Beware of Greeks bearing yogurt claims

General Mills, Inc. v. Chobani, LLC, No. 16-CV-58 (N.D.N.Y. Jan. 29, 2016)

GM also sued Chobani, and received an almost identical preliminary injunction, accompanied by an almost identical opinion, as that in Dannon’s case, reported earlier.  Yoplait Greek 100 was the other target of Chobani’s campaign.  The key difference is the video ad, which “opens with a woman seated behind the wheel of a vintage convertible, examining a cup of peach Yoplait Greek 100 yogurt.”  Narrator: “Yoplait Greek 100 actually uses preservatives like potassium sorbate.  Potassium sorbate? Really? That stuff is used to kill bugs!”  The woman scrunches her face in disgust and tosses the Yoplait, replacing it with Chobani “as the details of a roadside stand packed with fresh racks of produce become visible in the background.”  Voiceover: “Now, there’s Chobani Simply 100. It’s the only 100 calorie light Greek yogurt with zero preservatives.”  Happy woman consumes Chobani; camera pans to “reveal a happy child returning to the vehicle with a bag of produce in hand.” The  final shot includes a hashtag:  #NOBADSTUFF.

In the digital content, the Yoplait image is presented with several ingredients identified as “artificial” in large, red font.  Beneath the Yoplait image, the Chobani website describes potassium sorbate as both “an allowable chemical preservative for foods” as well as an “allowable minimum risk pesticide product.”

Potassium sorbate is generally recognized as safe by the FDA.  According to the U.S. Department of Agriculture, “few substances have had the kind of extensive, rigorous, long-term testing that sorbic acid and its salts [like potassium sorbate] have had.  It has been found it be non-toxic even when taken in large quantities, and breaks down in the body into water and carbon dioxide.”  In food products, it works to inhibit the growth of mold and yeast, and has been used widely and safely for decades in food products.  It’s also found in various pesticide products classified as “Minimum Risk” by the EPA and exempted from certain regulatory requirements.   

GM argued that the statement “that stuff is used to kill bugs” conveyed the literally false by necessary implication message that the potassium sorbate used in Yoplait Greek 100 rendered it unsafe to eat.  Chobani argued that its claims were literally true, and the rest of its claims were puffery. In context, however, the claims were literally false.  In the context of “no bad stuff” and the like, the ads painted GM’s yogurt as a safety risk because it contains potassium sorbate.

Presumption of irreparable harm from literally false comparative claim applied; even without a presumption, the inference of irreparable harm was easily made from the same circumstances, especially given the difficulties of quantifying the harm caused. 

Note: After I posted about Dannon’s victory against Chobani, I got a request from a Chobani PR person to update my story with Chobani’s “statement and social media post.”  In writing about legal cases, I try to confine myself to what’s in the opinion and, occasionally, the papers or other publicly accessible sources.  When I read the statement/social media post, I didn’t see any disagreement with the law or the facts, so I don’t think there’s any reason for me to include Chobani’s press release.

It's all Greek to me: chlorine claims over yogurt enjoined

Chobani, LLC v. Dannon Co., No. 16-CV-30 (N.D.N.Y. Jan. 29, 2016)

Chobani sued for a declaratory judgment that it wasn’t falsely advertising about Dannon; Dannon immediately filed its answer and counterclaims, and the court a bit over two weeks later granted a preliminary injunction against Chobani.

 

Dannon Light & Fit is the leading brand of light yogurt in the US, and Dannon’s top seller.  Dannon added Light & Fit Greek as an eighty-calorie Greek nonfat yogurt.  Dannon alleged that its highest proportion of light yogurt sales routinely occurs during the first three months of the year, “as this is the time when most American consumers resolve to make positive changes relating to weight loss, fitness, and overall health and diet.”  It’s also the time of year when consumers experiment with new yogurt products, making marketing and sales efforts during each year’s first quarter crucial.

 

Chobani, meanwhile, actively seeks to differentiate itself from its competitors in the Greek yogurt market by emphasizing its commitment to “natural, non-GMO ingredients” and “environmental sustainability practices.”  Its latest offering, Chobani Simply 100 Greek Yogurt, has “100 calories per serving with no preservatives or artificial sweeteners.”  Its January 2016 campaign included a TV ad, a print ad, and digital/social media content, all on the same theme.

 

The video ad’s opening shot focuses on a cup of Dannon Light & Fit Greek Yogurt sitting on a table, which is immediately picked up by a young woman lounging in a pool chair. As she scrutinizes the ingredients label, a voiceover proclaims:  “Dannon Light & Fit Greek actually uses artificial sweeteners like sucralose.  Sucralose? Why? That stuff has chlorine added to it!”  The woman scrunches her face in disgust and tosses away the cup of Dannon yogurt.  She then chooses Chobani Simply 100 Greek Yogurt, which is sitting on a table to her right, as a swimming pool becomes visible in the background.   Voiceover: “Now, there's Chobani Simply 100. It's the only 100 calorie light yogurt sweetened naturally.” “As she tears open the packaging, the Commercial pans to a wide shot of the swimming pool, where a child jumps in, making a big splash.  The camera returns to the woman, now smiling contentedly, before finishing with a wide shot.”  The final shot includes a hashtag: #NOBADSTUFF.

 

The print ad’s headline is “Did You Know Not All Yogurts Are Equally Good For You?”  It continues, “[y]ou think you are doing something good for yourself and your family [b]y buying yogurt and instead of bad stuff [a]nd then you find that the bad stuff* [i]s in your yogurt!” The asterisk refers to a mouseprint footnote explaining that “bad stuff” means “Artificial Ingredients.” The text above and below the Dannon product displayed is the same as that in the ad. Further:  “If you want to do healthy things, know what’s in your cup. Chobani Simply 100 is the only 100-[c]alorie Greek Yogurt without a trace of any artificial sweeteners or artificial preservatives.”

 

Print ad

The digital content is similar.  The website asks “Do You Know What’s In Your Cup? . . . . Scroll over to compare our ingredients with those in other light yogurts to see what’s really inside[.]”  Ingredients of Dannon’s product are identified as “artificial,” and the site has a link to the print ad.

 

Digital content

Sucralose, which Dannon uses, has been approved by the FDA since 1999, and Dannon provided evidence that the FDA reviewed more than 110 safety studies in connection with its use as a general purpose sweetener for food.  Sucralose is a molecule with twelve carbon, nineteen hydrogen, eight oxygen, and three chlorine atoms linked together in a stable form that is safe to consume.  It’s made through a process in which three atoms of chlorine are substituted for three hydrogen-oxygen groups on a sucrose molecule.  This trio of chlorine atoms is known as a chloride, that is, a compound of chlorine that is bound to another element or group. Chlorides are found in many natural food sources, from table salt to cow’s milk.

 

Pool chlorine, by contrast, is a lay term for calcium hypochlorite, “a powerful bleach and disinfectant that is harmful if added to food or ingested.” It’s distinct chemically and practically from the chlorine atoms found in sucralose, and it’s not in, or used to manufacture, any of Dannon’s products.

 

First, the court ruled that Dannon sought a prohibitory injunction to return the parties to the status quo ante, rather than a mandatory injunction requiring affirmative acts by Chobani.  Thus, the standard was no higher than that applied as a result of Winter/eBay.

 

Likely success on the merits: Chobani argued that it was literally true that sucralose had chlorine added to it, and that the other challenged messages about “good” or “bad stuff” were mere puffery.  Nope.  Although “no bad stuff” might be puffery if it weren’t tethered to a comparative claim about Dannon, here Chobani used that phrase in connection with statements and images that portrayed Dannon’s yogurt as a safety risk because it contains sucralose.  Some of the digital content didn’t give the full comparison, but it did include a link to the full print ad.

