Thursday, April 28, 2011

Western Sugar Cooperative sues ADM and others over corn sugar rebranding

I tried to put the complaint into RECAP, but it hasn't shown up yet, so here's another link.  The sugar producers argue violations of the Lanham Act and California false advertising law (since the backlash against high fructose corn syrup has been good for sugar producers).  Jeremy Sheff's work on unbranding might be of interest here--to what extent is there a social interest in preventing a company from changing the name of a product to something different?  And what is sugar to a consumer anyway (recognizing that the meaning might be different to a chemist, as the meaning of "salt" is)?

Thanks to an eagle-eyed correspondent.

Outsourcing of course catalogs, false advertising, and copyright

CollegeSource, Inc. v. AcademyOne, Inc., 2011 WL 1540403 (E.D. Pa.)

The parties compete to provide online college transfer services. CollegeSource complained that AcademyOne republished course catalogs and course information that CollegeSource digitized and made available to customers. These are used to facilitate transfer agreements between schools and to help consumers determine whether courses at different institutions are equivalent.

CollegeSource argued that AcademyOne breached CollegeSource’s Terms of Use by republishing the course descriptions, or in the alternative unjust enrichment. It also claimed false advertising based on a letter AcademyOne sent to various academic institutions “under the guise of a freedom of information request.” CollegeSource sought an injunction against use of the catalogs and corrective advertising. (The case is related to two previous lawsuits, one in which AcademyOne failed to win its claims of false advertising, trademark infringement, and cybersquatting, and one with similar claims to this one dismissed for want of personal jurisdiction, now on appeal in the Ninth Circuit (pending for more than 18 months, it appears).)

The court denied a preliminary injunction for want of irreparable injury on the contract and unjust enrichment claims, and for failure to show likely success on the merits of the false advertising claim.

CollegeSource has accumulated more than 39,000 digital course catalogs over 16 years by contacting individual colleges and requesting copies. It had no formal contracts or licensing agreements for distributing the catalogs. When it receives paper copies, it scans and OCRs them to digitize them. It adds a cover “splash page,” makes the data searchable, and appends its ToU specifying that the information may only be used for personal use and that data may not be displayed for use on another website or service.

The ToU say (quite implausibly, w/r/t the derivative works claim):
CollegeSource® and Career Guidance Foundation CollegeSource® digital catalogs are derivative works owned and copyrighted by CollegeSource®, Inc. and Career Guidance Foundation. Catalog content is owned and copyrighted by the appropriate school.
While CollegeSource®, Inc. and Career Guidance Foundation provides [sic] information as a service to the public, copyright is retained on all digital catalogs.
This means you may NOT:
* distribute digital catalog files to others,
* "mirror" or include digital catalog files on an Internet (or Intranet) server,
* modify or re-use digital catalog files without the express written consent of CollegeSource® and Career Guidance Foundation and the appropriate school.
You may:
* print copies of the information for your own personal use,
* store the files on your own computer for personal use only, or
* reference this material from your own documents.
CollegeSource® and Career Guidance Foundation reserves [sic] the right to revoke such authorization at any time, and any such use shall be discontinued immediately upon written notice from CollegeSource ® and Career Guidance Foundation.

AcademyOne testified that it built its corpus of course descriptions and college catalogs by getting it directly from about 80 schools, visiting about 4000 school websites and downloading html or PDF files—about 18,000 PDF files (its Chinese contractor did this). CollegeSource found approximately 680 catalogs that were digitized or converted by CollegeSource on AcademyOne's website, all with Terms of Use intact. Some of the 680 catalogs may have been downloaded by the Chinese contractor because some colleges and universities re-direct or "back-link" to CollegeSource's collection of PDF catalogs or because the colleges and universities posted copies of CollegeSource's catalogs directly on their own website.

AcademyOne also previously attempted to license CollegeSource’s catalogs, but CollegeSource declined.

After receiving CollegeSource’s C&D, AcademyOne removed the links to every PDF file of a whole course catalog on its website. However, the actual PDF files themselves were not immediately removed. Thus, someone who had the direct URL of the PDF catalogs would still be able to access the catalogs directly. A few months later, AcademyOne also removed the PDF files of every whole catalog from its servers and deleted the feature allowing users to access course catalogs. The 680 whole catalogs in question have not been in AcademyOne's database since mid-2007, though it did keep computer backup and litigation copies of the files at issue in compliance with its litigation obligations.

The Chinese contractor then re-collected course descriptions from school websites, with new protocols against downloading PDFs from CollegeSource, checking to make sure there were no downloads from CollegeSource internet addresses. AcademyOne nonetheless posted course descriptions from two course catalogs that might have been from CollegeSource’s websites, which it removed after becoming aware of the issue. It removed every course description that might have been derived from CollegeSource’s materials, then reposted certain descriptions after verifying derivation from other sources. There was no evidence that course descriptions from the 680 catalogs currently appear on AcademyOne's website or in its database.

Meanwhile, AcademyOne’s principal sent letters to public schools under applicable state freedom of information laws. AcademyOne requested any copies of any correspondence, emails or contractual agreements between the academic institution and CollegeSource that granted CollegeSource the authority to create and claim a derivative copyright of the institutions' printed or digital catalogs or add CollegeSource's various enhancements to the catalogs. Every school that responded indicated that there were no agreements giving CollegeSource the right to restrict the use of the course descriptions created by the schools. In response to this letter, various academic institutions questioned CollegeSource about what it was doing, and one client asked CollegeSource to remove the institution’s catalog from its collection.

The court found no irreparable injury on the breach of contract/unjust enrichment claim. CollegeSource argued that, without an injunction, nothing would prevent AcademyOne from reposting information gleaned from CollegeSource-digitized catalogs, but the court was unpersuaded given AcademyOne’s compliance with CollegeSource’s takedown requests and institution of procedural safeguards against future uses. CollegeSource’s delay in filing for a preliminary injunction (it sued in California in 2008, then in E.D. Pa. in July 2010, but didn’t ask for a PI until December 2010) also cut against a finding of irreparable harm. Damages could compensate for any ultimately proven violation of the law.

False advertising under the Lanham Act: the letter AcademyOne sent sought copies of any agreements between the academic institution and CollegeSource that would "grant[ ] CollegeSource … the authorization to create and claim a derivative copyright of [the academic institution's] printed or digital catalog for [2006-2010]; limit the rights of distribution of the electronic version located on their website; archive the file; add their logo and Terms of Use to the front of each catalog and charge for access to the catalog." The letter further explained that the request was made in connection with "copyright claims filed" in this lawsuit.

CollegeSource argued that the letter was an ad and that it was literally false: (1) no copyright claims are asserted in the lawsuit; (2) CollegeSource wasn’t attempting to preclude AcademyOne "and other software providers" from providing automated student transfer systems; (3) CollegeSource didn’t claim control of catalogs on its clients website.

The court rejected the literal falsity arguments, declining to address the “advertising or promotion” issue.
First, although no violation of copyright law is asserted in this lawsuit, such an understanding and description is a reasonable characterization of this matter for a non-lawyer to make. The heart of the violation alleged in this action is that AcademyOne violated the copyright and disclaimer notice appended to CollegeSource's catalogs by extracting course descriptions for its own products. In essence, the rights CollegeSource seeks to vindicate, though styled in terms of breach of contract, are very similar to a lay conception of copyright infringement. Indeed, the plaintiff has cited to several copyright cases to support its claim for injunctive relief and its original cease and desist letter declared AcademyOne's actions to be a violation of the Copyright Act.
The author of the letter testified that he meant to refer to CollegeSource's copyright notice included in its digitized catalogs, not a legal cause of action. This was ambiguous, not literally false.

AcademyOne’s contention that CollegeSource was attempting to prevent AcademyOne and other software providers from providing automated student transfer systems was also ambiguous. CollegeSource argued that only AcademyOne was the subject of the lawsuit and thus it is false to refer to "other software providers." But AcademyOne had reason to believe that CollegeSource intended to pursue claims against other companies that might utilize CollegeSource's digitized information.

Finally, it was not unambiguously false for the letter to state that "CollegeSource claims control of the digital catalogs they collect, even if they reside on your website." “AcademyOne presented evidence that some colleges and universities either directly posted, or provided links to, CollegeSource's digitized catalogs that contain CollegeSource's Terms of Use. In this way, a university's course catalogs that appear to an ordinary user to be on the university's website may be subject to CollegeSource's asserted Terms of Use.”

These statements were either true or ambiguous. (Materiality also seems important: the difference between the technical aspects, whether legal or on whose servers the catalogs were located, is unlikely to be incredibly important to schools, especially schools discovering that they outsourced their catalogs to a private provider who now claims monopoly control over the digital versions.)

Given this result, the next question was whether there was sufficient evidence of deceptiveness. Though one institution requested that its catalog be removed from CollegeSource’s collection, there was no evidence in the record about its reasons. Several other institutions asked CollegeSource for more information, but there was no evidence about how many inquiries or whether the requesters were actually confused about the facts. Thus, CollegeSource didn’t show likely success on the merits.

Comments: though this is a legal loss for CollegeSource, it’s worth noting that AcademyOne apparently felt bound to respect the ToU—even in cases where that was the best way to get the course catalogs from the schools themselves, which had linked to the CollegeSource copies. So CollegeSource protected a lot of its investment. Also, the schools that did this probably do need to make clear to CollegeSource that it has no claim to the catalogs. Maybe a CC license?

False advertising, though broader than fraudulent inducement, requires damages

Persaud Companies, Inc. v. The IBCS Group, Inc., 2011 WL 1542298 (4th Cir.)

The court of appeals reversed and remanded a grant of summary judgment in favor of Persaud on Persaud’s fraudulent inducement and false advertising claims.

Persaud signed a $3.5 million subcontract for work on a Texas border fence, which required Persaud to post payment and performance bonds. Its bond brokers recommended that the company obtain bonds from Edmund Scarborough, an individual surety, and his risk management company, IBCS Group. During negotiations, Persaud's brokers suggested that Persaud have the general contractor pre-qualify the bonds, ensuring that the bonds would be accepted. Persaud's brokers also asked IBCS how it would respond if the general contractor rejected the bonds. IBCS referred them to its brochure about Scarborough's bonds, which said, “We intend to pre-qualify all bonding requests to minimize the possibility of bond rejection. However, we will reverse a transaction if a bond is promptly rejected.”

