Friday, June 30, 2017

9th Circuit upholds SF ordinance targeting false advertising by pregnancy centers

First Resort, Inc. v. Herrera, 2017 WL 2766094, -- F.3d –, No. 15-15434 (9th Cir. Jun. 27, 2017)

First Resort, a nonprofit providing free pregnancy-related services, challenged San Francisco’s Pregnancy Information Disclosure and Protection Ordinance, which targeted false or misleading advertising by limited services pregnancy centers (LSPCs). The court of appeals affirmed the district court’s ruling that the Ordinance was constitutional and not preempted by state law.

First Resort’s target clients are “women who are unsure how to proceed with unplanned pregnancies, including women considering abortion.” It bought keywords such as “abortion” and “emergency contraception”; its advertising competes with abortion providers for viewers’ attention.  Online, it advertised itself “as an unbiased and neutral organization that provided ‘abortion information, resources, and compassionate support for women’ with ‘unintended pregnancies’ who are ‘considering abortion,’” promised to “equip [women] with the resources [they] need to make a well-informed decision about [their] options,” and offered information about abortion procedures and costs. “Notably, the website and advertising materials did not mention First Resort’s anti-abortion stance or that it did not provide referrals for abortions.”

Further background: false and misleading advertising by pregnancy clinics is a well-documented problem.  Some such clinics “frequently fail to provide medically accurate information” and “the vast majority of pregnancy centers” contacted during a federal investigation misrepresented the medical consequences of abortion.  San Francisco’s City Attorney sent First Resort a letter in 201 expressing his “serious concerns” about First Resort’s misleading advertisements and asking First Resort to “correct” its advertising “to clarify that the clinic does not offer or make referrals for abortion services.”

The city’s ordinance defined a “[p]regnancy services center” as “a facility, licenced or otherwise ... the primary purpose of which is to provide services to women who are or may be pregnant, that either (1) offers obstetric ultrasounds, obstetric sonograms or prenatal care to pregnant women, or (2) has the appearance of a medical facility.” A limited services pregnancy center (LSPC) is a pregnancy services center that doesn’t directly provide or provide referrals to clients for abortions or emergency contraception.”

Under the ordinance,

(a) It is unlawful for any [LSPC], with intent directly or indirectly to perform pregnancy-related services (professional or otherwise), to make or disseminate or cause to be made or disseminated before the public …, in any newspaper or other publication, or any advertising device or in any other manner or means whatever, … any statement, concerning those services, professional or otherwise, or concerning any circumstance or matter of fact connected with the proposed performance or disposition thereof, which is untrue or misleading, whether by statement or omission, that the [LSPC] knows or which by the exercise of reasonable care should know to be untrue or misleading.
(b) It is unlawful for any [LSPC], with intent directly or indirectly to perform pregnancy-related services (professional or otherwise), to make or disseminate or cause to be so made or disseminated any such statement identified in subsection (a) as part of a plan or scheme with the intent not to perform the services expressly or impliedly offered, as advertised.

Before filing an action, the City Attorney must provide the LSPC with written notice of the violation and indicate that the LSPC has ten days to cure the violation.  If it doesn’t, the City Attorney can sue, with penalties from $50-500 per violation.

First, the court of appeals found that the ordinance was facially valid; it had a constitutional application and it was not unconstitutionally overbroad or vague, but regulated only unprotected false or misleading commercial speech.  (I might have gone with “apparent professional speech” to bolster the commercial speech analysis; whether or not the centers provide medical services in the ordinary sense, they seem to be offering medical advice—at least in the limited way targeted by the ordinance.  The professional speech consideration is at least implicit in the discussion of the services and marketplace at issue.)

First Resort argued that the Ordinance regulated all advertising, not only false or misleading advertising, and also that it regulated only noncommercial speech. First, the Ordinance clearly limited itself to false or misleading speech.  As for commercial speech, “[w]here the facts present a close question, ‘strong support’ that the speech should be characterized as commercial speech is found where the speech is an advertisement, the speech refers to a particular product, and the speaker has an economic motivation.” These factors are not individually necessary, however.  In American Academy of Pain Management v. Joseph, 353 F.3d 1099 (9th Cir. 2004), the court of appeals held that advertisements for paid medical services constituted commercial speech, as to a California state law prohibiting doctors from advertising they were “board certified” in certain circumstances.  The advertising at issue related to a specific product, medical services, and the advertiser had an economic motive: to solicit a patient base.

Here, the ordinance’s purpose was similarly to regulate advertising related to medical services, and the LSPCs had  “at least one similar economic motive for engaging in false advertising: to solicit a patient base.”  However, in American Academy, the patients were paying clients, and here they were not. The court of appeals declined to limit American Academy to “circumstances where clients pay for services.”  In this case, soliciting patients “directly relates to an LSPC’s ability to fundraise and, in turn, to buy more advertisements.” The joint statement of undisputed facts included: “First Resort’s employees are encouraged to share client stories because they are useful in fundraising,” and “[a] majority of First Resort’s fundraising communications reference the benefit of its services to clients and often include client stories.” Furthermore, successful advertising directly affects First Resort’s employees’ compensation, as “[m]embers of First Resort’s senior management team are eligible to receive bonuses based on criteria which may include ... the number of new clients.” Thus, LSPCs had an economic motivation for advertising their services.

Moreover, an economic motive for speech is not absolutely required to make the speech commercial. The court of appeals pointed to Fargo Women’s Health Org., Inc. v. Larson, 381 N.W.2d 176 (N.D. 1986), which upheld a preliminary injunction preventing a “pro-life” pregnancy clinic from engaging in “false and deceptive advertising and related activity [that] misleads persons into believing that abortions are conducted at the clinic with the intent of deceptively luring those persons to the clinic to unwittingly receive anti-abortion propaganda.” Even though clients didn’t pay for services, the court explained that, “[m]ore importantly, the Help Clinic’s advertisements are placed in a commercial context and are directed at the providing of services rather than toward an exchange of ideas.”  

So too here: the ordinance is limited to “the pregnancy-related services an LSPC offers in a marketplace for those services.” Indeed, the record indicated that First Resort viewed itself as “advertising and participating in a competitive marketplace for commercially valuable services.” The undisputed facts included First Resort’s admission that it “views its online advertising as competing with that of abortion providers for the attention of online viewers,” and that “[t]he medical services offered by First Resort, such as pregnancy testing, ultrasounds, and nursing consultations have monetary value.”

