Thursday, February 28, 2013

press release announcing patent/misappropriation lawsuit might violate Lanham Act

United Services Auto. Ass’n v. Mitek Systems, Inc., 2013 WL 652420 (W.D. Tex.) (magistrate judge)

USAA moved to dismiss Mitek’s false advertising counterclaim and strike its claims of bad faith; the magistrate judge recommended denying these motions.  USAA provides various financial services, and alleged that in 2005 it invented a method for consumers to remotely deposit financial documents. It filed patent applications for this invention, and chose Mitek as the software vendor for software to read the numbers on checks.  USAA allegedly disclosed the invention to Mitek subject to a confidentiality agreement.  In 2008, allegedly unbeknownst to USAA, Mitek filed a provisional patent application, reciting a claim to a similar invention.  In 2012, Mitek began telling USAA that it was infringing on Mitek’s patents.  USAA sued for a declaratory judgment of nonfringement/invalidity/etc. 

Mitek alleged that USAA violated the Lanham Act by accusing Mitek of conducting its commercial activities in an unethical manner.  USAA’s press release, “USAA files Suit Against Mitek Systems, Inc.,” states:

USAA has filed suit against Mitek Systems, Inc. for misappropriation of USAA's proprietary information, breach of contract, and fraud, among other claims.

USAA spokesman Paul Berry says, "USAA invented remote deposit capture technology to meet the needs of our highly mobile military membership, enabling them to deposit checks with a scanner or smartphone wherever they may be stationed. USAA has invested substantial time and money in the development and implementation of an invention which has revolutionized the banking industry."

"Mitek misappropriated USAA's proprietary and confidential information while working under contract for USAA, and then took numerous steps to claim it as its own,” says Berry. “USAA filed this lawsuit to protect USAA members and our Association."

The magistrate judge concluded that this was commercial advertising or promotion.  It was widely disseminated and promoted USAA by claiming that USAA developed an invention that has “revolutionized the banking industry,” and that USAA is looking out for its members and filed the suit to “protect” them.  Such statements “go well beyond describing the allegations in a lawsuit and arguably involve an attempt to influence customers to buy USAA's goods and services.”  USAA argued that it was simply identifying its allegations, but the press release didn’t specify its allegations or say that USAA was giving its “beliefs, opinions or views." Instead, the press release presented its contents as factual statements "and, by suggesting that it was protecting its customers in filing suit, USAA intimates that Mitek's products and/or services are somehow unsafe or untrustworthy.”  (At a minimum, this conclusion seems in tension with the law surrounding Lanham Act claims based on statements made about pending patent lawsuits, though that’s not a “commercial advertising or promotion” problem.)

USAA then argued that it wasn’t in competition with Mitek.  The magistrate judge found sufficient competition: “both companies have apparently sought to develop and implement a product to designed to enable mobile banking.”  USAA targets individual customers while Mitek targets banks as potential users/licensees, but that “hardly [made] a difference; the parties clearly are both vying for use of the same technology with the intent of selling this product and/or service to its customers” (emphasis added).

USAA also argued that it wasn’t trying to influence customers with the press release.  (Whose customers?  This might bear on the “competition” question, though I also think that the fact that one company has integrated production and one supplies just one component of the overall experience is relevant and might be enough to justify a finding of competition under some circumstances.)  Mitek, though, argued that USAA’s claims jeopardized its well-earned reputation (with whom? Mitek’s customers or USAA’s customers?).  The magistrate judge concluded that the press release could be understood “to influence customers to continue or commence business with USAA.”

The magistrate judge also concluded that the statements alleging misappropriation of confidential information concerned the nature/characteristics/qualities of Mitek’s services or commercial activities.

USAA then argued that it accurately described its allegations.  But the press release suggested that Mitek’s actions were unethical and that customers needed “protection.”  “These statements go well beyond merely describing the allegations in the complaint and arguably convey a false impression of Mitek's goods and/or services, providing USAA with an unfair advantage in the marketplace.”  (The marketplace for what?)

Such watch: Amazon search results not confusing

Multi Time Mach., Inc. v., 2013 WL 638888 (C.D. Cal.)

MTM sells “military style” watches under the marks MTM Special Ops and MTM Military Ops through its website and authorized distributors.  It doesn’t sell or allow its distributors to sell watches on Amazon.  Amazon’s search function nonetheless provides results for a search on “mtm watch” or similar queries, offering other product listings—here, watches made by MTM competitors.

When a user searches on Amazon, the user’s search term will appear twice on the search results page: once in the search query box and directly below, in what Amazon calls the “breadcrumb.”  The breadcrumb “displays the original query in quotation marks to provide a trail for the consumer to follow back to the original search.” Below that, Amazon provides “Related Searches,” here including “mtm special ops watch.”  A gray bar separates these three instances from the product listings. For the “mtm special ops” search, one of the “Sponsored Links” results included a link for “Tactical Watches By MTM,” with the description “MTM Tactical Watches Worn By Military, Police, Sportsmen,” and another link to MTM's website.

You can’t buy from the search results page, only from a product detail page, which includes “a large image of the product, a hyperlink identifying the brand of the product, and a title identifying the product in larger font.”  Thus, the Luminox search results for a “mtm special ops” search include large brand identifiers.  On that product detail page, your original search query—here “mtm special ops”—still appears in the search query box, and there are also links suggested uner “Customers Viewing This Page May Be Interested in These Sponsored Links,” which in this case displayed sponsored hyperlinks labeled “MTM Watches,” with a link to Yahoo, and “Military Watches Sale,” which went to some sort of shopping site.

The court found this situation to squarely present the question posed by Judge Berzon in her Playboy concurrence:

I walk into Macy's and ask for the Calvin Klein section and am directed upstairs to the second floor. Once I get to the second floor, on my way to the Calvin Klein section, I notice a more prominently displayed line of Charter Club clothes, Macy's own brand, designed to appeal to the same people attracted by the style of Calvin Klein's latest line of clothes. Let's say I get diverted from my goal of reaching the Calvin Klein section, the Charter Club stuff looks good enough to me, and I purchase some Charter Club shirts instead. Has Charter Club or Macy's infringed Calvin Klein's trademark, simply by having another product more prominently displayed before one reaches the Klein line? Certainly not....

... If I went to Macy's website and did a search for a Calvin Klein shirt, would Macy's violate Calvin Klein's trademark if it responded (as does, for example) with the requested shirt and pictures of other shirts I might like to consider as well? I very much doubt it.

MTM’s argument was that, to avoid confusing consumers, Amazon was “obliged to inform the consumer that Amazon does not carry any products with that brand before offering products from other brands.”  Amazon responded that, so long as it labeled its results clearly to indicate their brands, consumers get what they want without infringement.  Amazon wins.

The court began with Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011).  Because it found no likelihood of confusion, it didn’t reach the question of whether Amazon’s internal use of a term as part of its behavior-based search technologies constituted “use in commerce,” though given the breadth of that term the court indicated that it would likely have found use in commerce.