Persaud’s agreement with Scarborough stated that the full initial fee was earned on execution of the bond and wouldn’t be refunded, waived, or cancelled for any reason. The agreement also stated that it couldn’t be modified orally.

The general contractor rejected the bonds, concerned over Scarborough’s assets, but waived the bond requirement for Persaud (with apparently some penalty for Persaud). Persaud timely requested a refund, and IBCS refused, relying on the agreement. “Scarborough later indicated that, although he had granted more than twenty refunds in the past, he did not grant Persaud a refund because (1) he was led to believe the bonds would be accepted; (2) Persaud retained the subcontract; and (3) Persaud did not have to purchase replacement bonds.”

Persaud sued. The district court dismissed its breach of contract and fraud claims, but found in favor of Persaud on fraudulent inducement and false advertising, awarding damages of $121,557, the total amount of the bond premium.

A false representation of a material fact that induces a contract, on which a purchaser has a right to rely, is ground for recission. The plaintiff must prove by clear and convincing evidence: (1) a false representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reliance by the party misled, and (6) resulting damage to the party misled. However, because Persaud had access to the agreement prior to signing it, and thus could read the refund provisions, the marketing brochure’s refund promise couldn’t have reasonably induced Persaud into signing. “Given the unequivocal contract language, Persaud's reliance on the statements in the brochure was unreasonable.” When both parties have equal access to the truth, if one relies on the other who has an interest in misleading it, the law will not help.

Even though Scarborough had given more than twenty refunds over the past several years, he was legally free to enforce or waive the contractual provision. The district court was ordered to enter summary judgment for IBCS on this claim on remand.

Virginia law also bars false advertising: "any promise, assertion, representation or statement of fact which is untrue, deceptive or misleading" if the advertisement is made with the "intent to sell" or "to induce the public" to enter into an obligation. Unlike fraud, a false advertising claim can target a statement as to future events or other promise. A plaintiff must suffer loss in order to recover damages. The district court found that the brochure was an ad and was misleading, but didn’t find that Persaud had suffered loss. The court of appeals agreed that the brochure was, at a minimum, a misleading or deceptive ad, but remanded for an assessment of whether the ad caused actual injury.

Wednesday, April 27, 2011

5 hours of energy, 5 years of lawsuit

Innovation Ventures, LLC v. N2G Distributing, Inc., --- F. Supp. 2d ----, 2011 WL 900054 (E.D. Mich.)

Another round in the energy shot wars. Innovation makes 5-Hour ENERGY, a drink that purportedly reduces fatigue. N2G created the “6 Hour ENERGY Shot,” using a red-yellow-black color scheme with a silhouetted figure climbing a mountain range, strikingly similar to Innovation’s packaging, and N2G used a caution statement that was exactly the same as Innovation’s.

Innovation sued for trademark and trade dress infringement, copyright infringement, false advertising, and counterfeiting. In 2008, the court granted a preliminary injunction based on the trade dress. After that, Innovation ran ads and sent letters to more than 100,000 truck stops and convenience stores referring to a “6 Hour Energy product” rather than identifying N2G by name and informed store owners that they “could be subject to liability” under federal law for selling “this product.” Each letter contained a copy of the complaint, which had a black-and-white photocopied picture of N2G’s product on page 6. N2G counterclaimed for tortious interference, violation of state consumer protection law, and various trademark challenges.

The PTO refused registration to 5-Hour Energy on mere descriptiveness grounds; it’s now on the Supplemental Register.

Innovation wisely conceded that its mark lacked inherent distinctiveness (puzzlingly, the court dropped a footnote that “energy” might be suggestive; registration on the Supplemental Register is generally understood as a concession of descriptiveness), but argued secondary meaning, emphasizing the presence of consumer surveys and proof of intentional copying. Its first survey of consumers of 2-ounce energy drinks led its expert to conclude that 77% of respondents called 5-Hour Energy a brand name, while only 16% thought it was a common name, better than the comparison brands. Another survey, not limited to energy drink consumers, found 39-52% brand recognition. And a final survey of prospective purchasers of energy shots found 64% association of 5-Hour Energy with a single company.

As for intentional copying, Innovation relied on the similarities in the product packaging. It also submitted unsolicited consumer emails as evidence of association with a specific source, argued that it had used the mark for more than six years, and noted that it had spent millions on advertising and sold millions of bottles. Various industry articles recognized 5-Hour Energy as an established brand, and N2G didn’t dispute that Innovation “advertises extensively and holds sway over a substantial portion of the energy shot market.”

The surveys took place after the alleged infringement (they were done in late 2008 while the alleged infringement was in March 2008), but the court could take that into account in weighing them. Defendants argued that the product was known as Chaser 5-Hour Energy until recently, but the court pointed out that while “Chaser” was part of the packaging, the words 5-Hour Energy were darker, larger, and more prominent. Defendants’ expert also criticized the three surveys. But even viewing this evidence in a light most favorable to defendants, no reasonable juror could find lack of secondary meaning “when confronted with the deluge of evidence presented by Plaintiff. Most notably, Defendants have not produced any evidence explaining how their product's very similar mark and design were independently derived, without any reference to Plaintiff's product.” (Intentionally copying the trade dress isn’t the same thing as copying a descriptive term, though—another reason to copy a descriptive term is that it’s descriptive.)

The court cautioned that merely descriptive terms couldn’t be appropriated by a single producer. Thus, Innovation didn’t own “5-Hour Energy” exclusively. But it did have a right to be protected against unfair imitation. “Therefore, viewing the marks at issue in conjunction with their trade dress, the evidence of intentional copying is so clear in this particular case that Plaintiff's mark should be afforded secondary meaning.”

Innovation also won summary judgment on its copyright claim, because N2G simply copied the medical cautionary statement verbatim. The court ruled that the statement had the minimum necessary level of originality to be copyrightable. Though N2G’s president testified that he didn’t copy the caution, N2G didn’t explain how it independently came up with an identical caution statement. Intentional copying was the only explanation, and it couldn’t be rebutted by the president’s unsupported, self-serving testimony. N2G argued mootness because the packaging and cautionary statements had been changed. But there’s still the initial infringement; though Innovation lacked a timely preinfringement registration and thus couldn’t get statutory damages or attorneys’ fees, other damages were available. (What’s the market value of the expression in the caution statement? I imagine it’s low.) Summary judgment for Innovation.

The court refused to dismiss N2G’s counterclaims. For tortious interference, Innovation argued that there was no evidence that it knew of N2G’s contracts, business relationships, or expectancies, and that N2G failed to produce any evidence of causation or damages. N2G’s president stated at his deposition that, as a result of Innovation’s mailing, customers wanted to return products or decline to buy products that had nothing to do with the lawsuit. He testified about difficulties with one specific potential distributor, Ravi. N2G also produced an email from Innovation to 7-Eleven, a potential distributor, claiming that N2G’s product was “making people sick.”

Innovation argues that N2G still didn’t show any contractual relationship or expectancy with any recipient of its mailing. “But the purpose of Plaintiff's communications was to inform the recipient of the preliminary injunction issued by this Court regarding Defendants' products. Given the purpose behind Plaintiff's communications, logic dictates that Plaintiff only sent the letter to businesses that it expected to have a contractual relationship or potential contractual relationship with Defendants.”

Innovation also argued that there was no unjust interference because it truthfully disclosed the existence of the preliminary injunction (and put a picture of the product at issue in the complaint). That doesn’t cover the 7-Eleven email, but also there’s a question of fact on misleadingness: “after all, the Court's preliminary injunction was based solely on trade dress and the cautionary phrase.” This created a question of fact. (The court later notes that courts have divided on the question of whether the mailing was misleading; viewing the evidence in the light most favorable to N2G, a reasonable juror could find misleadingness.)

Michigan Consumer Protection Act: N2G argued that this same conduct violated the MCPA because it contained false or misleading representations of fact. Innovation argued that the alleged wrongful conduct wasn’t directed at consumers. The law covers “the conduct of a business providing goods, property, or service primarily for personal, family, or household purposes,” and the court concluded that Innovation is in the business of providing goods for personal, family, or household purposes, and thus its conduct fell within the MCPA. Moreover, MCPA claims by competitors are permitted, since the intent of protecting consumers is served by suits by nonconsumers with a significant stake in the issues.

The court also refused to throw out N2G’s counterclaim for a declaratory judgment of noninfringement, because Innovation’s claim for trade dress infringement was vague, attacking N2G’s “mountain sunrise design and color scheme.” The declaratory judgment would help determine the scope of Innovation’s claims.

Practice tip: don't copy your competitor's product shots

Flowserve Corp. v. Hallmark Pump Co., 2011 WL 1527951 (S.D. Tex.)

An introductory note: kudos to the district court for showing us exactly what is going on in this case. It’s not quite the delicious irony of appending Action Comics #1 in its entirety to an opinion about owning Action Comics #1, but the pictures are extremely convincing even to a skeptic like me.

Another note: Hallmark was pro se, which means that some available arguments didn’t get made.

Flowserve makes industrial pumps, valves, and related products, and Hallmark distributes com-peting pumps. Flowserve alleged that Hallmark copied three images from Flowserve’s website for its own. Images 1 and 3 were registered, and Image 2 was allegedly “substantially similar” to images in a brochure whose registration status is not clear from the opinion; Flowserve pressed only claims relating to 1 and 3.

The brochure was online for nearly 2 months before Flowserve sent a C&D, and remained so until the time of decision, though the Hallmark removed the link to the brochure from the rest of the website after it was sued, and it’s now removed the brochure entirely.

Flowserve sued for copyright infringement and false advertising.

The court first noted that summary judgment in favor of a copyright plaintiff is possible when no reasonable juror could avoid finding copying and substantial similarity. Given the striking similarity here, the court had no doubt that Hallmark had copied the images, and there was also proof of access through Flowserve’s website and ad materials such as catalogs (the court also mentioned the registrations, though that’s pretty silly). There was also substantial similarity—the Image 1s were identical, and the Image 3s were identical except for a change from red to blue highlighting, while the yellow and light blue highlighting remained the same. Thus, without disrupting the general rule that summary judgment on substantial similarity is disfavored, it was appropriate here.