Nor was the Ordinance void for vagueness.  (If it had been, how could general prohibitions on false or misleading ads have survived?)  The Ordinance specified that its purpose was to prevent false or misleading ads about the nature of the counseling and services provided by LSPCs. A person of ordinary intelligence could understand what’s prohibited.

For basically the same reasons, the Ordinance was valid as applied to First Resort.  First Resort’s regulated speech wasn’t inextricably intertwined with its fully protected speech. First Resort’s commercial speech about the limited medical services it provides can easily be separated from its fully protected speech, that containing truthful information about pregnancy, on its website.  As the City Attorney’s letter explained, the clinic’s website included “detailed information about abortion procedures offered at outpatient medical clinics” and “implie[d] on its ‘Abortion Procedures’ page that First Resort perform[ed] pregnancy tests and ultrasounds as a prelude to offering abortion as an outpatient procedure, or referring clients to a provider who performs abortions.” The Ordinance regulated only misleading aspects of the website, which could easily be separated from other portions of the website, such as: “If you have missed at least one period, you may be pregnant .... The only sure way to know is by having a pregnancy test or pelvic exam.”

Nor did the Ordinance discriminate based on viewpoint. Whether the Ordinance applies depends on the services offered, not on the particular views espoused or held by a clinic. Even if an LSPC chooses not to offer abortions or abortion referrals for reasons that have nothing to do with their views on abortion, such as financial or logistical reasons, it’s covered.  Further, the Ordinance regulates LSPCs “because they engage in false or misleading speech, irrespective of their viewpoints.”  Applying only to the service providers that presented this “grave threat to women’s health” wasn’t viewpoint-based and didn’t restrict them from expressing their views.  The motivation for LSPCs’ false or misleading advertising might be anti-abortion views, but the Ordinance didn’t target the motivation, only the threat to women’s health.  Similarly, there was no equal protection problem based on the Ordinance’s use of a classification based on the speaker’s identity; rational basis review applied and was satisfied.

Separately, the Ordinance wasn’t preempted by California’s FAL (a matter that one of the judges, concurring, would have certified to the California Supreme Court).  “[A]bsent a clear indication of preemptive intent from the Legislature,” California courts presume that a local law in an area of traditional local concern “is not preempted by state statute.” However, preemption applies “if the local law ‘duplicates, contradicts, or enters an area fully occupied by general law, either expressly or by legislative implication.’ ” “Local legislation is ‘duplicative’ of general law when it is coextensive therewith.”  But California courts have mostly confined duplication preemption to penal ordinances, because when local and state offenses are duplicative, “a conviction under the [local] ordinance will operate to bar prosecution under state law for the same offense.”

The Ordinance here was civil and created no double-jeopardy bar to a state criminal prosecution for the same false advertising, and First Resort failed to show that the Ordinance would interfere with the enforcement of state law.  At least, the lack of a penal component weighed against finding preemption.  Also, the laws didn’t bar “precisely the same acts.” The Ordinance, which only applies to LSPCs and to statements about pregnancy-related services, was narrower in scope than the FAL in both covered parties and topics.  But First Resort didn’t show that the FAL covered all acts barred by the Ordinance—the Ordinance barred untrue or misleading statements whether through affirmative statements or by omission, while the FAL’s text didn’t mention omissions.  The Ordinance also regulated services “expressly or impliedly offered,” while the FAL didn’t mention implied offers. In addition, the Ordinance barred LSPCs from makng untrue or misleading statements about pregnancy-related services with the “intent not to perform” those services “as advertised.” By contrast, the FAL barred untrue or misleading statements about property or services with “the intent not to sell” them as advertised. Thus, the Ordinance covered false advertising concerning the performance of services, regardless of whether those services were  offered for sale.  The enforcement schemes were also entirely different, with the Ordinance lacking a criminal component that the FAL has.

Judge Tashima’s concurrence pointed out that many of the things the majority opinion said about the FAL weren’t really true—for example, the FAL covers omissions where affirmative statements become misleading because of the omission, which is pretty obviously the situation targeted by the Ordinance.


Reading list: unregistered marks in the EU

Verena von Bomhard & Artur Geier, Unregistered Trademarks in EU Trademark Law, Trademark Reporter, May-June, 2017 Vol. 107 No. 3
Abstract: The European Union (“EU”) trademark system is based on registration. Nevertheless, the laws of the EU Member States also protect unregistered rights, and these can be held against the use and registration of later EU trademarks. The article provides an introduction to unregistered trademarks in the EU and their enforcement in proceedings before the EU Intellectual Property Office. 
Excerpt: "[T]he law relating to unregistered trademarks is vastly different from one Member State to another. Some Member States do not recognize unregistered marks at all (beyond Article 6bis Paris Convention); others require varying degrees of market recognition or goodwill to protect trademarks based on use, while Denmark alone within the EU provides protection based on simple use."

Thursday, June 29, 2017

Second Circuit holds that allegations of "systematic" underweighing plead injury in fact for specific individual

John v. Whole Foods Market Gp., Inc., 858 F.3d 732 (2d. Cir. 2017)

John filed a putative class action under GBL §§ 349-350 alleging that New York City Whole Foods grocery stores systematically overstated the weights of pre-packaged food products and overcharged customers as a result. The court of appeals reversed the district court’s holding of lack of Article III standing on the pleadings.

John alleged that he “routinely shopped” for two years at two Whole Foods stores in Manhattan and made “regular[ ] purchase[s]” of pre-packaged products, including “pre-packaged cheese and cupcakes approximately one or two times per month.” The complaint didn’t identify a specific food purchase as to which Whole Foods overcharged John, but described pervasive overcharging of pre-packaged food throughout Whole Foods’ stores in New York City. The complaint a June 2015 press release of the New York City Department of Consumer Affairs announcing preliminary findings that Whole Foods’ New York City stores “routinely overstated the weights of its pre-packaged products—including meats, dairy and baked goods”:

DCA tested packages of 80 different types of pre-packaged products and found all of the products had packages with mislabeled weights. Additionally, 89 percent of the packages tested did not meet the federal standard for the maximum amount that an individual package can deviate from the actual weight, which is set by the U.S. Department of Commerce. The overcharges ranged from $0.80 for a package of pecan panko to $14.84 for a package of coconut shrimp.

The DCA’s findings, the press release continued, “point to a systematic problem with how products ... are weighed and labeled” and “suggest[ ] that individual packages are routinely not weighed or are inaccurately weighed, resulting in overcharges for consumers.” The investigation took place during the same period as John’s purchases and focused on the eight Whole Foods stores in NYC, including the two stores he patronized.  Whole Foods confirmed that cheese and cupcakes were among the pre-packaged products that the DCA alleged were mislabeled.

