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.

Pom and the art of motorcycle trademarks?

Spotted on the streets of DC, this Pom Wonderful ad. The Hells Angels are fearless, willing to litigate even against Disney; wonder what they think of this?

To speak is to remix

Kevin Kelly’s feature in Sunday’s New York Times Magazine, Becoming Screen Literate, is a fascinating read. Kelly argues that the average person’s ability to engage in visual remix is finally catching up with her ability to engage in verbal remix. One of the most striking things about the article, though, is that it doesn’t mention copyright at all. For Kelly, remix practices proceed unhindered by technological barriers (backed up by the DMCA’s anticircumvention provisions) or legal threats (such as the hundreds/thousands of DMCA notices received by YouTube users every day). It’s true—in practice, there’s a lot of remix, and that’s great. But the law is vastly out of tune with practice, and that’s a serious problem, both in terms of legitimacy and for the unlucky few who get singled out for threats by copyright owners.

Anyway, here are a couple of passages I found most noteworthy (and notice how I don’t fear a DMCA notice for my quotes; if Kelly’s article were a movie, how different matters would be):

An emerging set of cheap tools is now making it easy to create digital video. There were more than 10 billion views of video on YouTube in September. The most popular videos were watched as many times as any blockbuster movie. Many are mashups of existing video material. Most vernacular video makers start with the tools of Movie Maker or iMovie, or with Web-based video editing software like Jumpcut. They take soundtracks found online, or recorded in their bedrooms, cut and reorder scenes, enter text and then layer in a new story or novel point of view. Remixing commercials is rampant. A typical creation might artfully combine the audio of a Budweiser “Wassup” commercial with visuals from “The Simpsons” (or the Teletubbies or “Lord of the Rings”). Recutting movie trailers allows unknown auteurs to turn a comedy into a horror flick, or vice versa.

Rewriting video can even become a kind of collective sport. Hundreds of thousands of passionate anime fans around the world (meeting online, of course) remix Japanese animated cartoons. They clip the cartoons into tiny pieces, some only a few frames long, then rearrange them with video editing software and give them new soundtracks and music, often with English dialogue. This probably involves far more work than was required to edit the original cartoon but far less work than editing a clip a decade ago. The new videos, called Anime Music Videos, tell completely new stories.

AMVs are singled out in Kelly’s account, but the related (yet also very different) practices of largely live-action “vidders,” who are mostly female, are nowhere to be found, despite the nearly four decades of history of vidding. Francesca Coppa has written and spoken about the importance of claiming a place for vidding in both histories of remix and current understandings of remix culture.

As Kelly points out, what is so hotly contested by audiovisual copyright owners is standard practice with written works:

In fact, the habits of the mashup are borrowed from textual literacy. You cut and paste words on a page. You quote verbatim from an expert. You paraphrase a lovely expression. You add a layer of detail found elsewhere. You borrow the structure from one work to use as your own. You move frames around as if they were phrases.

….With powerful search and specification tools, high-resolution clips of any bridge in the world can be circulated into the common visual dictionary for reuse. Out of these ready-made “words,” a film can be assembled, mashed up from readily available parts. The rich databases of component images form a new grammar for moving images.

After all, this is how authors work. We dip into a finite set of established words, called a dictionary, and reassemble these found words into articles, novels and poems that no one has ever seen before. The joy is recombining them. Indeed it is a rare author who is forced to invent new words. Even the greatest writers do their magic primarily by rearranging formerly used, commonly shared ones. What we do now with words, we’ll soon do with images.

And here’s where copyright-blindness really hurts the article. The search and specification tools, which Kelly notes are already under development, could be used to free up creativity. But they’re being funded in significant part for the purpose of scanning the web for footage taken from existing mass media works—in other words, this powerful form of search will be used to subtract creativity rather than enhance it. Only a powerful account of fair use, one that is accepted by large content owners, will enable the new language of audiovisual creativity to survive and thrive, the way verbal creativity has.

