A Rolling Stone gathers no right of publicity liability

Stewart v. Rolling Stone LLC, --- Cal.Rptr.3d ----, 2010 WL 317016 (Cal.App. 1 Dist.)

Fascinating case! Indie rock musicians from the bands Xiu Xiu and Fucked Up sued to represent a class of over 100 bands who all appeared in an editorial feature, “Indie Rock Universe,” in the November 15, 2007 issue of Rolling Stone. The feature is a four-page foldout described as a “butterfly gatefold,” which has four ad pages and five editorial pages. It begins with an ad on the left. Then there's a page of editorial copy on the right. When the page is turned, two pages of ads appear as a “gate,” which can be opened like French doors. Then the four-page remainder of the editorial feature appears; if you are looking at all four pages of the editorial at once, the ads are not visible.

The feature here, which was listed along with two other similar features in the magazine’s table of contents, had “hand-drawn cartoon-like illustrations accompanied by both handwritten and typeset text.” Artist’s site; the artist wasn’t involved with the ad pages. The Camel ads featured “a collage of photographs.” The ad theme continues from the intro page through the gate, and then resumes when the gate pages are folded back to re-inclose the feature.

Plaintiffs sued Rolling Stone and R.J. Reynolds for violations of the California common-law and statutory right of publicity and unfair business practices. The trial court denied Rolling Stone’s motion to dismiss, holding that Rolling Stone’s “layout decision” was an “allegedly integrated 9-page advertisement” that a trier of fact could conclude was commercial speech “inextricably intertwined” with the Camel ad. Rolling Stone appealed, using California’s anti-SLAPP statute, under which if a cause of action arises from protected speech activity, the plaintiff must establish a reasonable probability of prevailing on the merits.

In 2003, the anti-SLAPP statute was amended to exempt certain lawsuits against people in the business of selling goods or services if the statements at issue were representations of fact about those goods or services or those of a competitor, made for sales purposes, to a buyer/customer audience. Despite plaintiffs’ rather strained arguments, the court had little trouble concluding that the exemption didn’t apply here. Rolling Stone is engaged in the business of selling magazines, not cigarettes, and the statements here weren’t factual representations about Rolling Stone or its competitors.

The key question was whether the feature was commercial or noncommercial speech. It was, as the anti-SLAPP law requires, made in connection with a matter of public interest; a feature on a popular music genre easily qualifies. The trial court found that the decision to put the feature within the gatefold format was protected by the First Amendment. Although there was a profit motive, that’s true of standard newspaper publication, including basic editorial decisions. It was the feature itself, regardless of the layout decision, that was protected speech.

Plaintiffs argued that the anti-SLAPP statute doesn’t cover commercial speech. The court disagreed. In fact, the exception for competitor speech suggests to the contrary. “Defendants’ acts on which the counts alleged in the complaint are based, are the acts of designing and publishing, within the advertising gatefold layout, an editorial feature containing plaintiffs’ band names. Those acts arose from protected activity for purposes of the anti-SLAPP statute as they were done in furtherance of defendants’ constitutional right of freedom of speech made in connection with a public issue.”

So, could the plaintiffs show a reasonable probability of prevailing on the merits? The common law requires appropriation of a plaintiff’s identity to the defendant’s advantage without consent and with injury; the statute adds in that the use of the name, voice, etc. for advertising purposes must be “knowing,” and requires a direct connection between the use and a commercial purpose. The statute expressly exempts use in connection with news and public affairs, similar to the exceptions developed to the common-law cause of action. The unfair competition action, meanwhile, requires a showing of likely public deception and injury/lost money or property as a result of the unfair competition.

Here’s where it gets really interesting. Rolling Stone argued that actual malice would be required to prevail; plaintiffs argued that actual malice applies only to defamation. The court held that they were wrong.

Media defendants can invoke the First Amendment as a defense to misappropriation claims. And actual malice has been applied to similar claims, such as one brought by Clint Eastwood about his alleged involvement in a love triangle, which the publisher touted in ads. Eastwood held that scienter of the alleged calculated falsehood was the proper standard of fault. Moreover, Comedy III cautioned against giving a broad scope to the right of publicity lest it allow censorship of unflattering commentary. So actual malice applies.

There are a couple of missing steps here, at least if you take the right of publicity as extending beyond false endorsement. Most obviously: actual malice makes sense as applied to falsehood. But what does actual malice (or reckless disregard) mean as applied to the right of publicity? Reckless disregard of someone’s publicity rights? But publicity rights are creations of law, not facts. Is this now a standard about knowledge of the law? That’s not what the actual malice requirement is supposed to focus on; it’s about how badly the defendant screwed up the truth of the underlying factual statement, not whether it had any clue what the law was. (I’m not a fan of the right of publicity by any means; I just don’t think actual malice is a helpful concept here.)

Meanwhile, false or misleading commercial speech is not constitutionally protected. And a public figure need not show actual malice to prevail against commercial speech (here the court cited Procter & Gamble Co. v. Amway Corp., which is a competitor disparagement case). But here, the feature was noncommercial speech as a matter of law.

Under Nike v. Kasky, categorizing speech requires an assessment of the speaker, the intended audience, and the message content. A commercial speaker has (or is acting on behalf of someone who has) a direct business interest in the goods that are the subject of the speech at issue. Rolling Stone isn’t in the business of selling cigarettes. It’s the medium by which ads are delivered by the actual commercial speakers, the advertisers. Its editorial purpose is noncommercial: assessing the current American scene. The other two Kasky factors supported the noncommerciality conclusion; the content of the commercial message had nothing to do with Rolling Stone.

The plaintiffs argued that it was hard to tell where, if at all, the Camel ad begins and ends. The court didn’t think the distinction was that difficult. The graphic designs were quite different, one hand-drawn cartoons and the other collages of photographs, with different backgrounds. The only “nexus” between them was their mutual references to independent music. “None of the band names in the Feature appear in the Camel ad, and none of the language or elements of the Camel ad appear in the Feature. … [P]laintiffs have not cited us to a case, and our research has disclosed none, in which a magazine’s editorial content has been deemed transformed into commercial speech merely because of its proximity to advertisements touching on the same subject matter.” The court did not find it significant that a prior feature used standard typeface and a statement that the feature was presented by Rolling Stone, along with a typical editorial border design. The absence of a border was consistent with the artistic theme of the feature, and it was still distinct from the Camel ad. Moreover, the name of the magazine and the page number appeared on the feature, but not on any of the ad pages.

It was undisputed that R.J. Reynolds had no role in designing the feature. Consistent with industry practice, Rolling Stone maintains a wall between editorial and advertising staff. The artist and staff who created the feature were unaware at the time that R.J. Reynolds had bought the surrounding ad space. R.J. Reynolds knew that the general topic of the gatefold was indie rock, but didn’t know the specific content. It paid only for the four pages of ads it designed itself. There was no evidence that anyone at Rolling Stone or R.J. Reynolds had any concerns that the ad and the feature would be perceived as an integrated whole. (Here the court cited a bunch of cases where, by contrast, the media defendant knew about the potential of a statement to mislead.)

In the end, there was no legal precedent to convert noncommercial speech into commercial speech based on the former’s proximity to the latter, nor to convert a noncommercial speaker into a commercial speaker in the absence of any direct interest in the product or service being sold.

That brings us back to actual malice, which isn’t at issue in ordinary right of publicity cases where the challenged speech is pure commercial speech and the celebrity’s identity is used to sell a product. There was insufficient evidence of actual malice, in that there was no intentional collusion to misappropriate plaintiffs’ identities. At best, there was a triable issue only with respect to whether defendants were negligent, in that they could have done more to ensure that the feature and the ads were distinct. But negligence isn’t sufficient to show actual malice.

