Lawyer's anti-supplement video protected by anti-SLAPP law but claim still survives

Brain Research Labs, LLC v. Clarke, 2012 WL 239578 (Cal.App. 1 Dist.) 

BRL sued lawyer Thomas Clarke and his firm, alleging false and defamatory statements about Procera, a BRL product marketed as a supplement.  Defendants moved to strike under the anti-SLAPP law and the trial court denied the motion, holding that though the statute applied, BRL had shown a probability of prevailing on the merits.  The court of appeals affirmed. 

BRL contends Procera helps people who experience “forgetfulness, fuzzy focus and attention, mood swings and mental fatigue brought on by stress, sleep loss, poor diet and aging.”  Clarke filed a class action in state court on behalf of a consumer, alleging that Procera was falsely advertised, that BRL failed to disclose its dangers, and that Procera was an unapproved drug marketed in violation of FDA regulations and California law. 

In 2009, Clarke posted a video on YouTube saying that Procera doesn’t work, that BRL’s claims about its efficacy are false and illegal, and that Procera’s ingredients cause harmful side effects and interactions with prescription drugs.  Clarke also attacked the makers of “so-called dietary supplements,” calling them “crooks and cheats” and “scam artists,” who “do not care if you live or die.”  At the end, Clarke invited viewers to contact him if they want an attorney to help them recover money “and to put out of business those who have cheated you.”  KTVU also broadcast a segment about Procera with statements from Clarke. 

BRL sued based on the following statements: (1) “I [Clarke] do not want you to die or suffer long term injury or disability because you forsake medical treatment for the false promises that are made by so many so-called dietary supplements. These scam artists do not care if you live or die. They only want you to live long enough to give them your money. Today I want to talk to you about a so-called dietary supplement known as Procera AVH.” (2) “As you can tell, Procera contains dangerous drugs with the potential to cause extensive harm or even death.” (3) “This product is not an alternative to proper medical attention for your illness [or] disease. Do not fool yourself. If you're not getting medical treatment, you may die or suffer serious permanent injury or disability.” (4) “Remember, the life you save [may] not only be your own, but those of your friends, family, [neighbors] and fellow residents and citizens of this great country.”  

BRL also alleged falsity in that BRL hadn’t actually made the claims Clarke challenged; Clarke said that Procera claimed to address “[d]epression and other forms of mental illness, mini-strokes in the brain, the early stages of dementia, the plaques associated with Alzheimer's disease, ... genetic diseases such as Parkinson's or Lou Gehrig's disease... So what Procera claims is that if you are suffering from symptoms of these types, the solution is, what a surprise—this product. Just send money and all your problems will disappear like so much snow on a sunny day.”  BRL alleged that it hadn’t advertised Procera for use in treating the effects of a stroke or head injury, depression, or Alzheimer's disease, or for the protection of the liver from the adverse effects of alcohol. 

BRL also based its claims on statements by Clarke on TV: “Unadulterated theft. You sell a fake product that doesn't do anything, with all kinds of promises, and you get people to give you lots of money for it. It's a nice, profitable scam.”  “They [the FDA and Federal Trade Commission] just don't view this as a high-priority item, even though people are dying from some of these products.”  “Absolutely ineffective. Matter of fact, there have actually been trials with humans that have shown that it doesn't work.” BRL alleged that it hadn’t committed “theft,” no one has died from Procera, and there have been no trials showing it does not work. 

BRL asserted claims for defamation, intentional interference with contractual relationships/prospective economic advantage, unlawful/unfair business practices, and false advertising under California state law.  Defendants filed a motion to strike (BRL’s initial claims against the TV station were voluntarily dismissed). 

The trial court ruled that Clarke’s statements constituted protected activity and related to an issue of public interest.  It then found that the YouTube statements fell within the commercial speech exemption to the anti-SLAPP statute, but the statute still applied to all the causes of action because they were “mixed,” including allegations related both to the protected TV statements and the unprotected YouTube statements.  The court of appeals rejected the trial court’s reasoning here and held that the commercial speech exemption didn’t apply to the YouTube statements.

The commercial speech exemption applies to statements about the speaker’s or a competitor’s operations, goods, or services made for the purpose of promoting the speaker’s goods or services to a consumer audience.  Though the YouTube video was part of an ad campaign, the challenged statements weren’t about Clarke’s services nor those of Clarke’s competitors.  They were about a noncompetitor, BRL. 

Thus, BRL needed to show a probability of prevailing under any part of its claim to avoid having the claim stricken. 

The court of appeals first found that the YouTube statements weren’t protected by the litigation and common interest privileges.  The litigation privilege applies when a communication functions intrinsically to advance a litigant’s case.  The court determined that the video didn’t have the required functional connection to the consumer action to trigger the privilege. 

Defendants argued that the YouTube statements were privileged as part of an attorney solicitation of potential plaintiffs for their class action.  However, that a communication is protected by the litigation privilege doesn’t automatically make each individual statement privileged if extraneous to the litigation.  Even though BRL alleged that defendants’ intent was to solicit plaintiffs, intent isn’t dispositive.  Here, the video content went beyond the class action.  The allegations in that complaint related to one product, Procera.  The YouTube video included broad statements addressing “so-called dietary supplements” generally, outlining the types of advertising claims allegedly made by the manufacturers of such products, and cautioning consumers about the risks of using them instead of obtaining proper medical treatment. The video began with Clarke saying: “You probably know me as the attorney who's very concerned about your health. I do not want you to die or suffer long term injury or disability because you forsake medical treatment for the false promises that are made by many so-called dietary supplements. These scam artists do not care if you live or die. They only want you to live long enough to give them your money.”  (If Procera is used as an example, I don’t see why this isn’t closely related enough to the litigation, especially if this intro is a lead-in to a solicitation.  Also, if it’s not about Procera, how can the statements be defamatory of BRL?) 

After the intro, Clarke said, “Today I want to talk to you about a so-called dietary supplement known as Procera AVH”; he then discussed some of the claims allegedly made by BRL about Procera. The video continued with statements about Procera with more general assertions about “so-called dietary supplements” and their manufacturers. Of BRL: “Like all scam artists to achieve their goal of getting their hands on your money they will say, they will promise you anything.”  Later, the video stated that failure to disclose potential side effects and interactions with prescription drugs is “standard operating procedure for most dietary supplements. Extravagant claims combined with silence about dangers and harm.”  After stating that Procera is not an alternative to proper medical attention, Clarke said: “Do not fool yourself. If you're not getting proper medical treatment, you may die or suffer serious permanent injury or disability. That is the simple blunt truth.” 

Clarke also said that BRL was making illegal claims: “It's also important for you to be aware that all of these claims are illegal.… So if a dietary supplement like Procera AVH claims that it can cure an illness or disease or the symptoms of an illness or disease then it is making an illegal claim. So all these claims made by Procera are illegal.”  Likewise, he offered to provide an “informative booklet” about the “rules” that govern “[w]hat claims can and cannot be made by the sellers of dietary supplements”; the booklet “also tells you how to protect yourself from these crooks and cheats.”  Finally, Clarke invited the viewer to call with any questions about the booklet, and to contact Clarke if “you want an attorney to help you recover your money and to put out of business those that have cheated you,” again without specific reference to Procera.  As a result, the video as a whole did not function intrinsically to assist in obtaining judicial relief in the class action. 

Along with the content, the YouTube distribution provided support for this conclusion.  The litigation privilege generally doesn’t cover statements made to nonparticipants in an action, particularly “litigating in the press.”  Defendants’ argument that the video was narrowly targeted because an internet user would find the video only by conducting a search using terms such as Procera failed because the video was generally available and could be accessed by anyone, regardless of whether he or she had a potential claim. 

The common interest privilege also failed; that’s a conditional privilege for a communication made without malice to an interested person by one who’s also interested, is sufficiently related to the interested person, or is requested to give the information.  General curiosity isn’t enough to trigger the privilege, which doesn’t protect broadcasts or other communications to the general public. 

Thus, the denial of the anti-SLAPP motion was affirmed. 

Comment: hunh?  Did I miss the part where BRL showed a probability of prevailing on its claims?  Did defendants concede such a probability for purposes of this appeal? I am confused.

Attacking national company's TMs doesn't create personal jurisdiction in California

Zero Motorcycles, Inc. v. Pirelli Tyre S.p.A., 802 F.Supp.2d 1078 (N.D. Cal. 2011)

Zero filed for declaratory relief against Pirelli seeking to protect its use of ZERO and ZERO-formative marks.  Zero makes electric motorcycles under the ZERO MOTORCYCLES mark in many foreign countries, since 2007.  It has US registrations for ZERO on electric vehicles, namely motorcycles, as well as ZERO MOTORCYLES, ZERO DS, ZERO S, ZERO SS, ZERO X and ZERO MX. Pirelli makes various products, including tires for vehicles, and owns a number of trademarks which incorporate the ZERO mark.  (There are a number of Pirelli companies; the one that conducts business in California is Pirelli Tire LLC.) 

Zero alleged that Pirelli began a global campaign against Zero’s trademark registrations in 2009, filing oppositions and cancellations in the USPTO and elsewhere, and that Pirelli submitted a declaration of use and incontestability claiming that the ZERO mark was in use in the US.  Its exemplar was marketing material showing a tire with the P ZERO mark, which Zero alleged was false because the exemplar was for P ZERO, not ZERO. 

