial never exceeded 6 hours per day, “show[ed] commendable industry but [were] nonetheless unreasonable.” In the end, the court deducted 15% for block billing; 30% for duplicative, multiple and excessive billing; 5% for time billed as travel; and 10% apportioned to non-Lanham Act unfair competition claims.

Monday, June 02, 2008

False comparative and credential claims enjoined

Healthport Corp. v. Tanita Corp. of America, 2008 WL 2224398 (D.Or.))

Healthport sued Tanita for patent infringement related to the parties’ competing body composition monitors. Tanita counterclaimed for false advertising. After the court granted Tanita summary judgment on the patent claims, the parties cross-moved for summary judgment on the Lanham Act and state unfair competition counterclaims.

Healthport has two public web sites, one targeting healthcare professionals and one targeting employers and healthcare benefits providers. Both describe ELG, which is Healthport’s metabolic analyzer (a body composition monitor). Healthport claimed that the ELG was “the only metabolic analyzer patented in the United States and abroad for unequaled accuracy and validity in the prediction of human body composition,” whose “patented accuracy” was “backed by the largest study on body composition analyzers ever conducted, including more than 750 subjects from a wide demographic population.” Healthport relied on two studies by USC, though neither was a head-to-head study. Neither study found “unequaled” accuracy, just accuracy. Healthport also owns two patents for the ELG, but neither patent suggests anything about comparative accuracy or validity.

In addition, the websites offer information about Healthport’s management team, including Richard Wooten, Healthport’s president and chief technology officer. The sites said that Wooten “received his M.S. degree from Oregon Graduate School of Health Sciences and a B.S. in Biology from Portland State University.” This is not true, as Wooten has no college or graduate degrees.

Healthport challenged Tanita’s standing. In the 9th Circuit, Lanham Act false advertising standing requires a commercial injury that is competitive—that could cause sales diversion. But Healthport’s own witnesses testified that the parties were competitors. Healthport also argued that it derived no revenue from the healthcare plan detailed on its websites, so Tanita suffered no competitive injury. But Tanita wasn’t challenging the healthcare plan; it was attacking statements about the ELG and Wooten. The ELG statements were inherently comparative and could divert business from Tanita, which also sells body composition monitors.

Healthport then argued that its website wasn’t “commercial advertising or promotion.” But the sites are commercial speech; the parties compete; they exist to sell health-related services; and they’re accessible to the public. That’s commercial advertising under the Lanham Act.

The court found that the Wooten credential statements were literally false. As for the ELG statements, there were three possible interpretations of the “only patented/unequaled accuracy” statement, but each was literally false. (1) It’s literally false to say that the ELG is the only patented metabolic analyzer. (2) It’s literally false to claim that the ELG is patented for unequaled accuracy and validity, or that it’s the only analyzer so patented. (3) It’s unsubstantiated to say that the ELG is unsurpassed in accuracy and validity when compared to other body composition analyzers, and lack of substantiation for a “tests prove” claim is treated like literal falsity.

Healthport argued that Tanita needed to show actual deception through consumer surveys or market research. The court disagreed. Courts may presume deception and reliance in cases of intentional false statements, even if there’s little overt reference to a competitor’s product. For online advertising, where an advertiser need not spend substantial funds to reach a wide audience, there’s no need to show substantial investment in a claim before presuming deception and reliance. Independently, non-comparative false statements can justify injunctive relief if they’re material.

The ELG statements were material. Tanita provided evidence from health professionals who testified that they seek the most accurate equipment and that claims of superior accuracy or patented accuracy would influence their buying decisions. Wooten’s credentials were a closer issue, but Healthport’s co-founder testified that his advanced medical degree is important to Healthport customers. This was sufficient for an injunction.

Tanita overreached, however, in requesting corrective advertising, disgorgement of profits, and attorneys’ fees.

Profits can be awarded even if there’s no proof the advertiser’s conduct was willful—lost profits serve as a surrogate for damages. In comparative advertising cases, courts can presume injury because the benefit to one advertiser necessarily harmed the other. Without a direct comparison, however, the plaintiff must show evidence of injury. Or the plaintiff can recover defendant’s profits under an unjust enrichment theory, at a court’s discretion; a willful violation can support an award of profits, but doesn’t require one. Here, the court determined that an award was inappropriate; there was no evidence that Healthport profited from its false claims.

Tanita requested an order of corrective advertising on all Healthport websites and by way of notice to all of Healthport’s clients. But there was no evidence that a large audience actually saw the sites or that consumers were actually deceived. Thus, no corrective advertising was necessary.

Attorneys’ fees are available in exceptional Lanham Act cases, including cases of willful, fraudulent, or deliberate deception. Intentional acts are insufficient; there must be deliberate intent to deceive consumers. Because Healthport’s liability rested on a presumption of consumer deception and reliance, and because the intentionally false statement about Wooton’s credentials was only marginally material, the court found a fee award unjustified.

Sunday, June 01, 2008

Washington Post covers tangled copyright claims

That ubiquitous "Footprints" poem, in which it's revealed that G-d carries you through your times of trouble, turns out to have equally ubiquitous authorship claims, and now a lawsuit, despite the fact that the claimed author's story clearly indicates divestive publication without notice before 1978 (not to mention ridiculous delay in asserting any rights there might somehow be). Rachel Aviv's article for the Poetry Foundation goes through the literary evidence of the poem's antecedents. "Along with [four people profiled in the piece,] at least a dozen other people have claimed, less rigorously, to have penned this poem. None of their accounts are particularly convincing, yet they all seem to genuinely believe they wrote the poem. They describe the words coming out effortlessly, even uncontrollably, as if they were finally articulating something they’d always known."