"always lit" not plausibly material for Christmas lights

Marvellous Day Electric (S.Z.) Co. v. Ace Hardware Corp., No. 11 C 8756 (N.D. Ill. Aug. 27, 2013)

Previous discussion, wherein the court dismissed Marvellous Day’s claims except for its design patent infringement claim, which remains on hold pending reexamination.  Repleading didn’t help.

Marvellous Day makes LED string lights under a design patent it owns.  Initially, MD sold its lights to defendant HBL, which imported them into the US.  HBL sold the lights to Ace, which sold them to retail customers.  In 2011, HBL switched to another manufacturer, causing Ace to switch.  Along with design patent infringement and false marking, MD alleged that HBL and Ace violated the Illinois Consumer Fraud Act (CFA) and Illinois Unfair and Deceptive Trade Practices Act (UDTPA) by using a photograph of Marvellous Day’s Christmas lights in ads for the infringing lights and by using the terms “patented” and “always lit” to describe the infringing lights.

First the court found that the false patent marking allegations failed to state a plausible claim.  MD alleged that Ace continued to advertise its Christmas lights as having the “Patented T5 LED bulb” actually exclusive to MD, in order to deceive consumers into thinking they were still getting the same product.  The statute states in relevant part:

Whoever, without the consent of the patentee, . . . uses in advertising in connection with anything made, used, offered for sale, or sold by such person within the United States, . . . the name or any imitation of the name of the patentee, the patent number, or the words “patent,” “patentee,” or the like, with the intent of counterfeiting or imitating the mark of the patentee, or of deceiving the public and inducing them to believe that the thing was made, offered for sale, sold, or imported into the United States by or with the consent of the patentee . . . Shall be fined not more than $500 for every such offense.

Violations have to be pleaded with particularity.  Here, MD didn’t plausibly allege “that by describing its Christmas lights as ‘patented,’ Ace intended to deceive consumers into believing that Marvellous Day was the manufacturer.”  (Yeah, false marking seems like a pretty dead letter now, except maybe in certain counterfeiting cases (despite the disjunctive “or”).)  There needs to be some objective reason to infer that by using the word “patented,” Ace intended to deceive the public into believing that its Christmas lights were still produced by MD.  

There were no allegations that would support an inference that “patented” would conjure any association with MD in consumers’ minds; the PTO has issued millions of patents over the years.  MD alleged that, because Ace first used the term to describe Marvellous Day’s Christmas lights, its continued use of the term was intended to deceive consumers into believing that nothing had changed.  But this was implausible: MD itself argued that Ace used the term “in order to communicate to consumers that the T5 LED light string product was superior to other light string products.”  This was the opposite of an intent to counterfeit.  A motive to make products seem innovative doesn’t suggest a motive to have consumers believe the products were authorized by MD. The law required more than an intent to deceive consumers about the patent status of the product: it required MD to show that Ace intended to deceive consumers into believing that the Christmas lights were manufactured by MD.  Using “patented” wouldn’t plausibly do that.  The complaint didn’t allege that any consumers actually associated the unique and novel ornamentality of MD’s lights with MD as a single source.  Possibly something like “Still the Same Patented Design” or “Patented and Unchanged” would have qualified.

The state law claims also failed.  The court rejected the argument that the parties needed to be competitors to allow a claim—these laws weren’t identical to the Lanham Act.  Nor did the court buy that there could be no claim because the defendants didn’t intend for MD to rely on any deceptive act or practice.  The Illinois courts have recognized that victims of disparagement and other commercial plaintiffs can bring CFA claims, even though the defendant’s intent was for third party consumers to rely on the deceptive statement.  Allowing a plaintiff damaged by a defendant’s attempted deception to sue furthered the broad remedial purposes of the CFA.

However, MD didn’t adequately allege materiality, and here things get a little weird.  Materiality looks to whether a reasonable person would be expected to rely on a matter in making a purchase decision.  MD failed plausibly to plead the materiality of “patented,” which is a standard result.  MD alleged that “patented” was material “because consumers would prefer a product being claimed to have superior patented design qualities and consumers would associate the product and its source with such patented bulb shape and design qualities.”  That wasn’t enough to plead facts sufficient to support an inference of materiality.  (Here we have a normative disagreement on what constitutes a “fact”—MD is pleading a fact about consumer psychology; the court just doesn’t believe it and wants further supporting “facts.”)  The possibility that a patent would make a product seem higher-quality wasn’t enough for plausibility.

This is where I’m surprised: the court found that the claims related to “always lit” suffered the same defect.  The court initially wanted “qualitative, quantitative, or even anecdotal evidence that might provide some basis to support its conclusory claim that the ‘always lit’ phrase is material to consumer purchasing decisions.”  I don’t know why logical inference wouldn’t suffice: consumers want Christmas lights for decorative purposes; burnt-out/unlit bulbs look bad; therefore features that makes it easier to deal with a burnt-out bulb would seem material.  This is the magic of common sense: courts always demand more evidence for things that they don’t think are true (though I don’t know why the court is skeptical here, other than bleedthrough from the other claims) and don’t notice when they find logical inference sufficient for materiality in claims like “this product will improve your health!” 

 

Anyway, MD didn’t plead real facts, just alleged that consumers preferred their Christmas lights to have this feature and that they understood that it meant that if an individual bulb in a string was burned out the rest would remain lit and the bulb could be replaced without turning off the remaining lights.  This didn’t add any “factual information,” whether qualitative, quantitative, or anecdotal.  “To say that a characteristic is material because consumers prefer products with that characteristic is a tautology; it provides no basis to assess the plausibility of the major premise.”  Moreover, “a claim about what ‘consumers’ understand a term to mean cannot be taken at face value; it requires some factual foundation.”  (What would “qualitative” evidence be?  A dictionary definition of “always lit”?  Pleading that experts in the field consider this feature important?)  The judge’s common sense, under Iqbal/Twombly, routinely fills in these gaps—so it’s very important to know what seems like common sense to an Article III judge.  The court noted that it was required to use experience and common sense in assessing plausibility, but couldn’t do so here without “factual information” about what consumers understand the term “always lit” to mean.

Finally, MD’s allegations about Ace’s use of a photo of MD’s bulbs in ads for non-MD bulbs failed for the same reason.  MD alleged that the photos sold replaceable bulbs but that Ace actually sold lights without replaceable bulbs.  But it failed to allege facts sufficient to show that replaceability was material.  And it was also implausible to believe that consumers would recognize the bulbs in the photo as MD’s or that, even if they did, that increased the likelihood of purchase.

Similarly, MD didn’t sufficiently allege causation.  MD alleged that defendants’ deceptive conduct caused consumers to buy competing lights, diminishing the demand for its own lights.  It also alleged that its US sales dropped 65% during the period of wrongful conduct.  This wasn’t enough, because the complaint didn’t allege facts from which one could plausibly infer that the drop in sales reflected consumer deception, rather than defendants’ shift to another supplier.  That loss could’ve occurred whether or not defendants engaged in wrongful conduct, and mere consistency with liability isn’t enough to plead plausibility.  The UDTPA claims failed for the same reasons.

Can "all natural" food be bioengineered?

Parker v. J.M. Smucker Co., No. C 13-0690, 2013 WL 4516156 (N.D. Cal. Aug. 23, 2013)

Parker sued Smucker over Crisco Pure Vegetable Oil, made from soybean oil; Crisco Pure Canola Oil, made from rapeseed oil; Crisco Pure Corn Oil, made from corn oil; and Crisco Natural Blend Oil, made from combined rapeseed, sunflower, and soybean oil. She bought the first product.  Her claims were based on the use of “All Natural” next to the oil’s name on the packaging.  Parker alleged that the oils weren’t natural because they were made with genetically modified (“GM” or “bioengineered”) crops, and are also “so heavily processed that they bear no chemical resemblance to the ingredients from which they were derived.” She alleged that the appearance of naturalness deceived consumers into buying/paying more than they would have.

