Wednesday, February 27, 2019

Belmora doesn't replace 43(a)'s usual requirement of protectable subject matter in standard trade dress case

Secret of the Islands, Inc. v. Hymans Seafood Company, Inc., 2019 WL 917209, No. 2:17-cv-342-BHH (D.S.C. Feb. 25, 2019)

SOTI sells salt scrubs and other body products; salt scrubs can be used as hand soap, but also exfoliate and moisturize. Hymans sells salt scrub and skin care products as Holy City Skin Care. Hymans initially displayed SOTI restroom samples in its Charleston, South Carolina restaurant and sold SOTI salt scrubs in its attached gift shop. After two years generating $100,000 in retail revenue from SOTI products, Hymans allegedly started relabeling SOTI products in its gift shop, and SOTI terminated the relationship.  After that, Hymans allegedly “misappropriated SOTI’s brand-value and goodwill by employing restroom-sample displays materially indistinguishable from SOTI displays, employing the same distinctive slogans that SOTI created to market its products to the hospitality industry, and duplicating SOTI’s distinctive packaging.” In July 2012, a SOTI manager informed Hyman’s marketing partner that Holy City’s products infringed on its rights.

The court first found that SOTI pled itself out of court on laches/statute of limitations issues.

The complaint clearly indicated that SOTI knew of the alleged infringement in 2011, when it terminated its relationship with Hymans, and then again in 2012. But SOTI didn’t file suit until 2017, well outside the three-year limitations period applicable to the South Carolina claims. The statutory unfair trade practices claim failed also because it didn’t allege sufficient facts to show an adverse impact on the public interest, as required. Claims of public confusion and deception weren’t enough to transform an “essentially private” business dispute into a matter that could cause “substantial injury to consumers.” There was no allegation that the Holy City scrubs were dangerous, or financially more costly to consumers.  Diversion of consumers and revenue, along with misappropriation of goodwill, were mere private wrongs.

The Lanham Act borrows state law statutes of limitation for measuring laches in the first instance.  Laches requires unreasonable delay by the plaintiff plus harm to the defendant from the delay.  Here, there was a nearly five-year delay between the latest point at which SOTI knew of Holy City’s allegedly infringing products and marketing practices, and the filing of suit.  Not only was there a presumption of unreasonable delay given the timing, but the complaint also pled events that established unjustifiable delay, given the prior relationship between the parties.  Even if it was reasonable not to sue when the relationship terminated, “it must have set off alarm bells for SOTI when, in July 2012, it subsequently discovered that a major corporate entity in the hospitality industry, U.S. Foods, was distributing Hymans’ now fully-branded competing product line—Holy City Skin Care—in notably similar mason-jar packaging.” Instead, SOTI waited to sue until “Holy City’s product line and business were successfully established. The Court finds that this delay was unreasonable, and would have the perverse effect of dramatically multiplying the damages to which SOTI might be entitled if the Lanham Act claims were permitted to proceed, damages which could have been easily mitigated if SOTI brought its claims when it knew they were ripe.” 

Prejudice to defendants was thus also shown by the allegations of the complaint: “Plaintiff … avers that by building a business model dependent upon SOTI’s trade dress and trademarks, Defendants have successfully supplanted hundreds of sales accounts, and diverted millions of dollars in revenue. Thus, the amended complaint demonstrates that Defendants, relying upon SOTI’s inaction, built a valuable business over the course of approximately six years, a venture that axiomatically required the commitment of substantial economic resources.” This was the rare case where no factfinding beyond that alleged in the complaint was required for laches.

Regardless, the Lanham Act claims were also substantively deficient. “The closest that SOTI comes to stating a plausible claim to relief based upon misappropriation of its intellectual property is its reverse passing off theory, where it alleges that Hymans, in 2011, took some amount of SOTI’s sample salt scrub product and placed it in jars with a different label for sale in the Hymans General Store.” But that claim was time-barred.

Instead, the core of  SOTI’s Lanham Act claims was that its marketing system of “providing salt scrub samples in hospitality business restrooms with signs encouraging users to purchase retail product in attached shops, its marketing slogans such as ‘Turn your restroom into a profit center,’ and its packaging the product in mason jars with an attached wooden spoon affixed by an elastic tie around the neck of the jar” was protectable.  But beyond conclusory allegations, SOTI failed to allege that its marketing system, marketing slogans, and mason-jar packaging “were anything other than generic, functional sales modalities.”

SOTI argued that Belmora didn’t require it to possess a protectable mark to proceed under §43(a), but Belmora “does not support the kind of open-ended unfair competition claims that SOTI suggests are permissible under Section 43(a).” Instead, Belmora allowed the owner of a foreign mark to proceed against a US user; it didn’t “open the door to ‘boundless application [of Section 43(a) ] as a remedy for unfair trade practices.’”

SOTI’s false advertising claim was premised on the fact that Holy City labels its salt scrub jars with a gross weight of 780 grams, whereas SOTI labels its packing using the net weight of the salt scrub itself, which is 455 grams. SOTI alleged that South Carolina’s Uniform Weights and Measures Law and implementing regulations to the federal Food, Drug, and Cosmetic Act require that consumer packing must state the net quantity of contents within a packaging container. But there was no showing that 780 grams was not the gross weight, and there was no private right of action to enforce the laws SOTI cited.

Monday, February 25, 2019

ICANN and the New Top-Level Domains, panel 2

ICANN and the New Top-Level Domains

“Walled Gardens:” Should gTLDs Become Private Platforms?
Becky Burr, ICANN Board & Neustar: We used to talk about .kids as a walled garden/moderated content for kids, a safe space. [Based on what we know about who abuses kids, it’s not surprising that it hasn’t worked all that well.] Others are more general—open to anyone to register, but with rules for registrants. Whether that’s good or bad has to be more granular.

Sarah Deutsch, ICANN Board: To me, depends on what the garden is: if it doesn’t allow other people in and there’s bad activity, such as anticompetitive activity, that wouldn’t be good. Other spaces might just be regulated. That could be a walled garden.  Worries: where someone gets exclusive rights to run a generic term as one competitor in the market.  [Example from Aufderheide: L’Oreal owning .beauty]

Kathy Kleiman, Center for Information Technology, Princeton University: When we started, gTLDs were to be managed in the public interest. We looked for abuse of the structure (malware, botnets) and not bad content (where laws differ worldwide and where it wasn’t our job to judge content). Country rejected SOPA/PIPA domain name blocking. We protected due process. But on the way to new gTLDs, ICANN decided to open up registry agreements to voluntary commitments.  Registry applicants slid a lot of other stuff into those agreements, which ICANN allowed.  Donuts, w/hundreds of TLDs, created a policy allowing it to block registrations based on agreements w/TM owners, a policy that had been rejected at the ICANN level.  Judge © and TM claims.  Minds + Machines promises to “constructively work with law enforcement to address reported cases of abuse”—law enforcement asks for a lot of things based on mere allegations, and no due process is mentioned.  Yet ICANN has a limited mandate.

Nonetheless, ICANN apparently embraced voluntary content regulation in its new bylaws.  Question for the panel: what’s left of the multistakeholder model and what is ICANN’s continuing role in protecting the open structure of the internet?

Jeff Neuman, Com Laude/Valideus: The ultimate end users are also of concern. (1) registries w/restrictions—only allow certain entities in. (2) closed generics: taking a generic word and using it w/in own organization/its affiliates. (3) ability to take down names that violate your policies.  All 3 of these can be and are good things. Organizations are facing increasing scrutiny for the content delivered through their platforms—FB, domain name registry [those actually have very different levels of control of individual posts/incentives to take users’ interests into account/levels of public exposure].  Have to think of it from their perspective. Wish it was as easy as saying we don’t regulate content. But there’s child porn, imminent threats of harm, counterfeiting and infringing movies. When things are that obvious, and you know that you will be criticized for allowing that activity through your platform, then the choice isn’t as simple as not looking at content.  He’s seen actual threats of car bombings [so he would have gotten rid of FB if he ran .com?] and he’d rather take that down than not do so.