Brand Obama

The New York Times campaign blog has an interview with the designer of the Obama logo. I was interested in the designer's initial discomfort with alterations of the logo--it seemed very old-school brand ideology; he wanted total consistency and control. But alteration worked very well for the campaign (this link shows lots of intriguing logo variants adopted for subsegments of Obama's supporters), and it also allowed people to take ownership of and express their support for the campaign. My husband made me a Yes We Carve pumpkin for Halloween (see also Republicans for Obama logo). Then there were, among others, Craft for Change, Obama pies, cookies, and the handmade paper plate logos I saw at my local volunteer station. These all strengthened the Obama campaign, regardless of what traditional trademark ideology would say.

The lesson: the trademark owner should probably think of itself as a brand manager, not an owner.

IP/Gender: Call for Papers on Female Fan Cultures and IP

CALL FOR PAPERS

American University Washington College of Law

IP/Gender: Mapping the Connections

6^th Annual Symposium

April 24, 2009

Special Theme: Female Fan Cultures and Intellectual Property

Sponsored by
American University Washington College of Law’s

Program on Information Justice and Intellectual Property

Women and the Law Program

Journal of Gender, Social Policy & the Law

In collaboration with

American University’s Center for Social Media

The Organization for Transformative Works

Rebecca Tushnet, Georgetown University

Francesca Coppa, Muhlenberg College

Deadline for submission of abstracts: December 19, 2008

The 6th Annual Symposium on “IP/Gender: Mapping the Connections” seeks papers on female subcultures and their relationship to intellectual property and copyright regimes, with a particular emphasis on fan works and culture. Appropriate topics include: fan arts, including fan fiction, arts, music, filk, crafts, and vids; and fan communities: including clubs, forums, lists, websites, wikis, discussion groups, rec sites, and other creative, celebratory, or analytical communities.

Introduction & Context

Historically, the study of subcultures has been biased toward male groups and activities: first, because male activities (e.g. punk rock, motorcycling, football hooliganism) tend to be public, and therefore visible; second, because many male groups have been seen as overtly resistant to mainstream norms. In contrast, many female subcultural activities took place in private, in the domestic realm or in other less visible spaces, and those that were visible tended, in the words of Sarah Thornton, to be "relegated to the realm of a passive and feminized 'mainstream' (a colloquial term against which scholars have all too often defined their subcultures)"; in other words, the things women did and do have often been framed as mainstream, passive, commodified, and derivative; consuming (in the negative sense of passive product consumption), rather than consuming in the sense of a passionate obsession or devotion to art or criticism.

This has changed significantly in the last twenty years, not only due to a rising feminist interest in subculture studies but also with the rise of fan and audience studies. In their pioneering "Girls and Subcultures" (1975), Angela McRobbie and Jenny Garber presciently suggested that scholars turn their attention "toward more immediately recognizable teenage and pre-teenage female spheres like those forming around teenybop stars and the pop-music industry." Even they had trouble seeing what girls do as interesting and importing, noting that "[b]oys tended to have a more participative and a more technically-informed relationship with pop, where girls in contrast became fans and readers of pop-influenced love comics." McRobbie and Garber don't associate being "fans" with participation, and they see girls as "readers" only. In fact, as we know from fifteen years of fan and audience studies, fandom is a highly participatory culture, and female fans also write, edit, draw, paint, "manip," design, code, and otherwise make things.

However, even within this brave new world of mashup, remix, and fan cultures, what boys do (fan films, machinima, music mash-ups, DJing) is often seen by outsiders and critics as better--more interesting, more original, more clearly transformative-- than what girls do (fan fiction, fan art, vidding, coding fan sites, social networking). This normative judgment risks legal consequences.

We are seeking projects that investigate the ways in which issues of originality and ownership as related to copyright and other issues of intellectual property intersect with this gendered understanding of cultural productions and engagement, especially since these historically female subcultural activities and practices have increasingly become culture.

IP/Gender Mapping the Connections Organizational Details

· DEADLINE for submission of abstracts is DECEMBER 19 at 5:00pm.

· To submit an abstract for consideration, fill in the web-based form at https://www.wcl.american.edu/pijip/ipgender/proposals.cfm . Participants will be notified if their paper has been accepted for presentation by January 15.