 

Even if Chobani’s statements about “chlorine” were literally true, there could still be literal falsity if the clear meaning, in context, was false.  (The court wasn’t so sure about literal truth.  The statement that chlorine was “added to” sucralose was inaccurate, if sucralose is created by adding chlorine to a precursor compound; sucralose doesn’t exist until the chlorine is combined with the precursor, and adding additional chlorine to a stable sucralose compound would likely have no effect.  Chobani’s own expert claimed that it was scientifically accurate to say “chlorine has been added to form sucralose.”  A factfinder is likely to conclude that the campaign unambiguously conveys the literally false message that Dannon’s product contains sucralose and is therefore unsafe to consume. Chobani argued that sucralose’s safety was the subject of legitimate scientific debate, but the record didn’t support that claim: “the balance of record evidence reflects that sucralose is an unusually well-studied compound repeatedly determined to be safe for ordinary consumption.”  While some research suggested that high doses could be toxic, that’s also true of salt and water.  Further, it was “telling” that Chobani’s own products contained the same type of “chlorine”—the chloride found in all-natural, non-GMO milk, but Chobani made no mention of that fact.

 

Dannon was entitled to a presumption of irreparable harm given the literally false direct comparative advertising at issue.  Even if such presumptions are illegitimate because “categorical” in a way precluded by eBay, Dannon still showed irreparable harm.  Given the difficulty of showing how many sales or how much goodwill would be lost, it was enough to show (1) competition in the relevant market and (2) a logical causal connection between the alleged false advertising and the claimaint’s own sales position.  That’s a no-brainer here.

 

The balance of hardships also favored relief, since Chobani has no protectable interest in advertising falsely.  And barring false advertising is in the public interest, especially when it comes to serious issues like food safety.

 

The parties agreed on a $1 million bond, which the court accepted. The injunction blocked the existing ads, as well as similar claims related to chlorine content, healthfulness because of the presence or absence of chlorine, the presence of pool chlorine in Dannon yogurt, the danger of sucralose, the lack of safety of Dannon products, or “bad stuff” in connection with Dannon products.

USPTO white paper on remix, first sale, and statutory damages

Here.  No love for an exception for noncommercial user-generated content (Canada's YouTube exception), but at least some support for the viability and importance of fair use, including discussion of the OTW's contributions.  What is a bit aggravating is the apparent belief that, because the noncommercial/commercial barrier is permeable, it is therefore of little significance to policy--after all, some noncommercial users might grow up to be professional artists in the field in which they first made noncommercial remix, meaning ... what, exactly?  That art students copying Picassos in the art museum should be licensed and paid-for, because it encourages the development of capabilities that are later employed in for-profit endeavors?  That the person who writes Star Wars fan fiction and later writes NYT-best selling novels about dragons should kick back some money to Disney?  Look, even my alma mater recognizes that it's only entitled to ask for some of my earnings now, despite its contributions to my capacities (such as they are).  That is, the observation "the noncommercial/commercial barrier is permeable," mostly with respect to creators but occasionally with respect to specific works, doesn't entail any inability to identify when a particular activity is commercial or noncommercial, or any reason to disregard that status.  And there's a lot of reason to treat activities that are noncommercial differently because of the different ways that people behave, reason, and learn in noncommercial spaces, even if some of them later take the skills they developed and make commercial art. 

(The White Paper does formally disavow any value judgment as between amateurs/professionals, but its implicit assumption that the natural arc of the amateur is to aspire to professionalism is understandable only in a context that expects or demands monetization to identify value.  I imagine all the drafters have some hobby or other that they engage in--singing in a choir, knitting for friends, telling stories to children--that they never plan to monetize.  Is their development stunted?  Or are they making choices about pleasure and nonmonetizable value that law should do its best not to squelch?  I know where my money, so to speak, is.)

Lexmark gives some non-TM owners standing to sue for infringement

Innovation Ventures, LLC v. NVE, Inc., 2016 WL 266396, No. 08-11867 (E.D. Mich. Jan. 21, 2016)

 

This long-lived dispute goes another round of various motions in limine.  Innovation sued NVE for trademark infringement; NVE counterclaimed for false advertising.  Here, the court applies Lexmark to resolve disputed questions around trademark ownership, and decides that the jury will hear all the evidence and render an advisory verdict about the equitable issues, because the false advertising counterclaim and unclean hands defense to trademark infringement are so intertwined.

 

NVE sought to present its unclean hands defense to the jury; Innovation sought to prevent NVE from presenting evidence about unclean hands to the jury and to bifurcate the trial.  The unclean hands evidence was: (1) Innovation’s allegedly improper registration of domain names using NVE’s 6 Hour POWER name, including www.sixhourpower.com and www.6hourpower.com; (2) Innovation’s alleged efforts to keep NVE’s products off the retail shelves; (3) Innovation’s alleged opposition to NVE’s application to register “6 Hour POWER” with the PTO; and (4) Innovation’s publication and distribution of a “Legal Notice” which NVE claims mislead retailers into removing NVE’s products from the shelves because it over-broadly identified the products against which Innovation had obtained an injunction. (Similarly named products from a different producer.)

 

Innovation wanted to try its trademark infringement claim to the jury first, without allowing the jury to hear any evidence about false advertising or unclean hands.  Innovation argued that the false advertising claim would be moot if Innovation won because NVE would have had no legal right to sell an infringing 6 Hour POWER product in the first place. And if Innovation lost, any  unclean hands evidence would be irrelevant, though a second trial could be held on false advertising.  NVE pointed out that this would let Innovation put its best case forward, and not allow NVE to provide a full defense. 

 

The court decided that all the legal and equitable issues would be presented to the same jury, and the jury would be instructed to return advisory verdicts on the factual questions related to the equitable claims, with the final decision on the equitable issues being reserved to the Court.  While Innovation argued that unclean hands evidence would be unduly prejudicial, many factual questions were common to the legal and equitable claims, requiring their presentation to the jury.  The unclean hands evidence largely overlapped with the false advertising counterclaim.  Moreover, the jury would be aided by a “full presentation of the real circumstances that surrounded how these parties acted in competition with one another.” Evidence of Innovation’s alleged efforts to get retailers to remove NVE’s products from store shelves “could indicate a concerted effort on behalf of Plaintiff to drive Defendant out of the market.”

 

Innovation’s concerns about prejudice were not dispositive because some of the evidence—that relevant to false advertising—“is rightfully before the jury and prejudice arising therefrom cannot be considered unfair prejudice.” Any additional risk of prejudice from the less serious unclean hands evidence could be avoided by carefully instructing the jury, and didn’t outweigh NVE’s right to a jury trial and the needs of judicial efficiency.

 

Innovation did win confirmation of its standing.  Previously, NVE argued that Innovation didn’t own the underlying trademark when it sued.  NVE argued that it learned during discovery that a separate company may have owned the 5 Hour ENERGY trademark when the case was filed, and the court agreed that it appeared that, at some point in time, this separate entity was in fact the owner, and Innovation had only a nonexclusive license.

 

However, Innovation sued under §43(a), and argued that it didn’t need to own a mark to pursue its claims as long as it showed it was likely to be harmed by infringement.  (It also argued that, by subsequent agreement with the third party, it became the owner nunc pro tunc of the trademark, but the court didn’t reach that argument.)  The court agreed that Innovation adequately alleged sufficient commercial interest in the mark to have standing under Lexmark.  (Sorry, Justice Scalia. Until you give us another simple name for it, it’s standing.)

