Tuesday, November 30, 2010

False advertising without harm: no new trial, no disgorgement, no injunction

Pom Wonderful LLC v. Welch Foods, Inc., 2010 WL 4794235 (C.D. Cal.)

Clever trial management by Welch saved it from a big loss. Pom sued Welch for false advertising. The court bifurcated liability and damages, and a jury found that Pom (1) proved Welch's 100% Juice White Grape Pomegranate product was deceptive or had a tendency to deceive a substantial number of customers; (2) proved Welch intended the name, label, packaging, or advertising to deceive consumers; and (3) failed to prove that Pom suffered injury, consisting of lost sales or lessening of goodwill as a result.

Pom moved for a new trial, arguing that the question of whether Pom suffered injury, was inappropriate in the initial phase. A trial court may grant a new trial only if the verdict is contrary to the clear weight of the evidence, is based upon false or perjurious evidence, or to prevent a miscarriage of justice. Basically, Pom argued that the court misled Pom about the evidence it needed to submit, then wrongly instructed the jury to determine injury in the liability phase.

The court disagreed. The jury was properly instructed as to the elements of a false advertising claim, which included the element that "Pom Wonderful has been or is likely to be injured as a result of the deception, either by lost sales or by a lessening of the goodwill associated with its products." This was also included in Pom’s own proposed set of jury instructions, showing that Pom’s claim that it didn’t understand proof of liability to encompass proof of injury lacked merit. Pom conflated issues of liability with issues of damages in dollars and cents.

At the pretrial conference, the court invited a stipulation that if falsity and materiality and impact on the audience were proven, the element of injury would thereby be inherently established without further need in the first phase to quantify it through evidence of damages. However, ultimately Welch never executed a stipulation. Welch’s failure to do so did not excuse Pom from having to prove some injury, and indeed showed that Pom “had plenty of reason to realize that it would have to prove some form of injury.” Its failure to follow through couldn’t be the basis for a new trial.

The court also pointed out that Pom did provide evidence of direct competition between the parties’ products and of lost sales. Even if it didn’t put on its best evidence of lost sales, that’s not enough to grant a new trial. “[S]ome evidence was proffered, corroborating the Court's conclusion that Plaintiff understood the nature of the bifurcation all along and tailored its case accordingly.” While there may have been overlap between the amount of lost sales and the actual fact of such lost sales, the court made clear that it was separating proof of damages and liability. Pom didn’t object to bifurcation, only to the special verdict question specifically directed at whether it had suffered injury.

The court also denied Pom’s motion for equitable relief of an injunction or disgorgement of profits. First, Pom didn’t prove a violation of the Lanham Act because the jury found that it didn’t prove injury. Pom argued that there was no injury requirement for injunctive relief, but plaintiffs aren’t entitled to a windfall. Under principles of equity, which also take willfulness into account (one would think the jury’s finding on intent is relevant here), Pom wouldn’t be entitled to disgorgement of Welch’s profits.

Nor was it entitled to an injunction. Among other things, the issue was moot. “Welch is out of the market and to the extent that there still may be some bottles on some shelves somewhere, the impact is de minimis. The balance of hardships does not favor subjecting the parties to the risk of endless litigation about the nature, scope, duration and compliance with the requested injunction.”

Trademark infringement claim triggered insurance coverage for title or slogan

CGS Industries, Inc. v. Charter Oak Fire Ins. Co., --- F. Supp. 2d ----, 2010 WL 4720320 (E.D.N.Y.)

CGSI sued Charter Oak for breach of contract for failure to defend CGSI in a trademark suit brought by Five Four Clothing. Charter Oak’s policy covered "'advertising injury,' caused by an offense committed in the course of advertising [CGSI's] goods, products or services." "Advertising injury" was defined as "injury, arising out of ... [i]nfringement of copyright, title or slogan...." There were exclusions for (1) advertising injury "caused by or at the direction of [CGSI] with the knowledge that the act would violate the rights of another and would inflict" such injury; and (2) advertising injury "arising out of oral, written or electronic publication of material whose first publication took place before the beginning of the policy period."

Five Four sued CGSI for trademark and trade dress related claims. It alleged that CGSI “counterfeited and/or infringed [its] trademarks by advertising, distributing, selling and/or offering for sale unauthorized goods including without limitation apparel bearing unauthorized reproductions of [its] trademarks." These trademarks allegedly "embod[y] the spirit of modern culture," and through "longstanding use, advertising and registration, ... have achieved a high degree of consumer recognition." They are purportedly "highly recognized by the public and serve to identify the source of the goods as from Five Four." The complaint alleged that CGSI possessed a culpable state of mind.

Charter Oak denied it had a duty to defend, arguing that the underlying complaint didn’t allege infringement of slogan or title, that the knowing violation exclusion applied, and that the allegedly improper conduct occurred prior to the policy period.

CGSI responded that the alleged TM infringement constituted infringement of title and slogan, and that Charter Oak had a duty to defend because of the potential for coverage, even if the facts may ultimately bar indemnity.

Under New York law, an insurer’s duty to defend is exceedingly broad, triggered whenever there is a reasonable possibility of coverage. If there is doubt, the insurer is generally required to defend. Exclusions are subject to strict construction and must be read narrowly, and the insurer must defend unless it can demonstrate that the allegations of the complaint unambiguously plead solely and entirely within the policy exclusions. If a relevant term is not defined in the policy, it is given its ordinary meaning, which may include its usage in federal law; any ambiguity must be resolved in favor of the insured.

“Title” isn’t defined in the policy or under NY precedent. Black’s Law Dictionary defines “title” as "A mark, style or designation; a distinctive appellation; the name by which anything is known." The Five Four complaint might reasonably allege infringement of title or slogan. Five Four specifically alleged that its marks served as source identifiers, and thus the alleged misuse of the marks reasonably constitutes "infringement of ... title" since it sought to exploit Five Four's "distinctive appellation." Charter Oak argued that “title” should only encompass literary or artistic works, but this was inconsistent with the case law and unduly restrictive given NY’s rules of construction. “Charter Oak could easily have drafted a policy which clarified that "title" only refers to literary or artistic works, as other insurance policies do.”

Charter Oak relied on a Second Circuit case, Hugo Boss, holding that “trademarked slogan” applied only to words or phrases used to promote particular products or product lines, not the product name itself. But the policy language here is different. “Moreover, the Five Four marks are not solely product names as was the case in Hugo Boss. CGSI's alleged misconduct ‘misrepresent[ed] the nature, characteristics, and qualities’ of the offending goods, not just their product names. The Five Four marks do more than simply display the words ‘Five Four.’ The marks include symbols and styles that, according to the Five Four Complaint, help ‘embody the spirit of modern culture.’ These symbols may therefore reasonably constitute ‘slogans.’" Anyway, even the insurer in Hugo Boss had a duty to defend, given the legal uncertainty about the meaning of “trademarked slogan.” Given legal uncertainty and New York's policy to construe ambiguous insurance provisions in favor of the insured, Charter Oak had a duty to defend.

Comment: the bigger problem here appears to be that the complaint alleged infringement of what seems to me pretty clearly a graphic design. The allegedly infringed mark/trade dress (does anyone but the lawyers really think this is inherently distinctive?):
The registered marks (also allegedly infringed, but it's pretty clear that all that's allegedly copied was the FF design, which was not registered standing alone and might have faced more difficulty getting a registration):
It’s true that graphics can communicate information just as words can, but that doesn’t make graphics into titles or slogans. Though I suppose one could make the argument that there are exceptions where graphics translate automatically into titles or slogans to the relevant consuming public, such as the symbol used by the artist formerly known as the artist formerly known as Prince. Maybe one could argue that this is one such case, because the design is readily recognized as an “FF”?

NY also requires that the claimed injury must “arise out of an offense occurring in the course of the insured's advertising activities” in order to constitute advertising injury. The issue was not whether the ad was the cause of the creation of the infringing product, but whether the injury was caused by an offense committed in the course of advertising the insured products. The Five Four complaint sufficiently alleged that CGSI’s misconduct was “in the course of” advertising by specifically mentioned advertising as well as other means of infringement. “Individual discovery documents from the underlying litigation do not establish with sufficient certainty that advertising is not at all implicated. The alleged sale of these goods at Wal-Mart stores, including any signs, tags, or other notifications to the public may reasonably constitute point-of-sale advertising.”

The knowledge of falsity exclusion also didn’t apply. It was simply undetermined at this stage whether or not the alleged misconduct was committed "with the knowledge that the act would violate the rights of another." Five Four alleged a violation of § 43(a), which does not require intentional misconduct, so CGSI could be found liable without intentional misconduct. There is no duty to defend only where there is no possible factual or legal basis on which a duty to indemnify could apply.

The court also rejected the application of the first publication exclusion. Charter Oak argued that CGSI sold the allegedly infringing jeans to Wal-Mart before the policy coverage period. Charter Oak’s argument was based on one declaration, which did not resolve the factual dispute with certainty. Plus, CGSI held a nearly identical insurance policy from Charter Oak during that period. Thus, there was a possible factual basis for indemnity, triggering the duty to defend. Partial summary judgment on coverage for CGSI.

Trivia: the underlying complaint says that Five Four was founded in 2002, yet it sells a shirt saying “est. 1980.”
The Five Four complaint also laughably claims fame, and lists as its celebrity followers Rainn Wilson, Sean Paul, Jay Sean, Gregory Michael, Aaron Carter, Erik Estrada, Larry King, Cory Monteith, John Salley, Matt Leinart, Omar Miller, Michael Strahan, Terry Crews, Edgar Ramirez and Josh Powell. Dude, I don’t even recognize most of your celebrities, let alone your brand.