· The symposium will begin at 6:00 Thursday, April 23, 2009 at the American University Washington College of Law in Washington, D.C. The symposium will convene from 9:00 am until 4:00 pm on Friday, April 24, 2009.

· To view papers and programs from prior IP/Gender: Mapping the Connections symposia, please visit http://www.wcl.american.edu/pijip/go/events/ip/gender/ip/gender-mapping-the-connection

· Papers may be published in the American University Journal of Gender, Social Policy & the Law.

· If you are interested in attending the event, but not presenting work, please contact Angie McCarthy, Women and the Law Program Coordinator at angiem@wcl.american.edu for details.

Trademark puzzle of the day

letmegooglethatforyou.com -- perhaps we should ask it "what is initial interest confusion and is it a good idea?"

Soup wars heat up

Okay, look, there are only so many headlines possible here. Stephen Colbert on the vicious comparative ad battle between Campbell's and Progresso.

Don't be a Patsy

The Partnership for a Drug-Free America is running an ad campaign with that theme. The conceit is that a clueless mom, Patsy, is posting videos on popular sites suggesting ridiculous ways to keep kids off drugs. Aside from the awfulness of the campaign, what I find interesting is all the YouTube comments accepting Patsy's reality and criticizing her ridiculous suggestions as if they were serious. Fake campaigns need to be well done or they just confuse consumers, as I think is happening here.

Don't be a patsy, indeed.

Paradoxes of work for hire

Matt Stahl, Recording Artists, Work for Hire, Employment, and Appropriation

abstract:

Authorship and ownership exist in a curious relation in U.S. copyright law. In theory and common sense, authorship underwrites and is the condition of ownership, but in practice ownership can establish authorship retroactively. Distinctions between proprietary and non-proprietary creative cultural workers, in this view, turn in no essential way on evidence of “creativity” or the investment of “personality” in cultural creation. This paper examines a legislative struggle between recording artists and the recording industry over the status of their stock-in-trade, sound recordings. In 2000, recording artists obtained the repeal of a 1999 law allocating authorship and ownership of recordings to their record company contractors through the former’s assertions not of authorship in the commonsense understanding, but through the artists’ legal ability to alienate their employed backup musicians, engineers and other creative personnel. Analyzing this struggle against the backdrop of a historical/theoretical consideration of the dynamics of domination and dispossession naturalized in the employment relationship, I show how the political-economic organization of creative production in the cultural industries depends crucially on and further naturalizes this legal “furniture of the social world” (Ellerman, 1992), as much or more than it does on immanent aspects of cultural products or production processes.

The analysis moves whipsaw-fast from general employment law at the beginning of the 20th century to recording artists' practices at the beginning of the 21st, and could have benefited from more detail on music industry practice, but it's the first detailed treatment I've seen of the paradoxical claims that featured artists have to make about authorship in order to insist that the other participants in their recordings aren't authors, but they are, and that sound recordings are works for hire with respect to non-featured artists but aren't with respect to featured artists.

The new New York Times

This special edition of the New York Times is special indeed, coming to us as it does from the future. I highly recommend the corrections, especially the one about Portraits of Grief, a feature that regularly made me cry the first time around.

Initial interest confusion? Note both the URL and the stylized T in the tab/beside the URL, for Firefox users at least.

Georgetown conference on blogging and legal scholarship

Last Thursday would have been Bob Oakley’s 63^rd birthday. Bob, the director of the law library at Georgetown, was a dynamic and scholarly leader who is much missed. Today, the Georgetown Law Library announced a symposium dedicated to his memory.

Immediately preceding the 2009 AALL Annual Meeting, on Saturday, July 25, the Georgetown Law Library will be holding The Future of Today’s Legal Scholarship (FTLS), a Symposium in Honor of Bob Oakley, which will build upon the fundamental assumption that blogs are an integral part of today’s legal scholarship.

This symposium will bring together academic bloggers, librarians, and experts in preservation to brainstorm and debate the great challenges presented for future researchers of materials currently populating the blogosphere. These challenges include unreliable materials, disappearing scholarship and documents, and the proliferation of online legal scholarship. Symposium participants will collectively develop innovative practices to ensure that valuable scholarship is not easily lost.