 

Under § 43(a), “any person who believes that he or she is or is likely to be damaged” may bring a claim for infringement resulting from false association or false advertising, “without regard to any ownership interest the plaintiff may have in the trademark.”  This means that manufacturers, competitors, distributors, and others may have standing if they satisfy Lexmark, which the court characterized as setting the standard for “whether a non-owner plaintiff has standing to raise a claim under § 43(a).” 

 

Innovation fell within the zone of interests protected by the Lanham Act—its interests were those of a person engaged in commerce, with commercial interests in reputation or sales at stake, and not those of a mere deceived consumer.  NVE couldn’t defend by arguing that a third party had superior rights; such a jus tertii defense is disfavored in trademark law.  Moreover, Innovation alleged proximate cause: that the introduction of NVE’s allegedly infringing product resulted in lost sales and association with a competing product.

Court rejects Zippo jurisdiction test but allows suit over alleged copying

Kindig It Design, Inc. v. Creative Controls, Inc., --- F. Supp. 3d ----, 2016 WL 247574,  No. 2:14-cv-00867 (D. Utah Jan. 20, 2016)

 

Mostly a personal jurisdiction ruling in this copyright/patent infringement/false advertising case brought by Kindig, which customizes hot rods.  Creative Controls, which customizes vehicles for accessibility purposes, is a Michigan corporation with no place of business, property, employees, etc. in Utah.  Creative Controls did have a website allowing Utah residents to order; it donated a custom parking brake for use on a car Kindig was customizing in Utah; it sold a single door handle to a Utah customer; and it allegedly copied photographs and contents from Kindig’s Utah-based website.  (In return for the donated brake, Kindig sent Creative Controls a disk with photos of the finished car, and a letter indicating that it could use the photos for promotional purposes; these are among the allegedly copied photos at issue.)   The door handle was ordered by a Kindig employee’s relative, and the parties agreed that personal jurisdiction could not be based on this plaintiff-generated contact.

 

The court found that it didn’t have personal jurisdiction over Kindig’s patent claims, but did have personal jurisdiction over copyright and related claims.  The court further held that the patent claims weren’t so related as to justify the exercise of pendent personal jurisdiction.  Among other things, the court rejected the Zippo website jurisdiction test as incompatible with modern internet practices, holding that traditional tests were readily applicable to internet-based conduct.  As the court pointed out, many now-ubiquitous interactive features didn’t exist in 1997 when Zippo was decided, and also the presence of intermediaries such as Facebook makes it hard to figure out how to judge the “interactivity” of something like a Facebook page related to the defendant’s own activity.  Moreover, the traditional purposeful availment test doesn’t require that the purposeful availment be for commercial purposes; without that limit, pretty much everybody looks like they’re personally availing themselves of pretty much any jurisdiction under Zippo.

 

The allegedly infringing copying of Kindig’s photos from its Utah website, however, gave rise to personal jurisdiction over Creative Controls on all claims related to the alleged copying.  Kindig sufficiently identified the works at issue by including copyright registration information and date of first publication.  By alleging that Creative Controls’ website “contains photographs of customized automobiles which [sic] are nearly identical to [the copyrighted] photographs of customized automobiles found on the Kindig website,” the complaint provided sufficient notice of the allegedly infringing works, even if it didn’t otherwise identified them.

 

Likewise, Kindig sufficiently pled false advertising/deceptive trade practices.  Creative Controls argued that the claims should be dismissed because the photos weren’t materially misleading: it was implausible that any differences in door handles displayed in photos of cars and actual Creative Controls door handles would be material to consumers, given the small size of the photos.  But the court found that it was plausible that consumers would be influenced by the photos.  “Indeed, the reasonable inference is that Creative Controls included the photographs of the unique customized cars with the very intent of influencing potential customers.”

 

Nor would the court dismiss unjust enrichment or conversion claims as preempted at this stage.  And here the court just errs: it said that, because some of the photo copyrights might be invalid, unjust enrichment and conversion claims might not be preempted if based on invalid copyrights.  But that’s backwards under §301, which was specifically designed to prevent claims replicating the subject matter of copyright, whether or not the work (or idea/fact) at issue was copyrightable.  It should be immediately evident that §301 applies to an unjust enrichment/conversion claim based on copying a work in the public domain due to expiration of federal copyright protection; so too here.  (And that’s setting aside the issue that, even if a registration is invalid for some reason, the copyright still exists if the work is copyrightable.  Only the details of federal jurisdiction/availability of certain remedies turn on the validity of the registration.)

 

The court did hold that Kindig failed to state a claim for fraud.  There were no facts indicating Creative Controls defrauded Kindig; a fraud on the public at large didn’t allow Kindig to sue, and Kindig didn’t allege it acted in reliance on Creative Controls’ misrepresentations.

Showing irreparable harm isn't easy

Pruvit Ventures, Inc. v. ForeverGreen International LLC, --- F.Supp.3d ----, 2015 WL 9876952 No. 15-CV-571 (E.D. Tex. Dec. 23, 2015) (magistrate judge)

 

Defendants moved for a preliminary injunction on their counterclaims involving dietary suppplements.  Defendant Axcess is the exclusive licensee of patented technology relating to

appetite suppression and weight loss.  Defendants alleged that a prospective sub-license to Pruvit never became effective, while Pruvit argued that it was approved.  Pruvit went to market with a supplement called KETO//OS1, allegedly using defendants’ patent and trade secrets, while defendant ForeverGreen then launched a competing supplement, KetonX.  Pruvit sued defendants for breach of contract, disparagement, and related claims.  Defendants counterclaimed for, among other things, trade secret misappropriation, patent infringement, and false advertising.  Defendants sought a preliminary injunction, and the court analyzed irreparable harm in detail, assuming arguendo that they’d shown likely success on the merits.

 

Speculation isn’t enough to show irreparable harm.  The movant must show that monetary damages are an insufficient remedy and that their alleged harms are not just possible, but likely. The judge reviewed six theories of harm, none of which worked.

 

Price erosion: Pruvit’s product allegedly caused price erosion in the relevant supplement market, and defendants might be forced to drop the price of KetonX to compete.  Further, customers would resist future price increases, so ForeverGreen wouldn’t then be able to raise the price without destroying goodwill.  Price erosion isn’t irreparable harm; money damages can compensate for it.  Plus, the testimony was merely speculative, with no economics expert or other expert testifying to it.

 

Reputational harm: although this can be irreparable harm, “the showing of reputational harm must be concrete and corroborated, not merely speculative.” Defendants argued that Pruvit’s supplement had negative side effects, such as headaches, diarrhea, and nervous system issues, and that such problems were likely to be attributed to KetonX or ketosis supplements generally because the products are seen as alternatives.  But they failed to show that the established negative side effects of Pruvit’s KETO//OS were causing customers to turn away from KetonX and/or the ketosis supplement market, or that KetonX didn’t also cause the side effects alleged.  The court agreed that “[i]t is difficult to imagine under what extraordinary set of circumstances the introduction of a product with a ‘lower reputation for quality’ would, instead of highlighting the higher quality of its competitors, reflect adversely upon the field as a whole.” Moreover, the Fifth Circuit previously held that “[t]he lost goodwill of a business operated over a short period of time is usually compensable in money damages,” and both products had only been on the market for about six months.

 

Harm to shareholder value: There were other explanations for a decline in share value, like ForeverGreen’s losses in 9 out of 12 fiscal years, and mere speculation wasn’t enough, nor was alleged temporal proximity between Pruvit’s launch and the decrease in value.