Because Whole Foods brought only a facial challenge to John’s allegations of standing, John had no evidentiary burden at the pleading stage. The district court thought that John didn’t plead injury in fact, which consists of “an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical.”

The court of appeals disagreed. It was undisputed that overpaying for a product results in a financial loss constituting a particularized and concrete injury in fact. But the critical basis for John’s claim that he was overcharged was the DCA’s press release announcement that 89 percent of Whole Foods’ pre-packaged products tested by the DCA were mislabeled, and the press release’s conclusion that the mislabeling was “systematic” and “routine[ ].”  The district court didn’t think that was enough, but it failed to draw all reasonable inferences in John’s favor.  It wanted “an investigative finding of ubiquitous, systematic over-weighting at Whole Foods’ New York City stores,” “invariable incidents of this deceptive labeling practice,” and “across-the-board overcharging so as to embrace, other than by conjecture, the cheese and cupcakes ... that John ... occasionally bought in 2014 and 2015.” It also wanted a description of the DCA’s methodology.


But the DCA’s press release asserted that the mislabeling was “systematic” and “routine[ ],” and a facial attack on the pleadings wasn’t the right place to test the DCA’s sampling methods.  His alleged facts made his alleged injury plausible.  The district court was concerned over evidentiary obstacles on the merits, but targeted discovery might be able to address those. 

Wednesday, June 28, 2017

What I said to the USTR

Thanks for the opportunity to participate.  I’m here on behalf of the Organization for Transformative Works, a nonprofit which has over 770,000 registered users who have created more than a million works, and our website receives over 115 million page views per week.  Our users, who are the creators of the next generation and today, come from all over, including substantial numbers in the US, Canada, and Mexico, and we have a strong interest in preserving a balanced copyright regime.

Copyright’s limitations and exceptions are vital to creative practices and to creators as well as to educators, journalists, and ordinary citizens.  Any renegotiation should ensure flexible limitations and exceptions, including the highly successful model of American fair use and Canadian protections for user-generated content and educational uses.

It’s also important not to repeat the SOPA/PIPA debacle through the trade route.  SOPA and PIPA tried to change the online copyright rules in ways that would have harmed America’s advantage in internet innovation; the ideas don’t get better when suggested as trade policy.  Negotiations shouldn’t be based on the prospect of tampering with internet service provider protections that have proven so successful for American companies operating worldwide.  The Section 512 safe harbors for internet service providers who respond expeditiously to notices of claimed infringement have enabled American internet companies to thrive and remain innovative.  Section 512 and Section 230 of the Communications Decency Act, which provides a broader safe harbor for non-intellectual property related claims, are far from perfect.  But that just makes them like democracy—the worst possible regime except for all the alternatives that have been tried or proposed.  Proposals in some of the submissions to change the law to require filtering after a notice of infringement would shut down huge sections of the internet, and piracy would still continue as it always does. 

Similarly, requests to require more countries to create quasi-copyright anticircumvention rights for digital locks hamper innovation and would make American products less attractive—why would a farmer buy a John Deere tractor when he knows he won’t be able to repair it himself because of the digital locks that only Deere can release?  The Copyright Office only last week proposed loosening the rules on anticircumvention measures.  Imposing rules on other countries we already know aren’t working well would be a mistake.  At a bare minimum, anticircumvention provisions should require a nexus to copyright infringement and exceptions to anticircumvention rules should be explicit and flexible, like fair use.


Likewise, we oppose negotiating with Canada to extend its domestic copyright term or restrict its limitations and exceptions and with Mexico, with its very different legal system, to impose significant statutory damages in domestic infringement cases—when statutory damages are already desperately in need of reform in the US.  Balanced copyright policy is an important goal that shouldn’t be sacrificed in any negotiations.

Tuesday, June 27, 2017

Testimony before USTR on NAFTA

I'll be testifying later today on behalf of the Organization for Transformative Works, based on this submission (for which Betsy Rosenblatt deserves primary credit, though she couldn't fly across the country to attend--a stark reminder that not everyone gets a voice in these discussions).

Reading list: right of publicity

Mark Bartholomew, The Political Economy of Celebrity Rights 
Whittier Law Review, Forthcoming

Abstract:

This essay discusses how the right of publicity became such a robust property right — much more far-reaching than analogous rights in copyright or trademark. One cannot explain the accretion of celebrity publicity rights as a matter of legal logic or simple reaction to the growing economic value of celebrity endorsements. Instead, the essay explains the right's expansion from the perspective of political economy. Critical innovations to the right of publicity occurred in the particular political environment of the 1980s and 1990s. Despite some groups' resistance to new, specialized entitlements for celebrities, the conditions were right for a particular coalition of interest groups to push through new vigorous interpretations of the right of publicity. I also discuss the right's expansion from the perspective of a different political actor: judges. At the end of the twentieth century, the political optics of celebrity changed in a way that provided more comfort for judges who were once hostile to the anti-democratic implications of publicity rights. Judges confronted a changing social definition of celebrity that was no longer linked to merit or inner greatness. Anyone, it was now argued, had the potential to become famous. This change in the meaning of fame made celebrity legal protections seem less like a perk for a rare few and more like a fundamental right available to all.

Thursday, June 22, 2017

Copyright Office issues 1201 report

Available here.  It's a lot to go through, but on first inspection they seem to be trying to address persistent problems, though in the main not by accepting the advice that participants had for them (like scheduling 1201 exemption proposals in a way that makes sense for law school clinics, and performing administrative factfinding rather than treating this as an adversarial procedure where the Office's role is to adjudicate).  One immediate thought: even if the goal of making it possible to participate in the rulemaking without counsel were achieved, that won't help if the exemptions continue to get ever more complex, so that you need counsel to use them.

Wednesday, June 21, 2017

Slightly cooler take on Tam

I will have some more thoughts in Tam in a forthcoming amicus brief arguing that dilution is unconstitutional.  I think this was about the least harmful affirmance the Court could have written, though for precisely that reason it leaves a lot up for grabs.  Right now, I will just say a few things: (1) It is now even harder to distinguish between content- and viewpoint-based regulation.  I thought that disparagement should be deemed content-based but not viewpoint-based because it was impossible to identify a disadvantaged “side”—whereas even in Rosenberger, one could identify a set of religious perspectives that were excluded from university funding.  I don’t think there’s a distinctive subset of disparaging perspectives in the same way.  (Justice Kennedy’s rejoinder, that this logic would allow bars on criticizing any government official, is particularly silly: because not everyone is a member of the category “government officials,” that’s not a level playing field at all.  Everyone is a member of the category “persons,” Eric Trump notwithstanding.  Marty Lederman talked a bit about this issue at Balkinization.)  But how this plays out in non-tarnishment/disparagement situations remains to be seen.