Infringement was also willful, which requires a defendant to know its actions constitute infringement or act in reckless disregard/willful blindness to a copyright owner’s rights. Ignoring a C&D can be willful, and was here given Hallmark’s failure to submit evidence that it was unaware of the infringement.

False advertising: In most situations, using a photo of the plaintiff’s product to advertise the defendant’s violates §43(a). (This isn’t an absolute rule: if the products really are the same, or at least indistinguishable at the level of detail shown in the photo, there may be no false advertising. Compaq Computer Corp. v. Procom Tech, Inc., 908 F. Supp. 1409, 1426-27 (S.D. Tex. 1995). There’s also some potential relevance to Dastar, again if the products are truly interchangeable. But don’t expect much toleration for this conduct.)

Flowserve argued, and the court agreed, that Hallmark’s photos were literally false representations about the nature and quality of its products. Hallmark submitted no evidence that the photos depicted its own products. Materiality and deception were presumed from literal falsity. The same finding of willfulness as in the copyright claim also followed—ignoring the C&D was, at minimum, reckless disregard. Moreover, Hallmark’s management reviewed the website containing the brochure, and they should have known that the images were not images of its own pumps but rather images of its competitor’s. (I can see rejecting this conclusion if the pumps actually look alike—but Hallmark would have needed to fight on this point.)

Remedies: For the copyright infringement, Flowserve asked for $10,000 per work, which the court agreed was appropriate, especially given that statutory damages could go up to $150,000 per work for willful infringement. $20,000 was reasonable compensation for Flowserve and a sufficient deterrent for Hallmark. (A high price to pay for not taking your own product shots!)

Saying that it was applying eBay to both causes of action, the court also found that a permanent injunction was warranted. (I say “saying” because it’s far from clear that the actual analysis is consistent with eBay, though that’s not a problem unique to this court; indeed, the analysis is taken directly from other post-eBay cases.) So: TM infringement can be irreparable injury when there’s a substantial threat to the plaintiff’s goodwill. Likely confusion can also justify a finding of irreparable injury. (In other words, a finding of irreparable injury is generally going to follow automatically from likely success; compare the eBay concurrences on whether this makes sense.) Also, irreparable harm is presumed from copyright infringement. (Again, query whether eBay is being honored in the breach.)

Thus, Flowserve had suffered irreparable injury. If we really took this requirement seriously, we’d want to ask how many people saw the website; Network Solutions, the website provider, produced discovery in this case, and there might actually be some information available on this point, but the court doesn’t talk about it.

Anyway, monetary damages were inadequate; the damage done to Flowserve’s goodwill and brand name through consumer confusion could not be quantified. (And why are copyright damages inadequate?)

The balance of hardships also favored an injunction, where all that was required was compliance with the Copyright Act and the Lanham Act. And the public interest in copyright protection and compliance with the Lanham Act also favored an injunction.

An attorneys’ fees award was also appropriate under both statutes, under the circumstances: willful and blatant copying of a competitor’s images, literally false use, and refusal to remove the images after a C&D. Absent objection from Hallmark, the court found $75,000 requested by Flowserve to be reasonable, given that Flowserve engaged in discovery, responded to a motion to dismiss or to transfer venue, and prepared a motion for summary judgment.

Monday, April 25, 2011

New article in Penn

Rebecca Tushnet, Running the Gamut from A to B: Federal Trademark and False Advertising Law, 159 U. Penn. L. Rev. 1305 (2011).

The Lanham Act bars trademark infringement and false advertising in nearly identical and often overlapping language.  In some circumstances, courts have interpreted the two provisions in the same way, but in other areas there has been significant doctrinal divergence, often to the detriment of the law.  This Article argues that each branch of the Lanham Act offers important lessons for the other.  Courts should rationalize their treatment of  implied claims, whether of sponsorship or of other facts; they should impose a materiality requirement, such that the only unlawful trademark and false advertising claims are those that actually matter to consumers; and in false advertising cases, they should recognize that competitors have sufficient interests to confer standing when the advertisers’ false statements are doing harm, rather than imposing increasingly elaborate barriers to suit.  The present practice of interpreting the same language in substantially different ways lacks justification and has the effect of promoting the interests of the most powerful companies, whether they are asserting claims of trademark infringement against smaller entities or defending themselves against false advertising claims by competitors.

TM scholars roundtable part 4

Session 3: Analyzing Confusion
Introduction: Laura Heymann

What is confusion? Leads to dissatisfaction, leads to sales diversion, leads consumers to think differently about the TM owner, or what? Then we have the question of why the law should care about those kinds of confusion and not others.

Flexibility: 9th Circuit’s Network Automation case says the factors are flexible and not hoops to jump through or a rote checklist (though Network Automation says district court erred by failing to consider the right ones). Grey market goods = courts often abandon the factors. Is confusion what we’re testing for in those cases anyway? Third Circuit has a 2010 case saying a district court can decide that certain factors are unhelpful, but it has to say explicitly why it’s not using those factors and the court of appeals can reverse if it hasn’t or if it’s weighed the factors inappropriately. Focus on particular examples might help.

Is considering proxies the right thing to do at all? If we’re supposed to focus on likely purchasers, should we do surveys in every case rather than guessing?

Primary Discussants: Barton Beebe

Bone’s work on the historical development of the multifactor test is very helpful. How does it work now? We should drop the quality factor, which has no present function, and intent. An opinion in the 2d Circuit by Judge Leval would be required to reform the factors. Instead, we have a case like the Virgin Wireless case, which says the intent factor isn’t meaningful but we apply it anyway.

Reforming the multifactor test: should be empirical in nature. All sorts of policy goals have wound their way into the test—e.g., encouraging parties to adopt inherently distinctive/fanciful marks, which we promote by theoretically giving more protective to inherently distinctive marks. Ridiculous, since the test is about factfinding. You can adjust the level of confusion required to trigger an injunction in light of these policy goals, but the test itself shouldn’t be distorted this way.

Consumer sophistication is hugely underrated. Should be one of the most important factors, and it’s built into all the others. Case about nuclear reactors: engineers are unlikely to buy the wrong reactor, if they’re not Homer Simpson. Sophistication will be more important online—Network Automation is a case about sophistication, driving the entire opinion—consumers using the internet are familiar with the medium and we can’t assume they’re easily misled.

How does the test work in counterfeiting? Post-sale? Parodic speech? Sometimes IIC comes as a ninth factor; sometimes the court starts with IIC and then goes through the factors; tends to wander all over the place. Reverse confusion: various factors flip around, which is sensible, but the test hasn’t been adapted explicitly enough to fit with these other situations like post-sale confusion or parody.

Big question: do the factors drive the outcome or when the court describes the factors is this symptomatic of the court’s initial decision? Posner’s approach to multifactor tests is to ignore them and write a common law opinion—very impressive; an appellate court judge can get away with this, but not a district court judge, so what should we do for them?

Are certain factors necessary? A multistep test not just a multifactor test? Empirically, the multifactor test does have some multistep elements, and maybe those should be encouraged—a gatekeeping or fast track approach.

Keep in mind some judges come to TM for the first time and have no idea what infringement is about. For us it may be tacit knowledge with codification unnecessary, but for error costs a multifactor test might be helpful even if specialists find it unappealing.

On the other hand, tinkering is limited—do we still have Ralph Sharp Brown’s courage to indict the entire system?

Bob Bone: Why would you have a multifactor test? Courts have largely reified it. You might focus on a test if you really didn’t know what you were trying to do, or you thought you had a broad tort and couldn’t predict all the covered situations. Could have a set of broad policy objectives, but it’s not clear judges would be able to get it right, so we provide factors.

We should take a closer look at the test in light of the normative goals in particular situations. He doesn’t agree with Beebe that the test is empirical. There are normative elements, which got packed in there because we were focused on the test and not on the objectives sought by the test. We are interested in erroneous information about the quality or characteristics of the products or its seller that’s likely enough to cause serious harm for us to intervene. That’s the big picture, but not the only thing we might want to do with TM law. Intent to deceive has a moral force in itself. Without a likelihood of confusion test, the inquiry becomes different. Assemble your goals, then have tests that fit those goals. If intentional deception is a moral wrong, then have a set of rules for dealing with that; need not be likely confusion. May want a materiality requirement to ensure the deception is about something important. Treat those separately from other types of conduct. Brand as personality approach will merit a set of different rules. (In my opinion those should be called “dilution” and kept separate from confusion.) If you’re interested in consumer autonomy you’d have different rules.

We see a judge trying to do right in a particular case, but may be creating defenses that are so difficult to win that they chill legitimate activity.

IIC: can understand why legal intervention might be desired in some cases. But the game isn’t worth the candle; if it is, it ought to be broken out and done separately from likely confusion. Don’t change the factors. Approach it separately. If we come up with other factors, ok.

Post-sale confusion: There may be some reasons for post-sale confusion, and there may be cases in which the goal of the law will be triggered. Again: is the game worth the candle? He’s not sure of the answer, but doubts it will be that serious. Leaves the prestige goods/Veblen goods argument. Again, treat it separately and break it off. (I would say again: dilution if you want it.)

Reverse confusion: he’s never understood it. Of course you change the factors—this is not rocket science.

Gay Toys--licensing/merchandising of toys based on TV shows: District court sees toys as a subsidy for the TV industry, whereas the Second Circuit says that confusion is the key. Second Circuit of course wins, mandating that we assume consumers are thinking about something they might not be thinking about. He’s sympathetic with the district court’s point that if this is about subsidizing the TV industry then that’s what we should focus on. (A copyright type interest.)

He’d keep the intent factor, unlike Beebe, but focus on whether that could lead to reputational harm.

Lemley: Sees a set of moves around uses or nonuses of test that are oddly outcome-determinative. This may be descriptively accurate but normatively troubling. We have bridging the gap factors that don’t seem to reflect how cases are decided, so get rid of it. We have causes of action we want in the law that don’t seem to map to the factors, so get rid of them and have a new test. If this were descriptive that would be fair: courts are not really applying the multifactor test. Should we give up on a test that could have normative and not descriptive content? If the p’s theory of confusion makes nonsense out of factors like bridging the gap/consumer confusion, or if IIC can’t logically fit into the multifactor test because it doesn’t survive 5 or 6 factors, maybe that’s an indication that the cause of action is the problem because there were reasons the factors got in the test in the first place. We care about consumer sophistication for good reasons, and ignoring them suggests the results are suspect.