FDA warning letters lack preclusive effect

State ex rel. McGraw v. Johnson & Johnson, -- S.E.2d ----, 2010 WL 4709084 (W.Va.)

West Virginia sued J&J and Janssen Pharmaceutica Products, L.P. under the West Virginia Consumer Credit and Protection Act for disseminating false and misleading information to healthcare providers in West Virginia about two drugs, Risperdal (an antipsychotic) and Duragesic (a narcotic pain reliever). The circuit court granted the state partial summary judgment on falsity/misleadingness and then assessed a civil penalty of $4,475,000. The Supreme Court of Appeals (state supreme court) found that the circuit court erred in treating FDA warning letters as dispositive on the issue of falsity and misleadingness.

With Risperdal, the FDA concluded that all atypical antipsychotics required a warning of an increased risk for hyperglycemia and diabetes, and that all patients receiving them should be monitored for symptoms of hyperglycemia. Defendant Janssen mailed healthcare providers a revised warning label with a cover letter denying any increased risk for hyperglecemia and diabetes and omitting to mention the need to monitor patients. DDMAC, unamused, sent a warning letter indicating that the Risperdal letter was false and misleading; it failed to disclose material information, minimized risks, failed to recommend regular monitoring, and misleadingly claimed superior safety to other atypical antipsychotics. Janssen disagreed but went several rounds with the FDA and finally sent out another letter, "IMPORTANT CORRECTION OF DRUG INFORMATION," which recited DDMAC's concerns with the earlier letter and set forth the previously omitted material information concerning the increased risk of diabetes and hyperglycemia. DDMAC then closed the matter.

DDMAC also sent a warning letter to Janssen based on insufficient or inappropriate substantiation for its claims (here, in a form of marketing material known as a file card) that Duragesic had a lower potential for abuse compared to other narcotics, had a "favorable side-effect profile," and improved social and physical functioning or work activity. The same process of disagreement and a corrective letter ensued.

The state’s claim for violation of the Consumer Protection Act was based entirely on the marketing that was the subject of the DDMAC warning letters. After concluding that the defendants had, as a matter of law, made false and misleading statements, the circuit court conducted a bench trial on whether the statements were made repeatedly and willfully, as required under the Consumer Protection Act for the assessment of a civil penalty, and if so, the number of violations that occurred and the appropriate penalty for each violation. The defendants argued that their evidence showed that their statements were not actually false or misleading and, therefore, that they had not willfully disseminated false and misleading information. The circuit court disagreed, finding that each communication constituted a separate violation of the Act. This led to a $5000 penalty for each phone call and a $500 penalty for each item mailed, for a total of $4,475,000.

The key question was whether the statements and omissions were false and misleading. Under the CPA, courts are to be guided by the interpretation given by the federal courts to the various federal statutes dealing with the same or similar matters. The circuit court therefore looked to the FDCA, which prohibits misbranding, including any false or misleading labeling. The FDA has very detailed guidelines, including bans on statements that a drug is better than the approved labeling says, use of studies that are inadequate to support the claims, and use of statistical significance to make a claim not shown to have clinical significance. Here, the circuit court found that whether the defendants had made false and misleading statements under the FDCA could be decided as a matter of law. (Only the US can enforce the FDCA, but a claim under the Consumer Protection Act is not a preempted action to enforce the FDCA as long as it’s premised on conduct that would give rise to liability under traditional common law principles. Here, the alleged false and misleading claims are traditionally subject to state law liability; the state didn’t simply allege a violation of the FDCA through a failure to provide mandated warning information, but further alleged that this resulted in the dissemination of false and misleading information.)

The circuit court found that Janssen could have administratively appealed the FDA's determination but chose not to do so. Instead, it issued corrective letters, thus waiving its opportunity to contest the FDA's ruling. Moreover, the circuit court concluded that the corrective letters--which restated the FDA’a allegations from the warning letters--constituted "mandatory FDA action and the FDA's official judgment as to the matters addressed in the letters" because the FDA had ordered Janssen to issue them and because they became part of the drugs' official "labeling" once they were publicized. Thus, the circuit court deferred to the FDA’s findings.

The Supreme Court of Appeal concluded that this was error. Under the FDA’s own guidelines, warning letters are merely "informal and advisory" and do not constitute a final judgment of the FDA. Moreover, defendants did not in fact have the ability to administratively appeal the warning letters. Under principles of issue preclusion, the FDA didn’t render a final adjudication on the merits, nor did the defendants have an opportunity to fully and fairly litigate the question. Although collateral estoppel may be applied to quasi-judicial determinations of administrative agencies, West Virginia has always been wary of doing so. At a minimum, the relevant decision must be rendered pursuant to the agency’s adjudicatory authority, procedures substantially similar to judicial procedures must be applied, and the issues must be identical.

The warning letters here didn’t qualify. The FDA doesn’t consider warning letters to be final agency action (which would subject it to suit based on a warning letter). Instead, failure to comply allows, but doesn’t require, the FDA to proceed with an enforcement action. In issuing warning letters, “the FDA is not acting pursuant to any adjudicatory authority, nor does it employ any due process procedures similar to those accorded defendants in courts of law.” Instead, it’s acting pursuant to its regulatory authority and informally. There’s no hearing or prior notice of the alleged violations: the warning letters themselves provide the notification, giving the target an opportunity to resolve the problem before any actual adjudication.

Nor did defendants have an opportunity to fully and fairly litigate the issue, and the circuit court clearly erred in finding that they could have formally appealed the findings in the letters, because the regulations provide for petitions for reconsideration of decisions of the Commissioner, not decisions of the Director of DDMAC, and only the latter was present here. Plus, because the letters aren’t final agency action, they’re not subject to judicial review for want of ripeness.

In the end, “the FDA's belief, as expressed in the warning letters and subsequent corrective letters, that Janssen violated the FDCA is not sufficient to establish, as a matter of law, that the Appellants' communications to healthcare providers were actually false and misleading in violation of the Consumer Protection Act.” Instead, the falsity and misleadingness of defendant’s statements are questions of fact.

Monday, November 29, 2010

Fees available in Lanham Act cases for abuse of process

Nightingale Home Healthcare, Inc. v. Anodyne Therapy, LLC, --- F.3d ----, 2010 WL 4721581 (7th Cir.)

Always interesting to wake up to a Posner Lanham Act opinion. Anodyne successfully defended against Nightingale’s lawsuit and then got an attorneys’ fees award of nearly $73,000, based on 15 U.S.C. § 1117(a), which allows such awards in in "exceptional cases."

Anodyne won summary judgment on the Lanham Act claim early in the litigation. Nightingale argued that the case was not "exceptional." Four circuits apply different tests depending on whether the plaintiff or defendant prevailed. In the Fourth and D.C. Circuits, a prevailing plaintiff is entitled to fees if the infringement was willful or in bad faith, while a prevailing defendant can show something less than bad faith, such as "economic coercion, groundless arguments, and failure to cite controlling law." In the Tenth Circuit, a prevailing plaintiff must show bad faith, whereas a prevailing defendant must show (1) lack of foundation for the suit, (2) bad faith in suing, (3) unusually vexatious and oppressive prosecution, or (4) perhaps other reasons, which led Judge Posner to call this “hardly … a test.” In the Sixth, a prevailing plaintiff must show that the infringement was "malicious, fraudulent, willful, or deliberate," whereas a defendant must show that the plaintiff's suit was "oppressive," quoting the Tenth Circuit’s list and adding that "a suit is oppressive if it lacked merit, had elements of an abuse of process claim, and plaintiff's conduct unreasonably increased the cost of defending against the suit."

By contrast, the Second, Fifth, and Eleventh circuits ask all prevailing parties to prove that the opponent litigated in bad faith or (for the defendant) that the suit was a fraud; the Fifth adds consideration of the merits and substance of the lawsuit. The First, Third, Eighth, and Ninth Circuits, like the Second and the Eleventh, don’t distinguish between parties, but they don’t require a showing of bad faith. They speak variously of willfulness short of bad faith or fraud (First), culpable conduct on the part of the losing parties (Third), or bad faith or other exceptional circumstances (Ninth, though with a later case saying that “exceptional” means that "the defendant acted maliciously, fraudulently, deliberately, or willfully" or that the plaintiff's case was "groundless, unreasonable, vexatious, or pursued in bad faith”). The Eighth just says bad faith isn’t a prerequisite.

The Seventh Circuit had previously said that the test was whether the conduct of the party from which the payment of attorneys' fees was sought had been "oppressive," and that "whether the plaintiff's suit was oppressive" turned on whether the suit "was something that might be described not just as a losing suit but as a suit that had elements of an abuse of process, whether or not it had all the elements of the tort." But for a prevailing defendant, “the focus would be on whether the defendant had lacked a solid justification for the defense or had put the plaintiff to an unreasonable expense in suing." Later cases stated that the standard for a prevailing defendant required conduct that "lacked merit, had elements of an abuse of process claim, and plaintiff's conduct in the litigation unreasonably increased the cost of defending against the suit”; that oppressive conduct by defendants included not only willful infringement of the plaintiff's trademark but also "vexatious litigation conduct"; and that a finding that a suit was oppressive could be "based solely on the weakness" of the plaintiff's claims or the plaintiff's "vexatious litigation conduct." Upshot: "vexatious litigation conduct" by any losing party can justify a fee award.