Parker alleged an “array of definitions from industry, government, and health organizations” that
“all characterize bioengineered crops as having been scientifically altered to combine one plant’s genetic material with another’s in ways that do not occur naturally.” Smucker itself states: “Due to expanding use of biotechnology by farmers and commingling of ingredients in storage and shipment, it is possible that some of our products may contain ingredients derived from biotechnology.” Parker also alleged that most of the relevant agricultural sources were GM, and therefore alleged that Smucker had to be using non-natural GM crops in its oils.

Parker’s second claim, that the oils weren’t natural because of extensive processing that removed the source plants’ original chemical properties, was based on distinctions in manufacturing processes.  Extraction methods like coldpressing allegedly “allow the oils to retain the chemical composition occurring in nature,” while Smucker’s more chemical methods modify the oil beyond recognition, including “alkali-neutralization, meant to separate free fatty acids from the neutralized oil; bleaching and deodorizing, meant to lighten the oil’s color and minimize its odor; and conditioning.” This allegedly involved “harsh, potentially harmful chemicals that render the Oils less like natural oils extracted mechanically and more like unnatural chemical composites.”

Parker brought the usual California claims, including warranty claims, and Smucker moved to dismiss.

First, Smucker argued that she failed to plead with particularity or plausibility either that the oils contained GM ingredients or that the processing made the oils non-natural.  As to the first, Smucker only admitted the possibility it was using GM crops, and Iqbal requires “more than a sheer possibility,” but the court found the pleadings sufficiently plausible.  As for the processing, Parker didn’t need to “set out scientifically precise descriptions of how the Oils’ chemical makeup changes. She only needs to describe the who, what, when, where, and how of the allegedly misleading conduct, which she has done: Plaintiff’s FAC describes Defendant’s chemical processing of the Oils, states that this renders them non-natural, and concludes that if the Oils are non-natural then the ‘All Natural’ tag is false or misleading. The truth of this theory remains to be litigated, but it cannot be dismissed on the pleadings.”

The court also found that Parker had standing to bring claims based on all the oils: there was sufficient similarity between the products and they bore the same alleged mislabeling.  They were all the “same kind” of product (despite the different oilseeds).

Smucker argued preemption: the FDA has long rejected a requirement that bioengineered foods must be labeled differently, having determined that there’s no material difference between bioengineered and non-bioengineered foods.  Also, the FDA hasn’t stated any intention to alter its longstanding position not to adopt any regulations governing the term “natural,” regardless of consumers being misled.  Thus, Smucker argued, Parker’s lawsuit sought to impose new and different labeling standards.

Parker rejoined that she wasn’t trying to do that, merely to enforce the ban on false/misleading statements, which in this case includes “All Natural” given the actual contents of the oil.  Smucker could have left “All Natural” off the labels, but its presence was misleading; this wasn’t a preempted claim. Smucker might not be required to disclose its use of GM ingredients, if such exist, but Parker was making a different argument.  (I feel that this conclusion is in some tension with the 9^th Circuit’s reasoning in Pom Wonderful, but then again who knows what that case means?)

Smucker also argued that FDA common or usual name rules preempted Parker’s claims: it would violate the regulations if it labeled its ingredients as, e.g., “bioengineered soy.”  But that wasn’t what Parker was asking Smucker to do, even though she alleged that she wouldn’t have bought any of its oils had they been so labeled.  This wasn’t a nondisclosure case. 

Turning to the sufficiency of the pleadings, Smucker argued that Parker failed to allege that its statements would likely deceive a reasonable consumer, given the FDA’s policies on bioengineered ingredients and the term “natural.”  This wasn’t an appropriate holding on the pleadings.  “[T]he Court cannot as a matter of law conclude, as Defendant urges, that reasonable consumers would all understand that packaged, non-organic foods may contain bioengineered ingredients and that the only way to avoid such ingredients completely is to buy only certified organic products.”  Rather, Parker alleged that “a reasonable consumer would read the ‘All Natural’ label, assume that such a product contains no bioengineered or chemically altered ingredients, and would then be misled if the product did in fact contain such things.”  This wasn’t capable of being resolved as a matter of law.

The express warranty claim survived: Parker alleged that Smucker’s failure to deliver an “All Natural” product constituted a breach of warranty. Smucker argued that the claim was mere puffery and that the parties weren’t in privity.  But California has an exception to the privity requirement that allows breach of express warranty claims arising from affirmations of fact made by manufacturers in labels or advertisements.  And “All Natural” “does not amount to mere puffery because it is not outrageous and generalized.”

Unsurprisingly, the court also declined to apply the primary jurisdiction doctrine.  “[V]arious parties have repeatedly asked the FDA to rule on ‘natural’ labeling, and the FDA has declined to do so because of its limited resources and preference to focus on other priorities. … [R]eferring the matter to the FDA would do little more than protract matters.”

Enzyte at Slate

While this excerpt from a new book on internet crime by Nate Anderson is pitched as "how Enzyte helped email privacy," it's also a stunning catalog of deceptive and abusive practices. 

What customers got for their money was a supply of herbal supplements designed to look as much like a pharmaceutical as possible, right down the shape and color of the tablets. Berkeley lacked scientific evidence that Enzyte worked, but it’s fair to say that efficacy wasn’t one of the company’s chief concerns. For instance, Berkeley at some point reformulated Rovicid, its prostate-health/sex-enhancing supplement, as a “heart-health dietary supplement” instead. Rather than throw out the old Rovicid, Berkeley simply slapped new labels on the old containers—even though the new ingredient list didn’t match what was in the tablets. In 2004, when Food and Drug Administration inspectors came through the company’s warehouse, the second shift manager went to the “sick aisle” of mislabeled products, packed the relabeled Rovicid into a rental truck, and drove it to the parking lot of another Berkeley-owned building. He restocked it after the inspectors left. ... 

Berkeley’s approach to marketing its products was perhaps best summed up by a February 2005 email from Warshak that explained the secrets of his advertising success. “GET 3–4 BOTTLES OF WINE​...​THEN SIT AROUND AND MAKE SHIT UP!!” he wrote. “THAT’S WHAT I DO​...​BUT WRITE IT ALL DOWN OR YOU’LL FORGET IT THE NEXT DAY.”

It is not an accident, I think, that the underlying products made unsubstantiated claims and then the seller deliberately enrolled consumers in an autorenewal program it refused to disclose (sometimes enrolling people who specifically declined) and made almost impossible to cancel. Sellers who have contempt for their customers tend to express that in multiple deceptive ways.  (And given the company's reliance on credit cards, there was additional deceptive conduct involved to keep processors from cutting them off for unacceptable levels of chargebacks.)

Topside amicus briefs in Lexmark v. Static Controls

Law professors' brief (which reflects my views).

AIPLA's brief.

Brief of DRI - The Voice of the Defense Bar.

Another court adopts Cariou

Kienitz v. Sconnie Nation LLC, No. 12-cv-464 (W.D. Wisc. Aug. 13, 2013) (via David Fagundes)

Kienitz, a professional photographer, took a photo of Wisconsin’s mayor, Soglin, and authorized him to use it as his official portrait. 

Though Soglin had been arrested in 1969 at a student street fair that thereafter became an annual event, and though he owed his initial political success to the student vote, in recent years he’s become a critic of the street fair and hoped to shut it down.  Defendants created a T-shirt using an altered version of Soglin’s face and the slogan “sorry for partying.” 

Kienitz sued, and the court found fair use.

Kienitz argued that the shirt wasn’t transformative because it wasn’t a commentary on his photo, but rather on its subject matter.  (Which demonstrates why that distinction is so terrible: critics should not be required to photo-stalk their targets or have drawing skill.)  The court found that (1) there might be some commentary on the officialness of the portrait/presenting the mayor as he wished to be presented (“the garishness of Soglin’s re-colored visage could be viewed as mocking the gravitas and rectitude with which Kienitz’s now-official portrait imbues the mayor”), and (2) loose targeting may be enough to be transformative.  Quoting Cariou, the court held that new meaning/expression/message sufficed for transformativeness even if the work didn’t comment on the original or its author.  Factors one and four were also intertwined: the shirts had no capacity to divert sales from the original photo.

