My first ever Justin Bieber reference

Apparently he's been slowed down 800%, resulting in a work that has more in common with art-world sound than pop.  While the Sixth Circuit says that recognizability is irrelevant when it comes to sound recording copyright infringement, what might a different circuit say about substantial similarity?

Scholar digitizes his own library

Story here.  In many countries, this would be personal use, a category we don't really have here.  Fair use?  (I too can't avoid the visceral shudder that comes from the destructiveness of the process, which is why I'm unlikely to take up my husband's suggestion that we do the same.)

Organizational standing produces default victory for plastic bottlers

International Bottled Water Ass’n v. Eco Canteen, Inc., 2010 WL 3719313 (W.D.N.C.)

IBWA is a nonprofit whose members are bottled water producers, distributors, and suppliers in the United States and abroad.  Some of the members use bottles containing polyethylene terephthalate ("PET"), and others use bottles containing Bisphenol-A ("BPA").  Defendant Eco Canteen sells reusable stainless steel water bottles, which contain neither PET nor BPA. It ran ads claiming that drinking water from bottles containing PET and BPA posed health risks, and underscoring the cost and environmental impact of plastic water bottles.  IBWA complained, then filed a complaint with NAD, but then issued a press release about the challenge.  This violates NAD’s rules against publicizing NAD proceedings, and so the challenge was closed.  (Practice tip: make sure the PR folks know this rule!)  IBWA then sued for false advertising under the Lanham Act and deceptive trade practices under the North Carolina UDTPA.

Eco Canteen ultimately defaulted, but not before challenging IBWA’s standing, which was especially important in a default case because IBWA had the burden of demonstrating its standing to seek injunctive relief and damages. 

IBWA did not have organizational standing, the right to sue on its own behalf.  It argued that Eco Canteen’s ads had harmed its goodwill and reputation with the public.  However, it hadn’t alleged injury suffered by the organization itself.  IBWA contended that, because Eco Canteen’s statements disparaged plastic water bottles, that would likely cause economic injury by disparaging IBWA’s reputation.  “This theory might hold water [sic] if IBWA's goodwill and reputation depended on the general public's opinion.”   But IBWA doesn’t promote bottled water through its own ads, but rather by lobbying and enforcing its Code of Practice among members.  “There is no indication that the general public is even aware that IBWA exists.”  IBWA needed to allege a loss in revenue or a decline in membership resulting from the ads to establish actual injury; it didn’t.  Nor was IBWA’s abstract concern with the quality and safety of bottled water sufficient to confer standing.

IBWA did, however, have associational standing on behalf of its members.  Associational standing exists when (1) an organization’s members would otherwise have standing to sue in their own right; (2) the interests it seeks to protect are germane to the organization's purpose; and (3) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. IBWA’s allegations met this standard.  The allegations of harm to individual producers met the constitutional requirements for individual standing, and IBWA’s individual members would have standing under the Lanham Act, because they have a commercial interest that’s being harmed, and they’re in direct competition with Eco Canteen. 

While I think this is correct, it is not clear to me that a court applying the execrable Phoenix of Broward test should reach the same result—especially if there are a number of producers who aren’t members or if the court looked at the difficulty of apportioning damages across multiple producers.  Here, however, the test for associational standing only assesses whether individual participation is required for the relief requested, and it’s not required for injunctive relief.  Also, there was no indication of a conflict of interest among members requiring them to act individually to protect their own interest.  (Hmm.  Aren’t there other companies touting BPA- and PET-free bottles?  Are none of them members of the association?)  IBWA did not, however, have associational standing to assert damages claims or ask for disgorgement of Eco Canteen’s profits.

Because of the default, IBWA got injunctive relief and costs, but the court did not find that the allegations (which have to be taken as true) showed that this was an exceptional case, and so refused to grant attorneys’ fees.

Dastar bars claim alleging false advertising about authorship

Romero v. Buhimschi, 2010 WL 3724595 (6th Cir.)

A once-collaborative relationship between two researchers in the area of maternal-fetal medicine went sour, resulting in a lawsuit against one of the researchers and her employer.  Romero, a federal employee working at Wayne State, claimed that he’d been wrongly denied authorship credit for an article Buhimschi submitted for publication, an allegation that led the first journal involved to decide not to publish it.  A resulting Wayne State (where Buhimschi then was) investigation found that Buhimschi had committed misconduct on two counts, but found insufficient evidence on another count.  Romero objected to the last finding and to the recommended remedy (oversight of Buhimschi’s publications for two years) and tried to get Buhimschi’s later employer, Yale, in on it, but that didn’t work. 

Buhimschi appealed the findings too, and she also published a version of the initial paper elsewhere, with the journal stating that it would publish a correction if it was later determined that Romero deserved authorship credit.  Immediately thereafter, Yale University issued a press release crediting Yale researchers and a Yale team with the results of the research. The press release did not mention Romero or researchers at Wayne State. This press release, along with the manuscript itself, formed the basis of Romero's Lanham Act claim. Romero also sued for breach of contract (to be coauthors) and defamation (based on various statements made and transmitted to relevant parties during the investigation).

There was no consideration for the alleged contract, since Romero’s job required him to collaborate with Buhimschi.  And there was no defamation because there’s an absolute privilege for invited comment, and Romero invited the various statements at issue by filing his complaints and engaging with the journals at issue.

It’s the Dastar discussion that caught my eye.  This is an easy case under §43(a)(1)(A): there is no cause of action for false designation of origin for failing to give proper credit to Romero.  Some courts have also kicked out §43(a)(1)(B) authorship claims on various grounds; the one the court picked here was that authorship isn’t a component of the “nature, characteristics, [or] qualities” of the goods themselves. 

Of all the reasons to reject a §43(a)(1)(B) claim, this is the worst.  (“Commercial advertising and promotion” and materiality are the best.)  Authorship is intimately tied to the nature, characteristics, and qualities of the goods.  Consider the effect of the court’s rationale were a publisher to promote a book as a previously undiscovered play by William Shakespeare: an arrant fraud, but apparently not actionable in the Sixth Circuit.  Artificially constraining “nature, characteristics, [or] qualities” by trying to figure out what “really” makes up the goods, without reference to what consumers care about, risks substantial consumer deception.  Consider in this regard “dolphin-safe tuna.”  The tuna is the same no matter how many, or how few, dolphins were killed to obtain it.  But consumers care about, and will pay a premium for, how the tuna was caught, because they care about dolphins, and therefore how the tuna was caught is part of its nature, characteristics or qualities.

There is a strand of reasoning that says that the law shouldn’t assist consumers in making decisions based on conditions of production, because as consumers they only have legitimate interests in the physical qualities of the objects they buy.  But this (paternalist, and really condescending) position is inconsistent with our general commitment to consumer protection/sovereignty.  Douglas Kysar’s article on this topic is quite excellent.

All of which is to say that, if misattribution of authorship in commercial advertising and promotion that is material to consumers is not actionable, we should be clear that the reason is that we want to manage the copyright/trademark divide, not that there is some essence of a product of which authorship is not a part.

Responses not typical

The FTC now disfavors "results not typical," since research reveals that consumers don't process this disclaimer.  Typical results need to be disclosed.  As I found while preparing for my advertising law class, not every advertiser has reacted to this development--even some (franchises of) big names.

As I'm in the middle of teaching the class, I find myself particularly interested in the use of Guides to make policy when the Guides are admittedly not entitled to the deference due ordinary APA-style rulemaking.  Since the FTC isn't allowed to engage in such rulemaking, it uses a lot of Guides; the Guides are produced using a notice-and-comment procedure that strongly resembles at least the initial stages of APA-style rulemaking.  Formally, in an enforcement proceeding, the FTC would have to show a violation of Section 5 because the Guides have no independent authority; but the Guides would be due some deference in determining whether such a violation had occurred.  The underlying consumer research supporting the FTC's abandonment of the "results not typical" safe harbor would also be important, supporting the factual contention in any given case that use of that label doesn't disabuse consumers of the notion that they could expect the depicted results.  The new Guides say that an advertiser could avoid an enforcement action by having substantiation that its particular "results not typical" disclaimer somehow manages to work, unlike all the others.  I wonder whether we'll see that tried.

Deception at the farmer's market

An NBC affiliate investigates.

Esoteric statement can't found class action

Fine v. ConAgra Foods, Inc., 2010 WL 3632469 (C.D. Cal.)

The court denied Fine’s motion for class certification on her UCL, FAL, and CLRA claims.  ConAgra makes microwave popcorn.  In 2007, it announced that it was no longer adding diacetyl, which has been shown to be hazardous to health when heated and inhaled, to its butter-flavored microwave popcorn products. It redesigned packaging for its microwave popcorn to display the words “No Added Diacetyl.”  Fine alleged that she relied on these claims, but asserted that she was deceived because diacetyl is still present in the products.

The court found that Fine established standing by alleging injury—spending money on the popcorn in reliance on the statement on the packaging.  But she wanted a class of all purchasers, not all who relied on the statement.  Class definitions should be tailored to excluded putative class members who lack standing, so this was improper.