 

Lost market share/first-to-market advantages: Defendants argued that, in the multilevel marketing model both parties used, being first to market was extremely important, because a new product launch creates significant interest in the industry and attracts distributors excited to take the new product to market, maintaining a larger market share than would otherwise exist. Moreover, Pruvit’s presence in the market also limited the supply of raw materials necessary to manufacture KetonX, prevented defendants from making important industry contacts/acquiring important distributors, and deceived consumers through false labeling.

 

Lost market share/lost sales aren’t irreparable harm in themselves.  Moreover, lost market share must be substantiated, and here all defendants did was claim that they must have lost market share, without quantifying it or establishing that it had happened. “[N]either the difficulty of calculating losses in market share, nor speculation that such losses might occur, amount to proof of special circumstances justifying the extraordinary relief of an injunction prior to trial.”

 

Lost opportunities to obtain raw materials: there was no evidence that Pruvit’s supplier was the only supplier.  Nor did the evidence show that Pruvit was to blame for lost distributors, or that Pruvit’s labeling had turned customers away from the ketosis supplement market as a whole.

 

Lost profits: these are readily quantifiable and thus not irreparable.

 

Lost right to exclude: Also not irreparable, especially given that defendant Axcess, at least initially, voluntarily began a sublicense agreement.

 

Defendants’ five-month delay in seeking relief also weighed against a finding of irreparable harm; they even delayed two months after Pruvit sued them to counterclaim, weighing heavily against a finding of irreparable harm.

NYT throws hissy-fit, sues over use of thumbnails in critical book

David Shields recently published War Is Beautiful: The New York Times Pictorial Guide to the Glamour of Armed Conflict.  The argument of the book is that the images chosen by the Times to decorate its front pages glamorize and glorify war.  Agree or not, it is at least an argument, and Shields even licensed the full-size pictures in the book from the Times.  However, the endpapers of the book as published show thumbnail images of the front pages of the editions from which the full-size photos come, and the publisher didn't license the front pages.  The Times has, quite unwisely, sued over this textbook (coffee-table book?) fair use.

Endpapers to War is Beautiful

Let's review: Factor one, purpose of the use: images contextualizing the main argument of the book, which involves the overall aim of the Times, not just the photos in isolation but their presentation by the paper.  That's classic historicization and commentary: transformative use under Dorling Kindersley.  Nature of the work: already published, favoring fair use; news photos and news stories, even if creative, are highly factual, though that doesn't matter much in transformativeness cases.  Amount taken: The Times apparently claims a copyright in the layout of the front page, but really the work would have to be that day's print edition, meaning that the book reproduces a fraction of the work, although qualitatively perhaps more important than an average page.  But the real kicker, of course, is size.  Much more than in Dorling Kindersley, where you could at least read most of the text in the images, there's no way anyone could read the chunks of news stories at issue here.  Size cuts decisively in favor of fair use.  Market effect: the Times isn't entitled to any market for transformative uses, even if there were some market for unreadable thumbnails.

It's hard not to look at this lawsuit as the reaction of a paper embarrassed at having licensed photos for what turned out to be a work of harsh criticism.  Whether that criticism is justified or not (and whether licenses were even required, or sought only to avoid a legal battle), the once-Grey Lady looks unappealingly thin-skinned.  I would point out that fees are available to prevailing copyright defendants, and no matter what happens in Kirtsaeng the law is clear enough here that this is a good case for such an award.

My Other Bag seeks fees from TM bully LV

Public Citizen supports My Other Bag in its motion for attorneys’ fees against fashionable trademark bully Louis Vuitton.  As usual, cogent and vigorous argument. 

reverse passing off still actionable as false advertising, court reminds us

OTR Wheel Engineering, Inc. v. West Worldwide Services, Inc., 2016 WL 236231, No. CV-14-085 (E.D. Wash. Jan. 20, 2016)

Interesting little case that doesn’t mention Dastar, but is a rare application of the Dastar principle that reverse passing off can be actionable as false advertising under appropriate circumstances, which these might be. Plaintiff alleged both trademark infringement and false advertising based on its contention that its Outrigger word mark was “buffed off” of test tires used by defendant in China. The court correctly granted reconsideration of its initial holding that this allegation raised a genuine issue of material fact as to infringement. The word mark was allegedly removed before the goods were shipped in commerce (which wouldn’t matter anyway, under Dastar). Moreover, a reference to “Outrigger” in email wasn’t infringement. However, there was a genuine issue of material fact whether defendants falsely represented to a customer that the test tires were their own tires when in fact, they were Outrigger tires, in order to get the customer to choose defendant over plaintiff. As a result, there was a viable false advertising claim even without an infringement claim. (“Commercial advertising or promotion” might be the big remaining barrier.)

NY has jurisdiction over out-of-state processor for alleged magazine scammer

People v. Orbital Pub’g Gp., Inc., 21 N.Y.S.3d 573 (Supreme Ct. 2015)

 

The AG alleged violations of NY state consumer protection law, including a law specific to magazine subscription sales, involved here.  Respondents send official-looking solicitations that allegedly misled consumers into thinking they came from the publications themselves.  On the left side, they contain four boxes, containing numbers, labeled: “Control Number,” “Please Return By,” “Installment” and “Total Amount.” Near the four boxes are (1) a publication’s name and (2) a phrase suggestive of billing, such as “Magazine Payment Services,” “Publishers Billing Exchange,” “Publishers Billing Center,” “United Publishers Service,” “Magazine Billing Network,” “Publishers Billing Association,” “Subscription Billing Service,” “Publishers Billing Center,” or “Subscription Billing Service.” The right side of the solicitations typically contain the same four boxes under a heading of “Notice of Renewal,” and again with the publication’s name printed underneath the boxes.  Here is an example of at least a similar invoice I found at the URL http://www.phgmag.com/docs/phgfraudinvoice.pdf:

 

“Respondents, which typically do not have authorization to act as agent for the various publications, charge significantly more for the subscription than the publications themselves charge and retain the difference.” In addition, the State alleged that that respondents, when soliciting for renewal subscriptions, failed to disclose the date that existing subscriptions end, as required by New York law.

 

Respondents argued that any confusion about whether the solicitation was made by the publication itself was not their fault.  The back of the solicitations said: “We offer over 600 magazines as an independent subscription agent between magazine publishers and clearinghouses in order to facilitate sales and service. As an agent we do not necessarily have a direct relationship with publishers or publications that we offer. . . ..”

 

Respondents also argued that the court lacked jurisdiction over the individual respondents and respondent Adept.  The state argued that Adept’s exclusive business was providing support to the other corporate respondents: bookkeeping, data management, consumer mail processing, and consumer refund processing. Adept denied any involvement in consumer complaint handling or control over the content of the solicitations, though Adept made some suggestions after an investigation by the Oregon AG.  (Adept is located in Oregon.)

 

The court found jurisdiction over Adept and its principal:

 

From a technical view, Adept has been careful not to project itself into New York or to transact business here. From a practical view, it is hard to deny that Adept, albeit indirectly, has availed itself of the benefit of New York consumers, as the record shows that Adept’s reason for being is to support and facilitate the solicitations that are the subject of this proceeding. The record also shows that all of Adept’s profits flow from these same solicitations.

 

Although Adept’s contacts with New York were through the mail and sent by sister entities, together the respondents formed a single business model.  The sister entities were owned by a New York LLC, and thus Adept availed itself of New York law.  Further, the record showed that Adept processed the mailing addresses, payments, and refunds of New York consumers, and also has some role in the content of the solicitations sent to New York consumers.