Judge Posner concluded that “the heavy caseloads and large accumulations of precedent in each circuit induce courts of appeals to rely on their own ‘circuit law,’ as if each circuit were a separate jurisdiction rather than all being part of a single national judiciary enforcing a uniform body of federal law. But whether the difference in standards generates actual differences in result is unclear because the opinions avoid commitment by using vague words and explicit escape clauses …. To decide whether the standards differ more than semantically would require a close study of the facts of each case.”

Starting from first principles: why does the Lanham Act make a narrow exception to the American rule against cost-shifting? The legislative history speaks of the public interest in the integrity of marks and the need for a complete remedy in cases where the conduct is malicious, fraudulent, deliberate, and willful. Plus, the patent and copyright statutes allow fee awards, and “trademark law protects an analogous form of intellectual property.”

More practically, businesses may use Lanham Act suits for strategic purposes, to obtain competitive advantages regardless of case outcomes. Almost all cases under the Act are between competitors. (This is not true of trademark infringement cases; Barton Beebe’s results in noncounterfeiting/licensing cases show that 30% involve a court finding that the proximity of the goods/services factor favors the plaintiff, and some of that 70% didn’t involve actual competitors. Most trademark cases may be between competitors, but I’d hardly call that “almost all.” I don’t think this is fatal to Posner’s point, not just because direct competitors are the majority but also because there are reasons I’d call “anticompetitive” in a general sense for trademark owners to litigate against non-direct competitors.)

The Seventh Circuit has expressed concern about anticompetitive TM litigation before. See, e.g., Peaceable Planet, Inc. v. Ty, Inc., 362 F.3d 986, 987 (7th Cir. 2004); Mead Johnson & Co. v. Abbott Laboratories, 201 F.3d 883, 888 (7th Cir. 2000) ("Trademark suits, like much other commercial litigation, often are characterized by firms' desire to heap costs on their rivals, imposing marketplace losses out of proportion to the legal merits."). (This is why I’ve long waited for a general hostility to claims against businesses occasioned by a particular variety of conservatism in the federal courts to turn into suspicion not just of false advertising claims, but also of TM claims, though the “property” idea has usually proved fairly resistant to this move.) Anticompetitive behavior can even occur on the defense side: “a large firm sued for trademark infringement by a small one might mount a scorched-earth defense to a meritorious claim in the hope of imposing prohibitive litigation costs on the plaintiff.”

Anticompetitive lawsuits are the ones “rightly adjudged ‘exceptional’; for in a battle of equals each contestant can bear his own litigation costs without impairing competition.” On the plaintiff’s side, “the concept of abuse of process provides a helpful characterization of his conduct.” The key is not whether the suit itself is baseless, but whether the plaintiff is using the litigation process for an improper purpose, regardless of whether the claim is colorable. Similarly, “[i]f a defendant's trademark infringement or false advertising is blatant, his insistence on mounting a costly defense is the same misconduct as a plaintiff's bringing a case (frivolous or not) not in order to obtain a favorable judgment but instead to burden the defendant with costs likely to drive it out of the market. Predatory initiation of suit is mirrored in predatory resistance to valid claims.” Thus, a case is exceptional “if the losing party was the plaintiff and was guilty of abuse of process in suing, or if the losing party was the defendant and had no defense yet persisted in the trademark infringement or false advertising for which he was being sued, in order to impose costs on his opponent.”

Judge Posner reasoned that this test accounts for most of the case outcomes, except for those that make it easier for prevailing defendants to recover fees than prevailing plaintiffs. The usual rule, “notably in civil rights cases, is the reverse: a prevailing plaintiff is presumptively entitled to an award of attorneys' fees, while a prevailing defendant is entitled to such an award only if the plaintiff's suit was frivolous.” But those are generally individual-plaintiff and corporate-defendant cases, meaning asymmetric resources. By contrast, “[p]laintiffs and defendants in Lanham Act cases usually are symmetrically situated: they are businesses. … Disparity in size will often be relevant in evaluating the legitimacy of the suit or defense, but it is as likely to favor the defendant as the plaintiff.”

Judge Posner then addressed a puzzle: One of the inherent powers of a federal court is to assess attorneys’ fees when a party “has acted in bad faith, vexatiously, wantonly, or for oppressive reasons.” So why would Congress bother to include a fee-shifting provision? Because in Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 719-20 (1967), the Supreme Court rejected the proposition that courts could award fees in cases under the Lanham Act without explicit statutory authorization, given the other intricate remedies prescribed by the law. Thus, Congress 8 years later enacted a fee-shifting provision to provide that authority.

On procedure: abuse of process is a tort. But a fee proceeding shouldn’t be a full tort lawsuit. “[A]n elaborate inquiry into the state of mind of the party from whom reimbursement of attorneys' fees is sought should be avoided. It should be enough to justify the award if the party seeking it can show that his opponent's claim or defense was objectively unreasonable--was a claim or defense that a rational litigant would pursue only because it would impose disproportionate costs on his opponent--in other words only because it was extortionate in character if not necessarily in provable intention.”

Here, there was more. Nightingale, a provider of home healthcare services, bought infrared lamps from Anodyne. It claimed that Anodyne falsely represented that the lamp had been approved by the FDA for treatment of peripheral neuropathy. Instead, the device was FDA-approved, and was intended for the treatment of peripheral neuropathy though not approved for that indication; it (like anything else) could be used off-label in a healthcare provider’s discretion. Nightingale told its patients that the lamp was intended for treating peripheral neuropathy, but not that it had been approved for treating the condition, and when it switched lamp providers on price grounds it continued to make the same claims. Thus, Posner concluded:
Not only had the Lanham Act claim no possible merit (which would not by itself demonstrate an abuse of process), but the district judge found that Nightingale had made the claim in an attempt to coerce a price reduction from Anodyne. Nightingale would have been content to continue buying Anodyne's lamps, as indicated by its purchasing lamps that were subject to the same limited FDA approval and advertising them the same way. The fact that the FDA had not approved Anodyne's lamps for treatment of peripheral neuropathy was thus of no consequence, for neither had it approved for that purpose the lamps that Nightingale bought to replace Anodyne's. To bring a frivolous claim in order to obtain an advantage unrelated to obtaining a favorable judgment is to commit an abuse of process.

Fee award upheld (and noted to include the costs of appeal).

Close to home: Livejournal, defamation, and personal jurisdiction

Miller v. Kelly, 2010 WL 4684029 (D. Colo.)

Thanks to Eric Goldman for passing this along.  This magistrate judge’s recommendation about a defamation claim based on a LiveJournal (LJ) post has no real surprises on jurisdiction, but suggests that, though courts now understand the internet in general, it’s still important to provide them with relevant information on various internet islands.

Plaintiff Miller sued Kelly for defamation. The relevant LJ post title was “Setting the record straight--If anything happens it was Ann Marie Miller.” The post described Miller as "an intimacy stalker" and detailed her purported "stalking" behavior directed at Kelly and Kelly’s husband. Miller, proceeding pro se, alleged harm to her reputation in Colorado.

Kelly argued that the court lacked personal jurisdiction over her because she’s not a resident of Colorado and her post didn’t constitute sufficient minimum contacts with Colorado to justify requiring her to appear in a Colorado court.

The plaintiff bears the burden of showing that personal jurisdiction over a defendant exists. A court can consider well-pled factual allegations as well as affidavits and other written materials submitted by the parties in making this determination. Factual disputes are resolved in the plaintiff’s favor at this stage, and the court should construe a pro se litigant’s filings liberally, but without supplying additional factual allegations to round out her complaint or changing procedural rules.

Kelley [who appears in the caption as Kelly] is a citizen of Virginia. In this diversity case, personal jurisdiction would only be proper if (1) Colorado’s long-arm statute allowed it and (2) it was consistent with the 14th Amendment’s Due Process Clause. Since Colorado’s long-arm statute extends as far as the Constitution allows, only (2) was at issue.

Due process requires two things: (1) minimum contacts and (2) a finding that exercising personal jurisdiction would not offend traditional notions of fair play and substantial justice. Minimum contacts can come either from the defendant’s continuous and systematic contacts with the forum state (general jurisdiction) or from the defendant’s purposeful direction of activities at forum residents or purposeful availment of the privilege of conducting activities in the forum, when the litigation results from alleged injuries arising out of or relating to those activities (specific jurisdiction). Basically, a defendant must have purposely established minimum contacts with the forum state such that she should reasonably anticipate being haled into court there.

Miller argued that Kelley was subject to general personal jurisdiction because she wrote the blog entry. General personal jurisdiction may sometimes come from authoring a website. The case law divides websites into (1) business websites conducting business in various fora, which subject the authors to general personal jurisdiction; (2) passive websites where information is merely accessible to users in many for a, which by themselves do not allow general personal jurisdiction; and (3) interactive websites on which users can exchange information with the host computer, where there’s a sliding scale. General personal jurisdiction based on an interactive website depends on the level of interactivity and the commercial nature of the information exchange that occurs on the site.

Miller alleged that LJ was an interactive website. But she provided nothing to support this allegation, only the purported text of the entry. That didn’t provide any information about LJ, Kelley’s particular LJ, or the level of interactivity or commercial nature of either LJ in general (comment: no way should this matter in the slightest!) or Kelley’s LJ. Comment: a screenshot would have been extremely useful, because it would have shown (among other things) whether comments were enabled on the entry and thus whether the entry was even minimally “interactive.” (Though my guess, based solely on the human desire to discuss matters, is that comments were enabled.)