Join the conversation now by tagging items you think are relevant to this symposium with the del.icio.us tag FTLS2009.

Details about the symposium and a complete list of all FTLS2009 tagged items can be found at http://www.ll.georgetown.edu/ftls/.

Origin/ownership false advertising claims barred by Dastar

Invista S.A.R.L. v. E.I. Du Pont de Nemours & Co., 2008 WL 4865208 (S.D.N.Y.)

Invista’s corporate predecessors formed a French joint venture, Butachimie SNC. Invista claimed that defendant Rhodia misappropriated a Butachimie technology known as Gen I, which is used to produce an ingredient for nylon, and that Rhodia intended to build a Chinese plant to use Gen I. DuPont and Invista allegedly disclosed Gen I to Butachimie and Rhodia, subject to confidentiality restrictions which defendants then violated.

Invista argued that defendants’ acts constitued unfair competition under Section 44(h) of the Lanham Act and the Paris Convention, as well as false advertising in that Rhodia has told a number of current Invista customers that it is free to use Gen I to build a new plant in Asia and that it co-holds the technology.

The court held that Section 44(h) does not provide an independent basis for federal jurisdiction. That section entitles foreign nationals from countries party to certain international conventions with the right to “effective protection against unfair competition,” but that’s just a guarantee of national treatment. It creates no new cause of action for unfair competition.

The false advertising claim fared no better. The claim was that Rhodia misrepresented its ownership of Gen I technology. But under Dastar, a process for creating a product isn’t a type of “goods” whose designation of origin might be found false. “Origin” in the Lanham Act refers to the producer of tangible goods, not the author of any idea or concept embodied in the goods. And that rationale holds even when the plaintiff pleads false advertising. (As I’ve said before, I think this is a mistaken overextension of Dastar, which specifically left open the possibility of false advertising claims where a plaintiff could make out the extra elements of competition, statement in advertising or promotion, and materiality.) Anyway, once we preclude repleading idea “origin” claims under the head of false advertising, none of Invista’s allegations related to the “nature, characteristics [or] qualities” of Rhodia’s products or processes.

The court also dismissed a bunch of state-law claims without prejudice.

Reverse passing off claim FUBAR'ed

Richardson v. Stanley Works, Inc., 2008 WL 4838708 (D. Ariz.)

Richardson sued Stanley for patent infringement and common-law unfair competition. Richardson allegedly invented and received a design patent on a hammer that can also be used as a step for overhead work, the StepClaw. (… Okay.) Richardson solicited Stanley and other companies to buy the rights; they didn’t. But Stanley then put the FuBar on the market. (… Hee.) The FuBar is a demolition tool derived from a hammer, with a design allegedly substantially similar to the StepClaw. Two articles in the popular press credit Stanley employees with the design. Allegedly, Richardson has been unable to license the StepClaw because of confusion over whether Stanley is authorized to sell Richardson’s design and whether Richardson invented the design.

State unfair competition laws are preempted by federal law when they interfere with the federal patent scheme. They need an extra element different from patent infringement to survive. False designation of origin and false advertising generally have that extra element. But failure to credit isn’t false designation of origin or false advertising. Articles not written by Stanley employees can’t form the basis of a claim against Stanley. And a claim that Stanley misrepresents the FuBar as its own product, when really Richardson owns the design patent, is barred by Dastar. Even though Richardson alleged consumer confusion, the claim is still preempted. Patent law provides the only protection Richardson can get against confusion over the source of the design.

Best practices for fair use

AU’s Center for Social Media has released another set of best practices, this time for fair use in media literacy education. Michael Madison has some introductory comments here. I worked on the Online Video best practices from the same source and found the process fascinating, given that it brought together people with very different perspectives but a common interest in fair use.

Stripped-down confusion analysis in videogame case

E.S.S. Entertainment 2000, Inc. v. Rock Star Videos, Inc. (9^th Cir. 2008)

The 9^th Circuit affirmed the district court’s ruling that defendant Rockstar (despite the caption, that’s how the opinion refers to defendant) didn’t violate the Lanham Act when it put the Pig Pen, a strip club that looked kind of like plaintiff Play Pen, into its Grand Theft Auto game. Like the district court, the court of appeals rejected nominative fair use but accepted an independent First Amendment defense based on Rogers v. Grimaldi.

