Where's the false advertising?

Some birthers sued Esquire for defamation, putting them in a false light, tortious interference, and false advertising under the Lanham Act over a satirical blog post.  Hard to imagine this is "commercial advertising or promotion," among the other barriers.  Notably, plaintiffs' lawyer Larry Klayman is no stranger to false advertising litigation (or litigation of many other kinds).  Not sure he's ever won such a case, but I hardly think winning is the point here.

Better question: are Amazon's reviewers violating FTC policy?

Are Amazon reviews corrupt?  Assuming that disclosure is required in high-value cases, what responsibility does Amazon have to ensure disclosure, as an intermediary between the reviewers and the providers of reviewed goods?

Hot dog beef

Vienna Beef, Ltd. v. Red Hot Chicago, Inc., 2011 WL 2516515 (N.D. Ill.)

Vienna Beef sought a TRO prohibiting Red Hot from (1) using the Vienna name in its promotional and marketing material; (2) using Vienna Beef recipes or claiming that their recipes are century old, date back to 1893, or that they are "Sam Ladany's recipes" or the Ladany family recipes; and (3) implying an affiliation with or continuation of Vienna Beef.

The company that became Vienna Beef was founded by Austro-Hungarian immigrants Emil Reichel and Samuel Ladany using their family recipe from 1893, and claims to have used the same trade secret recipe for 118 years. Defendant Scott Ladany is Samuel’s grandson, who began working for the company in 1971 and obtained a 10% stock interest. The Ladanys sold the company in the early 1980s to Vienna Beef, and in 1983 Ladany left Vienna Beef, sold all his stock, and signed a noncompete agreement with a confidentiality clause covering the trade secret recipes. In 1986, at the end of the noncompete term, he founded Red Hot Chicago.

Vienna Beef argued that its history as a 118-year old company using family recipes was part of its brand, including references to the 1893 Columbian Exposition and images of its Chicago-style hot dog. It contended that Red Hot was either misappropriating trade secrets or engaging in false advertising by declaring that it uses 118-year-old family recipes. Vienna Beef also argued trademark infringement/unfair competition for, among other things, use of the registered phrases “Make me one with everything” and “Drag it through the garden.”

Red Hot rejoined that it had been continuously emphasizing Scott Ladany's family history in the Chicago hot dog industry in its marketing materials for 25 years, including the slogan "A Family Tradition Since 1893." Further, it used the family history and images of a classic Chicago-style hot dog beginning with an ad campaign 8 years ago.

Vienna Beef focused on its false advertising claims at oral argument. Red Hot conceded that a brochure erroneously stated that it uses a “century old family recipe,” but that brochure has been in use for 8 years.

Vienna Beef argued literal falsity. But the court found that the statements at issue were not literally false, since Vienna Beef also argued that they had to be evaluated in context. Moreover, Ladany’s grandfather was one of the founders of the old company and sold hot dogs at the 1893 World’s Fair, and members of the Ladany family have been in the hot dog business for 118 years. Thus, statements of this kind are literally true, and Vienna Beef had no evidence of consumer confusion.

Trademark: "Make me one with everything," and "Drag it through the garden" were used verbatim, but they were used in a descriptive manner for customers ordering hot dogs with particular toppings and condiments. There was no evidence of consumer confusion, nor did Red Hot use the terms to refer to Vienna Beef product, rather than to hot dogs in general (I think this means that this wasn’t use as a mark). “The phrases are part of full-page ads and do not convey an attempt by RHC to palm-off its hot dogs as Vienna Beef products.”

The trade secret claim failed on this procedural posture because Ladany submitted an affidavit stating that Red Hot doesn’t use the Vienna Beef recipe, but rather uses a recipe he developed with another company in 1986.

Given these findings, it’s not surprising that the court declined to find irreparable harm. Red Hot had been using the slogan “A Family Tradition Since 1893” for 25 years. Though Vienna Beef argued that it was not directly challenging that slogan, it was related to many of the challenged images and statements (references to the 1893 World’s Fair and the 118-year history). Red Hot also claimed that it had been using the two phrases “Make me one with everything” and“Drag it through the garden” for eight years. Except for one new ad in the May 2011 issue of Food Industry News, the ads had been in use for years and the court failed to see an emergency requiring a TRO. Likewise, the balance of harms weighed against entering a prohibitory injunction that would change the status quo, and Vienna Beef failed to show a public interest in avoiding confusion since it hadn’t shown actual consumer confusion.

Frank Capra, remixer

From John W. Dower, War Without Mercy: Race and Power in the Pacific War (15-16, footnotes omitted):

Shortly after the United States entered World War Two, Army Chief of Staff George C. Marshall summoned Frank Capra, the Hollywood director, and asked him to prepare a series of orientation films for viewing by American troops....

In a memorandum to one of his aides when the project was still in the planning stage, Capra stated that there were two overriding objectives to the films: to win the war and win the peace. And he quickly hit upon a simple working motto that decisively shaped the style and texture of the films: "Let the enemy prove to our soldiers the enormity of his cause--and the justness of ours."  Capra also expressed this more colloquially.  "Let our boys hear the Nazis and the Japs shout their own claims of master-race crud," he declared, "and our fighting men will know why they are in uniform.

What this meant was that extensive use would be made of the enemy's own words and the enemy's own graphics as these were available in the form of confiscated or captured newsreels, propaganda films, commercial movies, and the like. Capra was known for his boldness in the cutting room and his fondness for contrast and counterpoint; the difference now was that he was working with footage taken by others, and indeed in good part by the enemy. He proceeded to collect millions of feet of enemy film, to cut and edit this until the expressions of the Axis powers became lean anti-Axis images, and to juxtapose the menacing faces and words of the enemy against the bright hope and accomplishments of the American people and their allies.

Right of publicity question of the day

Does using an irate customer's voicemail message in an ad violate her right of publicity?  There's certainly use of "voice," but it's not clear to me that Texas common law covers voice for a living person, and there may also be a requirement that the identity have commercial value.  The result in other states, of course, might be easier to predict; New York clearly protects the "voice" of "any person."  Given the expanded First Amendment protection for commercial speech in recent years, though, we have to ask whether a government interest in privacy--or the commercial value of publicity rights--can sustain such broad laws.

IP fellowship

Opening for IP Fellow at Chicago-Kent College of Law


Chicago-Kent College of Law is accepting applications for the position of IP Fellow. The Fellowship starts this year on August 1, 2011 and lasts 1 year, with the opportunity for renewal a second year.

The IP Fellow works with Prof. Edward Lee, the Director of the Program in Intellectual Property Law, in both teaching and administration. The Fellowship is especially suited for attorneys interested in pursuing a career in law teaching and allows ample time to write an article and attend faculty talks. Requirements: JD degree and excellent writing skills. If interested, please send a resume and transcript to elee@kentlaw.edu.

Fly on the Wall: preliminary thought

I have this working theory that participants in the financial sector have burnt out more and more of their credibility with courts as more frauds on the court have been revealed (screw anyone you want, but don't lie to a judge).  And the distrust of the Morgan Stanley etc. "business model," scare quotes and all, in this opinion, with its long footnote about how copying may just deprive the plaintiffs' clients of an unfair advantage in the first place (following a previous footnote about the fraud settlement arising out of the same recommendations whose exclusivity the plaintiffs wanted to protect), seems consistent with what I see in some of the foreclosure cases coming out now.

I do tell my copyright students that God didn't give anyone a right to any particular business model, and it's kind of nice to see the Second Circuit agreeing.

Dilution or stimulation?

The Weed Street Journal. (Firefox says that the site wants to geolocate me; I said no, but your browser might do something different.)

Abercrombie spectrum: threat or menace?

Comments on my Dropbox post on the blog and via Twitter offered characterizations of "Dropbox" for cloud storage as suggestive, descriptive, and generic--running the gamut from inherently distinctive to unprotectable.  I can't help wondering if that diversity of opinion is really that unusual.  (The list of terms found descriptive v. list of almost exactly identical terms found suggestive by courts/the TTAB in McCarthy's treatise is either amusing or depressing, depending on your mood.) 

Is the Abercrombie spectrum really doing anyone any good?  The statute does require distinctiveness, but couldn't we get at that in other ways?  We already know that some forms of marks, color and product design trade dress, can only be distinctive through secondary meaning.  Why not look for other contextual clues about whether a term is likely to be perceived as a mark, as Tom Lee has argued, instead of relying on an incredibly manipulable and barely meaningful test that predates most empirical knowledge about how consumers see marks and about how courts evaluate them?

and today's TM joke

This Daily Show extension of its criticism of CNN, mocking CNN's use of one of those scannable QR codes by creating its own, mashes up CNN and UNICEF.  Nice url, too.

Right to change TMed product's formula defeats proposed sunscreen injunction

Schering-Plough Healthcare Products, Inc. v. Neutrogena Corp., 2011 WL 2312569 (D. Del.)

As part of this case, the parties litigated over Neutrogena’s claim that its Ultra Sheer Dry-Touch Sunblock SPF 100+ contained Helioplex, a proprietary photostabilizing agent.

Neutrogena publicly defined Helioplex as a proprietary blend of specific compounds: avobenzone, diethylhexyl 2,6- naphthalate ("DEHN") and oxybenzone; the contested ads prominently stated that 100+ contained Helioplex; from April through August 2009, and in product shipped through April 2010, 100+ in fact used octocrylene instead of DEHN. These ads were literally false, but not preliminarily enjoined.

