major beer battle turns on Mead (Johnson)

Long post, lots of stuff to cover in this opinion.

MillerCoors, LLC v. Anheuser-Busch Cos., No. 19-cv-218-wmc (W.D. Wisc. May 24, 2019)

There’s an apocryphal ad story about a cannery stuck with unmarketable pale salmon that turned its disadvantage around by labeling the product as “Guaranteed not to turn pink in the can!” (The competitors supposedly responded by advertising that their products contained no bleach.)  The point is that the advertising context itself conveys a lot of meaning: in particular, aspects of one’s own product that one presents proudly are good, while aspects of the competition’s product that one brays loudly about are bad, even (or especially) if the consumer has no other information about how to identify good/bad characteristics.  AB took advantage of this standard feature of human communication, and got sued for it.

There’s a lot of detail here (and really good lawyering on both sides), but: AB started an ad campaign highlighting MC’s use of corn syrup in brewing Miller Lite and Coors Lite, whereas AB uses rice in Bud Light (but corn syrup in various other AB beverages).  MC sued for false advertising and trademark dilution; the court granted a preliminary injunction limited to ads that indicated in some way that Miller Lite and Coors Lite actually contained corn syrup when consumers drank it, specifically: (1) Bud Light contains “100% less corn syrup”; (2) Bud Light in direct reference to “no corn syrup” without any reference to “brewed with,” “made with” or “uses”; (3) Miller Lite and/or Coors Light and “corn syrup” without including any reference to “brewed with,” “made with” or “uses”; and (4) describing “corn syrup” as an ingredient “in” the finished product.  In addition, “the court would strongly encourage advance clearance before adopting any phrase or creative license in an attempt to maneuver around the prohibitions.”

The most disappointing part of the opinion for me was the court’s refusal to dismiss the trademark dilution claim because fair use is an affirmative defense. First, that’s new law as far as I’m aware, and given the First Amendment implications of applying dilution law to comparative advertising, it’s not a well-justified decision.  (The Ninth Circuit has held that in nominative fair use cases (which this is), the defendant’s only burden is to show that the use is referential (which MC pled), after which the burden shifts back to the plaintiff to show lack of entitlement to the defense.) Second, even so, the complaint clearly pled itself out of court; there is no way that this is not comparative advertising/nominative fair use.

On to the main event: The yeast that makes beer needs a nutrient substrate with sugars.  Sugars can come from malt, “or from a combination of malt and starchy grains like corn or rice.” The parties agreed that the sugar source relates to style and taste characteristics, though cost may also be a factor: corn syrup is cheaper than rice.  “There is no meaningful difference between using rice or corn syrup as an ingredient in terms of health or safety of the resulting beer product.”  Fermentation “converts the corn syrup sugars into ethanol, flavors, aromas, carbon dioxide, heat and a next generation of yeast cells, leaving a small amount of residual sugars.” No corn syrup remains in the Coors Light and Miller Lite products at the end of fermentation, and none is added.

Nonetheless, AB launched a huge ad campaign featuring claims that Miller Lite and Coors Light are “made with” or “brewed with” corn syrup. Here’s one Super Bowl ad.  Suffice it to say that the gist—central to the ads and much repeated—is that Bud Light doesn’t use corn syrup and Miller Lite/Coors Light do (“made with” and “brewed with” are frequently repeated).  AB billboards touted “100% less corn syrup” than the two competitors. An AB Twitter account posted an image displaying a Miller Lite can next to a Karo corn syrup bottle as if in a family portrait, and a Facebook user posted a similar image, referencing the campaign:

Karo Lite (syrup) and Miller Lite "family portrait"

user-generated content matching BL/ML with ears of corn and Aunt Jemima syrup

Another ad showed the following frames:

"Corn syrup"/"No corn syrup" by bottles of the parties' products

Another ad mocked MC for complaining and an AB character suggested “also imitating us by putting an ingredients label on your packaging. People want to know what ingredients are in their beer. But what do I know? I’m just the king of a kingdom that doesn’t brew beer with corn syrup.”

Beer Business Daily reported that according to Andy Goeler, AB’s head of marketing for Bud Light, “[Anheuser-Busch] did focus-group the heck out of this [Special Delivery] ad, and found consumers generally don’t differentiate between high fructose corn syrup and corn syrup, and that it is a major triggering point in choosing brands to purchase, particularly among women.”  In another interview, in response to the question, “What is wrong with corn syrup?,” Goeler responded: “People started to react to corn syrup, they started to react to no preservatives, and they started to react to no artificial flavors. There are things that consumers on their own had perceptions -- for whatever reason -- that there were ingredients they preferred not to consume if they didn’t have to.”  The interviewer noted that AB focused on corn syrup and not preservatives and asked why Goeler thought “consumers see corn syrup as something they don’t want.” He called it “an ingredient some prefer not to consume is the simple answer. . . . [S]ome consumers -- for their own personal reasons -- have concluded that they prefer not putting something like corn syrup, if they had a choice, into their body.” 

Though this is in one sense an ordinary bullshit nonanswer, it contains the key conflation at issue here: treating the brewing substrate as if it were what consumers “put[] … into their body,” which it is not.  Goeler’s answer recognizes the obvious fact that consumers have no particular reason to think about the distinction between beginning ingredients and the stuff in the can, and the ads are self-evidently encouraging consumers to consider the stuff in the can as if it still contained corn syrup, which is a reason to buy Bud Light instead.  What would be the point of the ads otherwise?  [See discussion of Grice below.]  Anyway, in another interview, Goeler stated that AB would continue to focus on “ingredient transparency,” and AB’s senior director of corporation communications echoed this, concluding that “Knowing what is and isn’t in your beer -- whether you paid for it or not -- can only be good for the beer industry overall.”  Again: there’s no corn syrup in MC beer, but of course that’s the message; the use of “made with” and “brewed with” does not tell consumers otherwise.

MC submitted a survey in which the control ad was the same as the test ad, but with an added, prominent disclaimer: “While corn syrup is used during the brewing of Miller Lite and Coors Light, there is NO corn syrup in the Miller Lite and Coors Light you drink.” Its expert concluded that “61 percent of respondents who saw the test stimulus believe that corn syrup is in the Miller Lite and/or Coors Light you drink,” compared to 26 percent in the control, for 35% net confusion. The expert also concluded based on an analysis of open-ended responses that the phrase “‘made with’ used in the Bud Light commercial to describe the relationship between Miller Lite and/or Coors Light and corn syrup is ambiguous.”

MC also argued that AB’s ads exploited or furthered misconceptions about corn syrup and high fructose corn syrup (HFCS).  They are not the same thing, but MC’s industry expert identified “a common point of confusion about corn syrup and HFCS, despite the fact that they are very different products.” The survey expert concluded that “more respondents who saw the test stimulus (24 percent) than who saw the control stimulus (19 percent) believed that the commercial says, suggests, or implies that corn syrup and high fructose corn syrup are the same.”

Unsurprisingly, after the ad campaign was launched, MC received a bunch of consumer communications related to corn syrup, up from basically none. The survey expert also analyzed these, and found that 18% indicated that the presence of corn syrup would end or decrease their purchases of MC beers and 4% indicated they’d start or increase purchases.  Relatedly, social media responses indicated that consumers were reacting to the ads as if corn syrup were a bad thing.  Of consumer posts that mentioned corn syrup and at least one of the relevant brands, 22% expressed negative sentiments and 9.8% expressed positive sentiments. Similarly, 28.6% of consumer posts indicated a mistaken belief that corn syrup used in brewing is present in the final product (the beer itself), while only 6.9% of posts demonstrated understanding that corn syrup wasn’t present in the final beverage.

Social media posts indicating that corn syrup is in the beer and that's bad

For the misleadingness alleged here, at the preliminary injunction stage, a consumer survey or other “hard evidence of actual consumer confusion” is not required. Instead, the Seventh Circuit, consistent with its self-understanding as a court of common-sense realists who are good at interpreting the ordinary meaning of ads, instructs that district courts should analyze “the ads themselves, the regulatory guidance, and the evidence of decreased demand.”  The court mentioned using intent to deceive as the basis of a presumption that the deception succeeded, but pointed out that courts that list this possibility never seem to find the requisite egregious intent, and it wasn’t going to be the first.  [The evidence here seems to me to support a finding that MC intended consumers to take away the idea that “brewed with” and “made with” is the same as “ingredient in the beverage.”  Is that “egregious”?  I think it’s about the natural meaning of an advertising statement.]