Regardless, the class was inappropriate for certification.  Fine properly alleged numerosity and commonality, but got hung up on typicality.  ConAgra argued that she failed to adduce facts that other class members have been injured by the same conduct, because the vast majority never read, let alone considered, the statement at issue, don’t know what diacetyl is, and don’t make purchase decisions based on its presence.  The court agreed.  Fine was seeking to certify a class that would likely include people with varying purchase rationales, so she didn’t establish that she was a typical representative of the class, which also made her an inadequate representative.

Even if consumers don't know what diacetyl is, isn't a message "no added diacetyl" necessarily an implication that diacetyl would be a bad thing to have in your microwave popcorn?  That might not be enough, but I wonder how we know that class members didn't read the statement, and why ConAgra put it on the package then.

Whirlpool generates more evidentiary rulings

If I were better at this I'm sure I could work up a Scylla and Charybdis joke.

LG Electronics v. Whirlpool Corp., 2010 WL 3613814 (N.D. Ill.)

And the hits just keep on coming!  This one’s about LG’s motion to exclude the testimony of Whirlpool’s expert Dr. Subbaiah Malladi.  After the Daubert hearing, the motion was granted on part and denied in part.

Dr. Malladi has an extensive background in mechanical engineering and studies how design specifications and consumer use lead to product failure, with experience with washers and dryers. He reviewed dictionaries, handbooks, and encyclopedias; bought the LG, Whirlpool, and other dryers marketed as steam dryers; performed various tests; and investigated how people use the word "steam" in magazines, patents, and advertisements. He was disclosed as an expert who would "evaluate Whirlpool's use of the word steam in connection with the performance of Whirlpool's Duet Steam Dryer relative to LG Electronics' (LG) claims." He opined that the Whirlpool dryer creates steam, as "authoritative references" and consumer publications use that word.

The court found his opinion relevant on the contested definitions of “steam”; his testimony, based on temperature tests of the dryer, will help the jury obtain a complete picture of what happens in the dryer.

Malladi also opined that the Whirlpool dryer is properly called a steam dryer because other home appliances and products similarly use the word steam.  LG argued that third party use was irrelevant, but Whirlpool contended that Malladi’s opinion was relevant to how the industry and consumers use the term.  The court reiterated its prior conclusion that Whirlpool had no authority on which to base its claim that competitors’ behavior is relevant to the alleged literal falsity of its own claims.  Moreover, even if this were an okay argument, Malladi isn’t the one to offer this opinion, because he provided no analysis.  He needed a recognized scientific method that was reliable and relevant; Whirlpool was essentially trying to use his status as an expert to present hearsay to the jury.  Malladi agreed during the hearing that he was “just reading literature that [he] found on the Internet to say that the discussion of steam is consistent with the definition of vapor arising from a heated surface.”  This opinion was excluded.

Malladi also opined that the Whirlpool dryer contains steam because Consumer Reports and Good Housekeeping referred to it as such.  LG argued that this was irrelevant, founded on hearsay, and not based on specialized knowledge; Whirlpool argued that it rebutted LG’s claim that Whirlpool’s products don’t create steam under any common and ordinary definition of the word steam within the washer/dryer context.  The court agreed this must be excluded: the underlying articles are inadmissible for the truth of the matters asserted therein, and reading them doesn’t require specialized knowledge or skill. 

Without knowing how Consumer Reports and Good Housekeeping came to use the term, there’s no reason to think that they didn’t just take Whirlpool’s name at face value—this could be evidence of deception as well as evidence of a broad meaning of steam.  Indeed, Malladi did not interview anyone at Consumer Reports, nor did he consider whether the articles’ authors were confused about the Whirlpool dryer.  “In essence, Whirlpool is attempting to circumvent the hearsay rules by having its expert rely on these publications to opine that there is steam in the dryer. Its effort fails.”

Similarly, Malladi was not qualified to opine on the significance of references to “steam” in patents.  He’d never drafted or interpreted a patent, is not an expert in patent construction, and didn’t know who drafted the patents; and he conceded that the patents he reviewed didn’t relate to steam dryers.  Even the LG patents weren’t sufficiently shown to be admissions by LG—Whirlpool offered no evidence that the inventors are or were LG employees.

The court also struck Malladi’s opinion that the Whirlpool dryer can relax wrinkles and reduce odors, because he only based his opinion on his own lay use of the dryer and a review of Consumer Reports and Good Housekeeping, without any testing or experience on the topic.

Malladi’s opinion based on the discussion of steam in the Encyclopedia of Chemical Technology, however, was admissible; LG’s disagreements went to weight (including whether he was taking the relevant language out of context) rather than admissibility.

Finally, the court rejected Malladi’s opinion that the difference between steam and conventional dryers was not their ability to produce steam while drying wet clothes but their ability to generate steam when dry clothing is placed in the dryer, because steam dryers are intended to relax wrinkles and reduce odors when dry clothing is placed in the dryer.  Though Malladi did examine steam dryers, he didn’t examine any conventional dryers or conduct wrinkle/odor testing in such dryers. He thus lacked a basis on which to compare steam dryers with conventional dryers; his opinion had to be excluded because it consisted of mere unverified statements.

trademark licensor liable for substantial participation in putting product on market

Lou v. Otis Elevator Co., --- N.E.2d ----, 77 Mass.App.Ct. 571, 2010 WL 3436833

In 1998, then 4-year-old Kevin Lou was severely injured in the PRC by an escalator made and sold by China Tianjin Otis Elevator Company, Ltd. (CTOEC), under license from the defendant, Otis Elevator Company (Otis). After trial, a jury returned a $3.35 million verdict for Lou, plus $3.3 million in prejudgment interest. Based on the evidence, the jury could have found the following: CTOEC is a joint venture with Otis and two Chinese companies for manufacturing in China elevators and escalators pursuant to Otis design standards and bearing the Otis trademark. Otis entered into a trademark license agreement and a technical cooperation agreement with CTOEC, allowing CTOEC to use the Otis trademark within China and furnishing CTOEC with Otis’s know-how, including a broad range of technical and managerial support. The escalator that caused Lou’s injuries was made by CTOEC. “It prominently bore the Otis trademark … and the escalator bore no other trade name or mark.”

The question was the applicability of the Restatement (Third) of Torts § 14, comment d, which is the current version of the “apparent manufacturer doctrine.” Liability may attach to someone who “puts out” a product. That could be read to require participation in the distribution or supply chain, but comment d to the Second Restatement §400, the parent of the Third Restatement’s §14, says that an actor “puts out a chattel as his own product” when it appears to be the manufacturer. Comment d goes on to explain that “one puts out a chattel as his own product when he puts it out under his name or affixes to it his trade name or trademark. When such identification is referred to on the label as an indication of the quality or wholesomeness of the chattel, there is an added emphasis that the user can rely upon the reputation of the person so identified.”

By the time of the Third Restatement, a majority of jurisdictions had recognized the rule of §400. There are three categories of cases: (1) a trademark licensor can be held liable as an apparent manufacturer if it exercised substantial control over the production of the product; (2) a trademark licensor may be held liable as an apparent manufacturer, despite having had little or no participation in the design or manufacture of a product, because of the likelihood that buyers or users of the product would rely on the trademark as an assurance of the product's quality; and (3) cases departing from (2) and declining to hold licensors liable where they had little or no involvement in design or manufacture. The court noted that the Lanham Act imposes quality control obligations on licensors, but courts generally have declined to base liability as an apparent manufacturer solely on the theory that trademark law requires supervision.

Against this background, comment d to §14 of the Third Restatement says: “Trademark licensors are liable for harm caused by defective products distributed under the licensor's trademark or logo when they participate substantially in the design, manufacture, or distribution of the licensee's products. In these circumstances they are treated as sellers of the products bearing their trademarks.”

The court held that this is not an unwarranted extension of the apparent manufacturer doctrine, but rather resolves the inconsistency between categories (2) and (3) based on the amount of involvement in the design or manufacture of the product. (I’d be happier with sticking strongly with (2), because the licensor should have to take the bitter with the sweet. The licensor obviously wants consumers to rely on the trademark, but then doesn’t want to take responsibility for the flaws of the licensee. It’s a natural impulse to want to externalize risk and internalize reward, but that doesn’t mean the law has to support that impulse.)

But there was still the question of whether Massachusetts should follow comment d. Until this case, no reported Massachusetts case had applied the apparent manufacturer doctrine to an entity outside the distribution chain. The court was persuaded, however, by cases from other jurisdictions which had done so. Thus, there was no error in the trial court’s instruction that a nonseller trademark licensor who participates substantially in the design, manufacture, or distribution of the licensee's products may be held liable under Massachusetts law as an apparent manufacturer. The instruction included the following language: “Substantial participation means participation and some importance in the design, manufacture, or distribution of the products bearing the corporation's mark as opposed to participation in merely minor, incidental, or trivial respects.” This result doesn’t ignore the separate corporate entities of the various entities involved; rather, the licensor is held liable as a result of its own role in placing a dangerous product into the stream of commerce.

