comparison charts might infringe if lacking a disclaimer

Penn Engineering & Mfg. Corp. v. Peninsula Components, Inc., 2022 WL 3647817, No. 19-513 (E.D. Pa. Aug. 24, 2022)

This seems like a silly result to me, shifting the burden to comparative advertisers, but it's often much harder to get summary judgment in a trademark case than in comparable cases.

The parties compete in the industrial fastener market. PennEngineering claims a PEM family of marks and sued Peninsula for trademark infringement, counterfeiting, false advertising, and unfair competition.

The court denied Peninsula’s motion for summary judgment except for pure keyword buys, counterfeiting (based on resales of PEM goods), and claims based on marks Peninsula didn’t use. That left for trial claims based on some online ads that used PEM in text and on cross-reference charts used for comparison, as well as trade dress claims based on a “square-in-square” clinching nut.

keyword ads, no use in text

Bizarrely calling keyword buys “keyword conquesting,” PennEngineering sought summary judgment based on alleged sales diversion. The court pointed out that “diverting customers is a key aspect of competition. … Here, there is no dispute that the links are clearly labeled as belonging to Peninsula and there is no likelihood of confusion where the use of trademarks as trigger words is hidden from the consumer.” 

However, allegedly according to vendor mistake, some ads did show PEM in display text. The court found that the requisite intent is intent to confuse, not intent to use, and that a factfinder would have to decide whether these ads were confusing. “[A] reasonable jury could conclude that there is a likelihood of initial interest confusion from the visible use of ‘PEM’ in Peninsula’s advertisements because the advertisement is not clearly labeled. On the other hand, a reasonable jury weighing the Lapp factors could instead conclude that that there was no intent to confuse (rather, a vendor mistake) and that the average Internet user’s ability to understand the difference between ads and direct search results diminishes the likelihood of confusion in these limited instances.”

keyword ads with mark in text

Because nominative fair use is the defendant’s burden in the Third Circuit, the court let claims based on cross-reference charts continue, even though it seems hard to understand why these comparisons would be confusing about source. Peninsula’s charts “identify Peninsula products that are available as substitutes for [PennEngineering’s] products.”

cross-reference chart

Although the customers are sophisticated, the fasteners cost only pennies per unit; the parties also disputed whether “a handful of emails sent to Peninsula—which PennEngineering interprets as attempting to reach PennEngineering instead—constitute more than de minimis evidence of actual confusion.” So there might have been confusion, though the court didn’t explain why there’d be confusion because of the comparison charts.

The court said that it could be necessary to use the plaintiff’s mark for comparison purposes even if fasteners are “staple items” (commodities). [Notably, plaintiff apparently has two-thirds of the relevant market.] “[I]t is clear that a party may use comparative advertising for any items, including ‘staple’ items.” Although the court rejected the claim that a cross-reference chart comparing types of Bob’s Burgers to McDonald’s burgers would constitute trademark infringement, because “there is no likelihood of customers confusing Bob’s Burgers and McDonald’s from looking at such a chart,” the charts here were apparently different.

The strongest argument I can find for this result is plaintiff’s argument that “the absence of disclaimers on the cross-reference chart ‘suggests a manufacturer-distributor relationship, or that [Peninsula] is a division of PennEngineering or a division of a common parent.’” Why would the relevant consumers think that? What makes Bob's Burgers different? The court thought that this constituted a factual dispute over whether the chart portrayed the true relationship between the parties.

The court also declined to grant summary judgment on whether the claimed double square trade dress, which was registered, was functional—the registration meant the burden was on defendant, and while its evidence created a factual dispute, the registration also weighed in favor of nonfunctionality.

the design

Peninsula, like PennEngineering, makes floating fasteners with square-in-square designs.

A floating fastener uses an outer retainer that allows an interior nut some “float” to accommodate minor misalignment. “Double squares” refers to a fastener with an interior square that rotates with a screw and is stopped by an exterior square, within a certain amount of “float” between the outer square’s corners for misaligned parts, as shown below:

PennEngineering’s VP of Product Development testified about the way the smaller square provides some float while the larger square prevents rotation, which is “necessary for the functionality of the part.” PennEngineering’s expert also opined that the interaction between the two square shapes “is a functional feature of” the product. And Peninsula cited a prior trademark prosecution by PennEngineering for admissions that the product design is functional.

The Third Circuit very clearly doesn’t require that a feature be “essential” to be functional.  Nor did the existence of other designs disprove functionality. “Further, PennEngineering does not show that these alternative shapes would allow the same amount of float in both directions.”