Statements that Miller Lite and Coors Light “use” or are “made with” or “brewed with” corn syrup were literally true, but allgedly deceived consumers into believing that MC’s products actually contained corn syrup and thus were unhealthy and inferior to Bud Light. MC relied on Abbott Laboratories v. Mead Johnson & Company, 971 F.3d 6 (7th Cir. 1992), in which the Seventh Circuit concluded that the name Ricelyte “implies more than the permissible message that Ricelyte is produced from rice or contains rice syrup solids derived from rice carbohydrates. It also implies that Ricelyte actually contains rice and rice carbohydrates—or at least we can say that Abbott has established a strong likelihood of so proving at trial.” 

But there is no affirmative duty to disclose or disclaim if the advertisement at issue is not false or misleading. And, unlike in Abbott Laboratories, the court thought that, viewing the “made with,” “brewed with” or “uses” statements in their full context, there were no express or implicit messages that the corn syrup is actually in the finished product. [So the court rejects the survey finding that indeed this was the message received by consumers from the ads.]  Specifically, the ads using the “made with” or “brewed with” language didn’t show corn syrup being added to the finished MC products.

MC also relied on Eli Lilly and Company v. Arla Foods, Inc., 893 F.3d 375 (7th Cir. 2018), in which the Seventh Circuit affirmed a preliminary injunction against a cheese manufacturer’s ads implying that milk from recombinant bovine somatropin (“rbST”)-treated cows was unwholesome. The ads stated that “Arla cheese contains no ‘weird stuff’ or ‘ingredients that you can’t pronounce’—in particular, no milk from cows treated with [rbST],” and depicted rbST as “a cartoon monster with razor sharp horns and electric fur.”  Though the explicit statements were true, the campaign “centers on disparaging dairy products made from milk supplied by rbST-treated cows” and drew “a clear contrast between Arla cheese (high quality, nutritious) and cheese made from rbST-treated cows (impure, unwholesome)” with monster imagery, “weird stuff” language, and child actors “to colorfully communicate the message that responsible consumers should be concerned about rbST- derived dairy products.”

But the ads here didn’t “disparage” corn syrup “or otherwise expressly draw attention to any negative health consequences.” (Even so, the court apparently agreed with MC that an express link “may have been unnecessary here, since at least some consumers appear to associate corn syrup, and particularly high fructose corn syrup, with harmful health consequences, or certainly defendant hoped,” but apparently didn’t consider that to be enough.)  Instead of “analyzing the commercial or the advertising campaign more broadly in order to demonstrate that these statements are misleading,” MC relied on the responses to open-ended survey questions, and that wasn’t enough.

The problem with using the survey to find the ads misleading (even though misleadingness is, even in the Seventh Circuit, supposed to be shown with consumer reaction evidence) is that surveys can’t be used to bring statements that are merely “susceptible to misunderstanding” within the scope of the Lanham Act. Mead Johnson & Company v. Abbott Laboratories, 201 F.3d 883 (7th Cir. 2000). In that case, “the Seventh Circuit rejected an attempt to solely rely on survey evidence to demonstrate that language is misleading.” On a petition for rehearing in Mead Johnson, the court of appeals stated that “interpreting ‘misleading’ to include factual propositions that are susceptible to misunderstanding would make consumers as a whole worse off by suppressing truthful statements that will help many of them find superior products.” The court of appeals also removed its initial statement that “[a] ‘misunderstood’ statement is not the same as one designed to mislead.” The court here commented that this statement would have supported plaintiff’s position that intent to deceive could be a basis for finding a statement misleading, but it’s gone now.  [I find it ironic that an amendment made to recognize that the Lanham Act is strict liability is used here to contract liability; the district court’s reasoning also makes a logical error about the contrapositive: the fact that intentional deception isn’t required for liability doesn’t mean that intent to deceive isn’t probative of whether an ad is misleading.]

“The court notes that Mead Johnson is not without its critics, and understandably so: how does one draw the line between an advertising statement that is susceptible to misunderstanding but not misleading?”  The court cites me:

One scholar has suggested that this holding requires materiality in addition to a misunderstanding for a claim to be misleading. Rebecca Tushnet, Running the Gamut from A to B: Federal Trademark and False Advertising Law, 159 U. Pa. L. 1305, 1349 (2011). To illustrate, Tushnet explains, “One may misunderstand a fact in the abstract: I could be wrong about the size of a computer’s hard drive. If I am misled, however, I am being led: induced, or at least potentially induced, to change my position based on my misunderstanding, as when I am more likely to buy a computer because of my belief about the size of the hard drive.”

But even this formulation “suggests that something more overt is required on the part of the advertiser to find a true statement misleading.” [I respectfully disagree.  The “something more” is materiality, which shouldn’t have to be “overtly” claimed in the ad, but rather should be based on evidence about the kinds of things consumers care about.  In my hard drive example, nothing more should be required than a misstatement about the hard drive’s size plus evidence that consumers care about the size of hard drive, rather than also requiring the rest of the ad to say “you should care about hard drive size!”]

“The Third Circuit -- the only court to discuss substantively the Mead Johnson decisions -- described the Seventh Circuit’s essential holding as follows: ‘there are circumstances under which the meaning of a factually accurate and facially ambiguous statement is not open to attack through a consumer survey.’”  [But exactly what are those circumstances?  I obviously share the district court’s frustration with the vagueness of the existing Seventh Circuit formulation.  The other possibility, besides materiality, that I discuss in my advertising law class is cost-benefit analysis: given how utilitarian the Seventh Circuit is, that might be even more plausible, especially given its language in response to the petition for rehearing.  The difference between true but misleading and true but misunderstood might be whether one can convey the truth some other, less misleading way. If a statement is useful to some substantial number of consumers and it can’t be appropriately qualified without confusing/failing to inform that subset, then confusion among another subset ought to be accepted as irreducable and unfortunate “misunderstanding.”  But if there is a way to convey the truth without also producing a big chunk of materially confused consumers, then the consumer protection purpose of the Lanham Act demands that we label the inefficient presentation of the truth “misleading.”  In that case, the survey here apparently shows that the existing ads are misleading, not just misunderstood, given the possibility shown by the control ad of conveying the truth without confusing nearly as many consumers.  In other words: some people may still misunderstand the control ad. But if it’s as good as we can get while still allowing AB to convey the truth, for whoever cares about it, then it’s the ad that should be used.]

The district court reasoned that “requiring plaintiff to point to some other aspect of the ad besides a truthful statement” was consistent with the caselaw—other cases finding misleadingness “consistently seem to rely on disparaging or derogatory references to the ingredients in the competitor’s product, or references that suggest a quality not present in a product is in fact in the product.” The fact that AB made a bunch of noise about corn syrup was not itself disparaging. 

MC relied on Grice’s “maxim of relevance,” H.P. Grice, Logic and Conversation, in 3 Syntax and Semantics: Speech Acts, 47 (P. Cole and J.L. Morgan, eds. 1975). As formulated by MC’s counsel:

if a speaker says something that is capable of more than one meaning and knows that . . . one of those meanings is something that’s relevant and meaningful information to the listener and that the other meaning is something that is irrelevant and not meaningful to the listener, the listener will assume that the speaker means the meaningful, relevant statement because why would you be telling me something that’s not important.

The court found this argument “[i]ntuitively” appealing, despite AB’s argument that there are other reasons to highlight rice versus corn syrup distinction, namely that consumers may align Bud Light with the “farm-to-table” movement or using a “real ingredient versus a syrup.” The court thought that was “counter to the weight of the evidence as to defendant’s intent that associating Miller Lite and Coors Light with corn syrup would motivate consumer’s health concerns with consuming corn syrup or worse, high fructose corn syrup.”  But even so, the scale of a campaign wasn’t enough to find a “neutral, truthful statement” misleading. 

I think the court’s reasoning does not mesh with how advertising actually works, and encourages pollution of the information environment. As Eric Goldman and I have written in our text:

[W]hen an advertiser prominently claims some feature for its product, we are likely to assume that the feature is relevant and desirable. The advertiser is using the cooperative principle of relevance to imply these things without stating them directly. The only direct statement is that the feature exists. Researchers have studied irrelevant claims used to tout brands, such as claims that instant coffee has flaked crystals. When some consumers saw ads featuring relevant attributes and others saw ads featuring irrelevant attributes, the latter group preferred the product more. Even when the researchers told consumers which attributes were irrelevant in advance, consumers still preferred the product more when shown ads using the irrelevant attribute. See Gregory S. Carpenter et al., Meaningful Brands From Meaningless Differentiation: The Dependence on Irrelevant Attributes, 31 J. Mktg. Res. 339 (1994).