Mitch Stoltz, EFF: Not super concerned with defining “walled garden.”  As a concept it’s useful to talk about gatekeepers of speech on the internet, of which there are many varieties. FB has an incredible amount of power over who gets to speak and who will hear it. It’s scary that registries can make your entire website disappear; registry is a private company w/its own business motivations exercising arbitrary power over speech.  It is important that different registries can do it historically doesn’t have policies like those the new ones are adopting.  Cloudflare has immense power.  Content industry wants to leverage that to make it police for copyright if it polices for child porn/foreign pharmacies. But it’s easy to see where it goes from there.  If we built a smart highway would we want it to scan to make sure you were driving in an ok way? [Note that China’s social credit system is doing exactly that—you won’t be able to travel easily unless you have good social credit.]

Burr: There are enormous numbers of issues here.  ICANN shouldn’t have taken on the burden of trying to figure out compliance w/all these public interest commitments, which applicants made in order to get a competitive advantage.  Now that people used those to get a competitive advantage, holding them unenforceable is unattractive too. We grandfathered the existing commitments into the new bylaws in order to kick the can down the road (outsourcing compliance which isn’t great either).   

If there are lots of different registries then it might not be a big problem if they have varying rules.

Example of problem: something weird is going on in a set of domains. Sites selling every dog breed in the world to US consumers, shipping the puppies sight unseen. She didn’t buy a dog so she can’t say she was ripped off, but there was no question that this was a scam & we took them down. It’s critical that people be able to exercise that kind of judgment where consumer harms are involved. There’s no state action & scammers can go register on some other site; we aren’t going to protect it. She doesn’t think that’s a matter of free speech.

Deutsch: all sorts of third party sites have provisions about copyright & TM etc; DMCA gives you obligations for takedown.  It’s not that surprising for stuff to be in a contract. There is also more pressure on platforms, ISPs, even possibly registrars & registries to take more fiduciary responsibilities for what’s on their sites. But shadow regulation also tends to grow.

Neuman: .biz had a problem with being a known source of spam; made it hard for legit clients to get emails through.  Created an anti-abuse policy for acting on malware, phishing, spam: first policy in the big registries. Registrars would have 12 hours to take the domain down or we’d do it. That made us pariahs in the community. But there wasn’t a slippery slope. In 2005, took down 32,000 domains with zero complaints from the registrants.  We’ve taken down 100,000s of domains. Took .biz from most abusive to one of the safest TLDs. Not all slippery slopes have to be slid down.

Stoltz: There are issues of norms & due process. Should the power company combat fraud by accepting complaints about fraud & cut off a business’s electricity if it finds the complaint persuasive? That sounds bizarre. Power is used in the commission of all sorts of crimes, but it’s still not their role to police that.  There is space for competition among policies, but that only works if that’s evident to consumers—if people know what they’re buying, and if there is actual competition.  Donuts owns 1 of 6 of the new domains, and they use policy rejected by ICANN.

Kleiman: the key move here is ICANN’s abandonment of the principle that it was about regulating infrastructure and move into regulating content.  The attempt here is not just to get the regulations into the agreements but to get to ICANN to enforce content regulations.

Q: if an applicant made promises & got the domain b/c of the promises, it’s sensible for ICANN to be one of the entities that can hold them to its promise.  If Goodyear got .tires and biased the search within that gTLDs—that would be ok if it’s disclosed, but maybe ICANN should stop it from happening. FTC said it would watch and if there’s deceptive trade practices the US would enforce against it. That’s how it happened at ICANN; there’s no blanket prohibition on a competitor running a closed generic and we deal with problems after the fact; would it be better to have it otherwise?

Karanicolas: Infrastructure layer makes a difference: there’s a difference b/t Twitter kicking Milo off and Comcast installing a filter to prevent anyone on their network from seeing Milo’s content. But where do registries fall on that spectrum?  [Right, one of the distinctions to be made here is the puppy mill v. Craigslist, both of which might be offering scams.  Do we have any way of distinguishing that in order to protect Craigslist against a significant chilling effect?]

Q: We need to know what the rules are about people being kicked off. If there are pre-agreements w/certain TM owners, is the decisionmaker biased?  Is there any way to appeal? If you’re making government-like decisions then there should be government-like protective structures for decisions.

Deutsch: .bible—applicant wanted to exclude nonChristians and anybody of which it didn’t approve, and to make UDRP panelists sign a statement of faith. This is a real world example of what happens in a closed generic space and we need to be mindful of that.

Neuman: .disaster could easily be exploited for fraud.  But we need to look out for end users more than a right to register any name that you want. A closed generic could be a lot more useful for end users than what’s in the market now. If Amazon had .book and could give an official page to any author, is that better or worse than letting anyone register and maybe never getting .book into widespread use.

Burr: doesn’t like the power company metaphor b/c power is a utility; I don’t have a choice about where I get power from. Registries/registrars doesn’t fit into that paradigm.  DMCA issues: registries/registrars can’t simply take down one piece of allegedly infringing content: that makes them fit poorly into the DMCA framework.  Issues w/r/t copyright & TM are not the same as issues about what’s not legal in Thailand (criticizing the royal family) or consumer fraud.  [Which is very telling insofar as Donuts and similar agreements are about copyright and TM, and side agreements w/© and TM owners are what have brought us here.  Donuts didn’t make any agreements with the gov’t of Thailand, or with the FTC or even the BBB.]

ICANN and the New Top-Level Domains part 1

American University Washington College of Law

Welcome, Christine Haight Farley, American University Washington College of Law
We are in the midst of an historic expansion of internet domain names with more than 1200 new generic top-level domains (“gTLDs”) now competing with <.com>. This 5000% increase in gTLDs is the biggest change to the internet's domain naming system in thirty years (and more are coming soon!). Accompanying these new gTLDs, are new and innovative--but little known--IP rights protection mechanisms. These developments could have a profound impact on the rights of IP owners, domain name registrants, and the public, and on the architecture of the internet.

Trademark Protections in the New gTLDs
Mary Wong, ICANN
What is the TMCH? Ten years of history. One of the mechanisms developed at ICANN (not by ICANN necessarily) for the latest round of expansion of gTLDs.  ICANN has staff but can be described as a world wide community, always talking about participants—gov’ts, businesses, lawyers, civil society participants, academics, other individuals.  Participants develop policy, not ICANN staff (which would be easier and faster!).  These mechanisms were developed/agreed upon by a wide variety of interests.

TMCH is not a rights protection mechanism (RPM) as such, but supports other RPMs in that TM owners submit marks into the TMCH. Those marks (their existence in a national register somewhere, or b/c they’re protected by treaty) would be validated by Deloitte, the operator of the TMCH, and you end up with a global repository supporting Sunrise and Claims (of which more soon). Over 80% of marks submitted are validated; marks from over 100 jurisdictions; 10,000s have been submitted since establishment 5-6 years ago.  Allows three categories of marks: (1) protected by a national registration, w/no distinction across countries; (2) marks validated by a court of law; marks protected by a statute or treaty.

Brian King, MarkMonitor: What did TM owners want from the TMCH? Assume you’re in-house at Delta Airlines.  Responsible for brand protection: monitoring for infringement, TM registries around the world. You may have 100s or 1000s of domain names, including country code domain names (, and have to monitor for similar/infringing names. Might hire MarkMonitor to help w/that. Privacy protections can help people hide identity of registration.  ICANN decides to multiply existing gTLDs by a lot.  Now I have to worry about .air, .flight, .sucks, .porn: concepts Delta doesn’t want the brand associated w/ and may have to register domain names in merely to preempt other people from doing so.  This is scary and new RPMs help address the fear.  Sunrise allows Delta to register before non-TM owners.  TMCH also provides a notification when someone else registers [an identical domain name] in a new gTLD.