 

There was no constitutional problem with asserting jurisdiction because these acts constituted minimum contacts with New York, and Adept received its revenue from a company organized under New York law. Adept could reasonably expect to be brought before a New York court if those solicitations violate New York law.

 

General Business Law § 335–a[4] provides, in relevant part, that:

 

Any person, firm, association or corporation engaged in business, the principal purpose of which is to regularly solicit magazine subscription orders for delivery in this state through the mail for profit shall, in any direct written communication to a magazine subscriber inviting the subscriber to renew a subscription, clearly, conspicuously, understandably and readably: a. disclose the month and year in which the subscription expires ...

 

There’s an exception for good faith errors made despite the existence of procedures designed to avoid such error. Respondents challenged the law as a violation of substantive due process.  (Not the First Amendment?)  But the law had a rational basis, even as applied to independent subscription agents with no relationship with the publishers (if not more so!).  Excluding non-profits from the regulation was rational.  Nor did the state instead have to rely on publishers printing an expiration date clearly on all publications sent to subscribers, allowing consumers to cross-reference those publications when they received solicitations.  The state’s consumer protection purpose was legitimate and rationally related to the regulation.  That it might preclude respondents from sending solicitations to New York was not of constitutional moment.  “The Legislature has made an implicit judgment that if a subscription agent does not know when a consumer’s current subscription ends, it cannot solicit that consumer for a renewal. Making that judgment is within the Legislature’s authority.”

 

General Business Law §§ 349 and 350: Deceptive acts or practices/false advertising.  The solicitations were clearly consumer-oriented, as required, and at least raised a fact question about misleadingness.  On their faces, the solicitations looked like they were sent directly from publishers, which could cause consumers to believe that they were being offered a standard price from the publishers, rather than a substantial premium (sometimes nearly twice the publisher’s rate). Nonetheless, the disclaimer on the back raised a fact question about whether a reasonable consumer “would have taken the time to read it and learn that the solicitations were not being sent by publishers and that the cancellation policy may be more draconian than the ones offered by publishers.”

 

SanMedica v. Amazon: how many clickthroughs make likely confusion plausible?

In SanMedica v. Amazon, the court initiallyfound enough evidence of confusion from Amazon’s continued use of a trademark in keyword ads (after it had kicked the seller off its platform, but continued to offer competing brands) to deny summary judgment.  However, the court’s initial opinion redacted the percentage of consumers who saw the Amazon ads and clicked through, and the percentage who bought something after clicking through, which meant that it was impossible to understand how the court had applied the governing 1-800 standard, which holds that clickthroughs provide an upper bound on possible confusion.  With the able assistance of Public Citizen, I intervened, and we ultimately agreed to remove a significant amount of the redactions in the opinion and the underlying documents.  I’m pleased to be able to bring you the crucial paragraph in the opinion:

In the present case, there is similar evidence setting an upper limit on how often consumers were lured to Amazon’s website by clicking on the sponsored ads. It is undisputed that during the Advertising Period, approximately 319,000 sponsored ads were generated. Out of those, there were approximately 35,000 clicks on the sponsored ads. The click to impression rate of the sponsored ads is approximately 11 percent. This rate sets the “upper limit on how often consumers really were lured in such a fashion.” Amazon contends that of the “35,253 users that clicked on the ads for SeroVital, only 984 made any purchase at Amazon.com, a measly 3 percent.” Although consumer purchases constitute three percent, the focus is not on the purchase rate but instead on the 11 percent rate that consumers were lured to Amazon’s website. Eleven percent, although a relative small number, is not so insufficient to suggest that there was no likelihood of confusion.

Trademark law takeaway: not great from a traditional perspective—11% as an upper bound is really low, when 15% is a more normal breakpoint.  However, given what’s known about clickthrough rates, most non-Amazon keyword advertisers can probably breathe a little easier.

If the messiah tarries, how long until we find laches?

Vaad L’Hafotzas Sichos, Inc. v. Kehot Publication Society, --- F.Supp.3d ----, 2016 WL 183226, No. 10–CV–4976 (E.D.N.Y. Jan. 14, 2016)

 

Found this one in another search and was fascinated.  After the death of Rabbi Menachem Mendel Schneerson (the Rebbe), a religious dispute divided the Chabad Lubavitch community. Counterclaim defendants Vaad L’Hafotzas Sichos, Inc. (Vaad) and Zalman Chanin held the belief that the Rebbe is the Messiah and still lives. One result was a lot of copyright and trademark lawsuits.  The court previously upheld the PTO’s registration of the Kehot Publication Society logo by Merkos L’Inyonei Chinuch (Merkos).

 

The court then conducted a bench trial about whether Vaad’s use of the logo, which it did on all its publications, infringed Merkos’ trademark rights and caused dilution under New York law.  Apparently, “Merkos would have no objections if Vaad did not omit the appellation “of blessed memory” after references to the Rebbe’s name—which is contained in Merkos’s publications. Vaad does this consistent with its belief that the Rebbe is the Messiah and still lives.” Merkos didn’t want to be associated with Vaad’s messianic belief and thus sought an injunction.

 

Rabbi Joseph I. Schneersohn founded the Kehot Publication Society, then established Merkos to provide broader educational services to the Lubavitcher community. In 1942, Merkos took over direction of Kehot, an unincorporated entity, and affixed the Kehot logo to almost all its publications. During Joseph I. Schneersohn’s tenure, several entities used the Kehot logo, some part of Chabad Lubavitch’s umbrella organization and others independent. All uses of the logo were contingent on Schneersohn’s approval. This practice continued when the Rebbe succeeded the previous Rebbe in 1951.

 

Vaad was formed in 1967 to centralize the publication and distribution of the Sichos (talks or sermons by the Rebbe).  From then through 1994, Vaad submitted its weekly pamphlets to the Rebbe, upon which Vaad would publish and distribute the pamphlets under the Kehot logo.  In 1994, the Rebbe died, but Vaad did not include the “of blessed memory” appellation in its next publication.  Members of Merkos’ board sent a letter to Vaad chastising it for doing so, and Vaad used the appellation for about a year, but then resumed publishing without it.  Merkos protested again in 1995, but Vaad did not stop its practice. 

 

In 2001, Merkos applied for a registration of the Kehot logo as a trademark for use on “books, magazines, charts, maps, and photographs on a variety of aspects of Jewish life.” The TTAB dismissed Vaad’s opposition in 2010.  The court affirmed Merkos’ ownership in a prior opinion; in a footnote, it noted that, even had it disagreed with the TTAB, B&B v. Hargis would likely have required it to apply preclusion to the TTAB ruling.

 

Strength of the mark: Conceptually strong (“an original image and … thus fanciful and inventive”) but commercially weak, because it was and continued to be used by numerous entities other than Merkos in the production of books for sale in the Hasidic community.  Thus, the logo didn’t provide strong source identification for Merkos. (But apparently strong enough to be more than merely descriptive?)  Weighed against confusion.

 

Similarity: the logos were identical, favoring a confusion finding.  So did the proximity of the products and their identical quality.  The books were identical except for the omission of the appellation after the Rebbe’s name in Vaad’s publications, and Vaad and Merkos targeted the same market, the Hasidic community.