Eric Goldman has some thoughts here. To me, the decision highlights a conceptual weakness in the application of Rogers, and relatedly in the 9^th Circuit version of nominative fair use. Rogers allows artistic use of a trademark in a title (and, as applied here, in an expressive work generally), as long as the use does not “explicitly mislead” about the source or content of the work. But what does it mean to “explicitly mislead”? “The Authorized Biography” could be explicitly misleading if untrue, but once you leave titles behind, what else could count?

One easy answer is: almost nothing. Mention or depiction of a trademark in an expressive work is almost never going to claim explicit sponsorship, unless you’re Stephen Colbert with his Doritos sponsorship—incidentally, I wasn’t sure whether that was a real sponsorship or not for months; I have now read that it is.

Unfortunately, the 9^th Circuit muddied the waters considerably in its analysis. After quoting the “explicitly misleads” standard, it then proceeded to state that this test goes to the purpose of trademark law, protecting consumers against confusion. “The relevant question, therefore, is whether the Game would confuse its players into thinking that the Play Pen is somehow behind the Pig Pen or that it sponsors Rockstar’s product. In answering that question, we keep in mind our observation in MCA Records that the mere use of a trademark alone cannot suffice to make such use explicitly misleading.”

So then the court performed a quick and dirty confusion test. The goods aren’t particularly related. Reasonable consumers wouldn’t think there’s a connection between a smallish strip club and a technologically sophisticated video game. The strip club isn’t a big enough part of the game for consumers to assume source or sponsorship.

All true enough, but what in heck do these things have to do with whether there is any explicitly misleading statement in the game? The implicit theory must be that a sufficiently prominent presence in the game, plus a sufficiently intuitive connection between the business and the game, would somehow count as explicitly misleading despite the lack of, well, explicitness.

As a matter of social meaning, I am not a huge fan of the explicit/implicit line in false advertising law. Sometimes implicit claims can be made as or even more clearly than explicit claims. And certainly some in-game presences are reasonably understood to indicate that the trademark owner actually agreed to or even paid for the ad space—look at the reporting on Obama’s ad buys in videogames. But let’s not pretend that we’re talking about explicit versus implicit any more. The 9^th Circuit simply makes the law worse by pretending that its confusion analysis had anything to do with explicit misleadingness.

I mentioned nominative fair use above, because the panel in Abdul-Jabbar v. GM had the same trouble: the 9^th Circuit test’s third prong is that the defendant must do “nothing else” to suggest source or sponsorship other than using the plaintiff’s mark. GM did nothing else, but the court implicitly held that the very presence of Abdul-Jabbar’s name in a car commercial might be understood by consumers as an endorsement. That’s a reasonable hypothesis about consumer reaction; what it isn’t is a description of “something else” other than the use of the mark.

Rockstar is clearly rightly decided. But there’s something badly off with our theories of source and sponsorship, and the result is doctrinal rot: one simply cannot rely on courts’ statements of the rules, because the rules don’t match judges’ intuitions about consumer confusion. Would Rockstar have won the case if the Pig Pen had been a bigger part of the game? Who can tell?

Fraudulent wine in contractual bottles?

Koch v. Greenberg, 2008 WL 4778813 (S.D.N.Y.)

Earlier opinion discussed here. Koch sued various defendants for fraud and consumer protection law violations over the sale of certain bottles of wine. According to the allegations of the complaint, Greenberg had one of the largest wine collections in the US until 2002, when he asked Sotheby’s to handle its sale. The head of its wine department, Serena Sutcliffe, told him many of his bottles were counterfeit, and Sotheby’s refused the commission. Greenberg then hired William Edgerton, a noted wine expert, who confirmed Sutcliffe’s conclusion on some of the bottles. Despite this, and after settling with a company that sold him the counterfeit wine, Greenberg consigned his wine to Zachys to sell at public auction in 2005. Koch bought some of the counterfeit bottles.