Zero sought to join the US subsidiaries, a motion the court denied because of undue delay.  In addition, the new claims Zero sought to assert didn’t work.  Zero wanted to add a Lanham Act disparagement claim; it was unclear whether the disparagement was of Zero’s products or of its marks, but no claim for trademark disparagement exists under the Lanham Act.  The allegedly false assertions were that Pirelli has used a Zero mark identical to Zero’s mark and that Pirelli swore that Zero was confusing and diluting Pirelli’s marks.  But these misstatements were made to the PTO, not in commercial advertising or promotion. Moreover, they related to Zero’s marks, not to its goods or services (what about its commercial activities?). 

The California UCL claim failed; it was too conclusory, and Zero didn’t allege facts showing a willful intent to provide false testimony to the PTO, which would have been “unlawful.”  Pirelli allegedly lied about its use of the Zero mark, but it provided the exemplar using P ZERO, and the fact that it submitted that exemplar “undermines any assertion of a willful intent to deceive the PTO, since the PTO obviously could assess the accuracy of Defendants' representation by comparing it to the exemplar.”  Likewise Zero failed to plead unfairness; Pirelli “did little more” than seek to protect its IP rights. 

More interesting, perhaps, was the court’s ruling on personal jurisdiction over the non-US defendants. After finding no general jurisdiction, the court analyzed whether their alleged attempts to harm Zero’s marks created specific jurisdiction.  In the 9^th Circuit, specific jurisdiction requires purposeful direction to the forum/resident or purposeful availment of the forum; the claim must arise out of or relate to those forum-related activities; and the exercise of jurisdiction must comport with fair play and substantial justice.  Satisfying the first two prongs shifts the burden to the defendant to show that the exercise of jurisdiction would be unreasonable. 

Purposeful direction applies to tort claims.  This means an intentional act, expressly aimed at the forum state, causing harm the defendant knows is likely to be suffered in the forum state.  A merely foreseeable effect in the forum state is generally insufficient.  Though Pirelli’s acts were intentional and may have had effects in California, the court found no express aiming.  Instead, Pirelli allegedly aimed its activities at the PTO, in DC.  (Compare the Second Circuit on copyright infringement.) 

Another case found that a letter sent to a Virginia domain name registrar challenging plaintiff's use of a particular domain name was expressly aimed at California because it individually targeted the plaintiff, a California corporation doing business almost exclusively in California.  But Zero is a Delaware corporation doing business worldwide.  Thus, Pirelli’s conduct didn’t individually target Zero in California with the intention of disrupting its California business. 

Likewise, Indianapolis Colts, Inc. v. Metropolitan Baltimore Football Club Ltd. Partnership, 34 F.3d 410 (7th Cir.1994), was no help.  In that case, the only activity the Baltimore defendant had planned in Indiana was broadcast of its football games, which were going to be shown nationwide. But the court concluded that the plaintiff’s trademarks would be affected in Indiana, making jurisdiction proper.  The Ninth Circuit has rejected that expansive reading of Supreme Court precedent, refusing to hold that a foreign act with foreseeable effects in the forum state always gives rise to specific jurisdiction.  More is required: specific aiming at the forum. 

Likewise, Zero’s claim didn’t arise out of Pirelli’s forum-related activities: there was no showing that but for Pirelli’s forum-related conduct, the injury wouldn’t have occurred.  The conduct at issue here took place outside of and was not related to California.  Even if Zero had succeeded on the first two prongs, the court found that exercising jurisdiction would be unreasonable in this case, because defendants are Italian entities that have no reason to be in California.  They purposefully availed themselves of the benefits of DC through proceedings before the PTO, and can be sued there.

reverse passing off was harmless

Paper Thermometer Co., Inc. v. Murray, 2012 WL 194369 (D.N.H.) 

Notably only because the judge, treating this as a false advertising case, saw something that most trademark cases miss.  PTC makes paper thermometers, which change color when exposed to certain temperatures.  It sued Murray for copyright infringement and false advertising and also sued a couple of former employees, the Duerigs, for misappropriation of trade secrets,.  (I omit some other claims and also the family dispute aspect of the case.) 

Murray, a bartender at a restaurant where the Duerigs frequently dined, talked to them about sales or marketing jobs at PTC.  Though there were no such jobs available, Murray asked whether he could buy products from PTC and resell them, and the Duerigs said that many people did exactly that and that they saw no reason why Murray couldn’t do the same.  Murray set about establishing a resale business through which he could resell PTC's paper thermometers to third parties. He asked the Duerigs for samples, and they complied, seeing him as a potential customer. 

Eventually, Murray settled on a name, Dishtemp Safety Company, registered a second level domain name, established a toll-free telephone number, and set up a PayPal account.  But, when he launched his site in summer 2010, Murray used some misleading or ambiguous text that suggested that he was manufacturing labels, rather than merely reselling PTC's products. 

PTC complained that Murray included a quote from Food Safety Magazine extolling the virtues of PTC's paper thermometers, but omitted words from that quote that identified PTC as the manufacturer of those products. PTC also complained that the “About Us” section contained a false and misleading claim that “[f]rom our tightly integrated sales and manufacturing facilities in southern New Hampshire, DishTemp Safety manufactures and distributes the most accurate commercial dishwashing temperature testing indicators available. Our engineers have over 30 years of field tested experience.”    Murray didn’t manufacture anything or employ engineers.  But PTC knew that early on, and Murray’s plan all along was to be a reseller.  When the Duerigs left the company, they gave Murray contact information for someone still there so he could continue to get supplies from PTC.  PTC nonetheless maintained that Murray intended to enter the market as a competitor and “proxy” for the Duerigs in a scheme to compete with PTC. “In short, rather than see the language of Murray's website for what it plainly was—hyperbole born of misguided youthful exuberance—PTC … choose to see it as evidence of a dogged conspiracy between Murray and the Duerigs to harm PTC ….”  Murray’s only sales were to PTC’s agent, who placed two orders and received PTC-manufactured labels. 

PTC claimed that Murray copied its website and packaging materials as well as engaged in false advertising.  First, the court found that statutory damages and fees were unavailable under the Copyright Act, since registration took place after the DishTemp website launched.  PTC argued that it was entitled to prospective injunctive relief as well as “actual damages” from the Duerigs, who allegedly induced Murray to infringe, in the form of costs and attorneys’ fees incurred in suing Murray.  They argued that they were not seeking attorneys’ fees as such, but rather seeking recovery for the monetary harm incurred in being forced to sue another.  The court found no supporting precedent for this under the Copyright Act or the Lanham Act.  The Restatement (Second) of Torts says that “One who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover reasonable compensation for loss of time, attorney fees and other expenditures thereby suffered or incurred in the earlier action.”  This makes sense when a party is forced to defend an action as a result of a third party’s wrongful action, but is less clear in scope when a party initiates suit and seeks to recover costs and fees as damages from a different party.  New Hampshire provides for fee recovery when a party has been forced to litigate by another’s bad faith.  But (even assuming state precedent has any relevance, which I’m not sure it would given the federal basis of this claim), nothing in the record suggested that PTC was forced to litigate.  To the contrary, the record suggested that “if plaintiffs had simply contacted Murray, explained their position, and asked him to either modify or shut down his website, he would have immediately complied, as he did when he learned of the lawsuit.”  A C&D would also likely have worked.  These simple, cheap steps would have avoided the “damages” PTC sought to recover. 

As for false advertising, PTC suffered no cognizable harm.  “In these odd circumstances, product quality was entirely consistent with PTC's standards since the product Murray intended to sell was PTC's product. No sales were diverted, but even if some customers had purchased from Murray rather than from PTC, Murray still would have had to first buy the products from PTC, at retail.”  Note that this is inconsistent with the general assumptions of reverse passing off—that a plaintiff is harmed by having people think its products are the defendant’s, since the defendant gets any reputational benefit from the sales. I think the court here has the better of the empirics; harm from reverse passing off is likely to be rare. 

The court declined to award injunctive relief on the federal claims against Murray.  Even assuming that the presumption of irreparable injury still applied after eBay, there was no presumption that past infringements will be repeated, and it was highly unlikely that Murray would ever again attempt to buy and resell PTC's products, much less copy its website content. Enjoining the Duerigs was also unjustified.  There was no plausible evidence that the Duerigs ever encouraged Murray in any infringing activity. 

The court declined to exercise supplemental jurisdiction over the remaining state law claims.

Via an eagle-eyed source

Disney pulls Joy Division inspired T-shirt.  I don't know what the IP claim is, exactly. Would a reasonable consumer who recognized the Joy Division cover actually think that the band (or whoever holds the rights now) authorized this?  Seems unlikely.  Copyright is also shaky, since the claim seems to be over the style of the illustration rather than the content.  Compare to the recent Velvet Underground/Andy Warhol dustup--who owns the rights in album covers anyway?

Convince me this isn't copyfraud and I'll buy you a Billy

This appeared on the back of the piece of cardboard that serves as backing for my new Billy bookcases. In what is Ikea claiming copyright?  And no, it's not the instructions.

I smell a follow-on class action

Clorox kitty litter suit.  H/T Eric Goldman

Julie Cohen's new book

Panel discussion on Julie E. Cohen’s great new book, Configuring the Networked Self: Law, Code, and the Play of Everyday Practice. 