Though likely confusion is fact-intensive, and rarely appropriate for summary judgment, it was so here.  MTM argued that Amazon was engaged in passing off, like serving customers Pepsi when they asked for Coke. In Coca-Cola Co. v. Overland, Inc., 692 F.2d 1250, 1252 (9th Cir. 1982), the court found that menus and posted signs indicating that Pepsi-Cola was the only beverage served in the restaurant were not “sufficiently conspicuous” to avoid liability. But that’s a question about confusion, and Sleekcraft still provides the basic test for confusion. Anyway, this case was different:

It is akin to the consumer asking for a Coca–Cola and receiving a tray with unopened, labeled, authentic cans of Pepsi–Cola, RC Cola, Blue Sky Cola, Dr. Pepper, and Sprecher Root Beer, and a copy of Coca Kola: The Baddest Chick, by Nisa Santiago. This is a substitution, but given the context it is not infringing because it is not likely to confuse.

In the internet context, the confusion factors should be applied flexibly. Network Automation said that the most important factors in a keyword search case were (1) strength of the mark, (2) actual confusion, (3) type of goods/degree of care, and (4) labeling and appearance of the ads and the surrounding context on the screen displaying the results page.  This was a good starting point. 

Among other things, the similarity of goods (note that this isn’t the similarity of the parties’ goods, but we’ve all agreed to ignore that usual requirement) was less important if ads are clearly labeled or consumers exercise a high degree of care.  A consumer may well type in a term identical to MTM’s mark, but that too only matters if the consumer ends up confused.  Though both Amazon and MTM sell watches, “this is misleading only if the consumer is confused, not if the consumer simply has clearly marked options.”  The fact that both Amazon and MTM sell watches on the internet is “too commonplace” to matter in the likelihood of confusion analysis.  (There are some interesting assumptions about consumer behavior encoded here—we could’ve decided that convergent marketing channels just increased the risk of confusion generally and thus always weighed against a defendant, but instead we’ve expected consumers to adapt to the internet as a marketing channel—paging Fred Yen.)  Intent also needed to be considered in the context of the clarity of labeling.

Looking at the strength of the marks at issue, the court didn’t find them especially strong.  “MTM Special Ops” and “Military Ops” referred to watches designed for members of the armed forces involved in special military operations.  MTM advertised “Special Ops Watches worn by Special Ops and Special Forces worldwide,” though to the PTO MTM’s attorney said, “The term Special Ops is nothing more tha[n] a suggestive reference to military type watches.”  (MTM claimed it had two other marks at issue—“American Watch” and “Pro Ops.”  American Watch was used for a company that sells promotional watches that can be inscribed with company names; no watches were branded American Watch.  While those two, and Military Ops, were “arguably distinctive enough” to be protected, they were also phrases that could be used to search for other products unconnected with MTM, and weaker than “MTM Special Ops”; thus the court’s analysis applied equally to them.)

The marks were not conceptually strong—at best suggestive and more likely descriptive.  The addition of “MTM” might make them protectable, but didn’t neutralize their descriptive connection to the product.  Thus, this factor favored Amazon.  (This discussion makes no sense in the context of product search.  Weak or strong, the question is whether it’s clear you’re being offered an alternative.  Compare a search for Xerox that offers Canon products as alternatives.)

There wasn’t admissible evidence about MTM’s market share, rendering evidence of its sales and ad expenditures of little significance; MTM didn’t show evidence of brand recognition. This factor was neutral because, though it was MTM’s burden to show likely confusion, it didn’t need to prevail on each Sleekcraft factor and neither party presented evidence of commercial strength.  Overall, given the conceptual weakness and absence of other evidence, strength favored Amazon.

Amazon argued that there was evidence of a lack of confusion, coming from its retained data about how often a consumer's search for “mtm special ops” or “mtm special ops watch” results in the consumer placing a product in a shopping cart or in a purchase.  Amazon compared the same data for queries for “luminox” or “luminox watch.”  Since consumers were 21 times more likely to buy a product after searching for Luminox than after searching for MTM Special Ops, Amazon argued that there was no confusion: if they were confused, one would expect a substantial conversion of MTM searchers into Luminox buyers.  MTM argued that Amazon’s data registered only sales/selections made on the same day of the search, whereas consumers might put a product into a cart but buy it later.  Amazon rejoined, persuasively, that there was no reason to think that such behavior differed for Luminox v. MTM searchers.  The court agreed that this was evidence of no actual confusion. 

In addition, queries for “mtm” were much more common than for “mtm special ops,” and the average price of units sold based on a “mtm” search was dramatically lower than the price of MTM’s competitors’ watches.  Thus, this wasn’t evidence of confusion. (The court didn’t say so, but I think what this means is that there are other kinds of “MTM” products—ammo cans turned up high in my Amazon search—that aren’t watches and that, for all that appears, aren’t sold by plaintiff.)

MTM’s president testified that there was actual confusion, but couldn’t present specific instances or records; his testimony was too vague to count.

MTM’s watches start in the several-hundred-dollar range and go up; its competitors’ products are likewise relatively expensive, triggering a high degree of care.  MTM argued that watches in general could be pretty cheap, but not so with the least expensive watch resulting from a “mtm special ops” search, which was $145 (the first five results are more expensive than that).  “[T]he relatively high price of the goods in question, combined with the increased degree of care used in Internet purchases, mean that consumers are presumed to use a high degree of care in such purchases.”

As for the key question of labeling and context, this too favored Amazon. MTM offered an expert report concluding that the search results were “ambiguous, misleading, and confusing.” MTM’s expert conducted no study.  At most, he could say that consumers might be confused about how the site functions, but not about the source of the products.  “A consumer could, for instance, puzzle over why the search query ‘mtm special ops produced a results page listing ten watches but none of them with the MTM brand without also being confused as to the source of the watches presented on the results page.” While not ruling out the possibility that a survey could show confusion in a case like this, the court found that there was no such evidence.  The court also noted that confusion might result if the products resulting from the search had substantially similar marks, which they didn’t here.

No confusion; no liability.

Lifehack ... or passing off?

From a list of ways to simplify your life.  I'm not sure that public drinking counts as simplifying, but ok ...

Tuesday, February 26, 2013

The baddest footnote on consumer confusion

I'll blog the Amazon v. MTM Watches case later, but for now:
Additionally, the instant situation does not appear to be a case of palming off in the traditional sense. It is akin to the consumer asking for a Coca-Cola and receiving a tray with unopened, labeled, authentic cans of Pepsi-Cola, RC Cola, Blue Sky Cola, Dr. Pepper, and Sprecher Root Beer, and a copy of Coca Kola: The Baddest Chick, by Nisa Santiago. This is a substitution, but given the context it is not infringing because it is not likely to confuse.
Yes, I know, analogies are dangerous.  But this one's so good!

Monday, February 25, 2013

Do universities have an obligation to police health claims made in their name?

Is Herbalife using UCLA's name to bolster its credibility?  And if so, does the university approve?  It would be interesting to know, especially given the FTC's Endorsement Guidelines.  HT Zach Schrag.

court resolves allegedly false claims about prior case by issuing new opinion

Millennium Laboratories, Inc. v. Ameritox, Ltd., --- F.Supp.2d ----, 2013 WL 628424 (D. Md.)

Midway through trial of this Lanham Act case between competitors in the urine drug testing industry, the parties resolved their remaining issues by agreeing to a consent order, but unfortunately, the hostilities continued. Both sides issued press releases and other public statements, and then filed new Lanham Act suits accusing each other of violating the consent order and misstating the results of the trial and the court’s rulings.  After various proceedings, the court told the parties that it would issue a memorandum “that neutrally and objectively recounted the earlier litigation,” then summarily dismiss the lawsuits. 