Brown’s 1948 article on TMs and advertising was something he wrote in his first years and may be the work of a junior scholar trying to take down the whole edifice.

Litman: talking about how to read the factors and picking off low-hanging fruit may actually prove influential. One of the advantages of the test in the 1980s was that courts felt they didn’t understand the markets in which these disputes arose, and the test made results seem tailored to the markets. Judges may not need the same help today. But genuine empiricism is expensive. She tells students that if they see a case in which every Polaroid factor points in the same direction, the judge is cheating, and if we could convince courts that was true we’d pick off some of the low-hanging fruit. Conviction in result may decrease care in analysis.

RT: One thing I can think of is that we could, as in false advertising, divide infringement into two types: double identity (explicit falsity) and different mark/different goods, which would ordinarily require extrinsic evidence of confusion. I’d rather see greater flexibility in false advertising, but defetishizing the multifactor test at the same time would be a good idea.

With respect to Beebe’s point about how well the system works for an unfamiliar judge: University of Alabama Board of Trustees v. New Life Art Inc., now on appeal, is an interesting case in this regard. The problem there wasn’t the test, it was the defenses. Good faith flailing resulted.

McKenna: We haven’t yet agreed what kind of confusion should be actionable, which is a prerequisite for a test. The multifactor test is designed for source confusion of noncompeting goods, and now we have 50 years of courts saying “confusion of any kind is actionable.” Those two things don’t fit but courts have been applying the test anyway. Maybe shunting different types of activity off into separate areas has the virtue of shunting each test into what it’s supposed to be doing.

Quality and intent: Will either make the defendant lose or irrelevant. Quality: if poor, favors plaintiff; if good, irrelevant because the plaintiff has the right to control the quality. We should just take it out of the test if it can’t genuinely tip in either direction.

Double identity: post-sale confusion is a double identity situation. But we might not think there’s confusion there—might not be a good proxy. Maybe that’s the way to slice it up presumptively, but not always. [I think the benefits might be worth the costs; I do think some kinds of post-sale confusion are actionable, and honestly I might be willing to throw copiers of Veblen goods under the bus to help other people using TMs in different ways.]

Goldman: the vast majority of the cases he reads get to the right result in his opinion, though he’s no fan of the multifactor test. Goes to the question of errors. Maybe the errors are acceptable. It’s the cases we aren’t seeing that are the problem. Can we expedite/improve cases in which the factors/uncertainty about them are leading to problems? TM bullying/threats cause of action, discussed last year.

Burrell: TM owners often claim multiple kinds of confusion: sale, post-sale, IIC—most plaintiffs would respond by trying to bring themselves under every head at once, so splitting might not be that helpful.

Grynberg: what’s the role of the multifactor test in catching errors? Would it be harder to catch errors without the structured test? The role of the test in creating transparency for a reviewing court. Rogers test: throws multifactor test out the window and courts look at whether anything was done to mislead. Sense that courts generally get those right; once courts see the defendant’s interests they are better at weighing both sides’ interests, and also perhaps courts are okay at assessing confusion without guidance from the factors. Potential tradeoff then between accuracy and transparency, incommensurables that are hard to weigh.

Dinwoodie: Bone thinks normative work can be done in the factors, but Dinwoodie would like to do the empirical work and then isolate those normative values, because courts face up to the tradeoff more honestly when the values are isolated. When submerged within confusion, there’s a pro plaintiff bias—don’t think about competition or expression. Rogers context hits them in the face.

Bone: doesn’t disagree that it’s useful to separate those things, but thinks that whatever the test we have will end up with normative components.

McGeveran: last year we talked defenses, and kept saying that the problem was confusion. Now we’re talking about how the multifactor test is getting freighted with other considerations and how we want those separated—defenses. That would suggest that more robust defenses could help if confusion wasn’t the end of the story for liability. Or it could mean we need better structuring of liability to deal with these multiple considerations.

Dinwoodie: normative work can be unrelated to defenses: whether you want to incentivize the creation of inherently distinctive marks, for example.

Dogan: Worries about errors—both normative and factor-driven. Also worry about predictability. When advising clients, the fact that we have different outcomes with respect to very same/similar marks ought to trouble us. One of the problems is lack of predictability even absent systematic errors. That can skew the law on its own.

McKenna: attracted by the idea that likely confusion should be separated from “how much confusion is required?” That would allow you to trade off expected harm against the benefits of the activity. But we’ve never had much sense of the quantum of confusion required more than zero. Steinway involved very low level of confusion and IIC, which taken together produces virtually zero harm—that’s too far. Could we agree on quantitative levels of confusion that mattered?

Janis: dissatisfaction with confusion: is that really dissatisfaction with confusion as a concept or is it that courts set the bar too low?

McKenna: where we have greater doubts about harm from confusion, we’d want more evidence of the quantum of confusion.

Leaffer: Noncompeting goods cases—level of confusion is too low. Something about the multifactor test isn’t working.

Lemley: quantum of confusion point is important. Not an obvious reason it centers around 10-15%. One story: if I assume everyone confused is making a mistaken purchasing decision, then a 10-15% loss could be quite significant. Leads the way to ask: how many of those confused consumers convert to purchasing decisions? This will differ between straight-up confusion and IIC or post-sale confusion. Maybe you need 80-90% confusion before post-sale confusion leads to significant change in sales. Injury and confusion on the other side should also be considered. Genericide: we worry about harm on both sides; we should consider more generally how many people are benefited by a use.

Dinwoodie: On distinctiveness/protectability, Grupo Gigante: our prescriptive commitment to territoriality leads us to require more in the way of secondary meaning before protecting a foreign mark. Could do the same thing more generally. Same in Wal-Mart where we ask more in certain contexts than in others before protecting a mark—that dynamic could be replicated on the confusion side of the ledger.

Beebe: on quantum: how does it relate to the idea of materiality? Are we asking essentially the same question, about impact on sales? More generally, does this shift to cost-benefit analysis and multipliers (likelihood x amount of harm) leave behind the nonconsequentialist reasons for granting injunctions and would economists dominate these inquiries? Note that people encountering the field for the first time think that 50% confusion sounds about right, perhaps because of the people not confused—have we defined deviancy down?

Strength is a normative consideration—students always point out that Coca-Cola is so strong that they notice deviations. The orthodoxy weighs strength in plaintiffs’ favor as a normative matter.

Heymann: the test doesn’t address quantum except insofar as we submit a survey. The factors aren’t sensitive to survey evidence. If we care about quantum, surveys should be required. How would you use other factors to assess the quantum, other than by the court eyeballing it? Specialized market might make a difference. (We do see courts saying “this factor weakly favors the plaintiff” and similar things.)

Negligence in tort: reasonability is the general question, and we use certain tools to address that question. We can do cost benefit analysis, and negligence per se where we presume the act is wrongful—possible analogies/models for holistic question that is not a multifactor test but does group classes of cases.

RT: quantum: like Heymann, I ask, how often are there surveys? I thought Beebe’s work showed they were relatively uncommon.  Not as if there was one in Network Automation, for example. Would first have to strengthen the requirement of a survey in the average case or in some set of cases for this intervention to be helpful: could do that by, again, presuming against plaintiff in a noncompeting goods case where the plaintiff doesn’t submit a survey. We do that with delay or with a really rich plaintiff and should do it more.

McKenna: could require “overwhelming” evidence of confusion in IIC. Standards could make clearer that a lot of evidence is required in some cases.

Another explanation for courts responding to low levels is that courts are concerned that low levels of confusion will get worse over time. Good empirical evidence that consumers adapt and that confusion will lessen over time, except perhaps for counterfeits, so we should be talking about that too.

McGeveran: quantum shifts more from measuring confusion on its own to measuring confusion with harm. Note that defendant will need an expert to fight the survey, so that is likely to increase the cost and complexity of litigation generally, which makes him nervous.

Bone: quantum is important but maybe not quite right. He wants to focus on the probability of inaccurate information. We should be willing to say there’s a lot of confusion but it’s not confusion that matters.

Bently: in Germany, surveys are seen to be cheap and often required by the court. UK experience: don’t like the idea of making the whole thing more empirical; don’t worry so much about getting it wrong and think more about doing it quick and cheap. Confusion might lead to satisfaction: a schnapps drink called Vodkat—people liked it even if they’d initially thought it was a bottle of vodka because it was cheaper and had half the alcohol. Post-sale satisfaction should be weighed against post-sale confusion. (He’s kind of joking.) Take more account of attempts to reduce confusion such as disclaimers and alternate packaging—tendency in Europe to look only at the registered mark and ignore the other signals consumers are getting. Moving away from the empirical, and accepting pro-plaintiff norms like intent, then should also accept pro-defendant norms such as weighing favorably a bona fide attempt to distinguish.

Dogan: systemic costs to TM system that we shouldn’t lose sight of if people can’t rely on TMs. Flexibility on quantum is appealing to the extent we think of it as a spectrum with an eye towards harm rather than a specific percentage—goes to cost benefit analysis. (I’m really surprised nobody’s mentioned KP Permanent, which outright says you need more confusion to find against a defendant in a descriptive fair use case.)

More protection for stronger marks: goes to the question of whether the defendant needs access to plaintiff’s mark. Less about TM’s affirmative goals but more about the court being suspicious of defendant’s justification.

Mid-point summary: Robert Burrell

Are we prepared to make the tough decisions we were talking about yesterday? If not, maybe confusion is malleable enough to get results even without agreement on the basics, by for example requiring 90% confusion for IIC.

Skepticism about surveys: common-law courts in UK, Australia, and even here generally hate surveys, don’t they? If we’re trying to do something to get courts’ attention, telling them they need more surveys will be difficult. Also, courts hate surveys for good reasons: they ask leading questions, use problematic methodologies. Can we find a survey we’re comfortable with?

How, if at all, should the confusion analysis be modified for registered marks? Coming from a registration system, that’s always his first question. Confusion is often used as a limiting doctrine to rein in registered TM rights. In a registration system, you have an abstraction on one side—not concerned with plaintiff’s actual use, but what’s on the register. A market-based test like likely confusion fits poorly when p’s rights are based on an abstraction. Historically, Anglo-Australian TM law features courts using confusion based analysis either through deceptive similarity or TM use, in order to set defendants free who’d otherwise be caught. Modifies the harshness of rules of strict liability. ECJ is at least contemplating the idea of modifying double identity to aim more at the things TM is really concerned about. That leaves him something of a fan of confusion.