Danielle Citron, U. Md.: Concurring Opinions will have an online symposium on the book this coming March.  Helps understand importance of architecture on human development. Networks know who we are and sort, categorize, and make decisions for and about us. Arbiters of access to knowledge, jobs, etc. Pervade our daily lives. Search engines highlight things they think are relevant to us; companies give us social media influence scores and sell those to advertisers; automated systems count and miscount votes, and remove voters from rolls; determine how much Medicaid etc. will be paid for a person; flag individuals as potential terrorists/threats. These systems have tremendous impact on the play of everyday life/creativity, but there’s a huge info imbalances. To them, users are open books; to us, they’re black boxes. Can’t demand of private parties or government to find out what they know, making it difficult to protest. 

Examples: Advertising/marketing companies mine info to find valuable customers.  Ads and news can be tailored to demographics and interests.  Someone who’s unemployed may see ads for payday loans, fast food, for-profit schools; in ad terms, she’s known as “waste” and so the news she sees will be tailored to that—military recruitment, vocational schools.  Architecture influences culture. 

Md. started surveying protest groups against the Iraq war. Physical surveillance and also data mining to identify activists as “terrorists,” including 2 Catholic nuns and a man running for Democratic office. Normally you’d never know you were identified as such, but you would lose jobs/wouldn’t be able to travel.  However, ACLU filed open government request; after a big fight, determined that 53 people were designated terrorists.  The explanation was: the automated software only offered me that choice; there was no option for “extremist” and terrorist seemed close enough. 

Public benefits systems: increasingly automated.  Programmed hundreds of legal rules incorrectly—denied Medicaid to breast cancer patients based on income allocations not required by state law; denied food stamps based on drug convictions contrary to federal law.  System hasn’t gotten better despite high-profile litigation and change of vendors.  One girl died when erroneously kicked from system. 

Sen & Nussbaum’s capability approach is important. Automated systems impact our core capabilities.  Cohen develops this by showing how the systems interfere with play, creativity, space to breathe.  Activists: felt watched and didn’t go to meetings or didn’t say what they thought.  

Does Cohen overemphasize creativity when more pressing capabilities should be in the foreground? Systems can deprive people of necessities of survival, like health care.  Creative activity is hard if you’re starving or if you can’t get a job because you’ve been marked as a terrorist. Social mobility—ability to give credit to talent—is key to creativity, but systems stereotype/pigeonhole people to keep them impoverished. Next steps: sort out how different systems affect different capabilities.  Objectification: whether systems fail to treat us as ends in ourselves. 

Daniel Solove, GW: Broad theme of Cohen’s work: how to carve out appropriate space for intellectual creativity?  One of few scholars to explore privacy and creativity together in their nuances. Copyright and privacy both concern control over information; tension because scholars who argue for limits on copyright are often arguing for more protection for privacy—less control/more control over information.  Is there a coherent way to argue for less copyright/more privacy?  Cohen’s work establishes the normative foundations for that.  A set of ways to allow creativity and the development of the self. 

We need to consume in order to create. Also need breathing space to create without someone watching us all the time. Cohen uses Sen & Nussbaum’s concept of flourishing: freedom that transcends negative liberty, includes access to real opportunities.  Introduce chance into our controlled, networked world.  Copyright: strict control over information can impede our ability to create in the ways we want to create. Privacy: growing surveillance threatens to put us under control that will make us hard to create and flourish in ways outside the norm.  Privacy is often treated as a second-class right; hard to give it the status of a fundamental right because fundamental rights tend to be simple and stable; privacy is nuanced, culturally and historically contingent; amorphous.  Privacy is a critical right, though, not just to individual flourishing but to society because our own intellectual development depends on the development of others.  Stunting creativity of others stunts our creativity. 

Surveillance can chill eccentric behavior; it can dull us.  Removes interesting eccentricities that are key to great aspects of creativity. Has subtle effects we might not notice: expecting to be under surveillance, we might not even realize we’re holding back. 

Self-exposure: not a nirvana of selfhood. Consequences of self-exposure not felt equally for everyone in society: race, gender.  Self-exposure is not pure: sites subtly manipulate, shape and control our own expression—site architecture pushes us towards particular ways of being and makes it hard to understand its effects.  We experience the consequences; the sites don’t. 

Next steps: answer more how one is to weigh privacy and integrate it into the matrix of other values. Cohen criticizes instrumental trading privacy off with other interests. But if it’s not instrumental and not something we should leave people just to choose to give up, then do we risk paternalism in telling them not to self-expose?  Law can’t be neutral; will shape architecture.  But where do we draw the line? Some creativity can be harmful to other people and society; some self-expression harms the expression of others, e.g., hate speech. 

Me: Sickness kept me (relatively) brief. 

There’s a tendency in law generally to oppose the real with the culturally constructed, and treat the former as unchangeable and the latter as not very important. In fact culture can be more powerful and constraining to imagining potential change, which is why 1960s Star Trek has recognizable (if bigger) computers and communicators that work a lot like our phones, but racial and gender assumptions that are now quite hard to sympathize with. Cohen challenges us to imagine better: understand culture’s power and make policies that both acknowledge and attempt to work with that power. 

Popular legal imagination: privacy is a featureless goo, copyright is crystal-edged property.  These are both unworkable and misdescriptive without an account of how people make themselves and each other in light of their environments. 

Past week: US v. Jones, majority used property concepts in the guise of trespass to avoid problems of what privacy means.  I’m most interested in the Alito concurrence, though, which tries to go beyond property but has a silence at its heart.  The concurrence has what Scalia, in a worse mood, might have called a “sweet mystery of life” section; it recites the law about reasonable expectation of privacy, talks in general about expectations, then jumps to “therefore, this was unreasonable.”  Illustrates the difficulty courts have thinking about privacy in context. 

Previous week: Justice Ginsburg used property concepts to say that the public domain was worthless to the public because unowned; the Bible and Shakespeare are not yours and therefore you lack a First Amendment interest in using them. They are debris, not the culture you breathe in and breathe out, transformed. This is again a failure of understanding how creativity is lived by people. 

So, of course, I ask how we can bridge this enormous gap between theory and practice. 

Cohen: we come to the law with bodies and histories; that means information and information rights affect us in ways that law often abstracts from.  People feel false and unwarranted confidence that we are unchanged by surveillance and copyright law.  Yes, we need ultimate answers; the way we’ve gone so far is to assume we can rationalize our way through the hard decisions.  We need to start making the hard choices so people can make themselves into critical citizens. 

Q: how to deal with the urge to share, experienced as empowering?  It’s neither inherently good nor bad, nor do networks inherently inhibit human flourishing as Citron suggested. 

Citron: she agrees there are stories of fighting back, like Hollaback against harassment. We need to think about management, and how we do undermine capabilities in ways that could be fixed. 

Cohen: we tend to uncritically celebrate freedom and delegate implementation to the technologist; or we get really technocratic and start dictating as if we could fix everything if we had enough info.  Those are both faulty ways of thinking: tech is empowering but also dangerous. Think about sensitizing designers to non-neutrality of tech. 

Heidi Li Feldman: is privacy any more slippery than any other fundamental right?  Maybe it’s more salient because of tech that we don’t understand what we’re trying to protect. 

Cohen: autonomy is a crutch; assumes a fixed self that privacy shelters from the world. But the self is in motion; privacy provides breathing space for the process of changing ourselves. 

Solove: sees privacy as an umbrella term; has identified 16 different things under the rubric. One of the challenges is that it’s culturally and historically contingent.

Images in judicial opinions are fair uses

So says Judge Posner.  And so timely too, given what I have to say about him in my article!

Worth a Thousand Words now in print

Worth a Thousand Words: The Images of Copyright, 125 Harv. L. Rev. 683 (2012) (pdf of article).

It's Dastar day: another overreaching plaintiff gets mostly kicked out of court

Dutch Jackson IATG, LLC v. Basketball Marketing Co., 2012 WL 124579 (E.D. Mo.) 

Plaintiffs sued ESPN and others for unauthorized use of plaintiffs’ musical work, “I Am the Greatest.”  They alleged that the work was used on a basketball DVD, “AND1® Mixtape® X,” released in 2008, though the song hadn’t been published at that time. 

As you’d expect, defendants argued that Dastar barred the Lanham Act claim.  The court agreed; there was neither physical repackaging nor false advertising pled to allow the plaintiff to escape Dastar’s reach.  Using an exact copy is not repackaging—which some courts haven’t understood in the context of internet uses—because the “goods,” here the DVDs, were “undisputedly created and manufactured by defendants. Plaintiffs’ song, whether an exact copy or not, is not a distinct tangible good in this instance, but rather an ‘idea, concept, or communication embodied in [defendants'] goods.’” 

There was no false advertising because defendants didn’t mention the origin of the song in advertising or packaging.  Plaintiffs argued that this was an implicit misrepresentation that the song was defendants’ original work.  This was an “impermissible workaround” of Dastar, which ruled that there could be no Lanham Act liability based on Dastar’s (truthful) statement that it was the producer of the video it sold.  This conclusion applied both to §43(a)(1)(A) and §43(a)(1)(B).  Allowing a Lanham Act claim to proceed under either head of liability would “impose an affirmative duty on defendants, thereby creating the ‘species of perpetual patent and copyright’ rejected in Dastar.” 

Likewise, plaintiffs’ claims for waste under Missouri common law, tortious interference with future business relationships, and civil conspiracy were preempted by §301 of the Copyright Act.  So was “tortious interference with the right of publicity,” a new one on me, based on failure to credit the true songwriter. 

