Don't send misappropriation to do copyright's job

Alaskasland.com, LLC v. Cross, No. S­15270 (Alaska Sept. 25, 2015)

 

A realtor group listed property adjacent to a neighboring subdivision, Susitna Shores, using three photos taken from the subdivision’s marketing materials, including one showing the subdivision’s stylized entrance sign.  The listing also contained a property appraisal stating that (1) based on plat­related information, existing legal access to the property might compromise the neighboring subdivision’s gated community perimeter fencing, and (2) based on statements made to the appraiser by employees of the local electric association, the neighboring subdivision’s electric service might be subject to legal issues. The subdivision’s developer sued for misappropriation of the photos, trade name infringement, and defamation. The superior court granted summary judgment to the realtors, and the state supreme court affirmed.

 

Of Susitna Shores’ 37 lots, 15 had been sold by the time the superior court granted summary judgment in July 2013; the most recent sale was in May 2011.  In 2009, a couple, the Goodes, inherited property bounded on three sides by the subdivision and on the fourth by the Susitna River.  Alaskasland had unsuccessfully offered the previous owner $45,000 for it in 2007.  An appraiser appraised it at $150,000 and noted that “[t]he electric service in the [Susitna Shores]  subdivision may be subject to legal issues due to the lack of [Matanuska Electric Association] participation in construction of the infrastructure.”  In addition, he wrote, “the [Goode property] has an undeniable access right that crosses the access to [the Susitna Shores] subdivision boat ramp — and that access could be developed and probably left open, thereby defeating the gated subdivision.”

 

In August 2011, the Goodes listed their property for sale with realtor Kevin Cross for $146,000.  The Goodes didn’t provide any photos, so Cross’s assistant used photos from the internet, specifically from Alaskasland’s website.  The appraisal was appended to the property listing on a realtor-only website.  When Alaskasland discovered that the Alaskasland photos were being used this way, it promptly notified the multiple listing service of the improper use, and contacted Cross about buying the Goode property.  Alaskasland’s GM offered to buy the Goode property for $95,000, which offer the Goodes promptly rejected.  The Goodes cancelled their listing in mid-December 2011; the appraisal remained on the MLS site until May 2013.  Shortly after Alaskasland sued, its GM reached an agreement with the Goodes to purchase their property for $155,000.

 

Misappropriation claims based on copying the photos were preempted by the Copyright Act. The photos were within the subject matter of copyright, and there was no extra element distinguishing the misappropriation claim from a copying claim.  Alaskasland argued that there was an unauthorized use of its goodwill and reputation, but that’s just a passing off claim (see below).  It also argued that creating the sign in the picture took $40,000 and that defendants engaged in free riding on its extensive advertising and marketing efforts.  “But the misappropriation of ‘sweat equity’ expended in the creation and advertisement of a copyrightable work is ‘precisely the type of misconduct the copyright laws are designed to guard against.’”

 

The superior court rejected passing off/trademark infringement claims because “Susitna Shores” was geographically descriptive, and Alaskasland’s failure to sell at least half its lots — and none in the prior two years — “evidenced that its marketing efforts had failed to produce a secondary meaning in the minds of the public.”  The state supreme court wasn’t even sure Alaska recognized the common law tort of passing off, but that didn’t matter because Alaskasland couldn’t show damages.  The only relevant sale here was Alaskasland’s own purchase of the property.  There was no evidence anyone was deceived, and Alaskasland certainly knew that what it was buying wasn’t part of its subdivision.  Even if dozens of people viewed the Goode listing online, there was no injury shown from those viewings, nor any indication that anyone who saw the photos expressed interest in the Goode property or lost interest in Susitna Shores as a result. 

 

One of Alaskasland’s expert reports on damages assumed lost licensing fees and lost advertising value, preempted theories.  A reasonable royalty measure of damages was also inappropriate for passing off, as opposed to patent or trade secret; the concrete sign that was allegedly appropriated was visible to anyone who went by, and the calculation of a royalty didn’t itself show that an injury had occurred.  Another expert claimed that the photos and similar keywords diluted Susitna Shores’ online marketing efforts—maybe this was a viable theory, the court said (ugh), but there was no genuine issue of fact on this record that it had been harmed thereby.

 

Anyway, the standard remedy for infringement is an injunction, and the injunction claim here was moot.

 

Finally, the statements in the appraisal were non-defamatory opinions.  Alaskasland argued that the statement about possible legal issues with electricity was defamatory because the local government had actually accepted Susitna Shores’ electric service, so it could not therefore be subject to “legal issues.”  Likewise, the claim that the Goode access right could be developed and left open, defeating the gated part of “gated subdivision,” was allegedly defamatory because “no matter how the Goode Property was developed, Susitna Shores could always maintain the security of its gated community and road.”

 

However, the type of language used indicated that the appraiser’s conclusions were opinions.  The electricity statement was made in the context of interviews with the local government’s “staff,” but made clear that the appraiser only spoke to a few people and didn’t find out all the possibly available information, e.g., “[t]he exact nature of the difficulty, if any, was not disclosed by the staff member interviewed.”  The phrase “may be subject to legal issues” connoted the appraiser’s uncertainty.  Likewise, the gated security statement used the cautionary and speculative terms “could be” and “probably.”

 

Context also confirmed that the statements were opinions: by statutory definition, an appraisal is an opinion.  Furthermore, the appraisal was intended to establish the value of the Goode property, and not intended to be read by prospective purchasers of Susitna Shores’ lots. (Which also suggests that there’s less need for reliance on statements about that property.)

 

Likewise, reference to possible future events signaled unverifiable future opinion, not currently verifiable fact.  And, considering the broader social circumstances, classification as opinion was appropriate, because appraisers serve an important social function by clarifying the value of real estate; they should therefore be free to express complete and candid opinions.  There are other safeguards against negligent or incompetent appraisers, “and we decline here to invent a sweeping rule making real estate agents vicariously liable for the alleged misdeeds of appraisers upon whose appraisals these agents rely for their livelihoods.”

 

Finally, the opinions here didn’t imply the existence of undisclosed defamatory facts supporting them.  Instead, the appraiser revealed the underlying facts on which his opinion relied.