Factors two and three got discussed, but who cares?  (Except insofar as this case provides further evidence that, where photomanipulations are concerned, courts aren’t interested in parsing whether the defendant took anything from the photo that the plaintiff actually owned—the creative elements of lighting, timing, and framing are missing from defendant’s shirt, but the court used that as part of factor three analysis rather than determining that there was no infringement to begin with, which I think would’ve been a superior analysis.  This seems to be the flip side of a phenomenon Eva Subotnik has identified, in which courts protect a photo as creative by noting that it has the characteristics that make it a photo: it was taken at a certain time, it had a certain frame, there was lighting, etc.  On the infringement side, courts hold that a photo was copied because its subject is recognizable, regardless of whether the creative elements of the photographer’s choices are visible in the new use, and fair use instead of fact/expression is the limiting doctrine.)

The court then found no market harm.  Side-by-side viewing was enough to establish this.  “Anyone seeking a photographic portrait—or even just an accurate representative image—of the mayor would not even consider the garish image of the mayor splashed onto defendants’ SFP shirts. That would be enough to quash the sale, but there’s also the mocking apology garlanding the cartoonish image which partially blocks the mayor’s features and which would totally irritate viewers who deemed Mayor Soglin to be worthy of and deserving more respect.”  Fatally, Kienitz himself testified that he would never license a photograph for the purpose of criticizing, mocking, parodying or satirizing one of his subjects.

Defamation suit against BBB survives anti-SLAPP motion

Budget Van Lines, Inc. v. Better Business Bureau of the Southland, Inc., 2013 WL 4494318 (Cal. Ct. App. Aug. 20, 2013)

Budget is a “relocation services broker”—moving companies do the moves, and Budget arranges for them to do it.  The BBB is a nonprofit that provides information to consumers.  Its Reliability Report for a given company includes a record of consumer complaints made to the company and the company’s responses, any governmental action against the company, any licensing or advertising issues that the BBB has learned about the company, and a BBB Rating, generally “A+” to “F,” “reflecting the extent to which the company is in compliance with the BBB’s standards for operating in a trustworthy manner and making good faith efforts to resolve consumer complaints or concerns filed with the BBB.”

Budget sued for trade libel, libel per se, and a violation of California’s UCL.  It alleged that the BBB damaged it by stating that Budget was “not in compliance with the law’s licensing or registration requirements,” Budget’s advertising was “grossly misleading,” and Budget deserved a grade of “F.” These statements were false and defamatory, Budget alleged, because it was a broker and not a moving company; it was in compliance with all laws and regulations; and its ads weren’t misleading.

The BBB filed a special motion to strike, but Budget argued that it had a reasonable probability of prevailing on the merits.  The Reliability Reports at issue prominently displayed “BBB Rating F” next to the title “Rating Explanation,” which stated:

Company Rating F

Our opinion of what this rating means:

We strongly question the company’s reliability for reasons such as that they have failed to respond to complaints, their advertising is grossly misleading, they are not in compliance with the law’s licensing or registration requirements, their complaints contain especially serious allegations, or the company’s industry is known for its fraudulent business practices.

Another version stated, “Factors that lowered this business’s rating include: Failure to have a required competency license.”  The Report also stated, “This company’s business is providing moving and storage services.” Under the heading “Licensing,” the entries labeled “Agency,” “License Number” and “Status” were blank.  The report advised consumers that the most up-to-date information on license status would come from two government agencies that license or register moving companies.

In the “Complaint Experience” section, the Reliability Report stated: “Bureau Summary and Analysis of customer complaints and company responses: Complaints allege failure to honor moving quotes, failure to notify customers that their move will be subcontracted out to another carrier, damage and loss claims, delivery issues and failure to assist in resolving disputes. The company generally responds to complaints by referring customers to ...,”  A list of the number of complaints “over the last 36 months” totaled 128.

The trial court denied the special motion to strike. The court also found that Budget was not a public figure and that the Reliability Reports on the BBB’s website were commercial speech.  (The court of appeal found that the BBB did not successfully appeal the commercial speech determination.)

The court of appeals affirmed. Though Budget conceded that the BBB’s acts were in furtherance of its right of free speech, Budget showed a probability of prevailing.  This isn’t a likelihood of success on the merits—instead the plaintiff must state and substantiate a legally sufficient claim, more like showing a material issue of fact.  Courts deciding anti-SLAPP motions consider the pleadings and supporting and opposing affidavits, but they don’t weigh credibility or compare the weight of the evidence.  The question is whether the defendant should win as a matter of law; a plaintiff’s minimal showing on the merits is enough.  Once a plaintiff shows a probability of prevailing on any part of its claim, the entire cause of action stays.

Libel/defamation must be assessed in context, as it could have been understood by the average reader in the target context.  An ambiguous statement must be assessed for whether it’s reasonably susceptible to a defamatory interpretation.  The claims here were for libel per se, which doesn’t require proof of special damages.  Libel per se is defamatory language that on its face has a natural tendency to injure reputation—here accusations of dishonesty or questionable business methods.

The court first evaluated the alleged statement that Budget wasn’t in compliance with licensing or registration requirements.  The BBB argued that its statement was part of the explanation of the kinds of things that can earn a business an F rating—part of a list of illustrative examples, prefaced with “such as, “and using “or” before the last example.  But defamatory meaning is judged by the natural and probable effect on the intended audience, in context.  The court agreed that the average consumer could easily overlook the words “such as” and “or” “and focus instead on (1) the statements about noncompliance with licensing laws and (2) “grossly misleading advertising,” with the understanding that each statement applied to Budget and supported Budget’s ‘F’ rating.”  Plus, the Reliability Report stated or strongly implied that Budget wasn’t licensed, with the statement in “Rating Reasons” that the “[f]actors that lowered this business’s rating include: [¶] Failure to have a required competency license....” And there were blank spaces under the “Licensing” heading, and the BBB directed consumers to agencies that wouldn’t have a record for Budget on file, since it wasn’t a moving agency but rather a broker. 

The BBB’s statement “Advertising Review: No questions about the truth of this company’s advertising [have] come to our attention,” didn’t prevent liability on the “grossly misleading” statement.  The average reader could reasonably be expected to focus on the F rating and explanation, which appeared prominently at the top of the web page and which included the “grossly misleading” advertising statement.  Whether the “Advertising Review” statement neutralized the defamatory meaning of the earlier statement was for the trier of fact.

In some contexts, “grossly misleading” might be privileged opinion rather than falsifiable factual statement.  But “[t]he actual or imputed expertise of the defendant regarding the subject matter of a statement may reasonably lead the target audience to understand or believe that the statement is a factual one.”  So here, given that the BBB “holds itself out as an expert on the professionalism and trustworthiness of businesses.”  Among its other claims, its website says that the “BBB is the resource to turn to for objective, unbiased information on businesses. Our network of national and local BBB operations allows us to monitor and take action on thousands of business issues affecting consumers at any given time. BBB is your key advisor, most reliable evaluator and most objective expert on the topic of trust in the marketplace.”  Because of the BBB’s “self-proclaimed expertise in evaluating companies and the claims in their advertising, a consumer reading a statement by the BBB that Budget’s advertising was ‘grossly misleading’ can reasonably be expected to interpret the statement as factual.” 

Budget also provided evidence of falsity: a declaration explaining that Budget is a broker subject to different laws and regulations, and evidence that it was in compliance with licensing requirements for brokers.

The BBB argued that Budget was a limited public figure and that it hadn’t shown actual malice.  But the BBB didn’t meet its burden of showing that Budget was a limited public figure, and Budget’s extensive advertising campaign didn’t in itself make Budget a limited public figure.