The prejudgment interest award was also upheld as proper under Massachusetts law.

Mixed ruling on preemption in organic milk case

In re Aurora Dairy Corp. Organic Milk Marketing and Sales Practices Litigation, --- F.3d ----, 2010 WL 3564849 (8th Cir.)

The key issue in this case was whether the Organic Foods Production Act of 1990 (OFPA), 7 U.S.C. § 6501 et seq., preempts state consumer protection law:

The OFPA establishes national standards for the sale and labeling of organically produced agricultural products, and creates a certification program through which agricultural producers may become certified to produce organic products. The OFPA also provides for the accreditation of certification agents, who inspect producers and make recommendations to the United States Department of Agriculture (USDA) regarding certification. Pursuant to the OFPA, the USDA promulgated regulations, known as the National Organic Program (NOP), 7 C.F.R. pt. 205, defining which agricultural products qualify as organic.

One certifying agent, QAI, Inc., certified Aurora Dairy Corporation's dairy farm to produce organic milk. Aurora has never been decertified, though the USDA proposed revoking its certification in 2007 due to willful violations of the OFPA, including multiple cases of using nonorganic cows to produce “organic” milk, failure to produce and handle milk in accordance with regulations, and recordkeeping failures. Aurora and the USDA eventually entered into a consent agreement; Aurora agreed to retire and remove some of its allegedly nonorganic cows, ensure continuous organic management from the last third of gestation in one herd, reduce the size of its herds and ensure daily access to pasture, remove the certification from one of its facilities, address other issues, and submit to further review.

Aurora sold its milk to the retailer defendants. Class plaintiffs sued Aurora, the retailers, and QAI, alleging that the defendants failed to comply with the OFPA and NOP and that Aurora’s milk violated the law claiming to be organic when it wasn’t. In addition, plaintiffs alleged that Aurora and the retailers made other false statements:

several of the cartons featured depictions of pastoral scenes with cows grazing in pastures, and advertised the idyllic conditions under which the dairy cows lived. Aurora advertised, "As producers of organic milk, our motto is 'Cows First,' " and, "We believe that animal welfare and cow comfort are the most important measures in organic dairy." Wal-Mart represented its milk was produced without the use of antibiotics or pesticides, and [that] organic farmers are committed to the humane treatment of animals. Safeway asserted its dairy cows "enjoy a healthy mix of fresh air, plenty of exercise, clean drinking water and a wholesome, 100% certified organic diet." Target declared, "Our milk comes from healthy cows that graze in organic pastures and eat wholesome organic feed."

The plaintiffs also alleged false advertising off the carton, such as Costco’s Costco Connection magazine, which contained an article about Costco’s house brand (for which Aurora was a supplier) claiming that “The cows on the farm have quite the life. They feed on a balanced organic vegan diet and have access to organic pastures for grazing.” The cases around the nation were consolidated, and the district court granted the motion to dismiss.

The court of appeals affirmed the dismissal of all claims against QAI. There was no express preemption, because OFPA’s limited preemption provision was inapplicable (which was a factor in the conflict preemption analysis). The district court found field preemption, because OFPA is so comprehensive, but the court of appeals disagreed. The district court analogized to OSHA, under which the only way a state may regulate an OSHA-regulated issue is pursuant to an approved state plan. The court of appeals found OSHA dissimilar; OSHA requires states to submit plans to the agency if they wish to assume responsibility for development and enforcement of occupational safety and health standards with respect to which a federal standard exists. The OFPA, by contrast, requires states to seek approval from the USDA only if they want to operate their own organic certification programs. And OSHA’s just a lot more comprehensive, seeking to ensure safe working conditions for everyone, whereas OFPA is a certification program designed to create national standards. The states’ traditional consumer protection role was also relevant; preemption of that isn’t found lightly.

There was a conflict preemption problem, however. The district court found that Aurora’s federally valid certifications shouldn’t be subject to challenge under dozens of different state laws. Congress meant to replace the “patchwork” of existing state regulations with a national standard defining organic food, which included the certification scheme under which QAI is an accredited certifying agent. Thus, all claims against QAI are preempted. Aurora’s certification also allows it to sell or label products using the OFPA-regulated terms without penalty. There’s an administrative procedure for appeals of a certification agent’s decisions. “[T]o the extent state law permits outside parties, including consumers, to interfere with or second guess the certification process, the state law is an ‘obstacle to the accomplishment of congressional objectives’ of the OFPA.”

Plaintiffs’ claims were essentially that QAI should have revoked Aurora’s certifications. This was preempted because QAI couldn’t both comply with the OFPA and its regulations detailing the process for revoking certifications and with any additional state law duty to revoke certifications. Plaintiffs argued that QAI mislead the public when it allowed its “mark of excellence” seal to be affixed to Aurora’s milk, but that’s the mark identifying QAI as the certification agent, as required by the regulations.

For the same reasons, claims attacking Aurora’s certification were preempted. Class plaintiffs argued that defendants must be both certified and compliant with the underlying requirements to comply with the OFPA, but in light of the statute’s structure and purpose, compliance and certification couldn’t be viewed separately. The goal of establishing national standards would be undermined by an inevitable divergence in application by numerous court systems. Not only different legal interpretations, but also “different enforcement strategies and priorities” could fragment uniformity. (Note the difference in this analysis from other courts which find that state enforcement of a federal scheme does not conflict with the scheme, just increases the incentives to comply.) The only statutory penalty for noncompliance with the OPFA is a civil penalty of up to $10,000. “[A]ny attempt to hold Aurora or the retailers liable under state law based upon its products supposedly not being organic directly conflicts with the role of the certifying agent ….” Thus, claims based on Aurora’s and the retailers’ selling milk as organic when it was not are preempted.

Other claims, however, remained. State law challenges to the certification determination are preempted, but not state law challenges to the “facts underlying certification.” The defendants argued that, if OFPA certification is to mean anything, it must mean the certified products have met all the statutory and regulatory requirements. The court found this argument only superficially attractive. The court’s task was not to determine what certification means, but rather whether Congress intended preemption when the claims rely on proof of facts that, if found by the certification agent, would preclude certification.

Put this way, the answer was no. Certification requires, among other things, preventive livestock health care practices, including sufficiently nutritional feed. Congress, the court felt confident, didn’t intend thereby to prevent states from enforcing animal cruelty laws if a producer was neglecting its animals, especially given the states’ historic roles in the area of consumer protection, fraud, and tort claims. Notably, “[c]ertification relies upon inspection and observation of only a portion of a producer's operations, and thus, the evidence which supported certification could, and very likely would, be different from the evidence which supports a state cause of action.” Also, the NOP allows alternative ways to satisfy many of its requirements, which suggests that Congress lacked intent to give preclusive effect to any particular determination.

Preempting state law claims unrelated to certification and certification compliance doesn’t advance the purpose of establishing national standards for organic foods. Nor does preemption of claims relating to facts underlying certification advance the cause of assuring consumers that organics meet a consistent standard. In fact, preemption of consumer protection law might diminish consumer confidence were consumers to become aware that the certifying agent didn’t suspend certification in spite of clear facts to the contrary and that there wasn’t anything that anyone else could do. Furthermore, “although broad factual preemption may increase organic production in the short term, consumers may well elect to avoid paying the premium for organic products upon realizing preemption grants organic producers a de facto license to violate state fraud, consumer protection, and false advertising laws with relative impunity ….”

(The court noted that preemption should not be broader for the retailers than for Aurora. Retailers are specifically exempt from the OPFA; it’s Aurora’s responsibility to maintain conditions supporting certification, and the retailers may have had a right to rely on the certification, and no duty to investigate Aurora’s compliance. But these are facts related to the retailers’ degree of fault. “Because the class plaintiffs' claims do not arise under the OFPA, the extent to which the retailers have fewer duties than Aurora under the statute suggests federal preemption is less, not more, applicable to the retailers than to Aurora.”)

The district court would need to decide which claims interfere with certification, and other issues with the consolidated complaint. Except for QAI, at least one claim against each defendant could survive preemption. Other than the “you said it was organic when it wasn’t” claims, claims based on representations made in marketing the milk fall outside the scope of preemption. Thus, Aurora allegedly “misrepresented the manner in which its dairy cows were raised and fed," and ommitted “material facts regarding the production of its 'organic' milk or milk products, specifically that ... the dairy cows were not raised at pasture." Likewise, the retailers allegedly misrepresented the manner in which the dairy cows were raised and fed, and Wal-Mart also allegedly advertised the milk as antibiotic- and hormone-free, while organic cows at Aurora were put in herds with ordinary cows and potentially subjected to injections of antibiotics and hormones. At this stage, there was enough pled to go forward.