After eBay, the court declined to apply a presumption of irreparable harm. Some of the ads at issue were directly comparative with Coppertone, though the falsity wasn’t in the comparison itself. Coppertone’s witness testified that the false advertising harmed the comparative consumer perception of the Coppertone brand, but didn’t describe lost sales or customers with any particularity. Coppertone didn’t conduct any investigation of the impact of the ads on its reputation or consumer base. It also didn’t quantify how much DEHN-free 100+ remained on the shelves.

The court didn’t make a specific factual finding, but the court “suspect[ed]” that “sunblock manufactured in late 2009 and early 2010 would have an expiration date that has either expired or that is fast approaching expiration at this point.” The Mayo Clinic says sunscreen lasts three years, so I’m not so sure about this.

Coppertone sought a broad injunction on the future use of the Helioplex mark in DEHN-free products, which would prohibit Neutrogena from redefining the Helioplex mark. Neutrogena’s website says:

Avobenzone is one of the best UVA blockers approved by the FDA, but it is highly unstable when exposed to sunlight. Neutrogena was the first in the U.S. market to introduce sun protection in which avobenzone was stabilized using oxybenzone and DEHN, effectively providing better, longer protection from harmful UVA rays. This breakthrough technology was called helioplex®. With time, and as science has progressed, the helioplex® name has come to encompass additional technologies and ingredients beyond DEHN but which still provide the same benefits of stabilized sun protection.
Today helioplex® represents a breadth of stabilized sunscreen technologies that deliver superior protection from the sun. When you choose a sunblock with the name helioplex®, you can be certain that you are using one that was specifically engineered to deliver superior UV protection that is broad spectrum and photostable.

Generally, a trademark holder is permitted latitude with respect to formula changes of products bearing the mark.

On balance, the proposed injunctive relief was not warranted. Neutrogena hadn’t shown any particular injuries as a result of the false ads. “Even were the court to assume a generalized injury to plaintiff's goodwill during the period of literal falsity, plaintiff adduces only conclusory allegations that money damages are incalculable and, therefore, inadequate to compensate any injuries it may have. Plaintiff has not attempted to quantify its loss.” (I don’t disagree; I’d just like to see this kind of reasoning applied in, say, a standard TM case.) On the other side, Neutrogena had a strong interest in using its Helioplex mark to the extent permissible by law. There was no indication that the public was currently being deceived; the relevant print ad was discontinued and it wasn’t clear that DEHN-free 100+ was still on sale.

Also, the proposed injunction was too broad. Even with the literal falsity here, Neutrogena wasn’t precluded from developing its Helioplex mark in connection with other photostabilizing technologies, and the court declined to “impede” Neutrogena’s TM rights.

today's TM question

Checking an old email account, I got an ad from YouSendIt offering to allow me to send files to "[my] Dropbox."  Intrigued, I clicked, because I rely on Dropbox and like it a lot (despite the fact that it just did a very scary thing when I tried to sync with Eric Goldman for our casebook!).  But YouSendIt means its own Dropbox, capitalized.  So, much depends on what kind of mark Dropbox is for cloud storage.  Is it generic?  Descriptive?  I bet Dropbox wants it to be suggestive, and in an age of competing internet analogies I wouldn't exclude the possibility that a court would so find, but I'm going to go with descriptive.  It's a great name for a cloud storage service that enables sharing with selected other people, but that greatness in communicating its meaning may weaken its conceptual strength as a mark.

Nonetheless, Dropbox has secondary meaning in the field, and I was at least uncertain about what YouSendIt was offering.  Descriptive fair use?

Lack of substantiation doesn't give rise to private cause of action

Chavez v. Nestle USA, Inc., 2011 WL 2150128 (C.D. Cal.)

This was a tentative ruling on Nestle’s motion to dismiss this putative class action complaint under the California UCL and FAL based on Nestle’s marketing of its Juicy Juice Immunity and Brain Development beverages. The amended complaint basically alleged that Nestle’s claims were deceptive because they were unsubstantiated. The court stated that, on the papers, this didn’t state a claim.

The Brain Development package, along with the name, stated “DHA—A Building Block for Brain Development.” The packages/ads also stated that babies’ brains tripled in size by age two, and the ad said, “Introducing new Nestle Juicy Juice Brain Development with DHA. An essential building block for her brain to develop … So she can shine a little more every day.” The website made similar but more detailed claims that DHA “may help support early-age brain and eye development” and that the beverage was “a smart choice for parents who are ready to introduce juice beverages into their baby's diet.” Chavez alleged reliance on these statements.

Similarly, the complaint alleges that the Immunity package’s claims, “Helps support immunity” and “Vitamin C & Zinc for Immunity …” were false and misleading. Chavez also specifically alleged reliance on these statements, as well as on TV ads claiming, “She'll be exposed to over a billion germs this year…. Introducing Nestle Juicy Juice Immunity With Vitamin C, Zinc, and Prebiotic Fiber. So they shine a little more every day.” The website also claimed the beverage “contains Vitamin C and Zinc which are essential for a healthy immune system, and Prebiotic Fiber to help maintain a healthy digestive system.”

However, the court concluded that Chavez failed to explain why the identified statements were false or misleading. Plaintiffs didn’t allege facts challenging the relationship of DHA and brain development, the role of Vitamin C and zinc in immune function, or of prebiotic fiber in digestion. There were no allegations that consumers were misled regarding the actual amounts of these components. The focus of the complaint was on the alleged lack of substantiation for the ads.

The court held that lack of substantiation can’t support a UCL or FAL cause of action, nor did Nestle have a duty to disclose its lack of substantiation. Unlike the FTC, private plaintiffs can’t sue on this theory; they offered no support for the contention that lack of substantiation renders claims misleading. (But the FTC’s ability to do so is predicated on the theory that consumers reasonably expect, and are entitled to expect, an appropriate amount of substantiation for specific factual claims, making lack of substantiation misleading.)

The court also thought that the claims would be subject to dismissal based on the primary jurisdiction doctrine, though it rejected the now-standard but ludicrous standing argument that plaintiffs’ current knowledge of defendants’ alleged misconduct would bar them from seeking an injunctive remedy.

Hold your nose: diaper pail claims don't merit preliminary injunction

Munchkin, Inc. v. Playtex Products, LLC, 2011 WL 2174383 (C.D. Cal.)

Playtex makes the Diaper Genie while Munchkin makes the Arm & Hammer Diaper Pail. Munchkin sued and Playtex counterclaimed. Munchkin sought a declaratory judgment that it wasn’t engaged in false advertising when it made the claim that the Diaper Pail was "The NEW # 1 in Odor Control. Proven Better at Odor Control than Diaper Genie II & Diaper Genie II Elite in a laboratory test." It also asserted that Playtex made false superiority claims such as "Proven # 1 in Odor Control," "# 1 Brand. For Ultimate Odor Control," and "Voted One of the Best Baby Products 11 times by readers of American Baby," the last allegedly false because the award is annual and the Diaper Genie II Elite wasn’t introduced until 2008.

Playtex counterclaimed about "Proven Better at Odor Control than Diaper Genie II & Diaper Genie II Elite in a laboratory test," as well as "Moms prefer Munchkin 2 to 1 over Diaper Genie II in an independent, national, in-home study of 100 moms."

To win its counterclaim, Playtex had to show more than methodological weaknesses in Munchkin’s test. It had to show that the test was not sufficiently reliable to permit one to conclude with reasonable certainty that it established the claim made. Criticism of Munchkin’s methodology was insufficient; Playtex needed something more, showing Munchkin’s data was irrelevant or false, to get a preliminary injunction. Playtex didn’t do this.

Playtex made two arguments: (1) Munchkin’s test didn’t support its superiority claim, and (2) the tests weren’t reliable. As to the first, Playtex argued that Munchkin’s test didn’t establish the “#1 in odor control” claim because Munchkin didn’t actually test for diaper or other odor and didn’t test in accordance with manufacturer’s instructions or with reference to real world use conditions.

Munchkin used two tests: a sensory test with human sniffers and an analytical test that measured the concentration of parts per million of ammonia in the air. Munchkin relied on the analytical test, perhaps because the sensory test produced no results. Playtex argued that the analytical test wasn’t designed to test odor superiority and that it wrongly tested only one compound, and that Munchkin made no effort to correlate its data to odor that human users would likely perceive. But Munchkin responded that its claim was about odor control, not on whether humans would perceive odor more or less over time. The court was not persuaded that Munchkin needed to use human/sensory testing, especially since analytical testing can help determine what humans are being exposed to. Analytic testing is quantifiable and avoids the “inherent subjectivity” of human sniffers. Thus, Playtex failed to meet its burden of showing literal falsity based on the use of analytic testing only.

But what about whether the smell levels would actually matter to people? The literature already established that people can smell ammonia at levels as low as 2-3 ppm. Thus, an analytic test was sufficient to measure odor reduction effectiveness.

Ammonia as the only odorant: real diaper odor has a host of other malodorants. But Munchkin’s declarant said that ammonia was an appropriate proxy because it’s generated quickly by a soiled diaper and has a foul odor. It’s also common in the field to test a single odorant. Despite weaknesses in these arguments, Playtex didn’t affirmatively demonstrate that ammonia-only data was irrelevant. And there was no industry-wide standard for diaper odor formulation; every company has to figure out its own test.