Whether the “F” rating was defamatory was a closer question.  Cases evaluating grading and rating systems have generally concluded that they’re nonactionable opinions, including cases about the BBB itself. Castle Rock Remodeling, LLC v. Better Business Bureau of Greater St. Louis, Inc., 354 S.W.3d 234 (Mo. App. 2011) (the “BBB’s ‘C’ rating of [the plaintiff] is not sufficiently factual to be susceptible of being proved true or false,” and “[a]lthough one may disagree with BBB’s evaluation of the underlying objective facts, the rating itself cannot be proved true or false”); Better Business Bureau of Metropolitan Houston, Inc. v. John Moore Services, Inc. ___ S.W.3d ___ 2013 WL 3716693 (Tex. Ct. App. July 16, 2013) (“the ‘F’ rating itself cannot be defamatory because it is the Bureau’s self-described ‘opinion’ of the quality of [the plaintiff’s] services, which lacks a high degree of verifiability”).  But that didn’t matter because Budget showed a probability of prevailing on part of its cause of action for libel, so the whole cause of action survived. 

 

Likewise, the UCL claim survived because the UCL incorporates violations of other laws, here libel.

Standard trademark claim, ill-fitting nominative use analysis

E Clampus Vitus v. Steiner, 2013 WL 4431992 (E.D. Cal. Aug. 16, 2013)

Plaintiff sued a number of defendants for infringement of its trademarks. After the court kicked out the earlier complaint for insufficient specificity, ECV filed an amended complaint, and this one largely did the job.  ECV alleged that it owned marks for “E Clampus Vitus,” “Clampers,” “ECV,” and related design marks using symbols and words; it used them to identify members of its historical organization, to notify members of upcoming events, and to sell goods including pins, headgear, and shirts.

Defendant Joseph Zumwalt Chapter 169 E Clampus Vitus is a corporation, and the individual defendants are former ECV members who allegedly created the Joseph Zumwalt Chapter.  ECV alleged that they used its marks on at least 6 specific occasions since 2011, including events at which they sold pins, hats, and T-shirts using ECV’s marks and marched under an “E Clampus Vitus” banner.  In one case, when they sold food and other goods under a “Georgetown Clampers” banner, ECV allged that its local chapter couldn’t participate in the same event because the authorities mistakenly issued a permit to the defendants, believing them affiliated with ECV’s local chapter.  Most recently, defendants allegedly created an online forum for “Joseph Zumwalt ECV 169” to sell products such as lighters bearing ECV’s marks, while ECV alleged that it conducts similar sales to raise funds for charitable purposes. ECV sued for trademark infringement and state-law unfair competition and false advertising.

The court first found that ECV had sufficiently stated claims against individual named defendants.  The complaint alleged specific details about their particular roles in identified events.  Likewise, it properly alleged sufficient facts to impose individual liability for the corporate defendant’s actions, even if they weren’t necessarily corporate officers: the complaint allged that the individual defendants created the corporation to exploit ECV’s marks. Being volunteer members of an organization wasn’t the problem; the problem was these specific defendants’ allegedly unique role in creating the corporation and organizing the infringement.  Active participation as a moving force in the decision to infringe can justify individual liability.  Here, ECV alleged that the individual defendants acted “knowingly, intentionally and deliberately” to infringe.

The court also rejected the nominative fair use defense on the pleadings, somewhat sketchily.  On factor (1), the court described the test as allowing a use “only when no descriptive substitute exists,” which is just wrong, and stated that defendants could just identify themselves as “Joseph Zumwalt Chapter 169” without infringing.  On factor (2), using no more than necessary, again despite precedent stating no disclaimers are required, the court found that “Defendants similarly fail to identify limits on their use of Plaintiff’s marks. Unlike the defendant in Playboy, Defendants fail to identify how they actively disclaimed any sponsorship or endorsement.”  More persuasively, the court pointed to the allegations that defendants claimed that their events were “official,” confusing the public into thinking them authorized by ECV—a serious factor (3) problem.

The amended complaint also alleged facts sufficient to sustain a likely confusion claim.  ECV alleged that the parties’ activities were similar, if not identical—they sold the same types of merchandise at similar events, and conducted similar online raffles.  ECV also specifically identified the marks allegedly infringed, and alleged that the word marks were used exactly on hats, shirts, and pins for sale, as well as on banners and in advertising.  The parties allegedly operate in the same geographic areas.  Though ECV didn’t need to allege actual confusion, it did allege specific facts about confusion (new members mistakenly enrolled with defendants instead of ECV), and it alleged intentional attempts to use ECV’s history and marks to cause confusion.  This was enough to plausibly plead confusion, even if it didn’t cover every factor.

Though ECV didn’t specifically allege that the goods defendants sold weren’t genuine, it was a fair inference from the complaint, and anyway ECV also alleged that defendants “inappropriately used Plaintiff’s marks in advertising,” which was an independent basis of infringement. 

Defendants argued that the California law claims failed because they didn’t allege lost money or property, aka “some form of economic injury.”  But ECV alleged that it had lost income and profits from lost merchandise sales, which was enough.  And the complaint met Rule 9(b)’s standard, as required for a California FAL claim: it identified specific defendants, specific events, and specific activities that constituted false advertising.  “Rather than using conclusory language, the FAC specifically alleges that this use of terms such as “official” along with Plaintiff’s marks could be misleading because potential members may think Plaintiff is hosting or sponsoring the event.”

pharmaceutical equivalence case fails, including weird materiality holding

Stiefel Laboratories, Inc. v. Brookstone Pharmaceuticals, L.L.C., 2013 WL 4406504 (11^th Cir. Aug. 19, 2013)

Stiefel sued Brookstone, alleging that Brookstone falsely advertised its acne gel BPO Gel as a generic equivalent to Stiefel’s competing acne gel Brevoxyl.  The court of appeals affirmed the grant of summary judgment in favor of Brookstone.  They’re prescription drugs, but “generally recognized as safe and effective” (GRAS/E) and BPO Gel didn’t need FDA approval before calling itself “generic.”  Indeed, there are no paths to approval for such a use, since the FDA doesn’t approve or accept comparative testing for this category of drugs, and they’re not in the Orange Book of FDA-approved generics.

Stiefel alleged that BPO Gel was not generic for Brevoxyl, so that Brookstone falsely advertised it when it (1) submitted “Labeling Statements” to a pharmaceutical database listing the product name as “Benzoyl Peroxide 4% Gel” and “Benzoyl Peroxide 8% Gel” instead of “BPO 4% Gel” and “BPO 8% Gel; (2) announced publicly that its BPO Gel was a generic for Brevoxyl; and (3) said on a Texas Medicaid Form that BPO Gel was graded an “A” in the “Orange Book.”  The district court found that Stiefel had shown the falsity of (1) and (3), but didn’t show enough material impact from those to survive summary judgment.

Stiefel argued that the district court erred in failing to consider misleadingness and looking only for literal falsity, when the evidence included an expert report offered for the purpose of proving misleadingness. But Stiefel didn’t clearly identify its theory or tell the district court that it was relying on the expert report for misleadingness, so the court of appeals confined its review to literal falsity.

Stiefel didn’t produce enough proof to show literal falsity on Brookstone’s “generic” statements.  It didn’t establish the meaning of “generic” in the relevant context.  Stiefel pointed to the FDA definition of “generic,” but Brookstone countered that the FDA definition didn’t apply to GRAS/E drugs not subject to FDA approval.  The court concluded that Stiefel didn’t show that, in this unregulated context, pharmacists understand the term “generic” to have the same meaning as it does in the regulated context.  Rather, the evidence reflected uncertainty about the proper meaning of the term. Thus, a reasonable jury could not decide that Brookstone’s statements were literally false.

Anyway, even if Stiefel had shown the meaning of “generic,” it didn’t present bioequivalency tests showing that BPO Gel wasn’t a generic, even though it argued that bioequivalence testing is the only way to establish genericity as understood by the FDA.  Rather, Stiefel argued that BPO Gel had never been tested for bioequivalence.  (I guess the court isn’t going for the Third Circuit’s rule that completely unsupported claims are false, eh?)