A few minutes on false advertising

I came in very late to Arnold & Porter’s webinar Competitor False Advertising Litigation: A Mock Temporary Restraining Order Hearing, but I caught a couple of interesting points: David Mallen of NAD made the point that NAD puts the burden of substantiation on an advertiser because the advertiser is legally obligated (under the FTCA) to have substantiation before making a claim. Will evaluate implied claims without a survey, but often consider surveys. Always a little suspicious when an advertiser claims to have relevant evidence but doesn’t submit it; confidentiality is possible.

Mallen said ¼ to 1/3 of NAD cases are monitoring cases (self-identified). Hot issues: health claims, telecommunications, green claims; maybe endorsements, testimonials, blogs. Dietary supplement makers are trying to clean up industry, using self-regulation a lot recently.

On average NAD cases take 3-6 months, but NAD has been swamped and complex cases may take longer; one can expedite somewhat by waiving a rebuttal.

Judge Liam O’Grady made the point that judges are going to be more willing to proceed on a limited record when the relief requested is more limited: if the product has yet to launch/the ad campaign has yet to launch; if it would be easy to discontinue the advertising given how the advertising is delivered.

Randy Miller, A&P: Sometimes you have to draw a line in the sand even if the direct economics don’t work out, to let the competitor know you will litigate, to stave off worse behavior down the line, even knowing it will cost a lot of money and suck up a lot of marketers’ and lawyers’ time and energy.

By the way, if you’re interested in advertising law but not following the ABA Private Advertising Litigation Subcommittee of the Antitrust Section, you should be! The free updates are great and there are a bunch of continuing education events like this one.

Jobs at EFF

The EFF is looking for a senior copyright lawyer, an activist, and a web developer. I have to admit, I've never seen a job called "activist," but it sounds awesome.

Today's dilution hypothetical

Or go for the gold: can one construct a plausible confusion argument from this Arthur Murray "So you think you can't dance?" ad?

Fan studies: sports edition

Mike Madison has a great post on Steelers fan memorabilia. The quoted materials make the point that many people look down on sports fans, ignoring their creative and curatorial work. Good point; and also, try being a media fan sometime!

Website scraping claim survives Dastar defense

Cvent, Inc. v. Eventbrite, Inc., Case 1:10-cv-00481-LMB –IDD (E.D. Va. Sept. 15, 2010)

Interesting case with a lot of different claims based fundamentally on Eventbrite’s contractor “scraping” Cvent’s online database. Eventbrite moved to dismiss everything but the copyright claims, and succeeded in kicking out the CFAA and similar Virginia state law claims, along with breach of contract claims, because Cvent’s browsewrap terms of use were insufficient to bind Eventbrite. But the court reached a different conclusion on the Lanham Act claims, adding another case to the ever-growing pile of weird readings of Dastar.

The court reasoned that the complaint “does not assert that Eventbrite has passed off its ideas as its own, but rather that Eventbrite has re-branded and re-packaged its product (the CSN venue database) and sold it as its own.” The court admitted that the “tangible goods” language of Dastar was confusing, and “tends to suggest that electronic products are not covered by the Lanham Act,” but the Court was trying to distinguish “goods and products offered for sale (which receive Lanham Act protection) from any ‘idea, concept, or communication embodied in those goods’ (which are protected only by copyright laws)” (citing Dastar, 539 U.S. at 37).

So close! The Court was clear that repackaging Fox’s DVDs as Dastar’s own would violate §43(a), but also that—to avoid conflict with copyright law, among other things—if Dastar made its own copies (which it did), then §43(a) had nothing to say about that. By definition, Eventbrite’s site (allegedly) contained Eventbrite’s copies of Cvent’s data. The product Eventbrite was offering was Eventbrite’s copies, not Cvent’s copies, and thus squarely within Dastar. Recall that one of the options Dastar rejected was to hold defendants liable only for exact or near-exact copying (wholesale appropriation), which is the same thing as saying that Dastar rejected holding defendants liable when the product they were selling was entirely copied. The court thought that Cvent’s claim was based on Eventbrite’s product—but to the extent that “product” means anything other than “data,” it means “protectable expression,” which gets us back to the copyright conflict the Dastar court managed by saying that §43(a) wasn’t concerned with non-physical source.

The court even spoke of the Lanham Act claim as an acceptable “alternative” to its copyright claim. Presumably, the court meant that there’d be a Lanham Act claim if all Eventbrite copied was unprotectable facts. It cited J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition 5 27:77.1 (2006) ("In many cases a Lanham Act false designation claim accompanies a copyright infringement claim in the complaint because it is unclear if the copyright is valid, is owned by this plaintiff, or is infringed. The Lanham Act claim is included as a back up in case the copyright claim fails."). But that highlights the reason that Dastar established its bright line: in many cases, there shouldn’t be a backup claim. If you can’t win a copyright claim because the only thing the defendant copied was uncopyrightable, whether because it’s in the public domain or for some other reason, then you shouldn’t be able to win a Lanham Act claim based only on that copying. If you could, then the Lanham Act would create exactly the illegitimate type of quasi-copyright Dastar rejected. To win a Lanham Act claim, you should have to show confusion as to source/sponsorship of the goods or false advertising.

Anyway, this also allowed the unjust enrichment claim to survive.

jury finds Welch advertised falsely but didn't injure Pom

Thanks to Eric Goldman for the link to the story.

Posting photos of product you don't make is false advertising

B & B Hardware, Inc. v. Hargis Industries, Inc., 2010 WL 3515710 (E.D. Ark.)

Here’s a lawsuit that backfired. B&B sued Hargis for trademark infringement, unfair competition, and false designation of origin. Hargis counterclaimed, alleging B&B obtained its trademark registration fraudulently and asserting claims for copyright infringement, false advertising, false designation of origin, and unfair competition; Hargis’s copyright infringement and unfair competition claims didn’t go to the jury, but the rest did. The jury returned a verdict in favor of Hargis on all claims.

The court denied B&B’s renewed motion for judgment as a matter of law or a new trial. The JMOL standard is tough: the evidence must point all one way. It didn’t. The false advertising claim was that B&B published phots of Hargis’s construction fasteners on B&B’s website for about six weeks. B&B argued that the claim should be dismissed as a matter of law because the fasteners are visually identical (so the representation was not materially false). Hargis cited some pre-Dastar cases that, while finding defendants liable in this situation, are probably no longer good law. But Hargis had a better argument: B&B hadn’t established that it had ever sent any fastener designs to any manufacturer for production of specimens, so the allegedly identical products didn’t exist. The court held that the verdict was supported by the evidence presented at trial.

B&B argued that this was really a trade dress claim, except that Hargis didn’t show that its fasteners were nonfunctional or had secondary meaning. But copying the fasteners’ design wasn’t the wrongful act; it was copying the pictures as if B&B had those exact fasteners to sell. This was not a trade dress claim.

Likewise, citing Porous Media Corp. v. Pall Corp., 110 F.3d 1329, 1335 (8th Cir.1997), the court held that showing a violation of the Lanham Act was alone sufficient to establish entitlement to injunctive relief even without evidence of likely future harm from the 6-week posting of the photos.

B&B argued for a new trial because the court erred in refusing to defer to relevant TTAB opinions involving the same parties and the same marks, and/or in refusing to admit those opinions, as well as by making errors in the jury instructions. The court disagreed. The TTAB denied Hargis registration of its mark on the basis of a likely confusion finding. Flavor Corp. of America v. Kemin Indus., Inc., 493 F.2d 275 (8th Cir. 1974), applied collateral estoppel to an infringement action based on an earlier CCPA ruling in a trademark cancellation proceeding. But there, the determination of an Article III court was at issue, not the TTAB.

Nor did the court need to defer to TTAB factual findings, given that this was not an appeal of a TTAB decision. Even if the court did apply deference, the trial evidence was sufficient to convince the court that the TTAB was wrong. And it would have been highly confusing and misleading to the jury, and prejudicial to both parties, to admit the TTAB opinions into evidence. The TTAB uses a different multifactor test than the Eighth Circuit to assess likely confusion, and of course the TTAB applies the factors and analyzes the evidence in an opposition proceeding very differently than a jury does in a confusion case. (Among other things, the TTAB assesses the description of the goods/services and the mark as applied for, rather than the actual marketplace context and presentation of the mark.) The TTAB resolved all doubts in favor of B&B; that’s not the standard here.

The court rejected other challenges to the instructions, including the court’s refusal to instruct the jury on what it should consider when determining the strength of the mark. B&B’s proferred instruction would have emphasized mark strength over other factors. Likewise, the court refused to give a proffered instruction on the incontestability of B&B’s mark. Incontestability was not relevant to any jury issues. B&B argued that the jury heard evidence on descriptiveness even though the issue was not sent to the jury; Hargis argued that this was admissible for purpose of proving the mark’s weakness. The court’s instructions didn’t tell the jury that the degree of descriptiveness of the mark should be considered in resolving the claims; the court upheld its prior refusal to instruct the jury on incontestability.