Grynberg: Unwillingness to jettison doctrines—IIC makes sense in some circumstances; among the problems with Brookfield was that the billboard metaphor was completely inappropriate. So we should bite the bullet and say sometimes we don’t redress harms because the costs of stopping them outweigh the benefits. Point of sale confusion can deal with most of the situations we care about.

How do we make it harder for plaintiffs in nontraditional cases? Requiring more surveys just increases the costs of bringing the claim and thus deters the bringing of it. But dilution developments show that this doesn’t work—in Visa in the 9th Circuit and “The Other White Meat” TTAB case, there was survey evidence. And the court said “never mind,” because courts like factors and won’t let them go.

Burrell talks about mitigating the harshness of strict liability, but the problem with more adventuresome TM claims is that we lack an initial reason for the harshness. Focusing on confusion is not a limit without focusing courts more on the thing that precedes the confusion (the harm).

Lemley: playing with quantum of confusion and with factors is great, but keep in mind Beebe’s conclusion: two explanatory factors are similarity of marks and defendant’s intent. Can’t prove causation here, but if those really matter, other factors and surveys won’t matter a lot. The manipulable factors: judge’s assessment of defendant’s intent, particularly pernicious; stands in the way of other reforms if judges have carte blanche to figure out whether the d’s a bad guy. Not sure how to minimize that factor, though would like to eliminate it. If we affirmatively said it wasn’t a factor, we’d at least make it more difficult for judges to use it sub rosa.

Litman: With literal falsity and implicit falsity, because surveys are expensive, we find cases where statements are found literally false because that lets the judge enjoin them without surveys. DMCA cases: all controls are access controls rather than rights controls because those cases are easier to win. So we may create categories but we can’t control their use. Better: persuade courts that knowledge of a mark is not probative of intent to deceive. Should be looking for affirmative evidence of intent to deceive. Presumptions of intent from knowledge are awful: if you knew Gallo was a wine, then importing your wine under the name you’ve always used for your wine is deceptive intent—courts will find against bad guys, but it’s useful to fight for an understanding that will persuade courts that not all these people are bad guys and/or that the bad guys here are standing in for good guys in the same circumstances.

McKenna: it feels like a concession to give up and say courts don’t care about doctrine, though it has a lot of explanatory force. Cling to the hope we can affect their behavior? A lot of our discussion is about our confidence that courts just do what they want. Common law does grow up around standards. For example, in practice, 15% confusion is a green light to file your case, and if you don’t have that, you get another survey. That has an effect on the cases that are filed, and a common law of 75% would have a different effect.

RT: Dastar and Wal-Mart have made big differences in outcomes and any reasonable lawyer would advise clients accordingly. We need a Supreme Court opinion that tells lower courts to think differently about competition more broadly. I think materiality could help, actually, by changing the guideposts courts use in the same way as these cases did: a clearly intelligible concept that can focus courts on cost/benefits.

Bone: breaking out moral reasons can help. Steinway and bait and switch cases strike us as particularly morally reprehensible—that may or may not be right, but bootstrapping it into confusion is the source of the mistake. It has consequences for elasticity of confusion in general, but it’s moral judgment that really drives us. Same with intent. We’re talking past one another until we deal with bad intent.

Bently: the tort of deceit was the genesis of passing off; then equity decided that intent was not required where there was likely confusion. Those two instincts have been there from the start, and history provides perhaps a reason to keep intent around.

McKenna: suggests that injunctions could be more regularly limited to making any falsity true (I’ll be my broken record: courts are really concerned about limiting their injunctions in that way in false advertising cases!) Tabari says that in nominative fair use cases the district court can only enjoin in a limited way unless it’s impossible to do less.

McGeveran: a really specific injunction is time-intensive at the front end. This is a problem for the overburdened nonexpert judge.

Thanks so much to our host, Mark Janis/University of Indiana.  As always, a great time!

Sunday, April 24, 2011

Nominative fair use or initial interest confusion?

Interesting ad from the Electronic Payments Coalition (note the referrer mentions "Home Depot campaign," which could be a problem in some circuits, for all Eric Goldman's justified grumbling).  Given the colors and the hardware shown, is this "no more than necessary"?  Even if so, isn't it obviously legit anyway?

Saturday, April 23, 2011

TM scholars roundtable part 3

Session 2: Confusion Analysis Considered Prescriptively
Introduction: Eric Goldman

Figuring out what’s in consumers’ minds is an enterprise that will never give a clean answer. Multifactor test is a weird mix of consumer- and producer-side factors, all put together. Entire test fails because it assumes one model of search. Network Automation case from 9th Circuit took the standard factors and said they were really about something else—slicing and dicing the test, showing how the factors don’t cohere very well with each other. Seeing therefore a proliferation of bypasses—we don’t need to use the multifactor test: initial interest confusion, post-sale confusion, some of the sponsorship confusion cases. And yet we come back to the likely confusion test. IIC is almost never cited any more and it’s almost never dispositive—empirically a red herring (similar conclusion to Barton Beebe’s w/r/t dilution).

If this group can’t agree on a better test, then there is no hope.

Primary Discussants: Bill McGeveran

Alternate history. What if we had listened to Schecter in the first place and created a dilution remedy early? Maybe liability more tied to source confusion, with greater attention to the consequences if any of such confusion. Secondary cause of action for reputation and the capacity of the mark to stand out—blurring and tarnishment, hopefully with more limitations. Might have avoided deformation of confusion rationale.

Where does the urge to address nonconsequentialist interests come from? Marketers’ desires, which are very strong in a branded culture/economy. There is an economy built on brand value, and law is unlikely to disregard that fact. Any changes in infringement standard or confusion metric will be manipulated/massaged to accommodate that concern. A hydraulic power of their value as assets, as indicated by congressional discussion of TM law which always emphasizes the value in the economy.

Michael Grynberg
Confusion is the boundary limit of the TM right. Figuring out what the TM right is—property, reputation, etc.—is the key battle, and confusion becomes the weak jurisdiction test. So it’s not surprising that confusion stories can be weak in expansive findings and even in core cases, with a low level of confusion accepted as sufficient. To make confusion a higher bar, we could do a lot of things: materiality, search costs, and so on. The very dynamic that leads to current doctrine will lead courts to want to uphold the TM owner’s right for reasons without relation to the harm argument, which can be seen as denying the presence of nonconsequentialist reasons for TM law. Even if courts do try to balance more, we need to ask whether they do it especially well. Materiality may not do all we hope it can.

Courts might be better at protecting rights. In particular, might be better at protecting rights of purported infringers. Should focus on what’s being asked of courts: curtail the rights of third parties. Need a better vocabulary for talking about accused infringer rights, so that expansions of TM harm third parties in ways Congress didn’t intend to do.

Lemley: On the thought experiment: we have less of a problem with bloated false advertising law because we shunted many things into TM, so we might have had less of a problem with confusion if we’d had early dilution. But dilution has its own creep—no attorney wants to tell a client “you don’t have the special mark, you just have a mark.” While Schecter narrowly imagined dilution, there’s no reason to think we would have limited the number of marks covered any more than we stayed limited in ideas of confusion.

McGeveran: one possible difference: you wouldn’t have the dishonesty/incoherence of calling the thing you’re targeted “confusion.” If it had been “blurring” or “tarnishment” you’d at least be calling it something real—IIC isn’t confusion in any non-semantic way.

Lemley: yeah, but we’d be here talking about cabining the expansive definition of blurring.

McKenna: it might have been clearer that this is not about consumers, but the interest of mark owners, which might have put people on guard about the expansion of the right. [RT: though Posner would be saying it was consumer-protective anyway.] If the issue is that courts are protecting value, then fighting over the conceptual basis kind of misses the point.

Dogan: confusion test defines the discovery/record litigators want to build, and helps to shape court’s analysis of facts presented. Theoretically we consider harm, but the places where harm ought to be considered have been watered down too much. So we should think about shaping the test in a way more demanding of plaintiffs to articulate what the harm is either in a particular case or more broadly. Materiality is one way; let’s think of others.

Beebe: mission creep happens a lot—clearly nonfamous marks are routinely found famous. Courts are just offended by misappropriation/effect on personality or reputation of brand. TDRA: some courts have said that even if you show association, you still have to show effect on distinctiveness. (Though I think all these were reversed/dissents—V’s Secret dissent, Charbucks district court; Beebe says Nikepal required a showing of effect on distinctiveness, but it didn’t seem to matter.) Shift of goalposts: show me the harm of association. Maybe this is a way to pull away from hydraulic pressure.

Litman: can we persuade courts that there unauthorized uses that don’t threaten value? As a way of persuading them that we should pay attention to harm caused by use instead of finding harm from use.

Dinwoodie: articulating benefits of third party use is the key to the next step.

McGeveran: courts sometimes see the public as sitting only on one side of the confusion analysis. If we saw it as more of an investment by brand holders, courts might be able to see the public on both sides betters.

Heymann: This is tied to TM as source indicator v. TM as marketing concept (TM as a kind of work of authorship). Borrow from copyright fair use: audience’s interest weighs against protecting the value of the work, after we have first disaggregated the two different conceptions of the TM.

McKenna: virtually everything collapses back into confusion; look at the caveat at the end of every defense—as long as it doesn’t cause confusion! That’s the preeminent policy interest. If you were to look at interests, courts look at the equities as between the two parties, but we might want them to do it more categorically—hard to focus on societal interest where defendant looks to be taking value that belongs to plaintiff. Balancing favors plaintiff by making amorphous interest in society in general weigh against apparently specific harm to plaintiff.

Bone: a brand is partly a source identifier in the TM sense, partly a personality, and partly it’s a product. When I buy a brand, I get that brand of the product—mark becomes vehicle for shaping product through advertising, so consumer gets consumption value from choosing that particular brand. Those are three different functions. If it’s part of the product, way of making product dynamic over time, we are (or should be) out of TM’s domain. TM should be focused on source identification, the first of those functions.

Dinwoodie: different set of lenses for expression may make value of defendant’s use more apparent—by dumping everything in the same pot we might lose that; wants to argue for value of bypasses for specific types of defendant uses.

Litman: what is it that we think consumers ought to be confused about? What, in the best of all possible worlds, would we want to measure? McKenna thinks it’s about buying one product instead of another.

