Tuesday, August 30, 2016

More Canadian IP pictures

Not legal in the US:
Cafe Olimpico, since 1970

Fake store with NY Yankees logo variant

Iraq-a-Fella records
OK, not gonna lie, I'm interested in the use of the Rubik's cube to indicate the completeness of the game plan advertised, but I was really more struck by the way in which a domain name can change an unremarkable business: franklyman.com, on the left.
Add caption

both sides do it: court in Trump Univ. case resolves some expert squabbles

Cohen v. Trump, No.: 3:13-cv-2519, 2016 WL 4487172 (S.D. Cal. Aug. 25, 2016)

Colorful personalities can produce colorful cases; first, Pom Wonderful, now Trump.  The court certified a class action under RICO for people who bought Trump University real estate investing seminars, including the three-day fulfillment seminar and the Trump Elite programs, based on allegedly material misrepresentations in advertisements, mailings, promotions, and free previews.  TU customers paid anywhere from $1,495 for a three-day fulfillment seminar up to $35,000 for the “Trump Gold Elite Program.”

Here, the court deals with various objections to expert testimony.  Plaintiff’s marketing expert, Michael Kamins, studies how consumers interpret advertising.  His expert report made four main claims: (1) TU’s advertising and promotional campaign focused almost exclusively on Defendant and targeted his biggest fans. (2) TU’s marketing and sales strategies incorporated a variety of strategies to encourage prospective customers to make decisions using emotions, rather than rational deliberation.  (3)  TU’s 98% approval rating was not the product of reliable questions or methodology.  (4) A survey Kamins conducted showed the importance to consumers of TU’s representations that they’d learn Trump’s strategies from his “handpicked” instructors.”

The survey was conducted online.  Kamins found that “overall, 87% reported that the opportunity to learn Trump’s real-estate strategies positively impacted their decision to purchase a TU Live Event, and 83% reported that the offer of being taught by Trump’s hand-picked professors positively impacted their purchase decision.” Kamins also found a larger impact for those with more intention to attend live events.

The court found that Trump’s objections to the survey went to weight rather than admissibility.  Trump argued that the universe was too broad, because it targeted those 21 and over (with certain exclusions), whereas “potential TU customers must have some basic interest in entrepreneurship, continuing education, real estate, or business generally.” TU used direct mail to target people who had purchased similar programs in the past.  But TU also used print media, online, and radio advertising in mainstream outlets to achieve the “widest distribution” possible. TU’s internet advertising was geotargeted, but not targeted by demographics.  The court also pointed out that “many of TU’s advertising slogans appear to be designed to appeal to everyday consumers who do not have a background in real estate,” such as “I can turn anyone into a successful real-estate investor, including you.”  Where a company uses “broad marketing techniques ... the general adult population may well be a sufficient proxy for the relevant market.”

Trump also objected to the absence of a control group.  Cohen responded that the survey went to materiality, not to causation, and thus didn’t need a control group.  I’ve got to cite the precedent, because the question is amazing: Fahmy v. Jay Z, 2015 U.S. Dist. LEXIS 129446 (C.D. Cal. Sept. 24, 2015) (the survey asked respondents “whether they would be ‘less likely’ to attend a Jay-Z concert had they known Big Pimpin’ would not be performed,” and didn’t require a control because materiality was a distinct question from causation).  [I wonder what an appropriate control here would look like; arguably the Trump name for a real estate seminar already communicated so much that consumers would make inferences about his expertise/involvement; see also the details of the pitches below.  Could you remove Trump references and leave only nameless bluster?]

The court mostly agreed with Trump, because Kamins drew causation-based conclusions in his report.  But many courts have found that the absence of a control group goes to weight, not admissibility.  Moreover, Cohen argued that other features of the survey, such as including “don’t know” or “no opinion” responses to close-ended questions, and comparing the response rates for the two dependent measures, compensated for the lack of controls.  However, other courts have found controls to be essential in the false advertising context.  The court wanted to hear more argument about the issue.

Trump also argued  that the survey was distorted from the actual market because it presented only several pieces of TU advertising, “rather than replicating the entire TU experience, including the 90-minute free preview and, in the case of those who purchased TU ‘Elite’ programs, the impact of the three-day fulfillment seminars.” But no survey can perfectly replicate an actual purchase decision.  Also, by showing representative print ads and the 2-minute “Main Promotional Video” played at the beginning of the 90-minute free preview, the survey showed ads substantially similar to those which would have been encountered by prospective TU customers, and which initially encouraged prospective TU customers to attend the 90-minute free preview.

Trump also argued that the survey had an unwarranted demand effect by asking if the claims in the ads had an impact on respondents’ interest in TU.  But the survey specifically asked whether the Trump-based opportunities had “a positive impact, a negative impact, or no impact on your decision to enroll in the live class,” which was neutral.

As for other opinions, Trump challenged Kamins’ criticisms of TU’s purported 98% approval rating; if Trump didn’t put that purported rating at issue at trial, the court would be inclined to exclude Kamins’ testimony on that issue.

Trump also challenged Kamins’ opinions about TU’s marketing scheme as “unreliable, irrelevant, and overtly prejudicial.” For example, Kamins cited academic research that “demonstrates how techniques such as using the ‘University’ moniker, playing the ‘Money, Money, Money’ song at the beginning of the 90-minute free preview, and setting the room temperature for the free preview at 68 degrees, were designed to induce a more emotive decision making approach on the part of prospective TU customers.”  The court found these opinions relevant to materiality, and reliable in being supported by Kamins’ experience in marketing and academic studies.

Cohen’s real estate education expert, Paul Habibi, was a lecturer at the UCLA Anderson Graduate School of Management and the UCLA School of Law, as well as a real estate investor. Habibi also taught real estate investment and development seminar courses at UCLA Extension.  His report contained a detailed comparison of the content taught at TU live events with that offered by leading schools in real estate education. Habibi concluded that TU’s live program materials didn’t “provide students with the analytical tools to systematically make sound real estate investment decisions; sometimes promoted illegal, unethical, and/or risky investment strategies; and did not provide any strategies or techniques unique to Defendant.”  He also reviewed the resumes of twenty-seven TU instructors, and found that TU’s instructors and mentors primarily had experience in sales and motivational speaking rather than real estate investment or education.

Trump argued that the comparison was unfair, and that TU should have been compared to “other business seminars” such as “Rich Dad Poor Dad,” given that TU differed dramatically from academic programs in its  price, length of time, focus on practical instruction, provision of part-time education, accessibility, and the objectives of TU students.  But, if Habibi was doing that, TU invited the comparison.  In the main promo video played at the beginning of each 90-minute free preview, Trump said:

We’re going to have professors and adjunct professors that are absolutely terrific. Terrific people, terrific brains, successful....The best. We are going to have the best of the best and honestly if you don’t learn from them, if you don’t learn from me, if you don’t learn from the people that we’re going to be putting forward –– and these are all people that are handpicked by me ––then you’re just not going to make in terms of the world of success. And that’s ok, but you’re not going to make it in terms of success. I think the biggest step towards success is going to be: sign up for Trump University. We’re going to teach you about business, we’re going to teach you better than the business schools are going to teach you and I went to the best business school.