Koch alleged that the catalogue Zachys used to sell the wine contained false descriptions, which are attributable to Greenberg. The catalogue contained disclaimers and limitations of liability. Koch bought $3.7 million worth of wine, eleven bottles of which he now alleges are counterfeit or possibly counterfeit, with a purchase price of over $228,000.

Greenberg moved to dismiss on the ground that he had tendered Koch full payment plus interest and costs. However, Koch sought punitive damages, to which he might be entitled. The court rejected Greenberg’s argument that this was just a contract dispute that shouldn’t be recast as fraud. Though punitive damages aren’t available in an ordinary fraud case, they are when fraud is aimed at the public generally, evidences a high degree of moral turpitude, and demonstrates “wanton dishonesty” rising to the level of “criminal indifference to civil obligations.” Koch sufficiently alleged all these elements, especially given that Greenberg allegedly only sold his wine at auction after recovering a settlement from the company that sold the wine to him; that’s pretty wantonly dishonest. Thus, the tender of the purchase price didn’t justify dismissing the case.

Greenberg also argued that Koch couldn’t show fraud, specifically justifiable reliance. Though there was a disclaimer here, a disclaimer won’t defeat a fraudulent misrepresentation claim if the relevant facts are peculiarly within the defendant’s knowledge. Whereas Zachys didn’t know about the earlier inspections, Greenberg did, and thus the relevant facts were peculiarly within his knowledge; even had Koch inspected the wines beforehand, as he was invited to do, he wouldn’t have known about the earlier experts’ conclusions about dubious authenticity.

The court also refused to dismiss Koch’s claims under NY General Business Law §§349 and 350, prohibiting deceptive acts or practices and false advertising. Such claims must cover deceptive “consumer-oriented” conduct. Though Koch is rich and sophisticated, such consumers are also entitled to the protection of the law. Given the large number of bottles—17,000—Greenberg consigned to the auction, and given that Koch’s purchase of a small percentage contained counterfeits, it’s possible that other consumers were also harmed. Thus, the complaint sufficiently alleged a broad impact on consumers at large.

Political copying

At the AALS recruitment conference this weekend, the hotel gift shop had some of these: Which of course evoked Shepard Fairey's poster, aka "Shepard Fairey's iconic poster": There's an interesting question in visual fair uses of this sort. The obvious critical point is directed at Obama, not Fairey. However, because Fairey's poster is not a photo, it's easily arguable that the McCain version also operates as a critique of the heroic style in which Fairey has portrayed Obama. Occasionally courts recognize similar points with photography--e.g., the Naked Gun case, in which the court found that a mockery of Annie Liebovitz's iconic photo of Demi Moore was fair use.

Denouement: copying doesn't always do what you want it to do:

Made in the USA claim partially barred by laches

Rocky Brands, Inc. v. Red Wing Shoe Company, Inc., 2008 WL 4771848 (S.D. Ohio)

Rocky Brands brought false advertising and false designation of origin claims against Red Wing under the Lanham Act and state law. Red Wing moved for summary judgment on laches.

Rocky Brands makes boots overseas. Red Wing makes boots in the US and overseas. Rocky alleged that Red Wing’s ads falsely suggest that all Red Wing boots are made in the US. Red Wing argued that Rocky acquired knowledge of the issue in 2001, when, Rocky’s CEO testified, he saw a “consistent intentional … bait and switch … of China made product trying to tie into the historical Red Wing brand and made in USA.” In 2003, Rocky contacted legal counsel, who investigated during the summer of 2003. In October 2003, Rocky sent a letter with its findings to the FTC.

In June 2004, the FTC wrote to Red Wing noting that some of its stores displayed “signs, posters, door mats, and clocks stating ‘made in USA,’ even though some of the boots in the stores are actually imported. Because these signs and posters are not affixed to any particular boot or box but are either on the store windows or inside the store, the staff believes that they may give the impression that all the products in the store are in fact ‘Made in the USA’....” Red Wing then sent a letter to its store managers about proper use of “Made in USA.”