Finally, Stiefel argued that the district court was wrong in its assessment of the materiality of the false statements in the Texas Medicaid form and the labeling statements.  Stiefel argued that it had shown materiality by showing that pharmacies linked BPO Gel and Brevoxyl, which caused pharmacists to substitute BPO Gel for the more expensive Brevoxyl.  But this showed only that Brookstone got some of Stiefel’s market share; it didn’t show that the false statements influenced pharmacists’ purchasing choices, so Stiefel failed to show materiality. 

Comment: Hunh?  If Brookstone concededly used a false name, and that name produced the linkage—that is, if the database wouldn’t have linked the two products without the false name equating it to Stiefel’s product, which is how I understand these databases to work—then how can that not be material, in the ordinary sense of “causing a different purchase to happen than would have happened if the defendant hadn’t used a false statement”?  The linkage influenced what products were used to fill prescriptions. 

 

Yes, once the linkage was in place, substitution may have been automatic because of policies favoring generics.  But that doesn’t mean that the falsity wasn’t material.  It just means that in the pharmaceutical market many material decisions get made behind the scenes.  Suppose a fraudster convinces the purchasing department for Georgetown’s cafeteria that it’s delivering organic eggs, but they’re actually conventional eggs.  Thus, every time a patron orders eggs, believing them organic, she gets conventional eggs, never aware of the problem.  In that sense, her decision isn’t influenced, but only in that she doesn’t know that she’s not getting what she ordered (or, in the case at bar, what her doctor prescribed).  I would call that false advertising even though the impact of the substitution is felt distant from the purchasing agent who’s been misled.  This seems like a very weird, mechanical reading of “influencing [consumers’] purchasing choices.”

Transformative work of the day, infomercial edition

Please Please Please Let Me Get What I Want, by Joyo and AbsoluteDestiny.  (Lord knows it would be the first time.)

Portland sues for infringement of functional public bathroom design

Story here.  It's actually worse than the reporting, which already makes clear that the "distinctive" elements of the design are functional--designed to deter graffiti, allow police monitoring, etc.

Here is a description from the complaint:

Measuring 10’7” long x 6’ wide x 8’6” tall, the Portland Loo is large enough to be handicap accessible and can accommodate a stroller or bike for the occupant. The Portland Loo is constructed with heavy gauge stainless steel wallpanels and is finished with an anti-graffiti powder coating. There is a simple button-activated hand washing station mounted on the exterior to promote shorter use times and to serve the general pedestrian population. Distinctively stripped of much of its plumbing, the Portland Loo can be delivered on site as a complete enclosure. Artwork on the door panel links the Portland Loo to its surroundings and conveys a sense of community ownership. Perhaps the Portland Loo’s most distinctive feature is its louvered slats. Louvers at the top and bottom are specifically angled and dimensioned to facilitate daylighting, ventilation, and natural surveillance by passers by. The design of the Portland Loo has been cited as ingenious in terms of CPTED (Crime Prevention Through Environmental Design). The louvers extend from foot level to knee level and again just above head level, making activity inside somewhat visible to passersby. It is this feature that has largely garnered praise as improving the safety and cleanliness of public restrooms.

Here are the allegations of what was copied allegedly constituting copyright infringement: "(a) the placement, size, position, and dimensions of its louvers; (b) the choice of metal wall panels; (c) use of an anti-graffiti powder coating; (d) the stripped down plumbing that facilitates its set-in-place installation; (e) placement of the sink on the exterior of the unit; and (f) dedicated space for art and advertising." That this is an architectural work doesn't change the difference between copyright and patent.

This should be taught as an example of "pleading oneself out of court."  Portland has included a claim for federal trademark dilution (and infringement).  (And alleges that the design is inherently distinctive, contra Wal-Mart.) If I were defendants, I'd ask for fees. 

Today's transformative work

The Wizard of Ahhhs by Pentatonix and Todrick Hall.  Fumi Arewa has pointed to the history of opera singers picking their arias to sing, regardless of whether the aria came from the rest of the opera in which the singer was performing; the mashup exists in many forms.

authorization to use complaint is irrevocable, precluding copyright claim

Unclaimed Property Recovery Service, Inc. v. Kaplan, No. 12-4030 (2d Cir. Aug. 20, 2013)

H/T The Trademark Blog.

The rule articulated here is clear but narrow: “[W]here the holder of a copyright in a litigation document has authorized a party to the litigation to use the document in the litigation, this constitutes an irrevocable authorization to all parties to the litigation (and to their attorneys, as well as the court) to use the documents thereafter in the litigation throughout its duration.”  It is not, I think, a copyright rule; if it were, interesting questions would arise.

Plaintiffs UPRS and Gelb authorized the clients of Kaplan, an attorney, to file a legal complaint and exhibits written and compiled by Gelb.  Gelb allegedly conducted the research underpinning the allegations in a class action complaint, located and obtained powers attorney from several class plaintiffs, and hired Kaplan to represent the class.  The district court dismissed the class action as time-barred, and Kaplan appealed.  He had a falling out with Gelb, and Gelb and his company (from now on for clarity they’ll be “Gelb”) retained new attorneys.  The class plaintiffs revoked the powers of attorney they’d given Gelb, and Kaplan remained their attorney of record.  Gelb’s new counsel moved to withdraw the pending appeal, a motion granted with respect to Gelb but denied with respect to the other appellants.  The Second Circuit resolved the appeal in the class action plaintiffs’ favor.  On remand, the district court granted the class action plaintiffs leave to file a second amended complaint to address issues raised in the Second Circuit’s order, and Kaplan did so.  Significant portions of the second complaint and exhibits were identical to portions of the first complaint and exhibits, and Gelb sued for infringement.

A copyright holder in a litigation document who authorizes a party to use the document in litigation “necessarily conveys, not only to the authorized party but to all present and future attorneys and to the court, an irrevocable authorization to use the document in the litigation thereafter.”  This doesn’t mean that permission is inevitably needed for the use of a copyrighted document (i.e., all of them) in litigation—rather, the ruling is only about a grant of authorization that is purportedly withdrawn.

The rationale is the need to conduct litigation, which requires that parties and their attorneys be free to use documents that are part of the litigation.  They rely on such documents to establish the nature of the dispute and the facts and legal arguments at issue. “The courts could not thoroughly and fairly adjudicate a matter if suddenly in the midst of litigation the parties lost the right to give the court copies of documents already used in the litigation that support their arguments.  The holder of the copyright in a document who authorizes a party to use that document in a litigation knows, or should know, those inevitable consequences of the authorization.”  Thus, authorization for use is irrevocable “throughout the duration of the litigation” to all parties and to the court for appropriate litigation purposes. This isn’t like authorization in a private dispute, where a party often has the right to be a jerk and disrupt expectations, since what’s at stake is “the ability of the courts to perform their function. The needs of the courts prevail over the copyright holder’s selfish interests.”

Assuming (without deciding) copyrightability, that couldn’t prevent defendants here from creating and filing an amended complaint.  A contrary holding would “encourage sharp litigation practices, undermine the attorney-client relationship, and limit the district court’s ability to manage its cases.”  Gelb was attempting to influence the class action by a “novel” use of copyright—Gelb shouldn’t be able to threaten the class action plaintiffs with the ability to “pull[] the proverbial rug out from under them—by pulling the complaint out from under the litigation.”  Gelb withdrew from the class action and shouldn’t have such unreasonable control over its course. 

The consequences would be even worse in the usual case where an attorney is the one who drafts a pleading.  The attorney’s authority over the use of the pleading would interfere with the client’s authority to control the litigation, and the lawyer’s pecuniary interests could be pitted against those of her client, at least potentially, in every litigation.  “Under the theory advanced by UPRS and Gelb, the attorney could deny the client the right to reproduce the pleading or prepare derivative works if the client fires the attorney and seeks to hire different counsel.”  That would be bad.