Michael Karanicolas, University of Toronto (delayed due to weather; I was able to rely on his notes)
Kathy Kleiman introduced Sunrise in his absence. Mandatory 30-day period (some registries expand it to 60 days) that all new top level domains are required to provide to owners of trademarks, whereby any owner of a mark which is recorded in the TMCH may pay a special fee to the registry to register a domain matching their mark before they are opened for general sale.

Why 30 days? And not forever? A balance designed to give weight to the interests of current trademark owners, but also to the interests of other potential registrants -- the innovators, speakers, entrepreneurs who want to register in a new gTLD as well.  There are multiple entities with rights in Delta, for example: dental, educational, fraternity, etc.  Both Sunrise’s duration and its limits—requiring an exact match with what the trademark owner has registered—reflect the desire to balance these competing interests.

Griffin Barnett, Winterfeldt IP Group: Q to address: Purpose of TMCH for TM owners as it has turned out?  Keep in mind function of TMs, which is to protect consumers from cybersquatting/fraud etc.  Benefits to brand community: operationally, TMCH generally works well.  Sunrise allows defense against phishing.  Two aspects to claims service: one is notice to brand owner who’s recorded the mark if a domain name matching the registration is registered, but also during the first 90 days a potential registrant who tries to register a matching domain name will receive a claims notice setting out the registered mark with some details. Just a notification: does not block registration but makes them aware and hopefully they can make an informed decision.  They might be deterred based on the knowledge of rights out there.

Q: where are these TMCH registrations coming from? 

Barnett: Deloitte has a report: a lot of these TMCH records come from the US, Europe.  There are a number of Asian jurisdictions represented, but majority are US/Europe. Large corporations tend to be the ones recording multiple marks, but smaller/medium businesses can use it too.

Wong: Yes; likely to see other countries’ submissions go up b/c of increasing awareness of these kinds of protections. Most big companies don’t enter all their brands.

King: it’s not cost effective to enter all TMs, but the crown jewels deserve TMCH entry. There was an educational period, but people are aware of this now.

Rebecca Tushnet, Harvard Law School
New legal or quasi legal systems are often set up assuming that they will be used against, and not by, bad actors, because that’s the problem that is most salient before the new system exists.  Unfortunately, online is like offline: bad actors find ways to game the system whether that’s by disseminating fake news or by claiming rights far beyond what they actually have, and we need to take that into account in designing our systems.  Devil is also in the details: when a policy is written, it may change substantially depending on who is implementing it and with what expectations.

After Sunrise, there is a Trademark Claims period: when we talk about Trademark Claims notice, we mean the notice that goes to anyone who attempts to register a term that is an exact match to a mark in the TMCH. If they proceed to a final domain name registration then the TMCH mark owner also gets a notice so that it can take further action if it chooses to do so.  This second notice is called a NORN in case there weren’t enough acronyms around.  

Top ten queried entries in the TMCH that trigger a Trademark Notice when there’s a registration attempt: Cloud (which is a registered Swiss trademark for pens, registered by a trademark lawyer), smart, love, luxury, nyc, forex, hotel, one, london, abc. Other terms that reporting has identified as being in the TMCH: Cash, "RICH," "CREDIT, the word “the,” VIP, global, hotels, mobile, prime, uk, virtual, “Christmas”, “Insurance”, “Dating,” “Discount,” Direct, social, construction, BUILD, BET, VACATION, and WEDDING. Not exactly Microsoft or Xerox, though those are likely also in the TMCH.

The Trademark Clearinghouse adopts a “lowest bar” approach to registration, whereby if a mark can be protected under any jurisdiction, and in any context, it is eligible for inclusion globally under a universal standard of protection. Doesn’t matter if the mark isn’t eligible for protection in certain jurisdictions – geographic indicators.  Huge dispute elsewhere in ICANN and in TM law over whether geographic indications are “marks,” but resolved in implementation, outside of agreement by participants, in favor of including GIs.  Also doesn’t matter if a word is considered generic for the relevant goods or services, or for some other goods or services, in certain jurisdictions. If it’s protected anywhere it’s protected everywhere for everything.

Moreover, although not by design, the TMCH accepts design marks - Once a mark has been accepted, it is protected as a word mark without reference to any distinguishing design features, since domain names are a text-only medium. So even when the trademark itself does not protect the textual elements as text, the TMCH will extract the textual elements for protection, as Deloitte confirmed when we asked them what they’d do with various design and stylized marks.  Cars by Disney, Music by Parallel Music Entertainment – all eligible as word marks for trademark protection.

For example: the American Physical Society publishes a journal called, naturally enough, “Physics”. Their US registration for the logo used on that publication was required to disclaim the word “Physics”. However, since the EU does not have an explicit disclaimer procedure, even though the mark is just as limited in the EU—it is a figurative mark—they used their figurative EU registration to get their TMCH entry for the word “Physics” per se.

Q: Implementation v. policy development.

Wong: One of the most fascinating aspects of the job is looking how a policy is written, which goes through multistakeholder consultation process, a little bit like treaty negotiations.  The output might be fairly general and that’s what happened. The original policy recommendations were really really general. Protect legal rights of others.  Everything we’re talking about today was developed as minimum protections during implementation of the very general policy recommendation. Had to be turned into something workable.  Now there’s a policy working group looking at all of this and will hopefully develop policy recommendations that can be implemented.  Where things go too far they can be restrained, where not far enough extended.

Q: was this issue discussed in policy development then?

Wong: there was a very general policy; with respect to specific points about GIs and text, the group didn’t list all the different things that could or couldn’t be protected, but during implementation it was made very explicit that no jurisdiction should be excluded.  It was felt that neither ICANN nor Deloitte as the validator are in a position to determine which marks are protected trademarks.  So the rules were made fairly generic.

RT: Where there are gray areas, to say “we’re not making a judgment” actually admits of two approaches: you can say it’s in or it’s out.  Both of those approaches are “nonjudgmental”—and you really could have thought that “all TMs are in” clearly excluded GIs because there’s an entire class of people who think that GIs aren’t trademarks and have a different ordinal priority when it comes to rights conflicts. And where you have already a really expansive definition of rights (protected anywhere, protected everywhere; registered for any good, covered for all goods/services) then further expansive decisions have collateral consequences.

Barnett: Different jurisdictions approach things from different standpoints, especially with respect to GIs; the clearinghouse was intended as a baseline so no one would be left behind by the way they were accepting certain rights. Concrete hypothetical: if Italy protects parmesan as a GI in national law, based on the underlying concept: we did discuss that rights based in national law should be protected.  [“Rights” is not “trademark rights” which was the actual language. Rights of publicity is another easy example where rights but not TM rights exist.]  There are a lot of nonspecific new gTLDs but you still might encounter consumer protection issues e.g., for .web, .online, .llc. Can’t tie Delta Airlines brand to exclude those general websites.  On design marks: where there’s a textual element w/stylization—going back to policy rationale, this took expansive approach b/c the underlying approach is to protect consumers against confusingly similar uses in the DNS.  If someone registered cars.whatever and uses it in bad faith to target Disney’s Cars, it’s appropriate to have that in the TMCH for Sunrise and Claims. It’s up to the registrant to make an informed decision.

Kleiman: Rules in consensus policy adopted by ICANN.  Unanimously adopted by the GNSO council and Board. Two things it says: the name of the RPM should be the TMCH (not “IP clearinghouse as proposed”) to signify that only TMs should be included. Should be required to include “text marks.”  As a parenthesis: design marks provide protection for letters and words only in the context of the design or logo and the group was under a mandate not to expand trademark rights.  We also debated the secrecy of the TMCH and decided against it: the notice function is important.  What happened? This goes way beyond implementation: they accepted GIs, which WIPO says aren’t TMs; they accepted design marks; they decided to make the TMCH secret. Stopped making sense of “implementation.”