(2) The opinion for four Justices rejecting the “government program” argument is hard for me to understand. It’s true to say that most of the decisions on which the government relied almost all involved cash or their equivalent, but the opinion does a poor job of explaining why that matters.  The main argument is: well, fire and police protection are services too, and you couldn’t deny them to users of disparaging marks.  The answer to which—completely unaddressed in the opinion—is “that’s what unconstitutional conditions doctrine is for.”  Denying trademark registration because a trademark is disparaging is a far cry from denying police protection to the user of the mark.  Also, the opinion distinguishes two non-money subsidy cases involving unions by saying they were very different.  That’s nice … why?  The opinion’s language suggests a kind of speech/conduct distinction (“lawmakers chose to confer a substantial non-cash benefit for the purpose of furthering activities that they particularly desired to promote but not to provide a similar benefit for the purpose of furthering other activities”), but not a very persuasive one, unless—again—we do an unconstitutional conditions analysis.


(3) I’m glad the Court didn’t say anything about the relationship between unregistrable marks and §43(a) protection, and highlighted that it was not doing so. While I believe that the issue deserves resolution one way or another, this was a poor vehicle for the question because so much else was going on.  (But here’s a question: after this decision, can the common law engage in the viewpoint discrimination entailed in denying registration to immoral/disparaging marks by denying common law protection to such marks, as a number of states at least arguably do?)

Monday, June 19, 2017

Court approves conjoint analysis to determine damages in consumer class action

Morales v. Kraft Foods Group, Inc., 2017 WL 2598556, No. CV14-04387 (C.D. Cal. Jun. 9, 2017)

Plaintiffs alleged that they were misled by Kraft’s use of the term “natural cheese” on its “Natural Cheese Fat Free Shredded Fat Free Cheddar Cheese,” bringing the usual statutory California claims. The court previously certified a California class.  Here the court partially decertifies the class but rejects Kraft’s challenge to plaintiffs’ expert, who performed a conjoint analysis to try to determine the incremental value to consumers of “natural.”

Dr. Anand V. Bodapati has been a Professor of Marketing at the UCLA Anderson School of Management since 2000, teaching “Marketing, Consumer Psychology, Consumer Behavior, and Statistical Methods for making inferences from data on how consumers respond to product offerings, pricing, advertising, and other marketing activity in the marketplace.”  He surveyed California buyers of Kraft shredded cheese, presenting them choices between images of (a) the marketplace offerings of some leading manufacturers, (b) Kraft’s shredded fat free cheddar cheese product as it was offered in the marketplace with the “natural cheese” label, and/or (c) a digitally altered image identical to the Kraft image except without the “natural cheese” label. Each respondent chose between options 14 times, with price differences between the products ranging from $0.80 to $4.50, randomly assigned.  The survey results showed that 26% of consumers would pay more than $1 extra for a product with the “natural cheese” label, and 12% would pay more than $2 extra for such a product. Bodapati concluded that, on average, customers would be willing to pay $0.747 more for a product with that label.

Kraft marshalled several experts in response.  Key challenges: (1) Was the proper group surveyed?  Kraft argued that its fat free cheese product was a niche product, so surveying all shredded cheese buyers was inappropriate.  The court found that this didn’t justify exclusion.  Bodapati explained why he chose Kraft shredded cheese buyers—he didn’t have any reason to believe that the value of “natural” would differ as between fat free and non-fat free buyers, and he didn’t want to make the study more arduous.  Also, some of the evidence Kraft cited indicated that consumers varied—its category review indicated that fat content was only the third most important factor cited by consumers, while the use they intended and the form of the cheese were more important; the review also said that “[c]onsumers buy more than one health segment for different uses, household members and taste preferences.” Thus, the markets didn’t seem that distinct.

Kraft then argued that the survey was irrelevant because it didn’t calculate damages.  The survey calculated the value to consumers, which was relevant to damages.  Kraft contended that a price premium theory was the only allowable model for false advertising damage, and conjoint analysis couldn’t be used. The court disagreed. Dourts frequently admit evidence based on a conjoint analysis.

Additional challenges to survey methodology could be addressed on cross.  Though the experts disagreed about whether conjoint analysis could be used to compare products with only one nonprice attribute, Bodapati testified that “having one attribute only is good for the conjoint analysis in the sense that it reduces cognitive overloading and thereby increases the fidelity of the decision making.”  As for whether the survey telegraphed its purpose to respondents, Bodapati explained that respondents’ attempts to pick the “right” answer weren’t worrisome to him because, in conjoint analysis, there is no “right” answer. He also testified that he elected not to show the back of the packaging out of a concern for verisimilitude—how consumers actually understand the products.  And he didn’t provide a none of the above option because, he said, conjoint analysis works without that.  These and other criticisms went to weight, not admissibility.

Decertification: willingness to pay can measure restitution damages, but under California law restitution  is confined to restoration of any interest in “money or property, real or personal, which may have been acquired by means of such unfair competition.” But the conjoint analysis provided only evidence of loss to the plaintiffs, not of gain to Kraft. While injunctive relief was still possible, the court decertified the Rule 23(b)(3) class and sought additional briefing on whether the class would be re-certifiable under Rule 23(b)(2). This was possible because, under California law, deception and materiality need not be proved as to every member of the class. Bodapati’s report and testimony showed a triable issue as to materiality under the CLRA.


Will B&B preclusion become typical?

Buzz Seating, Inc. v. Encore Seating, Inc., No. 16-cv-1131 (S.D. Ohio Jun. 16, 2017)

This case suggests that B&B is quite a broad decision, despite some cautionary statements in the Court’s opinion—you can avoid B&B preclusion if you sell goods other than those in the refused registration, but otherwise, watch out. 

Buzz, a maker of office chairs under the mark FLITE, sued Encore, which also makes an executive chair under the mark FLITE for trademark infringement and related claims. They allegedly advertise in the same publications, attend the same trade shows, and hire the same dealers and  sales representatives.