The fact that it’s in an ad instructs the viewer about the value to be assigned to the advertised characteristic—and consumers know this.

MC had another possible argument: the “something else” might come from the rest of the campaign—the ads that didn’t limit themselves to “made with” or “brewed with” but were (otherwise) focused on exactly the same message. “In other words, consumers could reasonably interpret ‘made with’ and ‘brewed with’ to mean corn syrup is in the final product because of defendant’s other ads describing Bud Light as having 100% less corn syrup, or describing Miller Lite as ‘corn syrup’ and Bud Light as ‘no corn syrup’ without reference to the brewing process.”  But the court was concerned that this was too much of a stretch because most of the ads at issue, and the ones most widely disseminated, used “made with,” “brewed with,” or “uses.”

The court also declined to follow FTC cases saying that defendants can’t exploit preexisting misunderstandings, because FTC precedent “is largely inapplicable to Lanham Act cases.” [While each of the district court’s conclusions here is understandable on its own, I have to say that the net impression is: MC needs to show “something more,” but the court systematically excludes any possible “more” that is outside the four corners of a challenged ad—which does not fit my understanding about how human communication works.]

Thus, there was no likelihood of success on the merits as to ads solely using the language “brewed with,” “made with,” or “uses.”

Next, the court turned to ads touting that Bud Light has “100% less corn syrup than Miller Lite or Coors Light” or that it has “no corn syrup.” “[T]hese statements, while also literally true, support a reasonable interpretation that Miller Lite and Coors Light contain corn syrup,” and MC showed a likelihood of success on the merits.  AB argued that, given the other ads, consumers would understand these to be shorthand references to brewing, but “a reasonable jury could and likely would find that these ads encouraged consumers to draw the wrong inference from the original ads.”

“Ingredient” claims: There aren’t labeling requirements for beer ingredients, and it’s not clear what an “ingredient” is when it comes to beer. For food, “ingredient” “appears to cover items that are used in the production of a food product, even if not in the end product (e.g., leavening items).” In the past (and apparently even now), MC has listed corn syrup as an “ingredient” on its website, without any reference to it being used solely in the brewing process and not present in the end product.  In context, in most of the ads, “ingredient” was used in conjunction with the “made with” or “brewed with” language, except for one ad, the one that says “Look if you’re this set on imitating our kingdom, may I suggest also imitating us by putting an ingredients label on your packaging. People want to know what ingredients are in their beer. But what do I know? I’m just the king of a kingdom that doesn’t brew beer with corn syrup.”  That language crossed the line “to encourage a reasonable consumer to believe that corn syrup is actually contained in the final product.”

MC also challenged AB’s statements that Miller Lite and Coors Light selected corn syrup to “save money” or because it is “less expensive.” The court refused to hold this misleading based on MC’s theory that a consumer would conclude that cheaper substrates are less healthy—that was just too much of a stretch.  [This result, by the way, seems reasonably consistent with my proposed cost-benefit reading of Mead Johnson.]

The court then returned to MC’s “strongest evidence,” AB’s own statements of its intent that “it was both aware of and intended to exploit consumer concerns about corn syrup (and high fructose corn syrup in particular).” Though this evidence indicated AB’s hope that consumers would interpret statements about “made with” or “brewed with” as meaning that corn syrup was actually in the finished products, the court declined to presume misleadingness, “though perhaps this evidence could serve to color the ‘made with’ and ‘brewed with’ statements to push them across the line to allow a reasonable finding that they are misleading, and not simply susceptible to misunderstanding.” [Which suggests that a jury could consider the issue as to all the ads, though the court then indicates that it’s most interested in guidance from the court of appeals.  Again, one might be able to fit evidence of intent into a cost-benefit analysis as well as into a materiality analysis: an intent that consumers believe something beyond the literal statement could itself suggest that there are other, less confusing ways to convey the truth, and an intent that consumers be alarmed by a statement is pretty good evidence that they might act on it, if we believe that a major manufacturer like AB generally has some idea about what its consumers care about.]

The court then, somewhat confusingly, turned to whether there was evidence that a “substantial segment” of the audience was deceived by the challenged ads: the survey, consumer communications to MC, and social media evidence.  AB contested the survey and the 35% net confusion finding.

First, it was ok to use a test commercial that wasn’t the ad that launched the ad campaign and ran the most times/was seen by the most people. Both ads compared the beers and highlighted corn syrup, and AB didn’t articulate a basis for treating them differently.

AB argued that the questions were leading because a consumer who chose the answer “made with corn syrup” to a communication/filter question was then told: “Being “made with” corn syrup may mean a number of different things” and then asked “Which, if any, of the following statements does the TV commercial say, suggest, or imply …?” (The possible answers included used only during brewing, in the beverage you drink, both, neither, and don’t know/unsure.)  AB argued that the follow-up improperly instructed respondents that the term “made with” is ambiguous. This went to weight, rather than admissibility, and there was “at least some likelihood of persuading a reasonable jury of the risk of confusion.” Anyway, survey evidence isn’t required for a preliminary injunction.

As for the consumer communications, there weren’t that many of them—32 total, out of the approximately 100 million people who watched the Super Bowl, and many accurately described use or brewing with corn syrup. Viewed in isolation, these statements were insufficient to prove that a substantial segment of consumers were likely to be deceived, “but it is some anecdotal support for the survey results.” The social media reactions were treated similarly.

So the survey, which tested a “made with”/“brewed with” ad, helped support a finding of likely success on the merits, but only as to those ads that didn’t use the “made with”/“brewed with” language and thus crossed the line from misunderstanding to misleading.  That sounds weird, but I guess I see how the court got there: if “made with”/“brewed with” ads are confusing but nonetheless nonactionable, then surely the ads that go even further are deceptive.

Irreparable injury:  “[I]t is well settled that injuries arising from Lanham Act violations are presumed to be irreparable, even if the plaintiff fails to demonstrate a business loss.” Promatek Indus., Ltd. v. Equitrac Corp., 300 F.3d 808, 813 (7th Cir. 2002). The Seventh Circuit hasn’t revisited this in light of eBay (though it should, but I understand why a district court wouldn’t, even though I think it could also have read the writing on the wall/in the statute). Anyway, no presumption was necessary given the evidence of irreparable harm.  AB argued that failure to prove harm to sales prevented a finding of irreparable harm, but MC showed reputational harm through its survey and anecdotal social media and consumer comments, which was irreparable even with conflicting evidence about whether MC’s sales or market share had been harmed.  Indeed, the evidence showed that MC’s market share was “stable at best, while defendant’s sales and market share is growing, albeit apparently at the expense of other, smaller competitors. This begs the question why plaintiff’s share of these lost sales has not grown, at least in proportion to its share of the market for light beers.”

However, the court qualified its finding of harm, which affected the scope of the injunction.  As in the SDNY Danone case, the court thought that there were truthful things that AB can say, and harm caused by truth couldn’t be actionable; relevant harm comes from the difference between the truth and what AB actually said. “Here, if plaintiff’s reputation was injured solely, or even principally, by consumer awareness that its products are brewed with or made with corn syrup, this may not serve as a basis for reputational injury.” [In the Danone case, however, there was no evidence that the potential truthful statement—Chobani actually had less sugar than the Dannon product, just not as much less as it claimed—was misleading, whereas MC’s evidence tends to show that the truthful “made with”/“brewed with” statements, presented in the way AB presents them, imply misleading factual claims to consumers.]

 

package with "no corn syrup" and image prominently on sides

The injunction thus didn’t disturb ads that only use the words “brewed with,” “made with,” or “uses.” MC also sought to cover AB’s packaging that prominently featured the claim “no corn syrup,” but this wasn’t part of the original written PI submissions.  The court allowed MC to submit an argument why the injunction should cover noncomparative packaging.  [The answer is Grice, or maybe xkcd.]