Likewise, B&B’s contention that the verdict was against the weight of the evidence failed. In a previous trial, the jury found B&B’s mark to be merely descriptive without secondary meaning, and the evidence in this trial showed that the mark hadn’t gained appreciable strength since then. B&B’s sales revenues had stayed flat or even decreased since 2000. It had de minimis ad expenditures, and the principals called no witnesses other than themselves to testify about public association. Incontestability alone doesn’t make a weak mark strong; it just blocks Hargis from asserting mere descriptiveness as a defense. B&B’s own reverse confusion argument seemed to concede weakness.

The only factor that supported confusion was that the marks (Sealtite) were phonetically identical, though Hargis always used the term in the context of “Sealtite Building Fasteners.” But, other than the fact that both products are fasteners, “they are distinctly and vastly different in their features and characteristics, functions and applications, and pricing structure.” Hargis witnesses testified that there was no possible product crossover between B&B’s high-precision, NASA/aerospace-focused product and its own screws for attaching sheet metal to wood and steel frames. There was extensive testimony about lack of competitive proximity.

On intent, Hargis admitted that it didn’t conduct any searches on the name Sealtite before picking it, but Hargis argued that the evidence supported a finding that Hargis lacked actual knowledge of B&B.

On actual confusion, a Hargis employee testified that she received approximately two calls per year from Fastenal looking for a B&B part, but that she received hundreds of calls per week and that the Fastenal inquiries were rare (which makes sense, since B&B had an exclusive written distributorship agreement with Fastenal). There was no evidence that Fastenal was confused as to source. Other evidence of confusion was minimal—a couple of queries. The jury was apparently unpersuaded.

Finally, on the degree of care exercised by consumers, B&B argued that neither fastener was expensive. But Hargis presented extensive evidence of care exercised by customers and the relevance of the types of applications for the fasteners and the differences between the markets. (Also, even if the fasteners are cheap, I have one word for a company with NASA as a client: O-rings. If NASA or Boeing isn’t paying attention to its fasteners, I am extremely concerned.)

The jury’s verdict was not against the weight of the evidence.

Third-party beneficiaries don't "use" a mark

Ruggers, Inc. v. United States of America Rugby Football Union, Ltd., --- F.Supp.2d ----, 2010 WL 3553885 (D. Mass.)

Is proximity to a mark “use” of the mark? Grocery stores might need to worry.

Ruggers, which sells rugby clothing and gear, sued USA Rugby, alleging it willfully violated the parties’ exclusive sponsorship agreement. Ruggers added claims against a number of its competitors, claiming they induced USA Rugby to violate its agreement, producing claims for unfair competition, false advertising, trademark infringement, unjust enrichment, intentional interference with contract, misappropriation of the right of publicity, and invasion of privacy.

Under Armour, a competitior-defendant, moved to dismiss and prevailed.

In 2004, Ruggers agreed to provide USA Rugby-sanctioned teams with $350,000 worth of rugby clothing and gear annually in exchange for the exclusive rights to use the USA Rugby trademark on its clothing and to have USA Rugby-sanctioned teams wear, use, and promote only Plaintiff's clothing and gear. Beginning in mid-2006, however, USA Rugby allegedly authorized a number of competitors, including Under Armour, to use the USA Rugby logo in association with their products; allowed teams to wear and promote competitors; clothes; and sold and promoted competitors’ brands through its website. Ruggers alleged that Under Armour and the other competitors induced this breach knowing of its existence and used USA Rugby’s marks and touted USA Rugby sponsorship knowing that Ruggers had the exclusive right to do so.

On the Lanham Act claims, Ruggers alleged that Under Armour (1) used USA Rugby’s trademarks to falsely indicate sponsorship, and (2) infringed USA Rugby’s registered marks. However, the allegations of the complaint were insufficient to demonstrate “use”; they were mere vague and conclusory allegations against “all” of the named competitor-defendants. The complaint didn’t allege that Under Armour sold or produced any item bearing the marks or attempted to exploit the marks in its ads; “broad undifferentiated allegations” were insufficient. (Also, isn’t there a standing problem? I can recall a few cases that have held that nobody can claim trademark infringement but the owner.)

The court also concluded that amendment would be futile, based on Ruggers’ additional factual allegations in its papers. Ruggers alleged that “on at least three occasions in 2007, representatives of USA Rugby, including members of the national team, wore Under Armour apparel ‘in close physical relation to the USA Rugby marks on other garments’ during public appearances.” The theory was that a USA Rugby representative’s choice to wear an Under Armour branded undershirt in conjunction with USA Rugby-branded uniforms was “use” by Under Armour.

The court was unpersuaded. Use “necessarily connotes some action by the user in relation to the object used.” The court cited Watson v. United States, 552 U.S. 74, 83 (2007) for the proposition that a person does not "use" a firearm when he receives it in trade for drugs. The allegations demonstrated, at most, that USA Rugby may have used its own mark in a manner which had the potential to confuse the public. This may have inured to Under Armour’s benefit, but passive receipt of such a benefit isn’t “use.”

I guess now athletes whose leagues have contracts with endorsers have to worry about wearing their pants so low that their branded underwear is exposed. While aesthetically I have no problem with that, I’m not sure it’s the proper subject of trademark law. But see National Football League Properties, Inc. v. Dallas Cowboys Football Club, Ltd., 922 F.Supp. 849 (S.D.N.Y.1996), a case I had not heretofore encountered: the exclusive licensee of the Cowboys’ trademarks sued the Cowboys under the Lanham Act. “Based in part on allegations the defendant-licensor Cowboys had posed in pictures at a press conference dressed in a shirt bearing a Cowboys Club trademark in conjunction with boots sporting a Pepsi logo, the NFL Properties court found that the plaintiff had sufficiently demonstrated that the Cowboys had used its marks in a manner likely to cause the public confusion as to sponsorship.” The court here assumed that the cases were not distinguishable on their facts, but noted that Pepsi, the alleged third-party beneficiary, was not a defendant in that case.

On this theory, what happens when Nike or some other official sponsor sues a tattoo artist for putting a tattoo too close to an athlete’s uniform and thus “free riding” on the value of the sponsor’s brand? Do we really want to enter an era in which we take seriously the theory that not only do consumers believe that every appearance of a mark in public is licensed, but that they also believe that the interactions between multiple sponsors are licensed? Or to put it another way: what exactly might USA Rugby’s conduct have had the potential to confuse the public about? Does anyone think that this potential confusion, whatever it was, could possibly have been material? USA Rugby has a remedy in contract, and (had it made out a case) the tort of intentional interference with contract. Trademark should stay out.

Regardless: Failure to demonstrate use of a USA Rugby mark by Under Armour was also fatal to the state-law unfair/deceptive acts or practices claim under Mass. Gen. Laws ch. 93A. Unjust enrichment failed: in Massachusetts, it’s a remedy unavailable to parties with an adequate remedy at law. Massachusetts also does not recognize a common law right of publicity claim. And the statute requiring written consent for the use of a person’s “name, portrait or picture” was aimed at protecting personality. Corporate plaintiffs have trademark remedies already, so the court was dubious that the statutory right should apply, but concluded that the failure to allege “use” of USA Rugby’s name or likeness was fatal to the right of publicity claim without deciding the scope issue. (What’s the “portrait or picture” of a corporation?)

Intentional interference with contract: the complaint lacked sufficient allegations to support the required elements that Under Armour knowingly induced USA Rugby’s breach and that its interference was improper in motive or means. Other than the bald and undifferentiated assertion that each defendants induced USA Rugby’s breach, there wasn’t a single factual allegation. The claim that Under Armour induced the breach “appears to rest on mere suspicion alone.” The court also noted that there was no allegation that Under Armour continued to supply its products to USA Rugby, only that USA Rugby representatives continued to wear them.

Fan films and German copyright law

John Walliss has an interesting article in the new issue of Transformative Works and Cultures, Fan filmmaking and copyright in a global world, in which he reports that that the relevant parties’ understanding of German copyright law—specifically, a director’s inability to waive his rights—led a game company to prohibit the release of a noncommercial fan film.

[7.3] Two years into the project, in early 2005, a legal support assistant from Games Workshop contacted Vu with a copyright disclaimer to appear at the beginning of the film. During these discussions, Vu told the company that under German copyright law, he would have "unrevocable [sic] rights" to the film as "[his] creation" (Torwächter, posting at Forenplanet, "Clarifications," July 11, 2007). This led Games Workshop to investigate the German copyright situation; after taking legal advice, it banned the release of the film in May 2005. Vu, however, claims he did not receive this e-mail from the company's lawyers, and he continued to work on the film in good faith, completing it the following November. When he announced this via the Damnatus Web page, Games Workshop wrote to him again to restate the ban.

[7.4] A month later, it was announced that an agreement had potentially been struck to overcome the copyright issues. This quickly broke down. After taking further, external, advice, Games Workshop amended its IP policy in mid-April 2006 to ban all fan films. Four months later, the legal and licensing head of Games Workshop, Andy Jones, wrote to Vu telling him although "the great endeavor upon which you have embarked is truly to be admired," because German copyright law would not allow the filmmaker to assign copyright to the company, "it is impossible for us to countenance the release—for free or otherwise—of this movie project." The company, Jones insisted, "must protect our IP. We have no choice…we cannot have elements of our intellectual property 'universe' owned by a third party." Consequently, in October 2007, Vu announced on the Damnatus Web page that the project had been put on indefinite hold.