The court first explained why it believed it had the power to issue this clarifying memorandum and dismiss the suits. First, the consent order gave the court authority to resolve disputes bearing on it; the court also had inherent authority to enjoin a party from making misleading statements concerning litigation on its docket.  (Wonder what Paul Alan Levy thinks of this.) Second, both sides sought a jury trial: a trial “at which a jury would decide what happened in the earlier litigation, including the import of this Court's rulings, and whether the parties' statements violate the Lanham Act.”  (In a footnote, the court noted skepticism over whether the press releases were “commercial advertising or promotion.”)  Asking a jury to review thousands of pages of pleadings, orders, exhibits, and transcripts “would be unconscionably wasteful of both judicial and private resources.” Thus, the court was the only feasible arbiter of disputes over earlier litigation. 

Third, the standard Lanham Act false advertising relief is equitable “because of the inherent difficulty in attributing economic injury to a competitor's false advertisements,” and here either side could only speculate about the effects of the press releases.  The new lawsuits were about the parties’ characterization of the earlier litigation.  The court’s memorandum, “which recounts the history of that litigation neutrally and objectively, affords both sides with appropriate equitable relief.” Thus, there was nothing more to decide, and the court would dismiss the cases.  I’m not clear on what happens if one of the parties decides that this memo isn’t accurate, though that mention of “inherent power” above probably gives a clue.

The parties advertise to pain doctors who prescribe powerful opiods such as oxycodone and hydrocodone.  As many as 75% of pain patients fail to take medications as prescribed.  Determining compliance is a problem, because time-consuming personal monitoring is “at odds with the business model (twelve to fifteen minutes per patient) that the pressure of modern medicine has forced on many practices,” and also insurance won’t pay for much monitoring.  Thus, there’s a market demand for a test to assist doctors in determining prescription compliance, which means taking the right medicine, in the right dose, at the right time.  Urine testing can provide some information, but it can only provide a snapshot of current use. Because individuals metabolize drugs at different rates, the tests can’t determine the dosage or time taken. Thus, they can’t determine prescription compliance.

After the parties sued each other in 2010, ultimately the court only sent four Ameritox ads to an advisory jury for a determination of literal falsity. The jury was asked to examine the ads from the perspective of a pain doctor to see whether each ad contained a literally false message that Ameritox tests could determine prescription compliance.

Ameritox’s first-generation service Rx Guardian would analyze a sample for drugs/metabolites, then normalize the results by means of an algorithm accounting for patient hydration and lean body mass, which would then be plotted against a reference range.  Ameritox described the reference range as a band within which a prescription-compliant patient’s result would be expected to fall; 95% of compliant patients would have results within the reference range.  The next generation, Rx Guardian CD, used a new source of reference ranges, calculated on an ongoing basis from a database of pain patients treated at a Wisconsin clinic.

The crux of Millennium’s claim was that Ameritox falsely advertised that Rx Guardian test results could, by themselves, be used to determine prescription compliance.  For the second-generation product, Millennium also argued that it was false to describe the Wisconsin patients as “known to be adherent,” because they were not monitored in a controlled in-patient setting, but rather interviewed and their compliance assessed in part by subjective staff determinations.  Ameritox argued that it only advertised the tests as another tool to help or assist doctors in monitoring.  It agreed that the Wisconsin patients probably included some noncompliant individuals, but argued that a reasonable pain doctor would understand “known” to mean “clinically assessed” in the context of its database.

The court granted summary judgment to Ameritox on Millennium’s claims against ads challenged as literally true but misleading, after excluding Millennium’s surveys mainly for lacking proper controls.  Here, the court found lack of a control particularly significant because these were technical services requiring highly nuanced messages; without a control, the survey couldn’t account for respondents’ preexisting views about urine testing.  The court consulted Shari Diamond, the author of the Federal Judicial Center's Reference Guide on Survey Research, as an independent expert, who also concluded that the surveys were fatally flawed, primarily for want of controls.  The court was also concerned that the surveys weren’t blind, that results hadn’t been coded in a replicable way, and that doctors were told that the survey would take only a few minutes even though the tested ads contained a significant amount of technical information.

With its surveys gone, Millennium argued that Ameritox’s intent to deceive relieved it of the need to produce confusion evidence.  But this “narrow” exception should be cautiously applied so that it wouldn’t swallow the rule; without “stark evidence of a knowing and intentional deception,” it didn’t apply.  Thus, the misleadingness portions of the case disappeared, along with a few other pieces, such as an internal marketing piece that the court determined wasn’t “commercial advertising or promotion.”

Likewise, Ameritox’s counterclaims ultimately went away.  Among other things, Millennium won summary judgment on challenges to its claims (i) to have the fastest turn-around time in the industry, and (ii) to be able to provide final quantitative lab results by the “next business day,” despite Ameritox’s surveys, because Millennium’s claims were literally true and clear.  Ameritox couldn’t identify a competing lab with a faster turn-around time, and Millennium could usually provide results the day after it received a specimen.  The court then said it didn’t need to consider survey evidence when claims were “unambiguously true,” but anyway Ameritox’s surveys were seriously flawed.

Only four Ameritox ads went to the jury, which was supposed to render an advisory verdict on literal falsity (as well as whether three of the items were “commercial advertising”), which was ultimately an issue of law for the judge.  A later phase, if necessary, would focus on injury and damages, also required to make out a Lanham Act claim.  The court instructed the jury that, if an ad actually promised that Rx Guardian by itself could tell the doctor whether a patient was compliant, that ad would be literally false.  If it instead promised only a tool, then the ad wouldn’t be literally false. There were no scientific issues for the jury to decide, such as whether the reference ranges were actually useful or whether the Wisconsin clinic’s protocol was sound.  As for the Wisconsin clinic, the challenged ad described the patients as “known adherent,” which would be literally true if a pain doctor would read that as “clinically assessed.”

The jury found that each ad communicated a literally false message about the capabilities of the Rx Guardian service or about the prescription compliance of the Wisconsin patients.  Using this advisory verdict as one source of information, the court independently found literal falsity.  Three of the ads “unequivocally claimed that Rx Guardian could ‘tell,’ ‘verify,’ or ‘determine’ whether patients were taking their pain medications in the prescribed dosages.”  The statement about the Wisconsin patients was also false. Though a reasonable doctor would understand that nothing in medicine is 100% certain, “known adherent” suggested rigorous monitoring in a controlled clinical setting, whereas the Wisconsin protocol only eliminated those who showed certain indicia of non-compliance.

At that point, two issues remained to make out a Lanham Act claim: injury and damages. The court held off on injury, but ruled that Millennium’s case for money damages was too speculative to proceed.  “[M[onetary damages are often difficult to obtain in Lanham Act cases due to the challenge of tracing monetary losses to specific advertisements. This difficulty is compounded for a company like Millennium, that has enjoyed steady increases in market share and profitability.” Injunctive relief was still on the table, though.