The FTC didn’t send a copy of the letter to Rocky; Rocky requested an update in September 2004 and sent along a copy of a Wall Street Journal article indicating that certain sketchy Red Wing sales practices continued. The FTC responded by indicating the matter would be given careful attention, but took no further action. In November 2005, Rocky wrote a C&D to Red Wing. Red Wing denied any wrongdoing. Rocky sued in April 2006.

Because the Lanham Act doesn’t have its own statute of limitations, courts use laches as a time limit; laches requires (1) a plaintiff’s failure of diligence and (2) defendant’s resulting prejudice. Courts look to the analogous statue of limitations in the forum state: if a claim is brought before that time, there’s a presumption of reasonability, whereas if it’s brought after, there’s a presumption of unreasonability and prejudice. The time runs from plaintiff’s actual or constructive knowledge of the allegedly unlawful conduct. Here, the court applied the two-year Ohio limitations period for claims of bodily injury or damage to personal property. (Comment: There wasn’t anything better than that? What about the state unfair competition statute, at least?)

The court found that Rocky’s knowledge began in 2001, and thus there was a presumption of prejudicial and unreasonable delay. Rocky argued that it could rebut the presumption because there was no reason to think the delay was prejudicial. The potential increase in damages during the period of delay, however, counted as prejudicial.

Rocky then argues that its out-of-court efforts and its protest to the FTC should excuse its delay. Though involvement in administrative proceedings can excuse delay in trademark cases, the court noted that this was not a trademark case; moreover, lobbying the FTC isn’t the same thing as being involved in an administrative proceeding. The FTC didn’t investigate, and it issued no formal findings or conclusions. Also, the FTC didn’t notify Red Wing of Rocky’s involvement, which means that—unlike in other cases—the administrative action didn’t provide Red Wing notice of Rocky’s potential claim.

Rocky also argued that the doctrine of progressive encroachment applied. This is a trademark doctrine, not a false advertising doctrine, though I think the analogy is persuasive: if a claim gets more exaggerated over time, it may move from nonactionable to actionable. The court, however, refused to apply the doctrine outside of the context of trademark, reasoning that the emergence of a likelihood of confusion is the “sine qua non” of progressive encroachment. Of course, likelihood of (trademark) confusion is a type of false advertising; likelihood of deception could also emerge over time.

More persuasively, the court noted that progressive encroachment requires some sort of change in direction, not a normal expansion of the size of the business. Here, the only change was the addition of more models of shoes to the lines Red Wing produces overseas. But they’ve always been directly competing with Rocky.

Finally, Rocky argued that egregious conduct—here, false advertising and false denials of the false advertising—defeated laches, an equitable doctrine. Knowing falsity can’t simply defeat laches in a false advertising case, because almost any Lanham Act claim could involve accusations of deliberate falsity. A court must be firmly convinced of the defendant’s fraudulent intent before rejecting laches on grounds of unclean hands.

The court found no such convincing evidence here; Red Wing’s denial came well after the analogous two-year statue of limitations had lapsed, and couldn’t have affected Rocky’s delay.

Rocky was, however, allowed to pursue claims for injunctive relief. Laches is not an estoppel. To avoid the possibility of injunctive relief, a defendant must show it’s been misled by the plaintiff’s acts or inaction, which Red Wing could not do.

False marking/trademark case continues

Vantage Trailers, Inc. v. Beall Corp., 2008 WL 4746288 (S.D. Tex.)

Beall has a trademark registration for the design of a bottom-dumping truck trailer with conical, tapered front and back ends, sold as the Beall Bullet. Vantage makes a trailer with a similar look. A previous lawsuit was dismissed for lack of a live case or controversy, because Vantage didn’t have a finalized trailer design; that’s on appeal, but Vantage filed this lawsuit too.

Beall moved to dismiss the complaint. First, Beall argued that Vantage’s patent false marking claim should be dismissed. Vantage alleged that Beall knowingly and falsely advertised on its website that the Beall Bullet was “patented,” intending to deceive the public. It claimed that each hit on the website constituted an instance of false marking subject to a $500 penalty. Beall’s objection was to the damages calculation; regardless of the proper method of counting instances of false marking, Vantage properly stated a claim for at least one offense of false marking.