Playtex also argued literal falsity because the tests were not in accordance with the manufacturer’s instructions as the claim expressly stated. The tests involved ammonia solution in a beaker, put into the pail with the lid closed for 30 minutes. The pail was then opened for ten minutes. Then an ammonia-soaked diaper was added and the pail was left open for another ten minutes, then closed for 30, then the bag and diaper were removed. Ammonia levels were measured throughout. The Munchkin outperformed the Playtex products at each step.

Playtex argued that leaving pails open for 10/30 minute intervals was contrary to the manufacturer’s instructions, which specify immediate lid closure. Indeed, on the Diaper Genie II Elite, the lid has to be propped open or it will close automatically, and its odor control feature activates when the lid closes.

Munchkin argued that its test was consistent with actual use and that any deviations from manufacturers’ instructions were necessary for scientific testing (that apparently didn’t measure anything that could take place in the real world, though). Munchkin’s declarants agreed that diaper pails aren’t continuously closed in use and are instead opened and closed repeatedly, so an open-pail reading is a valid measurement.

My recollection of diaper pails is that, though you do of course open and close them, they are open for as short a period as possible. Why wouldn’t you measure the ammonia immediately upon opening, which is the closest to actual experience? Munchkin’s answer was that the ammonia analyzer needed time to “settle out” after a change in condition. But does diaper odor “settle out” in this way in the real world? Shouldn’t you open the pail, then close it, then wait ten minutes for the odor to settle out to approximate the odor that would actually be around in practice? The deposition testimony quoted reinforces my sense that Playtex had the better of this argument, with Munchkin’s declarant coming out and saying that if you leave the pail open then the concentration of ammonia keeps increasing (and then stabilizes for purposes of measurement, but increases seems to be an important point)—which I presume has something to do with Brownian motion.

However, the court found that Playtex didn’t meet its significant burden of proof to show Munchkin’s test unreliable. In each of the five steps, Munchkin’s product released less ammonia, and so the closed pail measurements also showed superiority. Also, open pails were necessary for a more accurate reading from the analyzer. (This seems to me to mistake accuracy for precision. The reading might be more reproducible, but by deviating from real conditions, it seems less accurate.)

Playtex primarily relied on Church & Dwight Co., Inc. v. S.C. Johnson & Son, Inc., 873 F.Supp. 893 (D.N.J.1994), a carpet deodorizer case, to argue that Munchkin was required to show that its tests resembled real world conditions. That case found a “five times better than baking soda” claim literally false when the claim was derived from lab tests, not actual human experience, and would have no practical equivalent in the real world. The court here found that the key in S.C. Johnson was defendant’s failure to disclose that its results were derived from lab testing, not actual use. But Munchkin clearly indicated in its claim that it was relying on a lab test.

But isn’t the necessary implication that the lab test had practical implications in the real world? Well, the court found that Playtex hadn’t shown that Munchkin’s test had no practical equivalent in the real world. In S.C. Johnson, you’d have needed to use 37 pounds of the product instead of a good real-world shake to get the lab results, but the differences between the ammonia tests and the real world here were far less significant.

The court did find that Playtex showed materiality, since odor control was the most important characteristic of the product.

No logo: difference between OEM and non-OEM equipment immaterial

Bourgi v. West Covina Motors, Inc., 2011 WL 2207477 (Cal. App. 2 Dist.)

“[A]fter learning that a Hummer vehicle he had purchased as new had sustained prior damage in an eco-terrorist attack on the respondent's dealership” (!), Bourgi sued for violation of various California laws. After various maneuvers, he lost at a bench trial and appealed.

The 2003 Hummer H2 Bourgi bought cost over $69,000, of which he paid $15,000 down and financed the rest. The H2 was advertised and sold as new, but in fact had been vandalized and damaged by the Earth Liberation Front. Its hood and right side had been repainted and the right rear passenger window replaced. West Covina didn’t disclose this. After about five months, Bourgi returned to West Covina for repairs, complaining of wind noise. At that point, a service rep told Bourgi that the H2 had been previously repainted and printed out the vehicle’s history, which disclosed the vandalism. Bourgi demanded a replacement H2 but was refused.

Bourgi continued to make monthly loan payments until after the initial trial in 2007, at which point it was voluntarily repossessed with nearly 20,000 miles on it.

West Covina argued that it was entitled to a safe harbor under California vehicle law because there was no material damage to the H2, and thus no disclosure of prior damage and repair notwithstanding the CLRA. The court agreed that the CLRA was trumped by this safe harbor for minor repaired damage.

Bourgi’s expert testified that the quality of the repair and repainting was below industry standards, including a non-OEM replacement window without the GMC logo on it, and that the defects reduced the value of the H2 by 20% and that repainting would cost $2000 or $1000 if the dealer did it. He admitted that it was not uncommon for a new vehicle to get dings during transit requiring repair and repainting, but not damage that required approximately half the vehicle to be repainted.

West Covina’s expert testified that the H2 was a “gorgeous vehicle” without notable problems. He testified that the non-OEM window was acceptable and was under warranty, and that none of the items at issue affected the H2’s value. Another witness testified that the cost of repainting and replacing the window was about $1000, and would cost the dealer less than $500 to correct any paint defects.

The trial court personally inspected the H2 and found it to be in new condition, with only cosmetic defects correctable by minor repairs that Bourgi himself failed to notice for five months. Though reasonable minds might differ on the quality of the repairs, the trial court concluded as finder of fact that they were adequate to restore it to its new vehicle condition, and thus that there was no duty to disclose. Though the replacement window was lower cost than an OEM window, there was no evidence that it was of lesser value. The fact that the window and repainted areas weren’t covered by a GMC warranty wasn’t sufficiently material to justify recission because they were covered by warranties from the glass manufacturer/West Covina respectively. (Compare this to the treatment of gray market goods with divergent warranties.)

The vehicle law requires disclosure in writing of any material damage known by the dealer to have been sustained by the vehicle and subsequently repaired. Material damage is defined as damage requiring repairs exceeding 3% of the MSRP or $500, whichever is greater, with some other exclusions and details. Damage repaired at a cost at or below the threshold is not material and need not be disclosed. Whether the damage met the materiality threshold here required resolving questions of fact: whether the repairs actually restored the car to its predamaged condition, whether replacement parts and equipment used were OEM (as set forth in the statute), and the true costs of repair.

Bourgi argued that the repair was inadequate because West Covina used a non-OEM part, which by definition wouldn’t restore the H2 to its original, new car condition. He argued that all windows should match and have the GMC insignia, but the trial court was persuaded by West Covina’s expert, who testified that the replacement glass was acceptable to GM. The trial court also found that, had Bourgi requested it after the dispute arose, West Covina would have installed a GMC factory window. The evidence was that the replacement was identical to the OEM window except for the GMC “bug” on the glass. The appellate court agreed that, even if the replacement glass might not be acceptable as a non-OEM part, the cost of the replacement plus the cost of repainting didn’t exceed 3% of MSRP (here, $54,180).

Bourgi argued that, in order to avoid disclosure, the repairs must be complete and adequate. The appellate court disagreed to the extent that Bourgi argued for perfect repair that would never require a touchup. Here, Bourgi didn’t even notice the damage, and the trial court found that the damage wasn’t why he wanted to rescind the contract. The purpose of the statute, to allow a dealer to repair minor damage and still be entitled to call the car new, wouldn’t be served by finding a violation here.

Bourgi argued that the dealer misrepresented the standard equipment, since the company that made the replacement window was not a GM-authorized OEM supplier and thus he didn’t receive the “matching set” of tinted windows advertised on the sticker. The trial court could properly have credited expert testimony that the use of non-OEM class was both standard in the industry and immaterial, in part because glass might not be available from the factory, and also because following GM specifications and holding Department of Transportation certifications, as this window did, was sufficient to make the glass acceptable. The only difference was the logo. Thus, the trial court could properly find that there was no material misrepresentation.  The OEM window was more expensive, but there was no evidence that it was better, or even different, other than the logo. 

This case is an interesting test of various TM theories of value.  The customer now, though perhaps for other reasons, claims that he wants the TM for itself, and the vendor says the TM doesn't add any value.  I wonder if a court will agree with that argument the next time around.

Touting TM registration may be materially misleading

Basel Action Network v. International Association of Electronics Recyclers, No. C10-931RAJ (W.D. Wash. 2011)

Basel sued defendants, the Institute of Scrap Recycling Industries (“ISRI”) and International Association of Electronics Recyclers (“IAER”), over the term “certified electronics recycler,” which was entered on the Supplemental Register in 2003. The parties are nonprofits that certify entities that recycle electronic products. Basel uses the E-STEWARDS certification, registered in 2009. Defendants apparently typically use their mark in conjunction with the term R2/RIOS. Basel and defendants refer to the entities they certify as “certified electronics recyclers.”

Basel initially sought a declaratory judgment of noninfringement on the grounds that the term is generic, but the court found no Article III controversy because defendants have never threatened to enforce their purported rights against Basel. Basel also sought cancellation of the registration, but the court held that this claim couldn’t stand on its own without a valid independent cause of action for which cancellation is a remedy. (How would this apply to a claim for cancellation on grounds of disparagement?)

Basel filed an amended complaint including a claim for false designation of origin and false advertising under §43(a)(1)(B). The parties compete; defendants (now operating as one entity) even offer a “Recycling Industry Operating Standard Scorecard” comparing their certifications. The scorecard concludes by claiming that ISRI/IAER is the only certifier who can “[p]rovide[] the trademarked designation of CERTIFIED ELECTRONICS RECYCLER®.”