Many other components of TU’s marketing scheme and live events reinforced this comparison.
TU’s “[l]ecturer[s]” were directed to call themselves “a member of the faculty at Trump University” and to tell customers that

Mr. Trump went to the Wharton School at the University of Pennsylvania, and he knew that most people couldn’t afford the time or tuition to do that. So he decided to create an organization that would provide a world-class education, coupled with a year long apprenticeship resulting in personal development and wealth building. He saw the opportunity to give a Wharton School education in 3 days followed by an Apprenticeship[,]

They were also directed to promise that “Trump University will be your Wharton!”   Moreover, TU ads used “various forms of recognizable signs associated with accredited academic institutions, such as a ‘school crest.’”  The “Trump University Community,” TU advertised, included “Staff,” “Faculty,” “Instructors,” and “Program Directors (Trump University’s Admissions Department.”  Approved marketing “Catch Phrases/Buzz Words” included “Ivy League Quality,” and marketers were told to set a “tone”: “Thinking of Trump University as a real University, with a real Admissions process—i.e., not everyone who applies, is accepted”; and to “[u]se terminology such as” “Enroll,” “Register,” and “Apply.”  By contrast, there was no evidence that TU ever compared itself with for-profit entrepreneurship seminars such as “Rich Dad Poor Dad.”

If that weren’t enough, Habibi also did have experience teaching shorter, entry-level seminars at UCLA’s Extension school, and also based his opinions on that.  His opinion about the illegal/unethical nature of certain TU investment strategies was based on his extensive experience in real estate investment; he didn’t need to be a lawyer to  have relevant knowledge of the legality of different real estate investment strategies.

The court ended by concluding that Trump’s rebuttal experts could critique Cohen’s expert testimony, though if they became cumulative at trial the court would exclude the cumulative testimony.

Little Tree, big TM claim

Mike Masnick wrote basically the post I'd want to about Car Freshner's latest attempt to suppress anyone from using tree-shaped products that smell like trees--you know, descriptive use.  I too find the functionality claim interesting and on its face strong, at least to the extent of sharply limiting Car Freshner's rights.  The abandonment issue is, I think, stronger from a registration point of view than Masnick seems to--but courts often don't really understand what registration is, or what the specification delineating the claimed matter in the registration is supposed to do in terms of providing notice and matching up to actual use, so it's unpredictable.

Also, I am amazed that perfume for men who want to smell like pine trees exists.  (See bottom center, first image.)

Monday, August 29, 2016

Trader Joe's can go after Canadian reseller in US because harm to goodwill is so easy to allege

Trader Joe’s Co. v. Hallatt, No. 14-35035, 2016 WL 4488009, -- F.3d – (9th Cir. Aug. 26, 2016)

Hallatt buys Trader Joe’s-branded goods in Washington state, transports them to Canada, and resells them there in Pirate Joe’s, a store he designed to mimic a Trader Joe’s store. The district court dismissed Trader Joe’s claims for lack of subject-matter jurisdiction because Trader Joe’s did not adequately explain how Hallatt’s activity impacts American commerce.  The court of appeals reversed on the Lanham Act claim.  Trader Joe’s alleged a sufficient nexus between Hallatt’s conduct and American commerce to justify extraterritorial application of the Lanham Act. However, Trader Joe’s didn’t allege trademark dilution in Washington or harm to a Washington resident or business, so the dismissal of the state law claims was affirmed.

According to the complaint, Trader Joe’s does not operate outside of the United States, but Canadian consumers regularly travel across the border to shop at Trader Joe’s stores located in northern Washington.  Trader Joe’s also alleged fame in the US and abroad.

Hallatt allegedly advertises his wares with Trader Joe’s trademarks, operates a website accessible from the United States, displays an exterior sign at Pirate Joe’s that uses a font similar to the trademarked “Trader Joe’s” insignia, and designed the Pirate Joe’s store to mimic Trader Joe’s trade dress. Further, Hallatt allegedly sells perishable goods at Pirate Joe’s that he does not transport or store in a manner consistent with the strict quality control standards used by Trader Joe’s. Trader Joe’s alleged that it received at least one complaint from a consumer who became sick after eating a Trader Joe’s-branded product she purchased from Pirate Joe’s.

“Trader Joe’s declined to serve Hallatt as a customer, but Hallatt, undeterred, began donning ‘disguises to shop at Trader Joe’s without detection’ and driving ‘to Seattle, Portland, and even California to purchase TRADER JOE’S-branded products and evade Trader Joe’s refusal to sell them.’” Hallatt also allegedly pays third parties in Washington to buy Trader Joe’s goods on his behalf. On appeal, Trader Joe’s identified Hallatt as a United States Lawful Permanent Resident (LPR), which enables him to live and work legally in the United States.

The Lanham Act’s “use in commerce” element and broad definition of “commerce” clearly indicate Congress’s intent that the Act should apply extraterritorially. Steele v. Bulova Watch Co., 344 U.S. 280 (1952). Thus, the question was “the limits Congress has (or has not) imposed on the statute’s foreign application.” This wasn’t a subject-matter jurisdiction question but one going to the merits.

The Ninth Circuit’s three-part test for extraterritorial application ask whether “(1) the alleged violations ... create some effect on American foreign commerce; (2) the effect [is] sufficiently great to present a cognizable injury to the plaintiffs under the Lanham Act; and (3) the interests of and links to American foreign commerce [are] sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority.”

The defendant’s foreign activities need not have a substantial or even significant effect on American commerce.  The usual way to satisfy (1) and (2) is to allege that infringing goods, though sold initially in a foreign country, flowed into American domestic markets.  Here, however, Trader Joe’s allegations that Hallatt’s acts harmed its reputation and decreased the value of its American-held trademarks were sufficient.  Hallatt allegedly ignored Trader Joe’s quality control.  Though this was a circumvention of the first sale doctrine, that’s ok: “[d]istribution of a product that does not meet the trademark holder’s quality control standards may result in the devaluation of the mark by tarnishing its image.”  [So if I sell a used Ford that’s a lemon, I’m an infringer? Many of the foundational cases here involved goods diverted before their first authorized sale; here we see the expansion past true first sale, possibly limited by the idea that a bulk seller is a “distributor” while an individual seller is not.  I hope Liberty Puzzles never goes after my collection, with its crumpled tissue paper.]

Trader Joe’s theory was that “Hallatt’s poor quality control practices could impact American commerce if consumers who purchase Trader Joe’s-brand products that have been transported to Canada become ill, and news of such illness travels across the border.”  [Interesting question about how to show that each link in this chain is more likely than not, including the “brand devaluation” outcome.]  The court of appeals found this concern perfectly plausible, because food-born illness regularly makes international news and Trader Joe’s alleged one sick customer complaint.  “[R]eputational harm to an American plaintiff may constitute ‘some effect’ on American commerce.”

“Hallatt’s alleged attempt to pass as an authorized Trader Joe’s retailer could similarly harm Trader Joe’s’ domestic reputation and diminish the value of its American-held marks.”  If, as alleged, Hallatt sells at inflated prices, Pirate Joe’s shoppers “may come to mistakenly associate Trader Joe’s with overpriced goods” or poor customer service.  Trader Joe’s may suffer harm in the US because it draws international shoppers to its northern-Washington stores.

In addition, Trader Joe’s alleged that Hallatt engages in commercial activity in the United States as part of his infringing scheme: buying his inventory and hiring third parties to buy it.  Such domestic economic activity weighed in favor of applying the Lanham Act.