Wong: The implementation that Wong described started in 2008, and the policy was “protect the legal rights of others.” Kleiman’s team (quoted) happened during implementation. Took 4-5 years and there were multiple discussions. Coming back to consensus-building, at each step, all proposals were put out for feedback from stakeholders. Where we ended up was the Applicant Guidebook, reflecting a consolidated history of 5 years of implementation stemming from v broad policy. Not saying we got it right or wrong but that’s where we ended.

King: We protect TMs from any jurisdiction and not just from the US.  No one country’s law rules the internet, so it’s important for this community to allow TM registrations under the laws of all jurisdictions.

Barnett: Expanding rights: legit brand owners don’t want people having rights they don’t have. Consumer confusion and bad faith are the ultimate tests. If cars.whatever is confusingly similar and used and bad faith it shouldn’t be ok. Depending on the use, Disney might win a UDRP case.

RT: Letting everything in is a great way to get much, much further from the consumer protection basis of trademark. And every axis on which you decide to allow more in has effects on how much further away from protecting consumers you are. We’re already abstracting away from national rights and from goods and services.  Cars is a great example b/c the TMCH/Sunrise have already abstracted away from consumer confusion and bad faith.  How many cars.whatever websites would you have to look at before you found one that was infringing? (URS/UDRP is the right solution for the bad faith ones.)  And they’re all impacted by Sunrise and Claims.

Q: Global database of recordals would be really useful. So let’s talk secrecy.

King: Putting people on notice: TMCH does put potential new domain name owners on notice that they may infringe if they proceed.  That notice can then be evidence in a potential case.  90% bounce rate of those who put a domain in their cart, received a notice, then didn’t proceed to final registration.  That’s great for deterrence! TM is a clear way to cry foul but it’s impractical to go to federal court in every infringement case. 

RT: Abandonment rates are really unclear: 90% rate might be mainly for queries by automated programs, but we really don’t know. Also, that 90% rate refers to queries for cloud, hotel, one, london, abc—the idea that they were planning on being cybersquatters is simply not plausible. We were unable to survey actual cybersquatters and it’s hard for me to believe that someone who wants a phishing site is going to be deterred by a notice, but better data might convince me otherwise; the point is that making claims about deterrence is simply not supported by the current data.  We were able to survey ordinary registrants and their understanding of the notice was not much better than chance. 

Barnett: there are issues around gaming the register. We want a clean TMCH as much as we want a clean PTO register.  There is a mechanism that allows challenges to records in the clearinghouse—you can challenge a denial if you’re a TM owner, or a third party can challenge [if they learn of it]. If you’re attempting to register in good faith, then there is a mechanism to get that deactivated.

Confidentiality: there’s conflicting views on transparency. The idea of keeping it confidential is important b/c TM owners make strategic decisions. That reflects information from the brand owner; don’t want to provide road map to what gaps exist.

Farley: people monitor other countries’ registration systems for information already. 

[How would this “abuse of transparency” work exactly?  The abuse scenario is that they look at the TMCH, look at the PTO’s registration database, and register the domain names that aren’t in both? There is zero evidence that this is how anyone does anything, and zero explanation how knowing from the TMCH that Coca Cola might possibly consider Coke a more valuable mark than Vault would change anyone’s behavior.  Moreover, trying to register the domain names would itself reveal the relevant information to the putative abuser.]

Phil Corwin, working group co-chair at ICANN.  (1) Confidential, but if I want to know whether ACME has registered, I can simply go during the first 90 days and find out whether it’s recorded.  We suspect that some parties have done that. [So the point of the secrecy is ….?]  We don’t know how many queries were like this. (2) Domain names can be trademarked, as in  (3) We are talking here about new gTLD policy not consensus policy: to get that through ICANN you need consensus—unanimous or near-unanimous; 80% support isn’t going to be good enough. [Clarification: consensus policy would mean that Sunrise, Claims, URS would all be applied to every gTLD, including the legacy TLDs like .com.]

RT: [Great points; (3) means that policy decisions made in implementation are likely to stick.]

Q: a brand is not a TM. isn’t a problem if it isn’t confusing.  You don’t have rights against it even if you don’t like it.

Q from PTO person: GIs are not marks protected by statute/treaty. Way back when, we were thinking about Olympics, Red Cross etc. for those categories.  Has been handed her head for conflating GIs with marks—offends Europeans/WIPO. However, GIs can be protected as trademarks whether unregistered or registered if they are serving as TMs. This is a burning issue for the PTO. We are very concerned that when it says “marks,” “TMCH,” we want to be talking about marks and not GIs.  Is this still on the table with the working group at ICANN?

Q: how does GDPR affect rights protection mechanisms as we revamp WHOIS in a different PDP (policy development group)?

Michael Karanicolas: Manual input has determined some of the content of the TMCH, e.g., inclusion of Christmas and the like. Not a great oversight mechanism, though. Hard to get a broad understanding of how the system is working, which is vital to accountability and overall assessment: is abuse widespread or limited?  Corwin mentioned that if there isn’t consensus the status quo prevails, which is particularly problematic where the implementation drifted from the rules as originally designed, specifically for accepting design marks [and GIs].  Turns the original rules on their head.  Allows beneficiaries to block “consensus” even though that was the original consensus. Leads to larger Qs about ICANN and its role in internet governance. Transparency is fundamental to what ICANN does.  And it’s fundamentally problematic when used to maximize rights beyond what TM would grant (global rights, goods/services).

Wong: Yes, it is under consideration that GIs would be treated differently. Part of our discussions.  “Mark protected by statute or treaty” but the word mark isn’t defined.  May not be about whether something is a GI but whether it is a mark.  [But if GIs are not trademarks … I believe my logic class had something to say about this.]

Barnett: the wording of the claims notice can be improved, we all agree. 

King: “cloud” example—be careful b/c one of the most valuable TMs in the world is Apple.  [Though note it’s not at the top of the list of those queried in the TMCH the way “cloud” is, so a bit of a red herring, no pun intended.]  GDPR makes things a lot harder.

Misleading advertising that's already leaving the market can't support finding irreparable harm

Danone, US, LLC v. Chobani, LLC, No. 18 Civ. 11702 (CM), 2019 WL 760040 (S.D.N.Y. Jan. 23, 2019)

Danone sued Chobani for advertising that Chobani’s kids’ drinkable yogurt product, Gimmies Milkshakes, contains “33% less sugar than the leading kids’ drinkable yogurt” – which all agreed was a reference to Dannon’s Danimals Smoothies.  Although Danone was likely to succeed on the merits, it did not show irreparable harm and could not secure a preliminary injunction.

Danimals are sold in 3.1 fluid ounce bottle serving sizes which currently contain 9 grams of sugar per 3.1 oz. serving, although three of them used to contain 10 grams of sugar. (Dannon reduced the sugar content in those three flavors in mid-2018, but used up its old packaging for the new products; this packaging was available at least through January 2019 in NYC.) Chobani’s Gimmies are sold in packs of 6 4-ounce servings. Until early January 2019, each bottle of “Cookies & Cream Crush” and “Bizzy Buzzy Strawberry” contained 9 grams of sugar (now 8), while the “Chillin’ Mint Chocolate” flavor contained 7 grams of sugar. On a per ounce basis, Gimmies had less sugar (by a gram or two) than did Danimals.
front with 33% less sugar claim

back with mouseprint

On the front, top, and back of the packaging, the Gimmies packaging says that Gimmies contains “33% less sugar than the leading kids’ drinkable yogurt.” “On the front and top of the packaging, the claim appears in reasonably readable typeface and is in no way qualified.” On the back, it’s smaller and asterisked, referring the consumer to two footnotes that are found below the nutrition facts panel, “in typeface so small that it is barely legible.” Those footnotes read: “i. *chobani® Gimmies™ Milkshakes: avg. 8g sugar; leading kids’ drinkable yogurt; avg. 12 g sugar, per 4 fl oz serving; and ii. **Chobani® Gimmies™ Milkshakes: net 4 fl oz; leading kids’ drinkable yogurt: net 3.1 fl oz.”

