Yellow Pages wars, in Spanish this time

Momento, Inc. v. Seccion Amarilla USA, 2009 WL 1974798 (N.D. Cal.)

Momento sued defendant SAUSA for copying Momento’s Spanish-language ads for use in its own Spanish directories. Momento owned both the individual ads and the design and layout of its directories. (As set forth in another order, Momento created advertisements for its Yellow Pages by “preparing text, taking photographs of client advertisers, translating text from English to Spanish, and designing the layout of advertisements, including selection of fonts and colors.”) SAUSA argued that it got nonexclusive licenses directly from the advertisers as part of its form contract with them, and that the Momento ads were works of joint authorship because they resulted from collaboration between SAUSA and the advertisers and incorporated preexisting elements. (Interesting business model: allegedly, SAUSA solicits customers by sending an “ad proof” that’s a scanned copy of a Momento ad, sometimes with font/color changes; customers are asked for permission to print the ad “as is” for free, or with corrections for a fee.)

Under the 9^th Circuit’s test for joint authorship, the court found, Momento is the sole owner of the ads. Momento’s contracts with its clients say that Momento’s artwork is its sole property; one client expressly sought permission to use a photo taken by Momento on its web page; and several clients submitted declarations that they never gave SAUSA permission to copy the Momento ads (not sure why this is relevant to ownership, but ok—in fact, of course, regardless of whether the ads are jointly authored, the contract could separately change the ownership).

So Momento showed likely success on the merits of the copyright infringement claim. It also alleged false advertising under California state law based on SAUSA’s sales pitch that its directories are “the first and only Spanish directory delivered to consumers in Northern California.” SAUSA argued that the parties have entirely different methods of delivering the directories, making the claim ambiguous at most. However, Momento’s was the first Spanish directory published in Northern California and thus “at least that part of the statement is false.” In the absence of evidence that consumers weren’t deceived, then, Momento therefore showed a likelihood of success on the merits. Now, in Lanham Act parlance, it probably is true that “delivered to consumers” is ambiguous—if a directory is published, but consumers need to purchase it or call to request it or pick it up at a grocery store, then it’s not “delivered to consumers” and that even seems likely to be material to potential advertisers, since a directory delivered to consumers is more likely to reach those consumers who aren’t proactively seeking a Spanish-language directory. However, California law doesn’t include the false/misleading distinction, so it was open to the court to find the statement likely to deceive consumers even without evidence of actual consumer deception.

Since this was a preliminary injunction motion, the court then turned to the issue of irreparable injury. The old 9^th Circuit rule that a presumption of irreparable harm applies in a copyright case can’t be applied automatically after eBay, however. So instead the court applied the general test: irreparable injury; remedies available at law inadequate; balance of hardships; public interest.

Momento argued that the harm to its investment and competitive position caused by SAUSA’s copying at least 30 Momento ads showed irreparable harm. SAUSA says it’s the largest publisher of Spanish Yellow Pages in the world, and Momento is a family-owned business, directly competing. The court found that the copying and false advertising had an adverse and irreparable effect on Momento. The court could fairly consider Momento’s competitive position where SAUSA “built its business” around Momento’s works.

SAUSA argued that Momento’s four-month delay before filing suit precluded a finding of irreparable harm. Momento, however, wrote to SAUSA before that and got a response from SAUSA’s counsel that it took IP rights very seriously and was investigating, and would cease any infringements found, requesting proof of Momento’s copyright registrations and Momento’s directories to investigate further. Then, several months passed. The court accepted Momento’s explanation that it didn’t sue until it had evidence that SAUSA hadn’t ceased infringing, which came only when a new directory was published; Momento sued about a month and a half after that.

The court ordered SAUSA to retrieve directories stored on pallets at distribution points, but did not require SAUSA to retrieve directories picked up by consumers, and enjoined further distribution. SAUSA had notice of the infringement contentions as of the first cease & desist letter, yet proceeded with production; the injunction created a hardship for SAUSA, but not an unreasonable one in light of its decision to keep printing.

Note: in an earlier order, Momento, Inc. v. Seccion Amarilla USA, 2009 WL 1974905 (N.D. Cal.), the court denied a TRO on the ground that the plaintiff hadn’t made the extraordinary showing required. Without notice to SAUSA, the court stated the standard for irreparable harm using the old 9^th Circuit presumption. Once there was notice and a hearing, the court had a chance to get more deeply into the law as well as the facts: a victory for the adversary process.