At that point, the parties agreed to a consent order providing that Ameritox would no longer state in promotional materials or advertisements that its services can “verify compliance,” or “confirm adherence,” nor would it use similarly definitive phrasing. The order also required Ameritox to refer to the patients in the Wisconsin database as “clinically assessed to be adherent” rather than “known adherent.”  Further, Ameritox had to send its customers and post on its website a letter from its CEO disclosing the advisory verdict and the court’s ruling of literal falsity on the four challenged ads.  The letter would state that “no urine drug test can definitively determine whether a patient has taken the dosage of medication prescribed,” and that pain doctors should “always use their clinical judgment in combination with all available information” in assessing prescription compliance.  

Unfortunately, “[h]ostilities resumed within hours.”  The court held that its present memorandum mooted the disputes by providing a neutral account of the earlier litigation, so the pending cases were dismissed with prejudice.

7th Circuit affirms dismissal of claim against movie title

Eastland Music Group, LLC v. Lionsgate Entertainment, Inc., No. 12-2928 (7th Cir. Feb. 21, 2013)

Judge Easterbrook gives a 7th Circuit-standard breezy treatment of the trademark claim here. Eastland owns a registered mark for Phifty-50, a rap group, which produced a CD in 2003 (and a t-shirt).  Eastland sued Lionsgate for using 50/50 as the title of a 2011 movie.

The district court dismissed the complaint on the ground that the movie’s title was descriptive: the main character had a 50% chance of suviving cancer.  Eastland argued that this was a defense, not an element of the claim, and should have been done on summary judgment, which it expected to be expensive enough to make defendants settle.  “Counsel was surprised when reminded, at oral argument, that a motion for summary judgment can precede discovery, leaving the adverse party with an obligation to show a need for discovery under Rule 56(d).” 

The court of appeals didn’t need to tackle the issue of whether the movie ought to be treated as part of the complaint on a motion to dismiss as integral to the complaint (I don’t think this is a “difficult” question, but ok).  Nor did it need to decide whether to adopt the rule of Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989), which would be unnecessary constitutional adjudication (or, I guess, unnecessary constitutional avoidance).

This complaint failed because it didn’t allege that the use of 50/50 caused any confusion about source, “and any such allegation would be too implausible to support costly litigation.”  At oral argument, counsel conceded that no confused consumer has ever contacted Eastland looking for the film or complaining about its contents/quality.  Nor did the complaint allege that anyone went to defendants looking for a rap group.  There was no survey.  (Given the previous statement about implausibility, it’s not clear why alleging a survey should matter, especially when surveys are so often picked apart by courts upon inspection.)

Apparently calling back to an older understanding of incontestability, the court then said that if the film’s title had been Phifty-50, “allegations of confusion or secondary meaning could be omitted from the complaint,” because the mark was incontestable.  (Even under the older understanding, this seems wrong because a film is not a rap group; incontestability could have meant a presumptively exclusive right to use the mark on the registered goods before KP Permanent, but as far as I can tell the registration here doesn’t extend to films.)  But 50/50 isn’t Phifty-50, and the latter was registrable principally because “it is a made-up homophone of a familiar phrase, which in ordinary usage is suggestive or descriptive. It takes a powerful showing of association between such an expression and a particular producer of goods to establish a trademark claim—and Eastland Music has not attempted such a showing.”  (Interesting conflation of suggestive and descriptive, as well as of protectability and confusion.)

50/50 and soundalikes have been used in titles for a long time.  Wikipedia lists eight films with that title, six of which predate Eastland’s use, and one of those is by and about a rock band.  Wikipedia also lists three TV shows with that name, an episode of a fourth show, and three songs whose titles contain the phrase.  Nor is this list comprehensive; Wikipedia omits Phifty-50 and “doubtless” other examples.  (OK, there are many things one could say about Wikipedia and its omissions, but how about: if you hemmed and hawed over considering the film on a motion to dismiss, what is this discussion doing here?  Is it relevant to Iqbal/Twombly plausibility?  I would find that claim persuasive, in fact, but it deserves discussion.)  Given all these examples, Eastland “is a very junior user and in no position to complain about the 2011 film.”  Phifty-50 “entered a crowded field, and its rights are correspondingly weak and narrow.”  (It seems to me that Phifty-50 did not enter the movie title field at all.)

Judge Easterbrook turned to a different argument: A work’s title can infringe another author’s mark only if it falsely implies that the author is the work’s origin.  Dastar.  Thus, Truman Capote’s Breakfast at Tiffany’s, and the resulting movie, don’t infringe the rights of Tiffany & Co. “because no reasonable reader or moviegoer thinks that the jeweler is the source of the book or the movie.”  Parenthetically, the court noted that it wasn’t considering the possibility of dilution, which is good, since such a claim against a title wouldn’t be available under the federal statute/constitutional under state statues.

Dastar held that “trademark law cannot be used to obtain rights over the content of an artistic work; that would amount to an indefinite extension of a copyright. Titles of songs and movies cannot be copyrighted; Dastar tells us not to use trademark law to achieve what copyright law forbids.”  Only confusion about origin—the producer of the tangible product sold in the market—suffices, and the complaint did not and could not plausibly allege that consumers treat Eastland as the producer or source of 50/50, or treat Lionsgate as the producer of the 2003 rap album.

Final note: that last paragraph’s language might be of great interest not just with respect to trademark claims but also to the right of publicity.  If copyright is the body of law that governs intellectual property/misappropriation claims about the content of an artistic work, then neither trademark nor the right of publicity should interfere—the more so since the right of publicity, being a state right, is subject to conflict preemption while federal tradmark claims are not.

Sunday, February 24, 2013

Standing on the shoulders of vampires

A very interesting meditation on Vampires and the Paradox of Copyright:

When Universal began cranking out their horror classics in the 1930s, the unauthorized silent film was a major template in the minds of those who had seen it or stills from it.  And while debonair Drac remained the cultural icon of the un-dead for the 1930s and 40s, the influence of this film lurked just beneath the surface, cropping up on radio and in comics with increasing frequency.

Pretty remarkable when you consider every print of the movie had been ordered destroyed.…

You see, in a very real sense Dracula stopped being Bram Stoker’s property the moment he released it into the wild.  The moment he turned it loose, the moment other people began reading it, the cultural matrix of what we meant by “vampire” was forever altered.

This is not to say previous or non-Stoker vampyric creations were abolished, but that Stoker in the very act of creation had been forced to use collaborators, and those collaborators — however minusculely at first — used Stoker’s input to change the cultural gestalt that made Dracula possible.

Friday, February 22, 2013

Notre Dame part 4

Ann Schlosser (University of Washington, Michael G. Foster School of Business), What are my Chances? The Persuasive Implications of Using Imagery to Interpret Ratios

Commentators:            Raghu Rao (McCombs School of Business, University of Texas at Austin)

How to present ratios to consumers, perhaps in public service announcements about certain risks.  Turns out that numbers matter: 1 in 10 is perceived differently than 10 in 100.  Rao’s background is game theory, so this was all new/surprising.

One explanation for why: denominator effect, where the denominator is hard to process—total of affected and unaffected people, whereas the numerator is easier to process. So people will focus on the numerator.  100 in 1000 will convey higher risk. Another explanation: people start with the numerator, so the first thing you encounter has an anchoring effect. 

Question: should we talk about reductions in risk in the same way?  So if we’re trying to convince people to take acts that will minimize their risks, how do we do that?

Another question: what is the boundary condition here—10,000 to 100,000—if more is more effective, should we keep increasing the numbers?