Timeshare wars: no Lanham Act standing for property owner

Wyndham Vacation Ownership v. Reed Hein & Assoc., LLC, 2019 WL 2232241, No. 18-cv-02171-GAP-DCI (M.D. Fla. May 23, 2019)

Somebody seriously needs to write a story about the litigation war going on between timeshare companies and firms that sue timeshare companies. Wyndham is a timeshare company, and Reed Hein is “a timeshare exit company” directed and controlled by non-lawyer defendants, Reed, Hein, and Paranteau. Wyndham alleged that defendants ran false and misleading advertising, purporting to have “safe,” “legitimate,” or “guaranteed” means of “exiting” Wyndham owners from their timeshare contracts. “After successfully luring Wyndham Owners into paying exorbitant fees for its services, [defendant] TET instructs them to stop making payments on their timeshare contracts, which they do,” but TET doesn’t disclose the adverse consequence of breach. TET then would hire the lawyer defendants “to engage in fruitless negotiations with Wyndham for a fixed fee.” The lawyers allegedly would send boilerplate demand letters to Wyndham, demanding that it stop communicating with their client, but never work with any Wyndham entity to legitimately terminate a timeshare contract. Instead, they allegedly used “deceptive and unlawful” strategies such as having the owner execute a quitclaim on the timeshare interest without Wyndham’s knowledge or consent. Afterwards, or after the timeshare contracts are foreclosed on, TET and the lawyer defendants allegedly falsely tell their clients that they successfully cancelled or transferred their timeshare contracts.

Wyndham sued for false advertising in violation of the Lanham Act, contributory false advertising in violation of the Lanham Act, tortious interference with contractual relations, violation of Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA), and civil conspiracy to commit tortious interference.

Lanham Act standing: Not present.  The injury alleged came because owners stopped making payments on their timeshare contracts, but that injury didn’t flow directly from TET’s advertising. None of the ads allegedly included instructions to stop paying, and the complaint alleged that the instructions occurred after TET solicited owners. The injury was too remote. This also got rid of contributory false advertising.

Tortious interference: Defendants argued that, as counsel for Wyndham owners, they were agents with privilege to interfere, but this was an affirmative defense that didn’t clearly appear on the face of the complaint. To the contrary, the complaint alleged that defendants weren’t agents. Likewise, the complaint didn’t indicate that the owners were predisposed to commit a breach; rather, they were allegedly deceived into doing so.

FDUTPA: Same problem as the Lanham Act claim. [There was no analysis of the relevant statutory language, even though it is not limited to “commercial advertising or promotion” and otherwise is worded quite differently; FDUTPA is an FTCA-analogue rather than a Lanham Act analogue and on its face looks to cover far more commercial conduct than advertising, which affects whether the covered conduct is the cause of the harm.  Courts don’t like to do two analyses of the same basic claim, but I think they probably should in this situation.]

Domain name initial interest confusion isn't dead

Platinum Properties Investor Network, Inc. v. Sells, 2019 WL 2247544, No. 18-61907-CIV-GAYLES/SELTZER (S.D. Fla. Apr. 11, 2019) (magistrate R&R)

Rival real estate investors Hartman and Sells apparently developed a “personal feud,” and Sells allegedly initiated a campaign to harm Hartman’s reputation and steal his clients. Defendants allegedly set up websites and email addresses using plaintiffs’ registered trademarks to confuse consumers and divert internet traffic.  Defendants argued that their websites were noncommercial, nonconfusing gripe sites.

The registered marks were “Jason Hartman” and “JasonHartman.com,” and defendants allegedly combined them with generic terms such as “property,” “media,” “investments,” and “real estate investments” to create web and email addresses.  Defendants’ emails and websites, they argued, contained “a litany of derogatory information about Mr. Hartman,” as well as phrases such as “investigation,” “bad news,” and “the truth about.” Thus, they contended that confusion wasn’t plausible.

Plaintiffs responded that the disparaging terms weren’t contained in the domain name itself, and argued that defendants’ acts were commercial and competitive.  Because plaintiffs alleged initial interest confusion, the absence of disparaging terms in the domain name made confusion plausible, sigh.  Only upon reaching the landing page would consumers find out that these were gripe sites.  The allegations apparently included that defendants “harvested” the personal data of actual visitors to solicit competitive business opportunities—but there’s no suggestion in the report that consumers would have been confused when entering contact information, which seems like an important question about whether the confusion could have caused harm. “Based on Axiom, Promatek, and Brookfield, the undersigned concludes that a financial injury that results from an indirect or suggestive use of a trademark may supply the necessary predicate for a Lanham Act claim.” [A dose of the Ninth Circuit’s post-Brookfield domain name realism would be really, really helpful here.]

Dilution: Federal law requires federal fame and state law requires state fame. Since “Plaintiffs repeatedly indicate that the fame of their marks is limited to a niche segment within real estate investing circles,” the claims should be dismissed.  Plaintiffs alleged a couple of million dollars in advertising and millions in revenue, but Hartman’s alleged “guru” status was limited to “his trade.” Conclusory allegations of “famous[ness]” were insufficient.

Separately, and interestingly, the magistrate revived a pre-federal dilution argument that I haven’t seen in a while, but that I like: “principles of trademark dilution have no application in scenarios where, as here, the owner of the mark, and the infringer, are involved in the same trade.” Dilution is for noncompeting goods/services.  Infringement was the proper remedy, if any remedy is required for defendants’ conduct.

False advertising/common law fraud/negligent misrepresentation: Florida requires that a plaintiff plead its own justifiable reliance to make out these claims, which plaintiffs here did not do.  Civil conspiracy and unfair competition, however, survived because the infringement claims did, and tortious interference was sufficiently pled because the complaint alleged that “Defendants’ activities did either break contractual agreements with Plaintiffs and/or stopped doing business with Plaintiffs as a result of Defendants’ intentional and unjustified interference .... For example, one client of Plaintiffs’ canceled a speaking engagement ... worth tens of thousands of dollars ....”

Invasion of privacy: The complaint alleged that defendants’ website “was, and still is, completely devoid of any privacy policy .... and solicited visitor[s’] information through a ‘Contact Us’ fill-in webform.” Defendants allegedly fraudulently obtained and published Hartman’s “personal IP address, email address, and personal information, which was obtained when Mr. Hartman sent the cease-and-desist demand through the Infringing Website’s ‘Contact Us’ webform” and the “Infringing Website publicly disclosed Plaintiffs’ private information.”  But plaintiffs didn’t allege a right of publicity claim, and it wasn’t clear what they were alleging.  Allegedly false statements about plaintiffs’ “business, financial history, litigation history, commercial dealings, alleged prurient nature, credibility, and trustworthiness” couldn’t be the basis of an invasion of privacy claim. And plaintiffs alleged that they voluntarily disclosed Hartman’s “personal IP address, email address, and personal information” when they sent a demand letter through the “Contact Us” webform.  They couldn’t reasonably expect information voluntarily disclosed to competitors and adversaries to remain private.  Moreover, in Florida, residential addresses and contact information “do not typically fall within the parameters of “private” information.” And “professionals cannot reasonably expect that this type of information will remain private given the necessity of certain disclosures for state licensing applications, such as those relevant to the real estate and investment sectors,” which was the case here.  And further, Hartman disclosed the same information when he filed a criminal complaint against defendants. “Hartman’s expectations of privacy, even if reasonable, are ultimately irrelevant as these quintessentially public records are not entitled to privacy protection under Florida’s Sunshine Laws in any event.” However, the magistrate recommended allowing leave to replead a claim for commercial appropriation [which would have serious First Amendment problems if there wasn’t a false endorsement; you shouldn’t be able to avoid negative comparative advertising by using your name as your business name].

Placebo effect is ok by CLRA: Homeopathic remedy wins jury trial on false advertising, still needs to defend against "unfairness"

Allen v. Hylands, Inc., --- Fed.Appx. ----, 2019 WL 2142843, No. 17-56184 (9th Cir. May 15, 2019)

Allen, on behalf of a class, appealled following a jury’s verdict in favor of Hyland’s. “The gravamen of [Allen’s] claims is that Hyland’s [homeopathic] products are ineffective at providing the promised symptom relief.” The district court framed the argument as: “Defendants made material misrepresentations about products which do not work and cannot possibly work as a matter of scientific principle, given the level of dilution of their active ingredients.”

“The parties submitted conflicting jury instructions: Allen’s proposed instructions stated that Allen needed to prove that Hyland’s products ‘did not’ work, while the instructions proposed by Hyland’s stated that Allen had to show that the products did not and ‘cannot relieve symptoms as represented.’”  The court went with “cannot,” and declined to give Allen’s proposed instruction that the jury “may not take into consideration the placebo effect in determining whether [Hyland’s] products provided relief.”

The jury returned a verdict for Hyland’s on the Magnuson-Moss Warranty Act claim, express warranty claim, and CLRA claim. Relying on the jury’s express and implicit findings of fact, the district court found for Hyland’s on the equitable FAL and UCL claims and denied Allen’s motion for a new trial.