Encore applied to register FLITE for “Office furniture, including chairs” in 2011; Buzz opposed and filed its own application in 2013.  The TTAB sustained Buzz’s opposition because the marks were identical and the goods and channels of trade were legally identical (describing Buzz’s use as “for stacking or side chairs”).  Instead of appealing, Encore abandoned its first application and filed for a concurrent use application, allowing use in 24 states and concurrent use by Buzz in Ohio.  Buzz sued, and Encore answered and counterclaimed seeking a declaration of noninfringement and an order directing the PTO to reject Buzz’s application.

B&B preclusion applied to likely confusion, given that Encore had already argued before the TTAB that “there is no likelihood of confusion because Buzz Beating’s FLITE stacking chairs are vastly different from Encore’s FLITE executive chairs, are not sold to the same customers, and do not compete in the marketplace.” Encore argued that the TTAB considered only whether the broad category of goods identified in its application were likely to cause confusion, but here it was arguing that the specific executive chairs actually sold under the FLITE mark are not likely to cause confusion when compared to Buzz’s side chairs. But B&B says that preclusion will apply “[i]f a mark owner uses its mark in ways that are materially the same as the usages included in its registration application.”  The description of the class of goods encompassed the specific goods, executive chairs, Encore was selling, and thus there were no material differences between the usage identified in the application and actual usage.  Comment: under this reasoning, it’s hard to see why B&B wouldn’t always demand preclusion in this posture. 

The court pointed out that the TTAB already rejected this nonconfusion argument; Encore to told the TTAB that its chairs were “premium executive chairs sold to corporate customers for use  behind a desk or in a conference room,” and that “a person purchasing a stacking chair such as [Buzz Seating’s] Flite chair would not buy an executive chair and vice-versa.”  Of course, a “crucial” fact in the TTAB’s rejection was that Encore didn’t limit its identification of goods to executive chairs, but the TTAB also held that the differences didn’t avoid a likelihood of confusion, because the question was not whether the chairs would be confused but rather whether there’d be source confusion, and the evidence showed that executive chairs and side chairs were closely related, and sold by the same dealers or distributors to the same customers.  Indeed, Buzz sold both executive chairs and side chairs, and used the same mark at least once.

Even if the court found the differences material under B&B, Encore’s claim would still be barred under claim preclusion, because the issue could have been raised before the PTO.  Encore offered to limit its identification of goods, but the TTAB found it had done so too late.  And this holding further expands B&B—if one can imagine limiting the registration in a way that avoids likely confusion, one should have done so already.  Thus, the noninfringement counterclaim was dismissed.

The court declined to rule on Encore’s counterclaim about priority of registration because it doubted it had jurisdiction over a registration issue for a registration that had yet to issue; the court sought more briefing.


The court also struck affirmative defenses that concerned the same issues, including Encore’s abandonment defense, but it did not strike the defense that Buzz hadn’t used Flite, or made more than de minimis use, in certain regions of the US and that therefore Encore was the senior user in those regions.  The TTAB held that Buzz could succeed in its opposition without proving priority of use on a state-by-state basis, as long as there was prior use in the US, and thus the TTAB didn’t resolve that priority question. 

Friday, June 16, 2017

TM question of the day, we all scream edition

I'm reasonably sure Joy ice cream cones aren't not owned by the owner of rights in Pepperidge Farm goldfish or Teddy Grahams, so how should we think about these suggestions on the back of the package?

Thursday, June 15, 2017

Failure to plead with particularity dooms supplement false advertising claim

Nutrition Distribution, LLC v. New Health Ventures, LLC, 2017 WL 2547307, No. 16-cv-02338 (S.D. Cal. Jun. 13, 2017)

Nutrition Distribution sued New Health for false advertising of supplement products containing various “Selective Androgen Receptor Modulators (“SARMS”)” such as “Ostarine.” After New Health moved to dismiss, Nutrition Distribution filed a proposed amended complaint for false advertising (and RICO violations, of which no more will be said), based on New Health’s sale of products containing Dimethazine (“DMZ”).  Applying Rule 9(b), the court denied leave to amend on grounds of futility and dismissed the complaint.

The court first found that the proposed complaint wasn’t futile as barred by the primary jurisdiction doctrine.  The basic claim was that New Health’s failure to disclose DMZ’s health effects was misleading.  This claim doesn’t depend on whether DMZ is “safe” or not.  Instead, it is about misleading consumers through lack of disclosure; determining misleadingness doesn’t require the FDA’s technical and policy expertise (as Pom Wonderful indicated).

Nutrition Distribution also sufficiently pled that DMZ was a controlled substance because it is derived from, and structurally similar to, Methastorone—a chemical already deemed to be an anabolic steroid under federal law.  However, New Health’s alleged failure to disclose that DMZ is banned by anti-doping organizations was legally insufficient because it wasn’t an actionable omission. Under the Lanham Act, omissions are only actionable if they render affirmative statements false or misleading, and Nutrition Distribution didn’t identify any such statements, only claims that New Health’s product was “hands down the strongest anabolic Pre-Workout on the market today!” and “an extremely potent, high-intensity, high-stimulant and highly anabolic pre-workout concoction.”


Likewise, pleading that New Health  “purposely made false and misleading descriptions of fact concerning the nature, characteristics and qualities of its DMZ products by ... failing to disclose their status as controlled substances and failing to disclose the overwhelming clinical evidence that such products pose extreme health risks” was insufficient to plead a misleading advertisement with particularity.  The same was true with the initial complaint.

Fair use is the fifth season in Jersey Boys case

Corbello v. DeVito, No. 08-cv-00867 (D. Nev. Jun. 14, 2017) 

One reason fair use jurisprudence can be frustrating is that it has become the place to store many conclusions that the defendant didn't copy enough of what was protectable in the accusing work to infringe.  Because the de minimis doctrine is itself so tiny (without good reason), and because courts are so reluctant to say that nothing protectable was copied, judges reconsider those issues in the multifactor fair use test, and unsurprisingly the fact of minimal copying of expression leads to favorable findings on the other factors.  I would still favor a more robust standard for finding copying so that we didn't have to waste so much time on the other factors, some of which (as the court here notes) may not be appropriate when the issue is minimal copying.

Corbello is the widow and heir of Rex Woodard, who assisted Tommy DeVito in writing his unpublished autobiography Tommy DeVito — Then and Now, telling the story of his career with the musical group The Four Seasons. Woodard and DeVito tried to find a publisher for the book, and provided an outline to actor Joe Pesci to explore adaptation to a screenplay. But nothing worked out, given waning interest in The Four Seasons.  DeVito falsely represented that he was the sole author, and used the work to develop the screenplay for Jersey Boys, a hit musical.  After lots of back and forth, a jury found defendants liable for infringement, found that there was no fair use, and found that 10% of the success of the play was attributable to infringement of the work.