 

Actual confusion: Merkos provided emails from prospective customers to the Kehot customer service email address asking questions related to books published by Vaad. E.g.: “I’m interested in purchasing the likutei sichos parshios from you but I don’t see it online do you have it in stock?”  But the authors didn’t testify, and the court didn’t know why they believed that Merkos published Vaad publications.  It was possible that confusion stemmed from the logos, but also possible that confusion stemmed from the high similarity of the parties’ books.  For example, while Merkos does not offer the Likkutei Sichos organized by parsha (weekly Torah portion), Merkos does publish the Likkutei Sichos.  Moreover, Rabbi Mendel Sharfstein testified that individual members of the Hasidic community are “reluctant to interact with [him] and the activities that [he is] involved in for Merkos,” if they think Merkos believes the Rebbe is the Messiah. But the internal dispute about whether the Rebbe is the Messiah “is well-known throughout the Hasidic community, and it is likely that individuals in the community would inquire as to Merkos’s beliefs regardless of whether Vaad used the Kehot logo.”  Weighed against confusion.

 

Bad faith: Vaad’s continued use of the logo after Merkos’ protest was not in bad faith; the letters indicated that Merkos objected to the omission of the appelation, but didn’t demand that Vaad cease publishing under the Kehot logo. “Considering Vaad’s longstanding permission and practice to publish under the Kehot logo, Vaad’s disregard of Merkos’s instruction to include the appellation does not necessarily establish that from that point forward it was intentionally infringing upon Merkos’s trademark.”  Plus, Vaad believed that the Rebbe granted it permission to use the logo and that Merkos didn’t have the authority to revoke that permission. While that was wrong as a matter of law, it was not a decision made in bad faith.

 

Consumer sophistication: Merkos’ witness “candidly” admitted that “those who are interested in the Hasidic life” are aware of the present litigation and that there “are many savvy enough” in the community to recognize the difference between a Vaad and Merkos publication. Didn’t favor confusion.

 

On the whole, the multifactor test weighed against finding likely confusion.  The court weighed the commercial weakness of the mark—its use by numerous publishing organizations since the 1940s—heavily, as well as the lack of convincing evidence of actual confusion despite unauthorized use of the logo for over 20 years.

 

Even if the court had found likely confusion, it would have also found laches.  Vaad was entitled to a presumption of laches (using the analogous limitations period of  New York’s six-year period for fraud claims). Merkos delayed for 17 years before asserting infringement counterclaims, a delay that was not reasonable under the circumstances.  Vaad didn’t change the extent of its alleged infringement by, in 1998, changing the title page of Vaad publications from “Published and Copyrighted by ‘Kehot’ Publication Society” to “Published and Copyrighted by Vaad L’Hafotzas Sichos.”  “[I]f anything, clearly identifying a book as being published by Vaad could only help reduce consumer confusion.”  Nor were occasional communications/negotiations during the period between the 1995 letter and the 2001 litigation sufficient to excuse the delay.  Finally, bad faith didn’t disentitle Vaad to laches because Vaad acted in good faith when it continued to publish under the Kehot logo “in a manner it believed was consistent with the Rebbe’s directives.”

 

These findings also doomed Merkos’ unfair competition claims under New York common law and New York General Business Law § 349 fail.

 

As for dilution under New York General Business Law § 360–1, New York applies dilution only to those marks “which are truly of distinctive quality or which have acquired a secondary meaning in the mind of the public.” The Second Circuit has held held that the statute “protects only extremely strong marks.” Here, the numerous entities using the mark prevented the court from finding that the logo was an extremely strong mark.

Is a jigsaw puzzle a useful article?

I am pondering this question as I contemplate writing my massive "why you should do wooden jigsaw puzzles" post, because of the exception for pictures of useful articles that incorporate expressive works.  If I want to show some representative pictures, some of my best puzzles use images still within their terms of protection, and while I have full confidence in fair use, it's also worth considering whether the copyright owner's rights would be implicated even without fair use.  (Bonus round question: does a disassembled jigsaw puzzle, with all the pieces turned up, have "fragmented literal similarity" to the full image?)  I think the answer ought to be that a puzzle is a useful article, because assembling a puzzle is not merely a representation of the thing depicted (the way a toy airplane might be).  Indeed, the puzzle has utility, though perhaps less saleability, even without the image--there are image-less puzzles for people like me who like a particular kind of challenge.

Other questions of interest: is the jigsaw pattern itself a copyrightable work?  When hand-cut, there's a strong argument for that, and depending how laser cutting is done, perhaps also for laser-cut patterns.  What about when the pattern is created by a computer program?  This last question, at least, has generated a fair amount of attention in the legal literature.

I would love to hear others' thoughts.

Uniqueness claim can be falsifiable

Champion Laboratories, Inc. v. Central Illinois Manufacturing Co., 2016 WL 164364, No. 14 C 9754 (N.D. Ill. Jan. 14, 2016)

 

Fuel dispensing filters are designed to detect and remove water from fuel before fuel is dispensed into a vehicle. Champion and CIMCO are the leading competitors in the market for fuel dispensing filters in the United States. Champion sued CIMCO for false advertising, and CIMCO counterclaimed for false advertising.  Here, the court dismissed some counterclaims and allowed some to proceed.

 

The first challenged claim was on Champion’s website: “Only PetroClear filters are rigorously tested in the world’s most extensive dispenser-filter research-and-development facility.” CIMCO argued that no industry-recognized organization, group or association had confirmed this claim, while CIMCO’s filters “have been tested and recognized by an independent or third party facility, Underwriters Laboratories.”  Champion argued that its claim was puffery.  However, given the relevant market and the detail in the statement, the claim didn’t warrant dismissal.  Because UL does test filters, “purchasers might misunderstand Champion Laboratories’ statement … as trumpeting accolades it received from a third-party or independent organization for PetroClear filters.”

 

Second claim: Champion stated that an independent testing lab, Southwest Research Institute, found that PetroClear filters “stop” the flow of contaminated fuel when, CIMCO alleged, the lab only found that PetroClear filters “slow” the flow of contaminated fuel.  Champion made the statements in a video on its website, a May 2006 advertisement in National Petroleum News and, a 2009 presentation to the Petroleum Equipment Institute.  Borrowing the 3-year limitations period from the analogous state statute, the Illinois Consumer Fraud and Deceptive Business Practices Act, the court found that the continuing violation doctrine nonetheless rendered the claim actionable, at least on the present factual record.  The related laches defense was not amenable to resolution on a motion to dismiss.

 

Third claim: An email addressed to “Gilbarco and Wayne Authorized Distributors in Latin America,” repeated the “stop flow” statement and made other allegedly false claims. Champion argued that this email, directed to distributors in Latin America, didn’t trigger the Lanham Act or the Illinois Deceptive Trade Practices Act. (Under the Illinois Deceptive Trade Practices Act, the circumstances that relate to the disputed transaction must occur “primarily and substantially in Illinois.”)  The court granted the motion to dismiss because CIMCO didn’t show any effect on US commerce. There was no allegation that the allegedly false statement affected sales anywhere in the United States or its territories, or that CIMCO suffered injury in the United States market.

Amicus in Samsung cert petition

I also signed on to an amicus supporting Samsung’s petition for cert, both on the damages and the infringement/functionality standard.  This Recode story marks the first time I can recall being asked if I had a financial interest, though it shouldn’t be the last (and might not be the first).  For what it’s worth, I own shares in various index funds and a few specific stocks, but not Samsung, and nobody funds my research but Georgetown. 

Copyright in legal codes revisited

I signed on: Amicus arguing against copyright in building codes and other codes adopted as law, by Harvard’s Cyberlaw Clinic.

Going to the mattresses without initial interest confusion

Select Comfort Corporation v. Baxter, No. 12-2899, 2016 WL 158516 (D. Minn. Jan. 13, 2016)

 

A lot of stuff going on here. The parties compete in the market for adjustable air beds and related products. Select Comfort has a market share of over 90% in the adjustable air bed market.  It has registrations for “Sleep Number,” “Select Comfort,” and “What’s Your Sleep Number.”  Defendant Comfortaire is the second largest market participant; Baxter developed its online advertising.  It used Select Comfort’s marks as search terms in AdWords, as did defendant Personal Comfort.