Prospect theory makes some claims about how we look at probabilities. Robust finding: People often overweight the low probabilities and underweight the high probabilities.  If we look at that and the ratio, is there a connection between those two findings?

Rebecca Tushnet (Georgetown)

Interactions between numbers used in text, imagery, and the emotional appeal of an ad—whether it made the viewer feel helpless or efficacious.  All of these turn out to affect beliefs and intentions.

Questions about the study itself: I wanted to know more about how the studies assessed whether participants were using imagery.  According to the paper, participants reported their agreement with four statements assessing imagery processing, e.g., “I processed the ad using imagery,” but I don’t know whether those are good measures—do respondents really know what experts mean by “I processed the ad using imagery”?  Even if they do, do we believe them when they say how they processed the ad?  This is one area where asking the questions may influence the reporting.

Talk more about how specific emotions were evoked and measured. The studies suggested that “challenge” was an important emotional reaction, compared to fear, hope, guilt, or regret.  How did the ads trigger these emotions?  Were there particular groups of subjects who reacted as expected and others who didn’t?

More general observations: There is a divergence of questions asked by marketers and marketing researchers and those asked by lawyers.  Risk of misunderstanding (which I’ve documented with respect to studies about so-called trademark dilution).  When translating, can be important to define imagery carefully: it can include pictures in the ad itself, but can also include processing in which participants form mental images.  To a lawyer, it wasn’t clear throughout the paper that imagery meant both pictures of cars and also low ratios, which apparently caused consumers to imagine people represented by the numbers.  Since ads almost universally use pictures, if we’re talking about marketing regulation, then we may not need to specify what we mean by imagery, but I suspect it would still be a good idea.

Another concern, certainly known to marketers: intentional manipulation.  Lauren Willis has investigated how banks have responded to consumer-protective changes by manipulating decision environments to get them to “opt in” to overdraft protection.  How will understanding of the effects of different presentations on risk perceptions be used?  Will food companies use it to convince us that our risks of harm from obesity are low by carefully using smaller numbers when those will be more lulling? 

Regulatory implications: if presentation matters so very much, this suggests that regulators must be very careful about the level of generality of regulations requiring disclosures or other information.  The two alternatives would appear to be command and control—no, you don’t get to choose whether you use small numbers or big ones in your ratios—or outcome-based measures: you can structure the disclosures as you wish, but they must pass a copy test indicating that some significant percentage of consumers received the intended message.  Both of these have their weaknesses, but given the manipulability of information and the strong incentive of regulated parties to evade uncomfortable regulations, one or the other must be considered.

Finally, inseparability of emotion from knowledge.  The emotional effects of the ads changed how consumers thought, sometimes in the direction of a better understanding of the facts.  This is an important point for marketers to continue to convey to lawyers, judges, and policymakers, who tend to take a ridiculously rationalist viewpoint that assumes that emotion can be separated from reason.  Latterly this idea has been used to strike down cigarette warnings because they used imagery and were supposed to generate negative emotions.  But disease and death, the predictable consequences of smoking, should generate negative emotions; information without emotional tone will not inform decisions.  (See also: black box warnings on drugs.) If our commercial speech doctrine doesn’t soon start recognizing this, the regulatory state will be in trouble.

Schlosser: Reduction of risk would be a great extension.  Would think that large numbers would still lead people to see a dramatic drop, but “from 15 to 5” is an interesting thing to test.  She looked more at the lower bound—a small group is easy to spontaneously imagine.  If you went more extreme, there might be a point where respondents might not understand what millions and billions are in relation to each other.

Prospect theory: typically research on ratio has focused on low probability events, because with high probability events the effect seems to wash away and people recognize the high probability. Also it’s really hard to communicate a 10% risk.  Can tiny risks be presented in ways that produce meaningful differences? The evidence suggests they can.

Rao: imagery seems to flip results in certain cases—what’s going on?

Schlosser: holistic processing—may shift loss v. gain frames.  People think less about the probability of being in a car accident and then more about the probability of not being in a car accident. 

McKenna: also a question of which side of the ratio you’re presenting. If you present “4 out of 5 people have no problem” do you see different dynamics?  Which gets to the regulatory point.

Heymann: risk aversion also comes in.

Schlosser: two different processing mode, intuitive and analytical.  These are simultaneous.  People will realize that one is mathematically right, but they go with the one that feels right.

Montgomery: Imagery and discursive processing—you show a preference for a smaller denominator. On board w/the argument that this is because it’s easier for people to visualize. If you make it easier to visualize the denominator, would that go away? If you make it more difficult to visualize 4 people, can you flip it?

Schlosser: 1 in 4 may be difficult to avoid visualization.  Noticing when you intended to prompt imagery—one thing that reduces imagery is to have people think analytically and logically, which might depress the effects. 

Montgomery: think of 4 people you know—change the emotional valence.

Goldman: regulators in this space proceed with zero knowledge of social science; 1% knowledge may be worse.  How can you use this research for evil? You can imagine comparative advertising where one presents it as 6 out of 10 and the other says, 40 out of 100.  This paper explains why consumers take away different messages despite literal truth—it’s simple manipulation of consumer processing.

Schlosser: thought of this as a way for nonprofits to convey good messages.  The policy choices may be to tell people how they have to present numerators v. denominators. Or to require images.

McKenna: is there literature about processing ratios instead of percent?  Does it matter if you represent 1 out of 3 as 33%?  Measuring expected behavior: it’s hard to measure expected purchasing behavior because what people say they’ll do and what they will do is different.

Regulatory: if you require everyone to have the same baseline. Study shows that as an absolute matter, fewer consumers understand information conveyed in one way v. another. Is there any indication that consumers would learn better over time?

Schlosser: ratios are typically much more effective at conveying risk; prior research establishes that percentages are too abstract.

Rao: especially when percentages are low, ratios are likely to do better.

Schlosser: some offer an evolutionary explanation for this: we are used to processing frequency and not percentage.

Expected behavior v. intentions: there are some creative ways to get at that.  How can I track people? IRB difficulties (false memories are ok, even though they won’t be dispelled by disclosure, but apparently not sunscreen!).

Rao: One large-scale study tracked people; very controversial showing that ads improved intention but had no effect on action; industry argued that there were methodological problems.

Schlosser: very hard to push ingrained behavior.  Even a little nudge towards “this is a problem” is a move in the right direction.

Sheff: Failure of mandatory disclosure is well-known. There may be ways to avoid some of the standard failures with proper design.  CFPB is working on better disclosures too. Disclosures of side effects/efficacy in medical settings. Formalized framework sensitive to features of cognition.

Yen: Curious whether research could be extended to product design where victim precaution matters.  Failure to warn is available if presentation of warning wasn’t reasonable. Reasonableness on producer side might require some account of how consumers react to information: bland information panel might not be enough. Consumer precaution: we may also say it’s consumer’s job to push through the ratios and understand that 3 in 10 and 30 in 100, but that would be a big change in the law.

Is it possible to research verbal v. numerical cues? This is very dangerous v. 90% chance of injury.

Also: how is this related to brand commitment? If people are committed to their brands, will they react to numbers at all?

Schlosser: suspects that people will switch numbers in memory in ways that are congruent. Will they counterargue/switch over to giving different numbers (e.g., ok 4, out of 10 people who regularly eat at McDonald’s get sick, but 6 don’t).