Basel plausibly alleged genericness of “certified electronics recycler” as applied to a certification program for an electronics recycler, including allegations that it, other organizations that certify electronics recyclers, electronics recyclers themselves, and the media use the term “certified electronics recycler” to refer generally to an electronics recycler that is certified. The only difference here from a standard genericness claim is that this is a certification mark, but a certification term can be generic.

False designation of origin: Basel alleged that consumers confused its certification program with defendants’. Basel and ISRI were scheduled to make presentations at a September 2010 conference, where ISRI’s presentation was called “How to become a Certified Electronics Recycler®” and Basel’s subsequent presentation on the same day was entitled “e-Stewards® Certification Workshop.” Basel alleged that several people contacted it believing that Basel would present the first session.

The court noted that, in most circumstances, no one can assert a confusion of origin claim based on a competitor’s use of a generic term. That’s what generic means. There has to be something more to bring an unfair competition claim. But Basel had alleged no more than defendants’ use of the generic term, and its specific example included identification of ISRI as the first presenter and Basel as the second. Defendants’ scorecard explicitly differentiated its “certified electronics recycler” certification from Basel’s E-Stewards certification, and defendants apparently use the phrase “Certified Electronics Recycler” in combination with the term R2/RIOS as a matter of practice.

Basel’s false advertising claim, however, survived. Though it might be literally true to say that only defendants can “[p]rovide[] the trademarked designation of “CERTIFIED ELECTRONICS RECYCLER®,” this might be misleading. If the term is generic, then the claim is true but incomplete, and the truth would be that the ® symbol didn’t mean anything. Defendants aren’t obligated to reveal the complete truth in ads, but they are obligated not to abbreviate the truth in a misleading way. “It is not plausible that Defendants chose to tout the registration of their certification to advertise that they hold a meaningless registration for a generic term.”

So, why do they advertise the registration?

It is plausible that Defendants intend to convey that the fact that they hold a PTO registration is significant in a way that matters to consumers. It is plausible, for example, that Defendants hope that the public will perceive their PTO registration as a favorable substantive judgment on their certification program. It is plausible that Defendants hope that the public will perceive that their use of the term “certified electronics recycler” is somehow “official” or government-sanctioned. It is plausible that Defendants hope that consumers will perceive a tangible benefit to them arising from the mere fact that Defendants hold a registration. It is plausible that Defendants seek to send these implicit messages because it is difficult to imagine another reason that Defendants would tout the mere fact that they hold a registration for a generic term as a reason for consumers to prefer their certification standard over Basel’s and others’.

Any of these messages would misrepresent the import of the registration and constitute false advertising. This also provided a basis for Basel’s cancellation request.

Bikini line: defendant can sell genuine goods but not use TM name so prominently

Maya Swimwear, Corp. v. Maya Swimwear, LLC, -- F. Supp. 2d --, 2011 WL 2259644 (D. Del.)

Plaintiffs, whom we’ll call Maya Argentina for convenience, sued defendants, including an entity we’ll call Maya USA. Plaintiffs make an “exclusive” line of bikinis under the Maya brand name, which they sell at buymayaswimwear.com, and have registered the Maya mark for bikinis. Defendants sold genuine prior year Maya bikinis at buymaya.com; the court said a Google search for “Maya swimwear” returned defendants’ website as the second result after plaintiffs’ site. (Side note: the miniMAYA line for toddlers includes a design labeled the “Lolita,” which I would not have advised. The print features pictures of smiling little girls. Maybe they don’t read Nabokov in Argentina?) Plaintiffs alleged that defendants were engaging in trademark infringement and false designation of origin, as well as tortious interference through harassment of Christina Pinto, a former Maya USA employee who now works for Maya Argentina.

The parties used to have an exclusive distributorship agreement. This collapsed in late 2010, but defendants continued to sell Maya bikinis at buymaya.com, despite plaintiffs’ short-lived success in getting Network Solutions to take down the website for 8 days in January 2011.

Defendants used the stylized Maya trademark and “Mayan” symbols at the top of their website, with the logo in orange and presented as the largest text on the website: 

Defendants’ site contained no disclaimers. Plaintiffs use the logo in the same font and same relative position, though their version is white against a black background and the “Mayan” symbols were on the far right:

According to the complaint, Pinto was a former personal assistant to one of the individual defendants. She was let go in 2010, and began working for plaintiffs in 2011. She hadn’t signed a noncompete or confidentiality agreement or any other written contract, but defendants demanded that plaintiffs terminate her and cease using any customer lists and marketing materials obtained from her.

The court began with the affirmative defense of first sale/trademark exhaustion, which prevents liability even where there is likely confusion when a seller does no more than stock, display and resell the product under the producer’s trademark (note how this formulation swallows the “confusion over what?” problem—if there’s a genuine good, how can there be likely confusion?). However, resellers aren’t protected by first sale if they give the false impression they’re favored or authorized dealers for a product, or if there are material differences in the product they sell.

Maya Argentina argued that selling last year’s product line created confusion in the marketplace, because styles change fast. However, there was no case law to support this, especially when defendants didn’t claim that the products were the current line—which the court commented would give rise to a §43(a)(1)(B) claim.

The court thought that the only “true” question was whether defendants’ use of plaintiffs’ mark on the top of the website was actionable, and that it was indeed infringing. Of note in the confusion analysis: the court found that defendants’ intent was proper when they adopted the mark because they were associated with Maya Argentina at the time. However, because Maya Argentina put them on notice that they were no longer to use the mark, the intent factor “somewhat” favored Maya Argentina, even though there was no evidence that defendants intended to confuse the public. (But I thought first sale allowed defendants to continue to use the mark?) Also, “Defendants' placement of the mark in the title bar of their website along with the URL suggests that defendants are either producers of Maya brand bikinis or an authorized retailer.”

So, plaintiffs prevailed, but on a more limited basis than they wanted. “Had defendants' store been called ‘Bargain Barrel Bikinis,’ and defendants used the Maya trademark either as plain text or in whole with a clear disclaimer that they were not an authorized retailer, plaintiffs would not have a cause of action because of the first sale doctrine.”

The court found irreparable harm because defendants would continue to use the mark in a way implying sponsorship absent an injunction. (Why does this make the harm irreparable instead of compensable with damages, if the problem is false appearance of authorization in selling genuine goods? It’s a mystery.) The court recognized that defendants would have more trouble in search rankings if they couldn’t use buymaya.com, making it more difficult to sell their legitimate Maya stock, but this was “less significant than the harm to plaintiffs that stems from consumers' confusion over defendants' status as the official Maya representative” (of which there was no actual evidence). Likely confusion meant by definition that there was a public interest in suppressing confusion. (What is the public interest in not being confused over whether someone is an authorized dealer of bikinis? Is it really the same as the public interest in not being confused over whether the bikinis are genuine Maya bikinis, or even the public interest in not being confused over who is an authorized dealer of equipment one can expect to need a warranty for? When we talk about blanket rules after eBay, this one deserves some scrutiny.)

The court allowed defendants to continue sales, as long as they didn’t claim or imply that they were the current line unless they were. They couldn’t use the Maya mark at the top of their site, nor could they use buymaya.com, which indeed has already disappeared. They needed a site name that doesn’t involve “Maya.” “Defendants may use the Maya trademark on their website to advertise the sale of Maya brand bikinis, but they must use the mark either as plain text or in whole with a clear disclaimer that they are not an authorized retailer.” (Note the difference from the usual nominative fair use overstatement: defendants are allowed to use the stylized version as long as they use a disclaimer.)

The tortious interference claim failed on the pleadings; Pinto still works for Maya Argentina, which didn’t identify any actual or potential customer relationships harmed by Maya USA’s letters. However, without any analysis in the written opinion, the court did order defendants to refrain from contacting Pinto directly for any reason.

Supersized plastic bag claims?

The NYT on a false advertising lawsuit by plastic bag manufacturers against certain green claims by a competitor.  Note the reporting's emphasis on materiality (aided by Rich Kurnit).

Back from vacation; regular posting will resume shortly.

Free agents: defendants aren't responsible for forum signatures

Cornelius v. Bodybuilding.com, LLC, 2011 WL 2160358 (D. Idaho)

Prior reporting. Cornelius operated Syntrax Innovations, which made sports nutrition and dietary supplements. Syntrax sold its assets to plaintiff SI03, and Cornelius is now an independent technical consultant for the Syntrax line.

Defendant Gaspari Nutrition makes its own line of bodybuilding supplements. Both sides sell their products on Bodybuilding.com’s website, which also has an online forum. The forum has forum moderators with the power to edit and delete posts, move threads, and ban users. Moderators self-select by nominating themselves, and forum members then vote to confirm or deny them moderator status, which if confirmed is granted after Bodybuilding.com approves the application. They aren’t paid, but receive a discount on all products purchased from the site and offered a free trip to the Boise Fit Expo. (I can’t help myself: what’s second prize?)

Daniel Pierce, aka desurusan, posted a comment stating that Syntrax caused liver failure in multiple subjects, as documented in peer-reviewed journals; was notorious for patent infringement; made label claims for 3x-4x higher amounts of key ingredients than actually included; used “shills” on the Bodybuilding.com forums; and did other bad things. Later, he posted another comment stating that Syntrax was selling badly, had put numerous people in the hospital, and had done other bad things. A third comment upped the ante: “Syntrax was indeed responsible for killing a few people.”