During trial, the court stated it believed that defendants were entitled to a directed verdict on the fair use issue but did not want to risk a retrial in the case of reversal.  True to its word, the court here explains why, though fair use is often a jury question, the record here entitled defendants to judgment as a matter of law.

Market effect was the most important, so the court started there. Before the play debuted, the work had no market value, as various people had tried to get it published from 1990-2005, to no avail because of lack of public interest.  Any profit potential today is almost certainly because of the play, which itself was over half musical performance by running time, and the remainder of which used less than 1% of the work.

Factor one: Commercial use weighed against a finding of fair use.

Factor two: The biographical, factual nature of the work favored fair use. The unpublished status of the work would ordinarily disfavor fair use, but here the publication of (small parts of) the work did not diminish its value by preempting plaintiff’s right of first publication.  The reason the work hadn’t been published was that it was unpublishable, despite years of effort, creating an atypical situation in which there was no deliberate choice to withhold the work from the public. Thus, the biographical nature of the work predominated, favoring fair use.

Factor three: After discounting similarities due to unprotectable elements of the work, the jury was permitted to consider 12 similarities between the work and the play. The amount of protectable, creative material potentially copied in relation to the work as a whole was less than 1%.  The extent of the similarity was minimal, as two examples indicate: a discussion about the song title and subject matter “Walk Like a Man” had very similar dialogue, though with different characters and tone. “Assuming the jury believed the dialogue was not a historical recounting but a creation of DeVito and Woodard—a finding that is unlikely and perhaps not even permissible given the Work’s claim of historical accuracy—the closely copied dialogue consists of about 65 words.”  Similarly, the work said, “[T]he Beatles come to represent a whole social movement. We never aspire to be more than entertainers,” and the “social movement” line was “arguably protectable as original expression beyond bare historical fact.”  The play said,  “We weren’t a social movement like the Beatles. Our fans didn’t sit and put flowers in their hair and try to levitate the Pentagon.…”  And so on.

At most, the jury could have found about 145 creative words to have been copied, whether as dialogue or creative descriptions of events, or about 0.2% of the approximately 68,500 words in the work.  This factor strongly favored fair use, if the “heart” of the work wasn’t infringed.  Here, the “heart” of the work was unprotectable facts.  “Woodard’s writing style, which is the only aspect of the Work producing protectable elements, although necessary to production of the Work, was not the heart of the Work.”  A biographer’s writing style could maybe be the “heart” of a biographical work “in an extreme case, for example where the facts of the subject’s life were already known to the reader or mostly uninteresting but where a highly skilled writer celebrated for his wit and commentary had written the biography.”  (I just finished Patricia Lockwood’s Priestdaddy, which I think would qualify easily.)  But that wasn’t the case here. There was no evidence that there was any market for Woodard’s writing in and of itself; the attraction was the historical information he had to convey.

The court considered transformation separately, and found both a change of purpose and a change of character.  Purpose changed when the script, most of which wasn’t from the work, was incorporated into musical performances in order to entertain, whereas the purpose of the work was primarily to inform, to vindicate DeVito’s perspective, and to reveal hidden truths. Even if the purpose of the play were primarily to inform, the play would still have a different character because it incorporated DeVito’s “singular” perspective “into a more complete and balanced description of events based on competing perspectives of all four band members.”  In fact, the play was structured around this concept, with the four key characters each in turn narrating the play from their own perspectives during the Spring, Summer, Fall, and Winter portions of the play.  The Four Seasons, get it?  This additional creative expression was significantly transformative.

Thus, the first factor weighed against fair use “as in any typical case of commercial use,” the second factor weighed in favor of fair use, the third factor weighed “heavily” in favor of fair use, the fourth and most important factor weighed heavily in favor of fair use, and the transformative use “diminishes the significance of the sole factor weighing against fair use.”  To permit a finding of no fair use based solely on commerciality, when the other factors including transformativeness favored fair use, “would be to impermissibly treat the first factor as conclusive” and would hinder copyright’s purposes with respect to biographical works.


If this were overturned on appeal, the court would still grant a new trial on the issue of an implied nonexclusive license and on the damages award.  The jury’s verdict on the contribution of the copying of protected elements of the work to the play was against the clear weight of the evidence. The 12 similarities considered by the jury constituted approximately 0.4% of the playscript, which itself accounted for less than half of the play’s running time, the rest of which was music. Assuming that the music accounted for roughly half of the play’s success, a finding of 10% implied that the few words copied from the work accounted for roughly 20% of the success of the play attributable to the dialogue. Although the jury’s job is not to make a strict, mathematical calculation, the verdict must be supported by sufficient evidence, and it wasn’t.  There was instead substantial evidence that many additional elements contributed to the worldwide success and profits of the play, including the additional inventive material in the script; the stagecraft; the use of music; the employment of world-renowned writers, directors, and producers; and advertising and promotion efforts. 

Wednesday, June 14, 2017

Long review: of land (and other) registration

Benito Arruñada, Institutional Foundations of Impersonal Exchange: Theory and Policy of Contractual Registries: This books only significant weakness is the extremely dry and abstract way in which its written; theoretically it is extremely helpful in explaining the special functions of property registries.  At the core, a registry allows public knowledge of who owns what.  This enables third parties to understand who has the power to transfer property, encouraging the ability to contract with strangers.  When a registry or other similar publicity mechanism (the law of agency is his prime example, along with the corporate form) is in force, then it is possible to switch from the common-law rule of nemo dat to a rule that protects the interests of bona fide purchasers without notice (BFPs).  In other words, the true but unrecorded/unpublicized owner in a case of a transfer to a BFP by a perfidious agent, or by a perfidious land seller, is no longer protected by a property rule entitling her to the return of the wrongly transferred property, but instead by a contract rule entitling her to damages from the wrongdoer. 

If principals want a property rule, they must publicize their claims.  Contract rules that favor acquirers are then applied only when property owners consent, or are deemed to consent, to them by appointing agents or by not using the recording system.  The registry therefore serves as an enabler of modern, impersonal transactionsnot the nightwatchman-state, but the recorder/register state as a key foundation of a well-functioning free market where the system substitutes for trust based on personal knowledge.  Unless registration or recordation is required, one always has a choice about keeping information private, but subject to risks of losing property to good-faith purchasers without notice.  Reciprocally, these improved mechanisms for assessing risk enable the end of debtors prisons and the allowance of personal bankruptcy, as the harsh consequences of never releasing a person from individual liability become less important to incentivize performance when creditors know which assets they can attach.