Plus, Gelb’s theory would prevent the district court from exercising its discretion in case management.  “Courts often permit a party to amend a pleading in part but not in full.  Under these circumstances the court, in effect, requires that an amended pleading retain a portion of the original pleading.  Imposing such a requirement is within the purview of the district court.   The plaintiffs point to no aspect of the copyright law or its legislative history indicating that Congress intended that copyright should interfere with that authority.”

The court ended by saying what it wasn’t deciding: it wasn’t deciding the copyrightability of legal pleadings or other legal documents. It wasn’t deciding whether authorization to file a document in one case carried over to other cases.  It wasn’t deciding whether parties could use a pleading for purposes unrelated to the litigation.  It wasn’t relying on the traditional law of license, so it didn’t need the district court’s theory of implied license.  And it wasn’t relying on the initial authorization to Kaplan: even if the class plaintiffs had substituted a new attorney who’d never interacted with Gelb, that attorney would be entitled to use the complaint and exhibits as the class plaintiffs’ agent.

So basically, this is like the judicially made-up rule that professors’ scholarly writings aren’t works for hire, no matter the tension with the text of the Copyright Act.  Otherwise, it would be a holding about copyright licenses more generally (and the court says it isn’t, but never says what the alternative to the “traditional law of license” is).  Compare Walthal v. Rusk, 172 F.3d 481 (7^th cir. 1999) (allowing termination at will of copyright license with no specified term), with Rano v. Sipa Press, 987 F.2d 580 (9th Cir. 1993) (nonexclusive license with no termination date isn’t terminable until the 35-year termination period passes; this result also implies that a similar license to create derivative works is irrevocable).  Here, the needs of the judicial system substitute for consideration in making the license irrevocable (but does this last beyond 35 years? Inquiring minds want to know; my mother’s been litigating a case for roughly that long).

if product is objectively worse than promised, consumers have standing

In re Clorox Consumer Litigation, 2013 WL 3967334 (N.D. Cal. July 31, 2013)

This is follow-on consumer class litigation over Clorox’s Fresh Step cat litter marketing (previous discussion of class action; previous discussion of Lanham Act prequel).  The ads represented that Fresh Step was the only cat litter using carbon, and that Fresh Step was better at eliminating odors than baking soda brands.  Plaintiffs alleged that Church & Dwight’s studies showed the literal falsity of these claims, and that they therefore paid a premium they otherwise wouldn’t have paid: a 25-pound box of Clorox’s Fresh Step costs $10.77, or $0.43 per pound, while a 25-pound box of Clorox’s Scoop Away cat litter brand (which does not contain carbon) costs $9.37, or $0.37 per pound, while a 20-pound box of C&D’s baking-soda-based Super Scoop costs $7.88, or $0.39 per pound.

This opinion involved a new round of Clorox moving for judgment on the pleadings. It first contested plaintiffs’ Article III standing, arguing that plaintiffs failed to plead that Fresh Step didn’t work as advertised in reducing odors or that they personally found Fresh Step less effective; their injuries were only hypothetical since they didn’t allege that they compared Fresh Step to other brands.  Clorox argued that they couldn’t show injury if they never experienced Fresh Step’s inferiority, and that the presence of better cat litters on the market was irrelevant to harm.

The court agreed with plaintiffs: they pled an actual and concrete economic injury by alleging that they were deceived into paying a premium for a less effective cat litter.  Even if Fresh Step did eliminate cat odors, it didn’t perform as advertised if it was worse than other competing products. Plus, if it’s objectively inferior, it’s irrelevant that plaintiffs didn’t figure that out first hand.  The court was not going to assume that there was no objective way to measure or compare cat litter effectiveness. 

Clorox essentially argued that taste in cat litter is a matter of personal preference, like preferring Pepsi to Coke. Maybe so, but the complaint properly pleaded that baking-soda-based litters were objectively better at reducing cat odors.  That one type of cat litter might be objectively superior wasn’t implausible. Indeed, that was Clorox’s very own claim in its ads.  (In a footnote, the court rejected Clorox’s analogy to a Pepsi taste test superiority claim; Clorox argued that a consumer who relied on such a claim, enjoyed the Pepsi he bought, never bought Coke, and never personally found Coke preferable, wouldn’t have standing to sue.  But the taste of a soft drink can’t objectively be measured.  A better hypothetical would be Pepsi’s claim that its product had fewer calories than Coke. This could be falsified and, if false, could harm calorie-conscious consumers, who need not try Coke to prove injury.)

The cases Clorox cited didn’t allege injury from paying a premium based on a misrepresentation about superiority.  However, Clorox’s arguments did raise questions about certification.  If measuring odor fighting is subjective, then commonality/representativeness would be hard to show.  (I myself would be tempted to hold Clorox to its measurability claims, like the house that was haunted as a matter of law.)

New Jersey claims: the New Jersey Consumer Fraud Act requires (1) unlawful conduct by the defendant; (2) an ascertainable loss on the part of the plaintiff; and (3) a causal relationship between the defendant’s unlawful conduct and the plaintiff’s ascertainable loss.  Clorox repackaged its standing arguments to contend that plaintiffs didn’t plead ascertainable loss; nope. NJ accepts the “benefit of the bargain” theory, where the difference in value between the product promised and the one received can be reasonably quantified.

However, the breach of express warranty claim failed because the NJ plaintiff failed to provide the required notice within a reasonable time after discovering the breach; failure to provide such notice before suit bars the claim forever.  The fact that Clorox knew of C&D’s earlier Lanham Act lawsuits was irrelevant; the statute specifically contemplated notice by the buyer.

In NJ, unjust enrichment requires a plaintiff to show that it expected remuneration when it conferred a benefit on the defendant and that the retention of that benefit without payment would be unjust.  Some cases hold that enrichment claims should be dismissed when based on tortious conduct without allegations that the plaintiff anticipated remuneration (isn’t the allegation here that the plaintiff expected to get more than she did in return for her money?); others allow unjust enrichment claims based on false advertising to proceed. The court went with the former and dismissed the claim with prejudice.

New York: Clorox’s standing/injury arguments didn’t get rid of the GBL claims either.  Clorox argued that pecuniary harm wasn’t enough, but even the cases it cited recognized that a consumer might have a cognizable GBL claim where the consumer pays a higher price for a product as a result of a defendant’s misrepresentations.  Clorox argued that plaintiffs needed to plead more particularized facts about the alleged price premium, since Fresh Step is a very popular brand and thus would command a price premium anyway. The court disagreed.  “It is plausible that Clorox can charge more for Fresh Step because Clorox represents that Fresh Step is better at eliminating odors than other brands. It is also plausible that Fresh Step became one of the most popular brands of cat litter through the success of Clorox’s advertising.”

However, the complaint failed to allege that the NY plaintiff was deceived in NY, as required.  Alleging that she was a NY resident was insufficient; the deception must occur in NY. The plaintiff was granted leave to replead.

Express warranty claims survived: whether Clorox made an affirmation of fact or promise that was false when made was a question of fact, even though Clorox argued that it believed (and still does) that Fresh Step was more effective than other brands.  (This seems to interpret “false” to mean “knowingly false,” and I’m not sure that’s what it should mean in a warranty context.)  The rejected standing arguments also failed to show that there was no breach, even though the NY plaintiff didn’t allege that she personally deemed Fresh Step ineffective.

In NY, unjust enrichment isn’t a catchall cause of action, but applies only unusually, when, “though the defendant has not breached a contract nor committed a recognized tort, circumstances create an equitable obligation running from the defendant to the plaintiff.”  An unjust enrichment claim is not available where it simply duplicates a conventional contract or tort claim, as here.  If the GBL/warranty claims succeeded, the claim would be duplicative, and if it failed, her unjust enrichment claim would have to fail because it was predicated on the same theory of deception.

Florida: the Florida Deceptive and Unfair Trade Practices Act claims didn’t fall to Clorox’s rehashed standing/harm arguments.  In Florida, the measure of damages is the difference in market value of the product as delivered and the market value as it should have been.  However, the same problem as with the NY claims required repleading to allege a connection with Florida; the Florida plaintiffs didn’t allege where they saw Clorox’s ads or bought Fresh Step.