A few months after that last post, Gaspari hired Pierce as a customer service representative, at which point Pierce updated his signature on the site to reflect his new status, which meant that all his prior posts also got updated with that status, making it appear that he was a Gaspari rep when he made the statements. (So, anyone reading through the old forum posts would see the affiliation.)

A different forum member, Ingenium, said that SI03’s Syntrax Matrix product wasn’t “a micellar casein product,” which apparently means something; this was apparently a response to a post by an SI03 officer touting the product, who posted under a username accurately representing his status with SI03. Ingenium was not a forum moderator when he made the post, but became one nearly a year later, at which point being a moderator made his signature appear in bold for all posts whenever made. When he stopped being a moderator last year, his signature was no longer bolded.

After various maneuvers, there remained a Lanham Act claim against Bodybuilding.com and Lanham Act and various state tort claims against Gaspari.

Since an agency relationship didn’t exist between Pierce and Gaspari when he made the posts, plaintiffs argued that Gaspari was liable because it failed to take reasonable steps to remove the posts after Pierce changed his signature block, because at that point the posts appeared as if he was a rep. The court found that this theory could survive with proof that Gaspari intentionally and unreasonably failed to remove the allegedly defamatory posts after notice and opportunity to do so. Liability may attach when a reader may infer adoption from the presence of a statement, and the reasonability of such an inference is context dependent: the NY subway doesn’t endorse graffiti on its cars, but graffiti on the interior walls of a manufacturing plant where supervisors exercise greater supervision and control may be attributed to the company.

Here, no reasonable jury could infer that Gaspari intentionally and unreasonably kept the posts in public view. Gaspari didn’t know about the posts when it hired Pierce or that he changed his signature block, nor did it know until the lawsuit was filed that the change in the signature block would affect past posts. Moreover, Gaspari had no power to remove the posts. It could have directed Pierce to delete the posts once aware of them, but he didn’t have the power to edit or delete them more than 48 hours after they were made. (Interesting §230 consequences!) Thus, notice and ability to remove the posts were both lacking.

SI03’s claim against Bodybuilding.com also depended on attributing Ingenium’s post to Bodybuilding.com because Bodybuilding.com failed to remove the post after Ingenium became a moderator. Bodybuilding.com is responsible for acts of its agents within their actual or apparent authority. Actual authority may be express or implied for powers incidental and necessary to carry out express authority. SI03 argued that Bodybuilding.com gives moderators actual and express authority to delete forum posts and ban forum users, and thus are agents. Bodybuilding.com responded that moderators were only agents for the purpose of moderating discussions. The court agreed: there was no evidence of express authorization for Ingenium to speak on Bodybuilding.com’s behalf about products sold on the site, or any evidence from which a reasonable juror could conclude that Ingenium’s statements of opinion was necessary and incidental to his express authority to moderate the forum.

Further, the court found insufficient evidence that Ingenium had apparent authority to speak on behalf of Bodybuilding.com about any particular product’s virtues. Apparent authority requires reasonable belief in a third party that the agent is acting for the principal, or the principal’s awareness that other people believe in the agency without doing anything to correct the misimpression. There was no evidence of public perception. At most, Bodybuilding.com represented to the public that moderators had authority to moderate the forum, which isn’t the same as representing Bodybuilding.com when stating personal opinions. The required close link between the agent’s tortious conduct and his apparent authority was missing.

In the alternative, the Lanham Act claim failed because SI03 couldn’t prove any damages. It didn’t have evidence that anyone saw the post. The post was the last in the thread. And Ingenium didn’t become a moderator until a year and a half after making the post, making it even less likely that any forum member went back and saw the post, now with Ingenium’s name boldfaced to indicate moderator status.

SI03 argued that monetary damages are available in a false advertising case even without showing actual confusion. But that’s when there’s a deliberately false comparative ad, which wasn’t shown here. Here, there was no market analysis, no expert testimony, no consumer testimony, and nothing else showing injury.

Houston IPIL conference: Barton Beebe

Me on images in TM and advertising: the paper is not yet coherent, and my presentation was very tied to the many different things I’m not sure about in the paper, so I’m just going to punt for now. The comments were very helpful but would probably not make much sense without the paper.

Barton Beebe, Is the Trademark Office a Rubber Stamp?
New dataset. Huge spike in applications with the internet boom. International basis applications now are very small still. What proportion of applications are ITU applications? About 40% are use based. ITU got up to 66% but is now 56%.

Main point of the paper: registration success rates. Registration rates over time: overall registration rate for use-based was 75%; ITU was 37% from 1989-2007. Lots get ITU published but don’t file statement of use. Is this too high? Does that suggest the PTO is a rubber stamp? Sounds about right to him. No sense yet of registration rates at OHIM or in Canada, but OHIM has data available and may report soon.

25%: are those rejections or non-followthrough? Both. Use-based: some are failure to respond to office action, but that may be either substantive—they receive an office action they can’t answer--or a problem with the business. Can’t tell what the basis of the office action is from this data.

Q: break out pro se/represented by attorney? Online filing increases pro se filing; pro se filers may have no idea what to do when they get an office action and then give up. Beebe thinks the info may be in the data but hasn’t sorted it out yet.

Individuals did relatively poorly in publication/registration compared to corporations: 67% success in publication v. 76% for all types. Every result he gets is statistically significant because there are 5 million observations; .1 difference will be statistically significant, so we should really focus on what’s meaningful substantively. By classification of goods/services—clothing and telecom have the lowest success rates. High success rates for things like rubber goods.

Publication rates v. registration rates: the real question is whether the publication rates are too high. Publication is more or less the PTO’s last substantive review, though in rare ITU cases the manner of use in connection with goods will be examined. So the rubber stamp issue is the publication stage. We have exactly the same number for ITU and use-based: only 24% are filtered out. Needs to know what happened to that 24%--prepublication opposition? Very few oppositions in the data, compared to millions of application. Opposition is also rarely ever responsible for the difference between publication and ultimate registration.

Questions outstanding: how does trade dress do compared to word marks? Pro se applicants—how big is the difference? Particular goods: two-dimensional map of TM space of classification of goods v. similarity of marks, representing the density of certain classifications.

In litigation, we have a 50% win rate hypothesis—these are the hard cases where the parties can’t agree to settle. Empirically, in many different categories, this is what happens. Would that make any sense in TM application? Why aren’t applicants gambling a little more aggressively? Why are they so successful in the use-based side? Well, there is some risk in applying, and there is common-law protection, so a rejection would be really strong evidence your mark is unprotectable; claiming §43(a) is a costless alternative.

Bartow: What is the substantive review applied? If you’re asking whether it’s a rubber stamp, then we would like to know what the examiners asked for in terms of secondary meaning/etc. Are they not asking questions, are they accepting any answer whatsoever to those questions, etc. How do they use the Abercrombie spectrum? Intuition: ITU applications are quite speculative. When there’s an economic downturn, maybe people speculate less.

Beebe: interesting then that speculative filings have the same publication rate.

Bartow: ITUs can be used to mess with a competitor, too.

McKenna: statute says you’re entitled to a registration unless … and that really does set the baseline. Registration rate: doesn’t tell you what if any changes were forced in the registration—disclaimers, limit goods and services, etc.—that’s not a rubber stamp. No way to capture that in this data.

Beebe: can get entire casefile, in theory. If you could show a high number going straight from initial exam to publication, that would be good evidence.

McKenna: ITUs are speculative in the sense of not knowing whether you’ll actually use it. Doesn’t mean they’re more speculative in the sense of having capacity to identify marks/being descriptive v. suggestive. Consider using successful opposition as evidence that the office let through something it shouldn’t. If opposer win rate is low, may mean examiners are doing ok. Interested in seeing breakdown on types of marks—logos v. stylized marks v. word marks.

How many applications in which the examiner asks for evidence of secondary meaning?

Grynberg: doesn’t understand the assumption that registrants generally want to push the envelope. Not hard to come up with a TM that would sail through for an average business. (Really? Maybe a descriptive mark after 5 years.) Interesting that clothing was relatively high in nonpublication—stupid/squatting filings may concentrate there.

Correlation between applications and GDP: suggests that all the legal developments we’ve been bemoaning haven’t led applications to outpace GDP. Maybe law isn’t mattering.

My Q: how many ITUs does the average filer file? There’s the trolls who file for all sorts of categories, but pharmacos may also file a dozen ITUs for pharmaceuticals, which is not quite the same thing.

Re: GDP point I think misses the distributional issues. The average TM isn’t doing better, but the top TMs are taking up an increasing share of the value just as the top earners in the US are taking up an increasing share of the nation’s wealth.

Vetter: in the EU they talk about absolute grounds for registration (problems with the mark as such) and relative grounds (problems with some other existing mark), and he’s always found that useful for classifying things.

Beebe: excluded everything that ended up on the supplemental register—worth making clear about that.

Houston IPIL: Ann Bartow, Greg Lastowka

Ann Bartow, Counterfeits, Copying and Class

Wal-Mart: is very cheap, and lots of people have to shop there. The selections can look good, though, and one reason is that Wal-Mart has a thriving knockoff business: people without the privilege to pay more can still dress nicely.

Who is going to jail for counterfeiting, often a lot more time than it would be for physical violence? People without better employment options; not keeping much of the money. As a community, we rushed to the defense of filesharers: we need to rethink whether people should be going to jail for counterfeiting. Not a fan of counterfeiting, but she wants to do an explicit class analysis: who hurts?