Part (3) of the test requires consideration of international comity, balancing: “[1] the degree of conflict with foreign law or policy, [2] the nationality or allegiance of the parties and the locations or principal places of business of corporations, [3] the extent to which enforcement by either state can be expected to achieve compliance, [4] the relative significance of effects on the United States as compared with those elsewhere, [5] the extent to which there is explicit purpose to harm or affect American commerce, [6] the foreseeability of such effect, and [7] the relative importance to the violations charged of conduct within the United States as compared with conduct abroad.”  Considering these factors, it was appropriate to apply the Lanham Act to Hallatt.

For conflict with foreign laws: a conflict typically exists if there’s an ongoing trademark dispute or similar proceeding abroad, which there was not here.  Hallatt’s admission that he holds LPR status weighed in Trader Joe’s’ favor, and he allegedly has assets here. 

As for the relative significance of effects, the court quoted McCarthy on trademark’s twin goals of “protect[ing] property” in trademarks and protecting consumers from confusion.  The property was American; the most likely deceived consumers were Canadian, and federal courts ordinarily don’t have an interest in protecting foreign consumers from confusion.  But Trader Joe’s alleged that its trademarks were well-known in Canada, and that more than forty percent of the credit card transactions at one Washington store were with non-United States residents. Hallatt’s sale of Trader Joe’s goods in Canada had the potential to mislead these consumers, weighing in favor of extraterritorial application.

Trader Joe also pled facts indicating a purpose to harm American commerce, or at least the foreseeability of that.  As for the relative importance of the conduct within/without the US, an essential part of Hallatt’s commercial venture was in the US.  Still, arguably the most important part occurred in Canada: the display of Trader Joe’s marks on the store in a way that confused Canadian consumers and the resale of Trader Joe’s goods.  This factor weighed against extraterritorial application of the Lanham Act.  Still, overall, the factors didn’t weigh against extraterritorial application.

State law: Washington’s dilution statute requires fame in Washington and diluting conduct in Washington.  Trader Joe’s argued that the law only required dilution, not diluting activity, to occur in Washington, but the court disagreed, given that the primary remedy was the power of courts to enjoin “commercial use in this state of a [famous] mark.” A ripple effect wasn’t enough; use in Washington was required, and Trader Joe’s didn’t allege that. 

Similarly, the Washington Consumer Protection Act claims required the practices at issue to be carried out in “trade” or “commerce,” including “the sale of assets or services, and any commerce directly or indirectly affecting the people of the state of Washington.”  In Thornell v. Seattle Servs. Bureau, 363 P.3d 587 (Wash. 2015), the state Supreme Court held that the CPA creates a cause of action for a plaintiff residing outside of Washington to sue a Washington corporate defendant for allegedly deceptive acts, as well as for an out-of-state plaintiff against an out-of-state defendant for the allegedly deceptive acts of the defendant’s in-state agent.  This scope prevented Washington businesses from targeting out-of-state consumers for harm.  Here, though, none of the defendants were Washington residents. Trader Joe’s is a California corporation, so harm to the value of its trademarks was not a Washington-based harm. The alleged deception at the heart of the case allegedly occurs only in Canada and therefore harms only Canadian consumers. Nor did Trader Joe’s’ complaint allege that the existence of a low-quality, high-cost Trader Joe’s knock-off store in Vancouver puts honest Washington grocery stores at a competitive disadvantage. 

laches period won't run before false advertising claimant suffers harm

Star-Brite Distributing, Inc. v. Gold Eagle Co., 2016 WL 4470093, No. 14-61841-CIV (S.D. Fla. Jan. 25, 2016)

The parties compete in the market for marine fuel additives.  Star-Brite argued that Gold Eagle’s false advertising counterclaim was barred by laches; the court refused to grant summary judgment because of material issues about the time at which Gold Eagle could have satisfied all the elements of a false advertising claim, especially showing harm from the falsity. 

The Lanham Act borrows a presumptive laches bar from coordinate state law causes of action; Florida’s relevant limitations period is four years.  Star-Brite argued that, as early as 2007, Gold Eagle had reports that Star-Brite’s product didn’t perform as advertised, and Gold Eagle was also aware of a false advertising counterclaim filed against Star-Brite in 2009.  Gold Eagle didn’t counterclaim until 2014.  Gold Eagle argued that, before 2010, Gold Eagle’s product testing was focused on benchmarking against competitors, not on whether Star-Brite’s claims were true, and that the other litigation created doubt that the relevant tests could falsify Star-Brite’s claims.  In addition, though Star-Brite emerged as a direct competitor in 2008, Gold Eagle didn’t start losing market share to Star-Brite until late 2010.

The court couldn’t conclude as a matter of law that Gold Eagle’s delay was unreasonable.  Gold Eagle’s evidence indicated that it filed its claims within four years of determining that it had provable claims; it was not until October 2010 that Star-Brite began gaining market share from Gold Eagle and Gold Eagle thus had evidence of harm, as required to prevail on a Lanham Act claim. Moreover, the earlier litigation between Star-Brite and a third party “reasonably deterred the filing of a false advertising claim until 2012, when the majority of marine engine OEMs agreed that the [tests at issue] were appropriate to use when testing all ethanol fuel additives, including [Star-Brite’s].” Finally, it was not until after Star-Brite sued Gold Eagle that Gold Eagle determined in discovery that Star-Brite’s product did not contain enzymes (relevant to falsity).

Likewise, Gold Eagle’s state law claims weren’t barred by the statute of limitations. Floriday follows the continuing tort rule, and the evidence showed that Star-Brite continued its allegedly false ads after the counterclaims were filed.  Thus, Gold Eagle could recover damages for tortious acts committed within the limitations period prior to the filing of suit, allowing a four-year look-back period as well as injunctive relief.

Thursday, August 25, 2016

NY false advertising law lacks rigid false/misleading distinction

Classic Liquor Importers, Ltd. v. Spirits International B.V., --- F. Supp. 3d ----, 2016 WL 4419457, No. 15 Civ. 6503  (S.D.N.Y. 2016)

Classic Liquor is a newcomer to the liquor business that recently launched a line of vodkas under the mark ROYAL ELITE.  It brought a declaratory judgment claim against SPI based on SPI’s “elit by Stolichnaya” vodka brand. The court declined to grant summary judgment on non-infringement, but dismissed most of SPI’s false advertising-based counterclaims.  The state-law claims that survived indicate the importance of state-law claims where competitors are allowed to sue; state laws may not follow the calcified false/misleading distinction made under the Lanham Act.

Several ROYAL ELITE marks have been approved for publication, and SPI has opposed two of them.  SPI has four relevant registered marks, STOLICHNAYA ELIT and three figurative/stylized:
One stylized mark

Another stylized mark

The most recently registered stylized mark

Plaintiff made changes to the bottle during the course of the litigation: “ROYAL” is now close to the same font size as the word “ELITE”; a label bearing the ROYAL ELITE mark around the neck of the bottle was replaced with a sticker bearing the mark vertically; and there were other changes, all of which the court deemed immaterial to the matter at hand.
Royal Elite bottle

Stoli elit bottle

The false advertising counterclaims were based on: (1) the inclusion of the ® symbol next to the word “ROYAL” (falsely signifying that plaintiff owns a trademark registration in ROYAL or ROYAL ELITE) and (2) the inclusion of the words “Since 1867” on the front of plaintiff’ s bottle.