Plaintiffs also alleged a violation of the Missouri Merchandising Practices Act.  Defendants argued that plaintiffs lacked Article III standing, continuing the annoying trend of stuffing every objection to the substance of a claim into a constitutional standing argument.  The MMPA allows a civil action by “[a]ny person who purchases or leases merchandise primarily for personal, family or household purposes and thereby suffers an ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or practice declared unlawful.”  This isn’t an Article III standing problem—plaintiffs plainly have an alleged injury to themselves to complain about—it’s that this particular statute doesn’t provide a remedy for them.  The court concluded that they lacked standing under the MMPA, which at least didn’t endorse the idea that there was some kind of constitutional problem here. 

Defendants also won dismissal of claims for statutory damages and attorneys’ fees, since the work at issue was registered in 2010, long after the DVD came out, leaving only claims for actual damages from copyright infringement.  As anyone could have predicted.  Query whether a defendant who receives a complaint like this is likely to offer a lower settlement amount than a complaint simply alleging copyright infringement, since the complaint indicates an unwillingness to engage with copyright law.

Pleading "copying or substantial similarity" fails to satisfy Iqbal

Dorchen/Martin Associates, Inc. v. Brook of Cheboygan, Inc., 2012 WL 137829 (E.D. Mich.)

D/M, which provides architectural and design services, sued The Brook and Practical Engineers for copyright infringement, violation of the Lanham Act, and civil conspiracy, based on the allegations that Practical Engineers performed architectural and engineering services for The Brook and produced a design for an assisted living facility project that was allegedly substantially similar to the product D/M furnished to a nonparty that has the same officers and directors as The Brook.

D/M provided a design for The Brook of Houghton Lake, the nonparty, for a project in Houghton Lake, Michigan. Its design contained a copyright notice and was registered.  Defendant The Brook decided to build an assisted living facility in Cheboygan.  D/M alleged that it told The Brook that use or reuse of its work product from the Houghton Lake project was prohibited.  Though The Brook’s VP told D/M that its design product would only be used to show the exterior appearance of the facility, D/M alleged that Practical Engineering had access to the copyrighted work and copied it, evidenced by the substantial similarity of the completed project.

The court found that the complaint was deficient in pleading actionable infringement.  “Copyright infringement lends itself readily to abusive litigation, since the high cost of trying such a case can force a defendant who might otherwise be successful in trial to settle in order to avoid the time and expenditure of a resource intensive case.”  Thus, greater particularity was required to allege “plausible grounds” for relief.

Defendants argued that D/M failed to identify original material in its architectural work, which was identified as the “overall form as well as the arrangement and composition of spaces and elements in the design, but does not include individual standard features.”  However, defendants didn’t explain what features might be unprotectable based on functionality, merger, or the like, and consideration of those arguments would require the court to go outside the pleadings.

However, the court agreed that, without a description of the manner in which the defendants’ work infringed, it was not required to accept bare legal conclusions of infringement/substantial similarity.  D/M was allowed leave to remedy this deficiency by providing more factual details.

The Lanham Act claim, however, was fatally flawed because of Dastar.  “[T]aking tangible goods and reselling them as your own constitutes a Lanham Act violation; taking the intellectual property contained in those goods and incorporating it into your own goods does not.”  D/M fruitlessly argued that Dastar only dealt with works in the public domain, and that whether its work product constituted “tangible goods” was a factual question that couldn’t be decided on a motion to dismiss.  The court distinguished an earlier decision involving architectural plans where the defendant “removed” the plaintiff’s name and seal (this seems to mean traced the plans without tracing the name and seal; that really should’ve been barred by Dastar too unless it counted as false advertising).  There was no allegation that defendants used D/M’s materials as their own; instead D/M alleged that defendants copied or had access to D/M’s materials resulting in a substantially similar design.  This camouflaged copyright claim couldn’t survive.

Defendants also argued that the civil conspiracy claim was preempted by §301 of the Copyright Act.  The court agreed, on these alleged facts.

Failure to have a search function as facilitation of infringement?

An interesting statement in the Megaupload indictment:

It was further part of the Conspiracy that members of the Conspiracy had the ability to search files that were on the computer systems they controlled, and purposefully did not provide full and accurate search results to the public, or, in the case of Megaupload.com, chose not to provide any search functionality at all in order to conceal the fact that the primary purpose of the website and service was to reproduce and distribute infringing copies of copyrighted works for private financial gain.  

I recall similar arguments in Viacom v. YouTube: YT's terrible search functionality made it difficult to find all the infringing clips at once.  Given that there are good reasons to have nonpublicly searchable sites or areas in a site, how far does this argument go? Dropbox, which I now use, doesn't as far as I know have a search function at all, because it's designed for limited sharing circles, though one can generate a public link to a specific file and share that link.  While Megaupload is alleged to have done plenty of other stuff to facilitate infringement, it's a little worrisome that "failure to allow any random person to rummage through a user's uploaded files" might be taken as "evidence of intent to conceal copyright infringement."

NB: I have in the past used Megaupload to share my class notes and slides for Copyright and Trademark, though I now use Dropbox for the same function.

I'm gonna go out on a limb and call this unauthorized use

Chicka Latte brings the charm of Hooters to the serving of coffee.  Employees (apparently all women, or willing to dress as women) can choose from various outfits.  Two of them are listed as Girl Scout uniforms (the sashes say Sexy Scout and Cookie Girl, if you're interested).  Cookie Girl is also listed as a "Grabajava All Star Girls Official Approved Costume," which I guess means that Chicka Latte has a competitor sourcing from the same uniform supplier.  The link to "more Girl Scout and Brownie costumes" doesn't work right, but further inspection finds another Sexy Scout costume without a bare midriff, at least..

Let's assume that the sale of the costumes as costumes is ok.  Is Chicka Latte nonetheless at risk for encouraging the use of the costumes as uniforms at its business?

No fee award in 1-800 v. Lens.com

1–800 Contacts, Inc. v. Lens.com, Inc., 2012 WL 113812 (D. Utah)

1-800, famously (for certain values of fame), sued Lens.com for trademark infringement based on Lens.com’s keyword advertising; it had demanded Lens.com take measures to preclude Lens.com ads from appearing whenever a searcher used “1-800 Contacts” (which would preclude broad-matching on “contacts”). Lens.com even told its affliates not to buy 1-800 Contacts as a keyword, but 1-800 sued anyway. 1-800 made punitive demands in settlement negotiations (demanding a ban on the use of a long list of terms as keywords, and $10,000 or even $20,000 a day in liquidated damages if Lens.com or one of its affiliates engaged in a prohibited act). 

Lens.com won summary judgment and moved for attorneys’ fees. The court denied the motion. In support of its motion, Lens.com argued that 1-800 regularly sues smaller competitors and extracts such agreements because the smaller competitors cannot bear the costs of litigation. 1-800 conceded the lawsuits but said they were necessary to protect its trademark, and that it agreed to be bound by the same settlement provisions it demanded from competitors.

One year after filing suit, 1-800 moved to amend to add secondary liability claims based on Lens.com’s affiliates’ actions. As it had found, out of numerous keywords that Lens.com had purchased, “only nine were variations or misspellings of the trademark. In total, Lens.com derived $20.51 in profits off of those nine keywords.” Nonetheless, 1-800 continued to press its direct infringement claim. Meanwhile, Lens.com learned that 1-800 had bought variations of Lens.com’s trademarks as keywords, earning $219,314 in profits thereby.

Lens.com also argued that 1-800 engaged in improper discovery tactics to increase the burden of litigation, and pointed to stricken expert reports/surveys as evidence of bad faith. The court noted that “[d]iscovery problems existed throughout this litigation, but it is Lens.com that was sanctioned for discovery abuses.” Lens.com withheld discovery and provided false information, and was therefore sanctioned with a fee award and a ban on introducing certain evidence at trial, and also violated an order limiting the scope of a deposition. Lens.com argued that its obstructive behavior was triggered by 1-800's overreaching demands, but the court had already rejected that argument in awarding sanctions.

Fees are available in Lanham Act cases under exceptional circumstances, which can happen if a suit was objectively unfounded or harassing in its execution. The court first found that the Lanham Act claims were not objectively unfounded:

The main legal issue in this case involves an unsettled area of law given the emerging and changing nature of Internet competition. The Tenth Circuit has never expressly addressed whether purchasing another's trademark as a keyword constitutes trademark infringement, and such cases have survived motions to dismiss in other jurisdictions. Consequently, 1–800 Contacts had a legitimate interest in clarifying its rights. Moreover, once 1–800 Contacts obtained discovery, the evidence showed that Lens.com did purchase variations of 1–800 Contacts' trademark, even though such purchases were minuscule. 1–800 Contacts also had a larger claim based on secondary liability. Given the developing nature of the law in this area, and the fact that the case was proceeding on secondary liability, it was not unreasonable for 1–800 Contacts to continue pursuing its claim for direct infringement.

The court did agree that some of 1-800’s behavior was troubling, particularly its settlement demands and its hypocrisy in suing others for things it was doing. However, the court noted that Lens.com has sued over 1-800’s allegedly anticompetitive and abusive litigation tactics in another case, and that was the proper forum to resolve those issues.

Given that Lens.com had been sanctioned on more than one occasion in this case, and that the expert opinions offered by 1-800 were partially admitted and therefore not wholly without merit, the court was unwilling to award attorneys’ fees:

Viewing all the facts in totality, the court finds that neither party was fully candid with the court or its processes. The court further finds that 1-800 Contacts' actions raise questions about vexatious suits to defeat competition, but more facts would need to be developed than what have been presented to the court. Although 1-800 Contacts was aggressive in pursuing its claims in this case, and in hindsight the expense may have been greater than necessary to protect those rights, the court cannot conclude on this record that 1-800 Contacts' course of action was so unjustified to meet the requirements for an exceptional case. 