No matter what, 7 or 8 grams of sugar is not 33% less than 9 grams of sugar, or even than 10 grams of sugar. “Put otherwise, a single serving of Gimmies does not have 33% less sugar than a single serving of Danimals, no matter the flavor.” Chobani argued that its disclaimers disclosed the necessary information, but doing so required—and the disclaimer didn’t disclose that it required—a lot of math, including averaging all three flavors of Chobani’s products (8.333) without knowing the grams of sugar in the flavors other than those in the package the consumer was looking at, rounding that number to the nearest gram, then comparing it to the sugar in Danimals, which is 9 grams per serving.  Additional calculations were required to produce a hypothetical 4-ounce serving of Danimals (11.6 grams, which Chobani rounds up to 12 grams). (“And as the Court noted at the TRO hearing, parents do not ordinarily give a child 1.33 servings of yogurt anything.”)  At that point, the 33% less claim became “true.”

Chobani offered a simpler theory in litigation: dividing the number of grams of sugar in a single serve bottle of each drink by the number of ounces in the bottle yields 2 grams of sugar per ounce for Gimmies, and 3 grams of sugar per ounce of Danimals. “However, this rather more elegant and easily comprehended ‘ounce for ounce’ comparison is not suggested by anything on the packaging – especially not Chobani’s barely legible footnotes. And that is not how Chobani calculated its claim.”

Dannon’s extrinsic evidence came from a marketing expert.  Based on his review of academic literature, which the court considered an appropriate source, he concluded that consumers were not likely to attend to Chobani’s disclaimers, primarily because of their location on the packaging. He further opined that consumers would not likely understand that Chobani’s “33% less sugar” claim required “an averaging of Chobani’s three flavors, a scaling up of Dannon’s serving size, and a rounding of fractional sugar contents to the nearest whole number[.]” He also conducted an online consumer survey and concluded that significantly more consumers would interpret Chobani’s “33% less sugar” claim as referring to the sugar content of a bottle of Gimmies versus a bottle of Danimals – not to an ounce of Gimmies versus an ounce of Danimals.

The online survey used a hypothetical involving two ice cream brands with different single-serve sizes. Consumers were asked about their understanding of a claim of “25% less fat” by the larger cup. Specifically, the survey asked if they were more likely to assume that the comparison above is made with respect to fat content per cup or per ounce; and second, if they were more likely to assume that the comparison above is made with respect to each flavor independently or the average of all three flavors. There was a “don’t know/not sure” option. Forty-four percent of respondents thought that the comparison statement “25 percent less fat than [hypo]” referred to the fat content per mini cup of ice cream, while only 28% of respondents interpreted it as a per-ounce claim. Similarly, 45% thought that the comparison statement referred only to the specific flavor in question, while 27% of respondents chose an average across flavors.  Only 10% thought both that the comparison was per ounce and across flavors.  Chobani’s expert criticized the study, but conducted none of her own.

The court found that Dannon’s evidence ruled out a literal falsity claim but proved a misleadingness claim.  Dannon proved that multiple interpretations were possible and that 10% of respondents would understand the claim completely (which doesn’t seem like enough to me, but ok).  Still, “read in the easiest and most straightforward way, the advertising on the Gimmies package is not accurate. A bottle of Gimmies has either 7 or 9 grams of sugar; a bottle of Danimials has either 9 or 10 grams of sugar. Even taking the biggest difference (7 grams to 10 grams), without any averaging, there is not 33% less sugar in a serving of Gimmies over a serving of Danimals.”

Chobani offered no persuasive evidence of consumer reception, and Dannon did. Indeed, the survey was actually favorable to Chobani by offering respondents a menu suggesting per ounce and flavor averaging options; “had the questions been open-ended, it is plausible that some respondents would not have contemplated that interpretation.”  The questions were close-ended but not therefore leading because they didn’t suggest a specific answer.  In this case, too, no control group was necessary to guard against bias or pre-existing beliefs because it wasn’t that kind of study.

Ultimately, reasonable purchasers who saw “33% less sugar than the leading brand” on the front of the box “cannot be expected to study the back of the packaging in the detail necessary to discover the cryptic, microscopic footnoted disclosures … never mind figure out what needs to be ‘averaged’ with what and perform the multiple calculations needed to make sense of that claim.” The court credited “numerous studies across different types of products reveal[ing] that consumers are unlikely to notice or pay attention to Chobani’s hard-to-find and hard-to-read ‘disclosure’ footnotes,” and these particular disclosures were also incomprehensible. No yogurt-specific study was required to show likely success on these points.

Chobani made a useless argument that it couldn’t be liable because it complied with FTC/FDA rules. Multiple problems with that: (1) Pom Wonderful says the Lanham Act is different. (2) Read carefully, the rules did not clearly authorize, much less require, Chobani’s choices here. “The relevant FTC Guideline about ‘Comparative Nutrient Content Claims’ states that comparative nutrient content claims must not contain ‘misleading implications’ in order to survive FTC scrutiny” and should also make clear the basis for the comparison, which Chobani didn’t do. And the FDA regs cited by Chobani, to the extent they governed relative claims, didn’t seem to allow Chobani to average the sugar content of its various flavors.

Ultimately, though, the court was guided by common sense:

[A] parent walking down the dairy aisle in a grocery store, possibly with a child or two in tow, is not likely to study with great diligence the contents of a complicated product package, searching for and making sense of fine-print disclosures in asterisked footnotes, and looking for flavors other the one(s) s/he wishes to buy (which may or may not be on the shelf) in order to perform multiple mathematical calculations – all in order to confirm the truth or falsity of a claim that is of dubious veracity, and that could easily have been replaced with the simple and truthful statement, “My product has less sugar per ounce than his product.” Nor does the law expect this of the reasonable consumer. With yogurt or any other product, plain vanilla ads and labels tend to work best.

As a result, Dannon also showed a likelihood of success under its NY GBL § 349(a) claims. Chobani argued that Dannon’s competitive injury was insufficiently consumer-oriented, but that’s not true. Misleading parents about the sugar content of a product intended for their children is a consumer harm: the public “has a strong interest in receiving accurate information, especially when it comes to products marketed specifically for children.”

However, Dannon failed to show irreparable harm. Though some courts have found irreparable harm with a showing of competition + “a logical causal connection between the alleged false advertising and the plaintiff’s own sales position,” that couldn’t happen here. The evidence indicates that, in the month Gimmies launched, Dannimals’ share of the yogurt product market expanded.  This wasn’t an absolute increase—sales of kids’ drinkable yogurt were generally down during the holiday season—but it did indicate lack of harm to Dannimals’ market position. “This data strongly suggests that neither Danimals’ sales position nor its brand equity has suffered irreparably.”  Danone also didn’t offer any evidence that it lost sales, or that the lost sales were attributable to the 33% less sugar claim versus the fact that Gimmies has somewhat less sugar than Dannimals and a larger serving size. It was purely conjectural to say that Danone lost sales as a result of the misleading claim.

Anyway, lost sales would be remediable at law. Danone argued that its injury was to its good reputation as a purveyor of healthy and nutritious food for children.  But such “purely conclusory testimony” proved nothing.  “[T]here is no denying the fact that Danimals has more sugar per fluid ounce than Gimmies does.”  Even if the ads were misleading, there was no evidence or other reason to think that Danone’s reputation would be more injured by the misleadingness than by the truth, and Chobani had a right to injure Danone with the truth. 