SPI failed to bring an infringement claim, even though that’s generally a compulsory counterclaim in a declaratory action for non-infringement. But that didn’t entitle Classic Liquor to a default judgment of non-infringement; instead, the burden still rested on SPI to prove infringement, and if SPI did so, it could still get an injunction.  Starter Corp. v. Converse, Inc., 170 F.3d 286 (2d Cir. 1999).

Strength: while two of SPI’s marks were incontestably distinctive, that didn’t “make every component of those marks irrefutably strong for purposes of the Polaroid analysis.” SPI didn’t have a word mark in ELIT, but rather it had registrations for stylized versions of ELIT, a word mark in STOLICHNAYA ELIT, and variations on the stylized versions plus other stuff.  SPI’s confusion theory depended only on ELIT.  The court brushed aside SPI’s implausible argument that ELIT was a coined term; “[a] slight misspelling of a word will not generally turn a descriptive word into a nondescriptive mark,” especially given SPI’s positioning of ELIT as “ultra-luxury” and its argument that ELITE and ELIT had the same commercial impression.  Self-laudatory terms are usually deemed descriptive, but a weird outlier case in the Second Circuit says they’re suggestive. Estee Lauder Inc. v. The Gap, Inc., 108 F.3d 1503, 1509 (2d Cir. 1997), so district courts make case by case determinations.  Here, that didn’t save ELIT from descriptiveness. SPI argued that “elite” wasn’t an adjective describing a quality or characteristic, but rather a noun that “normally designates a group or class of persons in society.” Fortunately, the Eighth Circuit has already spoken on this precise issue:

Our dictionary defines “elite,” when used as an adjective, to be synonymous with “choice, superior, select.” Webster’s Third International Dictionary 736 (1976) (citing “an [elite] brand of coffee” as example of usage). Although plaintiff contends, based on another dictionary, that “elite” may refer only to persons, we conclude that the word may be used to describe objects as well. Because the word “elite” indicates superior quality, as used here it is a “self-laudatory” mark. ... Because “elite” is descriptive, plaintiff must show that the mark has acquired secondary meaning to obtain protection.

Jeld-Wen, Inc. v. Dalco Indus., Inc., 198 F.3d 250, 1999 WL 1024002, at *3 (8th Cir. 1999) (unpublished per curiam) (footnote omitted).

The court then found disputed issues of fact over whether ELIT had developed secondary meaning, despite an April 2015 market research report that SPI commissioned finding that “overall awareness of elit remains very low” and that “[t]he main reason to try elit by Stolichnaya is due to a desire to experiment with new brands.” An SPI internal marketing document states that “[t]he correct full name is: elit by Stolichnaya” and instructs, “[n]ever use: elit by Stoli, or Stoli elit. Wherever possible ‘elit by Stolichnaya’ should be written on one line.” The product had only $6.6 million and $5 million in sales in 2014 and 2015, respectively, and numerous other spirits brands that use variations of ELITE in trademark registrations and to market liquor products.

However, elit was supported by an annual marketing budget in the range of $3 million per year. Awareness of elit significantly increased since July 2014; the brand enjoys strong retention rates; and the brand’s recognition on social media has substantially improved. There was also some evidence that the product is colloquially referred to as “elit.” SPI further argued that the exclusive, high-end vodka market is by definition small, and that marks for luxury brands can achieve secondary meaning without having meaningful market share. Moreover, SPI argued that many of the registrations identified by Classic Liquor had been cancelled or abandoned, and that those that have not were easily distinguishable from the ELIT Marks.  Drawing all reasonable inferences in favor of SPI, this was enough to find a genuine factual dispute over protectability/strength.

Similarity weighed slightly in favor of SPI.  The court declined to defer to the USPTO’s “implied view—by virtue of having approved plaintiff’s applications for publication—that plaintiff’s marks do not give rise to a likelihood of confusion.”  The publication decision wasn’t accompanied by any analysis of the issues raised here, and the TTAB opposition proceedings are stayed.

The parties competed directly, favoring SPI.

There was “some evidence of confusion in the marketplace” in that “a lounge in New York City known as Vandal lists both ‘Royal Elit’ (sic) and ‘Stoli Elit’ on its nightclub’s bottle menu.” [Although it could just be that nobody can spell, which is part of the reason for the usual rule about minor misspellings.] “It is at least plausible that customers viewing this menu would be likely to mistakenly believe that the two products are affiliated.” Similarly, a brand promoter hired by Classic Liquor referred to “Royal Elite” as “Royal Elit” in correspondence with Classic Liquor. These “isolated instances of actual confusion” didn’t show actual consumer confusion, but were “probative of how easily consumers might do so,” and slightly favored SPI.

The court did reject SPI’s argument that confusion was shown because a search for “elite” and “vodka” on Pinterest returned photos of both Royal Elite and elit by Stolichnaya. “Given the contrived nature of the search, the Court does not find the results to constitute evidence of actual confusion. The results do, however, reinforce the Court’s determination, discussed above, that ELIT is a descriptive, self-laudatory term.”

Good faith/bad faith: Another genuine issue. Based on the timeline, Classic Liquor’s argument that the ROYAL ELITE mark was inspired by the legend of Tamerlane’s “Royal Elite” brigade and by the fact that the vodka is consumed primarily by upper-crust Uzbeks was flatly contradicted by the record. “Whether plaintiff’s apparent misrepresentation is an inadvertent (or immaterial) one or whether plaintiff is attempting to mask a bad-faith motive for adopting the ROYAL ELITE mark is a factual issue that cannot be resolved on summary judgment.”  The court pointed to other evidence that could indicate bad faith: Classic Liquor’s national sales director instructed an employee that the preferred placement for Royal Elite products was to the left of SPI’s Stolichnaya products.

Consumers: SPI argued that “desire for luxury products and status symbols does not imply a sophisticated consumer,” but its internal marketing documents revealed that it catered to “a more sophisticated segment of the vodka market,” so this factor favored Classic Liquor.

Overall, summary judgment was inappropriate.

False advertising: ® wasn’t a misrepresentation of an “inherent quality or characteristic” of the goods.  SPI responded that this language is just the Second Circuit’s way of saying “materiality,” and that, because ® was literally false, materiality was presumed.  But the court of appeals has said: “Falsity alone does not make a false advertising claim viable; ‘[u]nder either theory [of falsity], the plaintiff must also demonstrate that the false or misleading representation involved an inherent or material quality of the product.’” Apotex Inc. v. Acorda Therapeutics, Inc., 823 F.3d 51, 63 (2d Cir. 2016).  The court here reasoned: “The purpose of federal registration is to put the public on notice of the registrant’s ownership of the mark; the goods or services to which the mark pertains are entirely irrelevant.”  Thus, the false marking was not actionable as a matter of law.

As for Classic Liquor’s use of “Since 1867” on its vodka bottles, this wasn’t an unambiguous falsity.  SPI argued that, if the claim meant selling vodka since 1867, it was false; if it meant that the same product had been sold by others since 1867, it was false; and if it meant that its Tashkent distillery could trace its roots to a distillery founded in 1867, that too was false. But this very list showed ambiguity, and there was no extrinsic evidence of consumer deception.  (One of Classic Liquor’s witnesses testified that some distributorship customers have asked about the significance of “Since 1867,” “a fact which further demonstrates that the message of the designation is ambiguous.”)