Based on what’s said in the opinion, the entry was not friends-locked—a level of privacy LJ allows to users that, as far as I can tell, is much less familiar to non-LJ users, but is a really neat feature. Locked entries are visible only to the exact set of logged-in users chosen by the poster, and thus enhance privacy substantially. Facebook now provides something similar, but really clunky and nontransparent (I still have no idea how to change the privacy of individual status updates, and it’s appalling that there are posts on the top ten things you should do for FB privacy, each of which requires a different set of actions), whereas LJ gives the filter a fair amount of prominence and it’s fairly easy to customize for each post.

Anyway, under Iqbal, there wasn’t enough pled to establish interactivity. Plus, Kelley averred that she “[did] not engage in any commercial activity[,] such as selling goods or services [,] through her LiveJournal postings, nor [did] she request interactive responses to her posts." (Is leaving comments open “requesting” comment? I can see a lawyer concluding that it is not.) She argued that she used LJ "to post her thoughts, as she would in a bound paper journal." The court concluded that the blog appeared to have been merely a passive website.

The court then turned to specific jurisdiction because of Kelley’s allegedly defamatory attacks on Miller, which were accessible in Colorado and which harmed her reputation in Colorado.

Purposeful direction requires (1) intentional action, (2) that was expressly aimed at Colorado, (3) with the knowledge that the brunt of the injury from the action would be felt in Colorado. The complaint adequately alleged intentional tortious action. Was it expressly aimed at Colorado? In the Tenth Circuit, the forum state itself, and not merely a known resident, must be the focal point of the defendant’s intentional action. And creating a passive web site, by itself, isn’t considered to be purposefully directed toward any particular state. Thus, writing the entry wasn’t purposefully directed at Colorado. The entry itself mentioned Colorado once, stating that Miller was currently residing in Denver, but it didn’t “request that readers harass [Plaintiff], ask readers to spread the word throughout Colorado of her mental instability, or urge Colorado employers not to hire her."

Moreover (and here I wonder if it’s proper to consider this on a motion to dismiss, but ok), Kelley maintained that she intended that the entry would be viewed only by the approximately six “friends” she had on LJ, none of whom live in Colorado. She intended it to be “semi-private” and didn’t know it would turn up in Google searches. (Reminder: many people simply do not know what their privacy settings are, even on sites like LJ!  And I think Kelley is reasonable in her expectation that the post would stay unnoticed even without being locked; most posts are in fact lost in the great wilds of the internet, and greater attention strikes like lightning, a point that many scholars have made.)  Even assuming that she knew that her post might have a negative effect in Colorado, that’s not enough to show express aiming.

What about her failure to remove the post after Miller asked? Does that create sufficient awareness of harm in Colorado to justify the exercise of personal jurisdiction? No. Failure to remove a website is not a separate act purposefully directed at Colorado.

The judge then turned to the question of whether to recommend dismissal without prejudice or transfer to Virginia. Though Miller could still refile within the applicable limitations period (supporting dismissal), her claim as pleaded could have merit under Virginia law (supporting transfer). The statements were potentially defamatory per se in that they imputed to Miller the commission of potentially criminal acts involving moral turpitude: “stalking,” attempted break-ins, an attempt to run Kelley and her husband off the road and cause a car accident, hacking into Kelley’s internet accounts, and creation of fake accounts under Kelley’s husband’s name. The entry further suggested that Miller was “dangerous”: "If anything happens to me and the baby dies, it was a baby that is both wanted and that we are excited about. This means that under the code of Virginia, [Plaintiff] would be prosecuted for the murder of my unborn baby." Bad faith also affects the choice of dismissal v. transfer, and there was no indication that Miller, proceeding pro se, either realized or should have realized that she picked the wrong forum. Thus, transfer to the Western District of Virginia was in the interest of justice.

(Suppose Miller proceeds pro se. If she’s able to take advantage of electronic filing, is the foreign forum that much harder for her to litigate in?)

Tuesday, November 23, 2010

Skymall as source of review questions

Why isn't this naked licensing? Anyone can put any name on these posters, creating any associations with the teams they want.

Monday, November 22, 2010

Drug marketing class actions continue despite preemption defense

In re Celexa and Lexapro Marketing and Sales Practices Litig., --- F. Supp. 2d ----, 2010 WL 4644429 (D. Mass.)

Defendant Forest markets the antidepressants Celexa (and generic equivalent citalopram) and Lexapro. Forest allegedly illegally promoted the drugs for off-label use in pediatric and adolescent patients, even though the FDA specifically denied Celexa approval for pediatric use. In 2001, Forest received the results of two studies, one indicating that Celexa was more effective than placebo in treating pediatric depression, the other that it wasn’t and that it caused more suicidal ideation than placebo. (Another study also did not show superiority to placebo.) Forest nonetheless allegedly misled doctors for years thereafter by promoting the positive study and failing to disclose the negative one. Forest withheld the negative study from its thousands of sales reps, pediatric specialists hired to give promotional speeches on Celexa, the advisory board responsible for giving information to sales personnel, its department responsible for disseminating information to doctors, and its pediatric researchers, including Dr. Wagner, who’d conducted the highly publicized positive study. In early 2005, Forest added a black-box warning to the Celexa label about risk of suicidality and effectiveness in pediatric patients.

Forest also allegedly illegally promoted Celexa through kickbacks such as honoraria for participation in advisory boards, restaurant gift certificates, lavish entertainment, and research grants, all given to doctors who wrote more prescriptions for Celexa. Forest sales representatives would also interview doctors about how Celexa was used in practice, paying them up to $1,000 for participation.

In 2003 and 2005, two qui tam suits were filed against Forest; the United States intervened, alleging that Forest caused false claims to be submitted to federal health care programs in violation of the False Claims Act. A final settlement was just approved. Five related cases were transferred to the court in 2009.

Plaintiff Wilcox sued on behalf of a putative class of California consumers, alleging violations of the UCL and FAL. He alleged that his son was first prescribed Celexa in 2003 at the age of 12 and took it for 6 more years, because Forest’s misrepresentations and omissions misled his son’s doctor. Other plaintiffs, Jaeckel and Palumbo, sought to certify a US class, alleging 1) unjust enrichment, 2) fraudulent concealment and misrepresentation, 3) fraud and 4) violations of the Missouri Consumer Protection Act.

Forest argued that Wilcox lacked standing because the complaint failed to allege that his son’s doctor saw, heard of, or relied on, any of Forest’s alleged misrepresentations. Under Tobacco II, actual reliance can be proved by showing that a misrepresentation or nondisclosure was an immediate cause of the plaintiff’s injury-producing conduct. There’s a presumption or inference of reliance when a misrepresentation was material, which is generally a question of fact. Where an ad campaign was long-running, “the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements.”

Forest argued that Wilcox’s son’s doctor couldn’t have been materially misled because s/he continued to prescribe the medication for five years after the negative study was disclosed to the public. However, a reasonable juror could find that the negative study would be material to a doctor’s prescription decision and that such materiality was proof that the doctor relied on Forest’s alleged misrepresentation. “The fact that Forest issued a press release in 2004 and changed its label in 2005 does not automatically mean that class members and their physicians could not have reasonably relied on the misrepresentations after those events.” Tobacco II held that “an allegation of reliance is not defeated merely because there was alternative information available to the consumer-plaintiff, even regarding an issue as prominent as whether cigarette smoking causes cancer.” Thus, Wilcox sufficiently pled causation.

Forest then argued that Wilcox could not claim restitution because merely purchasing a product doesn’t constitute injury in fact, and Wilcox didn’t allege a difference in value between Celexa as advertised and as it was. Medina v. Safe-Guard Products, 78 Cal.Rptr.3d 672, 678 (Cal.App.4th 2008), held thata a plaintiff must allege more than purchase: that 1) he or she did not want the product in the first place, 2) the product was unsatisfactory or 3) the product was worth less than what the plaintiff paid for it. Here, pleading that Celexa was "inappropriate" and "not efficacious" for his son was sufficient.

Failure to state a claim: Forest argued that Wilcox failed to plead an “unlawful” practice because of the FDCA’s express preemption provision requiring that all enforcement of the FDCA must be brought only by the US. The court agreed that, if the only claim was that Forest violated the FDCA, his UCL claim would be preempted “because that would amount to using the UCL as a vehicle for bringing a private cause of action for violations of the FDCA.” (Note that there are California courts that reason otherwise: that such a claim enforces California law, not the FDCA; it’s just that California has chosen to incorporate the FDCA in its own law.) But that’s not dispositive, because Wilcox also argued that Forest’s specific claims were deceptive and fraudulent, which are unlawful business practices; this wasn’t preempted.

Forest then contended that Wilcox’s claims didn’t allege unfair business practices. The relevant test: a practice is unfair when the consumer's injury is 1) substantial, 2) not "outweighed by any countervailing benefits to consumers or competition" and 3) one that "consumers themselves could not reasonably have avoided." The court disagreed. “The cumulative effect of all class members purchasing an allegedly ineffective or unsafe drug instead of an alternative medication amounts to substantial consumer injury.” Nor is there any consumer or competitive benefit in failing to disclose a study revealing that a drug is ineffective or dangerous. “Finally, given that the non-disclosure was not publicly known until June, 2004, Wilcox's injury could not have been reasonably avoided.”