[There is an interesting set of ideas about but-for causation and appropriate baselines in here; this issue comes up a lot in various ways in advertising law, from whether a difference between the truth and the ad claim is merely puffery or is potentially actionable to materiality to harm causation, as here.  One can imagine a different legal regime where the advertiser acts at its peril in making false claims, even if it can show that the truth would also have worked. Presumably the advertiser chose falsity over truth because it thought the falsity would sell better, so we might rely on the advertiser’s own choices and not its post-hoc defenses. But that’s not the legal regime we have.]

Even worse for Danone, it developed that it had been selling Dannimals in old packaging that overstated the sugar content of its product. If Danone was willing to tolerate that because of the expense of making new packaging, it couldn’t turn around and accuse Chobani of irreparably harming it on the same metric.

In addition, prompted by the lawsuit, Chobani changed Gimmies, reducing the sugar in two flavors and changing the packaging. Flavor-specific labels now advertise that they contain “30% less sugar*” “*than the leading kids drinkable yogurt and disclose the comparison “Gimmies: 2g sugar per fl. oz.; leading kids’ drinkable yogurt: 2.9g sugar per fl. oz.” This easy to understand comparison will be on the front and the back.  The remaining old stuff will be sold or reach its expiration date by the end of March. Thus, an injunction would have nothing to redress. Although this will take a few weeks, Danone’s own use of stale packaging made its irreparable harm claim unpersuasive.

Relatedly, the balance of hardships favored Chobani because of the expense/difficulty of repackaging existing product (over 2.8 million bottles would expire before they could be relabeled) and the special harm of pulling a new product from the shelves before it’s fully established, which would damage relations with retailers.

Nor would a preliminary injunction help vindicate the public interest given the ongoing reformulation and repackaging.

Selling copyright-infringing content isn't trademark infringement or false advertising

Joint Stock Co.“Channel One Russia Worldwide” v. Russian TV Co., 2019 WL 804506, No. 18 Civ. 2318 (LGS) (S.D.N.Y. Feb. 21, 2019)

Channel One produces and broadcasts TV programming in the Russian Federation and its neighboring states, and granted third parties the “exclusive right to broadcast and re-broadcast [its] Programming and other copyrighted materials in the United States.” Russian TV allegedly runs a website through which it provides unauthorized access to the programming in the United States in exchange for a subscription fee, having decrypted or acquired unencrypted signals carrying the programming. The Russian TV website also sells set-top boxes (STBs) that facilitate unauthorized access to the Programming.  The website invites customers to “Watch Russian TV online” and advertises over 200 television channels; the complaint didn’t show use of Channel One’s marks on the website, but when unauthorized users stream the programming using Russian TV’s services, Channel One’s marks appear at the corner of the screen.

After dismissing a couple of defendants whose involvement wasn’t sufficiently pled, the court easily found that the complaint stated claims for direct copyright infringement and (in the alternative) secondary/contributory liability. In terms of unauthorized reproduction, it was reasonable to infer that the programming data remained on Russian TV’s US equipment for “at least several minutes” as required under Cartoon Network because the complaint alleged that defendants “store” Channel One’s programming signals “via equipment, including computer servers, located in the United States.” For secondary liability, given the allegations that Russian TV offered its streaming services “at far lower prices than lawfully licensed services,” it was plausible that Russian TV knew or had reason to know it was selling programming acquired through infringing activity and materially contributed to the unauthorized reproduction “by creating demand for it, advertising access to it on the Russian TV website and distributing it to subscribers.”

Trademark and false advertising claims were, however, dismissed. The complaint didn’t plausibly plead that Russian TV’s acts were likely to confuse consumers as to whether Channel One originated or sponsored Russian TV. Nor were facts alleged to show that consumers are likely to be confused about whether Russian TV or Channel One was the source of the programming. Instead, the allegation was merely that Russian TV displayed Channel One’s marks. “[A]s a general rule, the Lanham Act does not impose liability for the sale of genuine goods bearing a true mark even though the sale is not authorized by the mark owner because such a sale does not inherently cause confusion or dilution.”  

Comment: this analysis skips over a lot of detail that is fought out in other cases, particularly the various Phoenix Entertainment cases, but it gets to the right result.  There’s no such thing as a “counterfeit” digital signal in the way there can be a counterfeit purse, as long as the signal contains the content that is promised (here Channel One content).  A deepfake might be a counterfeit in the purse sense, but that’s not what’s alleged. The fact that the goods/services are intangible shouldn’t change this result (especially since the pixels on your screen don’t “come from” the broadcaster in any physical sense; the directions for how to configure them ultimately have the content creator as their source, but only through multiple intermediaries—and that’s true whether or not there’s an unauthorized rebroadcaster in the middle).  Dastar would be another way to get to this result, but it’s unnecessary where the court can see clearly the core issue, which is copyright.

False advertising: the complaint failed to plead anything that was false and advertising. Russian TV’s website states “Watch Russian TV online[.] Over 200 ... channels.” “Although this may be advertising, it is not alleged to be false.” The actual broadcasts of Channel One content weren’t “advertising or promotion” nor were they alleged to be false. Even the display of Channel One trademarks at the corner of the screen when consumers streamed the content wasn’t “commercial advertising or promotion” because that wasn’t an organized campaign by defendants to penetrate the relevant market. To the extent the false advertising claim was based on the theory that Russian TV misled consumers by “making it appear that Defendants have the right to rebroadcast [Channel One] Programming and Channels,” that didn’t work because claims about licensing aren’t misrepresentations about “the nature, characteristics, qualities, or geographic origin of ... goods or services,” as required by §43(a)(1)(B).

The DMCA anti-trafficking claim was also dismissed. The DMCA relevantly bars people from providing or otherwise trafficking in any “technology, product, service, device, component, or part thereof, that is ... designed or produced for the purpose of circumventing a technological measure.” 17 U.S.C. §§ 1201(a)(2), (b)(1). But the complaint carefully didn’t plead that the STBs provided to customers themselves circumvented any encryption, as opposed to receiving the results of prior circumvention. Accessing what’s already been obtained is not circumvention.

State law claims for unfair competition and infringement were, of course, preempted by the Copyright Act. Channel One tried to argue that Russian TV was “passing off the Russian version of Channel One Programming as the edited version of the Channel One Programming that is licensed to cable companies and IPTV providers.” First, relevant underlying facts weren’t alleged in the complaint, but more importantly, that wasn’t a passing off theory: “this alleged misrepresentation does not deceive consumers into believing they are watching Channel One programming when they are in fact watching Russian TV content.” So this theory was still preempted.

Fair use amicus for Google/Oracle cert petition

Pam Samuelson's amicus focusing on copyrightability was excellent and I hope it helps persuade the Court to finally take up this important issue in computer software.  I worked on a fair use amicus to point out that the Federal Circuit's override of a jury verdict in favor of fair use was also a big problem.

Thursday, February 21, 2019

Second Circuit summarily reverses bad Prevagen decision on statistical proof

FTC v. Quincy Bioscience Holding Co., 17-3745-cv(L) (2d. Cir. Feb. 21, 2019)

Quincy sold Prevagen dietary supplements, claiming (1) that the supplements improve memory and provide other cognitive benefits, (2) that these effects are clinically proven, and (3) that the products’ active ingredient “supplements” brain proteins that are lost with age. The FTC alleged that Quincy conducted a randomized, double-blind, placebo-controlled study that contradicted these representations and showed no statistically significant improvement in the memory and cognition of participants taking Prevagen over participants taking a placebo. Quincy subsequently “conducted more than 30 post hoc analyses of the results” of the study, and “the vast majority of these post hoc comparisons failed to show statistical significance.” While the study showed a “few positive findings on isolated tasks for small groups of the study population,” these findings allegedly did not “provide reliable evidence of a treatment effect.” The district court, in a poorly reasoned opinion, dismissedthe complaint because the post hoc analyses must have shown something. The court of appeals summarily reversed.