The district court then addressed the argument that “it would be illogical to require extrinsic evidence of consumer deception if it were the case that each possible message conveyed by an ambiguous statement was indisputably false.”  [Note from RT: This argument was implicitly accepted by an older Second Circuit case finding each of three possible meanings false and thus finding literal falsity. Johnson & Johnson v. GAC Intern., Inc., 862 F.2d 975, 979 (2d Cir. 1988).]  However, Classic Liquor provided an additional, non-false potential meaning: “Since 1867” refers to the fact that the distillery was founded in 1867, not that the vodka has been produced in the exact, same building using the exact same equipment that was in use in 1867.

Consumers might very well be misled by “Since 1867,” deeming it to refer to the product or to Classic Liquor itself rather than to the distillery that manufactures Royal Elite vodka. But that possibility, without extrinsic evidence, wasn’t enough.  Thus, Classic Liquor won summary judgment on the Lanham Act claim, which also kicked out the coordinate common-law unfair competition claims.

SPI’s counterclaims brought under §§ 349 and 350 of the New York General Business Law “are not mere Lanham Act analogues.”  They require (1) consumer oriented conduct, (2) that was misleading in a material way, and (3) that injured the plaintiff.  “The inclusion of this symbol on plaintiff’s vodka bottles—which, again, serves to put potential infringers of a mark on constructive notice that the mark is owned—was not consumer-oriented as a matter of law.”

However, the “Since 1867”-based claims survived, because state law doesn’t make the rigid false/misleading distinction requiring extrinsic evidence of deception for all ambiguous claims. “[T]he inquiry under §§ 349 and 350 of the New York General Business Law is objective in nature, requiring courts to assess whether a given practice or advertisement is “likely to mislead a reasonable consumer acting reasonably under the circumstances.”  Whether the misrepresentation caused SPI damage was a disputed issue of fact.  [And materiality?]

Pictures from Canada

Canada, like many other countries, considers "taking unfair advantage" of a trademark to be a distinct problem, making it less favorable to parody and other uses than the U.S. as a matter of formal law.  What difference does that make in practice?  From what I've seen, it means that grocery stores/pharmacies don't carry house brands that tell you they're comparable to national brands.  However, it doesn't seem to affect the T-shirt offerings of tourist traps.  (Side note: there was also more overt misogyny on offer than I would have expected.  Really, Canada?)
Not quite Rolls Royce

One of many John Deere alternatives--Canada also uses "fuck" more liberally at standard tourist stores

MasterCard and Red Bull, sexualized

Red Moose/Red Bull and Star Wars

John Moose instead of John Deere; Star Wars again; and what do we think of the Montreal logo v. Adidas?  This one was everywhere

Mountain Dude

This one is more consumer/contract law: "no contract" is also a thing in Canada; I wonder what the law is about that

Right of publicity claim for the Michael Jackson estate?

Snoop Dogg or just a dog?

Lady PurrPurr?

Queen size?

A little tramp?

Too close to Superman?

An entire province devoted to Pokemon

Pizza Pot, Zig-Zag, Addicted, Kick Ass, Fuma

National Pornographic, another John Fucking Deere, sex-based "I'm Lovin' It" and some of the aforementioned misogyny

Lord of the Rinks

Straight Outta Quebec

Starbear logo?

iTunes trade dress

Canada, Coke style

Angry Moose

Angry Beaver

Inconceivable: allegedly made-up price comparison allows consumer suit

Chester v. TJX Cos., 2016 WL 4414768, No 5:15-cv-01437 (C.D. Cal. Aug. 18, 2016)

When an opinion begins with the quote, “You keep using that word. I don’t think it means what you think it means,” it’s not going to go well for the false advertising defendant.

Plaintiffs brought the usual California claims against three off-price retailers under the TJX umbrella: TJ Maxx, Marshalls, and HomeGoods.  TJX’s price tags list (1) the price the retailer is selling the item for; and (2) a higher, comparative reference price accompanied by the phrase, “Compare At.” Neither tags nor ads define the term “Compare At” or otherwise offer context for the pricing provided. Some of defendants’ products also have a second price tag noting a purported manufacturer’s suggested retail price, or “MSRP,” for an item.  Where is “compare at” defined?  A page on the TJ Maxx website, found by searching the fine print, and a sign near the customer service/returns counter at one retailer store.  It says:

The “compare at” price is our buying staff’s estimate of the regular, retail price at which a comparable item in finer catalogs, specialty or department stores may have been sold. We buy products from thousands of vendors worldwide, so the item may not be offered by other retailers at the “compare at” price at any particular time or location. We encourage you to do your own comparison shopping as another way to see what great value we offer.

Plaintiffs alleged that they, like other reasonable consumers, expect that the “Compare At” tags listed “prices at which the ‘principal retail outlets’ in California have sold, or are selling, those products in any ‘substantial volume.’” This picks up on the FTC’s preferred means of substantiating such a claim.  Using the term for unverified estimates of possible prices, they argued, was deceptive.

The court quickly disposed of TJX’s standing challenges, including its challenge to plaintiffs’ standing to seek injunctive relief.  “It is inconceivable to think prospective relief in the false advertising context is bound by the rules of ‘fool me once, shame on you; fool me twice shame on me.’”  Accepting the no-standing argument would “eviscerate” California’s consumer protection laws.

TJX argued that plaintiffs hadn’t alleged sufficient facts about why the tags were deceptive to a reasonable consumer.  It argued that the FTC guidelines allowed it to offer price comparisons between one item and another of comparable value, and that those comparisons could be based on good faith estimates. However, the FTC specifies that comparison prices cannot “appreciably exceed the price at which substantial sales of the article are being made in the area.”  Comparisons must thus be based on actual prices, not “estimates” of prices at which “a comparable item” in another store or catalog “may” have been sold.  By contrast, TJX’s definition says outright that an item “may not be offered by other retailers at the ‘compare at’ price at any particular time or location.” “If Defendants believe that ‘estimates’ are the same as ‘comparisons with actual merchandise,’ then the Court is here to say that this word does not mean what you think it means.”  The court referred to TXJ’s practice as looking at “what a fictitious retailer may charge.”  Ulp.

Moreover, the FTC had more limits; the FTC Guidelines require retailers who use reference pricing to make “clear to the consumer that a comparison is being made with other merchandise.”  This TXJ failed to do: “a link at the bottom of a webpage and a sign near the return counter, not the sales counter, will not suffice” given the predominance and prominence of the “compare at” claims. “[I]t is unrealistic for Defendants to expect consumers to pull out their smart phones and search the retailer’s website for a definition of the seemingly clear phrase, or chance that they see a sign offering insight before they reach the check-out counter.” The tags and ads therefore didn’t clearly communicate a comparison between “like” items rather than with the same item.

As the court pointed out, there’s a reason that retailers use reference pricing: “it makes consumers think they are getting a deal.” Relying on the plain meaning of “compare at” to draw in consumers while also using an unrecognizable internal defintion of that phrase “is not very sportsmanlike. Anyone who says differently is selling something.”

Friday, August 19, 2016

Cthulhu the functional?