And here’s another misfit between actual malice and the right of publicity. Though Rolling Stone’s staff had no prior concern about the appearance of integration in this gatefold, after this case, aren’t they on notice that people might perceive integration (as the artists did; see also this discussion thread)? So isn’t the standard for malice changed, going forward, especially as product placement/integration becomes ever more the default expectation, see, e.g., 30 Rock and The Colbert Report? This is highlighted by the court’s apparent comfort with the idea that Rolling Stone was negligent in publishing the gatefold. The problem is that the thing about which knowledge/reckless disregard is assessed—whether the feature would be a misappropriation of identity (again, a legal conclusion)—isn’t related to the reasons we protect (or don’t protect) speech, the way that knowledge/reckless disregard for falsity is related to the reasons we tolerate a lot of factual error in noncommercial speech. The right of publicity isn’t about falsity, though it should be; as such, actual malice simply doesn’t fit. (And by the way, if the feature was noncommercial speech, how could it even count as an actionable appropriation of identity? That is, how could Rolling Stone even have been negligent about whether this was actionable, unless noncommercial speech can at times violate the right of publicity and this is one of those times? In which case, I guess, we're looking at Comedy III for when noncommercial speech is actionable--but that's a standard that would look to the content of the feature, not to its level of integration with commercial speech, which was where the court suggested the negligence lay. In other words, the incoherence here is all the way down. And also: is there now an actual malice standard applied to a straight-up Comedy III type case, such that the plaintiff has to prove knowledge or reckless indifference as to the absence of transformation? What, I ask again, is the actual malice with respect to?)

In a footnote, the court took judicial notice of the fact that R.J. Reynolds had been sued over this ad for violating the master settlement agreement prohibiting it from using cartoons in its ads. A California court found that the California AG failed to prove that R.J. Reynolds intended that its ads surround the cartoons or had advance knowledge that the ads would be positioned with or intertwined with cartoons. A similar Pennsylvania case, however, found that the ads “envelope, integrate and cross-pollinate” the cartoons “so completely as to constitute a single integrated whole.” But these aren’t admissible to prove the truth of the facts found; defendants also weren’t parties to those cases.

Plaintiffs’ unfair competition law claim also failed because they didn’t demonstrate injury in fact/lost money or property. Their claim was based on damage to reputation because of misappropriation. As no actionable misappropriation occurred, they couldn’t win on their UCL claim.

In a coda, the court also found that the freedom of the press barred the claims here. Editorial control and judgment extends to the content and placement of ads. Fear of liability shouldn’t impose self-censorship on publishers. The trial court faulted Rolling Stone for selling ads to enclose the feature, letting R.J. Reynolds design the ad to “integrate” with a feature about indie rock, failing to identify the feature as a Rolling Stone feature, and failing to ensure that the feature and the ad were sufficiently distinct. Even if this was all true, the court found, Rolling Stone’s conduct would still be privileged.

Finally, the court noted that the November 15, 2007 issue of Rolling Stone was “replete” with full-page ads—108 of 215 pages. Thus, all the editorial content is “in a sense, ‘embedded’” with ads. The gatefold layout might intensify readers’ exposure, “because the pages run more or less contiguously and because the format requires readers to lift the advertising pages to the left and to the right, instead of just mindlessly turning them.” But there was no principled legal distinction between ordinary preceding-and-following placement and the gatefold format.

The court acknowledged that the placement of the feature “may have caused plaintiffs some distress, insofar as their bands’ names appeared in such close proximity to R.J. Reynold’s expressions of corporate sponsorship for independent music.” But without actual malice, the lawsuit still failed.

Leaving a billboard in place isn't actionable use of a mark

Howard Johnson International, Inc. v. Vraj Brig, LLC, 2010 WL 215381 (D.N.J.)

HJI licenses franchisees to use Howard Johnson marks. Defendant Vraj Brig was one such licensee. A nonparty leased the hotel facility from defendant Peter Tucci and contracted with Vraj Brig to manage the hotel, on a fifteen-year contract signed mid-2001. HJI was allowed to terminate the license if Vraj Brig discontinued operating the hotel or lost possession. In the event of termination, Vraj Brig was to cease using all Howard Johnson marks.

In mid-2006, Tucci took legal action against the nonparty lessee, and then took physical possession. At the time, the property was nonfunctioning, with extensive evident vandalism, theft and destruction. Vraj Brig then ceased operating it. When HJI learned of this, it terminated the license agreement, leaving Vraj Brig owing over $66,000 in recurring fees. Tucci and HJI began ultimately unsuccessful negotiations for a new license.

Key in this case was a billboard at the facility, visible from a nearby highway, using the name “Howard Johnson.” The parties disputed whether Tucci had refused to allow its removal when representatives from Vraj Brig and HJI sought to remove it.

HJI sued and Tucci brought a bunch of counterclaims. Of interest here is HJI’s Lanham Act claim.

Did Tucci use a mark to identify goods or services? Tucci argued that, since he hasn’t operated a lodging facility on the property in question since retaking possession, he hasn’t used the mark, and his failure to remove the Howard Johnson sign falls outside the scope of the Lanham Act.

HJI argued that the Lanham Act isn’t limited to profit-seeking activity, citing United We Stand America, Inc. v. United We Stand America New York, 128 F.3d 86, 90-92 (2d Cir. 1997), which applied the Act to political groups. Even assuming that United We Stand applied, however, it dealt with defendants in the business of providing identifiable services, albeit without charge. Tucci, however, isn’t alleged to have provided any goods or services whatsoever at the facility with the sign.

The court concluded that the Lanham Act shouldn’t apply when a defendant “displays” a protected mark, but doesn’t use the mark in the offer or provision of any goods or services. In support, the court cited Holiday Inns, Inc. v. 800 Reservation, Inc., 86 F.3d 619 (6th Cir. 1996), involving the use of a telephone number that corresponded to 1-800-H0LIDAY—taking advantage of preexisting confusion, but not making any effort to create confusion or publicize the alphanumeric combination. Generalization from this and similar cases: “The mere fact that confusion exists with respect to the affiliation between a protected mark and a defendant’s goods or services is insufficient grounds to hold the defendant liable. Rather, the defendant must take some affirmative action to create or enhance the confusion in order to violate the Lanham Act.”

Likewise, the caselaw supports the proposition that infringing use is only illegal if done “in connection with the defendant’s offer or provision of goods or services.” Thus, merely criticizing the trademark holder’s goods or services can’t violate the Lanham Act, see Bosley Medical Institute, Inc. v. Kremer, 403 F.3d 672, 677-680 (9th Cir. 2005). (There's some language here about intent to free ride on goodwill being a requirment; that probably can't be read as broadly as it would seem on its face.) Trademark law protects only against mistaken purchasing decisions and not against confusion generally; United We Stand would extend this to cover the cost-free consumption of goods and services. (Note that this can’t be right, at least if information is a good or its provision a service; United We Stand should be read to be about fundraising, not providing goods and services, to allow it to make sense in this context.) Summing up: the Lanham Act only prohibits the “affirmative use” of a protected mark, and only when the use is in connection with the defendant’s offer or provision of goods or services.

Thus, HJI’s Lanham Act claims had to be dismissed. Even if Tucci prevented HJI from removing the billboard, that was only “passively allow[ing]” the preexisting billboard to remain standing. He never “used” the protected marks within the meaning of the Lanham Act. Even if he had, he never offered or provided any goods or services at the facility, so there’s no display “in connection with goods or services.”

HJI argued that people traveling on the highway might exit the freeway looking for a Howard Johnson and then experience frustration on their failure to find a Howard Johnson hotel, tarnishing the mark. Again, the Lanham Act requires use in connection with the defendant’s offer of goods or services, not in connection with the plaintiff’s. Otherwise, any speech critical of the trademark owner would qualify as trademark infringement. “Simply put, §§ 32(1) and 43(a) do not prohibit unauthorized use of a protected mark when the user is not trying to gain any advantage through confusion in offering its own goods or services.”

The court had little trouble rejecting the federal dilution claim for the same reasons—there was no “use” “in commerce.”

Tucci raised some counterclaims of relevance. The court refused to dismiss his trespass claims, because a trespass can be committed by the continued presence on the land of a thing when the party who placed it there loses its license, and there was a genuine dispute over whether he prevented the sign’s removal. He lost his conversion claim, however, because he never contended that he owned the billboard. On his unjust enrichment claim—for compensation for allowing HJI to maintain the sign on his property after he retook possession—HJI argued that its repeated requests for him to take down the sign meant that he couldn’t reasonably expect remuneration. Given the dispute over whether and to what extent HJI demanded Tucci remove the signs, and whether or not Tucci prevented HJI from removing the signs, summary judgment was unwarranted. He couldn’t maintain passing off or false advertising claims, because there had been no services offered at the facility at all relevant times.