The state law claim for fees also failed; the standard was whether the action was without merit and not brought or asserted in good faith. Lens.com argued that it should be awarded fees on the coordinate state-law claims because 1-800 expended no effort to develop them. The court was unpersuaded, because 1-800 argued that its unfair competition claim was based on the same facts that supported the Lanham Act claim. The only claim that 1-800 expended no effort to develop was its unfair practices claim, but Lens.com likewise had to spend little time on it.

Must be campaign season

The infringement lawsuits have begun.  This one has a twist: Ron Paul is suing YouTuber NHLiberty4Paul over an anti-Jon Huntsman video posted as a reason to vote for Paul, alleging (1) false advertising under the Lanham Act, (2) false designation of origin under the Lanham Act, and (3) defamation (the theory being that it associates Paul with repugnant opinions).  As is not uncommon with Lanham Act false association claims paired with defamation claims (see Jenzabar), the theories seem a bit suspect on their faces.  Unless, contrary to what I've seen so far, NHLiberty4Paul is selling his/her own Paul stuff, it's not "commercial advertising or promotion" under the Lanham Act, so (1) doesn't work.  (2) assumes symmetry, which doesn't make sense in this context: "I, random YouTube user, endorse Ron Paul" does not mean "Ron Paul endorses me."  It would be nice if more courts in trademark cases noticed this!  (3) is just tough to pull off for a public figure; Ron Paul in particular may find it difficult to show that the video, described as "libellous on its face," defames him--sure, it offers degrading and xenophobic reasons to vote against Huntsman.  But even assuming people thought the message came from Paul and not from Paul's supporters (because if they think that, and it's true, then it can't be defamatory), can Paul prove a clear difference between that and other things he's said?  (There may be a "dirty tricks" theory that this isn't from a real Paul supporter, but a theory of group defamation of the class of Paul supporters would be constitutionally dubious at this point and also I don't see that Paul would have standing to allege it.)

I have to say, as awful as the message of the video is, I hope the Does get counsel.  Holding awful opinions is not a proper source of liability in our system.

False use of (R) symbol as false advertising

Perfect Pearl Co., Inc. v. Majestic Pearl & Stone, Inc., 2012 WL 98493 (S.D.N.Y.) 

Perfect moved for leave to amend its complaint against Majestic to add claims for misuse of the ® notice and false advertising under federal and state law to its initial unfair competition claims.  The court granted the motion in part and denied it in part. 

Perfect began the case claiming that it was the prior owner of MAJESTIC and MAJESTIC PEARL for jewelry.  In discovery, Pearl learned more about Majestic’s activities: it argued that it found out that Majestic falsely used the ® after its registration expired, and falsely claimed the registration on its website as a point of distinction from Perfect. 

Since a scheduling order had already been entered, leave to amend required good cause, meaning that Perfect needed to show that it had been diligent and neither knew nor should have known the relevant information before.  The court found that Perfect had shown good cause for delay in adding allegations based on continuing use of ® on Majestic’s promotional materials, but not for new claims based on content on Majestic’s website.  A late deposition (whose lateness was largely due to problems on Majestic’s side) revealed that undated materials using the ® had been produced in large numbers and were still in use, even though the registration lapsed in March 2008, more than 2 years before the present suit was filed.  The court stated that, even if the materials were produced before cancellation, continuing to supply them to customers long after the registration expired might constitute false advertising.  However, “it would have taken Perfect little investigation and probably no more than 15 minutes' time to determine that Majestic's publicly-accessible website continued to falsely claim registered trademark status.”  Thus, it was too late to add allegations based on the website. 

Majestic also argued futility: misuse of trademark notice is only an affirmative defense, not a freestanding cause of action, so that claim was not allowed.  But the Lanham Act false advertising claim was not merely, as Majestic argued, a claim of trademark misuse.  The court quoted McCarthy:  the “use of ... the ® adjacent a mark not federally registered is ... a form of false advertising which may result in serious repercussions.”  Perfect’s allegations satisfied the federal pleading standards.  Majestic argued that Perfect needed to show willfulness to bring a false advertising claim predicated on misuse of a ® symbol; even if that was true, which the court did not resolve, Perfect had adequately pled facts to support an inference of willfulness.  Perfect alleged that Majestic knew for more than two years that it did not own an active registered trademark, persisted in disseminating promotional materials with the ® symbol to potential customers. 

Majestic also argued it would be prejudiced by the addition of new claims because of significant additional required discovery.  But Majestic only identified one issue as to which additional discovery might be required: its own intent.  “Any discovery as to that issue would, presumably, be sought by Perfect—for Majestic should have accessible to it the evidence bearing on its own state of mind—and Perfect represents that it is not seeking additional discovery.”  Granting the motion wouldn’t extend the litigation much—the court pointedly noted that the motion was pending for far shorter than the time it took Majestic to produce the Rule 30(b)(6) witness who provided the key information that led to the motion for leave to amend.

Fair use of the day

Our Virginia, Our Challenge: Uses pages from a Virginia history textbook (the one that was revised after eagle-eyed readers noticed how much of it was not, technically speaking, true) to illustrate and discuss what it means to teach facts that make sense in context, as opposed to disconnected and random statements.

Julie Cohen's excellent new book

Here's Georgetown's announcement:

How just are the rules that govern information access and use? Why is cultural and technical information often so restricted, while personal information is hardly restricted at all? Georgetown University Law Center Professor Julie E. Cohen asks these questions and more in her new book, Configuring the Networked Self: Law, Code, and the Play of Everyday Practice. A release is available here.

Virginia law student writing competition

2012 Student Writing Competition. The Virginia State Bar Intellectual Property Section is seeking papers written by law students who are attending law school in Virginia or are residents of Virginia attending law school outside of Virginia and relating to an intellectual property law issue or the practice of intellectual property law. The winner receives a cash prize of $4,000. The judge of the final round of the competitor is the Honorable Richard Linn, judge of the U.S. Court of Appeals for the Federal Circuit. The deadline for submissions is Friday, May 25, 2012 at 4:00 EDT. Additional information is available at the section’s website.

Incontestability not enough to help weak mark

Holding Company of the Villages, Inc. v. Power Corp., 2012 WL 39395 (M.D. Fla.)

Eric Goldman has often made the point that a non-famous TM owner runs a risk in bringing edgy TM claims: if the court isn’t interested in pushing the limits, that can end with a negative judgment on the strength of the mark itself, and that’s often just deserts.  Here’s an example.

Plaintiff alleged infringement, federal dilution, false advertising, and unfair competition based on defendant’s use of “Villages of Lakeside Landings” in connection with the sale of real estate, in competition with plaintiff’s federally incontestably registered “The Villages,” in use since 1992.  (Federal dilution?  Really?)

Defendant developed a residential community in Sumter County, Florida.  Plaintiff bought adjacent property about two years after defendant began its development.  In 2004, defendant sent a letter asking whether plaintiff had any objections to defendant’s use of “The Villages” as part of its proposed mark, and plaintiff did.  Nonetheless, defendant began using the name “Lakeside Landings at The Villages.”  After threats, defendant renamed the development to “Lakeside Landings,” but still used “Villages of Lakeside Landings” in its signs, ads and website.

In a fruitless effort to avoid litigation, defendant removed the “s” to make the name “Village of Lakeside Landings,” and uses a sailboat logo with almost all its uses of the name in ads and signs.

Plaintiff only argued infringement in its analysis of likely success on the merits in its motion for preliminary injunction (why did it bring that dilution claim, again?) so the court analyzed only infringement.

The most important factors the court considered were the type of mark and evidence of actual confusion.  Incontestability serves to enhance a mark’s strength. However, defendant documented extensive third party use in Florida and throughout the US, both in real estate and in other industries (thousands of businesses registered in Florida use “Villages” in their names, for example).  A neighboring residential development, Villages of Parkwood, has used the term in its name for at least five years, advertising itself as being “Near the Heart of The Villages.”  The PTO noted that “[t]he term village, or its plural, is a common industry term which describes or names a residential community. The term village is routinely disclaimed or registered under Section 2(f) in registrations for names containing such wording.”  Thus, plaintiff’s mark was weak and deserved only narrow protection.

Similarity: both parties used a family of “Village(s)” marks.  In addition to “The Villages,” plaintiff used “Village of Ashland and Lynnhaven.”  However, in overall impression, the marks were distinctly different.  Defendant uses “Lakeside Landings,” along with a different font, color, and style, and an image of a sailboat.  The court also noted plaintiff’s position before the PTO when it was distinguishing other Village(s) marks from its mark: plaintiff argued that “The Village at Bear Trap Dunes” and design, “The Villages of Taylor” and design, “The Village” and design, “The Villages at Turning Stone” and “The Villages at Turning Stone” and design, “contain very different words, and four out five include unique designs which set them apart from [Plaintiff's] [m]ark in sound, connotation, overall appearance, and accordingly, commercial impression.”  As a result, plaintiff couldn’t turn around and claim that marks in substantially the same form were similar to its mark.  This favored defendant, and the court cited precedent that, where the primary word in the mark was weakly protected to begin with, minor alterations could negate any confusing similarity.

Similarity of services, advertising, and target customers thus didn’t help plaintiff much, especially since the customers were sophisticated and buying real estate isn’t a knee-jerk purchase, something plaintiff had also told the PTO in its quest to register.