McKenna: confusion about actual source or responsibility for quality (fair to presume harm from that), or plaintiff must show that the confusion is material.

Dinwoodie: interesting that McKenna and Lemley allow the possibility that other kinds of confusion can be actionable on specific proof of materiality; why not just exclude it?

Lemley: he’s willing to allow IIC if you can show an effect on purchasing decision at the end of the day that flows from being deceived, but he doesn’t think it could be shown 99% of the time. Messy bits: what do you do about franchising, outsourcing, etc.? The fact that I bought from a franchisee should be important because there’s a representation that the franchisor stands behind the quality of the goods.

Litman: can you rule aftermarket confusion out entirely? I absolutely might decide to buy a guitar from how it looks across a smoky bar.

McKenna: two questions—what quantum of consumers should be required for that. We think it’s very unlikely harm will follow, so you should have to show materiality.

Dinwoodie: suggests you’re still reluctant to impose prescriptive judgments about what should matter to consumers.

Lemley: there’s a plausible story that consumers shouldn’t care about branded v. generic, but that’s not the role TM should play. Most of the time purchase decisions are not going to be affected by sponsorship, but he won’t take it out of the game preemptively.

McKenna: he thinks the law shouldn’t try to regulate sponsorship either by preventing it or by giving TM owners a right to prevent others from suggesting sponsorship when that’s not relevant to purchase decisions. [What about regulating disavowal of sponsorship? E.g., atroturfing.]

Bone: without a good idea of what responsibility for quality means, a consumer might not think A is involved in making B’s product, but they could believe that A is careful about choosing A’s friends and that A isn’t going to choose a bad one.

McKenna: if this is true, then that might justify a finding of infringement. Still should rule out “they had to license this because use requires licensing.”

Goldman: shifting presumptions depending on the kind of use—maybe that’s something we could learn from Europe which formally channels types of uses into different types of analysis.

My reaction: this discussion of whether we want prescriptive rules about what consumers should care about gets to the Wal-Mart v. Samara issue: whether the game is worth the candle, if it’s so unlikely that harm will actually result. Maybe we shouldn’t allow litigants to try to show that they’re the 1 in 100 who are really affected, given the costs of litigation and the risks of error. This is a big part of my forthcoming article in Penn. You don’t need to have a prescriptive account of what consumers should care about to make this practical judgment, though it ends up bearing a strong relation to a prescriptive account, as Scalia’s opinion in Wal-Mart about what consumers ordinarily rely on (not trade dress) does. Also note that puffery is a similar half-prescriptive, half-descriptive account of what claims consumers (should) rely on. We are completely comfortable with that, not least because it suits the goals of producers to be able to make a lot of claims with no accountability.

Lemley: Wal-Mart allows you to prove that you’re the exceptional product configuration deserving of protection if you show secondary meaning. And (in response to questioning) he thinks that you should probably get the chance to prove that “best” means “best” to your consumers—we’ve taken puffery too far.

McGeveran: back to rules and standards.

Lemley: two questions are intertwined: is puffery per se unactionable/what is puffery?

McGeveran: to have a bypass lane for easy cases, you need both a 1 in 100 determination as in Wal-Mart and also an easy way to figure out what gets into that lane. (And I note that Wal-Mart provides a decision rule: if uncertain whether something is product configuration trade dress or packaging, secondary meaning is required.) And the puffery case law may help you sort given precedents over time.

Lemley: antitrust has a history of developing per se rules for common cases, though we’ve gotten rid of many of them over time. Then we create a bunch of rules within the rule of reason to cabin things.

Heymann: if you always get to prove eligibility, then we face problems like surveys showing that consumers don’t perceive a parody; we might not like that result since we might want a blanket rule protecting parodies. What does source mean? Quality control w/r/t a particular product. Pepsi today will be a same as a Pepsi bought tomorrow. Related brand extensions: with Diet Pepsi we might expect certain characteristics to carry over. Licensing: choosing your friends—but do you expect sound judgment to mean anything w/r/t Pepsi choosing a particular T-shirt company to produce its T-shirts? Why would consumers ever believe that Pepsi was good at that?

Beebe: thinks that Mutual of Omaha v. Novak would come out differently today. Courts would look at the relation of insurer to t-shirt maker, the rule that strength can make differentiation easier.

Litman: note that the Michelob Oily case didn’t reject Novak.

McGeveran: but dramatic improvements in other circuits.

Leaffer: need filters—antitrust has something to teach us—for judicial efficiency. A well-designed puffery rule that generalized claims of superiority aren’t actionable is a good idea. Linedrawing arises, but efficiency demands a filter for irrelevant deception/confusion.

Bone: likes puffery. It’s a normative thing—a level of seriousness. Leaves some consumers perhaps harmed, but the law can’t help everybody, and it’s expensive to try. We might want to adjust it but it’s a good idea. It’s all about false positives and false negatives in the end. When the SCt forces you to prove secondary meaning, sometimes you won’t be able to prove it even though your mark is in fact distinctive. We are generating false negatives in order to protect against false positives, and that’s the same thing we do with puffery. We have to face up to that tradeoff. Post-Wal-Mart, some courts have made it pretty hard to prove secondary meaning in such a case. “Just make you prove it” is not necessarily that easy, given the administrative costs.

Mid-point summary: Mark Lemley
Nobody likes to talk about confusion. Sometimes judges adopt dilution results, sometimes they expand the concept of confusion to include any relationship, sometimes they use pseudo-confusion: efforts to gin up a plausible confusion story to cover the nonconfusion based result (IIC, counterfeiting and post-sale confusion). Jeremy Sheff has an interesting new draft talking about the difficulties with post-sale confusion even in the Veblen goods context. Outside the US we just say same mark, same goods; US uses the fig leaf of confusion. We’re doing something other than protecting against confusion.

Why? Free riding. Unfair competition is an ultimately empty concept—whether it’s unfair is precisely the conclusion that we are trying to understand. We can’t and don’t want to prohibit free riding, except when we do. Why is this particular form of free riding bad? The theories underlying this are effectively copyright stories: a derivative works right to control the mark in an unrelated field: it’s my mark and protecting the right will give me some financial benefit. Without the underlying justification copyright offers, and without the limitations built in by copyright.

Nonconsequentialist possibilities, per Bob Bone. Lying is immoral. Right of publicity broadened from privacy by drawing on TM; now TM is returning the favor by claiming brands have the right to control persona. But why give such a right? Right of publicity lacks good answer, and claim for corporate personality is further removed from constitutive personhood justifications that people like Peggy Radin might give.

Dinwoodie: what would the anticounterfeiting justification be?

Lemley: when consumers might end up with a functionally different product that hurts them. Harder case: communicative counterfeiting, where the only thing imitated is the communication of the existence of the brand itself. At the end of the day the instinct is not a brand instinct at all but some copyright/design patent concept. When fashion people talk about counterfeiting, they talk about batteries and drugs, because that’s a harm story it’s easy to endorse. Veblen harm is harm society might not care much about.

Bone: we don’t always ban intentional lying, but that doesn’t mean the moral principle lacks weight. There are pragmatic reasons we might keep the norm out of law. Sometimes courts may worry about the landscape becoming confusing rather than the consumers becoming confused. People using the same mark on different goods or in different ways—world looks more complicated; natural reaction might be “there’s got to be costs from this!” without necessarily asking “who’s being confused?” Unless court sees good reason to tolerate this confusion, it won’t. First Amendment concerns etc. put some pressure on this, but slowly.

Bently: a registration-based system has similar concerns—first UK registration act didn’t want new word marks (only old word marks with secondary meaning) because the idea that image marks would be clearer. Modern registration system retains something of that with a broader likely confusion test for registration—if you’re thinking about putting something new on the market, why not make them stay further away than perhaps necessary?

Janis: Ferrari case, called post-sale confusion and holding that post-sale confusion extended past potential consumers to the general public—sounds like Bone’s idea.

McKenna: baseline question: do you go in looking for a reason to allow the defendant to do what it’s doing or to prevent it. Functionality: competitive need operates from the presumption that the defendant shouldn’t get to act, which is a very different baseline than a general free market. If we really want order in the marketplace, then we should do away with product categories altogether. One American and no more. Also, order in the marketplace is inconsistent with expanding the types of things we allow to be TMs—8 to 10 layers of protection on some goods. That’s a lot more clutter. On lying: can’t think of a single freestanding regulation of lying. Even fraud requires materiality. It would be weird for this to be the place to decide that lying generally, independent of consequence, is harmful, when the claim most directly about lying is fraud.

RT: there’s a recent set of 9th Circuit concurrences and dissents to the vote to reject en banc review about whether the government can ban lying in itself. The panel invalidated the Stolen Valor Act, but there the government explicitly disavowed a connection to harm, and there will always be harm stories to tell in TM. And it’s a function of post-Lochner lawmaking that the legislature can make probabalistic determinations about likely harm and enforce them. Even in commercial speech contexts.

Litman: in a good person v. bad person litigation, bad person wins, and the worst bad person is a liar; the bad person who lies to judges is going to lose no matter what. Whether or not it’s TM’s business to say whether lying is bad, as a predictive matter judges are likely to slap perceived liars down. If we want to protect people from the distortion caused when the perceived liar loses, it’s not good enough to say that the government can’t prohibit naked lying because real judges will be influenced by perceived honesty.

Bone: materiality doesn’t mean there’s no nonconsequentialist anti-lying norm; there can be pragmatic constraints on enforcement. Materiality aids inferring intent.

Burrell: Courts never seem to inform themselves about how many traders are actually using the mark along with the claimant—TIDE is held to be unique when actually dozens are using it.

Lemley: there is something driving the cases, and maybe we have false consciousness about free riding. But there’s plenty of coexistence/clutter 75 years ago. The difference was marks were used for narrower, more geographically limited things, so interaction may have been less, and as McKenna points out we use multiple brands now on one thing. But we seem to operate today with an underlying assumption that names ought to be exclusive, which has to be ahistorical. Domain names, one and only one; that may be driving the idea of uniqueness as a requirement or at least the desirable standard to which we are aspiring. (Maybe we’re reasoning from government IDs; we expect that everyone/every company can be uniquely tracked.)