Calling on insurers fails for phone-card defense

Total Call International, Inc. v. Peerless Ins. Co., --- Cal.Rptr.3d ----, 2010 WL 188213 (Cal.App. 2 Dist.)

Plaintiff-appellant TCI argued that Peerless improperly refused to defend TCI in litigation arising out of its advertising activities; the court of appeals affirmed the dismissal of its complaint.

TCI sells prepaid phone cards. As the court described its allegations, “[m]ost providers rely on ‘point of sale’ advertising, that is, billboards and posters at gas stations and other places where cards are sold that state the price of the provider's card and amount of paid minutes. Because cost is the determinative factor for most consumers, they typically buy the least expensive card advertised on the billboards and posters.” I highlight this because a different phone card seller just argued to the contrary in a different false advertising case.

Anyway, Peerless insured TCI for “personal and advertising injury,” including “[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services” but excluded coverage for “‘[p]ersonal and advertising injury’ arising out of the failure of goods, products or services to conform with any statement of quality or performance made in [the insured’s] ‘advertisement.’”

TCI was sued by IDT (plaintiff in the suit referenced above, too) for false advertising. Peerless refused to defend on the ground that IDT alleged only that TCI’s ads misrepresented TCI’s own phone cards.

The duty to defend is broader than the duty to indemnify, and arises when a lawsuit against an insured alleges a claim that potentially or even possibly could result in liability for covered damages. To figure this out, courts generally compare the allegations of the complaint with the terms in the policy, though facts extrinsic to the complaint can also trigger a duty to defend. The insurer can establish the absence of a duty to defend when the allegations in the underlying complaint disclose no basis for policy coverage and allege no extrinsic facts that raise a possibility of coverage.

The court of appeals reasoned that the coverage at issue was for “product disparagement and trade libel as well as defamation,” but all of these require that statements be “of and concerning” the plaintiff in some way. Though IDT alleged harm to its reputation and market share, the alleged falsehoods didn’t meet the requirement of making specific reference to IDT, which would have at least required reference to a small group of which IDT was a part; California cases use the number 25. (How many phone card sellers are there at IDT’s level?) Anyway, TCI’s allegedly offending ads weren’t comparative. Consumers would have had to look at other materials to compare the prices. Thus, the alleged injury wasn’t covered advertising injury.

Moreover, the nonconformity exclusion also meant that there was no policy coverage. The issue was whether TCI’s cards measured up to their claims, and harm caused by that type of misrepresentation was excluded. TCI argued that the exclusion should be read to bar coverage for claims by consumers, but not claims by competitors, but the court of appeals found no ambiguity in the exclusion justifying such a reading.

New short paper on hybrids and remixes

Hybrid Vigor: Mashups, Cyborgs, and Other Necessary Monsters, 6 I/S: J. L. & POL. INFO. SOC. 1 (2010). I consider this a first run at an introduction to the book I'm slowly preparing to write.

Department of Justice, false advertiser?

Trusted Integration, Inc. v. United States, --- F. Supp. 2d ---, 2010 WL 174143 (D.D.C.)

A false advertising claim against the US caught my interest here. In 2002, Congress passed the Federal Information Security Management Act (FISMA), requiring the National Institute of Standards and Technology to “set standards and best practices for information security at federal agencies, and agencies must meet security standards and conduct annual, independent evaluations of their information security.”

According to the complaint: Plaintiff makes TrustedAgent, software that automates compliance with FISMA. The Department of Justice bought a license to use TrustedAgent in 2004, after using it for about seven months. DoJ also used another proprietary program that certified and accredited users of its information systems. Together, these programs were the DoJ’s “FISMA solution,” known as “Cyber Security Assessment Management” (CSAM). (Boy, we do love our acronyms.)

In 2006, OMB told federal agencies it was planning to evaluate their FISMA compliance and designate Centers of Excellence. Agencies not so designated would be required to purchase a FISMA solution from one of the Centers. Plaintiff and the DoJ agreed to submit CSAM. DoJ’s proposal said that TrustedAgent was part of CSAM and that plaintiff’s staff would provide technical services. DoJ demonstrated TrustedAgent as part of its proposal. In 2007, OMB selected DoJ as one of two Centers of Excellence. After that, DoJ demonstrated CSAM to potential customers, suggesting that TrustedAgent was a “key component” of FISMA.

Plaintiff alleged that, by late 2006, DoJ was already developing an alternative to TrustedAgent to increase its revenue. It didn’t submit the new program in its OMB proposal because it hadn’t yet been successfully used, but in March 2007, after selection, it announced it had completed the replacement, and began including the new program as part of the FISMA solution sold to other agencies. It also made disparaging comments about TrustedAgent to various potential customers, and in April 2007 it dumped plaintiff.

Plaintiff sued for violations of the Lanham Act, common law unfair competition/disparagement/false advertising, and violation of fiduciary duty. The Federal Tort Claims Act broadly waives sovereign immunity for tort claims, but not for “[a]ny claim arising out of ... libel, slander, misrepresentation, deceit, or interference with contract rights[.]” 28 U.S.C. § 2680(h). In addition, district courts lack jurisdiction over contract claims over $10,000, which have to go to the Court fo Federal Claims.

Though the court’s opinion is a little wobbly on whether this is fundamentally a trademark or a false advertising claim, the Lanham Act claim focused on false designation of origin—a false claim likely to cause confusion about the relationship between DoJ and plaintiff, the origin/sponsorship/approval of the DoJ’s product, and the nature/characteristics/quality of its FISMA solution. The US argued that this was essentially a contract claim and thus barred. But the rights on which plaintiff based its claim were not based in contract. And the US has waived sovereign immunity for Lanham Act claims.

The US argued that DoJ never referred to its own product as TrustedAgent, but that doesn’t exhaust the possibilities of false designation of origin. Attributing plaintiff’s name to the work of another can be an actionable misrepresentation. Here, DoJ allegedly falsely suggested that TrustedAgent would be a “key component” of DoJ’s solution. The US also argued that the DoJ’s acts didn’t occur “in commerce,” because DoJ is a federal agency and not a commercial undertaking. But the Lanham Act’s reach isn’t limited to commercial entities. DoJ allegedly actively promoted and sold CSAM to various agencies.

Injury was properly alleged because “defendant falsely and deceptively advertised a product it was selling to plaintiff's potential customers.” I wonder about this. Under the OMB’s rules as the court’s summary of the complaint gives them, plaintiff can’t compete for the business of other agencies, because only agencies and not private businesses can be Centers of Excellence from whom other agencies are required to buy. So plaintiff might have been harmed, but was it harmed by any misrepresentation?

(Note that the Lanham Act claim survives even though the court speaks in terms of misrepresentation, which is arguably inconsistent with the resolution of the unfair competition claim, discussed next.)

The unfair competition claim was that DoJ misled customers into thinking that TrustedAgent would be part of its FISMA solution and that DoJ disparaged TrustedAgent (presumably thereafter). The US argued that this was either a contract or a libel/misrepresentation-type claim. The court again found that the alleged violations were tort claims that didn’t depend on contract rights. But the libel exclusion applies where reliance on government misstatements or misinformation is essential to the plaintiff’s claim. This was the situation here: the alleged unfair competition was “essentially a claim for misrepresentation.”

Plaintiff argued that misrepresentation wasn’t the actual basis for the claim because the US’s liability comes from dropping TrustedAgent from its FISMA solution and interfering with plaintiff’s access to customers. But this would be “unfair” only because of DoJ’s prior representations. Plaintiff didn’t suffer damages merely because of the replacement program. Rather, it was damaged because of alleged negligent misrepresentation.

Finally, the breach of fiduciary duty claim here sounded essentially in contract and therefore also had to be dismissed.

Highs and lows: mixed ruling in copying/comparative advertising case

Gennie Shifter, LLC v. Lokar, Inc., 2010 WL 126181 (D. Colo.)

Gennie Shifter makes aftermarket auto parts and accessories. It sued competitor Lokar for a declaratory judgment of noninfringement of copyright and trademark and lack of false advertising/unfair competition. Lokar counterclaimed for the things you’d imagine.