The court then found that Wilcox’s fraud allegations were pled with sufficient particularity, identifying details of the marketing campaign and plaintiffs’ doctors as recipients of the marketing.

Statute of limitations: the UCL has a 4-year statute of limitations, and the FAL 3. Forest argued that the claims were time-barred because the alleged deceptive acts occurred more than 4 years before December 2009, when Wilcox filed his complaint. The UCL cause of action generally accrues when the defendant’s conduct occurs, not when the plaintiff learns about it. Wilcox argued that the discovery rule should apply, and the court agreed, because the basis for the claim is the allegation that Forest concealed material information until June 2004. However, Wilcox failed to allege that he reasonably didn’t discover Forest’s misrepresentations until after December 2006 (FAL) and December 2005 (UCL). Thus, the court allowed the motion to dismiss but with leave to replead.

The other class action complaints: Forest moved to dismiss the Missouri state law claim brought by non-Missouri plaintiffs on choice of law grounds. The court agreed that there were significant differences in the statute of limitations in Missouri and the plaintiffs' home states, which included Utah, Connecticut, Texas and Pennsylvania. Forest had principal places of business in Missouri and New York. Missouri follows a rule that “[i]n false advertising, fraud and misrepresentation cases, unlike personal injury cases, the principal location of the defendant's alleged misrepresentations is more important than the place of loss when the place of loss is difficult to identify.” New York looks for the most significant interest, which, for conduct-regulating laws like those governing fraud, is the law of the place where the tortious conduct occurred. The court determined that choice of law would be best left for the class certification stage, because more facts were needed to determine where the plaintiffs relied on the claims and were injured, and where the allegedly fraudulent statements came from.

Forest argued that the plaintiffs failed to state a claim under the Missouri consumer protection law, which requires an “ascertainable loss of money or property.” The plaintiffs alleged that their injuries came from failing to receive full value for their direct or indirect payment of money for Celexa and Lexapro for pediatric use; incurring personal debt and/or out-of-pocket expenditures to purchase Celexa and Lexapro for pediatric use; and foregoing safe and effective alternative treatment options in reliance upon Forest’s misrepresentations that Celexa and Lexapro for pediatric use was effective and had a positive risk-benefit profile. Under Missouri law, buying a product in reliance on a deceptive statement doesn’t amount to injury. Some form of economic or property damage is required, which can be satisfied when a plaintiff alleges that the actual value of the item purchased was less than the value of the item as it was represented to be. The court found the plaintiffs’ pleading sufficient.

Causation: Forest made the same reliance argument as above. In Missouri, a plaintiff must allege that the unlawful practice caused his or her loss but need not allege that it caused him or her to make a purchase. "[I]t is presumed from the statute that the customer has relied upon the obligation of fair dealing in making his purchase." Plaintiffs’ allegations of reliance were sufficient.

The court also found that these allegations were pled with sufficient particularity. Unjust enrichment claims also survived at this time.

"Steel Curtain" as mark for NFL team is slogan, triggering advertising injury coverage

Hudson Ins. Co. v. Colony Ins. Co., No. 09-55275 (9th Cir. Nov. 5, 2010)

NFL Properties sued All Authentic for allegedly selling counterfeit National Football League jerseys. Hudson defended All Authentic, but Colony argued that its policy did not cover the claims that NFL Properties brought against All Authentic and refused to defend the suit. Hudson defended (its policy covered “advertising injury,” including “[i]nfringement of copyright, title or slogan,” but did not contain a trademark exclusion) and sought equitable contribution. The court of appeals affirmed summary judgment for Hudson, because the NFL Properties complaint alleged facts showing that All Authentic was potentially liable for slogan infringement, a claim covered by the Colony insurance policy.

The NFL complaint listed several specific causes of action for trademark infringement, trademark counterfeiting, trademark dilution, unfair competition, and deceptive acts and practices. For example, Paragraph 18 stated that All Authentic offered a counterfeit “Steel Curtain Custom Limited Edition Steelers Jersey” using numbers and colors associated with the Steelers and that “[t]he Steelers have strong common law rights in the mark ‘Steel Curtain’ and own a state registration for the mark “Steel Curtain … Pittsburgh Steelers.’”

In relevant part, the Colony insurance policy covered “personal and advertising injury,” defined as “injury … arising out of [the offense of] … [i]nfringing upon another's copyright, trade dress or slogan in your ‘advertisement.’” The Colony policy contained an exclusion providing that the policy did not apply to “‘Personal and advertising injury’ arising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. However, this exclusion does not apply to infringement, in your 'advertisement,' of copyright, trade dress or slogan.”

Comment: Why do these policies distinguish trade dress/slogan from trademark? I understand that people are reluctant to change existing language, but modern TM no longer distinguishes these things, and it seems to me that the policies could be a lot clearer by cleaning up the language. As I understand it, the aim is to say: we’ll defend you if the ad is the source of the alleged infringement, but not for advertising an allegedly infringing product/service. Incidentally, that kind of language could have gotten Colony off the hook here.

After the NFL Action settled, Hudson sued Colony for equitable contribution because “[b]ased on the allegations in the NFL Action, All Authentic faced potentially covered liability for trade dress infringement and slogan infringement in All Authentic's advertisements.” The district court concluded that “by alleging that the insured infringed ‘Steel Curtain,’ the [NFL complaint] set forth a claim for slogan infringement that was potentially covered by the Colony Policy.” The court of appeals agreed.

“Colony faces an uphill battle from the beginning because the duty to defend in California is extensive.” Any lawsuit that creates a potential for indemnity triggers the duty to defend, and ambiguities are resolved in favor of finding coverage.

Colony first argued that no slogan infringement claims were made in the complaint. But it’s the facts alleged, not the names the underlying plaintiff applies to the facts, that matter. The complaint, fairly read, revealed that “Steel Curtain” is used to promote fan loyalty to the Steelers. This potentially stated a claim for slogan infringement because a “slogan” is a “brief attention-getting phrase used in advertising or promotion.” Thus, it didn’t matter that the NFL complaint never referred to “steel curtain” as a slogan and never listed slogan infringement as a cause of action (comment: which of course no plaintiff ever would, since slogan infringement is not a separately recognized cause of action and TM infringement/§43(a) is).

Colony then argued that NFL Properties and its “powerhouse international law firm” (aww, how sweet!) must have consciously “chose[n] not to advance [NFL Properties'] claim for slogan infringement, which [they were] clearly aware of.” The court found no merit in this argument.

Finally, Colony argued that, even if the NFL complaint stated a potential slogan infringement claim, “the NFL disclaimed any rights to that slogan in its complaint and thus could not have pursued a claim for slogan infringement.” The facts in the complaint failed to allege ownership of the “Steel Curtain” slogan or that NFL Properties had standing to enforce the slogan rights. However, California courts have “cast doubt” on the idea that a complaint must support all the elements of a cause of action to create potential liability. That there may be a good defense, even an ironclad one, obvious to the insurer doesn’t relieve it of its obligation to defend. California courts have found no duty to defend only when the underlying complaint “unambiguously” disclaims or concedes an element.

NFL Properties did not unambiguously concede that it lacked standing to bring a slogan infringement claim. Instead, it stated that it was jointly owned by the Member Clubs and that it protects the Clubs’ marks, then stated that the Steelers had common-law rights in “Steel Curtain.” This was an argument for standing, not a concession of its absence.

Saturday, November 20, 2010

Notre Dame 2010 Creativity and the Law Symposium panel 2

Panel Two
Rebecca Tushnet, Georgetown, Scary Monsters: Hybrids, Mashups, and Other Illegitimate Children

Part of my larger product on vidding and copyright. I begin with Joanna Russ, How to Suppress Women’s Writing: “She didn’t write it. She wrote it, but she shouldn’t have. She wrote it, but look what she wrote about. She wrote it, but ‘she’ isn’t really an artist and ‘it’ isn’t really serious, of the right genre—i.e., really art.… She wrote it, but there are very few of her.”

Start with the last: she’s an anomaly and there are no historical models for her work. In 2005, I was at an MIT conference with Naomi Novik and Francesca Coppa, sitting in the audience, and these guys got up on stage and talked about the amazing new art form they’d invented: taking video game footage and editing it to music. There was nothing wrong with their work, but we were stunned at the claim of invention (and its positive reception) given that media fans had been vidding for decades, growing out of Kandy Fong’s timed slide shows for Star Trek. In the 1980s fans vidded with dual-deck VCRs and stopwatches, an excruciatingly difficult process; eventually digital editing came to dominate the form. I recount the history to reclaim it. Art forms with history are more readily recognized as legitimate and not the idiosyncratic behavior of a few strange people. As Mike Madison has written, it’s easier to make a legal case for an art form that is part of a persistent cultural pattern.

I then showed a vid, Vogue, using footage from 300, which I chose for several reasons. First, it’s about reclaiming the gaze from men: a woman putting a woman’s voice in charge of the narrative, directing and interpreting the action, exposing the pornography of violence in the film as such. Second, Vogue was specifically discussed by the Register of Copyright in her recommendation on DMCA exemptions, and the discussion exemplifies a lot of conventional reaction to women’s art forms. It’s art, except it’s not really art. Vids were the only examples discussed in the text as fair uses, yet the recommendation kept saying that they might not be fair use. They were creative, but disavowed. This was connected both to their basis in pop culture—about which we’re not supposed to be critical or reflective—and to an idea of excessiveness, taking too much. Excessiveness is of course a charge often leveled against women’s expression, associated with inappropriateness and with lack of creativity, and here it has a specific legal payoff in the fair use factors.