Beall also argued that there was still no case or controversy because Vantage hadn’t fixed on a design when Beall sent it a C&D or when Vantage initially sued. After MedImmune, Inc. v. Genetech, Inc., 127 S.Ct. 764, 771 (2007), however, a declaratory judgment plaintiff need not have reasonably anticipated litigation to establish an actual controversy. Instead, a court is to examine the totality of the circumstances at the time the suit is filed. When this suit was filed, Vantage had “designed, sold, and advertised” an allegedly infringing trailer. It was in the process of making five additional trailers for its first customer, and its design allegedly facially resembles the design shown in Beall’s registration. This, along with allegations of direct competition, make the dispute sufficiently definite and concrete to support jurisdiction.

The court also rejected the argument that the trademark dispute should be resolved by the TTAB under the doctrine of primary jurisdiction. There was no TTAB proceeding pending and no reason to defer to the TTAB when additional claims for injunctive relief were present that couldn’t be resolved by that body.

Further, the court rejected the argument that Vantage couldn’t use functionality to invalidate Beall’s mark because the mark became incontestable before functionality was added to the grounds for cancellation of an incontestable mark. Because Vantage sought only prospective relief—the invalidation of the mark—there was no retroactivity issue.

Finally, the court held that Vantage had adequately pled its claim for fraudulent procurement of trademark. The trademark examiner initially rejected the application on functionality grounds. Beall allegedly represented that equally efficient alternative designs were available for the same cost, which Vantage alleged was an intentional misrepresentation because it contradicted Beall’s ads touting its design’s lower cost and superior features. This was sufficiently specific to satisfy the heightened pleading requirements for fraud under Rule 9(b).

State consumer protection action warrants Younger abstention

Arbitron Inc. v. Cuomo, 2008 WL 4735227 (S.D.N.Y.)

This September, New York’s AG Cuomo began investigating whether Arbitron, the leading publisher of radio audience estimates, was engaging in deceptive business practices associated with a new method for compiling radio ratings in New York. The issue is whether Arbitron’s newer method, which electronically records listening habits, underrepresents racial minorities, which could dampen ad revenues for minority-targeted radio stations.

The AG announced his intention to sue Arbitron in state court, and Arbitron filed a federal lawsuit seeking a TRO and a preliminary injunction against the AG, arguing that any restraint on Arbitron’s publication of its new estimates would violate its First Amendment rights. The AG subsequently filed the state lawsuit alleging fraudulent and deceptive business practices and moved to dismiss the federal case under the Younger abstention doctrine.

Younger abstention requires a federal court to allow a state court to resolve a pending matter within its jurisdiction that implicates an important state interest, so long as the state proceeding affords the federal plaintiff an adequate opportunity for judicial review of its federal constitutional claims. Arbitron did not contest the existence of adequate opportunity for judicial review in state court.

Arbitron argued that there was no pending state proceeding at the time it sued in federal court. The AG only sued four days after Arbitron sought a federal TRO. However, the test looks at how far the federal lawsuit has gotten, not how far the state proceeding has gotten. No proceedings of substance on the merits had taken place in the federal case before the state proceeding began.

Arbitron further argued that the AG’s investigation didn’t implicate an important state interest, because the AG was simply substituting himself for private parties, the minority radio stations. Under Younger, a state interest is important where it concerns the central sovereign functions of state government. Here, enforcing laws against discrimination and deceptive practices is an important state interest. The state has interest in protecting the health of radio stations serving minority communities in New York against unreliable and misleading ratings.

The Second Circuit refused to apply Younger abstention in a deceptive business practices claim by Connecticut seeking reimbursement from tobacco companies for Medicaid expenses from tobacco-related illnesses. But eliminating discrimination is an important state interest under Younger, and the AG isn’t bringing what is essentially a suit for money damages—he’s seeking to change business practices and enforce state laws.

Private parties may also be able to sue under some of the statutes at issue, but the AG has an independent obligation to enforce the law, and the AG’s lead claim was brought under Executive Law § 63(12), which gives the Attorney General sole authority to sue to restrain repeated fraud in commercial activities.

Thus, abstention was appropriate.