In 2007, Gennie Shifter began selling the Lo-Dapt Shifter Knob Adapter, which allows customers to attach Gennie Shifter specialty shifter knobs to push-button type shifters manufactured by other companies such as Lokar. The Lo-Dapt is similar to Lokar’s Shifter Knob Adapter. Lokar objected to the use of its trademarks in Lo-Dapt ads, similarities between Lo-Dapt installation instructions and ad materials, and claims that the Lo-Dapt had no “annoying rattles.” Undeterred, Gennie Shifter began expanding its family of Lo-branded products (which had since the early 1980s also included the Lo-Line Brake, though the dates are hotly disputed by the parties). It used “Lo” in ads, including the words/phrases “Lo-Craze” and “Lo is the new Hi.” (Lokar’s president is named Craze, and Lokar had a product line called “Hi Tech.”)

On cross motions for summary judgment, the court granted Gennie Shifter’s motion on the copyright infringement claim as to the installation instructions. Though Lokar’s installation instructions were registered, and in spite of Lokar’s arguments that (1) the decision to use certain terms such as “outer adapter housing” and “inner sleeve” was creative and (2) Gennie Shifter’s ultimate rewriting of the instructions proved that there were alternatives, the court found that merger and scenes a faire defeated the infringement claim. Here’s a sample of the instructions, to give you the flavor: “STEP 1: Using a 9/16 wrench, loosen the jam-nut. Unscrew both the knob and jam-nut and remove them from the shifter lever. (These parts will not be reused in this installation. Save them for future use in changing back to the Lokar knob.) Fig. 1 (For Pre-1995 Shifters, please call Lokar for Shifter Knob Removal Instructions.)”

The court found that the instructions were “merely the recitation of the mechanical steps and parts dictated by the installation process.” Naming of parts merely reflected the physical reality of the product, flowing naturally from considerations external to authorial creativity. Gennie Shifter’s revised instructions didn’t avoid a finding of scenes a faire, because that doctrine does not require that there be only one means of expressing an idea as long as the expression necessarily flows from the common theme or setting.

By contrast, Lokar’s catalog was creative enough to be protected; the text described its jam nuts as “hidden” and the overall appearance of the product as “clean.” (That doesn’t seem like a modicum of originality to me; it seems like two words. But ok.)

The Lokar catalog said: “The Shifter Knob Adapter is designed with the common 3/8-16 and 3/8-24 threads found in most aftermarket shifter knobs. Designed with hidden jam nuts for a flush mount against the shifter knob. Chromed finish blends with the Lokar chromed shifter lever to give you the desired clean look with a custom knob.” The Gennie Shifter catalog said: “The Lo-Dapt TM Shifter Adapter is designed with the common 3/8-16 threads found in most aftermarket shift knobs. Designed with hidden jam nuts for a flush mount against the shifter knob. Gennie's polished 304 Stainless Steel Lo-Dapt TM blends with any chromed shifter to give you the desired clean look with your choice of Gennie Shift Knobs.” Thus, Gennie Shifter copied thirty-nine of the fifty-two words in the quoted paragraph.

The court found that an ordinary observer would find substantial similarity in the protectable expression, and Lokar might be entitled to summary judgment, but withheld judgment pending resolution of other motions. (Query: isn’t the protectable work the entire catalog? Can substantial similarity really be found based on 39 words from a much larger catalog? I realize our de minimis doctrine has gotten ridiculously restrictive, but doesn’t this case show the problem with that?)

The court proceeded to deny summary judgment on the trademark claims, using traditional confusion to analyze both Gennie Shifter’s use of “Lokar-like” and its use of the “Lo” prefix. Though Lokar argued that the latter increased the confusion caused by the former, the court rejected that argument—it appears that “Lo” is used to evoke “low” by both parties. Gennie Shifter argued nominative fair use—it only used Lokar’s name in text, not the stylized version of the mark for which Lokar has a registration, and that it used Lokar’s name to point out that the Lo-Dapt was compatible with Lokar shifters. Though this sounds like a slam-dunk to me, the court adopted the (misguided) view that nominative fair use isn’t an affirmative defense but rather goes to proof of likely confusion.

Lokar argued that, since Gennie Shifter’s product was compatible with all push-button shifters, not just Lokar shifters, the reference to Lokar was unnecessary. (So, since there are many brands of cola, I guess it’s not necessary to refer to Coke when making comparative claims about Pepsi?) Gennie Shifter responded that each of its three Lo-Dapt models were designed for different shifters, but the court found the argument problematic, because the catalog at issue didn’t distinguish between the models.

Argh! This is a sideshow. The test is not whether it was necessary to refer to the trademarked product, because one can always imagine an ad that does not do so. The test is that, having decided to refer to the trademarked product, was the use of the trademark to do so necessary? And the answer is, of course, yes. Amazingly, the court ruled that, because it was not necessary to reference Lokar in describing the product—the FAQ didn’t do so—the use was not nominative. This is clear error.

So somehow the obvious comparative use of the mark turned into a “very close” question on likely confusion, largely because of the intent and degree of care prongs. Notice that because the use was nominative—describing the compatibility of the product with those of a market leader—similarity of marks, similarity of products, and strength of mark all favored the plaintiff in the classic confusion test. But any comparative claim regarding a market leader will look bad on these factors no matter how obviously nonconfusing the use is. This is precisely why the nominative fair use test is a replacement for the usual multifactor confusion analysis in such cases, as the New Kids court explained.

On to false advertising: Lokar alleged that Gennie Shifter’s reference to an “annoying rattle” accused Lokar’s product of having such a rattle, and that Gennie Shifter’s press releases about the present litigation were also false advertising.

Gennie Shifter argued truth: there was a history of customer complaints about audible rattling in Lokar’s product. Lokar didn’t disagree, but attribued the complaints to faulty installation, not faulty construction. The court interpreted this as a claim of falsity by necessary implication: by suggesting that the rattle could be avoided by using a different brand, the claim necessarily implied that the fault was with the product and not with the installation process. (Couldn’t it be both? If Gennie Shifter’s product is easier to install, or simply differently configured, then the claim could be true because of the lower risk of improper installation.) The court found the argument “too attenuated” for a reasonable factfinder to accept. Given that the actual claim was that Gennie Shifter’s construction process produces “long lasting durability without any of those annoying rattles,” the slur on Lokar would not necessarily and unavoidably be received by the consumer, and thus could not violate the Lanham Act without evidence of consumer perception. Moreover, even if the message were necessarily implied, the evidence showed that the set screws of Lokar’s product, even when properly installed, were at least part of the problem; Lokar changed the design to address the issue. Thus, there was no material issue of fact.

What about the press releases? Lokar argued that Gennie Shifter falsely accused Lokar of instigating the underlying litigation anticompetitively, and objected to Gennie Shifter’s characterization of its claims as “spurious.” But the press release was titled “Gennie Shifter, LLC Files Suit Against Lokar, Inc.,” and merely mentioned the counterclaims. And the “spurious” claims were those which Lokar agreed to dismiss with prejudice. Again, no issue of material fact on falsity.

Lokar’s federal dilution claim was dismissed for failure to show fame, as one would expect. Though “If you’re into hot-rods, you know Lokar,” that’s not the standard: it’s fame to the general consuming public. Use since 1983; marketing expenses of about $1 million/year from 2002-2006; tens of millions in sales; sales in all fifty states and some foreign countries; and federal registration—all were insufficient. Niche market fame, which was established, is simply insufficient.

Finally, the court also dismissed Lokar’s false designation of origin/product design trade dress claim for failure to prove the distinctiveness of its trade dress. The evidence of secondary meaning was from “a recently fired employee of a company owned by Gennie Shifter’s president,” who stated that one customer inquired about whether the Lo-Dapt was actually Lokar’s product, based on its appearance. A Lokar employee also testified that Lokar customers recognized Lokar’s “hexagonal-tapered” shape as an indication of source. Again as you’d expect, this was insufficient, even without weighing credibility, especially given Gennie Shifter’s evidence of another competing product with a similar shape.

Number of minutes is material to calling card ads

IDT Telecom, Inc. v. CVT Prepaid Solutions, Inc., 2009 WL 5205968 (D.N.J.)