Beebe: When it comes to goods that convey relative value, Veblen goods, judges do think that everyone has a place and every person should know it, implicit and sometimes all-but-explicit enforcement of social hierarchy. Second nature to judges, there’s something unseemly about this kind of conduct. Noise as an aesthetic issue—a problem of modernity, too many stimuli. Judges might be saying: Self-blurring is one thing, but the conduct of all these riff-raff is too far. Uniqueness of names: it’s quite striking that historically there wasn’t much effort to be unique—New London, New York. It was not until mass production arrived and people are consuming the same things that we start reaching out for intangible and incredibly unpersuasive forms of uniqueness. There are millions of millions of copies of Coca-Cola but somehow we maintain that Coca-Cola is “unique.”

McGeveran: we don’t have to pick just one explanation. Ralph Brown wrote at a time when the brand’s power was not yet dominant and it was possible to be skeptical of the value of the trademark. Judges have now deeply internalized how companies think of the brand as the key asset detached from what the companies actually do. Value doesn’t tell you to whom the value should be assigned normatively, but that’s what’s going on.

Janis: rhetoric of noise/clutter is explicitly articulated by commentators in favor of expansive dilution by blurring cause of action.

Heymann: name as creative output for kids; parallels a sense of property right in the name. Also a greater opportunity to create names than before, rather than choosing a geographic name as would be historically common. Same with personal names; we are used to choosing a screen name and creating ourselves. [Greater social anxiety may be driving some of this—with so much economic insecurity, any advantage whether justified or not needs to be run with, and if you think a name promotes success then you feel positionally disadvantaged if your sister gives her baby the same name.]

McKenna: not obvious that forcing people to use really different names reduces noise. Might be harder to figure out what’s what. We’re trying to explain why someone who looks like a copyist should get off—this is why abandonment has died, because copyists look like they’re trying to get off on a technicality. How politically salient is the idea of a problematic government intervention into the market because consumers can’t take care of themselves?

Dogan: a big problem is the absence of judicial sympathy for interests on the other side. When there’s an articulable interest like parody or nominative fair use, then courts listen. They don’t always get it right, but they can hear the argument. Sponsorship/affiliation, courts don’t see an interest in access to the mark and are willing to act against any misinformation that might occur. [My reaction: This is where the false advertising analogy might be able to help: general commercial freedom to promote one’s own goods and services as the countervailing interest.] How can we change the cases where courts are really getting it wrong?

Leaffer: how many people in this room accept the notion of post-sale confusion as legitimate? A few; why? He believes in a TM property right. Ralph Brown was anti-trademark because he was monopolophobic, a view that is unpopular now because of the Chicago school idea that product discrimination is procompetitive. Post-sale confusion as in Mastercrafters undermines the strong image of the mark, the brand identity.

Grynberg: We are speaking as if, in practice, judges don’t see the burden of proof as being on the TM holder—think there needs to be a good reason to withhold relief. Why do judges think that they have the openness to evolve the law? Do the judges even think they’re expanding the law? Judicial proclamations that they’re doing just that are rare, though you see it in Boston Hockey.

Litman: She doesn’t believe that post-sale confusion is sensible sometimes because of a property right as Leaffer does, but because product distribution chains are really complicated and products may be seeded into the hands of people who will use it. So the moment of sale isn’t always as clear as it can be, and in those unusual cases confusion that happens after the point of sale can affect future consumers’ decision to purchase or knowledge of what it is they’re purchasing.

McKenna: when companies give handbags to celebrities?

Litman: yes, and when someone takes a fake LV bag to school and the catch breaks. People engage in all sorts of complicated marketing schemes and confusion may result outside the chain of sale. People think it’s X and it’s Y and they decide they won’t (or will) buy X.

Dogan: sports teams are given cleats to wear; if you see IU’s team wearing Adidas, maybe you want to buy Adidas, but there’s a slippery slope.

McGeveran: what about the Veblen goods exclusivity issue, when now any prole can get one?

Litman: not a fan of that argument, but as it gets harder to distinguish marketing from placement, you can’t assume the sales transaction is the only one that matters.

McGeveran: once you’ve conceded that the broken catch could be actionable, you’re allowing the claim every time because it’s all hypothetical—it’s the risk of the catch breaking that allows courts to impose liability.

Litman: she disagrees. [I’m with McGeveran.]

Burrell: but people who see the broken catch will think, oh, that’s a fake. Even people who see a genuine LV break may well think it’s a counterfeit because LV is high quality.

Litman: also thinks that a bag produced on the same production line without LV’s authorization should not be actionable, because it has the same quality.

Lemley: consistent with his proposal: confusion doesn’t demonstrate harm, but you could show harm in some other way.

McGeveran: okay, but how? Show that the bag is low quality?

Lemley: no, more evidence on purchasing decisions would be required.

McGeveran: so, survey people about how they’d think about a bag with a broken catch?

Lemley: maybe a showing of what people who had this happen thought. Sounds implausible, but to him that’s evidence that the problem is theoretical and unlikely to move the market.

McKenna: empirical work on effects of counterfeits—counterfeits of high-end goods are net beneficial because of the advertising effect, but lower-end they’re more problematic.

Dogan: materiality rule would discount things that happen in the market that might change a consumer’s perception but are very difficult to trace to a termination in a particular consumer decision. An information-focused rule might be able to think of an articulable harm that matters even if it falls short of materiality.

McGeveran: without administrative costs, the inquiry would look very different. He pressed before on the actual harm requirement because regardless of the abstract normative intuitions, it needs to be reduced to doctrine and will then require some assumptions pointing in one direction or another. Demanding proof might be the same as not allowing relief.

Janis: materiality will be hard to prove [I think this is not a rule for all cases!] and judges will want to find it in some cases.

Heymann: it’s also important to give some content to “material.” Is there a temporal requirement or some other proximity requirement? Will it cause them to buy X when they meant to buy Y? What about sponsorship: I think the TM owner has sponsored this, which may change my view and affect my decision later because it changed how I think about the TM owner? Post-sale confusion? Do we think that I have to be within the group of consumers who’s likely to be making a decision in the short or medium term? Inevitable normative aspects to it.

RT: doctrine has a lot of these answers already.

Dinwoodie: still a normative premise that materiality in false advertising is the same we’re worried about in materiality in TM.

RT: true that some of the concerns of post-sale confusion don’t fit in false advertising materiality terms, but I think that those are not proper confusion concerns. They are actionable, if at all, only as dilution. (And of course I think dilution is an unconstitutional regulation of truthful commercial speech, but you don’t have to agree.) (Jeremy Sheff's paper, mentioned above, sorts types of post-sale confusion, some of which could meet the materiality standard if proven likely and others of which couldn’t but might be dilution, if we knew what dilution was.)

Friday, April 22, 2011

TM scholars roundtable part 2

Session 1, Continued

Mid-point summary: Rebecca Tushnet
Might be interesting to go back to KP Permanent as a key moment in revisionist history of TM: as I recall, the position of Lasting Impression relied very heavily on the statutory history with respect to incontestability, explaining why incontestability could have been seen as the equivalent of double identity, thus making likely confusion plausibly and coherently part of the descriptive fair use defense as a defense put in the statute specifically to deal with the new concept of incontestability. Its analysis, while historically rich, came off as all but incomprehensible from the presentist narrative you see in the Supreme Court opinion.

eBay and this discussion: in irreparable harm, the magic happens all over again. What is the difference between goodwill and lost sales? Even courts that demand an eBay analysis in infringement cases think that goodwill losses automatically result from confusion and result in irreparable harm, meaning that injunction is automatic. Need to start questioning that.

Search costs and confusion: search costs may have offsetting benefits. Richard Craswell is excellent at explaining that eliminating costs also eliminates benefits in some cases, and the question is balancing. Failure to recognize benefits—often a failure to recognize pleasure. Courts are aware of information reduction costs—descriptive fair use and nominative fair use exist to protect against lost information. They’re much more uncomfortable with having fun. Charbucks court has no idea what might be enjoyable about consuming Charbucks coffee, and even though the Chewy Vuiton court got the result right it described the effect as parody, but parody is often thought to require a message; what Chewy Vuiton is really about is the value of enjoyment, of play. Without recognizing that we’ll get cost-benefit analysis wrong.

Bently’s question: why are we making it easier on deceptive marks? Because the abandonment of producer rhetoric coincided with the reconfiguring of law to favor producers. Same results obtain in the US, as I’ve argued—only instance in which the PTO doesn’t need to show materiality to refuse registration based on deceptiveness is when the deceptiveness is about source/affiliation. Structural opportunity in US given that false advertising and infringement of unregistered marks are subject to the same statutory provision and nearly identical language—can find justification for materiality and certain kinds of empiricism in existing Lanham Act doctrine.

Stacey Dogan
Search costs can work if we do cost-benefit analysis about competition. To the extent TMs confer information about the social status of the user, we in this room have discomfort with endorsing robust protection for a single owner. We should be cautious about promoting the protection of this kind of information, but we have to confront the reality that consumers derive value from associating themselves with prestige products. Posner & Landes say that if people buy Tylenol because it makes them feel better, that’s not a terrible thing. Need to deal with the questions of reduction/increase in search costs and the overall value and quality of information in markets.

Discussion of harms should take place in context of benefits to potential users of marks or marks similar to TMs. We tend to talk about overexpansion of TM either in the abstract or with respect to certain crazy cases. But it’s worth asking whether, when there’s a potential info harm, there is a plausible, compelling interest on the other side in access to the mark. McGeveran has identified many such interests, and Tushnet also in the value of play. But critique in the abstract plus a few jarring cases can be misleading. Harm to TM owners exists on a spectrum, as does benefit to users, and they need to be married better.

TM appears overinclusive with respect to materiality; but if we accept the role of accurate information in efficient markets, then unfair competition might appear underinclusive. This depends on how we define materiality and the risks of false positives/false negatives.

McKenna: confusion is imperfectly related to the idea of misinformation. Misinformation might be something that’s not objectively false. Most cases involve a bunch of things at the same thing, good and bad information—you can’t just say we want to deal with misinformation. Comparative advertising: raises search costs; might be worth it because the long run effect of competition is worth it, but that means accepting some level of confusion, e.g., in similarity of cereal boxes imitating national brands. Normatively, courts say there’s no confusion, which means there’s no confusion we care about. Costs and benefits can’t be cashed out in search costs, but in ultimate effects. Hard because we tend to include a lot of things in “effect on competition.” Competition on price, quality, product characteristics; but in the modern brand world, competition can also be between brands—from one perspective there’s nothing anticompetitive about saying “compete not on price or quality but by creating your own brand.”