If “cannot” was error, it was probably harmless, because the parties used “do not” and “cannot” interchangeably throughout. As for the placebo effect instruction, Allen relied on FTC v. Pantron I Corp., 33 F.3d 1088 (9th Cir. 1994), rejecting the placebo effect as a way a product could “work.” But CLRA, Magnuson-Moss Act, or express warranty cases haven’t adopted this holding [nor have they rejected it, for the record], so the proposed instruction wasn’t supported by law.

Admitting Hyland’s expert was also not an abuse of discretion.  He was a board certified expert in toxicology who’d published extensively; several of his works concerned the principles of hormesis (Wikipedia: “any process in a cell or organism that exhibits a biphasic response to exposure to increasing amounts of a substance or condition,” in particular, a response at low doses that would be reversed or not observed at high doses), about which he was called to testify; and his testimony on the relationship between hormesis and homeopathy was derived from a literature review citing to several peer-reviewed sources in his field.

There was a reasonable basis for the jury’s verdict, and no abuse of discretion in denying Allen’s Rule 59 motion.

As to the equitable claims, the district court should follow the jury where it found facts, but if “determining the equitable claims requires proof of a fact that the jury did not implicitly or expressly find, the district court must make its own determination.”  The FAL claims required proof of the same facts as the legal claims, so that was ok. But the UCL claim had both deceptive advertising and unfairness theories, and the latter was broader than the CLRA, Magnuson-Moss Warranty Act, or express warranty claims. The UCL’s unfair prong can apply to business practices that are against public policy, that are “immoral, unethical, oppressive, unscrupulous or substantially injurious,” or that cause unforeseeable injuries to consumers that are not outweighed by countervailing benefits. The jury’s “narrow” findings on deceptive advertising didn’t resolve the broader unfair practices theory. Thus, the district court erred in granting judgement to Hyland’s without further analysis and that part of the case was reversed.

call for law student papers: Harvard J of Law & Tech

Harvard Journal of Law & Technology Student Note Submission

Deadline: June 17, 2019

The Harvard Journal of Law and Technology (JOLT) is excited to announce our student note submission is open for our Fall 2019 issue. Submissions should be 4,000 to 6,000 words and engage with novel issues at the intersection of law and technology. Topics may include but are not limited to cybercrime, biotechnology, space law, entertainment and new media, comparative legal approaches to intellectual property, the law of the Internet, and technology in the public interest. We encourage creative approaches.

The deadline for submissions is 11:59 PM Eastern Time on June 17, 2019. Submissions will be evaluated on a rolling basis but all pre-deadline submissions will be considered! 

Download the volume 33.1 student note application at bit.ly/studentnotefall2019. You can find the application link, full rules, and eligibility requirements on JOLT’s website at http://jolt.law.harvard.edu/submissions. Email JOLT's Notes & Comments Editor at joltstudentnotes@gmail.com with any questions.

AARP endorsement of insurer doesn't inherently represent that AARP chose disinterestedly

Levay v. AARP, Inc., 2019 WL 2108124, No. 17-09041 DDP (PLAx) (C.D. Cal. May 14, 2019)

Plaintiffs are AARP members who allege to have “joined and paid to be AARP members” after being allegedly “induced ... through unlawful, misleading and/or unfair representations of products, services and endorsements by AARP and/or concealment of AARP’s unlawful ‘for profit’ business activities.” Specifically, they alleged reliance on “AARP’s misrepresentations that it protected seniors and that it put their interests first ahead of ‘for profit’ business ventures, and about its endorsements of insurance products.” Plaintiffs alleged that AARP’s stamp of approval was only a “stamp indicating the winner of [a] bidding war,” rather than a true endorsement on the merits. They brought California UCL and FAL claims.  The court found they failed to state a claim.

Initially, the court rejected the argument that the complaint didn’t allege any “statements by AARP, only advertisements run by United Healthcare and New York Life ....” The relevant representations were (1) solicitations and ads from AARP in which it represents its status and role as an advocate for seniors, and (2) AARP endorsements on United and New York Life insurance advertisements. “AARP does not dispute that it permits its name to appear on the advertisements and that AARP in fact endorses these products. Therefore, the endorsements constitute AARP’s representations even though they appear on United and New York Life advertisements.”

But was there an actionable misrepresentation?  Plaintiffs alleged that they “believed that AARP endorsed products and services, such as insurance products, were products and services that were the best for seniors.” But “best” was too vague ans subjective a promise of superiority, even if implied, to be actionable. By contrast, in Hanberry v. Hearst Corp., 276 Cal. App. 2d 680 (1969), the Hearst Good Housekeeping seal of approval could have deceived someone who bought defective shoes. The court held that “[i]mplicit in the seal and certification is the representation [that] respondent has taken reasonable steps to make an independent examination of the product endorsed, with some degree of expertise, and found it satisfactory.” But it was key that Good Housekeeping magazine stated: “ ‘This is Good Housekeeping’s Consumers’ Guaranty’ and ‘We satisfy ourselves that products advertised in Good Housekeeping are good ones and that the advertising claims made for them in our magazine are truthful.’ ” “The seal itself contained the promise, ‘If the product or performance is defective, Good Housekeeping guarantees replacement or refund to consumer.’ ” These express guarantees “made a consumer’s reliance on Good Housekeeping’s independent examination reasonable.”  And even if an implied promise of superiority was actionable, plaintiffs didn’t identify any defects in these insurance policies.

What about an implied representation that AARP had evaluated the insurance plans for suitability for seniors, “irrespective of profits”?  AARP wasn’t a fiduciary just because it was a nonprofit. Plaintiffs allegedly saw “solicitations and ads from AARP ... in which AARP represented its non-profit status and advocacy role for seniors and that it provide[d] endorsements for products and services as a benefit of membership, which [Plaintiffs] believed meant that AARP would [ ] make endorsements and stamps of approval based on what was best for seniors, rather than based on profits.”

“A representation that a product is selected irrespective of profits could be an actionable misrepresentation because it is sufficiently specific and objectively determinable such that a consumer could reasonably rely on such representation.” But the complaint didn’t sufficiently allege such a representation. Sample ads in the complaint said that United Healthcare and New York Life Insurance Companies “pay[ ] royalty fees to AARP for the use of its intellectual property.” “Therefore, it would not be reasonable for a consumer to believe that AARP was not engaged in revenue generating activities,” and there was no allegation of any representation that revenue concerns played no role in its endorsement decisions. “It would be foolish indeed for an enterprise, regardless of its status as a non or for-profit entity, to be blind, all other factors being substantially equal, to revenue generating opportunities. In short, there is nothing nefarious about AARP making endorsement decisions, or any other business decisions, based on generating maximum revenue that will be used to support its activities, absent some allegation that such decision resulted in articulable harm to its members.” It wasn’t enough to allege that AARP benefited.

Separately, the court found that plaintiffs didn’t plead with particularity the ads they relied on or when/how they became AARP members.

blog posts on company's site are "commercial advertising or promotion" under Lanham Act

Luminati Networks Ltd. v. BIScience Inc., 2019 WL 2084426, No. 18-CV-00483-JRG (E.D. Tex. May 13, 2019)

Mostly a jurisdictional challenge; the court found it had specific personal jurisdiction over Luminati’s claims for patent infringement and false advertising and supplemental jurisdiction over the remainder of Luminati’s claims, though it declined to exercise supplemental jurisdiction over Luminati’s claim for tortious interference with employment agreements, “as determination of that claim is best left to the judicial authority of the State of Israel.” There was personal jurisdiction because BIScience has sold its allegedly patent-infringing proxy service to at least 52 customers in Texas, and its service allowed customers all over the world to utilize residential proxy devices in ten Texas cities, which BIScience advertised (at least in terms of allowing them to use US addresses).

Luminati sufficiently alleged the falsity of blog posts on BIScience’s website stating: “Some proxy providers look great and fancy until you try to integrate them. Some—such as Luminati—are very difficult to integrate, as they require you to install complex proxy managers and to ultimately modify your entire solution.” Luminati sufficiently alleged falsity by alleging that its residential proxy service didn’t require installation of Luminati’s proxy manager.