Plaintiffs alleged they’d lost market share and millions in sales from defendants’ misleading ads for prepaid phone cards. Though cards are sold in dollar denominations, the number of minutes available depends on the rate per minute to a particular destination, plus fees and charges. It’s uncontested that STi, the defendant implementing/providing the minutes, used fees and charges that reduced the number of minutes and that varied according to destination and call duration. Ads focus on the number of minutes to key destinations, e.g., “250 minutes to the Dominican Republic.” The minute claims were displayed on posters at the point of sale and in voice prompts before a call was made (heard only after purchase). Defendant Telco’s posters told consumers about the gross number of minutes, but also contained a disclaimer that “[a]pplication of surcharges and fees will have the effect of reducing total minutes actually received on the card from the minutes announced ... Prices and fees ... are subject to change without notice.”

Defendant IDT lost market share in 2006-2007. One card, for example, declined from $5 million in sales to $5000. Meanwhile, defendant STi went from $2.3 million to $5 million in sales. Other factors contributed to IDT’s losses, such as a shift in demand to wireless phones and losses to other competitors such as AT&T and Sprint. Defendants STi and Telco had a complicated corporate relationship, meaning that they disputed who was responsible for any mismatch between ads and minutes delivered.

Defendants argued that the plaintiffs lacked standing to bring a Lanham Act claim for failure to show that defendants lured customers away from them; plaintiffs’ damages were too speculative. The court disagreed: the alleged injury was of the “exact nature” the Lanham Act targets—sales lost due to a competitor’s false advertising. Speculative damages might weigh against standing in the Conte Bros. test, but that’s just one factor. Outweighing it is the nature of the injury, the relative directness of the injury, and the fact that plaintiff IDT was not at all remote from the injurious conduct. Nor was there a risk of duplicative damages: defendants wouldn’t be forced to pay double if IDT wins.

Plaintiff UTA, however, is a distributor of prepaid phone cards (majority owned by IDT), while STi is a provider. Under Conte Bros., it was in the wrong part of the distribution chain to have Lanham Act standing.

The court also refused to extend standing to the plaintiffs under New Jersey law, which protects “consumers,” though no New Jersey court had explicitly rejected competitor standing. And the court dismissed the California-based CLRA claims, for which only restitution was available, because plaintiffs had not lost money or property by purchasing defendants’ cards, as well as an Illinois claim for which damages were not available.

On the merits, defendants argued that the Lanham Act claims had to fail. The critical issue was causation: a link between the allegedly false ads and plaintiffs’ damages. Here, defendants argued that a survey was required. IDT argued that it provided evidence that STi deliberately targeted false advertising toward IDT; evidence that customers, including distributors in major markets, were relied on and were confused by the ads about available minutes; evidence that the false ads were correlated with an increase in STi’s market share and a decrease in IDT’s; and evidence that the ads created a perception that IDT’s price wasn’t competitive with STi’s. The court concluded that this was sufficient to avoid summary judgment. There is no Third Circuit case requiring a consumer survey to establish damages. (The court rejected similar causation-based arguments against the California FAL, Florida, Illinois Consumer Fraud Act, and New York consumer protection law claims.)

Aside from causation, defendants argued that the ads weren’t false. The posters, they argued, contained a disclaimer (above). Given that courts have enjoined ads with small disclaimers before, and given plaintiffs’ argument that the posters were inherently misleading because customers could never use the card in a way that would produce all the minutes advertised, the court found issues of material fact.

What about voice prompts? Are they ads? They’re only heard after purchase, but they might still be “promotional” and therefore “commercial advertising” for Lanham Act purposes. The court concluded that the prompts were informational, not promotional, “and have nothing to do with promoting or furthering the sales of more prepaid phone cards.” (Really? If a consumer believed the prompts, and if they falsely inflated the minutes—how time flies, one might say!—then that would seem to increase the likelihood of repeat purchases. If a consumer was not intended to rely on the prompts—and thus naturally to form an opinion about the cards’ performance—why were the prompts (allegedly) false?)

Defendants also contested materiality, arguing that the number of advertised minutes was “completely immaterial” to purchasers. Instead, they argued that “[a]mong the most important factors for consumers are: (a) the number of minutes actually delivered by a card, rather than the advertised minutes; (b) the clarity of the connection; and (c) the connectivity of the card.” Defendants offered a survey in which only 2 of 401 respondents said that ads/posters/flyers are how they “generally decide” which card to buy, and only 3% “look at the printed material in the store.”

I am not entirely sure about this, but it seems to me that defendants are arguing that their industry is so pervaded with false advertising that nobody believes factual representations about numbers of minutes available, perhaps relying on trial and error to figure out the real numbers. This does not seem to be a very good argument. Indeed, the court was not convinced. The ads “go so clearly to the purpose of the product” that they were material as a matter of law.

Litigating about litigation: infant formula battle continues

PBM Products, LLC v. Mead Johnson Nutrition Co., 2009 WL 5216948 (E.D. Va.)

Several earlier rulings. Of note here: PBM’s infant formula often says “Compare to Enfamil Lipil” on its label. In less than a decade, the parties have been involved in four Lanham Act actions, and various other claims/counterclaims. In 2001, PBM won a restraining order against Mead Johnson’s false advertising attacking PBM; Mead Johnson was held in contempt for not retrieving all its false ads as directed by the court. In 2002, PBM sued again over ads that stated that PBM’s products didn’t contain the beneficial nucleotide in Mead Johnson’s products; the court entered a TRO. The parties settled in 2003, agreeing that Mead Johnson denied wrongdoing, that the parties wouldn’t disclose the fact of the lawsuit, the TRO, or the existence or terms of the settlement. The court sealed the pleadings. (Was this a good idea? Would it do any good today?)

In 2006, Mead Johnson sued PBM for trade dress infringement and unfair competition, which was settled with an agreement that included a provision in which Mead Johnson agreed to the use of packaging with the “Compare to Enfamil Lipil” label, but allowed a renewed suit if PBM started selling formula in packaging that infrined the Enfamil Lipil packaging.

PBM started the current suit in 2009; the complaint, which was not filed under seal, made specific reference to the 2002 dispute. PBM issued a press release with the headline: “Mead Johnson Lies About Baby Formula ... Again; PBM Products Sues Mead Johnson for Third False Advertising Campaign.” Mead Johnson counterclaimed for breach of contract, defamation, violation of the Lanham Act, and civil contempt.

On the contract claim, Mead Johnson failed to win summary judgment in its favor because it hadn’t established damages as a matter of law. That people heard and asked about the lawsuit didn’t establish damages. Mead Johnson’s related claim for civil contempt also failed. Although the court documents were sealed, referencing them was not the same as breaking the seal.

Defamation: Mead Johnson alleged that the following statements in the press release were defamatory: (1) “Mead Johnson Lies About Baby Formula ... Again; PBM Products Sues Mead Johnson for Third False Advertising Campaign”; (2) “Mead Johnson has ignored the court’s two prior injunctions by launching yet another false and misleading advertising campaign designed to undermine public confidence in PBM's store-brand infant formulas”; (3) “‘Incredibly, this marks the third time Mead Johnson has engaged in false advertising campaigns against PBM’s competing store-brand infant formulas by distributing literally false advertising to doctors and mothers,’ said PBM CEO Paul B. Manning. ‘The two previous times we sued Mead Johnson for false and misleading advertisements, the court ruled in favor of PBM and Mead Johnson's senior executives and scientists admitted that Mead Johnson's statements were literally false....’”; (4) “Additionally, Mead Johnson intentionally maintains its false advertising campaign and the blurry-eyed baby graphic, despite adverse rulings from the National Advertising Division of the Council of Better Business Bureaus (NAD).”

PBM, naturally, argued that its statements were true, privileged, and said without actual malice. On (1): given that the court had previously enjoined Mead Johnson’s ads, “Mead Johnson Lies About Baby Formula ... Again” was substantially true, though harsh; “false advertising is substantially synonymous with lying.” What about “Third False Advertising Campaign?” Mead Johnson argued that the statement at issue in the 2002 litigation wasn’t advertising, much less a “campaign,” and both parties denied liability in resolving the lawsuit. PBM rejoined that the court had previously twice enjoined Mead Johnson’s ads. The court reasoned that the 2002 dispute involved promotional materials sent to doctors, which was sufficient to call it an advertising campaign. Thus, this portion of the statement was also substantially true. As a result, the “again” and “third false” language constituted opinion that couldn’t be reasonably interpreted to declare or imply untrue facts. They were “standard posturing statements of opinion” related to the third lawsuit PBM had just filed against Mead Johnson. As a whole, (1) was not actionable.