RT: on expected behavior: I immediately thought about the Obama campaign’s attempt to convert intention to action, not for nothing taken from marketers like Cialdini.  “Make a plan” as effective predictor of action.  If they indeed ended up imagining themselves putting on sunscreen, for example, more of them probably did so, but that’s imagery-mediated.

Schlosser: challenge as the mediator suggests a measure of personal responsibility—it looks like it’s imagery processing that’s really doing this. Ease of simulating the behavior mentally is key.

RT: so do ratios matter at all?

Schlosser: interesting extension to see whether people who processed it textually behaved differently than those engaged in imagery.

Montgomery: sufficiently painful imagery may backfire because people don’t want to confront it.

McKenna: with smoking images, too.

Schlosser: in some ways, numbers can also validate claims, so “very dangerous” may have trouble being convincing.

Montgomery: even numbers are relative in a way.  People judge based on their own situation—easier to visualize out of 4 than out of 10.

Schlosser: but that’s with smaller numbers. When the numbers are larger, people are overinfluenced by which number comes first (denominator neglect).

RT: I am starting to wonder if we’re just rearranging deck chairs on the Titanic: if disclosure doesn’t do much, we might need bigger design changes—narrowing the streets instead of making the speed limit sign stand out more.

General discussion of anchoring effects and their implications for statutory damages—even when a judge thinks s/he’s giving a defendant a good deal, large statutory damages may do harm.

Manta: similarly, prosecution adding charges to multiply exposure.

Notre Dame 3

Irina Manta (Hofstra), Hedonic Trademarks

Bill McGeveran: disconnect between aspect of meaning of mark that lawyers care about and aspects that marketers care about. Manta is trying to focus our attention on the tertiary aspects of meaning: not just producers/mark owners but how consumers think about the mark.

Concerns: slippage between the is and the ought in the paper/critiques of other aspects.  Search costs theories and responses to them: McKenna/Sheff—those are ought rather than is projects.  Search costs is attempting to be somewhat more descriptive, at least insofar as it accurately captures courts’ rhetoric.

When we talk about preserving the hedonic signal sent by a mark, he thought about the Academie Francaise trying to continue to control the French language and prevent its bastardization by other languages. And about how which nightclub is the coolest in NYC is always shifting, and how the bridge & tunnel people always find it and ruin it for the hipsters and then the hipsters move on.  Wondered about advisability or even possibility of having a static, permanent hold on “hip.”  Protecting the coolness of the mark from encroachment seemed like an unwinnable task, if this is a normative project.

Relatedly, if you talk about a presumption of justified intervention, you have to think about what costs exist related to compliance and enforcement.  Would like to see more discussion of that.  If you can’t demonstrate a market failure, why not let fluid markets distribute hedonic benefits rather than having legal static monopolization? People might enjoy eating a Gucci burger, as the paper acknowledges.

Eric Goldman (Santa Clara)

Big paper, big claims.  Means lots of avenues of attack.

Maximizing social utility: are you counting everything that should count?  You acknowledge that the utils of the consumers of the defendants’ products count, but then seem to discount them. It’s also not just the utils of the consumers, but the innovation that might follow. We don’t know what we don’t have yet, and that’s hard to figure out.

Common objection: there are too many rights; costs of dealing with them create problems of deadweight loss as well as overall decreased utility. 

Say more also about self-dilution.  Bad brand extensions, reformulations: reduce consumer hedonics, but self-inflicted. If goal is to maximize hedonics, then we need to follow Dillbary’s lead and say that might be actionable.

Don’t know how to distinguish hedonic loss from new market entrants and hedonic loss from criticism: the playground criticism of “you’re a loser because you’re wearing that brand.”  Brand criticism probably does more to interfere with hedonic benefit from brands.

Normative v. descriptive: what’s the principled way to set the boundaries?  Maybe we are going too far in protection even if we don’t account for hedonic benefits formally.  Example: LV v. Hyundai.  Hard to reverse engineer what makes brands more or less likely to create the benefits you want.

Would focus more on descriptive, with only normative point being that a cost benefit analysis has to account for consumer hedonics, which might be undercounted today.  

Side note: Gucci burgers do exist on the market—if you make a claim about a specific product, it’s worth noting that such exist.

Manta: doesn’t disagree with very much here. The normative/descriptive slippage here is a fair point.  Establishing a framework here.  Not a pure free riding argument.  There is an underlying understanding: why should some people be able to gain benefits as others when they didn’t invest the same? (Producers or consumers?)  Also agrees that First Amendment values are important; her First Amendment argument is just meant to be descriptive: TM isn’t going anywhere. For most of these things, we don’t know what the hedonic loss is.

Goldman: the LV basketball isn’t a real product: how do you calculate that?

Sheff: a few women may benefit from the Gucci purse, but the thousands of women who want the counterfeit may gain utility from having them—this is a distributive question separate from optimization.

Manta: if hedonic theory bears out, some level of straight-up counterfeiting might be beneficial compared to other things.  What happens when people assume that you’re carrying around a counterfeit even if you have the real thing because of the high level of counterfeiting.  Can’t ignore that there is a harm. The Guccis of the world we may never see because of counterfeiting, investment in building up a prestige brand.  (See again Yi Qian from last time at Notre Dame.)  This might be a harm because we don’t have the data.

Goldman: if that’s your route, make that the only point in your paper.

RT: I think one reason people are having the normative/descriptive conflict here is that the current version has insufficient attention to hedonic gains.  The empirical project Manta suggest isn’t the full empirical account.  Manta says that we might be able to justify dilution by adding up total net utility, and suggests proving that by experimenting to see if a small group who likes the famous brand is negatively affected by a small use. That would, the paper suggests, be evidence that something worth stopping has happened.  At the very least you then would have to examine a different small group who might like the “diluting” product/use and see if they gain utility, and then estimate how many in the former group will see the diluting product/use per individual in the latter group.

One reason I am skeptical when Manta says “we have to admit that there is a harm” is the problem of the utility monster.  Why favor the wealthy consumer protective of the exclusivity of his Porsche over the poorer consumer whose marginal utility of wealth, not incidentally, is likely to be higher?  (Barton Beebe has of course covered this in some detail.)  It’s good to favor consumer utility, but which consumers?

As far as I can tell Manta’s response is that defending the utility monster/status goods isn’t Manta’s project, because we already have trademark law.  But what that law is and ought to be is precisely the question for discussion.  If you argue “dilution law is good because it protects hedonic value” and I say “but that protection redounds to the benefit of utility monsters, and that’s bad,” it’s not a persuasive response to say “well, we have dilution law and need to rationalize it somehow.”  Maybe I’m unlikely to win my First Amendment argument today, but I want to keep it alive for tomorrow (remember, First Amendment protection for defamatory speech was initially shocking, and the Commerce Clause argument against health care reform wasn’t colorable), and also even courts unwilling to strike down trademark law are often willing to listen to arguments about the role free speech principles should play in defining its limits.

Why is market preclusion a harm?  Producers can still enter those toilet paper markets if they want to—but they might have to do so under a different brand name.