Plaintiff argued that the similarity of the marks and services plus the parties’ geographic proximity indicated bad faith. The court disagreed.  Defendant backed off “Lakeside Landings at the Villages” despite its belief in its right to use the term based on numerous third-party uses, and made further changes to avoid litigation.  There was no evidence of intent to infringe.

There was also no compelling evidence of actual confusion.  A former resident of Lakeside Landings (the place) drove past the entrance to defendant’s property and noticed the “Villages of Lakeside Landings” sign, and assumed that plaintiff bought defendant’s development.  A week later, he contacted plaintiff’s counsel and his confusion was clarified.  The court gave this little weight, because he found the testimony self-serving, and the resident wasn’t a customer or potential buyer.

No likely success on the merits.

Fair use of the day

Poses can make up part of what's protectable about an image ... but copying those poses can also itself work as criticism.  Jim Hines demonstrates.

Google AdWords' individual characteristics defeat class action

In re Google Adwords Litig., 2012 WL 28068 (N.D. Cal.)

Plaintiffs alleged false advertising of Google AdWords and sought class certification under California law.

The AdWords network includes parked domains (part of AdSense for domains, AFD) and error pages (AdSense for errors, AFE).  The ads display as a result of Google’s attempts to match ads with the terms users entered to arrive at a particular page.  Plaintiffs alleged that Google failed to disclose that, whether they chose to advertise in Google’s Search or Content networks, Google would place their ads on parked domains or error pages, and that Google was aware of the negative reputation of such domains/pages and deliberately concealed its involvement with those sites.  Indeed, Google allegedly published misleading AdSense policies which prohibited publishers from putting ads on pages lacking content, and obscured the URLs of AFD and AFE sites on Google's Placement Performance Reports so that advertisers could not see the actual sites upon which Google had placed their ads.

Google argued that plaintiffs mistakenly presumed that every ad on any parked domain or error page was worthless and harmful, whereas advertisers reaped demonstrable benefits from such ads (even if they had a negative perception of such ads).  Google also contended that its disclosures were fine, and that advertisers could exclude their ads from entire categories of web pages, including parked domains and error pages.

Plaintiffs moved to strike declarations by three Google employees because they were offering inadmissible expert testimony.  The court largely agreed with Google that these were lay witnesses testifying to the personal, particularized knowledge they had by virtue of their positions in the business, and thus their testimony was not problematic under Rule 701.  They provided key information about how AdWords pricing worked and about how many advertisers opted out of placing their ads on parked domains and error pages.  (Interestingly, the court used the term “behaves” to describe AdWords, suggesting a level of complexity and even agency beyond that of ordinary pricing systems; STS folks take note.)  To the extent that they opined on the merits, such as the viability of classwide restitution, the court disregarded their testimony.

Plaintiffs moved to certify a class of customers who were charged for clicks on ads placed on parked domains or error pages.

First, the court addressed standing.  Named plaintiffs have to show actual reliance under the UCL and FAL.  This can be done by showing that the defendant's misrepresentation or nondisclosure was an immediate cause of the plaintiff's injury-producing conduct.  For omissions, a plaintiff may show that, in the absence of the omission, the plaintiff in all reasonable probability wouldn’t have engaged in the injury-producing conduct.  An inference of reliance arises when a misrepresentation was material.

The named plaintiff alleged that it viewed the parked domain and error pages as low quality sites upon which it didn’t want to advertise, and that Google knew that plaintiff was likely to regard Google’s placement of ads on such pages as important.  Plaintiff further alleged that Google’s omissions led it to buy ads it otherwise wouldn’t have bought and to overpay for clicks on ads on such pages.  These allegations were sufficient to establish reliance.  Plaintiff also satisfied Article III with the same allegations, which indicated that it had lost money or property by buying ads it wouldn’t have wanted had it known the full truth.

Google argued that, even in UCL cases, absent class members needed Article III standing, and thus a fact-intensive individualized inquiry into injury was required for each member.  Since California provides relief under the UCL and FAL without individualized proof of deception, reliance, or injury, and since the governing objective test requires a plaintiff only “show that members of the public are likely to be deceived” by a defendant's representations about its product, no such fact-intensive inquiry was required.  If the class representative has Article III standing, no further analysis of unnamed class members need be undertaken.  (And anyway Article III was satisfied: consumers who bought AdWords were relieved of money in the transactions.)

Plaintiffs sought 23(b)(3) certification, which requires predominance of common questions of law or fact.

Google argued that the class wasn’t ascertainable, because there was no systematic way to exclude advertisers who benefited from ads on parked domains/error pages; most advertisers didn’t use Google’s tool to calculate conversion rates so there’s no classwide method to determine the benefits they received from ads on such pages, and anyway conversion rates alone might not be a satisfactory measure of overall benefits from such ads.  Given the class definition, the court saw this as an issue regarding entitlement to restitution, not ascertainability.

Numerosity wasn’t a problem.  On commonality, plaintiffs argued that whether Google's alleged omissions were misleading to a reasonable AdWords customer was capable of classwide resolution, while Google contended that whether advertisers were entitled to restitution wasn’t.  The court found both questions central to the litigation.  Though the second might generate individual answers, there was still a valid common question.  Plaintiffs’ claims were also sufficiently typical, and there was no evidence of conflicts of interest with proposed class members.

However, plaintiffs flunked predominance because questions of restitution would require individual inquiries.  (The court specifically rejected Google’s argument that individual questions of reliance and materiality also existed, because of the UCL/FAL reasonable consumer test.)  Though damages variations alone can’t defeat certification, the facts here were special.  AdWords uses an auction that means that each advertiser paid a separate amount per ad and per click, dependent also on the other bidders. “These intricacies make it more difficult to calculate what AdWords customers would have paid ‘but for’ the alleged misstatements or omissions.”  Thus, a reduction in demand for advertising on AdWords wouldn’t necessarily lead to a lower price for all advertisers. 

Moreover, advertisers have “widely varying goals,” making it difficult to calculate the value of what they received.  Conversion to purchase is one way of measuring performance, but in 2009 only a small percentage of active AdWords accounts opted into conversion tracking, and even for them that might not be the only measure of value.

Restitution need not be determined with exact precision, but it must be based on a specific measurable amount supported by substantial evidence.  With these parties and facts, the court wasn’t convinced that restitution could be reliably measured using common methods.  A full refund, for example, wouldn’t take into account benefits received, given that some advertisers actively sought to have their ads placed on parked domains and error pages.  A uniform discount for all such ads would also ignore that individual advertisers’ ads might outperform the same ads placed on other types of pages, as was the case for one named plaintiff.  Individual benefits from ads would need to be accounted for in any restitution calculation.  “Where, as here, proof of restitution due each class member cannot be proved with relative ease, the court finds good reason to deny class certification.”

Pleading standard dooms misleadingness claim

Ameritox, Ltd. v. Millennium Laboratories, Inc., 2012 WL 33155 (M.D. Fla.) 

Ameritox (a drug testing lab) sued Millennium for false advertising under state and federal law.  Millennium moved to dismiss the Lanham Act claim.  The allegedly false statements were contained in a billing letter to patients; Millennium argued that wasn’t commercial advertising or promotion because the relevant consumers were medical providers.  Ameritox contended that the letter was widely circulated both to medical providers and to patients, and that both groups were part of the relevant purchasing public.  The court found this insufficiently pled; among other things, Ameritox had to allege how many consumers in the relevant purchasing public Millennium contacted. 

Ameritox did sufficiently plead misleadingness: it claimed that the letter told patients that they weren’t responsible for [Millennium’s?] co-pay or deductible charges, and that this was misleading because Medicare patients by law aren’t subject to such charges for clinical lab work anyway.  However, Ameritox failed to plead deceptiveness: the claim that “Millennium's statements are ... likely to deceive a substantial portion of the targeted customers” was a naked assertion that couldn’t survive a motion to dismiss.  Left unclear is what Ameritox is supposed to plead.  Actual deception isn’t required, in theory; is Ameritox supposed to plead that it has a survey in hand? 

Likewise, Ameritox’s allegation that “Millennium's false or misleading statements have already, and will continue to, influence materially purchasing decisions to the extent that customers choose Millennium's services instead of those offered by Ameritox” was insufficient to plead materiality.  The Lanham Act claim was dismissed without prejudice.  The state law unfair competition claim, based on the same theory, was also dismissed (though note that it seems quite unlikely that the state law claim requires “commercial advertising or promotion” or, for that matter, an interstate commerce nexus in the same way as a Lanham Act claim; nonetheless courts don’t like to do two analyses where one will do, so there you go).

Court thinks that commercial speech is any speech that's sold

People v. Douglas, --- N.W.2d ----, 2011 WL 6846218 (Mich. App.)

Douglas was charged with “copying audio/video recordings for gain.” The trial court dismissed the case because the statutory term “prominent place” was unconstitutionally vague. The prosecution appealed.  The relevant statute stated that “[a] person shall not ... [s]ell, rent, distribute, transport, or possess for the purpose of selling, renting, distributing, or transporting, or any combination thereof, a recording with knowledge that the recording” does not “contain in a prominent place on its cover, box, jacket, or label the true name and address of the manufacturer.”  The court of appeals reversed, completely misunderstanding the definition of “commercial speech” under the First Amendment when it said that it was “confin[ing] the scope of the statute to commercial speech to eliminate its application to activities that the First Amendment protects.”  I hope this gets fixed on appeal. 