BIScience argued that a blog post on its own site wasn’t “commercial advertising or promotion.” Yes, they were.  The blog posts were commercial speech by a company in commercial competition with Luminati, made for the purpose of influencing customers to use BIScience’s GeoSurf service. Shortly after the statements at issue, the blog posts continue: “In short, stay away from these proxies. Instead, go for easy-integration proxies that support whatever your needs may be. GeoSurf, for instance, takes less than 5 minutes to integrate....” Moreover, “while company blog posts may not be traditional ads, they are a quintessential type of informal promotion.” BIScience allegedly purchased search engine ads for terms like “luminati” so that potential customers would be directed to its website.  “Thus, Luminati has alleged that these blog posts are disseminated sufficiently to the relevant purchasing public.” [Note an emerging divergence on this: some courts would want evidence that lots of people landed on the blog posts, which I think is probably an issue of damages rather than “commercial advertising or promotion”; it’s still an ad even if everyone successfully avoids reading it.]

law firm alleging clients lost to competitor satisfies Lexmark, in part

Brave Law Firm, LLC v. Truck Accident Lawyers Group, Inc., No. 17-1156-EFM-JPO, 2019 WL 2073872 (D. Kan. May 10, 2019)

Brave, a personal injury firm, sued various parties for violating the Lanham Act and Kansas state law.  

It alleged that “from 2007 to at least 2017, Defendants created and disseminated false and misleading advertisements regarding the amount of money they obtained as settlements and jury verdicts for their clients.” For example, one ad claimed that they obtained a settlement of $9 million for a past client, but Brave alleged that they didn’t because they were fired by the client. They also allegedly falsely advertised gross recoveries of $4.1 million, $2.4 million, $2.1 million, $1.1 million, and $1.6 million.

Brave pled three specific examples of past clients who relied on the allegedly false advertising. One hired one of the defendants in 2011. “During mediation, the mediator told her that her case had a value of $360,000, but the highest settlement offer [defendant’s entity] AAPLO obtained was $225,000 in exchange for a full release to the tortfeasor. Consolver rejected that offer and terminated AAPLO as her legal counsel. …. Consolver then hired Brave, who pursued a different theory of recovery and obtained a settlement amount of $360,000.”  Defendants/their entities filed an attorney’s lien, reducing the amount of Brave’s fee.  The other examples were very roughly similar though more complicated.

The court rejected defendants’ arguments that the statute of limitations barred a Lanham Act claim relating to the first client and that it wasn’t sufficiently pled under Rule 9(b). On the limitations issue, the court borrowed the Kansas period for fraud, 2 years; Kansas uses a discovery rule, and Brave alleged that defendants’ injury-causing conduct wasn’t reasonably ascertainable until within the two-year period for filing.  Brave hadn’t pled itself out of court by alleging facts making it clear that a reasonably prudent person would have investigated Defendants’ actions in 2007 or 2012, when Consolver hired Brave.

Brave also identified specific allegedly false ads.  Although Brave didn’t allege which exactly Consolver viewed or when she viewed them, it was enough to allege that defendants “engaged in a false advertising scheme that exposed potential clients, such as Consolver, to numerous false advertisements over a period of time. The requirements of Rule 9(b) are relaxed when the alleged fraudulent acts are numerous and occur over an extended time period.  Here, it would be unduly burdensome to require Defendant to specify every false advertisement that Consolver relied upon and when she saw that advertisement.”

Brave also sufficiently alleged falsity by identifying specific claims about verdicts or settlements achieved by defendants and alleging that they were false. For example, ads reporting the $9 million settlement were allegedly “literally false” because “the person that actually reached the settlement had terminated [defendants/their entities] prior to any settlement being reached.” Defendants argued that the claim was true because they were able to assert an attorney’s lien against the former client when settlement was eventually reached and thus they contributed to the ultimate resolution.  The court wasn’t persuaded. The ad didn’t identify defendants as causally helping to obtain a settlement: it said that one of them did obtain it.

As to another client, defendants argued that the claim failed to satisfy Lexmark. The alleged “injury to a commercial interest in reputation or sales” was that because it had ended up embroiled in litigation about the attorney’s lien on that client’s recovery that (1) it “has been embroiled in litigation and forced to deal with the abandoned lien issue for years”; (2) it “has sustained injury to its reputation as well as been forced to spend considerable time and expense defending frivolous litigation”; (3) “the allegations that Brave Law Firm, LLC and its employees acted ‘illegally, unethically[,] and immorally’ have been disseminated far and wide and damaged its reputation both within the Kansas legal community and [with] potential clients.” Proximate cause ordinarily requires “economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that occurs when deception of consumers causes them to withhold trade from the plaintiff.” Here, the allegations of injury were “simply too remote” from the false advertising.  Brave didn’t allege losses of fees from an attorney’s lien, but rather from losses due to fighting with defendants about the underlying case.

As for the third client, it was sufficent to allege that Brave “likely” would have been her first choice in the absence of advertising; it was not required to allege that she definitely would have been. This third client’s claim was dismissed, allegedly because of defendants’ missed deadlines, and allegedly would have resulted in a multimillion-dollar recovery. Defendants argued that it wasn’t plausible to conclude that Brave would have won, and won so big.  But it was enough to allege that the client’s “case would not be one that was particularly difficult to win and, if properly handled, would have generated a substantial attorneys’ fee upon successful resolution.”

However, Brave didn’t successfully plead tortious interference. Even if Brave pled the existence of a business relationship or expectancy with the clients, nothing indicated that defendants were aware of that when those clients initially hired defendants.

CopyrightX: Article 13

Panel Two: Online Service Providers, Automated Anti-piracy Systems, and Article 13 [like CDA 230, it may never lose the initial number even if it no longer fits the statutory numbering]

Moderator: Jennifer Esch

Giancarlo Frosio: Copyright and Article 13

Summary of current provisions.  Automated technology is the intended effect. Hard to see how that can be done without general monitoring of all contents of a platform for unlimited times.  Scarlett court made clear that fundamental rights are implicated—freedom of information and expression—and automated technologies are not proportional, especially given that they might jeopardize a business.  Limitations and exceptions also need to be accommodated somehow.

Ginka Hristova: The Effects of EU Article 11 and Article 13

Content ID is the prime example that people give of how it should be done but Content ID works badly—it’s not a good model.  [And the same content owners complain bitterly about Content ID not being good enough!]  Burden of proof is reversed from the Electronic Commerce Directive.  Now platforms will have to prove that they’re making enough efforts to avoid direct liability.  Collisions w/GDRP as well.  Especially when determining whether exceptions and limitations apply, much information will need to be collected.

Mohammed Iriqat: Copyright Piracy in the Arab World

Extensive unlicensed downloading of music, movies, software. 60% of software running in the Arab world is unlicensed.  Millions of DVDs.  Gov’t institutions and universities participate.  Microsoft Office $5 an unlicensed CD, compared to $70 authorized price.  $2 billion in calculated economic loss.  Possible solutions: collective management organizations, but there are just 5 Arab CMOs and 22 Arab countries. Raise awareness. 95% of Arab citizens don’t see a problem with illegal downloads.  Internet laws like DMCA, which are lacking in the Arab world.  Customs authorities: no control over entry of pirate CDs.  World Cup 2018: Four countries blockaded Qatar, which had the rights to broadcast; they made sites to distribute the World Cup w/o authority of the Qatari rightsowner. Intergovernmental conflict.  Qatar went to WIPO for arbitration, but WIPO hasn’t made a final decision.

Jordan Gimbel: Twitch and the Likely Effects of Article 13

Wide spectrum of online service providers and treatments of unauthorized use/debates w/ different rightsholders: music, film, gaming.  Twitch isn’t YouTube or Twitter; has some features but also Patreon-like.  You can live broadcast your gaming.

Streaming could infringe, but game publishers/developers often license streaming—an attractive complement to their titles.  Many license monetization by individual streamers. But we’re not immune from unauthorized works appearing.  We do see notices for (1) livestreaming sports; (2) violations of embargo conditions on new games; (3) user disputes over emotes (users who create designs for the overlay).  Twitch as complement: NBA brought its G-League (farm team) cames to Twitch, allowing others to costream it (add it to their own channel with their own overlays).  NFL selected a few costreamers who could stream it to their own audience w/their own commentary.

We process DMCA notices in minutes; suspend live broadcast for 24 hours. For VOD works we mute the songs—if you create an archive of a live broadcast, we scan & create audio fingerprints w/Audible Magic and mute portions for matches.  Some rightsholders have priority access—soccer leagues, game companies—to act w/o needing to send notice.