What does it mean to transform? The doctrine tells us that it’s more likely to be a fair use to bring something out of the work that’s already there, rather than to make an unrelated commentary. But that means that the transformative use is always going to be subject to the objection that it didn’t tell us anything we didn’t already know, that wasn’t obvious from the original work. This faulty reasoning shows up in the district court opinion in Salinger v. Colting, which rejects a fair use argument that the new work shows how awful and pointlessly narcissistic a character Holden Caulfield is, rather than a romantic hero, on the grounds that it was always obvious that Holden is absurd and ridiculous. But it wasn’t obvious to everyone! If we recognize that people read works in different ways, then a variety of different responses are transformative of those meanings.

In this context I discussed another vid, It Depends on What You Pay, which set images from the TV show Dollhouse to a song celebrating rape. Some responses from Joss Whedon fans (Whedon created the show) thought that the vid was pointless because it was already obvious that the show was about rape; others thought the vid was unfair because the show was obviously not about rape. The responses made the vidder’s point: our culture encourages many people to deny the prevalence of rape and the ways in which the attitudes of nonrapists allow rapists to continue raping; the show lent itself to the second reading at least as readily to the first. The vid was transformative because it took what was (to the vidder, and to some others in the audience) obvious and shouted it more loudly.

Vidding comes from love as well as from hate; there’s passion in both. You don’t work this hard because you’re indifferent to the source.

Olufunmilayo Arewa, Northwestern Law, Creativity, Improvisation, and Risk: Copyright and Musical Innovation

Improvisation was a norm in classical music until about 1910. When accomplished musicians improvise, it activates different areas of the brain than reading music.

Visua/textual bias in music copyright. Copyright assumes the locus of creativity is in the writing of music, and in many areas that’s simply not true. Classical tradition comes out of specific historical development in the 20th century, and other traditions like jazz and blues don’t even have that. Imagine trying to transcribe a hip-hop piece—virtually impossible to do so in writing. Notes are incomplete representations of sound. Rhythm can’t be musically notated—whether medieval chant or complex African rhythms.

Copyright focuses on writings, in part for historical reasons: at the time, writing was the only alternative to human memory. We assume that notation is objective and neutral, but it’s not; disregards performers, reflecting the fact that at the end of the 19th century composers became very powerful. Before that, aria insertion by performers was common when they knew/liked/thought the aria fit better than what was in the text. Sacralization: pieces can no longer be touched or improvised on. All classical composers were great improvisers, and some say Beethoven was better at that than at composing. But we now assume that writing is where the only creative action is.

We now have ways to preserve music through sound recording, challenging the visual assumption. But performers are still presumed to be just mouthpieces—our bias against performances is reflected in the way we treat sound recordings, more limited rights/neighboring rights.

Performers are not silent. They have increasingly claimed copyright credit for the songs they perform; Beyonce was named songwriter of the year. This has led to controversy with songwriters who claim extortion of various sorts. Catherine Fisk working on allocation of writing credit for film/TV: SAG allocates credit based on both visual and nonvisual material—dialogue, but also scene settings and other elements. Text alone leads to a different conception of authorship. Focus on writing disadvantaged creators from other traditions—allowed record execs to claim authorship/ownership.

Sources of visual bias: historical (sacralization; historical origins of copyright in written text; displacement: profound shift in basis of popular music in last 100 years); cognitive (perceptions of writing and sound); linguistic/semiotic (notation and problems of representation). Displacement: 100 years ago, music in US was very European in sound; then broad takeover by African-Americans—ragtime, blues, jazz, influences on rock ‘n roll and country, etc. That matters because the tradition is much more oral. Visual assumptions of copyright coming from sacralized view of classical tradition, confronting music not from that tradition—leads to clashes about locus of creativity.

Musical notes are not representational.

In copyright infringement: Harder to assess what is “too much” with respect to nonvisual aspects of performance.

Improvisation: could end up with something creative and new, or something disastrous. Hip-hop was all about improvisation—jazz, blues, etc. Creativity is located there, and copyright needs to figure out how to deal with that. Improvisation requires borrowing from an existing base. Copyright disfavors use of existing works as important building blocks.

Conservatories are now starting to teach aria insertion again: necessary to make the tradition a living one instead of a dead one. Not so wedded to the written word as authority.

Copyright is a technique of risk management, focused on ownership. Need to think about risks to artists of deterring them from exercising their own creativity.

Michael Madison, Pitt, Commons and Curation

Shakespeare: his works weren’t collected until after his death. Modern example: in Dec. 2009, a tape was found—the only known recording of Game 7 of the 1960 World Series in which the Pirates beat the Yankees, the greatest single moment in the history of organized baseball. The tape was in the basement of Bing Crosby’s house, an early adopter of taping—arranged for a kinescope to be set up to record his TV screen. Internet Archive hosts all kinds of digital collections, including Grateful Dead audience recordings. Social singing: the practice in the late 19th century of Americans sitting around singing songs collectively. Blues: related kind of material cultural practice with stability and fixity but in an intangible sense.

All species of knowledge curation: collecting and preserving knowledge as it existed at the time of production is something law and policy should think about. How do we get such creation and what should law do about it? (Geographic indications are a related topic.)

Knowledge: ways of knowing the world—art, arts, science, information, mapmaking, musicmaking—important to talk about products as well as processes. Creativity is not just a quality of mind and not just an act or technique, but is embodied in objects.

The value of copying itself (thanks for the shout-out!): the value of the object.

Knowledge curation is a species of the public goods problem we use to justify IP rights in general, but doesn’t lend itself readily to proprietary rights solution, even given limited duration arguments. A governance model can help us understand how curation was managed in the past and how we should design for preservation going forward.

Why move from creativity to knowledge? Lawyers sometimes lose track of difference between creativity as characteristic of human mind and creativity as something external to the mind. We should focus our policy on external manifestations of creativity. This emphasizes the social character of knowledge and how people interact with knowledge and with each other.

Forms matter: when we talk about creativity and innovation generally, we talk mostly about processes rather than objects.

Problem: if you look far enough into the future, the present value of having an undistorted/preserved version of a creative work is basically zero; hard to put into the IP scheme. Gift economy may work better than public goods model. Likewise, we haven’t come up with a good, granular sense of what happens when you put items into the public domain: how do you end up with knowledge goods that are durable over time (Shakespeare) and ones that aren’t (as social singing has been). Mechanical licensing—offers new musicians the ability to copy existing compositions, so long as you maintain a certain level of identity with the prior work—expresses a value judgment about copying identical works. We thus have a collection of pop culture recordings that preserve the original while advancing the interest in the new. But that’s the exception rather than a rule.

Governance model: commons structured around the idea of sharing. Populations or communities defined either external or internal to the practice. Community has rules, and sanctions, for appropriation and for when you have to return borrowed/shared materials to the common pool. IP regimes remain useful but not central. Moral rights, geographic indications, TM become useful for maintaining character—these are not generally thought of as responses to the public goods problem.

Curatorial practices: distribution of copying; performance; infringement—the Bing Crosby example shows how infringing copyright interests can be a way of preserving things. Adrian Johns’ book Piracy talks extensively about this. Museums, archives, libraries: collections in their own right are mechanisms for curation, but they’re not exclusive.

Why do we need a theory of knowledge curation at all, when intangibles don’t degrade? You can’t take for granted that ebooks will be preserved—format questions/quality of curation (similar to concerns in DMCA rulemaking about needing high quality source) can be brought in.

Roberta Kwall: If the female voice had been embraced historically, would the law look different?

Me: There are two versions of this—maybe the world would look the same except more of the people making money would be women; I don’t think so. My analysis would imply cutbacks in the derivative works right and in substantial similarity analysis.

Fromer for Arewa: How important is fixation in your analysis?

Arewa: We could easily address sound recordings as performance, taking the ability to fix in that way more seriously. But she also wants to recognize the building blocks of new works as building blocks, think of infringement as intepretive process. Right now we base infringement analysis on the written text; basing it on performance would be very different. Her preference would be to open more space for different types of creativity.

Buccafusco for Arewa: Elite French cuisine had the same type of sacralization Arewa describes, but then that changed in the 1970s. Movement was based on market/social preferences, not changes in IP. Could the market do a better job?

Arewa: Sacralization was a broad 19th century trend, not limited to music—happened with museums too. Unlike cooking, music already has copyright constraining and shaping the markets, so you can’t say just change the market. Things people didn’t worry about in the music industry 10 years ago are claimed as infringements now.

Buccafusco for Madison: What’s valuable? There’s a tension between authenticity and creativity.

Madison: He calls his topic “curation” not just preservation because there are value judgments involved. Copyright hides them but he doesn’t want to. 3 possible arguments: (1) History is valuable in itself. (2) Classic copyright presumes the existence of building blocks, but we need to talk about how we get those building blocks. (3) Objects, tangible and immaterial, are important for groups—they are focal points and boundary objects—this builds some circularity into his argument. We know objects are important to other levels of social activity. Social singing isn’t completely gone: people are emulating Glee on YouTube, reworking the form.

Q: What about dilution? It’s easy to take film clips out of context.

Me: Dilution is bunk. Authors have never been able to stop (mis)interpretation; they just didn’t have so many opportunities to hear about it in the past. Everyone should be able to participate in conversations about the meaning of our culture and its productions. Criticism doesn’t have to be fair; critics should get to use visual evidence, and there is nothing wrong with using persuasive techniques, including music—which is well-recognized as an important way to evoke emotions, structure reactions, create deeper meaning.