Further fan reactions/various overstatements followed. Despite those, it seems unlikely that Games Workshop would have “lost” its copyright by failing to object to the film—there would certainly not be a loss against the world, and I would also be very interested to hear what the German position is on further derivatives of a movie based on an existing work where the moviemakers are licensed only to create the movie. Regardless, it’s an interesting example of apparently unwaivable rights defeating what seems to have been an otherwise worthwhile transaction.

IPO Association Annual Meeting, Ethics session

Moderator: Lynn Alstadt, Buchanan Ingersoll & Rooney, PC, Pittsburgh, PA

Frank E. Quirk, University of Akron School of Law, Akron, OH

Model Rule 5.1 and 5.3: duties of lawyers as supervisors. Have to ensure measures in effect giving reasonable assurance that all lawyers in the firm conform to the Rules of Professional Conduct. Applies to all lawyers with comparable managerial authority to partners in firms, not just partners in firms. Lawyers subject to the Rule have to establish internal policies and procedures designed to detect and resolve conflicts of interest, identify dates by which actions must be taken in pending matters, protect client funds and property, and ensure that inexperienced lawyers are properly supervised. For IP practice groups/firms: calendaring/docketing aspect is probably the most important. Then practices and procedures for issuance/review of opinion letters.

Comment 3: additional measures will depend on firm size, structure, and nature of practice. Partners may not assume that all lawyers associated with the firm must inevitably conform to the rules. Most complaints are about small firms. Managing partner may be in the bullseye for misconduct by others (gave example), but that’s rare. Alabama: lawyer disciplined for overburdening associates and having a quota system for opening files, not giving them enough time to do the work responsibly; DC: supervisory lawyer disciplined for failing to offer even rudimentary ethics training; NJ: supervisory lawyer disciplined for having no plan for systematic periodic review of assigned files.

Whether a lawyer has supervisory authority is a question of fact. Pushing a heavy caseload on undertrained and overburdened lawyers is a problem, especially in the public defender system.

Appropriate remedial action must be taken, which depends on immediacy of the lawyer’s involvement and seriousnes of the misconduct. Supervisor and subordinate both have responsibility to correct misrepresentation by the subordinate.

Responsibilities for nonlawyer assistants: you have to put measures in effect giving reasonable assurance that the person’s conduct is compatible with the professional obligations of the lawyer. Very important for outsourcing.

Must give assistants appropriate instruction and supervision on ethical aspects, especially nondisclosure—these people aren’t lawyers, don’t know the rules, aren’t bound by the rules: this means more supervision is required than that for lawyers. A lawyer can be held responsible for assistants’ misconduct if knows/ratifies/fails to supervise appropriately.

Outsourcing and offshoring. Some claim that $1 billion of work will be going to India within a few years. ABA approves of outsourcing so long as the lawyer remains ultimately responsible. Must comply with 5.1 and 5.3 specficially: take reasonable efforts to ensure that lawyers’ conduct is compatible with their obligations. Lawyers must disclose outsourcing to clients. If they’ll communicate confidential information, that requires client consent. Standard terminology is coming into play: outsourcing generally refers to domestic agencies; offshore outsourcing refers to going out of the country; offshoring refers to establishing offices outside the country to undertake activities that would otherwise be outsourced offshore.

ABA: Substantial due diligence must be taken to establish providers’ competence. State opinions approving outsourcing consider them to be nonlawyers under 5.3 rather than lawyers under 5.1, addressing a concern over the unauthorized practice of law. No confidential information may be revealed without client consent.

Major issues to be addressed: Competence of outsourcing agency; unauthorized practice of law/aiding and abetting same; client confidentiality; reasonableness of fees and expenses.

Prof. David Hricik, Mercer University School of Law, Macon, GA

“Better them than us”: things that can go wrong in patent, and IP, practice in general. He monitors filings, talks to insurance companies, etc.: things are happening that should make you pause. First, the number of claims is clearly increasing dramatically. Second, the types of claims are changing: not typical missed deadline case where someone lost a PCT date. More focused on substantive errors: claims were not properly drafted; didn’t pursue broad claims early in prosecution, costing client money in licensing. Third, less noticeable but still a trend, is that big firms are no longer untargeted. Maybe it’s because boutiques have been swallowed up.

Number one source of problems: missed deadlines. Always have a double check: don’t let one person enter the data. Could keep a paper and a computer log. Be really careful if you have an FDA practice where you’re dealing in days, not months; people get confused sometimes and calculate based on the wrong unit. 90 days is not the same thing as 3 months.

Vaxxion v. Foley Lardner: A number of wrinkles. West Coast FL was retained to file a provisional application for Vaxxion on a technology known as mini-cells. Next, filed nonprovisional application, and 1-year bar for filing PCT application passed (there’s a fight over whose fault it is); filed a bit late. Consequence: can reach back only to the nonprovisional filing date. If there’s any intervening art in the period between provisional and nonprovisional, there’s client harm. East Coast office of FL was hired to represent a client, and missed the conflicts check. FL filed a provisional application for EnGeneIC in between Vaxxion’s provisional and nonprovisional; it was cited against Vaxxion as prior art.

Patent conflict checks are an art, not a science, on subject matter: but look at this disaster. The judge in the case said that knowledge was imputed among all lawyers in the firm for purposes of malpractice claims. The lawyers who filed their application on time “knew” that they were harming Vaxxion. The lawyers who missed the deadline “knew” it would help EnGeneIC. For some purposes this makes sense, but for malpractice these mistakes were turned into deliberately harming one’s own client. Case settled after that ruling.

What are the odds of 2 clients in the same field coming to the same firm? Pretty high! If a firm is known as being good in a certain area.

Cases pending now where claim drafting errors are alleged. In one case the firm used “consisting of” instead of “comprising,” which narrows the scope of the claim. Several cases: claim is that the spec wasn’t drafted broadly enough to support the scope of the invention disclosed to the lawyer. A lot more botched litigation claims being brought—patent firm retained to prosecute an infringement suit and gets in a ditch; client sues for improper handling, especially if the client was sanctioned for having brought the suit. Some of this is judgment call, though he doesn’t think consisting/comprising is.

One pending case involving due diligence is pending in Texas. Facts: Company A retains firm A to do stock purchase of company; its principal asset is IP, a couple of patents. The firm is retained to do due diligence, including making sure company owns its IP. Firm fails to realize that the principals of the company own the IP in their own names. Worse, then, the statute of limitations on specific performance/breach of warranty runs. Thereafter, without explanation, firm A comes to principals and asks them to assign the patents, without saying that firm A doesn’t represent the principals, that they might want a lawyer, or that they’re under no legal obligation to sign (though there may be a moral obligation). Not clear whether firm realized the problem on its own or went to the company and confessed. Next, principals sue firm and its client for fraud for saying that the principals should sign the assignment without explaining.

Disputes/motion practice over client identity: be clear about who the client is. Inventors: well-known problem. Individual claimants often try to disqualify firms because they allegedly represented the individuals as well as the company during prosecution: maybe they executed a power of attorney; maybe you sent an email to them marked ATTORNEY-CLIENT, and in some states their expectations can make a difference. Inventors subject to assignment who give power of attorney are not, without more, clients, but they do regularly sue and seek to disqualify firms claiming they were clients. Mostly they lose, but it still costs a lot of money.

What can you do to reduce these claims for disqualification/malpractice? One: have the invention assigned to the company, don’t get power of attorney. Other firms say that’s not practicable with big companies. Other thing: when you send power of attorney, stamp on it and put on the cover letter in big letters: WE ARE NOT YOUR LAWYERS; this doesn’t make you my client; I represent only the company and I don’t represent you. Also remember: some people may be legitimately confused about your role; a clear statement is a good thing in that circumstance.

Another client identity issue being litigated more often: do you represent General Electric just because you represent General Electric Credit Corporation? For patent, the question arises with joint development agreements. Your client enters into a JDA with some other company. That company has its own law firm. Its scientists will be named on the patent application with yours. Normally, the agreement will say that one party has control of patent prosecution, subject to an obligation to confer with/confer in good faith with/keep the other side informed. If everything goes fine, great. But 80% of these JDAs fail. You think the other guy’s scientists aren’t clients, because all you have is a power of attorney and the other guy’s scientists are represented/subject to assignment. But in litigation it may be argued that you represented the other guy’s scientists. You would think that these arguments would fail—how could you owe a fiduciary duty where the agreement says you have control? But in one case, the court granted SJ to the other side, holding that the other scientists were also clients. Lawyers use poor language: record “met with client” in work records when they weren’t clients.

Reduce risk of this mess: send out letters to the scientists and the other law firm: we only represent our client, though we understand our client has contractual obligations to the other side. Those are our client’s obligations and our fiduciary duty is only to our client. There can be a lot of ambiguity; there’s bad law out there now.