How does this change under Art. 17/13?  Obligation to license, notice and staydown: filters are the only option.  Reference files aren’t available for livestreams so that’s a challenge. This content is yet to be created.  And the overlays are different digital assets. We can scan the audio, but scanning images on overlays from multiple sources are a challenge. Scratching our heads.  Algorithmic tools are going to be needed; taking $ from other developments. Open Qs.  Mistakes in livestreams lead to suspension of channel, which impacts people’s livelihoods.  Filter’s false positives are therefore concerning. Crossborder implementation challenges: different rightsholders across Europe.  GEMA (German PRO) announced that it thought it should be given a larger negotiating power on behalf of images as well as music. That’s great, but only for Germany.

Q: what could gov’ts do/what are the missed opportunities?

Hristova: implementation legislation.

Q re real people depicted in games.

Gimbel: US-centric answer: right of publicity is what’s debated.

Q: where do you get the filters from? Google?

Gimble: question of market power.  Content ID has been around for a while and they’re set on approach. Compliance w/best efforts: we’re trying to figure out whether that means we can engage in licensing from a vendor, but may have to develop a filter that maps to your service using your reference materials. Open Q: does the law require us to build our own tech to do that because we have a different way in which we serve content, w/overlays that are different from other services. [One of my biggest questions about all this is how licensing is going to work for visual works—is there just going to be a wealth transfer from platforms to the small percentage of visual artists who are represented by PROs and to the PROs themselves based on the overall “value” of visual works?  Whereas music really does have a high percentage of covered material deliberately part of a PRO, visual works don’t and won’t.]

Terry Fisher: some suggestions about implementation: make platforms responsible for costs of wrongful blocking of noninfringing materials in order to incentivize balancing and use of mechanisms such as arbitration or option system to reduce social costs of this regime.

CopyrightX: UGC panel

Panel One: User-generated Content, Digital Labor, and Collaborative Authorship

Moderator: Bethany Rabe

Rebecca Tushnet: Fanworks, Fair Use, and Self-Actualization Through Transformative Expression

Title assigned a few months ago is a little misleading because I actually wanted to take the opportunity to talk about the Copyright Office’s recent report on moral rights, though I’m happy to talk about anything fanwork related during the panel discussion and Q&A.  I was one of the founders of the nonprofit Organization for Transformative Works.  OTW runs the Archive of Our Own, which hosts noncommercial transformative works by fans of existing works, of people, or really of anything about which one might create new art. From our recent fact sheet I can tell you that we have over 1.2 million registered users and 4.7 million fanworks, as well as tens of millions of visits per week. “Our open-source code was built from the ground up by fans for fans…. Our users are fans of every sort—teenagers and grandparents, first-time writers and professional authors—from all around the world, creating fanworks” for nearly 32,000 different fandoms.  From the beginning, it was a priority to be ad-free and noncommercial, not under the control of advertisers.  Instead, the priority was authorial control: AO3 was designed to give creators the ability to post and edit their works flexibly, to orphan their own works to preserve access to them without connecting them to the author, and to exclude search engines or non-Archive users from reading.

One of the most distinctive features of the Archive is the curated folksonomy used to tag individual works: “Users are able to tag in whatever format is most useful or natural to them, and our team of over 350 tag wranglers link these tags together into easily searchable concepts.”  If you misspell Harry Potter’s name—or put it in kanji—we’ve got you covered.  Creators can use tags to allow other users to find exactly what they want to see—or to exclude exactly what they don’t. “[U]sers can easily create specific searches, including all Sherlock Holmes works posted in 2018 that are exactly 221 words long and Lord of The Rings/Game of Thrones crossovers that don't include either Frodo Baggins or Arya Stark.” “Related concepts are also linked: Space Opera and Space Battles are both found under the metatag Outer Space, along with other related terms like Astronauts, Spaceships, and even Space Whales.”

Fanworks provide incredible benefits in literacy, sexuality education, language learning, community building, and other good things that come from making something you love and sharing it with other people who might just love it too.

On the content v. tech distinction that Maria Strong made: we consider ourselves content folks who use tech.  But importantly, we rely on fair use: our basic purpose is to host transformative noncommercial works. Gives us a particular perspective on various copyright controversies.  For example, recent Copyright Office report on moral rights, which you’ve just heard about.  The Office did a lot of good work pulling together the legal background both internationally and in the US, covering many issues that go beyond copyright into other regimes that affect authors.  A moral right of integrity that would protect authors against uses of their works they found offensive would be incompatible with US fair use and the First Amendment and the Office didn’t suggest any basic changes to that system, to the Office’s great credit.

It is definitely true that norms of fairness matter a lot in authorship, including attribution in many circumstances—but not necessarily in the rigid categories formal law might use.  For example, fans regularly describe authors of books, but generally identify performers of songs rather than songwriters. More generally, attribution practices in and out of fandom are highly context specific—what works for one group might not work for another.  Hollywood screenwriters have an arbitration system for assigning credit that is often needed because fights regularly break out.  Similarly, the Office pointed out that, “in legal writing, attribution norms for academic articles are quite rigid, whereas practicing lawyers routinely copy without attribution ‘the form and language of legal instruments.’” Attribution turns out to be the kind of inquiry that isn’t well suited to the American legal system, because modern copyright statutes and regulations tend to make big, specific lists of required information.  The Office wisely recognized that antiplagiarism norms work about as well as anything can work, and that the context of attribution would be essentially impossible to write into law.

Nonetheless, and without showing that there was a noticeable unmet need for new protections, the Copyright Office has just suggested that the federal Lanham Act can & should be used against unattributed copying of digital works, in defiance of the Supreme Court’s decision in Dastar and its own stance on digital first sale.  [I should note I think the Office is completely right in saying (1) §43(a)(1)(B) claims should survive Dastar where false attributions are material to consumers and (2) Dastar applies to in-copyright works as well.  It’s just disingenuous at best in endorsing a distinction between nondigital and digital copies that does not make sense of the Supreme Court’s interpretation of “origin,” especially in light of the Office’s (correct) position in discussions of first sale that a digital copy stored on a computer is a reproduction.  The “origin” of a digital copy is the host computer, and maybe stretching it could be the sending computer, but there is a physical instantiation and that instantiation is what the Lanham Act covers in “origin” under Dastar.  Specifically, the origin of the creative work contained in that copy is not the same thing as the origin of the physical copy, no matter whether the copy is on a general-purpose computer, a videotape, or a DVD, and thus failure to attribute the origin of the creative content is not actionable under §43(a)(1)(A) per Dastar.]

It also stated that Congress might want to consider amending the Lanham Act to create new causes of action to cover false representations regarding authorship of expressive works, even without a showing of harm to consumers. The Office suggested amending the Copyright Act to provide damages when a defendant knowingly removed or altered copyright management information (“CMI”) with the intent to conceal an author’s attribution information even if there was no intent to conceal infringement, and possibly even adding a federal right of publicity.  In addition, the Office suggested some changes to the more limited Visual Artists Rights Act. 

Aside from the suggestions about VARA, the rest of the Office’s ideas are a classic case of proposing to use a missile against a gnat—likely to the detriment of small and noncommercial creators, who are the ones who can neither afford to bring claims nor fight claims brought against them.  And the specific suggestions lack exactly the kind of context sensitivity the Office acknowledged was needed—for example, the proposed CMI provision on its face makes it illegal for an app to remove identifying information of people submitting anonymous videos of police brutality—and if you think that enterprising prosecutors wouldn’t use this law against the ACLU, you haven’t been paying attention.  [The CO says that the intent requirement would mean that automated removal wouldn’t be actionable unless it was designed to remove authorship information … but anonymous reporting apps are designed to do that. And for what it’s worth, the complaints the CO reported receiving about removing authorship information were mostly about automated processes—the proposed remedy doesn’t even match the thing that’s being complained about.]

It’s also worth pointing out the solution that the Copyright Office didn’t suggest for congressional intervention: although its discussion of authors’ rights mentioned attribution and integrity rights secured by labor law and collective bargaining, both in the US and elsewhere, the Office didn’t suggest that strengthening authors’ positions could be achieved by strengthening the position of workers, even though the most vulnerable authors are labor and not management.   The problems the Office identified in securing attribution for certain groups, like freelancers, are labor problems—authors after all make copyrighted works, and we should not allow the concept of the “work” to disappear as if authors were mystical beings with no connection to other forms of labor, other forms of production, that do things in the world.  Our desire to highlight the process of creation was in fact one of the reasons that we called our nonprofit the Organization for Transformative Works: whether made for profit or not, creative works are the product of labor.  Remembering the inherent dignity of that labor, and its value whether or not there is a market for the resulting creativity, is a goal that the OTW shares with the Copyright Office.