The books historical comparisons provide some color.  When Arruñada discusses the use of symbolic marking to claim ownership, he mentions its use on valuable movables such as livestock, automobiles, and books, but also for spouses, with the wedding ring used to give notice of marital status.  Also, in ancient Athens, a slab (horos) could be posted on the land itself, to be removed only by releasing the encumbrance”—the horoi included a statement of the nature of the horos as security and often the creditors name and amount of the debt.  Arruñada identifies this as one of the first systems to enable use of land as collateral without transferring ownership or possession to the lender.  Later, I was fascinated by the initial reaction to public company registries (a prerequisite for limited liability) in France, when judges in Paris failed to understand the advantages of impersonal transactions and insisted that traders must know their trading partners.

Arruñada draws a number of provocative lessons from this basic framework, including that policies directed at formalizing land title may not be appropriate, or pro-development, in countries lacking other preconditions for impersonal transactions such as a functioning, neutral judiciary for enforcement of contracts.  Registries and recorders (distinguished because the former evaluates the quality of the claim, and the latter simply records all claims that meet its formal standards) are expensive, and not always worth the costs.  They may be necessary, but they arent sufficient for a modern economy.  Arruñada argues that public demand for registries is the best signal of their appropriateness (meaning that subsidizing them to spur development is probably a bad idea), and thus that recording should generally be voluntary, especially in the early stages.  Attempts to formalize titling have often foundered when people stop recording transactions after the initial, subsidized formalization, and Arruñada believes that owners arent underestimating the value of title but rather title suppliers are overestimating it.

To work, registries have to be independent of all the parties involved.  This means that the state is the appropriate manager, assuming it is not corrupt.  And registries must be public or at least open to potential third parties.  But Arruñada, in classic libertarian mode, tells us that registries have inherent limits because theyre run by public organizations (he advocates performance-based pay to combat this tendency, which seems odd given his acknowledgement of the role played by private short-termism in the 2008 crisis), and because they reduce transaction costs, thus threatening the livelihoods of lawyers, notaries, and other people involved in the conveyance process, who often succeed in fighting registries politically.  Among other things, Arruñada doesnt like professional monopolies, such as requirements to have lawyers or notaries involved in land transactions; he contends that sufficiently well-functioning registries can substitute for them, especially when backed up by the ingenuity of the private sector, which will offer services that help owners navigate the registries.  (Cf. Deborah Gerhardts work on the role of lawyers in trademark registration applications.)

Arruñada argues that one should not see local forms of property, ones that rely on personal transactions, as mere customary versions of impersonal property regimescustomary regimes cannot easily be adapted into impersonal regimes.  Even developed market economies, he argues, often have outdated law that treats personal exchanges as the rule and impersonal ones as the exception, to the detriment of impersonal exchanges.  As for less developed market economies, their local legal orders cant support transactions outside of the localitythe very thing that makes them legitimate as between locals makes them biased when a local and an outsider transact.  One example: in urban Ecuador, having a man in a household makes land harder to sell than when female-only households try to sell; he posits that this is because buyers fear that [male-present households] might be able to claim the land back.  At the same time, those households can rent more easily, because they rely on self-enforcement and men are (expected to be) more violent. 

Arruñada advocates that titling programs therefore should be targeted at communities with weak informal legal orders and young communities.  The big difference in who resists law supporting impersonal transactions, he says, is that in less developed economies its general social or economic classestribal chiefs, the nobility, land tenants, and current debtors”—while in more developed economies its the professionals who specialize in providing palliative services to facilitate impersonal exchangemainly lawyers and conveyancers who draw up formal documents.  These are presented as artisan solutions, whereas impersonal exchange requires industrial, mass-produced contracts, default contract rules, and registries.  Thus, colonial powers such as France and the United Kingdom in Africa, as well as the United States in the Phillipines, introduced land registration in their colonies while keeping more traditional systems of privacy and recordation in their homelands. Apparently, colonies had stronger bureaucracies and weaker professions.  But professionals arent the only ones to blame; so is simple legal inertia and path-dependency.

Solutions should be situational: markets need institutions that match their scope.  Another example: Cattlemen in the US West could enforce their rights locally, but needed government intervention to make branding effective because cattle were traded across long distances; they thus pressured government to create brand registries, to ban driving unbranded cattle from a range, and to regulate and inspect cattle sales.  Thus, a larger market requires larger authorities, which may constrain local jurisdictions through common rules (which also sounds like a description of the evolution of international trade).  For land, this often also means introducing a numerus clausus that nullifies or degrades some customary and communitarian property rights.

Without political authority, private parties may try to develop institutions to do nearly the same thing, such as networks involving collective responsibility (usually among ethnic groups, for example with small groups of borrowers in microcredit schemes) or private registries (as with the US mortgage market).  Collective responsibility, however, relies on personal ties that tend to weaken just as trade and development increase.  And partipants in the US mortgage market developed MERS, which purported to be a national registry but didnt impose sufficient controls to actually track things.

Arruñadas arguments about the 2008 crisis were the weakest part of the bookhe blamed it on the fact that the United States has poor institutions for publicly recording land transactions. They are plagued by the obsolete design of public recording offices, the poor incentives of the bureaucrats in charge of them, and the vested interests of conveyancers and title insurers. I would not have put those entities in the list of top ten causes.  The lack of a legal mandate to record a transaction in the name of the owner definitely was a problem, but I find it hard to blame the clerks for that.  Later, he says that the crisis was at least partly caused by bad incentives and poor performance by MERS and the mortgage industrys members, as well as their apparent oblivion of the judicial and political risks ever remaining on the enforcement of home foreclosures against apparently weak parties. [L]ocal courts took a narrow legalistic position against MERS in order to protect local intereststhose of borrowers. 

I can only read that last part as suggesting that contributors to the crisis were that (1) judges might actually enforce the law as written, and (2) politicians might object to massive foreclosures (although in fact they mostly intervened to foam the runway for the banks, with individual homes/homeowners playing the role of bubbles crushed to protect the bank-plane and its investor-passengers).  But neither (1) nor (2) helped start or worsen the crisis; financialization and the ultimate end of the rise of home prices did thatand by the way, the more foreclosures there are, the lower home prices go.  Speeding foreclosures would not have restored the banks to health because there would still be no one to sell the homes to at inflated prices.  Arruñada frames anti-MERS rulings as conflict between local and wider legal orders, respectively, supporting local and wider markets, without considering whether MERS actually supported wider markets or merely wider rent extraction.