The Florida Advertising Act declares that the dissemination of “any misleading advertisement” is “fraudulent and unlawful.” Clorox argues that plaintiffs were required to satisfy Rule 9(b) as interpreted by the 11^th Circuit; the court already rejected a similar argument on an earlier motion to dismiss and declined to revisit the issue.  Also, the case wasn’t in the Eleventh Circuit; the court here was bound to follow Florida law, not the law of another circuit.

On breach of express warranty, the court noted uncertainty about whether privity was required, as it is with breach of implied warranty.  Some courts don’t require privity where the retailer or “middleman” is unlikely to have relevant knowledge regarding the manufacturer’s product. The court found those cases persuasive and applicable, given that it was unlikely that cat litter retailers had relevant knowledge about the comparative effectiveness of cat litter.  Thus the express warranty claim survived, though the unjust enrichment claim was dismissed as duplicative.

Texas: the Texas Deceptive Trade Practices Act allows suit over three types of conduct: (1) false, misleading, or deceptive acts or practices; (2) breaches of express or implied warranty; and (3) any unconscionable action.  For the first two prongs, Clorox argued that plaintiffs failed to satisfy Rule 9(b), but the court disagreed.  As for (3), unconscionability relates to “an act or practice which, to a consumer’s detriment, takes advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree.” “A slight disparity between the consideration paid and the value received is not unconscionable, a glaring and flagrant disparity is.” The court didn’t find Clorox’s alleged conduct “grossly unfair,” since plaintiffs conceded that Fresh Step did reduce cat odor.  “[F]or the purposes of Texas law, it is not unconscionable to charge a premium of a few cents per pound for an effective cat litter.”

The breach of express warranty claim also was kicked out for failure to provide notice within a reasonable time.  A demand letter to Clorox’s counsel a year after litigation began was too late, since plaintiffs allegedly learned of the defects through Church & Dwight’s lawsuits, filed in early 2011.  Nor was there an independent cause of action for unjust enrichment; it was just a theory of recovery.

Hangman copyright and TM claim escapes executioner, unfortunately

Ward v. Andrews McMeel Publishing, LLC, No. 12 Civ. 07987 (S.D.N.Y. Aug. 1, 2013)

Ward sued defendant AMP for copyright infringement, trade dress infringement, and common law unfair competition.  Ward has published Scratch & Solve Hangman (S&S) books for about twenty years.  Hangman involves guessing a word or phrase letter by letter; failed guesses mean that the player draws a portion of a man hanging from a scaffold.  As the district court quoted, “[w]hen you play the game . . . , either you win or you die.  There is no middle ground.”  George R.R. Martin, A Game of Thrones 488 (1996).  (Sorry.) 

The S&S books came to the US in 2005, and Ward registered the copyrights.  In 2008, AMP started publishing hangman books as part of its Pocket Posh line.

Ward alleged that the PP Books “incorporate the entire concept, feel, and design of the S&S . . . Books,” taking their “overall appearance and trade dress,” “lift[ing] their layout and style of the text . . . and even the appearance of the typefaces,” “misappropriate[ing] the style and appearance of the hanging-man drawing,” and “copy[ing] a substantial number of the answers.”

Plaintiff's S&S:

 Defendant's Pocket Posh:

So, the court had to allow free use of ideas and look only for substantial similarity in protectable elements, but without dissecting works into separate components and comparing only copyrightable elements.  This impossible and contradictory test, unfortunately, seems to have prolonged this dispute; unless something is going on other than the images offered by the court and by Amazon, I find it hard to imagine even the notoriously vague “look and feel” test offering any protection.  The only apparent similarities stem from the nature of scratch-off/one-player Hangman: similarity of idea.  Infringement can consist in copying the plaintiff’s selection, coordination and arrangement of unprotectable elements.  And infringement is usually reserved for the trier of fact because substantial similarity “typically presents an extremely close question of fact.”  (This is a dumb rule having no empirical or theoretical justification, and honored in the breach.)

The court didn’t consider allegations that AMP copied the S&S instructions because this wasn’t alleged in the complaint but only in opposition papers.  So it looked at the overall appearance, layout and style, including the rows of scratch-off letters and answer location, and the appearance of the hanging man drawing.  (What the heck is he supposed to look like?)

As to the letters, Ward argued that that they were similar in silver circles covering similar-looking x marks.  But only the PP books submitted to the court had an x; the S&S books had a hangman sticking out his tongue.  S&S:

PP:

If Amazon has an accurate representation, some S&S books have an x—but again, what is a wrong answer supposed to look like? 

As the court pointed out, “a bold X” is not protected by copyright.  “Aside from the image of the hangman, which AMP did not copy, no aspect of the lettering scheme is protected.”

Here, there was no separability from the utilitarian aspects of the scratch-off lettering.  The silver circles weren’t protected; no copyright owner can monopolize colors or circles (not to mention that this is completely generic for scratch-off products, which should bear on the selection, coordination and arrangement analysis as well!).  Nor were the “variations of typographic ornamentation, lettering, or coloring” subject to copyright protection. The arrangement of the letters in alphabetical order was also unprotected; indeed, alphabetizing was singled out by Feist as below the minimum for copyrightability.

Ward also alleged that the PP books copied a significant number of answers from S&S books. Each answer was individually unprotected as words or short phrases.  While selection and arrangement can be original, Ward alleged that only a small fraction of the S&S answers were copied and didn’t allege that they were copied in the same order.  In any event, Ward failed to plead with sufficient specificity—he didn’t identify which S&S books were allegedly copied, while claiming registration for over two dozen books and publication for twenty years.

AMP argued that the hanging stick figure was an unprotectable scene a faire.  Amazingly, the court disagreed.  It distinguished Universal Athletic Sales Co. v.Salkeld, 511 F.2d 904 (3d Cir. 1975), which held that the use of stick figures in instruction manuals for exercise equipment were not sufficiently similar to constitute copyright infringement, finding similarity only in ideas.  That was a substantial similarity case, but it seems pretty apposite: what jury could find that the literally thin protection given to S&S’s particular expression of the hangman figure, which is the basis of the game, encompassed AMP’s version?  This game isn’t worth the candle.

Boisson v. Banian, Ltd., 273 F.3d 262 (2d Cir. 2001), also said that “copyright protection does not apply to ‘familiar symbols or designs.’”  But copyright still covers original combinations of basic symbols, designs or letters, which after all make up most works, and the originality standard is low.  Stick figures are not unprotected as a matter of law, though they might get very thin protection.

“The differences between the illustrations contained in the S&S and PP Books demonstrate that some originality was used in each.”  (And that there couldn’t be substantial similarity.)  The court noted that the orientation of the S&S stick figure and gallows varied so that the gallows always appeared between the stick figure and the edge of the page, while the gallows were always to the right in the PP books.  The base and the shaft of the gallows, along with the corner between the horizontal and vertical shaft, were also differently configured in each.  The PP gallows had an additional diagonal piece.  The rope in the S&S Books curved around the head of the hanging stick figure, while it descended in a straight line in the PP Books.  The PP noose had a not; the S&S noose didn’t, and was tighter around the stick figure’s neck.  The relative size of stick figure and gallows differed; the stick figures’ heads were differently shaped; their arm positions were different; and the PP figures’ limbs were straight, while the S&S figures’ limbs were curved.

So, the illustrations (which didn’t look alike) were copyrightable, while the scratch-off lettering and answers weren’t.  Now the switcheroo: “Whether the illustrations or total concept and overall feel of the PP Books are substantially similar to those of the S&S Books presents a close factual question. Accordingly, it will be left for a jury to determine.”  Motion to dismiss denied!  (Why not convert it to a motion for summary judgment?)  Query: what is left of the total concept and feel that isn’t idea?