“The FTC has stated a plausible claim that Quincy’s representations about Prevagen are contradicted by the results of Quincy’s clinical trial and are thus materially deceptive in violation of the FTC Act and New York General Business Law.” For example, Quincy claimed broadly that in a clinical study “Prevagen improved memory for most subjects within 90 days,” yet this wasn’t true: the study “failed to show a statistically significant improvement in the treatment group over the placebo group on any of the nine computerized cognitive tasks.” Not only did this make plausible that it was deceptive to claim that “the majority of people” experience cognitive improvement from taking Prevagen, but the FTC also stated a claim that Quincy’s representations that this cognitive improvement is clinically supported are deceptive. Further, the FTC alleges that Quincy’s claim that the active ingredient in Prevagen, apoaequorin, “enters the human brain to supplement endogenous proteins that are lost during the natural process of aging” was false. Quincy’s “safety studies show that apoaequorin is rapidly digested in the stomach and broken down into amino acids and small peptides like any other dietary protein.” “Drawing reasonable inferences in favor of the FTC, as we must, the FTC plausibly alleged that Quincy’s representations about Prevagen’s active ingredient entering the brain are false.” The district court erred in dismissing the complaint and declining to exercise supplemental jurisdiction over New York’s claims.

The court doesn’t go into detail on the bad statistical understanding underlying the district court’s mistakes, but you can read the amicus brief I signed or let xkcd do it.

Show me your teeth: dentist's before-and-after closeups aren't copyrightable for want of originality

Pohl v. MH Sub I, LLC, No. 4:17cv181-MW/CAS (N.D. Fla. Jun. 20, 2018)

H/T Daniel Kegan. Dr. Pohl took before-and-after photographs of his cosmetic dental work for his Florida cosmetic dentistry practice’s website. He took such photos of “Belinda” in 2004. “The photos consist of two direct shots of the patient’s teeth—one before the dental work and the other after the dental work. The patient is revealing her teeth and, in both shots, the photo consists of her teeth, her lips, and a small area around the mouth.”  
the photos at issue

He sued defendants for designing/developing seven websites on which the images appeared without his permission.  Although the deposit copy of the site he used for his copyright registration wasn’t in the record, the jury could find that it contained the images at issue.

The court then found that the before-and-after photos weren’t copyrightable because no reasonable jury could find the photos were sufficiently creative or original. Though the bar was low, the photos failed to pass it.  Highly informative product photos intended to sell the product through accurate depiction may lack sufficient creativity to be protected, and that was what happened here. Such photos “lack any creativity or originality primarily because they serve a utilitarian end—to identify goods or services that a viewing customer can expect from the business.”

Pohl argued that he was responsible for “selecting the camera, posing the subject matter, and determining the lighting and photo angle before taking the photographs.” But none of this involved creativity.  He didn’t remember what kind of camera he used—even whether it was digital or film.  He didn’t remember whether Belinda was sitting or standing for the photos.  “To the extent he posed her for the camera, it was to tilt her head, lift her chin up or down, instruct her to smile, or to tell her to look at the camera. As for lighting, there is no creativity in merely having sufficient lighting in the room ….” For the angle, he testified that he moved “the camera in and out until I get it in focus,” which the court deemed “the most rudimentary and basic task for photographers since the era of the daguerreotype.” The entire process took no more than five minutes.

If utilitarian photos of Chinese food in different patterns are uncopyrightable, as a previous case held, then these photos are clearly uncopyrightable; “directing a subject to smile and moving a camera to focus on a portion of the subject’s face” has even less of a “creative spark.”  

Guitar design authorship blues: delay and consent defeat (c), ROP, other claims

Webster v. Abbott, 2018 WL 7352411, No. 8:17-cv-01795-T-02CPT (M.D. Fla. Nov. 30, 2018)

Webster is a luthier and guitar technician who goes by “Buddy Blaze.” Around 1985, he modified a Dean ML guitar and had the guitar painted blue with a lightning graphic. He gave the guitar to a friend, Darrell Abbott, who called it “The Dean from Hell” (DFH) and then went on to become a guitarist in the band Pantera known as “Dimebag Darrell.” In 2004, Abbott signed an “endorsement-type” contract with Dean Guitars (and was then murdered). Dean Guitars began to sell copies of the DFH. After Abbott’s funeral, the former owner of Dean Guitars contacted Abbott about painting a copy of the DFH for release, but Webster explained that another person had painted the original version at his direction. After he knew Dean Guitars was selling DFH replicas, Webster also lent photographs to Dean Guitars for a display at the 2005 National Association of Music Merchants tradeshow which linked Webster to Abbott and the DFH. He testified, “I was okay with them displaying it at the booth during the show.” 


By 2006, Webster knew Dean Guitars was selling the DFH as a “mass-market product” with several price points and versions. He was unhappy that Dean Guitars was issuing a cheap, imported version of the DFH called Cowboy From Hell or DFH/CFH. He told the then-CEO of Dean Guitars, “we’ve got to work this out.... I’m not okay with what’s going on,” and “you can’t do that without, you know, my blessing, without a release from me.” In 2007, the then-CEO responded that “I have taken some time and spoken to several ‘people in the know’ and the consensus concerning Dime’s graphic is that Dime’s estate is the legal owner of it. With that said, I still would like to work with you on a Dime project because I am not about making enemies but keeping friends.” Webster objected; Dean Guitars told him to sue the estate as the owner/licensor of the graphic. Webster continued to object.

In 2009, Webster worked on his own signature guitar, the Buddy Blaze ML, produced and sold by Dean Guitars; he promoted the Buddy Blaze ML alongside the then-CEO and provided a brief history of the DFH and compared his model with the DFH. He’s appeared and been referenced in other videos apparently produced by Dean Guitars, whose website at one time linked two YouTube videos featuring interviews with Webster in which he gave the history of DFH in front of the original DFH and promoted his own guitar and volunteered information about Abbott and the DFH. Neither video made any mention of DFH reissues.
Buddy Blaze ML

In 2016, he registered a copyright in the DFH lightning graphic design and sued for copyright infringement, civil conspiracy and unfair competition in 2017.

The court found the copyright infringement and civil conspiracy claims time-barred. Though a copyright infringement claim separately accrues with each infringing act, “[w]here the gravamen of a copyright infringement suit is ownership, and a freestanding ownership claim would be time-barred, any infringement claims are also barred.” Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014) didn’t change the rule that the an ownership claim accrues only once. In the Sixth and Ninth Circuits, such a claim accrues “when plain and express repudiation of co-ownership is communicated to the claimant.” In the First, Second, Fifth, and Seventh Circuits, the clock starts “when the plaintiff learns, or should as a reasonable person have learned, that the defendant was violating his rights.” Under either test, the claim here was time-barred.

Dean Guitars’ “olive branch” offer of a separate relic DFH with the possibility of royalties for Webster didn’t make its repudiation of Webster’s claim to ownership any less express. The language was clear that any royalties would have stemmed from Webster’s work with a possible future relic model, not from the original DFH. Further, Dean Guitars told Webster to sue the estate. Webster’s delay, allegedly out of respect for Abbott’s family following his death and then because of Webster’s own family issues and the then-CEO’s failing health, weren’t justifications that would pause the legal clock.

Although the unfair competition claims weren’t preempted (they didn’t depend on ownership or infringement of the copyrighted design), they also failed. Webster objected to the use image “for years in connection with the historical fact of his creation of the Dean From Hell,” especially as it relates to the reissues. As a result, he alleged, “people came to think that [Plaintiff] was wealthy or had authorized these uses of his name and likeness” and this association damaged his reputation. But his allegations and evidence couldn’t support this claim.