McKenna: if hedonic value gives form to TM law, you’re coming from a position of rights in gross, and now you need to tell me what the limits are, which you can only do by talking about countervailing interests.  If you are instead trying to give a description of something that should count as harm, then it’s not as incumbent on you to identify the limits. Now, paper reads like unifying theory, which provokes the “tell me the limits!” reaction. 

Manta situates TM with patent and copyright, with the goal to incentivize. He just rejects that as an account of what TM does and should do. That is beyond a descriptive account; that is normative. You can describe certain changes over time as influenced by that idea, but you can’t justify the history and scope that way.

Manta says people who buy Gucci burgers aren’t getting much benefit from them. If courts etc. call it free riding, they must be getting a benefit.  If they aren’t getting a benefit, it wouldn’t be a free ride.

Hedonic value is not found value. It frequently comes from excluding other people from the value. If you do it as an empirical matter, are you assuming hedonic value is finite.  If it goes away from Gucci, it just disappears.  But that’s not how consumers behave.  Consumers fill their hedonic needs some other way. Unless you think consumers can’t do that, it’s hard to understand what happens/just becomes a distributional question. Understands why the brand thinks of it as lost utility, but from overall standpoint it’s not clear why it matters if utility doesn’t dissipate.

Empirical assumption that hedonic value disappears by Gucci burgers is belied by the existence of thousands of Tiffany’s restaurants. There are a zillion such restaurants.  It suggests that for marks that are likely to have great hedonic value, it’s very unlikely that third party use will detract from that, and the most likely source of harm is speech/tarnishment/criticism that’s outside this model.

Manta: Among other things, she thinks trademark and copyright may give rise to the same kind of consumer experience; is willing to think of them as the same from this perspective. 

Free riding: could be taking away more than it is producing: if the benefit is small.

McKenna: but the benefit to the producer depends on the benefits to the consumers on that side.

Manta: but it could be utility of 10 while costing the producer 50.

Finity of hedonic value: might be finite in some individualized contexts.  Especially luxury goods. Somebody will win and somebody will lose.

McKenna: people have developed brands for a while without dilution protection.

Manta: internet changes things.  If we allow free riding, eventually there will be nothing left of any brand, at least that’s the story.  (But that’s a ridiculous story.  Especially since there’s no dilution protection for nonfamous marks in many states, and those states have brands.)

Sheff: what’s the net effect on societal value of not having brands?  Could be negative, but it could be positive—if you had to get your kicks elsewhere than brand consumption.

Manta: might be harmful to have a chain of Tiffany restaurants with bad food.

McKenna: we undoubtedly do have such a chain!  (He made no comment about quality, but Goldman noted that the reviews on Yelp did not average 5 stars.)

Montgomery: difficult for consumers to make connection between Tiffany jewelry and Tiffany restaurants without further connection (as in color). Goes back to how many source identifiers the brand is using.

Sheff: Does agree that it’s a fool’s game to distinguish hedonic from other qualities; that said, there are testable qualities.  There is nonfat yogurt, and if high-fat yogurt is advertised as such, there will be deception. Now, people may get hedonic value from eating the yogurt and thinking that it’s nonfat—there’s a Seinfeld episode about this, where Newman ends up mad that he found out the truth—but that’s not the end of the matter.

Yen: Ask how much hedonic loss is already captured in existing misappropriation theories of TM; producer may capture it in the price of Gucci bags.  Loss valuation for counterfeiting may also count that.

Some people get hedonic value from rulebreaking: hard to shake that out.

First Amendment: Hurley—it’s possible to make an argument that control over admission to the Boy Scouts or the St. Patrick’s Day Parade is protected by the First Amendment—why not allow TM owners to control admission to the Gucci club?

Heymann: takeaway was that our notion of harm wasn’t capacious enough.  What is the pleasure here?  Is it related to exclusivity?  Identity formation?  Confirmation of wealth or status?  It would help the discussion of why TM law should take more account of it.  (Interesting observation, especially since law is usually quite terrible at valuing pleasure. Compare this paper. I might suggest that it is precisely ambiguity about what kind of “value” we’re protecting that has allowed courts reflexively to protect it with respect to status/luxury goods, or at least an idea that status is a different and better form of pleasure than other forms of pleasure.)

Rao: We sometimes forget that hedonic goods can have explicit functional value.   Fancy car eases my search for a certain kind of person to date.

Montgomery: we talk much more about individual value in marketing than social value; everyone has unique hedonic/functional needs.  The individual sees the product as a whole, and if the marketing improves the overall value then the individual experiences that increase.

Notre Dame part 2

Nicole Votolato Montgomery (William & Mary, Mason School of Business), Remembering the Best of Times or the Worst of Times? The Moderating Role of Brand Commitment on False Product Experience Memories

Commentators:            Laura Heymann (William & Mary)

How do we think about brand commitment?  Measuring brand commitment through purchasing, and also through identity formation (do you enjoy talking about the brand with friends?).  Those may be distinct/distinguishable.  Can be committed to Trader Joe’s for their food and not committed as a matter of identity.  Can false memory creation operate differently depending on the kind of commitment we’re talking about?

Does false creation of memory differ in other ways from how advertising creates false beliefs: e.g., if I buy this product I will be more popular.  It is leading the consumer to have some attitude, belief, interaction with the product—no different from anything else where the ad creates a conception that is not rooted in reality and the marketer hopes it will lead to future purchase.

What are the legal implications? Does it make us more willing to regulate advertising, and in what ways?

Jeremy Sheff (St. John’s)

Neat paper, result that is consistent with everything we’ve learned so far about how consumers process information and how that can be affected by loyalty.  False positives are problems for policy but good for the trademark owner, as are true negatives that the committed consumer discounts. Policymakers and TM owners therefore will disagree over the desirability of the effect you identify and what we should do it, before you even get to the interests of competitors and consumers.

Regulatory framework is not going to be TM-based, but rather advertising based, and that may raise significant First Amendment concerns.

Montgomery: some studies have shown false memory created by being told about incidents; what she’s showing is a moderating effect of other factors.

Commitment: the measure is emotional attachment to a brand, which can occur even when we don’t buy the brand: can love Aston Martin without having any effect on buying behavior. 

Heymann: do people believe they’re really being asked about a brand?  False Subway “Artisan” brand sandwich might be descriptive term.

Montgomery: if they didn’t think Artisan was a brand, you’d expect that different groups would all have had the same baseline of false memory of trying it, but you actually see differences depending on their commitment to the brand.  (I’m not sure it has to be a brand in the TM sense as long as it’s a type.)

Rao: problems of confirmation: suppose you’ve just said you’re committed to the brand—you might then feel like you have to say you’ve used it.

Montgomery: we’ve tried to correct for that by brand usage measures, including examples of nonadvertised variants, and we don’t see differences except for the products in the (fake) ads/reviews. Counterhypothesis: brand experience means you know which is real so you’ll know you didn’t try the fake product.  It wasn’t that high-commitment people were more knowledgeable, but commitment seems to be independent.

Ethical debate: what should we be improving in ads?  If you take brand attributes v. describing brand experiences in detail, the latter creates false memories.  Exposure to information itself can create false memories compared to a situation in which we just ask “what’s your experience with [fake variant]?”  This also happens at the brand level, not just the brand variant level.  So this is important for people who are considering purchases in the marketplace.

Another implication: we can actually develop commitment in people by giving them vivid information in false claims.  A bit scary!