Madison: does not think curation is a justification for expanding dilution rights.

Arewa: in copyright we often focus on appropriations from “original” work but those works took from something else. A lot of music is alike because Western music has 12 notes/common chord structures.

Notre Dame 2010 Creativity and the Law Symposium panel 4

Panel Four, Joseph Bauer – Moderator

Jeanne Fromer, The Role of Creativity in Trademark Law

Lady Gaga was sued by an ex-boyfriend for a share of her profits. His story was that he helped create her, in part by coming up with her name. The suit settled, but the interesting thing for her was that there is no TM claim, even though he alleged he came up with the name of her brand. So what’s the role of creativity in TM?

TM protects indicators of source as long as they are recognized as such, even if that source is itself unknown to the consumer. TM is about use; conceiving of the mark has no necessary relation to its use. Ownership controversies do break out, for example when members of a musical group that’s broken up fight over the name, but there’s very little solicitude for the creator.

Unless you interpret creator differently: this person created a link between the mark and the service. Then TM does reward the creator, unless the public is the creator (e.g., when Playboy gets protection over “bunny” because of public reaction).

Schecter said that creativity was important to TM once people stopped understanding who the actual source was: creativity is important to consumers. Establishing a link between the mark and the underlying good/service entails creativity: recall earlier discussion of balancing newness v. appropriateness as the two poles for creativity. TM users strive for appropriateness as they create a new link. (I think Tom Lee’s work on consumer perception challenges this: put almost anything in the place a mark ordinarily goes and people perceive it as a mark.)

TM law thus incentivizes a certain kind of creativity. In infringement, strength of the mark matters, which requires assessement of distinctiveness. In addition, defendant’s intent in using the mark is important—she argues that bad intent is more likely to be found the more distinctive the mark is. (I think she’s talking about conceptual distinctiveness not marketplace strength, but I might be wrong.) Protectability standards also demonstrate this by distinguishing inherent from acquired distinctiveness. TM incentivizes going to the extremes because the boundary between descriptive and suggestive is fuzzy (courts split on what L.A. for low alcohol beer means), so you do better to pick arbitrary or fanciful terms.

Mario Biagioli, Originating Creativity: The Peculiar History of “Personal Expression”

The author as vegetable. 18th and 19th century Western accounts of creativity: how is creativity conceived of by the law, or people arguing about what the law should be, in order to establish property rights? Goethe analogized a novel to a green plant shooting up and producing a flower; Edward Young, 1759, said that an original work “may be said to be of a vegetable nature; it rises spontaneously from the vital root of genius; it grows, it is not made.” He contrasts that to imitators who make things from preexisting materials.

What is creativity? We don’t know what the term means. Has doubts about the mentalistic picture of creativity but also about whether this thing is exclusively human. Machines, experimental systems: creative agency is not only human—in the Lady Gaga story, the name allegedly came from a spelling correction made by a phone to an attempt to type Queen’s Radio Gaga.

So, the traditional accounts: Constant analogies between landed agriculture and IP; references back to the Lockean narrative of production of property rights in tangibles. There is more to it than Lockeanism, though. If you go back to fundamental texts in which the notion of genius and personal creativity were articulated, you find the notion of the spark of genius side by side with the idea that genius is a plant. What is it that allows genius to be related to apparently diametrically opposed processes, nearly instantaneous and boringly slow?

These narratives do not do what they are supposed to do. Consider the Young quote. But the genius is neither the owner of the field in which the plant grows, nor the farmer who cultivates the plant; the genius is the plant itself. The plant is the model for the production of the literary work that deserves copyright protection. Genius belongs to nature, not to artifact. Artifacts are the realm of copiers. If you follow the rules of writing craft, you are not producing works of genius. Genius is unaware of itself: the writer notices that the work is happening through him, but is not aware of the work being done. Young: The original writer is an oyster who does not know it contains a pearl or a rock that does not know it contains a diamond. Genius absorbs nutrients through the roots. A mechanism of “culture laundering”—absorbs culture as chemicals, not as culture.

Criticism: real creativity is collective, starts with other texts that have inspired the author; others are involved in creating the material artifact. Genius is the image that renders all the rest of this invisible. His argument: genius doesn’t do this—in Young’s text, the coverup doesn’t work because the proposed notion of genius falls apart by naturalizing genius.

Fichte, 1791: argued that no one can ever appropriate the author’s ideas, because by understanding them the reader transforms them. By virtue of being in the reader’s brain, they were no longer the author’s. It was thus theoretically impossible to violate the author’s rights: if you understand it, it’s yours. This was not an argument against copyright but for it: Damage to the author could only be done by reprinting. Reprinting constituted taking over the usufruct of the author’s property. Fichte also maintained that engravings of paintings were fine because they were not reproductions; they altered the form. Even an engraving of an engraving was not a reprint, because each artist contributed his own unique form. Only taking someone else’s plate would be (bad) reprinting. Implication: making a movie out of a novel would not infringe.

Taken seriously, weird notion for birthplace of copyright: looks like a very limited right.

Genius and creativity are neither vegetable nor natural: Fichte and Young present the author as such, exposing the problem of coming up with a cultural construction/definition of creativity.

Abraham Drassinower, Incentives, Rights and the Public Domain in Copyright Law

Rights-based accounts of copyright have a promise we have not yet explored: a vigorous public domain. Idea that copyright is supposed to incentivize creativity is fundamental to North American copyright discourse, whatever side of the copyright wars you’re on. But vivid controversy hides depth of latent agreeement: bedrock idea that © is about incentivizing creativity. The wars are not foundational struggles. Civil wars in which each side feels the other is betraying the nation to which the combatant is faithful. Minimalist argument is that expansive copyright rights can interfere with creativity by ignoring role of users. Question is only about the effects of protection on creativity.

Minimalist complaint about copyright expansion is not about expansion per se but about its effects. If we showed that expansion increased public welfare, there’d be nothing wrong with it—an empirical dispute.

Minimalists accept the evidence that copyright has expanded, and thus empirically stifles innovation. But then minimalists insists that copyright normatively should be about incentivizing creativity. Empiricists think they’re having an empirical debate, but they’re deeply normative.

But therefore convergence between theory and practice can’t prove the theory—contracting copyright wouldn’t prove the minimalist story.

Creativity as constitutional imperative: “progress” of science and the arts. If that’s true, then we ought to stop behaving as if the meaning of progress and art were self-evident, and as if we could understand copyright as a mere means to its end. The idea that progress in art is something that we could achieve by legal means is not self-evident.

Civil law jurisdictions: copyright is a recognition of the inherent dignity of authorship. North American minimalists think this can’t account for limits on scope, so avoid rights accounts.

Wants to reverse this: instrumental accounts help expand copyright and a rights-based account could affirm the public domain. Familiar story: Donaldson v. Beckett overturned Millar v. Taylor, establishing copyright as a statutory right rather than a common-law right of authors. But an equally important story would be that Millar survived through Donaldson. Mark Rose: the common-law right triumphed through reconceiving the statutory right as a recognition of the public interest in giving authors rights/commodifying knowledge.

Consider the sweat of the brow standard and its rejection in North America. Manifest story: move away from sweat of the brow heightens the copyright standard and increases the public domain. Latent story: we generally think of sweat of the brow as endorsing the idea that the author is entitled to the value generated through her labor. But there are actually 2 related propositions: (1) author is entitled to the value she originates; (2) implicit, the author is a generator of value. Rejecting sweat of the brow rejects the first but accepts the second. Sets the stage for redistribution of value from author to public, but doesn’t challenge the image of author as generator of commodified value. This is just a decrease in price public must pay. Upshot: successful haggling on price masquerades as a conceptual foundation for the public domain.

Instrumentalist stance lacks a sense of the constituitive sense of the public domain. Public domain is a mere tool of public interest. Linked only empirically; its role is negotiable, whereas the author’s role is secure in the incentive paradigm. Where transaction costs drop, it seems more and more difficult to postulate a public domain. Tech can help the market cure itself, making the public domain obsolete. (My reaction: This might not be true if the public domain helps the public interest as a matter of, essentially, natural law—Carol Rose has this discussion about the comedy of the commons/the way in which open spaces inherently and always enhance overall social value.)

His move: define authorship as an act of communication. Define rights: transformative uses, uses that involve another author, would be legitimate as long as the use is reasonably necessary. Fair use is fair because defendant isn’t just repeating the work parasitically but is herself an author; plaintiff’s own claim is an authorship claim, no better than defendant’s. (Not sure I’m convinced—courts weigh people who have the same claim for whose version is better all the time.) His paradigm would also liberate any noncommunicative uses from copyright liability, with the paradigm being Baker v. Selden. Scope limitations would not be imposed on author externally but flow from the nature of subject matter as communicative. They are not negotiable to serve the public interest, but part of juridical recognition of the inherent dignity of authorship.

Buccafusco for Fromer: TM law promotes the novelty half of creativity, but does it do anything meaningful about appropriateness? When people are contemplating a mark, they have to balance descriptiveness (Food Fair is very good at communicating what it is) and uniqueness.

Fromer: law doesn’t care as much about social appropriateness because it doesn’t need to; the market takes care of that. Except that the law constrains anticompetitive uses of terms. There is every incentive to adopt socially appropriate marks to facilitate acceptance.

My discussion with Drassinower: he thinks that harm-based discussions will never get us to identify what we think is important about authorship; that is, what authorship is and what we want to protect.