Trade dress protection in product design should simply be eliminated. Bright line test is optimistic, because there are always questions of linedrawing, but it is so easy to get secondary meaning if you have an ad budget that there is no meaningful limit on what can get protected.

Style diffusion is important; post-sale confusion is a terrible idea. Abercrombie & Fitch v. American Eagle—turns out people were buying the clothes because of the way the clothes looked, not because of the A&F TM. When they could get the clothes cheaper at American Eagle, they went there. This is not a TM problem. TM is used to enforce social shaming: “I don’t shop at Wal-Mart” as a way to oppress other kids.

Deborah Gerhardt: Three stripes on Adidas would not be protected, but not the Nike swoosh?

Bartow: the stripes are decorative—Payless didn’t copy three stripes, it did copy two and four and obtained rights over stripes in general. I’m willing to give Adidas three stripes, but not two/four/stripes in general. You could do an amoeba or a different swoosh.

Heymann: class-based aspects versus breadth of TM—would encourage focus on class-based aspects. Ask also who the buyers are of these products. Especially if the Payless product doesn’t look exactly like the Adidas product, the purchasers may differ. People in a different socioeconomic class may know where to get their knockoffs of Coach purses.

McKenna: idea of raising the bar for secondary meaning: you have to show secondary meaning for each claimed feature; your ads don’t focus on this aspect and so you don’t show secondary meaning. Can also tighten the infringement standard to near identicality—maybe you’re arguing that you want an infringement standard that looks more like a design patent standard. Courts used to be comfortable saying that labeling was the way to avoid counterfeiting. Nike might say the swoosh is the label; may struggle to distinguish design from label since Vuitton bag is covered with the logo.

Me: Lawrence Liang on copyright would be a useful reference here. Susan Scafidi’s work on the claims by designers: the shopgirl shouldn’t be able to wear what the socialite should. Jeremy Sheff and Veblen brands: a breadth question about the goals of TM—what is TM for? If we really care about counterfeit drugs/phones and not counterfeit purses, then that affects how we treat TMs in those different areas—and may also cut against Mark McKenna’s argument, since we would be making judgments about what consumers should care about, or at least about what the law will enforce when they care about it.

McKenna: agrees the law does sustain certain consumer preferences and not others; it’s just not honest about it. [I agree: the structural problem is this—to say aesthetic functionality should be treated as robustly and with as much indifference to consumer confusion as utilitarian functionality is often to say that “we don’t care why consumers want what they want, we just want to give it to them,” and wanting an easy-to-hold baby bottle and wanting a Baroque place setting are both preferences that could be different under different social circumstances: there are plenty of places historically that have rejected “empirically” efficient technologies. Once we treat the functionalities the same, we have a hard time saying that preferences for exclusivity are off the table just because they compete with other people’s preferences for the aesthetic benefits. You have to at least then say that we are only interested in the preferences of direct consumers, and, John Stuart Mill-like, we don’t care about the negative utility created for non-consumers by defendant’s consumers.]

Beebe: democracy appears to need ordering devices—or at least we have a habit of having sumptuary codes, methods of identifying distinctions. In consumer society, hierarchy is based on possession of scarcity/rarity. IP is the one place that has as its goal the preservation of artificial scarcity, even when we could make a million copies. A symptom is effects on poor people, but we are all involved in the larger system of hierarchy.

Bartow: rarity might be redirectable to the label/name and not the trade dress.

Greg Vetter: How do we come to grips with people copying, and do we want to allow it? Be more explicit: the judiciary as a class contributes to this through the framework the Lanham Act allows.

Kumar: we’ve seen Supreme Court strike down Federal Circuit’s bright line rules: is the Court going to be receptive to bright line solutions? Doesn’t see Wal-Mart as such a bright line rule.

My tangent: look at huge resistance to eBay among courts applying the Lanham Act. Even though the presumption of irreparable harm from showing likely confusion is precisely the kind of bright-line rule the Court condemned, lower courts are entirely unwilling to say so. And I think this is because the empirics—the assumptions about how the world works, and specifically about how harm to TM owners occurs—are so encoded in judges’ minds that this won’t change until the default stories they have change.

Grynberg: how do consumers of these products feel? Do they condemn free riding? What do we know about this? Maybe people don’t like it when other people buy counterfeits, but maybe that doesn’t matter (John Stuart Mill again!).     

Vetter: there’s been a general failure to get empirical evidence. In patent, courts are most willing to eyeball tech and decide whether it’s obvious when it’s simple, and that’s mostly what happens with product design as well.

McKenna: Anti-free-riding principle is not uniform. Nobody thinks it’s wrong to copy a device whose patent has expired. Nobody thinks it’s wrong to copy something unpatentable. Every time you see a Walgreens on a corner, there’s a CVS on the opposite side. One figures out where a good intersection is, and the other copies. Nobody thinks that’s a problem. Free riding is an impulse that sometimes applies and other times not, so it’s not a good enough explanation. Beebe’s point: why do courts react badly to this type of free riding? Why is it good to copy mechanical features that aren’t patented but bad to copy aesthetic features that aren’t patented?

Heymann: Different people have different reactions. In part some are educated by the law and the marketers about where the line is. Also wonders about how the class interactions are occurring: are people really interacting across classes so much that they are making judgments about who has a real Rolex?

Bartow: she objects to blurring knockoffs and counterfeits. Proper labeling makes it a knockoff; even if you know that it’s a counterfeit and there’s no likely confusion, it’s still a counterfeit.

Lastowka: doesn’t this cut down on your argument substantially?

Gerhardt: maybe a safety example might help—where the TM guarantees something other than social class.

McKenna: design features are TMs. Maybe you just want to say normatively is that a counterfeit is a copy of a product that uses the word mark or logo; every time you expand what you’re willing to cover you make it harder to draw lines.

Maybe you’re only protecting design features when there’s exact copying.

Gerhardt: Charlie Henn says they won the Adidas/Payless trial when opposing counsel picked up the wrong shoe—when their own lawyer couldn’t distinguish three from four stripes, who decides?

Greg Lastowka, Trademark’s Daemons

What’s been bothering him: a 10,000-foot view. We say TM is about consumer confusion, but what is this dilution stuff about? Why all these weird results? The trope of the daemon: judges, given the malleability of likely confusion and flexibility in using the factors, often end up deciding cases in ways that purposes that don’t have much to do with the supposed foundations of TM law. When they do, it makes the doctrine incoherent.

One example: misusing TM to serve copyright’s goals. Sega v. MAPHIA, where bulletin board serves copies of Sega games, with Sega TMs in software because they were true copies. Is anyone confused about source? No, they’re coming from Sega! But the court says that consumers would think they were endorsed/sponsored by Sega when downloading from this pirate site. Trade dress are often situations where TM is trying to pick up copyright’s slack: Wall of wine case: judge goes on at length about how beautiful and award-winning the wall of wine is. The judge thinks something this nice deserves protection, then finds likely confusion, when the store is in a different region, with a different name. Protection of creativity via TM.

Another: identity. White v. Samsung is a perfect example—somehow when I see a robot I’m confused and I think the robot is the Vanna White mark. Bizarre except as importation of right of publicity. The merchandising cases also make more sense seen this way. Individual team logos are marks associated with collective identities; courts see free riding on those collective identities and feel uncomfortable about misappropriation.

Efficiency: a lot of doctrine says Landes & Posner got it right in their economic analysis of TM law. Dilution especially, talks about TM as if it were a propertization regime. TM owners invest in the value of their brands and own that value and others aren’t allowed to profit from them. And that’s efficient. Search costs replace consumer deception. It’s not that likely confusion is clear, but search costs are license to go crazy, as some “explanations” of dilution show. ACPA: cybersquatting doesn’t raise much likely confusion; required bending the doctrine. ACPA put into TM statute a prohibition that has to do with reducing search costs, not confusion. Efficiency works into a large portion of TM at that law—doesn’t know if it could be expelled.

Fair use: a mess in TM. Classic fair use (descriptive/non-TM use) is completely fine. That’s nonconfusing and noninfringing. Outside the scope of the TM owner’s rights. When TM doctrine grows, then we see a need to allow consumers and competitors to use the TM. Nominative fair use is really about expanding TM rights because it shifts the burden to disprove confusion to the defendant—a backformation of the expansion of TM. (This is like the current reading of Folsom v. Marsh in copyright: fair use turned out to be a way to allow overall rights to expand.)

Motivations that seem to be fueling judicial decisions that aren’t often explicitly noted. We should bring them out into the open.

Bartow: another possibility for a daemon: courts that don’t understand that the Abercrombie spectrum requires looking at the mark in the context of the good.

McKenna: struck by Lastowka’s use of “deception” as the core of TM, because he thinks that’s right. So the daemon that the rest of the daemons come through is actually confusion. If courts were required to talk about deception, many of these problems wouldn’t arise. There are so many things you can call confusing—but about what? TM shouldn’t be about thinking, it should be about preventing mistaken purchasing decisions.

Lastowka: agrees—deception is really what we’re getting at.

McKenna: the idea of uncertainty, not really knowing, maps really well onto search cost idea. Deception doesn’t map well onto search costs.

Vetter: A daemon is a judge-influencing meme. Maybe “efficiency” should be replaced with “economics.” Or even “property.”

Lastowka: all of the above, but judges use the word efficiency, which is why he picked it.

Vetter: the fair use one is a parasite of the first three—it would go away in a different ecology.