Lemley: Search costs analysis is part of a broader analysis, in the service of a well-functioning market. TM can do that can enforcing rights against people who raise search costs by deceiving, but not always. Search costs per se don’t have much to say about functionality, for example, which is about market competition more directly. (McKenna says it’s a doctrine that means that we have to swallow some search costs.) That’s inconsistent only insofar as we think it means that people have internalized the idea that this useful product can only come from one maker. Likely to be true only in a vanishingly small set of cases. (RT: But there will be a spectrum of consumers.)

Search cost theory often argues for limiting TM. Doesn’t think that comparative advertising causes confusion that has to be tolerated; he thinks comparative advertising on balance reduces search costs. Genericide is the same—people may be confused on both sides—but search costs tell us to look closely at TM claims that interfere with a free market for information. Eric Goldman’s paper on search relevancy is useful here—if people get useful info from internet searches, regulating the way they do searches on TM grounds is problematic.

Dogan: the effect on search costs should be just one consideration in determining whether a use of a mark makes a market function better. Even if you accept that comparative advertising increases search costs, search costs are just one vehicle for competitive markets—it forces the consumer to pause and think about the characteristics of the product, which is good for competition overall (McKenna: in price/quality terms).

Eric Goldman: so much of TM assumes a single model of how consumers behave, and that model doesn’t work for him. Different products entail different search strategies/engagement with choice. Different consumers of the same product have different choice strategies. More semantic ambiguity than we acknowledge. Empiricism: you usually find subcommunities, some with greater confusion than others.

Bone: We need to avoid making the inquiry so complicated that it’s nonfunctional. We need to pitch our solutions at an administrable level of generality. Search costs is the wrong box—we need to sort via costs balanced with benefits, and that requires various kinds of tailoring. Saying it’s just about competition is difficult because lots of things affect competition, and many bodies of law regulate it, including antitrust. How do we fit TM into that vast landscape?

Dogan: certainly TM can’t guarantee competitive markets. But you agree it can facilitate them?

Bone: TM’s role is to protect quality of information offered to marketplace. In some abstract sense, it’s to keep markets competitive, but there’s lots of ways we do that—something special about supplying info through marks to the marketplace, keeping that info from being tainted.

Beebe: search costs v. information costs—what is the distinction between those?

Bone: search costs—what we often mean is not that consumers will search, but that consumers won’t bother and will buy the product and not get the product they want. Maybe we want to measure that harm in other ways. If judges were thinking sensibly about this, it shouldn’t make a difference. But search costs label tends to push us in a direction where we suddenly worry about whether dilution increases search costs. That’s ridiculous; why worry about extra time thinking? Point of TM is not to keep those costs low, but to keep the quality of info TMs are conveying as appropriate as possible (costs and benefits both).

Lemley: What things go into cost and benefit buckets? One of benefits of thinking about TMs in competitive market is not just broader framing, but that when TM in the supposed service of one aspect of competition ends up interfering with the market economy, that has to count in the analysis. This won’t happen if we think just about confusion and ignore, for example, functionality. Cost benefit analysis might have the implication that some of the ways in which we bias the confusion inquiry are wrong. If we think it’s costless, then stopping 7% confusion might be great. If we think there are costs to TM enforcement, then we must weigh confusion against costs of stopping. In genericness cases, we require a substantial majority to see the marks as generic, because it’s obvious that there’s injury on both sides—people who think Kleenex is generic are injured by exclusivity, and people who think it’s a mark are injured by nonexclusivity. This leads to the question of rules v. standards. When do we short-circuit the inquiry in any particular case? He likes standards but recognizes the appropriateness of presumptions sometimes.

McKenna: everyone agrees in evaluating benefits. Shares Bone’s sense that just saying it’s about promoting competitive markets isn’t enough, because it’s not helpful to courts in any particular case. Falls to us to specify at a class level what kinds of things you should take into account. Not sure “quality information” gets much better. Quality info depends on perspective: mark owner thinks any implication of involvement should be stamped out and that’s quality info. In a lot of cases, like Chewy Vuiton, there’s not info in the sense of product characteristics—using the mark for some other purpose.

Dinwoodie: Lemley & Dogan offer a totalizing theory allowing you to balance harms and gains. Problem is more acute—many of the benefits of third party uses are not commensurable in those terms. Competitive market analysis is the same as search costs in this way—it’s attractive for certain things like functionality, but TMs do much more than serve an economic function.

Burrell: difficulties of modeling how TMs really relate to market functioning—how do you model enjoyment? How do we deal with consumer variability? What about rational ignorance?

RT: I think McKenna’s conclusion that Chewy Vuiton doesn’t involve product characteristic information is both a natural reaction to the use of law & economics lingo and wrong—we should identify pleasure as an effect of info if we are very serious about taking preferences as exogenous. But this is a classic problem of the inability of this type of analysis to truly accommodate preferences (especially since they are not exogenous but, very noticeably in Chewy Vuiton and similar cases, shaped by the market).

McKenna: we have a sense that uses that affect meaning are different because we’re used to thinking about price/quality characteristics. But Posner of course thinks that the “value” or quality includes meaning. [RT: And so Posner punts to a property concept which turns effects on meaning—nonexogenous—from benefits to costs.]

Michael Grynberg: question of benefits of an incomplete theory. A good theory of search costs could be used to screen out some problematic uses, and then we’d have leftover uses like Chewy Vuiton. Would the ability to screen out some uses make it easier to generate new defenses, like First Amendment defenses, for the problematic things that were left over? Do we need a theory to handle everything?

Lemley: another way to think about utilitarianism: a functioning market should allow people to do what they want with their preferences. If you want to spend twice as much on Advil as on generic, knock yourself out. But what do we do with Chewy Vuiton? In a market economy, that’s a spillover effect, and we don’t care. Propertization says we have to internalize all externalities to provide incentives, and this has had a lot of traction in copyright and has crept in through free riding to TM, justifying the argument that a preference for a Chewy Vuiton toy comes from Louis Vuitton, that must be an externality to internalize for LV. As a matter of economics, that’s just not right. Spillovers enhance growth/innovation.

McKenna: Chewy Vuiton is not just uncaptured positive spillover, but it also has a potential effect on Louis Vuitton, which can be articulated as harm to the mark owner—changing how people feel about the brand—not just an uncaptured externality but a change to preferences. His argument: construct consumers as capable of managing preferences themselves. Courts should be symmetrical. If consumers can make up their minds for themselves about whether they care about image, then to the extent that all defendant’s conduct does is affect image, it should be left alone by the TM system.

Lemley: but if it distorts purchase of plaintiff’s product then there’s a case for action.

Me: what’s distortion? [Change in preference is change, in the absence of deception about what it is you’re buying, not distortion.]

Goldman: Communities are related to the question of play. How do brand communities exist, and can we recognize them as independent of the brand owner?

Bone: Complex, pluralistic consumer world out there. Makes cost-benefit seem very hard to do. The key word is: is there systematic distortion of the market? He’s attracted to rules rather than standards. We have to keep the rules relatively narrow, recognizing that TM is not all-purpose tool for avoiding harm to consumers. Places where unauthorized TM use is harmful exist, and we should have core rules for those (without even presumptions), and resist the impulse to create extensions to expand that core.

McGeveran: We’re talking infringement, dilution, unfair competition together. If the topic is confusion, then even if confusion is meant to be the core of infringement we still have satellite areas of law doing other things.

Beebe: argues that most of the empirical studies out there are not very good. 70 undergraduates are tested in front of a computer; results used to intervene in TM doctrine are based on terrible protocols (as I pointed out in Gone in 60 Milliseconds).

McKenna: it’s true that methodology leaves a lot to be desired. Worth noting that those are done by marketing departments to tell brands how to act. If anything, they overstate the case for brands. But companies rely on them. To the extent they nonetheless don’t support TM doctrine in favor of brands, then it’s fair to hold marketers to that.

Goldman: So how do we engage marketing researchers better to help them understand TM? Maybe we should be inviting them.

McGeveran: marketing literature is not about quality—it’s about telling the brand story, personality, play. Talking about confusion without acknowledging that courts are protecting what they see as an investment in brand personality is swimming upstream.

Dinwoodie: given discussion of biases, how would things change if surveys were inadmissible, as they are in some countries?

One of the problems of drive for totalizing theory is that we’ve taken different causes of action pursuing similar but distinct policy goals and collapsed them. Historical urge among scholars/courts to find totalizing theories for all causes of action?

RT: I agree but am more interested in the return of the repressed: we collapse the causes of action into one and then we realize that different situations require different responses so we get a million defenses and also this contributes to the rise of the multifactor confusion test. This is a greater judicial culture problem: the standard Supreme Court case now articulates five things for the court of appeals to consider on remand. (See also the development of the “standing” test in false advertising, in which multifactor analysis substitutes for a basic test of whether there’s harm.)

McKenna: before the great shift in confusion for noncompeting goods there were different proof frameworks for different harms, and then we wound up with the same proof framework for all different kinds of harms including harms where presumptions were not appropriate as they were for pure market substitution.

Bone: disagrees with McKenna some about the role of property concepts and when types of harm became conceived of as the same. But, per McKenna, agrees that the multifactor test emerged after harm from noncompeting uses had been deemed to be all the same thing as harm from competing uses. Causes of action do get unified under that harm theory and blended together. [Similar story in copyright, I think—the question has often been “did we exclude that from copyright’s scope because we weren’t thinking broadly enough or did we exclude it because we didn’t think copyright should extend that far?”]

McKenna: a narrow right is less likely to collide with other interests; once the right broadens, its underlying theory becomes much more important so that you can figure out where the right should end and give way to other considerations.

Lemley: if we disaggregate, a logical breakpoint would be to have different rules or standards for different types of confusion—double identity should get one set of rules, source confusion another, sponsorship confusion/affiliation confusion a different set.

McKenna: courts always say when they’re breaking new ground that confusion about anything counts, so we’d go a long way by saying that they have to specify what the confusion is about.

Heymann: would also help us specify what harm we’re balancing, rather than assuming that it’s always the same interest.

Bonus: a caricature of Mark McKenna smashing TM law, by Bill McGeveran: any effect on his brand?