Similar analysis followed—finding substantial truth—for the remaining statements. On (2), Mead Johnson argued that it couldn’t have “ignored the court’s two prior injunctions” because those injunctions were temporary and had expired. The court disagreed that the press release communicated that Mead Johnson was presently in violation of two injunctions. Given that the press release focused on a freshly-filed complaint and made no reference to a suit to enforce the prior injunctions, the gist was that Mead Johnson had “failed to learn its lesson.”

(3): “Incredibly, this marks the third time Mead Johnson has engaged in false advertising....” Mead Johnson argued that the prior TRO couldn’t be characterized as a ruling in favor of PBM because there had never been a final judgment. The court disagreed: getting an injunction against certain ads is enough to justify a statement that the court ruled in PBM’s favor. Also, Mead Johnson argued, the court had earlier ruled that the mailer ads at issue in this case weren’t literally false, so characterizing this dispute as a rerun of “literally false” claims was defamatory. The court didn’t address PBM’s argument that there is no defamatory sting in the difference between literal and implied falsity, though I think that’s a good point; instead, the court ruled that, at the time it was made, the statement that Mead Johnson was engaging in literally false advertising was opinion on the merits of the current suit.

(3) also included the statement that “Mead Johnson’s senior executives and scientists admitted that Mead Johnson’s statements were literally false.” Mead Johnson argued that the deposition testimony on which PBM relied for this claim was not admissible because it was parole evidence and because it occurred during settlement negotiations. The court again disagreed; the testimony was not being offered to contradict or add to a writing or to prove liability, but to evaluate allegedly defamatory statements.

(4): “Additionally, Mead Johnson intentionally maintains its false advertising campaign....” Mead Johnson argued that NAD had never prohibited Mead Johnson from making the claims at issue; its ads hadn’t been the direct subject of a NAD proceeding instituted by PBM. But the NAD decision states: “NAD is incredulous that after two compliance proceedings, with the second compliance proceedings making explicit that any noncompliant advertising would result in a referral to the appropriate government agency, that [Mead Johnson] would disseminate advertising that clearly does not comply with NAD’s decision.” The gist of the statement is that Mead Johnson has ignored NAD’s prior reprimands, which is a nonactionable mix of truth and opinion.

Mead Johnson also counterclaimed for false advertising under the Lanham Act based on “Compare to Enfamil” and “partially broken down whey protein” appearing on PBM’s store brand infant formula. PBM argued laches (starting with an analogy to Virginia’s two-year limitations period for fraud), because these statements had appeared on PBM products since 2003/2006. The court disagreed. PBM sells over forty different labels and names for its products, and a significant number began using these claims more recently; for example, PBM began placing “compare to” on its added-rice formula just this year. Moreover, PBM failed to show prejudice.

For similar reasons, PBM’s res judicata argument failed; the 2006 dispute between the parties couldn’t resolve claims that weren’t in existence when the suit was brought. Likewise, the prior agreement between the parties that PBM could use a trade dress that included those claims wasn’t dispositive; the agreement was about packaging, not ad claims, and in any event could be read to be limited to the Maker’s Mark brand shown in the exhibits to the agreement.

On the merits of the Lanham Act claim, there was no literal falsity. PBM attacked Mead Johnson’s survey as incapable of proving that consumers perceive “compare to Enfamil” as an identicality claim. On “partially broken down whey protein,” the issue was whether the claim communicated that all the protein is (partially) broken down. PBM contended that any difference in message was immaterial because Mead Johnson’s expert admitted that there was no scientific proof that the products differed in digestibility. The court found triable issues of fact. The two claims combined could imply that all of the whey protein in PBM’s formula is partially broken down and that as much or more of the whey protein in PBM’s formula is partially broken down as in Enfamil’s competing product. And the amount of protein that is broken down could be material to consumers and doctors.

ETA: see comments for update on the counterclaim.

Off topic: tech stuff I like

With all the hype over Apple’s forthcoming tablet (disclosure: if it’s got a stylus, I fully intend to buy one too!), and exam grading weighing me down, I thought I’d do a little post about tech stuff I like. First on the list is, yes, tablet computers. I’m on my third (I’m a little rough on my toys) and I love my tablet, which swivels to reveal a regular laptop keyboard. My current model is the Lenovo X61. The tablet makes working on the Metro or on an airplane much easier than a regular laptop does: I read stuff in portrait mode, and it takes up a lot less space. I can handwrite comments on Word documents, and with the aid of the cheap and highly useful PDF editing program Bluebeam PDF Revu I can also handwrite comments on PDF files. I can handwrite annotations on my Powerpoints, which is really useful in class, allowing me to combine the benefits of a slide show with the flexibility of a blackboard—and then I can erase or keep the handwriting after! The handwriting recognition is good, though it’s faster to keep my annotations as images when that will suffice. I would recommend a stylus-enabled tablet for anyone who routinely reads/edits in transit or would like to be able to edit presentations while giving them.

Speaking of Bluebeam, I’ve also found it very helpful in putting together supplemental materials. I can cut and paste pages; I can edit bits out of pages when I only want students to read, say, a section of an article; I can “staple” a supplement together, add a table of contents in front and number the pages consecutively, and create a single PDF file for them to have, whether or not they want to print it out. Another useful-for-teaching application even without a tablet.

Probably my greatest productivity enhancer in the last year, though, is tabs for Microsoft Office. Why isn’t this a standard feature? Tabs are great for internet browsing; they are also wonderful for working on multiple documents—no more scrolling through that list, and often enough picking the wrong document. I’ve also made Foxit my default PDF viewer because it, too, supports tabs.

Virginia State Bar Section on Intellectual Property Law Law Student Writing Competition

For anyone interested:

The Intellectual Property Law Student Writing Competition seeks to promote academic debate and the dissemination of ideas and scholarly writing in the field of intellectual property. The Competition is sponsored by the Intellectual Property Section of the Virginia State Bar.

Prize: $4,000 cash and publication on the Section’s website.

Eligibility: The Competition is open to all students enrolled and in good standing during the 2009-10 academic year (including December 2009 graduates) at (i) any Virginia law school, or (ii) a law school outside Virginia as a resident of Virginia (with proof of residency). Articles must have been written solely by the entrant while enrolled in law school.

View the complete rules at the website.

Literal greenwashing--well, the washing part anyway

Koh v. S.C. Johnson & Son, Inc., 2010 WL 94265 (N.D. Cal.)

Koh sued for violations of California’s UCL, FAL, and CLRA, along with common-law fraud and unjust enrichment based on SCJ’s alleged “greenwashing” of Windex and Shout. In 2008, SCJ began to sell Windex in packaging that prominently displays the Greenlist label, and it’s used the label on other products, including Shout. Koh alleged that the label is deceptively designed to look like a third party seal of approval, which it is not, and it falsely represents that the products are environmentally friendly.

Koh alleged that today’s environmentally-conscious consumers will pay a premium price for “green” products, which they will buy in preference to non-green products. SCJ competes with ecofriendly brands such as SimpleGreen and Seventh Generation, and a major SCJ competitor, Clorox, announced that its Green Works cleaning products would launch with a Sierra Club seal of approval. As a result of the Greenlist label, Koh alleged, SCJ could charge as much as 50% more than non-green-labeled products. He alleged that he wouldn’t have bought Greenlist-labeled Windex at its premium price if he had known that Greenlist was a label applied by SCJ, not a third party, and that Windex is not environmentally friendly.

SCJ argued that Koh had not sufficiently alleged injury and that no reasonable consumer could have found the label misleading. In this case, the court found that Koh had sufficiently alleged loss: courts have held that being induced to purchase a product one would not otherwise have purchased is not “loss of money or property” within the meaning of the UCL and FAL as long as the purchaser received the benefit of the bargain. Here, however, Koh sufficiently alleged that he didn’t receive the benefit of the bargain because Windex cost more than similar products without misleading labeling.

SCJ then argued that the Greenlist label makes no mention of a third party, describes Greenlist as a “rating system” and not as a seal of approval, and directs consumers to SCJ's own website for further information. This is a question of fact not subject to resolution on a motion to dismiss. Given the context described in the complaint, it’s plausible that a consumer could interpret the label as being conferred by a third party. The court also referred to FTC guidelines for products with “environmental seals,” which state that such labels are likely to convey environmental superiority, and that the labels are deceptive in the absence of substantiation for this broad claim.

