Tuesday, May 18, 2010

difference between Mongolia and Mexico not defamatory

Direct Shopping Network, LLC v. Interweave Press, LLC, 2010 WL 1951142 (Cal. App. 2 Dist.)

DSN’s lawsuit begins with gemstones derived from feldspar. Plagioclase feldspar is divided into six sub-classifications; at issue here are andesine and labradorite, which are apparently so close in composition and appearance that the names are sometimes used interchangeably. Yellow is the most common color of gem-quality feldspar. Mexico produces relatively large quantities of yellow (iron-containing) feldspar, while Oregon produces smaller quantities of red and green (copper-containing) feldspar. Red feldspar from Oregon, aka sunstone, is significantly more expensive than Mexican yellow feldspar.

Oregon was, for some time, the only known source of red gem-quality feldspar. Then, in the early 2000s, some dealers began to sell inexpensive red feldspar gems, called andesine or andesine-laboradorite and said to come from Mongolia, Tibet or the Congo. Robert James, president of the International School of Gemology in San Antonio (ISG), ran tests on gemstones from various sources, including DSN, and concluded in a report that this inexpensive red feldspar was treated yellow feldspar from Mexico. Interweave, publisher of Colored Stone magazine and producer of the content of Colored-Stone.com, published James’s report along with articles of its own essentially agreeing that the material was artificially treated Mexican feldspar.

DSN sued James and Interweave for trade libel, interference with contract and intentional and negligent interference with prospective economic advantage. Interweave moved to strike under the anti-SLAPP law, arguing that the statements were made in a public forum on an issue of public interest and that DSN couldn’t demonstrate a probability of success on the merits, as required to survive the motion to strike. The trial court agreed that the claims arose out of protected conduct, but concluded that DSN presented a prima facie case to support its claims and denied the motion. The court of appeals held that DSN failed to meet its burden and reversed.

The court found several potentially actionable statements of purported fact in the challenged publications, divided into two basic issues—whether the feldspar was treated (as opposed to naturally colored), and whether it was Mexican. As to the first, the court of appeals found that DSN didn’t provide sufficient evidence that its stones were not treated; its scientific evidence was from a testing body that explicitly disavowed (a) the ability to detect all forms of treatment and (b) the reliability of its conclusions as any kind of guarantee.

As to the second, while DSN did provide evidence that could lead a factfinder to conclude that its stones were not Mexican, and thus that defendants’ claims were in that regard false, there was no independent harmful sting from the origin claims. The thrust of the claims at issue was that stones marketed as “all-natural” were, in fact, color-infused. The point of the Mexican origin claim was to support the hypothesis that the stones had been artificially treated: given that all known Mexican feldspar was yellow, if the feldspar originated in Mexico, then its natural color would be expected to be yellow. (There's a strangeness in the court's framing: unless Mexico is also the only/main source of yellow feldspar, then the premise that the stones were naturally yellow doesn't say much about Mexican origin. M-->Y means ~Y-->~M, but it doesn't mean that Y-->M. To say "we know it's treated because it's Mexican and we know it's Mexican because it's treated" is bootstrapping--which is not to say that the underlying claims by the defendants suffer from this flaw, merely that I found the court's summary puzzling.)

Stating that a gemstone is not “all natural” because it’s been treated by heat and color infusion is “obviously disparaging” of its quality. But DSN failed to present evidence that statements about Mexican origin, “standing apart from the statement concerning artificial treatment, would be understood in a disparaging sense or persuade a consumer to avoid the product.” Moreover, DSN presented no evidence of lost sales from the Mexican origin claims other than a conclusory statement by its president.

Comments: Ordinarily, Made in USA would be material to consumers, and I would expect “these products aren’t really Made in the USA” to be obviously disparaging as well. But do gemstone consumers think that the Congo differs from Mexico as a source? That’s far less clear. I wonder what a European perspective on geographic indications would bring to this analysis—if origin really is important by default, then ought we presume that consumers care where their gemstones were mined? Here, the argument that consumer interest in origin is parasitic on whether the stones are “all natural” makes a lot of sense.

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