Setting aside issues with proving injury and a possible fair use defense, the most fundamental flaw in Plaintiff’s argument is that Defendants’ statements were neither false nor misleading. … Most of the statements at issue concerning the history of the DFH and Plaintiff’s friendship with Mr. Abbott are made by Plaintiff himself. Importantly, Defendants made no misleading statements with respect to any endorsement or sponsorship of the DFH reissues, or even Dean Guitars itself. In fact, there are no such statements or implicit suggestions linking Plaintiff to the replicas at all.

A NAMM attendee also stated in his declaration that “I heard Dean representatives using Buddy’s name when selling the Dean From Hell copies. The gist of their statements was that Dean was selling guitars like the one that Buddy Blaze re-built for Darrell.” But there was nothing untrue or misleading about such statements.

“There is no suggestion in any material Plaintiff sets forth that Defendants used Plaintiff’s name or likeness to sell or market the DFH reissues, or any suggestion that Plaintiff endorsed or derives income from the guitars.” Webster voluntarily participated in each video, and couldn’t identify any harm therefrom.

Webster’s invasion of privacy by misappropriation claim (right of publicity under Texas law) also failed. Texas requires that (1) the defendant appropriated the plaintiff’s name or likeness for the value associated with it; (2) the plaintiff can be identified from the publication; and (3) there was some advantage or benefit to the defendant. Defendants pointed out that Webster voluntarily participated in the videos, but Webster argued that he permitted use as it related to the history of DFH, but not reissues of the guitar. The court reasoned that Webster “certainly had some idea of the extent of the publication of the interviews yet nonetheless consented. Each video appears to have been filmed by Dean Guitars and, moreover, at trade shows for music merchants. As for the reissues, Plaintiff no doubt knew that the guitar Defendant Haney signed in one of the NAMM videos was not the original DFH. Plaintiff nonetheless voluntarily related the history of the DFH to the interviewer. Reissues do not appear and are not referenced in any other video featuring Plaintiff.”

Ultimately, there was insufficient evidence that defendants appropriated Webster’s name or likeness for the value associated with it. At most, they used his name (when he wasn’t himself participating in a video) only to provide historical background. In addition, the claims based on the videos were “extracted from either an old Dean Guitars website, or from the vastness of the internet” and there was no evidence that these old videos were even used as ads to sell the reissues.

Tuesday, February 19, 2019

Competitor can't stop allegedly false promotion of unapproved substances bearing CYA "not for human use" warnings

Nutrition Distribution LLC v. Pep Research, LLC, 2019 WL 652391, No. 16cv2328-WQH-BLM (S.D. Cal. Feb. 15, 2019)

Nutrition Distribution sued Pep for false advertising under the Lanham Act, alleging that its competitor, a supplement company, falsely advertised certain prescription-only drugs and synthetic peptides as “research peptides and chemicals” that are “not for human consumption” and “intended for laboratory research only” while also marketing the products for personal use and consumption by bodybuilders, which is misleading because Pep fails to disclose that the [roducts are banned from sporting events and pose health and safety risks. Pep’s website states, for example, that one product has “undergone several recent studies ... reveal[ing] rises in lean body mass and decreases in body fat,” and “a considerable rise in strength, well being, along with healing possibilities”; another product “enhance[s] bone toughness as well as stop[s] weakening of bones”; and another product “decreases the risk and severity of atherosclerosis.”

A page also states:

All customers represent and warrant that through their own review and study that they are fully aware and knowledgeable about the following:
The[] government regulations regarding the importation, purchase, possession and use of research products and other peptides.
The health and safety hazards associated with the handling of our products in a research setting.
That our products are NOT intended to be used as a food additive, drug, vitamin, supplement, cosmetic or any other inappropriate application. Such a sale would be otherwise denied.

Other allegedly disingenuous pages state: “Safety Information: For Research Use Only. Not Intended for Diagnostic or Human Use. Information is for educational purposes and product is not intended to treat, cure, or diagnose any condition or disease” and “All products are intended for laboratory and research use only, unless otherwise explicitly stated. They are not intended for human ingestion, use, or for use in products that may be ingested.”

Somehow, however, ads for the products turned up on and  Moreover, the products are allegedly intended for human consumption given that they’re “sold in liquid form in dropper vials, for easy oral use, along with the amount of liquid to take for an active oral dose.” Pep allegedly targets “bodybuilders, athletes, and fitness enthusiasts,” using social media and terminology specific to that audience. For example, an affiliate offered a free give away via social media post, and one customer tagged an amateur bodybuilding competitor in the post.

The court granted summary judgment to Pep for failure to show literal falsity.  The problem here seems to be a contradiction: the clear warnings against human consumption are combined with marketing to human consumers, in a wink-wink-nudge-nudge fashion.  Pep argued that failure to disclose safety risks wasn’t false advertising (which is not the case, though it’s often harder to show falsity by omission than to show affirmative falsity) and that use of a particular advertising forum couldn’t constitute falsity (which I think is also wrong as a blanket statement: use of a forum itself can make a representation that the products advertised are appropriate for the target market).

The court seems to have answered a slightly different question, framing the issue as whether the claims “for research purposes only” and “not for human consumption” were literally false, and it then concluded that there was no evidence that these statements were false.  The fact that the products pose health risks to humans wasn’t inconsistent with those statements. “To demonstrate falsity by necessary implication, there must be evidence showing that a particular unambiguous conclusion ‘necessarily flow[s]’ from the Representations in the context of the Product marketing, and that the conclusion is false. There is no evidence in the record demonstrating an unambiguous message necessarily implied by the Representations in the context of the Product marketing.” There was also no evidence submitted of a false implicit message.  [It seems that one possibility here, other than consumer survey evidence, would be expert evidence about how bodybuilders are induced to try unapproved products.  Interesting question about how to frame the survey: in some sense, you’re looking for bodybuilders/other targets to explain how they’d react to seeing an ad for these products in a bodybuilding context.  I am guessing they’d infer that the products could be used by humans to improve performance, given that the only point of advertising them to bodybuilders instead of to research scientists is to suggest that bodybuilders try them.]

Without more, the record (viewed in the light most favorable to plaintiff) showed only that defendants advertised to bodybuilders online, described the products’ putative benefits, sold consumer-usable formulations, and didn’t provide information about health risks or anti-doping bans.  That wasn’t enough to show falsity as a logically necessary conclusion.  [I suspect a government agency could get a different result on whether this combination encourages unlawful use, if the use is in fact unlawful (those do sound like disease/drug claims).]

ICANN and the New Top-Level Domains: Feb. 25 conference at AU-WCL

ICANN and the New Top-Level Domains

American University Washington College of Law, Room NT01

Monday, February 25, 2019
We are in the midst of an historic expansion of internet domain names with more than 1200 new generic top-level domains (“gTLDs”) now competing with <.com>. This 5000% increase in gTLDs is the biggest change to the internet's domain naming system in thirty years (and more are coming soon!). Accompanying these new gTLDs, are new and innovative--but little known--IP rights protection mechanisms. These developments could have a profound impact on the rights of IP owners, domain name registrants, and the public, and on the architecture of the internet.
1:30 Welcome, Christine Haight Farley, American University Washington College of Law

1:40 Trademark Protections in the New gTLDs
Brian Beckham, WIPO (invited)
Michael Karanicolas, University of Toronto
Brian King, MarkMonitor (invited)
Rebecca Tushnet, Harvard Law School
Brian Winterfeldt, Winterfeldt IP Group (invited)
Mary Wong, ICANN (invited)

3:00 Break

3:15 “Walled Gardens:” Should gTLDs Become Private Platforms?
Becky Burr, ICANN Board & Neustar
Sarah Deutsch, ICANN Board
Kathy Kleiman, Center for Information Technology, Princeton University
Jeff Neuman, Com Laude/Valideus
Mitch Stoltz, EFF

4:30 Closing, Patricia Aufderheide, American University, School of Communication

4:35-5:30 Reception

Sponsored by American University Washington College of Law, American University School of Communications, Program on Information Justice and Intellectual Property, and Internet Governance Lab