SCJ also argued that Koh couldn’t sue over Shout’s labeling because he didn’t allege that he purchased Shout. Koh argued that this was appropriately dealt with as a matter of class certification, later on. Though he wouldn’t have standing in a suit over Shout alone, he alleged that SCJ used the Greenlist label on multiple products, including one that he bought, “and there is no brightline rule that different product lines cannot be covered by a single class.” So the court decided to wait until the class certification stage to decide the issue.

It's a Wonderful Remix

Eugene Jarecki used It's a Wonderful Life to promote the idea of moving one's money to community banks. Stephen Colbert showed Jarecki's video and then a response to Jarecki's video also using footage from the film, which argued that Mr. Potter should have been the hero and not the villain. It's a Wonderful Life, of course, was not renewed by the studio; it is only covered by copyright rights because of the renewed rights in the underlying story--so it may well be the case that neither video took anything protectable from the work still protected by copyright law. The substantial similarity/de minimis analysis would have to compare the remixes to the written story, and without the similarity of images to rely on, there might not be anything there even before getting to a fair use analysis. (Both the Rear Window and Newton v. Diamond cases might be of use here, the former in emphasizing how much of a movie is distinct from the underlying story and the latter in discussing how to deal with similarity that comes from elements of a work that a defendant has the right to use when those elements are inherently intertwined with copyright-protected elements.)

World's Fair Use day part two

Panel 2: Emerging Media: Commentary, Criticism and the New Publishing Paradigm

David Bollier, Public Knowledge board member

Pat Aufderheide, American University Center for Social Media Director: Excited by the increased attention to fair use. Copyright’s “limited” monopoly is vitally important. We want to encourage people to use existing culture to make new culture; if people can’t use or don’t understand the exemptions, private owners become censors. We used to know that everyone stands on the shoulders of giants to make culture, but this has slipped from public knowledge, creating an imbalance. Fair use was formerly a backwater but has become extremely important as the most flexible exemption. Broad, adaptable, usable in digital culture. But people are worried about how to interpret it. So they ask: will I get sued? Will my boss get mad?

This is where the best practices movement comes in. Filmmakers, archivists, teachers are defining them. Success of filmmakers in getting insurance/distribution encouraged media literacy teachers to create fair use best practices, to avoid the climate of fear, uncertainty and doubt that surrounded the ways in which they taught children to identify and analyze media messages. Code of best practices is being used for national student contests, allowing them to upload remix to websites, including school websites. Code of best practices in online video also exists now. Dance archivists have a code of best practices now. Poets have fair use issues, and they’re now working on a code. Every code expands the utility of fair use for a community of practice and for its adjacent communities: lets people know that fair use exists.

Issues: extending to other areas, especially music. DMCA and automated interference with fair use. International translation. These all can be addressed, though.

Lincoln Bandlow, Senator John McCain’s attorney, argued a fair use defense when the song "Running on Empty" was used in a campaign ad without permission, and speaks to the political import of the doctrine.

Has represented RIAA, MPAA, and every single major studio as well as McCain. He focuses on First Amendment protections in defamation; he has not argued against fair use but has defended it on behalf of big corporations—the big guys are on the other end of this issue a lot, with films using dialogue/snippets. They do fight the good fight.

Fair use is not anything you want to do. We need copyright to incentivize artists, and therefore we also need fair use. It has to be gray to exist—if we had a bright line, all that does is stop the next creative person who thinks of a different way that didn’t make it on the list. (Yes, but how gray? There can still be large areas of clarity.)

Transformation: Courts like to see tinkering—do something with the material, though he doesn’t think that’s required. Clients tend to say it’s a parody because it’s funny—that’s not necessarily so. A parody targets the underlying material for criticism or commentary. (This is a very constrained definition of parody from a literary perspective, though it clearly is what Campbell said; Campbell also said that satire could be fair use too, but courts tend to forget that; Bandlow recounts the unfortunate decision about The Cat NOT in the Hat!)

Other stuff: courts don’t care about factor two, nature of the work; he gave the blanket statement that using an unpublished work is not fair, because courts don’t like you to preempt first publication. (I just wrote about this; he also mentioned Hillary Clinton’s book.) There’s no ten-second rule. (Aufderheide mentioned that standards & practices departments at major networks wrote their own best practices, and the journalists there followed a 30-second rule for a 15-minute news segment; the rule, but not the overall context, leaked into other areas, undergirding a lot of current confusion.)

Courts should focus more on substitution of demand; licensing market arguments are circular; they should recognize that hearing 3 seconds of a song in a movie will not interfere with and may spur sales of the song.

He showed the McCain ad! I hadn’t been able to find a version before. Though I remain confused by why the Ohio Republican Party thought that Obama’s point that inflating tires would save a bunch of oil and money was a strike against him. Bandlow noted that “running on empty” is a cliche/trope in political speech about energy policy, but he concluded that this was a tough fair use case. There was no transformation; it wasn’t a commentary on Jackson Browne. He also noted that individual artists are often plaintiffs in these type of cases.

Mike Masnick, TechDirt and Floor 64 founder and CEO: More ordinary people are beginning to realize the impact copyright has on them.

Ian Shapira, Washington Post reporter: Mainstream media are not dinosaurs. He decided to write a story last year, with no idea of the viper pit into which he’d be thrown—his beat is “millenials” and he wrote a story about people who give talks to Baby Boomers about the new generation. Took a lot of drudgery to get access to the seminar leader. He was initially grateful to Gawker and other linking blogs. But Gawker stole his story! They had excerpted enough that he felt a reader wouldn’t need to click through. HuffPost and DailyBeast etc. don’t staff with journalists with benefits like health care—the blogger who excerpted his story was on a contract basis. Gawker’s ad rates are much cheaper than the Washington Post’s. He likes blogs, but wants people who create original content/do original reporting to get paid; web traffic is not helping the bottom line there.

Aufderheide: This is a question of not having a clear interpretation of fair use. Shapira is intuitively using the criteria Bandlow described. Some of the business model issues exist independently of copyright—you can’t solve a business model problem by applying copyright. This is an ugly moment, when some things are not working and others aren’t paying yet. You could address the Gawker problem through journalistic standards.

Bandlow: Fair use should be two questions: what did you give us? What did the other guy lose?

Masnick: Gawker linked to the story 3 times, added a bunch of commentary about the article, and drove a fair amount of traffic to the story. Yes, some people may have read that instead, but there are different audiences: others would never have seen the WP article. Business issue: newspapers now have a ton of competition for advertisers that didn’t exist a decade ago. If the WP had given people a reason to read the article on the site—discussions with Shapira or the article’s subject, for example—they would havegone.

Shapira: He likes Gawker and doesn’t mind them riffing on the articles as much as they want—but here they made it pointless to go to the WP site by copying 4-5 paragraphs.

Masnick: He still disagrees on this specific case—bets traffic stats were good for WP overall—also, getting people discussing a WP article is good for the WP in the long run.

Shapira: But there’s no immediate commercial value to eyeballs. Gawker’s ad rates are much lower than the WP’s.

Masnick: That’s a totally different issue.

Aufderheide: Nobody ever promised newspapers or any other business a lifelong purchase on their business model. (This is something I say every year in copyright, though I tend to phrase it as “God didn’t give anybody a right to a business model.”) Fair use is so valuable precisely because there are so many instances when you want to quote from existing culture and the owners would mind.

Shapira: he supports any organization that wants to pay reporters a living wage/benefits. The problem is that the organizations that do that are hurting, and the web hasn’t figured out how to provide that structure—which may not be a copyright issue, but he argues there is some connection.

Bollier: what kinds of political uses are not ok?

Bandlow: There aren’t too many cases. There isn’t an absolute right to use copyrighted works in political ads, even though it receives the highest protection. Courts have also said that political importance doesn’t mean fair use. Harper & Row was political speech. Commentary on the work helps. He sees issues that tend to be more TM/right of publicity issues. Heart hated when Barracuda played for Sarah Palin, but those venues had ASCAP licenses to play the music! Copyright preemption is helpful in allowing certain uses against TM-type claims. What’s driving these disputes are artists upset about uses of their work. (How many artists, as opposed to corporate owners, submit content to YT’s filters? If only we could know.)