Stacey Lantagne: Internet Memes, Fanworks, and Copyright’s Authorship Challenges

Memes regularly involve © works; one opinion expressed: the public “owns” the meme because the public authors the meme even if not the underlying photo.  Fox defended an infringement case juxtaposing 9/11 and WWII images—court didn’t like the fair use defense b/c didn’t see the transformativity, but it turns out that the range of “memes” is very broad.  Knowyourmeme has no definition.  When Trump (or a Trump fan) adds CNN’s logo to a clip of wrestling so that it looks like Trump is beating up “CNN,” that’s what’s adding the meaning especially after it’s been shared by Trump himself. Similarly, Pepe the Frog became a white nationalist symbol and created contests over ownership w/initial artist and those who altered it. Gab now uses a frog logo and claims that frogs have been symbols of free speech for a long time (narrator: they have not), and it’s a reference but not all that similar to Pepe.  Then the distracted boyfriend meme, which comes from a stock photo with a © owner, who is fine with most uses but not w/objectionable ones (which may be censorial).  As the distracted boyfriend meme develops, responses to it/reworkings of it are based on transforming the meme rather than on the photo alone, which has become subsumed into the meme and the idea of the meme. 

The internet thus exposes that the mastermind narrative of single creation is wrong. We knew that but dealt with it mostly by contract, and then we have this control test for noncontractual situations but it still wrongly assumes that there is a “boss” in control of everything. When you don’t have contracts, when you don’t have lawyers, we don’t know what we’re doing in terms of ownership. Garcia v. Google: opinions don’t make sense internally and are conflicting all over the place.

Capitalism makes everything worse/more exploitatitve: Swedish company used distracted boyfriend meme for job searching and ad regulator called it sexist and said it couldn’t be used in ads. There is a pending case against a MAGA poster by Pepe’s original creator Matt Fury; there’s a fair use argument but also the defendant argues that Fury abandoned the © (which is not a thing).  There’s a lot of unsettled territory here.

Hilary Richardson: Google Open Source and Collaborative Authorship

Writing a casebook on open source legal issues: opensource.google.com/docs/casebook: you can send us edits or additions in a GitHub pull request.  Current joint authorship standards give equal rights to all authors.  Some projects list all “authors” giving them shared control. Some may have 100% consensus, but for a growing project that can be unsustainable, and some institutions may not want the potential liability/disputes that comes from open source authors’ potential for contestation.  Current doctrine (Al-Muhammad etc.) looks for a mastermind—important contributions can still avoid being authorial. Court was concerned about discouraging future editing/feedback if joint authorship was a possible consequence. Creative control/direction mattered, versus value of contributions and impact on final version. Spike Lee had the control (although it was a work for hire) and the court found that determinative.  Other jurisdictions also use editorial control over final piece as part of the test, but with more focus on intent to be co-author.  Control can be evidence of intent, but intent could also be evidenced by, e.g., registering the © in a person’s name.

Clarity can come from legal agreements: two popular mechanisms, developers’ certificate of origin (Linux) which doesn’t say anything about retaining © but does grant an explicit license.  Is everyone a joint author?  Contributor license agreement: says that © stays with contributor but they grant a license.  That makes it clear that people aren’t considered joint authors.  More light-weight approaches: root license of a project is used to cover contributions. Can be used to imply effects on individual contributions; sometimes licenses say “if you contribute, you do it on these terms.”  The Stuff case about contributing special effects to a larger film: helps explain the effects of an implied license to use a contribution.

Katrina Geddes: Should User-Generated Content Be Compensated?

UGC: just about everything you find on the internet.  Childish Gambino’s This is America was a canrivalesque commentary on police brutality, fetishization of black performers, modern-day minstrelsy. People responded w/, e.g., This is Nigeria: commentary on police brutality, corruption, poverty, Boko Haram, and other Nigerian issues. Similar music and choreography but different lyrics (both set in warehouse).  Why do we value things like fan fiction?  People get to see themselves where they don’t get to see themselves in mainstream works: LGBTQ people, people of color. Challenge racial and social assumptions of mainstream works; challenge the monopoly on cultural production of large producers. Can also maintain the cultural relevance of works, such as maintaining interest in the Star Trek universe.  Satisfies demands for variation and personalization, rather than works manufactured for a huge audience. Democratizes creativity—authorship is diverse and diffuse.  Meme authorship can often be indeterminate. 

Content ID: used algorithmically mostly for commercial content.  400 hours to YouTube uploaded per minute. Fanmade videos for Harlem Shake were matched to the song, allowing the song © owner to generate millions of revenue with no allocation between the music and the video created by fan labor. Under 1% of Content ID matches are disputed.  Fair use can’t reliably be done by algorithms; Content ID is black box governance, unaccountable—even when the uses removed or monetized may be perfectly lawful.  Expands scope of © by making it difficult for users to rely on exceptions like fair use.

Locke and labor theory: just reward of labor should extend to fan creations that are monetized.  Eric Posner etc. have argued that not just UGC but our labor online, clicking and producing valuable data, should be understood as compensable.

Canadian UGC provision: protects UGC made by an individual, though there’s usually more than one author.  Also protects UGC only when © subsists, which bakes in originality.  Requires noncommerciality—no pro-rated advertising revenue.  Also bars anything with a vague, broad “adverse effect, financial or otherwise” on the © owner—that could include offending the original © owner.

Should users be compensated?  The labor of users should be recognized and respected, and possibly compensated. But commercialization is part of the fair use inquiry; it may weigh against fair use.  Commercialization may result in reduction in expressive diversity: anticipation of paid markets may affect content and willingness to participate/be spontaneous in creativity.  Distinguishing when compensation would be paid would require resources, negotiation in allocation between different owners. Right now it’s 100% to the original claimant, but other points on the spectrum are possible. Don’t just assume that everything with a match should be 100% monetized by the © owner.  We could ask users to categorize their works to claim a share; this would allow more information and an algorithm could at least look for percentages/set things up for human review.

Q: fair use is important; from litigator’s perspective, one downside is expense to determine.  Oh, the Places You’ll Boldly Go! was found to be fair use on summary judgment, but not at the MTD stage which was 1½ year earlier.  Is there a way to get to fair use faster?  Market harm may require discovery—that’s the most expensive part of most lawsuits.

RT: sadly, not a lot.  There are uses that are fair as a matter of law, including parodies.  Big data, purpose-transformation uses are for better or worse somewhat easier to identify as fair use as a matter of law.  Sometimes you are going to have to evaluate the transformativeness of an individual work.  [We can have rules that help, like the Second Circuit’s rule that you can’t avoid a fair use finding by offering  a license for something that is in fact transformative—that helps draw the sting of some market evidence.] Small claims: 40% of Americans can’t come up with $400 for an emergency.  A “small claims” court that allows $30,000 in statutory damages is not a small claims court. It’s just another way to harass individuals.  [I forgot to add: best practices in fair use for different fields—also very helpful.]

Lantagne: education, nonprofits like OTW/EFF.

Geddes: Canadian UGC exemption needs some time to develop.  Education is also important.  People want rules like “30 seconds is ok.”

Richardson: people do want rules: are 3 lines of code ok?  Depends on what the 3 lines are!

Kimberly Isbell: proposed 1202A.  The reason we made it a new provision is b/c it’s narrower and specifically exempts criminal enforcement.  The only person who could bring a claim would be the uploader. The ACLU has terms of use: if you provide content it will be anonymous.

RT: Disagree.  The statutory language is “any person injured by a violation,” and the police will say they’re injured by the inability to investigate the circumstances under which the video was taken further.  The injured person doesn’t have to be the author (or heirs) under this proposal.  There is a long tradition of (mis)using civil awards to silence speakers, e.g. NYT v. Sullivan.  The proposal does not exempt information submitted by someone who wants to be anonymous or who doesn’t know or care about stripping of metadata [nor does it limit enforcement to the author, which would also be a potential fix, though I still don’t see the evidence that an additional cause of action is needed].

Q: software should just be patentable, not copyrightable.

Richardson: the law says copyrightable and she’s ok with that.

Q: memes & defamatory content. There are a lot of really awful Helen Keller memes out there.  What should happen when there’s a historical figure & derogatory content.

Lantagne: a lot of times people bring © claims that should be more personal tort based.  She hasn’t come across non-© meme cases, but she wasn’t specifically looking for them.  Unless publicity rights outlast death, there are few remedies for the dead.

Richardson: revenge porn is an example of where © was deployed even though it wasn’t intended for those situations; you shouldn’t need to register an explicit photo to deal with the problem of revenge porn, and new laws and platform policies are recognizing that.