Friday, November 19, 2010

Notre Dame 2010 Creativity and the Law Symposium panel 3

(panel 2 later when I have written up my notes)

Panel Three, Dan Kelly – Moderator

David Galenson, Market Structure and Innovation: The Case of Modern Art

Most art historians have not recognized some key determinants: the dominant story is that modern art destroyed the idea of dominant styles/coherence in the 60s/70s. But this was a logical extension of practices that began in the late 19th/early 20th century.

A change took place in theory and practice of art. Art historian: Western art underwent a transition, in which works of art need not represent natural objects/events—art is not necessarily concerned with representation but with expression of human experience. Cubism in first decade of 20th century: artistic reality can be something other than the conventional visual image fixed as the “true” representation of an actual object in physical space.

But why did this happen? Art historians don’t have good explanations, even though we have a lot of evidence about 19th century Paris. Monopoly of the Salon was destroyed: the public had other ways of finding out about new art. But independent galleries didn’t grow large enough to create a genuinely competitive market until early 20th century. Investors began to perceive that Impressionists and Post-Impressionists were increasing in value. By 1910, critic observed that individual exhibitions weakened the effect of the large annual Salon. Over time, individual exhibitions replaced group ones.

First artist to gain prominence through galleries: Picasso. Deliberately used work to cultivate dealers who could sell his art and promote him: executed 9 portraits of dealers and a 10th’s wife in his early years. Once he had a market, he could make whatever he chose, a new freedom. Became the model for other artists like Matisse, who benefited from competition between independent galleries.

The significance: innovation is the hallmark of important art, but from the Renaissance on artists had to satisfy powerful patrons or institutions. Overthrow of Salon created an opportunity to innovate and compete by removing the constraint of patronage.

What did artists do with their freedom? Experimental and conceptual innovators. Experimental: seek to record impressions, pursuing imprecise goals; spend their careers pursuing a single objective; innovations emerge piecemeal as they explore. Conceptual: pursue ideas; innovations are sudden and differ from their own previous work as well as from others’. Experimental innovations tend to arise late in life; conceptual innovations come earlier because habits of thought are not as fixed. There’s a persistent belief in the art world in conspiracies: artistic importance can be manufactured by dealers and curators. But unless this leads to influence on other artists, that can’t be important to art history. He insists that innovation is demonstrated by influence on later artists.

For centuries, neither type of artist dominated. This changed as a result of the changed market structure: innovations no longer had to be acceptable to patrons. Greater freedom: artistic innovations only had to appeal to fellow artists; could be more radical, transgressive. Decided advantage to young conceptual innovators.

Why do some modern artists work in so many styles they appear to have no style at all? E.g., Murakami. Stylistic versatility is a pattern tracing from Picasso. Changes also in the substance of art—Picasso glued fabric to a canvas, violating a convention that nothing other than paint should be placed on a 2-D surface. Collage was immediately recognized as an important innovation—quickly resulted in counter-relief, Readymades, and so on. Resulting Balkanization of modern art continues now.

Use of language in visual art: many artists like Jenny Holzer make art out of language; began with Braque stencilling letters on paintings in 1911. Intentional provocation of debate over whether work is serious or a joke: Damien Hirsh, Jeff Koons. Artists who have work executed entirely by other people: highlighting the role of the concept. Artists have begun coauthoring all their work. Open embrace of market (artists have always worked for money, but weren’t supposed to say so); Damien Hirst is probably the wealthiest artist.

Jessica Silbey, Inspired Beginnings and “Work Makes Work”: Two Stages in the Creative Process of Artists and Innovators

Summary of book project based on interviews with creators and people working with creators. Language used by artists and their lawyers: they talk about serendipity. IP intervenes along the chain of creativity towards commercialization, but not at the beginning of creation.

Face to face interviews with artists, musicians, sculptors, in-house and external counsel, music agents, etc. Snowball sample. Ask them how they started their work, what they love, what’s hard, disputes they’ve had. Get a sense of their attitudes about what they own.

4 categories of language used to describe beginnings: serendipity and luck; intrinsic or natural forces compelling them to make something; play and pleasure, experimentation; need or urgency. A-ha moment of serendipity comes out of seeing and realizing that something is a creative work; unconscious but inevitable discovery. Other reasons than property entitlements are given for beginning work; law appears absent as an instigator.

Further question: is law really absent? IP is, but there are employment relations, implied/express contracts, financing arrangements in the background structuring what goes on. If we care about artists and inventors, maybe IP law shouldn’t be our focus.

Work: what keeps artists working every day? The time and space involved; work has rhythm and propulsion. They’re nesters: where they work matters to how they work. This takes a lot of time, but flexibility is really important—it can’t be a punch clock. “Work makes work”: when you’re working, you’re in the zone. Working hard is more important than what is produced. Pride in labor: the value of putting work in, the way Locke argues. Real and personal property language does play a role. Mix your labor and create something of value: talk about harvesting, fishing (some days you catch something good and other days you don’t), seeding, bricklaying. Plagiarism is standing on someone else’s “scaffolding,” patents are “chits” for trading, breaching DRM is “shoplifting,” etc.—metaphors for tangible property.

Surprises: infrequent use of possessive terms like “mine” or “taking.” Rarely discuss desire to fully control their output despite real property language. When they talk about possession is where reputation or attribution is at issue, even though IP law doesn’t protect against misattribution or blocking patents.

Property talk assigns value where the artists want it to be: inherent justification for ownership. Implications: beginnings are spontaneous and lucky; value of work is time and labor; this is not IP talk.

Variations do exist. Firms (and those who represent firms) think more in terms of incentives than individuals do. So, should IP law focus more on firms than authors or inventors? IP could be a tool for exploiting the copy instead of incentivizing initial creation—duration could extend; fair use could collapse; patent ownership could default to the firm—but these are all terrible ideas. If we do care about individual artist/creators, think about regulating the relationship between creators and intermediaries. They want a stable income—patronage—they don’t care about royalties so much as about making a living; don’t have a very high risk tolerance.

Is IP right in ways that matter, even if it doesn’t map onto the ways in which works are generated?

Roberta Rosenthal Kwall, Creativity and Cultural Influence in Early Jewish Law

Jewish law as a component of cultural property. Jewish law extends to every aspect of life, including the order in which you put your shoes on and tie them. But how do we apply Jewish law in modernity, where we place a tremendous value on autonomy, customization, etc.? At odds with traditional Jewish worldview; threatens the survival of Jewish law. More liberal sectors of Judaism are making decisions that are arguably outside the boundaries of the tradition; more conservative are manifesting rigidity that is completely inconsistent with the tradition of flexibility—compare to Arewa’s discussion of sacralization.

Creativity in the development of Jewish law in the earliest periods. Early-CE Jewish society was heavily influenced by Hellenistic tradition. Model: discontinuity within the confines of continuity—new factors/traditions have always been embraced but reworked and remixed to make it appear as if the Jewish tradition was seamless. Compare to Tushnet: one of the most important challenges to Jewish law right now involves women. Although you can’t throw the baby out with the bathwater, the bathwater is really dirty. How do we negotiate/develop changes to allow women to have a voice and still be part of the tradition, approaching the tradition with love and a sympathetic reading while still requiring evolution and change to accommodate modernity?

Jewish law itself is a product of contestation within the culture. There is both written and oral law (the latter of which is also written down!). Written: vertical paradigm, G-d appearing to Moses on Mt. Sinai and handing down the written law. In addition, G-d also gave to Moses, according to the tradition, the oral law. Provides explanations and elaborations of the written law. Part of the oral law is steeped in the same vertical paradigm of dictation from G-d, but a part of the oral law is not vertical but horizontal: the development of the oral law is to be done by the sages in every generation. The sages are equal to each other.

Two major centers of Jewish learning in early CE: Palestine/Hellenistic; Babylon/more independence from their hosts. Oral law began to grow, along with persecutions of the Jews; created felt need to write the oral law down. Knowledge curation as per Madison. 3 main documents: Mishnah, 200 CE in Palestine; nuts and bolts rendition of the law, meant to be memorized quickly because it was oral. 200 years later, in Palestine, the Jerusalem Talmud. 100 years after that, the Babylonian Talmud was redacted: the central book of life in Jewish law, overtaking the Jerusalem Talmud. There was back and forth between the sages, so there are similarities in the documents.

Picking and choosing from the past is a part of the development of the law—resembles the earlier discussion of creative practice. Early rabbis followed Pharasaic tradition: anybody who was educated/knew the law could be a sage (though this was really any man)—you could be from a lowly family. Democratic ideal; borrowed from Platonic concept of education. Passover Seder: the paschal sacrifice was the key to the ritual in Exodus—changed after the destruction of the Second Temple, after which the sacrifice was impossible. Rabbis had to invent a different ritual; looked to Greco-Roman tradition of discourse and what became important was telling the story of the Exodus.

Essential ingredient in preservation of Jewish law: In civil law matters, the law of the land is the law.

What to do going forward? Consider the historic boundaries of Jewish law and where there is wiggle room to put the discontinuous within the body of the continuous.

Fromer for Galenson: how much are these findings limited to art itself versus literary or other realms?

Galenson: for virtually every intellectual activity—we live in a conceptual world. Since the Renaissance there’s been this misconception that creativity was the domain of the young, wisdom of the old. Increasing emphasis on deliberate, conspicuous, transgressive innovation, but we ignore the experimentalism that goes on. We live in a conceptual world because that’s what we think we live in.