False positives/false negatives: if you expose committed people to negative false information, encourages them to develop positive fake memories about the product. They’re spontaneously creating false memories as a protective measure.  From a policy perspective, we should be concerned about that!

McKenna: another reason dilution is bunk.

Montgomery: research next—implications for competitors.

McGeveran: how important is the incremental step from “I expect Artisan sandwiches to be good because I like Subway” from “I remember trying Artisan sandwiches” in terms of the impact on consumer behavior?

Montgomery: indirect experience v. direct.  Reading an ad and having an experience differ in strength of resulting opinion, so the link to behavior changes quite a bit.  Feel very strongly about liking and correlate very strongly to purchase behavior.  Nature of claim matters: a sentence on a blog won’t necessarily do this, but a vivid description might.

Schlosser: would you see similar effects in people committed to a negative evaluation?

Montgomery: we chose commitment because it’s deep in the marketing literature; we could have looked for confidence in judgment which would have accommodated negative valences. She thinks they’d still see similar effects—one study took brand preference into account and gave positive information about a nonpreferred brand.

Schlosser: compare political campaigns: you get counterarguing with arguments from the other side.  If it’s really commitment that matters, it shouldn’t matter what the valence is.

Montgomery: if you really hate Chick-fil-A, you might be readier to develop false memories; but on the other hand if you don’t go to Chick-fil-A, you might think it implausible that you actually ate there.

Heymann: still not convinced that questions go to emotional commitment and not just repeat purchasing. False memory of product experience might not be used to confirm/disconfirm a pure identity or values based commitment to the product (Aston Martin example).  Would I think I don’t like Chick-fil-A sandwiches because I dislike the company?  If I’m emotionally committed to a brand, my feeling of experience with a sub-brand might not interact with identity formation.

Montgomery: positive experience might not change emotional commitment?

Heymann: might overlap but might not.  Your commitment might not have anything to do with experience. Now that we know people react in this way, what does that mean to commitment?

McKenna: related to plausibility point. One might develop a view that one’s had a Subway Artisan sandwich because that’s plausible based on eating other Subway sandwiches. If you just like the company but don’t eat there, that’s less plausible.

Montgomery: yes, with no experience, plausibility goes down. Though commitment and experience do tend to go hand in hand.  Tested stuff that the population did have experience with (and McKenna points out that it wasn’t a car by Subway).  Did test by frequency of consumption and still saw effects of commitment.

Schlosser: plausibility is dependent on how you operationalize false memories—do you remember eating? is different from do you remember seeing an ad for this/hearing about this? 

Goldman: Maybe there’s no such thing as bad press from a marketing perspective. Any information to hypothetical buyers can be processed as positive—exposure.  It isn’t false memories per se, but getting any attention at all.

McKenna: how does this relate to the literature on how mere exposure increases likeability?

Montgomery: people try to protect their commitments to brands they love: counterarguing, minimizing spillovers, etc.  Negative information can eventually become too strong, though.

McKenna: normatively: how much are we shaping TM law for the committed v. uncommitted consumers? Committed consumers are very robustly protected against dilution.  Are brands at risk of losing uncommitted consumers/those they haven’t gotten yet (why are they “entitled” to those again?).

Schlosser: attitude accessibility: one study found something counterintuitive—the more accessible an attitude was, the more susceptible you are to errors in fact.  (Couldn’t recall what the errors were.) 

McKenna: in TM, there is a Q of whether a really well-known brand will be more resistant to confusion because small differences are more easily detectable, or more easily confused because it’s strong.

Schlosser: people are very motivated to justify what they think their choice was, even if you swap their choice—e.g., ask them to pick more attractive person of two, then ask them to explain why they chose the other one; they don’t notice the swap.

Yen: resistance shows up in other areas—perspectives on healthy eating, etc.

Montgomery: we’ve looked at this—approach v. avoidance.  I avoid McDonald’s versus I choose to eat in a healthy way. Actually easier to implant a false memory of affirmative choice.  Tell them to imagine that they’re making a healthy choice; don’t tell them to imagine staying away from McDonald’s.  It’s also harder to generate imagery about avoidance. Trying to find domains in which people can easily imagine approach v. avoidance.  Imagine “staying out of the sun”—can imagine how they’d do that.  Or imagine “wear sunscreen.”  Those are two different types of behaviors that are both visualizable.  And there is still a difference: wear sunscreen works better.

Joe Urbany (Notre Dame, Marketing): What are the welfare implications of translating this to the legal system?  Own research on reference pricing—sale price/was $499 v. sale price/was $799, where that’s made up. People will say they don’t believe the initial price, and yet it influenced their attitudes and intentions.  Court case in Colorado: company would sell something very briefly at a high price and then say it was on sale the rest of the year.  AG figured it out and sued.  Consumers say they were injured because they believed, and later found the product at a lower price later. Court found advertiser guilty and fined $8000 after a huge trial.  AG’s not going to bring more cases, because of cost/benefit—even though the impact on consumer welfare was clear.

Committed people are going to buy no matter what, while less committed are influenced—can you interpret purchase intentions along a welfare line? Do your results suggest less harm to welfare from false memories?  How many people are non-committed (and do we know they’re harmed?).

Montgomery: would say that even high-commitment people are more likely to buy because they think they’ve already done so.  For low-commitment people, the implications are larger.  She believes high-commitment effects are also important.  Low-commitment people are better off, because the brand doesn’t take a welfare hit in terms of false memories.

Deborah Gerhardt: what motivates commitment?  Do you think of the brand as a trusted friend?

Montgomery: yes.  It’s a kind of self-defense.  If you have a close friend and you hear something negative, it injures you to hear something bad about someone you like and implicates your judgment about who your friends are.

Yen: there’s a level of commitment that’s beyond that, where you subsume something into your identity in an intimately personal way.  More than friendship—constitutive/like a parent-child relationship.

Montgomery: some people connect with the brand; there’s a wide literature on that.  I see the brand as a reflection of myself; begins as a behavioral thing and then develops over time. We can also manipulate brand commitment by asking people to evaluate a brand, take their picture, advertise them with the brand.

Schlosser: what does loyalty mean? Can be habit or can be overlap between brand and self-identity. But there’s still a lot of disagreement about what loyalty is.

RT: my question is like McKenna’s and others’: normatively, so what if preferences change?  Regulators shouldn’t necessarily even be concerned with false memories unless they are false memories of non-taste-based claims/non-puffery.

Garcia: failures of recall: research by Park & Schwarz: the Moses illusion—how many of each animal did Moses take on the Ark?  People say “two.” That’s false recall. But if you put it in a difficult font, they scrutinize the question more and produce the correct answer. Confusion/effort is supposed to be bad, but has the ironic effect of sharpening the mind.

Yen: consider research on racist biases.  In that area, we talk about debiasing.

Schlosser: we are better at identifying biases in others’ thinking than our own.

Montgomery: once I tell you that your memory is false, you won’t believe me. Intervention has to come before the memory is formed.  Prior to incorporation of the information into memory. Research on memories of 9/11: accounts initially after were compared to accounts after, and they differed, and people insisted that their initial accounts weren’t theirs.

Schlosser: interesting to see under which conditions people stop defending (may be self-defense against embarrassment of being wrong).

Montgomery: we don’t know the answer yet.