Arruñada also notes that registration is hard to make complete.  Among other things, tax authorities resist having to record/risking destruction of their interests, people who benefit from complex systems like lawyers have an incentive to press for protection of unrecorded interests, and judges may feel the pull of equity (what Carol Rose calls the problem of crystals and mud). Arruñada also cautions that the government may want to use the register as a useful database for other things: enforcement of land use regulation substantially increased in Spain after a 1986 law ordered the land registry to check for building licenses as a requirement for registration.  But tax authorities have different incentivesthey want a complete register of ownership when it might not be efficient to do that.  Similarly, Arruñada is a bit worried about making registries completely public, as opposed to available only to people with a good reason to ask, because of the possibility of big data aggregation (hes not really clear on what harms he thinks might follow, but I guess we can all insert our own). 

Arruñada likes registries that are financed by user fees and that allow the administrators to keep any surplus (subject to personal liability for problems).  Fixed salaries lead to sluggishness, because Homo Economicus.  (Except that he does believe in deferring compensation by paying below market in early years on the jobthis would motivate people with a lower subjective discount rate to self-select for the job; such people are likely to be relatively averse to fraud; so Homo Economicus has varying exogenous preferences.)  But it doesnt often work that wayinstead public sector jobs pay relatively low salaries, and then with more experience workers may leave for the private sector, fully trained, leading to increased risks of agency capture.  To solve these problems, Arruñada advocates linking pay to performance and funding the registry through user fees that cant be raided by the larger government.

Arruñada also points out that effective registries need to identify individuals in order to make them legibleimpersonal trade requires being able to figure out how reliable the counterparty is, whether through public enforcement or using palliatives based mainly on private records of reputational assets.  (So, seeing like a state may be also inherently seeing like an impersonal economy.)  Still, enforcing contract rights through public means requires an independent, effective judiciary, which is often unavailable.  So, Arruñada reasons, identification of individuals may be most important in countries without such a judiciary, to allow private parties to keep records of reputations.  In fact, if its hard to foreclose on a family farm but easy to penalize a reputation in private records of a default, developing credit records for individuals might often be a more viable strategy than allowing them to use their assets as collateral, especially for the poor, because even when they have such assets, enforcing repossession after debtor default is often impossible for an outsider.  Titling systems may thus not be that helpful in increasing access to credit; banks remain more interested in salary and other income streams, which implies that better enforcement of contract rights might be more useful than better definition of real property rights. 

Likewise, developing or reforming contractual registries should occur before or along with developing courts.  Right now, for example, Indias land administration services are highly corrupt, making their records unreliable; judges naturally will not predictably rely on them.  This uncertainty, in itself and whatever the prevalence of corruption, considerably reduces the value of the registered information for transacting parties.  In fact, judges are a key target of registry reform: the register should be reliable enough for judges to have confidence in it, because the weight judges give the registry will ultimately determine its value to market participants.  Unfortunately, Arruñada says, current titling projects often focus only on registry filers and not on the understandings and interests of third parties like judges.

Arruñada ends on a rather sour note, pointing out that governments have struggled for almost a thousand years to make real property registries reliable, and though most countries have now been running property and company registries for more than a century, only a few have succeeded in making them fully functional, as shown by the fact that in most countries adding a mortgage guarantee to a loan does not significantly reduce its interest rate.

Though he doesnt talk about trademarks, Arruñada does make some claims about patent registration as analogous to a first registration for land.  Publicity provides for those whose rights are affected by the grant to challenge it.  Like land conveyancers, patent lawyers gain from bad granting decisions that increase demand for litigation.  However, patents are more uncertain in terms of legal enforcement because judges can invalidate them.  This makes sense to Arruñada because of the possibly incomplete nature of initial patent examination.  Unfortunately, the PTOs political masters seem to hold a mistaken assumption as to its main users, wrongly believing that the PTO must serve only patent applications and not the public.  Thus, (pre-AIA) the PTO had turned into a de facto recording system, not a true registry, even though the presumption of validity was still being afforded.  The resulting uncertainty generates litigation and provides a paradigm of registry mismanagement by showing how registration systems can be transformed into recordation through poor decisions.  Cheaper registration means more litigation later.  Arruñada advocated stronger incentives for examiners, giving more weight to variable compensation and introducing examiners liability for mistaken decisions, which he also thought would reduce the length of the examination period.  Query whether the fixes actually attempted by the AIA would meet his approval.

I havent tried to recast the books insights in terms of trademark registration, which (like patent granting) is supposed to be a type of true registration system, involving examination to avoid conflict with other rights.  Trademark registration is voluntary, and looks to remain so, indicating that there may be no evolution towards requiring recording/registration when there are good enough reasons to protect unrecorded interestsbut of course that makes the register less reliable.  There might be an interesting comparison between the Supplemental and Principal Register in terms of the ability to choose between land registration and land recording, as was possible in Cook County until 1997apparently rightsholders with more valuable land self-selected into the registration system.  Relatedly, Arruñada argues that legal palliatives often offer versions of one system inside the other: recordation systems often provide a simplified judicial procedure to clear title , a solution to underassurance of the most valuable land. Conversely, registration systems usually allow some kind of inexpensive filing with lesser, or provisional, legal effects. [Possessors are often allowed] to enter their claims in the register so that they are automatically upgraded to ownership if nobody has opposed them after a certain number of years. 

As between the two types, Arruñada concludes that at least in Europe registration, which is more reliabile at establishing priority of claims, outperforms recordation due to lower prices for mortgages, which result from faster and safer repossession.  There are regions in France and Italy that have registries, while the other regions have recording systems, and apparently both French and Italian authors consider registries superior but attempts to expand them have failed.  Registries, though they require substantive examination, also have lower legal transaction costs/needs for lawyers and conveyancers assistance than recording systemsthe cost of conveying real property is roughly halved.  (I really wonder whether this holds up with trademarks, where the boundaries are very hard to fix without legal interventionEurope is closer to a recording system, but are its legal transaction costs any lower?)  Consistent with his general leave-demand-to-the-market orientation, however, Arruñada says that doesnt mean that a system that spends less on registration and more on private due diligence is necessarily inefficient; it depends.