 

A consumer who clicked on a Personal Comfort link would see this comparative ad:

 

Personal Comfort’s logo is at the top of the page, beneath which smaller text reads “Compare Us to Sleep Number Bed®,” then “PREFERRED OVER SLEEP NUMBER® BED.” On the left side under the bold “Compare” heading, it reads “vs. Sleep Number’s®.” Another bold heading: “The Sleep Number® Bed versus Personal Comfort® Bed Comparison.” Lower on the page (not shown in the screenshot), there is another link to “Compare to Sleep Number®,” and the following: “We invite you to do your homework and check out the competition.” At the very bottom of the webpage, there’s also a disclaimer of any affiliation and a link: “No affiliation exists between Personal Comfort® or Sleep Number Bed®. No product belonging to Select Comfort® or Sleep Number Bed® is sold on this site and any reference is for comparison purposes only. Select Comfort® and Sleep Number Bed® are registered trademarks of Select Comfort® Corporation you can visit them at www.sleepnumberbed.com.”

 

Select Comfort objected to ads displayed in pay-per-click ads, such as the following: “Sleep 55% Off Number Beds”; “Number Bed Sleep Sale 60% -Closeout Sale”; “Comfort Air Beds On Sale”; “50% Off Sleep Number Beds”; “50ff Queen Number Beds ... PersonalComfortBed.Com/SleepNumber”; “Select 55ff Comfort Bed PersonalComfortBed.Com/SelectNumber.”  Select Comfort also objected to banner ads on third-party websites, such as:

 

In addition, Select Comfort argued that defendants used its marks in phrases such as “Sleep Number bed” and “Sleep Number Beds on sale” in hyperlinks on third-party sites leading to Personal Comfort’s website.  Further, Select Comfort objected to various uses on the Personal Comfort site, including, for example, the use of “Sleep Number Bed” in the title tag of the Internet Explorer tab; the use of meta-tags on Defendants’ websites; and the use of “WHAT’S YOUR NUMBER?” “Number Bed” also appears in the Personal Comfort logo:

 

Somewhat differently, Select Comfort objected to defendants’ use of a “lead generating” website, Mattress Quote. The Mattress Quote website was created by defendants Baxter and Stenzel, and it allowed consumers to obtain quotes on a number of brands, including Sleep Number and Comfortaire products.  Though it was billed as an independent website, Select Comfort submitted evidence that when consumers selected either Sleep Number or Comfortaire, they received a quote from defendants. Select Comfort also submitted evidence that, in responding to a direct inquiry from the Mattress Quote website, defendants responded purporting to be “Sleep Number.”  Select Comfort also submitted evidence that defendants made allegedly false statements to consumers who visited defendants’ website, called, or participated in a live chat.

 

The court found issues of material fact as to whether “Sleep Number” and “Number Bed” were protectable marks, descriptive, descriptive with secondary meaning, generic, or even suggestive (Sleep Number seems non-suggestive for beds that are adjustable—I may not know exactly what it is, but I immediately know there’s a range).  Similarly, there were fact issues as to whether defendants engaged in descriptive or nominative fair use.  And there were fact issues on likely confusion, with some factors favoring each side and some contested.

 

Notably, the court held that it was inappropriate to use initial interest confusion in this circumstance, where the products are expensive (the average Select Comfort bed costs between $1,600 and $2,300) specialty products purchased online. “These factors lead to the conclusion that consumers would exercise a high degree of care in purchasing such a mattress. Therefore, Plaintiffs’ trademark infringement claim will require Plaintiffs to establish a likelihood of actual confusion at the time of purchase.”  This mattered in part because most of Select Comfort’s confusion evidence, according to defendants, involved only post-sale mistakes/confusion, and because the key question in Select Comfort’s survey didn’t test for source confusion (again, according to defendants).  Defendants’ own survey showed only 1.5% confusion regarding the source or affiliation of their ads.

 

On the false advertising claims, defendants argued that Select Comfort lacked standing.  It didn’t, because it had a sufficiently close connection to the asserted false advertising under Lexmark, so this serves mainly as a reminder that Justice Scalia has lost the war on calling this inquiry “standing.”  The other aspects of the falsity claim were contested and had to go to a finder of fact.

 

The court likewise found that a jury would have to decide whether “Sleep Number” and “What’s Your Sleep Number?” were famous under the rigorous federal dilution standard.  Select Comfort submitted that they had spent over $150 million in 2014 and over $1 billion since 2010 in marketing, advertising, and promoting their Sleep Number products across many media. Publicity included “rankings in industry magazines, positive reviews in Consumer Reports, celebrity endorsements, and numerous mentions in magazines, newspapers, online, television programs, and comics,” as well as other pop culture references. It claimed over $10 billion in sales since 2010, and that in 2012, “Sleep Number” achieved 21% unaided brand awareness and 75% total awareness.

 

Defendants disagreed, arguing that this wasn’t enough for fame, since unaided brand awareness for the “Sleep Number” mark achieved under 20% awareness from 2001 to 2011, reached a high point of 21% in 2012, and hovered around 12-13% from 2007-2009. The court declined to resolve the battle and would let the jury decide.

 

Unjust enrichment went away as a separate claim because Select Comfort had an adequate remedy at law.  The Minnesota Deceptive Trade Practices Act claim survived, however, because it might provide a separate basis to calculate damages.

 

Finally, the court dismissed a counterclaim based on Select Comfort’s purchase of competitive trademarks as keywords.  Select Comfort acknowledged that the keyword purchase alone wasn’t infringing or unfair competition.  “What Plaintiffs do contend is that Defendants’ purchase of the keywords in conjunction with the resulting advertisements is wrongful.”  This is an excellent limitation and I hope more potential plaintiffs pay heed.

Wear and tear: First Amendment takes another bite out of law protecting military medals

United States v. Swisher, No. 11-35796 (9th Cir. Jan. 11, 2016) (en banc)

 

H/T Eric Goldman.

 

The facts of Swisher are colorful (a murder trial, at which he was not the defendant, is involved) but irrelevant.  United States v. Alvarez, 132 S. Ct. 2537 (2012), invalidated a statute prohibiting lying about being awarded military medals.  Reversing circuit precedent, the en banc court here also invalidated a prohibition on wearing such medals without authorization.  Since the statute has been amended to remove the mere prohibition, this particular issue won’t come up again, but the First Amendment analysis is of interest for trademark purposes.

 

Under Alvarez, false statements aren’t for that reason unprotected; punishment is confined to particular contexts.  The plurality’s exacting scrutiny required (1) a compelling government interest; (2) that the restriction at issue was necessary to achieve; (3) and that there was a direct causal link between the restriction imposed and the injury to be prevented.  (Question: what work does (3) do?  Is there a case where the restriction would be necessary but there was no direct causal link between restriction and injury?)  Here, though the interest in protecting “the integrity of the military honors system”  was compelling, the government’s interest could be satisfied by counterspeech, including a “Government-created database [that] could list Congressional Medal of Honor winners.” The government also failed to prove “its claim that the public’s general perception of military awards is diluted by false claims.”