Douglas was arrested in possession of DVDs marked with handwritten titles of movies still playing in theaters. He had two CD/DVD burners, 334 counterfeit CDs and DVDs, and 100 blank recordable disks.  Neither the DVDs nor the CDs contained any written information on them besides the handwritten titles. 

The trial court thought that a legitimate DVD doesn’t really have the manufacturer’s information in a “prominent” place on the box, and thus that the law created far too much uncertainty and discretion and was void for vagueness. 

The court of appeals applied the standard that a statute must be construed as constitutional unless clearly unconstitutional.  Vagueness occurs when a statute doesn’t provide fair notice of the proscribed conduct; confers unstructured and unlimited discretion on the trier of fact, and is overbroad with respect to First Amendment rights. 

Douglas needed to show facts suggesting that he complied with the statute and argue that “prominent place” was vague.  He failed to do the former, so he didn’t show that vagueness in the term caused him to violate the statute. Since his discs made absolutely no attempt to convey the required information, any possible vagueness was irrelevant.  Moreover, “prominent place” provided adequate notice.  The Random House Webster’s College Dictionary definition of “prominent” indicated that the statute required the manufacturer’s true name and address “to be on a particular portion of the cover, box, jacket, or label so that the information will stand out and be easily seen. This language is sufficiently clear to provide notice of what the statute requires.” 

Even if the statutory language were vague, it didn’t impermissibly confer discretion on the trier of fact.  The law “clearly and plainly sets forth the elements that the prosecutor must prove beyond a reasonable doubt,” and thus didn’t leave the jury with unlimited discretion.  The prosecution has to prove that a defendant sold, rent, distributed, transported, or possessed for those purposes, a recording with knowledge that the recording didn’t have the required prominent information.  The knowledge requirement “substantially limits the potential reach of the statute because, in general, only illegitimate manufacturers and distributors of these materials will have actual knowledge that the items they sell or deal in do not contain the required information,” with the exception of a person distributing “original recordings to spread a message,” to be taken up shortly.  “Thus, the innocent resale of legitimately bought items would generally not violate the statute even if the manufacturer had failed to place the required information on the item, because the seller would lack such knowledge.”  (There seems to be equivocation about “knowing” here.  If the information is not prominent on the recording and the seller looks at the recording, how does the seller not necessarily know that the information is not prominent?  The seller may not know she’s violating the law, but I sincerely doubt Douglas knew of this specific law either.  Which is why, by the way, this is really a copyright infringement law and should be found preempted, since its extra element only narrows the class of infringements covered by the state law.) 

Overbreadth: the standing requirement is relaxed when First Amendment rights are involved.  Here, the statute regulated both speech and conduct.  Reasonable minds would agree that selling, renting, distributing and possessing recordings is conduct.  (If money is speech, why isn’t selling speech also speech?  With the inclusion of possession, any tangible residue of speech is conduct by this reasoning, and regardless of the overall incoherence of the speech/conduct distinction, this just doesn’t make sense.) 

Overbreadth, however, does not apply to commercial speech.  And here’s the plain error: commercial speech, as the court means it here (that category of speech to which the overbreadth doctrine does not apply) is speech proposing a commercial transaction: advertising.  It is decidedly not speech that is sold in the market.  If it were, the New York Times (our go-to example of core protected speech) would not be able to invoke the overbreadth doctrine for its articles, which it plainly can.  The court of appeals went on to dig itself deeper: “In essence, the law presumes that the economic incentive to speak will outweigh the chilling effect a law may have, removing any need to allow a party to raise the rights of third-parties not before the court.”  Kind of like in NYT v. Sullivan? 

Here, the statute regulates both commercial and noncommercial activity (read: speech).  Selling and renting are commercial, but distribution and possession for the purpose of distribution don’t have to be.  Thus, the statute “regulates substantially more noncommercial speech and conduct than its plainly legitimate sweep allows.”  Talley v. California, 362 U.S. 60 (1960) struck down a law prohibiting the distribution of any handbill that didn’t contain the writer/printer’s name.  This impermissibly restricted anonymous speech, as did the law here. 

The court of appeals continued, “CDs and DVDs today spread information in a way similar to the hand-bills and pamphlets so common in England and colonial America. People can, and do, create and record original commentaries, speeches, documentaries, and other political and social media on CDs and DVDs. Because of their audio and visual format, these recordings may be even more effective in evoking a reaction than the printed form.”  The law was designed to prohibit piracy.  (Again, which is why it’s preempted.)  As written, however, it applied to “the innocent distribution of original recordings containing political messages, social commentary, and countless other noncommercial recordings.”  (Note, however, that if you want to sell your self-published CD or DVD, you’re subject to the law.  Whoops!) 

Construing the law narrowly to save it, the court limited the statute to cases in which a person commercially distributed a recording or possessed it for commercial distribution.  I hate to harp on this, but that doesn’t mean anything like the court’s next sentence: “This limitation adequately restricts the sweep of the statute to commercial speech, which the state may regulate more broadly.”  This statute could possibly be constitutional if not preempted—though I can imagine underground publishers with political things to say who don’t want a public paper trail and have a decent First Amendment argument against being required to put their names on every copy—but the reason given is aggravatingly wrong.  And the court makes this even clearer in a footnote:  “Limiting the statute to only commercial speech allows innocent distributors of original works to give away their original recordings and removes a potential First Amendment violation.”  No, because one is generally not required to stay out of the world of paid content in order to exercise one’s free speech rights.  Even copyright’s fair use doctrine treats noncommerciality as only one factor, and commerciality is easily outweighed by transformativeness. 

Anyway, Douglas could only be prosecuted if the state showed that he possessed the recordings for the purpose of commercial distribution. 

AALS: IP and International Trade panel

Moderator: Cynthia Ho, Loyola U-Chicago 

Rochelle Dreyfuss, NYU 

Demandeurs learned that regime shifting worked, going from WIPO to WTO.  Then bilateral agreements.  Then ACTA.  That didn’t work fully either, so now we’re doing other things—seeking to incorporate ACTA into bilateral FTAs, with poorer countries that had no role whatsoever in the negotiation process.  Secrecy and trade context are linked; reaping comparative advantage is paramount, and expression/scientific values are largely obscured. Trade negotiators don’t realize that maximizing IP rights isn’t the unmitigated good that relaxing trade barriers is.  Public interest groups have minimal voice.  Procedural reform might help.  But is transparency enough? 

Some countries found flexibility in TRIPs and resisted demands for TRIPs-plus, but many didn’t.  What accounts for the differences?  Partly institutional.  Ecuador, Andean community, was about to sign TRIPs-plus but didn’t because of a ruling it would violate Andean law.  Brazil: health ministry has a lot of power over IP, so its position was shaped by pharmaceutical issues.  Largely shaped by access to information about substance—the actual effects of IP law.  No country had local organizations dedicated to IP.  Other institutions: local generic drug industry turned out to matter a lot.  Some countries have fake drugs; those industries weren’t helpful or trusted.  Others have branded generic industries, relying on TM instead of patent, and that didn’t help either.  Chile has a strong industry and ended up with a nuanced deal with the US.  Empirical studies, long experience, and strategies for dealing with demands for strong protection—some NGOs can do that; others can’t.  Some NGOs are good at vernacularizing their scripts to local interests—human rights, consumer protection, indigenous rights.  WIPO is supposed to perform some of that role, but none of her interviewees mentioned WIPO.  Individuals also matter. 

Bottom line: procedural opportunities, while critical, aren’t enough.  Must reconceptualize substance of IP in helpful ways.  New soft laws; agreements on exceptions and limitations on copyright; Max Planck’s proposal to amend TRIPs.  Her proposal with G. Dinwoodie: the IP acquis: an undertaking of express and implicit obligations.  Rights of proprietors in IP tend to be explicit, rights of users implicit.  They want an agreement on customary etc. norms protecting producers as well as users/nations.  Principles appear repeatedly in national laws, embedded in cognate bodies of law, reflected in national constitutions.  These are the fabric of IP regimes, and recognizing their existence would further legitimate expectations and stability; would also enable forms of resistance to IP rights along with ways of making further demands for IP owners: balance.   Would also assist international dispute resolution, since the WTO panels don’t fully understand IP law. 

Sean Flynn, AU-Washington College of Law 

TPP: post-ACTA, being negotiated right now to make law internationally that will be brought down to the national level.  Enforcement/maximalist agenda led by US, EU, Japan etc.  Gervais says this is an addition narrative: more IP is always better for developed and developing countries.  Dominant over the last century.  Second agenda: development agenda, which is often associated with access to medicines but begins before that.  More limitations, flexibilities, special treatment through all areas of international law including IP.  

Special 301 threats over limited IP rights remain.  One important trend: defunding of civil society organizations over the last decade, both in this country and abroad, dealing with IP issues.  While IP owners have access to policymakers and secret information about negotiations.  ACTA is negotiated in that context, with only two developing countries (Mexico and Morocco, already handed out high IP rights/closely allied with the demandeurs).  TPP: also being negotiated with weaker countries less likely to stand up to the maximalist agenda. 

India: no patent rights for new forms of known substances that don’t result in increased efficacy.  TPP: takes exactly opposite position—intended to create new global standard where the target of the standard is not present at the negotiations. 

IP industries tend to shoot for the head, not the long tail.  Consumers in developing countries are in the tail, except for a small number of wealthy consumers in each country.  Top 1% of people around globe make $35,000/year: that’s the market for medicines, digital media.  How do we shift medicine and digital media into affordable/competitive markets?  That’s the development agenda.  Enforcement agenda is in closed forums; development agenda is multilateral, open. 