Grynberg: Unfair misappropriation of brand value: how is this coherent/meaningful? Very easy to describe creativity/identity daemons in the context of courts trying to vindicate “if value, then right.” The real daemon is the view of goodwill as having any kind of meaning independent of consumer interest.

My reaction to Vetter’s idea: may make sense to look at really naïve TM opinions by judges clearly unfamiliar with the concept, as with the district court judge in the Crimson Tide paintings case now on appeal. Are they doing better with their outcomes? They aren’t infected by any daemons.

Beebe: talk about misappropriation directly.

Lastowka: judges are sensitive to that; might fit into an INS v. AP doctrine.

Heymann: think also about why plaintiffs are suing in this way: what injuries do they feel for which they are seeking redress? So much of the law comes through threat letters or filing the suit even if it’s not adjudicated. Corporate psychology: what interests are they trying to vindicate? Why does TM feel like the way to handle the problem?

McKenna: goodwill and creativity are related: if you don’t have a strict definition of goodwill as consumer purchase-related, and see it in general terms of liking the company, then it makes sense to say that people like companies that offer them creative things and find that creativity is within the interests TM protects.

Bartow: does have empathy for celebrity desires not to be associated with bad products or offensive products.

Lastowka: is sympathetic to that goal too, but doesn’t fit TM.

Houston IPIL conference: Mark McKenna

2011 IPIL/Houston Symposium
Trademark: Today and Tomorrow

Mark McKenna, Dysfunctionality

Very difficult to teach functionality: why? In mechanical functionality, courts have at least two very different ideas about what functionality is supposed to do, making it difficult for them to agree in any particular case. Worse in aesthetic functionality: some courts reject the concept outright, others are uncomfortable with the consequences.

Window into bigger problem with TM: despite all TM’s talk about how its goal is to promote competition, it doesn’t have a theory of fair competition. Thus when you’re trying to judge unfairness, there’s no backstop. What is competition supposed to look like? This is why courts are attracted to free riding and market preemption ideas, because they have no idea where the concepts are supposed to stop.

Competitive baseline: mechanical/utilitarian functionality. Traffix is an attempt to resolve a tension between 2 different views: (1) Right to copy: Sears/Compco; basic idea is that the baseline is that everything is available for free copying, and deviations from that are to be secured from copyright and patent. Labeling is the remedy. (2) Need to copy: puts burden on defendant to establish need for a particular feature, and if not TM operates unproblematically. Traffix is (1) because many patented features don’t create market power and if the patent is expired there is often equally good technology given the advance of tech over time. Expired patent is not strong evidence of (2), but it’s good evidence of (1).

But a lot of courts refuse to accept what the Court said in Traffix. Federal Circuit says that Traffix confirms what it was doing all along, which isn’t so. Courts have oscillated between views (1) and (2) for a hundred years. Sears/Compco is (1), Bonito Boats is (2)—recharacterizes Sears/Compco to say that as long as there’s a functionality defense and a secondary meaning requirement, preventing access to the feature is fine.

These are both competitive baselines; they just conflict. (2) says that if TM would regard this as a source identifier there’s no problem as treating it as such without a special need. (1): the defendant always wins. (2): the plaintiff always wins.

What about aesthetic functionality? No similar concerns about design patents. Very clear trend: design patents are not to be worried about. Courts don’t think aesthetic/design features are competitively important. Access to mechanical features is important, but design features are not and can be designed around. Implicit assumption about what kind of competition we should have: competition to develop aesthetically pleasing designs, but not non-patent competition about mechanical features.

One reason courts really struggle with aesthetic functionality is that they’re uncomfortable with its consequences. They think of it as a doctrine that knocks out protection for a feature full-stop—not protectable against anyone, like genericness. But that’s often not really what the defendant is saying—the deft is saying that “the way I’m using this is not as an indicator of source.” Au-tomotive Gold is like this—they’re not saying that VW isn’t a mark for cars, just saying that when we use it on keychains we’re using it in a way functional with respect to keychains—people don’t care whether VW made it, they just want it to match their cars. Courts are uncomfortable with thinking of aesthetic functionality as a “functional use” defense—it’s functional for me.

Market definition: Dippin’ Dots pellet ice cream case. P says they don’t need to make pellets to compete in the ice cream market, look at Ben & Jerry’s. Court says: they don’t want to compete in the ice cream market: they want to compete in the flash frozen ice cream market. They aren’t substitutes for McKenna’s kids. How you define the relevant market in which there’s supposed to be competition is dispositive, but courts do it without a methodology or without thinking of substitution. Not advocating antitrust test, but courts aren’t even aware of the fact that figuring out whether there’s a competitive disadvantage you need to know what the market is. Example: orange flavored soda doesn’t need to be orange; brown/purple would still taste like orange soda. [This is not quite true.] The problem is that if it wasn’t orange people wouldn’t buy it. So functionality requires that we define the market is “orange soda,” not soda, and TM doesn’t have a way to talk about it.

Extreme doctrines that people have been critical of like post-sale confusion: is competition just price and quality competition, or does it include competition on the dimension of brand image? Many cases think: even if access to a feature is a relevant quality consideration, but we should encourage people to compete on brand image, we shouldn’t allow them access to those features—make them create new images. Coca-Cola isn’t a market, it’s a brand image. That helps explain what’s going on in the more extreme cases.

My thoughts: [research on how color influences flavor judgments, re the orange soda example] Functional use: like descriptive fair use—it’s descriptive for me. Interesting test cases: iPodmybaby where, assuming the click wheel is functional, it isn’t functional for this use; TerraCycling bottling/fake safes made out of actual soda cans or Cheetos cans. Functionality of the Hooters trade dress: what kind of competition is ok? Safecut/baby bottles case: how do configuration claims come into this, when the claim is that this particular configuration offers special advantages and disadvantages compared to others?

Ann Bartow: disclosure doesn’t work, so labeling might not be enough in Au-tomotive Gold.

McKenna: but that’s what functionality is: some confusion is tolerated because the feature is functionality.

Bartow: but that’s an upward slog.

McKenna: it’s almost always a source indicator and functional. His view is that you can decrease confusion through things short of an injunction, but you can’t do anything to preserve competition once you’ve enjoined. (He also thinks that confusion over authorization shouldn’t generally matter; see his & Lemley and my work on materiality.)

Greg Lastowka: what kind of competition do we think is socially useful? Counterpart to aesthetic functionality is copyright, not patent.

McKenna: in a lot of cases it’s design patent—design of bags or clothes.

Lastowka: Betty Boop case—an appeal to things that are aesthetically pleasing. We’re not depriving the public of something useful.

McKenna: but that’s the judgment that he questions. Why do courts make that normative choice without fully explaining it.

Lastowka: echoed in patent and copyright—you can’t have Mickey Mouse absent fair use.

McKenna: but we’re comfortable with that in patent too. The analogy works fine (except that copyright no longer has a functionally limited term).

Lastowka: copyright won’t protect some of the broader trade dress claims.

McKenna: courts are descriptively comfortable with using TM, but from a right to copy perspective the fact that a design is outside of copyright is a reason not to protect it.

Lastowka: roots of doctrine are in utility not aesthetics; always shadowy/questionable.

McKenna: some courts have accepted competitive need, but parties have shown up saying “I need this aesthetic feature too.”

Lastowka: but the competitive need is [often] derived from the brand not from the product. So that could cut deeply into brand value.

McKenna: this kind of brand value exists only because of the law. No one would’ve thought 100 years ago that a Betty Boop T-shirt implicated brand value. TM has been a one-way ratchet.

A couple of cases use “contextual functionality”—Rosetta Stone: Google is using the mark for the functional purposes of locating things.

Aesthetic functionality gets a lot of pressure because our other tools are bad—we accept almost anything as secondary meaning. Aesthetic functionality as functionality of d’s use may make more sense with noncompetitors as in Au-tomotive Gold, because when competitors are using the feature their claim is likely to be “everyone in this market should be free to use this feature.” (Though he notes that VW is likely to claim that it’s a competitor in the market for keychains.)

Laura Heymann: the patent might be able to tell us what the market is in some sense. On labeling: the court in Traffix says you don’t have to put a box about the springs—you can compete without engaging in extra effort to hide the feature/decrease confusion.

McKenna: though we now see labeling requirements in genericness cases. Putting a box around the springs requires making changes to the design; there’s nothing problematic about requiring labeling and packaging in the sale, but you can’t require a box that would stay on during use.

Heymann: aesthetically, courts are concerned with the defendant creating the market through its own activities. The question isn’t so much “is there a market for black outdoor motors” but “are consumers likely to see source indication.” But that gets back to circularity/how law shapes preferences.

McKenna: it’s often really hard to tell whether the courts are saying there’s aesthetic functionality or no secondary meaning in the classic cases like Wallace. But it’s striking that courts in those cases aren’t saying any of the things courts ordinarily say about secondary meaning: empirical evidence. Courts are saying “there’s no secondary meaning here and don’t try to tell us there is,” which is the same as saying “don’t bother to prove secondary meaning; we don’t care if there is.”

Heymann: does calling that functionality get you something, as opposed to saying that we’re going to call it nonconfusing by fiat? [This is the nominative fair use debate.]

McKenna: he’s taking the terms as they find them. McCarthy says aesthetic functionality is bunk, but that there are some things functional for marketing purposes—he just doesn’t like the word. Not trying to change the terminology. Focusing on secondary meaning makes him nervous because courts will inevitably find it in bad cases.