Jake Linford has recently expounded in detail about the descriptive or even functional characteristics of certain sounds, making certain "coined" words more useful in marketing.  Here's a great example from Michael Saler, As If: Modern Enchantment and the Literary Prehistory of Virtual Reality (2012): "Some critics found these names ridiculous, but Lovecraft countered that 'a coined word which has been shaped with great care from just the right associational sources' could be effective, evoking sensations from Symbolist poetry. 'Cthulhu' was self-evidently le mot juste."

Thursday, August 18, 2016

Fashion weak: fashion show fails to enjoin New York Fashion Week name

Fashion Week, Inc. v. Council of Fashion Designers of America, Inc., 2016 WL 4367990, No. 16-cv-5079 (S.D.N.Y. Aug. 12, 2016)

FWI sued CFDA for trademark dilution, unfair competition and false designation of origin, and trademark infringement based on use of of “NEW YORK FASHION WEEK” and its acronym “NYFW” (“NYFW THE RUNWAY SHOWS” was also theoretically at issue, but not really pressed; the court didn’t think FWI had a protectable mark in that phrase).  On June 28, FWI sought a TRO and a preliminary injunction against the use of these terms in connection with live semi-annual events in New York during which fashion designers launch new clothing lines. The court denied these requests.

CFDA’s showcase events date back to 1943 when “Press Week” was launched, an event dedicated to promoting American designers of women’s fashion. The semi-annual week-long events in New York “are recognized as one of the four major fashion weeks in the world.” From 1993-2015, they were formally named after their location or sponsor, such as “Olympus Fashion Week” and “Mercedes-Benz Fashion Week,” but in the press and the industry, they were widely referred to as “New York Fashion Week” from at least 1993 onwards. In 2015, CFDA went with “New York Fashion Week,” “NYFW,” and “NYFW The Shows,” in promotion and production of the fashion events, as well as a new domain name, NYFW.com.

FWI produces fashion shows and sells tickets to “consumers and fashion aficionados,” positioned as “publicly accessible alternatives to [CFDA] fashion events which are restricted to members of the fashion industry and media only.” FWI shows are one day long and coincide with the defendants’ semi-annual schedule.  FWI registered NEW YORK FASHION SHOWS in 2012, and produced three fashion shows under that name, then in 2013 renamed itself Fashion Week Inc. and applied for NEW YORK FASHION WEEK on the Supplemental Register.  The application was granted for online entertainment ticket agency services in 2014. FWI produced and sold tickets to two fashion shows under the NEW YORK FASHION WEEK mark—a show in September 2014 and a show in September 2015. Both sold five hundred tickets and earned $25,000-30,000 in profit. 

FWI applied to register NYFW for online ticket sales for entertainment and fashion shows in May 2015, after defendants announced their intention to use NYFW online to promote their fashion events.  The mark issued on the Principal Register in December 2015.  In August 2015, defendants sent FWI a C&D “requesting that FWI cease promoting its fashion shows online in a manner that might mislead consumers into thinking they were purchasing tickets to the [CFDA] events.”  In ensuing discussions, FWI offered to transfer its marks and sponsors to defendants “and threatened litigation, delay, and bad press.” FWI subsequently filed trademark applications for the marks NEW YORK FASHION WEEK THE RUNWAY SHOWS, NYFW THE RUNWAY SHOWS, NYFW and NEW YORK FASHION WEEK for organization of fashion shows for entertainment purposes.

In July 2015, CFDA organized and produced the September 2015 and February 2016 fashion events. In April and June 2016, FWI sent cease and desist letters to defendants about the marks.  This litigation resulted. CFDA’s next fashion events were scheduled to begin on September 8, while FWI didn’t have any fashion shows presently scheduled; plans to hold an event in February 2017 had been put on indefinite hold after FWI’s anticipated sponsors severed ties with FWI.

The district court began by assuming that eBay and Salinger required it to reject any presumption of irreparable injury based on likely success on the merits, even in a trademark case.  This change also changed the significance of delay, once used to rebut such a presumption.  Now it’s just a “significant” factor to consider in determining irreparable harm.  Here, FWI’s delay in suing and moving for an injunction “argues strongly against granting the preliminary injunction.”  In January 2015, after all, CFDA had filed a petition to cancel the NEW YORK FASHION WEEK mark, and the petition included CFDA’s representation that it had made continuous use of the trademark since at least 1994.  Plus, there was the April 2015 announcement that CFDA would be using NYFW as part of its domain name and on social media platforms. In its moving papers, FWI even included a news article from January 2015, reporting that the defendants’ event in September 2015 would be called “New York Fashion Week.”

FWI argued that its delay was due to investigation and settlement discussions, but there was no evidence that defendants ever considered reverting back to a sponsor-based title.  In light of the public announcements, at least by August 2015, FWI’s belief that CFDA would reverse course was unreasonable. After the shows in September 2015 and February 2016, FWI knew that CFDA wasusing the marks it claimed a right to use, but FWI continued to do nothing.There was no evidence that settlement discussions continued into 2016, but even if they had, the time between their alleged collapse in January and June 2016 was too long.

In addition, FWI failed to show actual irreparable harm.  Loss of control over one’s reputation is irreparable because this loss “is neither calculable nor precisely compensable.”  [Note that if this is really true, we’re back to the presumption of irreparable injury, because courts have told us that lost control is what confusion means.  If courts acknowledge that, in fact, what they call confusion is often unlikely to pose significant risks to the plaintiff’s reputation—perhaps because of the demonstrated resilience of strong brands—then this claim makes some sense even in a world without presumptions of irreparable injury, but it does call into question why “confusion” is defined so broadly.]

Here, FWI didn’t provide sufficient evidence of goodwill that it could lose.  It only presented evidence that it used the NEW YORK FASHION WEEK mark in connection with the September 2015 fashion show, and it didn’t submit evidence of brand loyalty or recognition in the industry.

Separately, FWI failed to show likely success on the merits—you can tell from this discussion that there are serious doubts about the validity of its asserted marks or their extension beyond “online entertainment ticket agency services.” FWI argued that consumer confusion, evidenced by emails to FWI seeking to buy tickets to the CFDA events, showed secondary meaning and harm.  The court thought otherwise—CFDA, not FWI, was likely to show secondary meaning in these descriptive marks.  Though CFDA didn’t use “NEW YORK FASHION WEEK” to describe itself until recently, the press and industry did, and it could claim trademark rights in nicknames.  (Industry evidence included a declaration from Anna Wintour, FWIW.)

Unsurprisingly, the balance of equities and the public interest also argued against any injunction.  An injunction would disrupt the upcoming New York Fashion Week, which was “an important asset to the New York economy,” and would deprive the public of a useful term by which to describe the events.

Cookie crumbles: court refuses to dismiss (c) claim based on facts of plaintiff's life

Eggleston v. Daniels, No. 15-11893, 2016 WL 4363013 (E.D. Mich. Aug. 16, 2016)

Sophia Eggleston alleged that her self-characterization in her 2009 memoir The Hidden Hand was the uncredited inspiration for the character Loretha “Cookie” Lyon on the FOX television series Empire, and sued for copyright infringement (and violation of her right of publicity). The Hidden Hand recounts “many significant events” in Eggleston’s life, including “the attempted kidnapping of her youngest daughter, and coming to terms with her brother’s homosexuality, which he revealed to her while she was in prison,” as well as numerous gun threats and the murder of her two sisters.  The memoir also covers her romantic relationship with a man in the music business.