Growing area: misuse of trade secrets. Not Pepsi’s lawyers running off to Coca-Cola, but firms are getting sued because they’re taking closer and closer applications. When you’re prosecuting 2 cases close together, you’re setting yourself up for a trade secret misuse argument. Even public information you learn while representing a client can be a client confidence. Lawyer can be disciplined for disclosing something in a public court record learned while representing a client.

Background information about how technology works: court has ruled that information can be confidential even if it’s known to those with ordinary skill in the art. Don’t reuse “back in the day, here’s how they did it” in different applications. He’s not saying that’s properly decided but you should be aware of the state of the law.

Grievance committee of the PTO, the OED. Aggressive organization, sometimes surprising choices. OED is going around and looking at firm webpages. If you say “Bob prosecutes applications” and Bob isn’t registered, they’ll come after you for aiding unauthorized practice of law and false advertising, even if Bob helps people. They want you to say “Bob assists in the prosecution of applications, with supervision.” Scientific advisors: don’t use the words “prosecutes applications.” If they send you a letter, be careful about how you respond: the slightest misstep in response becomes a second allegation against you. He’s not sure this is a big problem, but they are going after it.

Reported case, half a year back: clamping down on people submitting art in cases that aren’t theirs. Narrow form of filing protest to get art in front of the examiner. Any other way will be deemed a violation of the rules. You can do “poor man’s reexamination” and mail the art to the applicant, informing them of material art and hope that works, but otherwise be careful.

Guy gets a case and hands it off to his litigation partners, but stays on the case/shows up for hearings/listed as lead counsel. Client and law firm get sanctioned for bringing the case. The OED sends a letter to the lawyer asking why he shouldn’t be sanctioned for failure to supervise his partners, who weren’t registered and thus weren’t within the scope of the OED’s authority. What’s this got to do with patent prosecution?

Q: how many of these claims are related to fee disputes?

Hricik: none of the ones he discussed. However, it’s not one to one that suing for fees invites a malpractice claim, but it’s close enough that you should count on it.

Q: What happens when you want attorney-client privilege to protect communications between counsel and the scientists? Joint interest defense?

Hricik: the common interest privilege is designed to protect privilege when there is disclosure to a non-client; otherwise we’d be talking about the joint client privilege: in fact an element of the privilege is that you didn’t represent the other guy. So it’s consistent to claim the privilege without agreeing that you represented the other guy.

Q: if you get waivers from both clients in a related field, are you clean?

Hricik: Maybe from a disciplinary perspective, if there’s full disclosure—we may, while prosecuting the other claim, say bad things about your patents or try to antedate another of your patents. Would still worry about trade secret misuse allegations. Possible also that you’d be charged with deliberate blindness in not learning relevant information.

Q: if you’re reading the Official Gazette on behalf of a client and see a reference, that’s now confidential and you can’t disclose it to the Office without consent from your client?

Quick: question is what the expectation of the client was. Cases are now coming down where the information is publicly available: e.g., disclosing a former client’s criminal conviction—you learned about it in the course of the attorney-client relationship and the client expected it to be confidential.

Hricik: Gazette probably won’t ever be in that category, but what if you find a dissertation on a shelf in Michigan and the client doesn’t want it disclosed (but doesn’t take unethical action and just declines to file an application), and then later you have another client to whom this is material? Cases are in direct conflict: one requires disclosure, another requires suppression. Patent Office has taken the position that you have to go to the first client. If the client says no, you have to noisily withdraw from that prosecution—which seems to send a signal about case/client #2, but is it the right signal?

Q: Can you use boilerplate? At some point, that was originally drafted for another client.

Hricik: the court in the relevant case wasn’t going to hold it was boilerplate on a 12(b)(6) motion; client sufficiently alleged it was more than that. Be careful copying text anyway, because you can end up limiting claims.

Q: if you want to take advantage of offshoring for document review/prosecution, what steps do you have to take re: US export laws?

Alstadt: you can’t export products/information within certain categories. When you file a patent application, you get a foreign filing license. So he’s filed a provisional application and gotten his license, which then makes it ok under export control laws. If not that, have someone review it for compliance with the export controls, and keep a record of having done that.

Hricik: Calendaring maintenance fees for clients—he doesn’t think you should do it. PTO and Oregon bar has said that you have to count them as an active client if you’re calendaring their maintenance fees. Might also toll the statute of limitations because you’re actively representing them. Sometimes the PTO has said this doesn’t create an attorney-client relationship, but it’s also said the opposite. Maintenance fees are missed all the time; if you miss one, you’ll lose every penny of profit you ever made by doing maintenance. What you can do if you really want to do this: in engagement letter and when sending a reminder, say: if you ask, we’ll calendar your maintenance fees but this is a non-legal service and it isn’t part of our attorney-client relationship. Missed maintenance fees = malpractice claim; it’s amazing that the fees are only missed on really valuable patents (if you look at the complaints).

IPO: surveys

Intellectual Property Owners’ Association Annual Meeting

Internet Surveys and Dilution Surveys

Moderator: Paula Guibault, Coca-Cola

Gerald L. Ford, Ford Bubala & Associates, Huntington Beach, CA

1946-1960, 18 reported surveys in Lanham Act cases; 1961-1975, 86 reported; 1976-1990, 442 (29/year); 1991-Jan. 2007, 775 surveys (46/year). What fueled this dramatic growth? First, 1960 publication of handbook of recommended practices for trials—predecessor of the Manual on Complex Litigation and companion Manual on Scientific Evidence. Second, passage of FRE in 1975, particularly Rule 703. Initially, not welcomed—many were challenged on hearsay grounds. Then a near-meteoric rise of surveys in late 1970s/early 1980s—deficiencies went to weight and not admissibility. Surveys became more complex and more expensive, and the judiciary became more sophisticated in evaluating them.

We’re back to challenging them under Daubert. 4 surveys excluded in the 13½ years prior to Daubert, 25 in the 13½ years after—from 1% to 4%. But expense has increased as surveys have become more sophisticated in response to Daubert questions. He looked at 75 recent surveys: 36 likely confusion; also genericness, secondary meaning, fame/dilution.

Surveys that missed the mark: Straumann v. Lifecore Biomedical, 278 F. Supp. 2d 130 (Aug. 2003)—secondary meaning for a dental implant. Survey found dental implant had secondary meaning, but couldn’t tie that meaning to the nonfunctional portions claimed. Good lesson: focus on causality is key in surveys claimed.

Tokidoki v. Fortune Dynamic, 2008 U.S. Dist. LEXIS 65665: heart and crossbones design; found confusion but court accorded it no weight. Methodologically flawed because it showed one product after another and asked respondents if they came from the same company; did not replicate market experience. Survey questions and procedures were wrong. Good primer on what not to do for plaintiff doing survey and faced with both marks not very well known in the market.

Trafficschool v. Edriver Inc., 633 F. Supp. 2d 1063: Question: did DMV.org create confusion about affiliation with a state agency? Many respondents thought was operated or endorsed by DMV. Defendants did a survey too, but survey question did not address sponsorship/affiliation. Result: website enjoined.

McNeil v. Merisant, 2004 U.S. Dist. LEXIS 27733: shows evolving nature of survey designs—survey for secondary meaning/likelihood of confusion of yellow color of Splenda packet. Test cell respondents were shown Splenda trade dress, yellow color with some graphic elements, and asked about source. 62% indicated they believed the sweetener came from Splenda. Control cell: shown a package that didn’t include the yellow or graphics—was actually the initial Splenda package. 4% of respondents indicated that was from Splenda.

Remax v. Trendsetter Realty, LLC, 65 F. Supp. 2d 679 (S.D. Tex. 2009): defendant’s sign looked like ReMAX sign with red white and blue. Half respondents saw the real sign; half saw red and blue elements redacted; defendants enjoined.

LG Electronics v. Whirlpool, 661 F. Supp. 2d 940 (Sept. 2009): good example of two-cell study with control cell shown ad for same product without the allegedly false/misleading claims. Judge allowed survey. Defendants have a survey on materiality; case is ongoing.

Hot issues: Daubert. Causality: courts want to know whether the element specifically claimed to create likely confusion is doing so—can the survey show a link? Same with secondary meaning. Single-cell studies can show likely confusion, but can’t tie it to the elements claimed. Today, almost all studies are two-cell studies. This can measure bias attributable to survey questions, market share, preconceptions, or other factors.

Eveready v. Promax: Evermax batteries; tested with a control of “Powermax” with same trade dress.

Callaway v. Dunlop: the longest ball on tour—test cell had the claim on the box and control had the claim redacted; name was Maxfli and question was whether the name itself would produce the claim, but there was a 30% difference in perception.

Joyagra tea (for sexual stimulation): control cell saw “Joy tea.”

Courts are going to want empirical evidence of why a survey is flawed to reject a survey—not just expert’s ipse dixit criticism.