Michael Grynberg: secondary meaning intrudes into right to copy v. competitive need. Right to copy = anything not copyrighed or patented. But definition of right to copy almost excludes product design.

McKenna: trade dress can often be patented.

Grynberg: but trade dress is not a null set.

McKenna: part of this is terminological. Packaging/design. To the extent there is a category of protectable configuration, it would be something outside the legitimate subject matter of patent or copyright. Lots of things are allowed—packaging, maybe restaurant design. [This really does limit TM in most cases to words and symbols. I’m surprisingly okay with that.]

Sapna Kumar: are courts capable of coming to consensus on what it takes to promote free competition? We don’t usually think of them as all that competent on the matter.

McKenna: courts have done all of TM—created all the relevant doctrines, so there’s greater comfort. Not sanguine about turning it over to legislature; usually a disaster in TM. This is the kind of policy judgment Congress could make, and one could say that Congress did make it by creating patent and copyright law.

Me: (1) Discussion with Heymann shows structural similarities between emergence of nominative fair use from descriptive fair use and emergence of aesthetic functionality from utilitarian functionality: as it turns out, and corresponding to the expansion of the subject matter of TM and the scope of what we call actionable confusion, the thing we want to do with fair use/functionality needs to be done in 2 different ways depending on how the defendant is using the mark at issue. (2) ok, talk about symbols. Many will be within subject matter of copyright, so there are strong implications for them too.

Reading list: the Statute of Anne

Parts of a very interesting article by Oren Bracha, The Statute of Anne: An American Mythology, 47 Houston L. Rev. 877 (2010) (full symposium here), resonated with some other reading I’ve been doing. Bracha traces the role of natural rights theories of property in breaking down a variety of initial copyright rules—unsuccessfully with respect to the limited term, but successfully in most other areas. He discusses a set of 19th-century arguments about extending copyright protection to foreigners. Proponents of the natural rights/property theory of copyright said it was simple: if copyright is property, then it must be recognized no matter the country of origin. Sample quote: “If a foreigner brings into the country any material product of his labor, wherever produced, and whether he hail from the rising sun or the setting; whatever his nation, his color, or his product, we receive him hospitably, and extend protection to his person and his property. Why, then, if he brings an immaterial product, a literary work, shall we rob him?”

The reason I found this so fascinating was that there was, simultaneously with these arguments, a vicious debate over the treatment of property in slaves across jurisdictions: was a slave brought into a free jurisdiction thereby freed? What obligation of return or compensation did free polities owe slaveowners from slave polities? In fact, bringing a slave into certain jurisdictions did immediately convert him or her from property to a person, which slaveowners characterized as robbery.

Obviously, the free polity had determined that it was wrongful to own slaves, which was not the case with domestic copyrights. (Though there is also the precedent of banning the slave trade while allowing continued domestic slavery.) But it strikes me that a historian might write a really interesting book about intellectual property theory in the context of property theory overall in the 19th century, with specific reference to what kinds of property are acceptable. Especially given the long rhetorical linkage of works of the intellect with children, I think there could be some fruitful comparisons. The US could not survive half free and half slave, and eventually it couldn’t sustain denying foreigners copyrights either.

The advertiser of ice cream: all natural claims and alkalization

Astiana v. Ben & Jerry's Homemade, Inc., 2011 WL 2111796 (N.D. Cal.)

Plaintiffs in this putative class action alleged that Ben & Jerry’s and Breyers misrepresented ice cream containing Dutch or alkalized cocoa as “all natural,” even though alkalized cocoa is processed with potassium carbonate, a synthetic ingredient. As the court explained, unsweetened cocoa powder has two forms—unalkalized or alkalized, both of which are safe. Alkalized is less acidic and has darker color, reduced sourness and bitterness, and improves solubility in some drinks compared to unalkalized. But alkalization also destroys many of cocoa’s flavonols, water-soluble pigments that allegedly contribute health benefits.

The Center for Science in the Public Interest sent a letter to Unilever, the parent company of Ben & Jerry's and Breyers, identifying approximately 50 products CSPI claimed were improperly labeled. One category was chocolate ice cream and frozen yogurt containing alkalized cocoa labeled "all natural." Ben & Jerry's, but not Breyers, agreed to phase out the use of "all natural" on such products. (My beloved Häagen Dazs Five also uses “all natural” on its chocolate flavor (not my favorite: try the mint and the coffee), though the ingredient list includes cocoa processed with alkali.)

Plaintiffs filed on behalf of a nationwide class and a California class, alleging consumer protection violations (“unlawful” conduct based on violation of California’s Sherman Food, Drug, and Cosmetic Law; violation of California law incorporating all relevant regulations of the FDA; and “fraudulent” conduct) as well as unjust enrichment.

Defendants argued this claim was not plausible; the court found that the defendants’ arguments, though somewhat persuasive, involved questions of fact not resolvable on a motion to dismiss.

Defendants made the now-usual standing arguments, claiming that plaintiffs received the benefit of their bargain and consumed the product, despite defendants’ guarantee of satisfaction “or your money back.” Plaintiffs argued that they adequately alleged that the ice cream they bought contained potassium carbonate, an undisclosed synthetic ingredient, and that had they known that the ice cream was not “natural” they would not have bought it. Moreover, defendants haven’t offered to return their money and are defending the lawsuit instead. The court found adequate standing allegations.

The complaint was also pled with sufficient particularity. Defendants argued that plaintiffs’ theory requires “all natural” to be a term of art. Thus, to be deceived, a consumer would have to be familiar with the FDA’s “natural” policy and USDA regulations about what a “synthetic” is, then interpret defendants’ “all natural” label as a representation that the alkali used in the Dutch cocoa process is not synthetic as defined by the USDA (which would apparently mean in this instance that it is sodium carbonate) and buy based on that belief. But false advertising law focuses on a reasonable consumer, and defendants argued that it was not plausible that a reasonable consumer would think this way. The court found that none of this was a failure to plead with particularity: the statements were allegedly misleading because defendants didn’t disclose that the alkalizing agent was a synthetic, potassium carbonate. Defendants were arguing factual disputes.

Preemption: Non-identical state requirements are preempted. Defendants argued that plaintiffs were seeking to impose disclosure requirements different from the FDA’s policy on natural claims, though they admitted that the FDA does not require a statement of which alkali was used. Defendants contended that the FDA’s policy was an advisory opinion that the FDA was obligated to follow, and that plaintiffs were seeking to create a “natural” rule where the FDA has not.

Plaintiffs responded that the FDA has not regulated “natural” or “all natural,” and thus preemption could not apply. The court applied a presumption against preemption in the area of food labeling, historically governed by state law. The NLEA governs statements about nutrients such as fiber and fat, and “diet” as applied to soft drinks, but there’s no regulation of the use of “natural” on food labels, so there was no preemption. Nor was abstention appropriate; abstention doesn’t generally involve deference to a federal agency.

The court refused to dismiss the plaintiffs’ claim for restitution on a theory of unjust enrichment based in quasi-contract. In California, unjust enrichment is not a cause of action, but a principle synonymous with restitution, which can be alleged in connection with a quasi-contractual claim.

Fraud: defendants argued that plaintiffs couldn’t plausibly claim that defendants acted knowingly and with intent to deceive, because it didn’t make sense to allege that, though defendants complied with FDA regulations by disclosing the ingredients, they deliberatedly didn’t disclose use of potassium carbonate in order to dupe consumers into believing they were getting cocoa alkalized with sodium carbonate. Plaintiffs responded that they alleged that defendants knew or recklessly disregarded the fact that their ice cream was not “all natural,” and thus knew the products were misleadingly labeled. The court found that issues of reliance and materiality were too fact-dependent to be resolved on a motion to dismiss.

The fundamental dispute over what “natural” means was likely to present factual disputes. “The only FDA guidance appears to be a distinction between ‘natural’ and ‘synthetic’ in the ‘policy,’ but that definition in the Federal Register is qualified as meaning something that would ‘not normally be expected to be in food.’ Surely, that characterization raises multiple linguistic and philosophical questions, not to mention factual questions.” The way I’d frame the court’s conclusion is something like: consumers may well have nonspecific expectations about what “natural” means but lack the specific knowledge to apply it, so telling them that the cocoa was alkalized—even telling them that it was alkalized with potassium carbonate—wouldn’t help them apply their preference for “natural” foods. One way to interpret this would be to say that, then, consumers don’t really care about “natural.” But another is that they do care but seek the assistance of truthful experts—and the producer can be expected to be expert—in implementing those preferences. These are both factual and philosophical questions about what we want consumer protection law to be doing in a highly complex consumer society in which consumers can’t reasonably be expected to understand the details of many claims.

Defendants, in another increasingly common move, sought to strike the class allegations, arguing that the class was not ascertainable because plaintiffs didn’t plead facts showing that any member of the proposed class knew which alkali would have been used in the ice cream they bought. So, because some ice cream might have had sodium carbonate and some potassium carbonate, and because the label wouldn’t have disclosed which, even the most attentive consumer couldn’t know whether she was in the class. But the class definition is those class members who bought products labeled “all natural” but contained alkalized cocoa processed with a synthetic ingredient; those people couldn’t self-identify.

Defendants also argued that a class action was not superior because of defendants’ money-back guarantee.

Certification decisions are normally done in motions under Rule 23. A few courts have struck class allegations using Rule 12(f), but the court found that inappropriate. The class allegations were relevant to the subject matter of the litigation, and not redundant, immaterial, impertinent or scandalous, and thus not subject to Rule 12(f).