David Levine, Elon U. 

Transparency in ACTA—US unwilling to have any.  The public can see how the US position evolved when the final agreement is signed, according to the draft FAQ ultimately coughed up by the US.  Gallows humor!  Wikileaks cables have shown that the US position (key demander of secrecy) was of significant concern to other countries.  Even legal positions of allies have been kept secret on “national security” grounds.  ACTA has been designated a “national security” issue by presidential order, making it an executive order rather than a treaty. This allows ACTA documents to be designated exempt under FOIA.  A list of private entities who had to sign NDAs to see a draft of ACTA, required by USTR, was itself designated exempt from FOIA because disclosure would damage the national security of the US. 

Peter Yu: primary argument is that other countries won’t negotiate in good faith if their positions and US positions are made public.  Levine is dubious about this, but the eventual release of information through leaks/public pressure suggests that perhaps assumptions about secrecy should be rethought.  Mutuality of interest between commercial entities & gov’t defeats transparency.  This is about private interest conflicts, and the gov’t is choosing commercial entities over the public’s right to know. FOIA allows use of exemptions in unintended and bad ways.  FOIA becomes a proxy for this battle: control of flow of info benefits commercial entities because the process allows these entitities to advise the USTR, and not public interest entities.  Ability to sign NDA is given primarily to commercial entities. 

Let’s assume that secrecy is good.  Did we get its benefit through ACTA?  Primary supposed benefit: smooth and efficient process, fewer chefs in the kitchen.  But that level of secrecy was undermined by the reactions of others.  Plus, transparency in other IP policymaking, e.g., WIPO, is significantly more extensive.  Published agendas, lists of participants, meeting minutes, draft documents etc. were all available. By contrast, it was difficult even to find out when ACTA negotiations were taking place.  Majority of major IP treaties going back 20 years completed in comparable or less time despite being more transparent: TRIPs took 3½ years, though we don’t know exactly when ACTA started so it’s not all that easy to compare. 

Documents also indicate that many gov’t ministers didn’t need that level of secrecy. They said as much. Harm to the credibility of the process outweighs the benefits of the secrecy.  People conclude that the negotiators must have something to hide.  ACTA shows that lawmaking gets bogged down with nondisclosure plus unrealistic assumptions about ability to maintain secrecy. 

Keith Maskus, UC-Boulder, Department of Economics 

Critical needs for new environmental mitigation and adaptation technologies, and for ways to diffuse and adapt these to developing countries. Non-OECD emissions are now greater than OECD emissions.  Need for cuts is huge.

IP and tech transfer have been highly contentious in climate change negotiations, in fact so contentious as to be omitted from the last couple of meetings.  Agenda difference is fundamental: OECD countries say patents are necessary and effective for inducing innovation and tech transfer; China, India, etc. say they’re a barrier.  Compulsory licensing, public funding, exempting least developed countries from patent obligations are counterproposals.  Banning patents on genetic resources and plant and animal varieties relevant to climate change adaptation. It is hard to compromise as between these positions. 

Political economy means a domestic bias towards inaction; without int’l coordination, everyone will free ride regardless of wealth.  Radically different social and economic valuations of clean air etc. across and within countries.  Leakage issues: risk of pushing older tech to developing countries without better means of tech transfer.  IP system itself won’t support sufficient investments in environmentally significant tech and especially in efficient tech transfer to developing countries. 

There is good evidence that property rights can expand tech through raising certainty, facilitating licensing, and facilitating tech markets, but the effects don’t seem to happen much in less developed countries.  Studies of patents in environmentally significant technologies: rapid increase in patenting in developing countries, but highly concentrated in China and other middle-income countries.  Virtually no patents in LDCs, suggesting no intent to transfer. Patent ownership is largely in OECD and is widely diffused (meaning multiple tech sources available, unlike the situation in pharma—substantial numbers of substitute technologies often available; China is a major and growing source for solar, fuel cells, wind).  Biofuels and synfuels, however, may behave more like pharma. 

Basic conclusions: patents not yet a significant barrier to tech transfer, but little evidence that patent incentives are enough to overcome externalities and market failures. 

Most ideas stem from pharma.  Patent term extensions to incentivize particular significant tech most useful for reducing emissions; ex post extensions aren’t likely to stimulate more innovation and are costly to users.  If done, should be tied to broad licensing. Short extensions for new uses also seem unlikely to help.  Expedited patent exams and differentiated fee structures have some promise, but requires improving patent examination quality. Difficult to figure out how to set fees and eligibility; could provide rebates for licensing commitments to poor countries, especially for renewal fees.  Lower up front fees and higher renewal fees could also make things move faster.  Short-term extensions in major markets for diffusion to LDCs—doesn’t make much sense to him. 

Patent variations are largely marginal changes; probably need more global coordinated efforts. One possibility: increase info flows through searchable databases and voluntary patent pools with differentiated access royalty rates.  Universities/public labs should license or freely transfer tech developed through public funding—initiatives in their infancy.  Need global access to knowledge treaty on basic research. 

All of the above is secondary to raising global carbon prices to induce innovation and tech transfer. 

Mark Wu, Harvard 

Selective enforcement and commercial scale provisions create additional problems above what we’ve discussed already.  Occurs in the US but is much worse elsewhere, especially in places like China.  Forced people to turn to civil remedies; TRIPs requires such remedies but authorities have enforced them selectively, making it difficult to bring a TRIPs challenge because there are people who get arrested.  Yet remedies are not high enough; they get baked into the cost of doing business, which remains overall very profitable.  EU/US/Japan have therefore pushed for criminal procedures.  TRIPs asks for criminal penalties for infringement of a “commercial scale.”  What does that mean?  Not out of the blue from TRIPs.  Mainly used in developed countries’ law, but Zimbabwe too.  

Maximalist camp: anything that is of economic benefit/private financial gain is commercial scale.  Many critics of this perspective, since any act of infringement could fall into this category.  ACTA proposal initially was acts of commercial gain and significant acts of infringement with no direct or indirect commercial gain; this was eventually shot down as significant activities for direct/indirect commercial gain.  But that doesn’t really solve the problem, because ACTA negotiators aren’t the countries where the selective enforcement is a big problem.  

Selective enforcement may seem to make things not as bad as they seem from the anti-maximalist position.  But that pleases no one: not the maximalists, not the development agenda folks who are interested in access to medicines/seeds/essential tech, which are issues where there is often a chokepoint and you can’t get the latest one off of the street corner the way you can with DVDs or purses.  Two dissatisfied sides who feel unable to deal with each other’s problems.  Need to seek an accommodation, but emerging economies will make this harder instead of easier over the next decade. 

Michael Carroll: Isn’t SOPA etc. an admission by US rightsholders that the international products/regimes they invested in have failed, since they can’t get enforcement elsewhere and so they have to wage proxy war against domain names etc.?  Why is there bite to these regimes on the patent side and not the copyright side? 

Flynn: SOPA tries to deal with a very different problem than Wu talks about—US-directed websites trading in pirated material. The piracy problem in the US is very small.  Hard to measure piracy, but the number of true consumers in the US of most of their media through pirated content is about 1% by self-report.  India, Russia: tech companies say the piracy rate is well over 60%, and for some fields like games or movies can be 80-90%.  You can talk about those problems completely differently.  SOPA has lots of problems, but it’s not the same as trying to cut off piracy in Russia/China. What kind of world do you have to create in those countries to drive the piracy rate down to US rates?  You can’t cut off all piracy in a country where piracy is the mass market. Universal pricing is the problem—in India, a legit CD costs $17.  Won’t sell many CDs in a country with GDP $1500.  You can throw the 99% in jail, or you can try public policy forcing media into new distribution models. As long as the agenda is the perfect enforcement model for the $17 CD, that is doomed to fail. 

Maskus: the policy is designed to destroy content, ultimately, by punishing and angering your own consumers.  Extending that internationally makes little sense.  New distribution structures are better: licensing digital content is difficult technically and legally with different collective societies.  That needs to be cleaned up through competition policy or agreement about licensing.  We don’t need a global compulsory licensing regime because everyone can always do compulsory licensing already, but the question is one of effectiveness. 

Dreyfuss: Many countries don’t have enough money to affect incentives much. Even if they bought the stuff, it wouldn’t provide much; the real problem is exportation, which SOPA is trying to deal with. Might be better to deal with exports in TRIPs for both patents and software.  Most patented stuff really does ship as a physical problem so it could be dealt with that way as part of an acquis.  Exports instead of imports. 

Colleen Chien: She hears discussion of legislative agreements and dispute settlement panels as the new form of decisionmaking rather than courts.  Is it enough to get countries to agree to ACTA or will that be tested in enforcement mechanisms. 

Dreyfuss: developing countries see nonviolation complaints as a real threat to push for compliance, but there are also opportunities to grow WTO law.  One area where that might happen is bilaterals asking for TRIPs-plus when countries thought they were signing on to ceilings—a developing country might be able to bring a nonviolation complaint when pressured to sign TRIPs-plus.  Any change now draws the charge of “not TRIPs-compliant,” but we don’t know whether that’s true.  Why not more complaints/proceedings? Because people are regime-shifting. That’s why she thinks a nonviolation complaint might be useful. But people are also leery because present decisions have not displayed much understanding of what IP regimes really are. 

Wu: have to convince developing countries that they want to do a nonviolation complaint but still have all the benefits of TRIPs—have to create a carveout for TRIPs and get the rest of the trade benefits.