Case involving a Muslim organization excerpting a long portion of a Michael Savage show—used to suppress the message; court found fair use because it was commenting on Savage’s politics. If you’re just using material to make a spot punchier, especially if it seems to imply endorsement, that will draw the artist’s ire.

Shepard Fairey case: Should be a side note that Fairey used a different image than he initially told the court—AP moved to preclude him from a fair use defense on the grounds of unclean hands; the judge punted and waited to decide what the sanctions should be. Intersection of fair use and substantial similarity: did Fairey take protectable expression? Obama’s face was really what was taken, which the AP doesn’t own. A similar case involving a similar artist, Mr. Brainwash, was filed in LA.

Masnick: Browne was given a huge platform to promote his own message, just when his new album came out. It makes sense for a candidate to make sure the artist supports you, otherwise the press will all be about the artist who hates you, even if you have the legal rights.

Bandlow: growing problem of using TM to achieve what is essentially perpetual copyright protection. Is there a preemption policy argument?

Paul Levy, Public Citizen: The Post has apparently decided not to litigate the Gawker issue: from your description (which is contested) this is not a fair use, but instead of suing the Post is just publicly complaining. So it doesn’t show that fair use has gone too far, but that you’ve made a forum decision. What’s up with that?

Shapira: He wasn’t part of any big discussion about infringement. But he’s noticed that Gawker is still doing this, even though Gawker’s founder agreed with Shapira that his taking went too far. Gawker’s founder noted that other sites “steal” from/do the same thing to Gawker. The WP has sued other websites, but he doesn’t know anything about plans for Gawker.

Q: I get news alerts with one sentence. How do you decide how much is enough?

Shapira: he doesn’t know. Twitter is nice because it’s a tease—forces you to click through if you’re intrigued. In his case, he wrote a feature; no one-line summary would sate a reader. In the case of a straight news story, it could be different. He doesn’t like rules, but he wants organizations to be rewarded for original reporting.

McIntosh: He doesn’t go to WP because they make him register to read.

Shapira: but advertisers get more info when you register, so that’s good for us.

Q: Are there international best practice standards?

Aufderheide: This is difficult because of the general absence of fair use internationally, and the disparity between countries which take copyright very seriously and countries which don’t. Using international materials in the US is governed by US law. People in practice communities in other countries have found the best practices model very encouraging, and have borrowed the Center’s approach. South African filmmakers have interpreted their right of quotation to allow them greater freedom to operate; Canadian filmmakers are helping interpret fair dealing. Also a lot of interest in Europe in interpreting the right of quotation; Scandinavian countries are developing a common interpretation, inspired by the US. Not a panacea, but useful.

Q: Why draw such a clear line between business model and copyright? There’s no excuse for a failed business model, but there’s still an overlap.

Aufderheide: Yes, it’s a Venn diagram overlap. Not all of the business issues are copyright ones. Best practices have opened up conversations about new business models grounded in a better understanding of fair use. Fair use becomes much less risky/more usable when communities interpret it, and therefore it will become part of tomorrow’s business model.

Masnick: Many businesses/individuals who’ve relied on copyright as a crutch for a business model have trouble separating the issues, but once they see beyond copyright as a way of forcing people to pay in a certain way they can find solutions. People have the impression that they have to use copyright in a particular way, but that’s not right.

Fair Use Question and Answer

Anthony Falzone & Peter Jaszi

Falzone: Stanford Fair Use Project. Wants to note that he believes that the merits of Fairey’s case are as strong as ever, and he fully expects Fairey to win and desires that it should be so.

Jaszi: AU’s IP clinic provides a variety of types of assistance to creators and communities of cultural practitioners. The groups copyright exists to support are reclaiming the rights they need in the era of big copyright.

Q: Should there be more statutorily defined safe harbors?

Jaszi: loves topic-specific safe harbors that don’t interfere with or derogate from the flexibility of §107—education-specific safe harbors are useful, some of them anyway, but the law is fixed while culture, economics and education change. The best thing Congress could do about §107 would be to leave it alone and let us work with it, using its dynamism and flexibility.

Falzone: ambiguity is a strength as well as a problem. Nobody had any idea about new technologies—e.g., search engines—when §107 was written.

Jonathan Band: Georgia State litigation over electronic reserves—talk about that?

Jaszi: Isn’t as familiar with the facts as he ought to be in order to predict where it will go in litigation. But generally, providing e-reserves is simply an extension of a set of practices that have been not only familiar but broadly sanctioned by consensus in the library/education field for generations. The question ought to be how radically, and with what detrimental effect, does the electronic model of e-reserves depart from the broadly sanctioned practices of libraries over time. His greatest fear of the litigation: it will not be decided by a court, and we won’t get clarification of the broad application of fair use to e-reserves practices. So many past suits brought by large industries against educational institutions have settled; publishers then attempt to intimidate other educational institutions with the settlement.

Falzone: First sale and other doctrines don’t necessarily translate into the digital realm. So will the library exist in the digital space? Will the rules be tweaked/modified or will the library become obsolete (you have to go to the library terminal to look at a digital copy).

Q: Internationalizing fair use?

Falzone: “Harmonization” often means ratcheting up protections and diminishing freedoms that US law cares strongly about at home. The moment you try to internationalize fair use, we will be pulled down into a race to the bottom.

Jaszi: He once believed that fair use should be imposed on the national laws of other countries, by whatever means worked. There’s a slight movement in this direction: primarily Israel’s new fair use law. But he no longer believes this is a proper solution, because it reflects too much American exceptionalism. Creators and lawyers are very attached to the ways their laws do fair use. In South Africa, there’s little enthusiasm among creators for a US-based solution, but a great deal for taking advantage of existing flexibilities in South African law, such as the quotation right. Broad principles about transformation need to find expression in international law, but it shouldn’t be a specifically American model.

Last night’s discussion of ACTA: although it’s true that exporting fair use as such might not represent good international copyright policy, there is something deeply cynical about international copyright policy that actively seeks to export rights without exporting limitations/exceptions. We don’t know for sure, but there’s no reason to think ACTA requires limitations/exceptions instead of constraining them. The US has benefited enormously from robust limitations and exceptions, and we shouldn’t suggest to the rest of the world that they can get good copyright laws that will assist their cultural and economic development without limitations.

Q from DIY bookscanner guy: Libraries of tomorrow may look like libraries of today: packed full of books, but all access will be online. This is because Google settled with a very strong fair use argument: what are the ripple effects on fair use?

Falzone: That was a disappointment. Still: The settlement provides more access than fair use as they were asserting it did. Others don’t have the same resources to fight the fight; the law remains unclear.

Jaszi: Judicial resolution would have been good—he thinks the fair use argument was strong. Spillover effects will depend on how the ultimate settlement is understood—it will be up to us (if it’s a new way of selling whole books, it has little effect on snippet use). Settlement as a business decision has no direct legal effect on the merits, but it may not be understood as having no effect. So those of us who care about fair use must, in our communications, make clear that this is an outcome which tells us nothing about the scope of fair use. Will anyone else ever be in a position to litigate like Google’s? Hard to know. But increasingly, private actors/cultural institutions will engage in mass digitization, perhaps less extensive but similar in their general character in that they want to digitize a whole segment of material in order to be able to use parts. And Jaszi thinks that fair use test will succeed.

Falzone: He’s concerned with market impact. People with resources were willing to digitize, but are now less excited. Some people think the problem is solved; some think it’s now too messy.

Gigi Sohn: What’s the future of the Harry Potter Lexicon case?

Falzone: Encouraging. Though we thought the decision was wrong, the publisher decided to rewrite the book and was happy with the new one. It’s a roadmap to what can be done: a silver lining. It established the right to create encyclopedias and reference works in general as not a right of the copyright owner: what you have to worry about is taking too much, not about occupying a market to which the copyright owner in a fictional work has rights. It’s a starting point.

Jaszi: It’s always disappointing to lose, but the opinion, while a setback for Tony’s client, was a general victory for fair use, solidifying jurisprudence in courts of the Second Circuit, which asks whether a use is transformative and whether a use is appropriate in amount in relation to the transformative purpose. The question of whether licensing revenues were lost is no longer important. The question isn’t whether you used as little as possible, but whether the amount you used was appropriate given what you were doing. If you have a plausible story about amount, you can win.