In Empire, Cookie Lyon, the imprisoned, drug-dealing ex-wife of the man in control of Empire Entertainment, gains release and demands her share of the company.  “Thus begins the struggle for control of Empire Entertainment between Lucious, Cookie, and their three sons: Andre, a married businessman with bipolar disorder, Jamal, a gay singer rejected by his homophobic father, and Hakeem, a talented but unfocused rapper.”  Eggleston alleged that there were many striking similarities between her self-depiction and Cookie Lyon’s character: they’re “both light-skinned African-American women who wear expensive clothing, lead gangs, have placed hits on men and sold drugs, have gay family members, have two family members who were murdered, have served prison sentences, and are known for their ‘vicious insults’ and propensity to slap people.” They’ve both “shielded others by stepping in front of a loaded gun, have endured the kidnapping or attempted kidnapping of one of their children, lost their lovers while in prison, and attacked their former lovers’ new lovers upon release from prison,” as well as making liberal use of “hoe” and “bitch.”  Fox, understandably, contended that these were stock features, which seems correct.

However, the court refused to dismiss the copyright infringement claim.  Copyright in facts is thin, but selection and arrangement of facts are protectable.  [But if your selection principle is “this happened to me,” that can’t be a protectable selection method, any more than alphabetical ordering is protectable even though some methods of ordering (top 10 books) may be.]  The court took back all its statements about filtering by agreeing with Eggleston that the appropriate comparison was between “copyrightable elements of her self-portrayal in The Hidden Hand” and copyrightable elements of the Cookie Lyon character.

The court agreed that the twenty-three elements Eggleston listed in her complaint “represent a protectable compilation of experiences and traits,” and constituted more than the sum of its parts.  Though at first glance, many of these elements seemed typical to “stories about those involved in drugs and violence.”  But featuring a woman “in the dominant role as drug dealer, gang leader, and perpetrator of violence. This is not the stock and trade of the average drug gangster potboiler.”  The court commented that “Defense counsel could not offer examples of other works in this narrative genre that featured female characters in the ‘drug or organized crime boss-like’ role,” and that the court found only the 2011 telenovela series La reina del Sur produced by Telemundo or the 1999 Jorge Franco novel Rosario Tijeras. 

[Not Savages, the Don Winslow book/Blake Lively vehicle with Salma Hayek in the boss role?  Animal Kingdom, the 2010 Aussie crime movie resurrected as a TNT series?  WeedsQueen Pin (this seems exactly on point)?  Megan Abbott’s QueenpinNot to mention the history, or, as Joanna Russ might say, How To Suppress Women’s Criming.  She did it, but she’s the only one!]

[Separately, this reasoning would still be wrong without these examples.  It may be unusual, but implementing the idea “the surgeon was the child’s mother!” is not unknown.  And it’s also just an idea, no matter what profession it’s applied to.  The scenes a faire that follow may gain new resonance because of the audience’s reaction to the gender-swap, but they’re still scenes a faire.  Moreover, the court’s explanation reveals the far deeper flaw: copyright is for expression, but the characteristics plaintiff alleged were copied are—according to plaintiff herself—facts, and there is no protection for facts no matter how difficult they were to produce or live through.  By saying that the similarities are between plaintiff and Cookie Lyon, rather than between a character plaintiff created and Cookie Lyon, the court reveals the fundamental error here.]

[And the court makes it worse by allowing plaintiff to carve up the work any way she wants and claiming protection only in the “character,” instead of treating the memoir as the expressive work protected by copyright.  Once you slice out the “character” (who actually only exists in conjunction with the plot, sequence of events, mood, etc.—try to imagine James Bond hosting a cooking show and see if there’s still “James Bond” there), then all other dissimilarities in the works can be ignored, even though they are crucial to any actual audience’s perception of the character.  Justin Hughes did great work warning about this, but it still happens.]

The court found that some elements [facts about Eggleston] were “also not obviously of the stock-standard variety, regardless of a character’s gender.”  For example, both Eggleston and Lyon had a gay family member.  [Okay, if you have ten people in your close family, it would appear that the odds are actually pretty good that you are closely related to a gay person.  True, previous generations would have been somewhat less likely to write about it, but so what?]  Other “unusual” commonalities between Eggleston and Lyon were that they both “experienced the kidnapping of one of their children, have had two close family members murdered, have lost their lovers while serving time in jail, and have shielded others by stepping between them and a loaded gun. Taken together, these elements are arguably original and substantially similar.”  [To put the objection another way, these elements aren’t original to Eggleston.  She didn’t, I take it, make her brother gay, kill her lover while she was in jail, or point a loaded gun at someone she cared about.  Stepping in front of the gun, while brave, is not a creative act even though the precise words she used to describe that event might be copyrightable.]

Eggleston’s copyright claim survived the motion to dismiss.  Her right of publicity claim didn’t, because she didn’t plausibly allege a pecuniary interest or any commercial value in her identity.

Wednesday, August 17, 2016

6th Circuit rejects college players' Lanham Act, ROP claims

Marshall v. ESPN, No. 15-5753 (6th Cir. August 17, 2016)

Plaintiffs claimed that, as college football and basketball players, they had publicity rights in their names and images as used in TV broadcasts.  “Whether referees, assistant coaches, and perhaps even spectators have the same rights as putative licensors is unclear from the plaintiffs’ briefs.”  Tennessee’s right of publicity statute, however, explicitly excluded any “sports broadcast,” and Tennessee refused to recognize any common-law right of publicity.  This also killed a Sherman Act claim, since there could be no conspiracy to control a non-existent right.

Plaintiffs’ Lanham Act claims failed because—well:

The theory here is that if, say, ESPN shows a banner for ‘Tostitos’ at the bottom of the screen during a football game, then consumers might become confused as to whether all the players on the screen endorse Tostitos. Suffice it to say that ordinary consumers have more sense than the theory itself does.

But honestly, is this theory (which was justly rejected) any more ridiculous than the theory that consumers might think that a fast food restaurant endorsed a movie about beauty queens?  That consumers might think that Jose Cuervo had partnered with a whiskey company because both used red wax seals among many other packaging devices?  That Budweiser might have endorsed a parody ad for Budweiser Oily?  And, if we have nothing but common sense to guide us here, on what basis exactly is the players’ theory so easily distinguishable from those successful claims that it doesn’t even reach plausibility?

ISP fails to dismiss (c) and CMI claims based on watermarked photo

Goldstein v. Metropolitan Regional Information Systems, Inc., 2016 WL 4257457, No. TDC-15-2400 (D. Md. Aug. 11, 2016)

Goldstein is a professional photographer who registered a copyright in a 2007 photograph he took of the Silver Spring Metro Station, which appears on his website with the watermark “© www.goldsteinphoto.com” centered at the bottom of the image.  Defendant MRIS runs an online real estate listing service that allows subscribers, mainly real estate brokers, to post listings for available properties for a fee. Subscribers agree to assign to MRIS the copyright in any photograph they upload to the database.  In 2014, Goldstein learned that his Metro Photograph had been uploaded to the MRIS database, still with Goldstein’s original watermark, but also the additional watermark “© 2013 MRIS” or “© 2014 MRIS,” depending on the year the image was uploaded.  Despite notice from Goldstein’s attorney, the photo allegedly continued to be displayed on/uploaded to the MRIS site during 2014 and continuing into 2015, at which point the MRIS watermark was updated to “© 2015 MRIS.” Goldstein alleged that, as a result, the Metro Photograph was uploaded to additional real estate websites and used in additional real estate promotional materials without his permission.