Bruce R. Ewing, Dorsey & Whitney, LLP, New York, NY

Surveys are a product of choices: who to ask, where, what to ask, what to show. 15 years ago, you could choose mall intercept or sometimes a phone survey. Now, internet surveys show up with increasing frequency. Some courts have accepted, others rejected. Courts find universe criticisms easy to understand and accept; even if they allow it in, the jury will understand those criticisms too. So always ask: am I accessing the relevant consumers? Don’t expect doctors from a mall intercept.

Internet access is not universal. College graduates, persons with incomes above $75,000, and persons 18-54 are high internet users (94-80% in past 30 days), and non-college grads, people with incomes below $50,000, and 55+ are less likely (50-52% have used in last 30 days). So for private label goods you might make different decisions than for high-end goods.

Is the survey panel representative of the universe? Relatively few vendors out there (Harris and eRewards most popular). Problems obtaining respondents in cases involving goods or services restricted geographically, by age, or by income. Knowledge Networks does try to match US Census data, a probability sample: but that comes at a price in expense and time. If the incidence level (frequency of participation) is low, they may not be able to get you enough panelists. Other issues: geographically limited area—any internet panel will have problems with that.

Courts are very attentive to this: can you adequately replicate the marketplace/purchase experience? An issue with mall intercept surveys as well. But if a consumer would typically be able to pick up/examine the product, an internet survey will be trickier: may be attacked for not adequately replicating the context. Insurance/banking and other surveys, where stimulus in pre-internet era might have been brochure, might be particularly appropriate for internet survey. If it’s an internet-based product, then you might be asked why didn’t you do an internet survey.

Data collection is generally less expensive than mall intercepts, particularly if you’re dealing with products that many people would use in daily life—if incidence level is high, you can probably save money with an internet survey. If speed is an issue, an internet survey is also faster. The fastest mall intercept study takes weeks; we were able to do an internet survey in 10 days. Another issue: controls—showing people a control may require endless rounds of creating boxes and looking at the boxes and fixing the boxes. Miracle of photoshop: you can get your control stimulus very quickly.

Downsides: when you’re dealing with a panel where people get something pegged to the number of surveys they take, you want to check data about frequent survey takers. And both companies will preclude people who’ve taken a certain number of surveys within a certain period from being further surveyed. Ask your survey expert in advance: what is the incidence level. If they say 20% and your survey says 70%, that’s a red flag: why are suddenly all these people you wouldn’t expect to qualify saying that they do qualify? May be ok, but you need to investigate.

Determining who respondents are: you don’t have interviewer there looking at people; relying on self-reporting. So use some sort of pre- and post-validation questions.

Exposure to stimuli: leave it in front of the respondent/allow them to click back? Same question arises in mall intercept surveys. You’ll be criticized one way or the other, as giving a “reading test” or a “memory test.” If it’s a high-involvement product/service with a lot of thought, let people click back. If low-involvement like chewing gum, maybe not.

Eliciting meaningful responses: you don’t have an interviewer there to ask clarifying questions. Make sure you get a response that at least takes up some amount of word space. Include an algorithm that pops up if someone types a message below a certain number of characters—“can you explain more?” But don’t do this too often or you annoy survey takers who respond with profane rants.

Necessity of testing by counsel: before the public takes it, go through yourself. We’ve presented stimuli that looked fine but then on screen there were lines or weird colors.

Validation: advisable to include some sort of question making clear that the person you’re surveying is the intended one. Can also use an educational level check at the end.

Discovery: huge changes in expert discovery coming Dec. 1; big limits on what you can get, such as draft expert reports; certain communications with counsel. If the expert relies on something, you can get it, but not if they considered it but did not rely on it. So you should be able to get panel data if the survey relied on it. Interesting data: how long does a person take to get through the survey? Variations from 45 seconds to 5 hours, which means the person walked away and came back later. Screen shots of what people saw.

How have courts and NAD addressed this issue? Same as other surveys; generally not viewed them as having problems rising to the level of exclusion. But you can’t show people an index card over the internet when people are going to see the packaging; you need to survey the accurate universe, and provide that panel information as part of the expert report; deficiencies can lead to surveys being discounted. If the purchasing experience in the market doesn’t lend itself to being approximated online, or the relevant universe is not accessible online, you’re going to need another way—interviewing trade participants or something else.

Manny D. Pokotilow, Caesar, Rivise, Bernstein, Cohen & Pokotilow, Ltd., Philadelphia, PA

Dilution surveys: looking for association between the marks based on similarity. Surveyor in Wawa/Haha case asked in a house-to-house survey within a 2-mile radius of the Haha:

1. Have you ever seen or heard of this store?

If yes:

2. What do you think of when you see or hear the name of this store?

If any answer:

3. Do you associate this store with anything else?

29% of respondents, after control subtracted, named Wawa.

Ringling Bros. case: the survey is instructive even though the actual harm requirement is gone. There first needs to be a likelihood of association. The survey: individuals were interviewed in 7 malls, one in Utah. Shoppers presented with a card: “GREATEST ____ ON EARTH.” Questions: with whom or what do you associate the completed statement? Can you think of any other way to complete the statement? With whom or what do you associate the completed statement?”

Utah: 25% completed the blank with only SHOW. All associated with the circus. 24% completed only with SNOW, and only associated it with Utah. 21% completed with both, and associated only SHOW with circus and only SNOW with Utah. Outside Utah, 41% completed only with SHOW and associated with circus; no one put in SNOW. 5/10 of a percent completed with both SHOW and SNOW, and associated them with circus and Utah respectively.

You might think this was a perfect way to show harm: In Utah, 16% actually thought of Utah instead of “Greatest Show on Earth.” But the court found this inadequate to show threshold mental association of the marks. They’d have to associate SNOW with circus before an association would be shown by the survey. Pokotilow thought that there was harm.

Louis Vuitton v. Dooney & Bourke. Survey involved 5 bags: D&B bag of different color, bag of challenged color, and LV bags. Surveyor would put hand on one D&B bag and ask whether knowing these bags are being sold make it more likely you’d want to buy the LV bag, less likely, or does it not affect your desire to buy the bags? Respondent would then be asked what it was that would make it less likely they’d want to buy. Special master said that affect on desire to buy doesn’t show association. Survey kicked out under Daubert for not asking relevant question: is there a mental association with the famous mark when people see the accused mark.

Jada Toys Inc. v. Mattel: Hot Wheels trademark. Hot Rigz: 28% thought that Mattel/Hot Wheels puts out or makes a toy vehicle with that name. Court found that was enough to show dilution.

Nike and Nikepal: Question: What if anything came to your mind when I first said the word “Nikepal”? 87% said Nike. Incredibly high percentage of association; Nike won.

Starbucks, 588 F.3d 97 (2d Cir. 2009): Charbucks. 35% said that Starbucks was the first thing that came to mind: enough to show dilution.

TTAB finally applied dilution in National Pork Board v. Supreme Lobster & Seafood Co., Opposition NO. 91166701: THE OTHER RED MEAT. National Pork Board used a telephone survey and asked: thinking about the slogan you just heard, do any other advertising slogans or phrases come to mind? If yes: What other advertising slogan or phrase comes to mind? 35% answered “the other white meat.” Applicant argued the survey was biased—encouraged you to think of ad slogans/phrases. TTAB found that wasn’t biasing, because that was what you were looking for.

Ewing, in response to Q: tarnishment is more “I know it when I see it”—questions the need for a survey in a tarnishment case, and hasn’t seen any in a parody case.

Pokotilow: a good parody tells you there’s an association; the question then is whether it’s a fair use.

Q: when would you advise a client there was no need for a survey?

Ewing: counterfeiting; if you’re inundated with evidence of confusion; if you’re in a PI situation and don’t think you can get a good survey together—plenty of cases say survey isn’t required; also if you’re not certain what the use will be in the marketplace: the other side is ready to launch but you don’t have a sample.

Pokotilow: in dilution, you don’t need a survey when the exact mark is being used.

Q: has variance in circuits leveled off?

Ford: 11^th Circuit in the 1980s said that survey evidence was less important to them than other circuits, but he hasn’t found that to continue.

Ewing: in certain courts they don’t have much TM, so you have to put yourself in the position who doesn’t see surveys much and you have to make a more deliberate and careful presentation of things you might otherwise skip over.

Pokotilow: you expect sophistication on surveys in SDNY, but not necessarily elsewhere. Even in SDNY: Judge Rakoff, 18 years on bench, and our case was his first survey. Litigators made a bunch of assumptions, with expected result.

Wawa judge was very skeptical of the survey, but accepted it as confirmation of his own conclusions.

Q: which survey is more likely to result in fake answers?

Ewing: Hard to say. You don’t have any interviewers there: reduces chance of interviewer fraud/error. But you don’t have any interviewers there to control what the interviewees are doing!

Q: Will FRE changes impact ability to get discovery about the internet panel?

Ewing: If the expert relied on the panel, then courts will allow discovery into how that survey was done. He’s had this come up twice. One panel company violently resisted disclosing information about panelists such as how long they took to complete surveys; the other company handed the information over with no fuss.