AMP fared slightly better on the trade dress claim, though not for the reasons you’d expect.  This too involves the total image of a product.  AMP argued that this was just a duplicate of the copyright claim and barred by Dastar.  But Dastar does not foreclose Lanham Act claims based on the same underlying conduct as copyright claims. Though courts must exercise caution with communicative products, multiple violations of IP laws are possible.

However, a plaintiff seeking to protect trade dress in a product line must articulate the elements comprising the trade dress and make clear how they’re distinctive.  Using too great a level of generality may indicate that the plaintiff is trying to protect no more than a concept or idea, which won’t do.  Ward pled that all S&S books used the same trade dress, including a series of silver scratch-off circles below each letter of the alphabet, depicted in a few rows, with numbered blanks for the answers below and a stick figure with a noose loosely around its neck beside.  Ward further pled misappropriation of the style and appearance of the hanging-man drawing, including the body outline, noose and gallows.  The court found this sufficient, because it didn’t plead such broad assertions to provide it a claim against any competitor or a monopoly over a concept. (Really?  Again, what’s a printed hangman game supposed to look like?)  Somehow the color scheme is also involved: “Ward has adequately explained how his trade dress is distinctive based on both the color scheme used and the general layout and spatial relationship of the various elements appearing on each page of his books.” 

I don’t really understand why it’s plausible to plead that this trade dress is protectable when it doesn’t cover the covers.  Even if it’s adequately specified, it’s the inside of the books.  Since when is that protectable trade dress?

What about secondary meaning and likely confusion?  Premature to address them.  But the claim was still dismissed because Ward failed to plead nonfunctionality, as required for unregistered product design trade dress.

Ward’s unfair competition claim was also not preempted by copyright, because passing off has an extra element of confusion over source and bad faith (not itself an extra element).  Comment: I don’t get it.  AMP didn’t properly plead infringement of anything protectable.  What do bare allegations of confusion cover? Confusion over what?  If it’s not over the trade dress, what is it?  If it is the trade dress, shouldn’t failure to plead nonfunctionality be equally fatal, especially if we are to avoid a true conflict with federal law?

This case goes to show that, too often, the words “copyright” and “trademark” apparently are the magic keys to get past Iqbal and Twombly.

Snowball fight, part X

Southern Snow Manufacturing Co. v. SnoWizard Holdings, Inc., 921 F. Supp. 2d 527 (E.D. La. 2013)

This case seems like a good poster child for those arguing in favor of a “threats” action for US law, since current law doesn’t provide much protection against trademark overclaiming.  It’s another litigation deathmatch between producers of snowballs, shaved ice confections flavored and colored with “flavoring syrups” made from “flavor concentrate” mixed with simple syrup.

In the mid-2000s, SnoWizard began asserting various state and federal trademark rights in flavor concentrates it manufactured, registering 22 trademarks between 2003 and 2008 and sending numerous C&Ds to other industry participants.  In 2006, Southern Snow sued, claiming that SnoWizard fraudulently procured a registration for ORCHID CREAM VANILLA, made false assertions of trademark infringement of ORCHID CREAM VANILLA and WHITE CHOCOLATE & CHIPS, made false assertions of trademark rights in SNOBALL, and violated the Louisiana Unfair Trade Practices and Consumer Production Act (LUTPA).  SnoWizard counterclaimed for infringement and dilution; the case was stayed until the TTAB cancelled the ORCHID CREAM VANILLA registration on descriptiveness grounds.

In 2009, Southern Snow and a new plaintiff, Parasol, filed a new case challenging SnoWizard’s assertion of trademark rights in 10 other terms, and SnoWizard counterclaimed for infringement and dilution of eight of those terms.  In 2010, the court dismissed plaintiffs’ claims for damages for procuring a false trademark registration under state and federal law, because they didn’t show cognizable injury or ascertainable loss.  The court also dismissed infringement claims for PRALINE, KING CAKE, BUTTERED POPCORN, GEORGIA PEACH, DILL PICKLE and BUTTERCREAM, because they are generic terms.

Southern Snow, Parasol, and a new plaintiff, Simeon, then filed a new suit against SnoWizard, asserting various claims against SnoWizard for infringement of SOUTHERN SNOW and FLAVOR SNOW and challenged the validity of more SnoWizard trademarks, including CAJUN RED HOT, MOUTAIN MAPLE, TIRAMASU [sic], and ZEPHYR.  SnoWizard counterclaimed for trademark infringement and dilution and for cancellation of SOUTHERN SNOW and FLAVOR SNOW. 

In the consolidated case, the judge dismissed all of plaintiffs’ unfair competition claims based on alleged false advertising, concluding that using a trademark symbol with a generic term wasn’t literally false, and that there was no evidence of materiality to consumers or actual or likely deception.  SnoWizard also won partial summary judgment on MOUNTAIN MAPLE and SNOSWEET, because the plaintiffs “offered no evidence to rebut the presumption of validity” attached to registered trademarks.

One month before trial was scheduled to begin, plaintiffs filed a new suit, naming SnoWizard’s owner and principal officer, and six new plaintiffs with varying ties to the existing plaintiffs.  Thereafter, one of the cases went to a new judge, who ruled that many of the claims had to be dismissed as duplicative of substantially identical claims previously alleged by the same plaintiffs or their privies, violating the rule against claim-splitting.  SnoWizard argued that three plaintiffs were in privity because they were related through common ownership by one person, and that another was in privity because of an asset sale; the others were allegedly in privity because they distributed the products of manufacturer-plaintiffs.  The plaintiffs conceded that three of them were closely related through common ownership, but argued that a fourth was a competing manufacturer with no relationship to them.  Two distributors, they argued, weren’t in privity with each other; they were in different states and the owners had never met, and two plaintiffs operated snowball stands on opposite sides of the Mississippi River.  Also, plaintiffs argued that claims based on more recent conduct, such as SnoWizard’s applications for new federal trademark registrations, weren’t encompassed in the earlier suits.  But SnoWizard didn’t seek dismissal of all the claims as duplicative, only the ones that were essentially the same as those in the earlier suits—the vast majority. 

The court accepted that most of the new plaintiffs were closely enough related to the old ones to justify applying the rule against claim-splitting: the distributors were in privity with the manufacturers by virtue of their express legal relationship, and the one that bought the assets from another was also in privity.  As for the retailers who sold directly to the public, they did buy from the original plaintiffs, which might be enough for privity.  But in the absence of clear authority on this, the court declined to find that their interests were adequately represented by the plaintiffs in the original cases.  But mostly, the rule against claim-splitting applied; the only explanation the court found credible here was an attempt to “expand Plaintiffs’ procedural rights, upset the trial schedule, harass Defendants, and avoid the requirements of amendment of Plaintiffs’ claims.”  The court noted that one plaintiff filed additional lawsuits alleging similar claims in 2012.  Plus, though the cases had already been consolidated for trial, the parties “failed to come forward with any manageable way to present the issues articulated in the four consolidated cases to a jury.” Thus, the court dismissed the duplicative claims except as to the two retailer plaintiffs.

However, there wasn’t evidence establishing a material issue of fact on the claims for fraudulent procurement of trademarks and unfair competition.  The Lanham Act, §38, provides for liability to any person injured by a fraudulently procured registration, but only “for any damages sustained in consequence thereof.”  Louisiana’s trademark law has a similar provision.  LUTPA likewise requires an “ascertainable loss” of money or property due to an unfair or deceptive practice.  Plaintiffs didn’t show such injury, since apparently dealing with C&Ds and claims to own generic terms didn’t count.

The unfair competition/false advertising claim was doomed for the same reasons.  The use of a trademark symbol for a generic term wasn’t literally false, and plaintiffs didn’t show evidence of actual consumer confusion and materiality.  Circuit law clearly required such evidence in the absence of literal falsity; even expert evidence of materiality and deception is insufficient when it’s not based on reliable market survey analysis and instead relies on common sense.

Nor did plaintiffs rebut the presumption of validity established by the federal registrations of MOUNTAIN MAPLE and SNOWSWEET.