Goldstein sued for infringement, contributory infringement, violation of the DMCA’s CMI provisions, and violation of the Lanham Act. Easiest bit first: Goldstein alleged that MRIS’s addition of its own copyright watermark to the Metro Photograph was a false representation under the Lanham Act. Although this sounds like a false advertising claim, the court found it Dastar-barred: Dastar held that “claims of false advertising and trademark infringement under the Lanham Act do not overlap with copyright claims” because “origin” means physical origin, and because otherwise plaintiffs could create a kind of perpetual copyright or patent.  “Thus, ‘creative’ works, those artistic creations that fall within the ambit of copyright law, necessarily fall outside the scope of the Lanham Act.”  This is overstated in some significant ways, but query whether anyone’s found a way to say it better.

Direct infringement: MRIS argued that Goldstein didn’t allege “volitional conduct” by MRIS, relying on Costar Group, Inc. v. LoopNet, Inc., 373 F.3d 544 (4th Cir. 2004). Direct infringement requires “actual infringing conduct with a nexus sufficiently close and causal to the illegal copying that one could conclude that the machine owner himself trespassed on the exclusive domain of the copyright owner.”  In Costar, LoopNet was a passive ISP that could not be held liable for direct infringement of Costar’s copyright when Costar’s unmarked photographs appeared on its website, even though it engaged in cursory screening of photos.  The court here, however, distinguished Costar as having been decided on summary judgment.  Goldstein alleged that MRIS or an agent of MRIS uploaded the Metro Photograph.   In one exhibit, the photo appears in a slide in a slideshow that was available on the MRIS website, which didn’t contain any reference to a particular real estate agent or broker, or to a particular property. “Drawing all inferences in Goldstein’s favor, this Exhibit, particularly with the markings added by MRIS, supports the reasonable inference that MRIS or its agent, rather than an outside user of MRIS, engaged in direct infringement by copying Goldstein’s copyrighted photograph to its website.”

So far, so good, but the court goes on to say more things that ought to be disturbing.  The court also distinguished Costar because “(1) when MRIS received it, the Metro Photograph, on its face, was marked as copyrighted by Goldstein; (2) MRIS, unlike LoopNet, took the affirmative step of marking the Metro Photograph as subject to its own copyright; and (3) MRIS then copyrighted its entire website, including the Metro Photograph.”  [The court here means “registered” for (3), and this conflation pervades the opinion, including the treatment of (1)—after 1978, all original works are “born” copyrighted, so if you see a modern photo you know it’s “copyrighted,” though you may not know who owns the copyright or whether it has been licensed or whether a fair use is being made.]   (2) is probably bad business practice, but it’s likely as automatic as many other activities that have been held not to strip ISPs of the DMCA safe harbor, when the court gets around to that.  Anyway, I’m not sure why any of these three facts makes MRIS’s conduct “volitional” if Loopnet’s wasn’t.  The court said that “MRIS doubly asserted a copyright in the Metro Photograph by stamping that facially copyrighted photograph with its own copyright markings and then copyrighting the entire website containing that photograph,” but that’s still not “volitional” conduct implicating the rights protected by copyright, under Costar.

Further comment: It seems really, really unlikely that MRIS uploaded the photos, as opposed to a MRIS user.  Should my prediction prove true, should MRIS get its attorneys’ fees for defending the direct infringement claim?

Contributory/vicarious infringement: contributory sufficiently pled; vicarious not.  MRIS knew or had reason to know of Goldstein’s copyright, because “[w]here works contain copyright notices within them, as here, it is difficult to argue that a defendant did not know that the works were copyrighted,” and when MRIS got Goldstein’s C&D, it knew or had reason to know of the infringing use.  And

MRIS’s practice of adding its own copyright to the Metro Photograph, a practice it continued even after being placed on notice that the Metro Photograph was being used on its website without Goldstein’s permission, can reasonably be considered ‘conduct that encourages or assists the infringement.’ For example, the addition of the MRIS copyright markings could lead MRIS users to believe that they had a license to use the Metro Photograph in their listings as part of their subscription to the MRIS service.

Though MRIS asserted that it promptly removed each reappearance of the photo, that wasn’t enough on a motion to dismiss, and its continued reappearance was enough for contributory infringement [in the absence of the DMCA].

Vicarious infringement/inducement: MRIS likely had the right and ability to control the infringing activity and charged a fee to post listings on its website, “the website has as its main purpose the posting of real estate listings, a purpose distinct from trafficking in infringing material. It is therefore not reasonable to conclude that the availability of infringing photographs such as the Metro Photograph drew customers to subscribe to the MRIS service.” The inducement claim failed for similar reasons.

Compliance with the DMCA, the court further held, was an affirmative defense not suitable for resolution on a motion to dismiss.  And here it gets even worse, though presumably the court could at least fix this on summary judgment: the court suggests that the copyright notice on the photo might trigger actual knowledge that using the photo would infringe “a copyright.”  How is that actual notice, especially given an automated upload?  Moreover, the statutory provision that noncompliant DMCA notices don’t give actual knowledge would seem to preclude this reasoning, since a watermark is a far cry from a DMCA notice with all the relevant information.  And again, the court suggested that MRIS’s addition of its own watermark went beyond “storage at the direction of a user of material that resides on a system or network” to “affirmative appropriation of another’s copyright.”

CMI violations: Goldstein alleged violations of § 1202(a) and (b). §1202(a)  makes it unlawful for a person to “knowingly and with the intent to induce, enable, facilitate or conceal infringement provide copyright management information that is false.” §1202(b) prohibits a person, “without the authority of the copyright owner or the law,” either to “intentionally remove or alter any copyright management information” or to “distribute” work “knowing that copyright management information has been removed or altered …knowing or ... having reasonable grounds to know that it will induce, enable, facilitate, or conceal an infringement.”  Again, the complaint adequately stated a claim, though the court commented that Goldstein could only recover once for a §1202 violation.

MRIS unconvincingly argued that the watermark wasn’t CMI because it didn’t meet the requirements for a full copyright “notice.” §1202 doesn’t require that.  §1202(a)’s requirements were satisfied because MRIS allegedly added its own copyright watermark to the photo without owning the copyright.  MRIS argued that it had a copyright in the database as a whole, thus had a good faith belief that its watermark wasn’t false.  That didn’t work because of (1) Goldstein’s watermark and (2) the procedural posture of a motion to dismiss.  MRIS argued that its watermark wasn’t added knowingly and with the intent to facilitate infringement, because it was added “automatically” to all images uploaded to their site, but again that’s not an argument that works on a motion to dismiss, and anyway Goldstein’s C&D provided actual knowledge.

§1202(b): MRIS argued that it didn’t “intentionally remove or alter any copyright management information,” since Goldstein’s watermark was left intact.  The court, however, declined to dismiss Goldstein’s claim that adding CMI was “constructive” alteration of his own CMI, since it had “more visual impact” and “undercut[]” the message that Goldstein owned the copyright. There was no case law either way on constructive alteration of CMI, but, “[p]articularly where MRIS’s copyright mark was placed immediately before Goldstein’s copyright mark and used more recent dates, that mark could be construed as trumping, diluting, or superseding, and thus altering, Goldstein’s CMI.”