 

Justice Breyer concurred, using intermediate scrutiny.  He would (1) take “account of the seriousness of the speech-related harm the provision will likely cause”; (2) consider “the nature and importance of the provision’s countervailing objectives,” and (3) weigh “the extent to which the provision will tend to achieve those objectives, and whether there are other, less restrictive ways of doing so.”  Other statutes punishing false statements were more acceptable, he found, because they typically “narrow the statute to a subset of lies where specific harm is more likely to occur.”  Breyer noted that a more limited statute could have adopted these requirements by (1) requiring a showing that the false statements caused a specific harm, (2) requiring that the lies be made in a context “where such lies are most likely to cause harm,” or (3) focusing on the more important military awards that Congress most values.

 

Previously, the 9^th Circuit held that Alvarez didn’t control the false medal-wearing statute because the statute regulated conduct, not speech.  Thus, it was more akin to (ok) impersonation statutes or statutes prohibiting “the unauthorized wearing of military uniforms.”  Under O’Brien’s test for regulating expressive conduct, the government had “a compelling interest in ‘preserving the integrity of its system of honoring our military men and women for their service and, at times, their sacrifice.’”  The government’s interests were “unrelated to the suppression of free expression” because the statute “does not prevent the expression of any particular message or viewpoint.” And third, “the incidental restriction on alleged First Amendment freedoms” was “no greater than is essential to the furtherance of that interest,” because, “even if § 704(a) is not the most effective mechanism, in at least some measure it promotes the goals of maintaining the integrity of the military’s medals and preventing the fraudulent wearing of military medals.”

 

The en banc court reasoned that, if a law suppresses conduct to regulate the communicative nature of that conduct, then strict scrutiny applies, not O’Brien.  Under Reed, if “a regulation of speech ‘on its face’ draws distinctions based on the message a speaker conveys,” it is a content-based regulation.  This was exactly what the law here did.  “Wearing a medal, like wearing a black armband or burning an American flag, conveys a message.”  The law was designed to stop a particular message: “the misappropriation or distortion of the message of valor conveyed by a medal.” Thus, O’Brien didn’t apply.

 

Under Justice Breyer’s concurring opinion in Alvarez, the law here failed as well, lacking the same necessary limiting features that other laws against false statements have.  The government said that this law was like the Lanham Act’s ban against trademark infringement, since it prevented “misappropriation” of government property.  But Justice Breyer rejected a similar argument, albeit incoherently; trademark law focuses on “commercial and promotional activities” and requires showing likely confusion, which makes it more likely that the feared harm is involved.

 

Circuit precedent said that “[t]he use of a physical object goes beyond mere speech and suggests that the wearer has proof of the lie, or government endorsement of it,” but the en banc majority saw no basis for the claim that wearing a medal is more probative than speaking a lie. (Citing Kevin Jon Heller, The Cognitive Psychology of Circumstantial Evidence, 105 Mich. L. Rev. 241 (2006) (noting, as an empirical matter, that jurors give more weight to testimony, such as eyewitness identifications and confessions, than to physical evidence, such as blood and fingerprints).)  Given that military medals are freely available for purchase, “the probative value of owning a medal or other military decoration is minimal.” Regardless, “wearing a medal has no purpose other than to communicate a message,” so it was core protected symbolic speech.

 

Nor was the ban like laws barring impersonation of government officials, or the unauthorized wearing of military uniforms, which the Alvarez Court assumed (without deciding) were valid.  Impersonation statutes typically focus on impersonation, not mere speech, and require showings that others were deceived.  Other laws, limited to false representations in the contexts of banking, finance, or law enforcement, where “a tangible harm to others is especially likely to occur,” were distinguishable.

 

Although the government had a strong interest in avoiding dilution of “the country’s recognition of [award recipients’] sacrifice in the form of military honors,” a narrower law, plus a register of awards, could also serve the government’s interests equally effectively.

 

Judges Bybee, N.R. Smith, and Watford dissented, and would have viewed the case as one involving deceptive conduct, not just mere speech.  The dissent pointed to a number of other now-threatened laws: bans on unauthorized wearing of a uniform of a friendly nation; wearing of the Red Cross (or related international symbols) with the fraudulent purpose of inducing the belief that the wearer is a member or agent of the Red Cross (or related national/international organizations).

 

The dissent disagreed with the majority that the “quantum of conduct involved in pinning on a medal . . . is not materially different from the quantum of conduct involved in speaking or writing.”  If that were true, the dissent contended,

 

then we could save ourselves trouble and money by simply announcing that we are awarding medals without actually giving the recipients anything. But as anyone knows who has witnessed the President awarding the Congressional Medal of Honor or a promotion ceremony pinning a new officer—or even an Olympic medals ceremony or a Cub Scout court of honor—there is value, both symbolic and tactile, in the awarding of a physical emblem. If there is important value in the act of awarding a physical medal, there is important value in the wearing of it.

 

Here the dissent is nitpicking about the phrase “quantum of conduct,” whatever that means.  The majority means wearing a medal is an act in the world that is fundamentally communicative; speaking and writing also have physical aspects, but the extent to which that makes them “conduct” is usually zero given why they are usually regulated, and so here.  The dissent says that the physical act of receiving (and thus wearing) a medal means more than just announcing that medal, which is also true, but (as is inherent in the dissent’s own formulation), the act remains almost entirely communicative, with the physical aspects serving to confirm the communication, just as standing at attention as the national anthem is sung confirms a communication of respect.

 

The dissent also would have found that this particular ban risked less of a chilling effect, because you can’t carelessly wear a medal as you can carelessly claim to be a medal winner.  (Everybody, majority and dissent, would require intent to deceive for liability here.)  There was also less ambiguity in wearing a medal than in speaking—the risk of misinterpretation or “censorious selectivity” by prosecutors was less.

 

Moreover, the power of visuals meant that falsely wearing a military medal did more harm to the govenrment’s interest than “mere false speech”:

 

Even if the wearer is later exposed as a liar, the utility of the medal as a symbol of government commendation has been undermined. The public can no longer trust that the medal actually is a symbol of government commendation …. It is one thing to say that one has been decorated; it is quite another to produce the evidence for it by appropriating a symbol that the government, through decades of effort, has imbued with a particular message. Unlike false statements, which may work harm by giving the public the general impression that more personnel earn military honors than actually do, the false wearing of medals directly undermines the government’s ability to mark out specific worthy individuals, because the symbol the government uses to convey this message can no longer be trusted. This may also mean that those who rightfully wear a military medal are less likely to be believed…. [T]he wearing of an unearned medal offers more convincing proof of the lie than a mere false statement.

 

Thus, a medal is like a trademark.  [Actually, the dissent is claiming that the physical medal is like a trademark; apparently the name of the medal is not as much like a trademark.]  “When those who are unworthy are allowed to wear the medal, the government can no longer identify its heroes in a way that is easily discernible by the public.”  Of course, this harm doesn’t occur “when an unearned medal is worn for purposes of art, theater, political expression, or the like.”  It’s only when the medal-wearer tries to convey that he’s actually earned a military honor that the medal’s symbolic value is diluted.   [Under this rationale, it follows, trademark dilution is unconstitutional, despite the way Justice Breyer tosses around “confusion” and “dilution” as synonyms.]

 

Also, the government had fewer less restrictive alternatives to banning the false wearing of a medal than it did to banning false claims of military honors.  “[T]he fact that the lie here is told in a more effective way, with physical proof in the form of the medal to support the false claim of entitlement, increases the harm caused by the lie and also means that other, less restrictive means are less likely to be effective.”  Counterspeech would be less effective, because, as the Fourth Circuit held, “speech may not effectively counter that which a person sees.”  Plus, if a person has to check a database to confirm that a medal was honestly earned, “the purpose of the medal itself is utterly defeated. If we can no longer trust what we can see, the only honor the United States can confer on its heroes is a listing in a database.”