Nonetheless, Peninsula didn’t meet its burden of proving functionality, because it didn’t introduce its own expert report or explain exactly how the design “affects the cost or quality of the article,” or how “the ‘exclusive use of [the feature] would put competitors at a significant non-reputation-related disadvantage.’ ” PennEngineering’s expert opined that the method of manufacturing the shape “entails the same cost and produces the same quality for any shape, although ‘some shapes may be marginally easier to form than others.’” That was enough to avoid summary judgment.

Counterfeiting through reselling legitimate PennEngineering products: Protected by first sale. There’s an exception when goods are “materially different,” which [supposedly, though not always in practice] requires consideration of “whether the allegedly infringing products are likely to injure the goodwill developed by the trademark owner in the trademarked goods.”

PennEngineering argued that resold products were “materially different” because they weren’t covered by PennEngineering’s warranty or customer service. But this wasn’t a material difference where no reasonable person would ever claim on a warranty for a two-cent fastener (the warranty did not cover consequential damages), and where its own VP of quality was unaware of any warranty claims from reseller sales and even stated that, if such a claim did occur, PennEngineering would likely honor its warranty the first time for a given customer. PennEngineering also apparently was unpersuasive in analogizing to an unauthorized used car dealer selling a Ford truck.

Such a truck would not have the original Ford warranty and dealer services but would have the Ford logo and all original parts without physical alteration. According to PennEngineering’s theory of counterfeiting, the truck is “not a Ford.” Yet, a material differences claim requires showing “differences that are likely to damage the goodwill developed by the trademark owner.” Unlike a fake Gucci bag that falls apart and injures an unsavvy, label-anxious customer’s goodwill toward Gucci, a used Ford truck is still a Ford. PennEngineering’s “ceci n’est pas une Ford” theory of counterfeiting falls flat.

False advertising: PennEngineering argued that Peninsula’s use of cross-reference charts and copied performance data constituted false advertising, because PennEngineering had test results supporting its performance data and Peninsula’s comparisons were based only on its expectations that the results would be the same.

The court declined to grant summary judgment on literal falsity. In the Third Circuit, “although the plaintiff normally has the burden to demonstrate that the defendant’s advertising claim is false, a court may find that a completely unsubstantiated advertising claim by the defendant is per se false without additional evidence from the plaintiff to that effect.”

So, were these claims completely unsubstantiated? “Peninsula admitted that it reverse-engineers the parts and then assumes that the performance ‘should’ be the same as the PennEngineering products.” By contrast, “PennEngineering describes a time-consuming and expensive process to test each of its products for performance ratings (e.g., how much weight each fastener can secure).” Peninsula “publishes performance data on thousands of products that show identical performance but … only independently tested around 51 of its products,” and PennEngineering argued that it “sometimes disregards its own test results to publish PennEngineering’s data instead.”

PennEngineering’s expert opined that the way in which the fasteners are manufactured affects the final performance properties. Peninsula’s Director of Product Development admitted that Peninsula does not know how PennEngineering manufactures each part and does not specify manufacturing processes for its manufacturing vendors.

However, PennEngineering did not actually show that any particular performance rating published by Peninsula was incorrect.

For summary judgment purposes, Peninsula’s testimony that the goal of the reverse-engineering program was to follow the “form and function” to achieve the same performance, plus its expert test results showing that the performance characteristics of a subset of the products tested were the same, would allow a reasonable jury to conclude that Peninsula’s performance data has a “semblance of support,” which would defeat the per se falsity theory. PennEngineering also failed to show actual deception, as required because it was seeking both injunctive relief and damages.

Likewise, the court denied summary judgment on the argument that the charts would mislead consumers based on an expert’s opinion (apparently not backed by a survey) that the cross-reference charts were likely to mislead customers “into believing that the corresponding [Peninsula] products are equal in quality and all other respects.”

antitrust claim against Suboxone, including false advertising, survives summary judgment

In re Suboxone (Buprenorphine Hydrochloride and Naloxone) Antitrust Litig., --- F.Supp.3d ----, MDL NO. 2445 13-MD-2445, CIV. A. NO. 16-5073, 2022 WL 3588024 (E.D. Pa. Aug. 22, 2022)

The court here allows an antitrust claim to proceed based in part on allegedly false/misleading statements because they form part of the alleged anticompetitive product-hopping scheme and because the unique characteristics of the drug market make market-based responses to false advertising difficult. (That difficulty is not really unique, but the court is forced to make distinctions because of the unwarranted exclusion of many false advertising claims from antitrust consideration.)

The issue here involves Reckitt Benckiser’s switch of Suboxone, a drug commonly used to combat opioid addiction, from tablet to sublingual film. This made it difficult-to-impossible for generic tablet sellers to succeed in the market because they weren’t AB-rated (therapeutically equivalent) to the remaining branded product.

Reckitt’s scheme had many alleged parts, one of which was safety claims for film over tablets. Unfortunately for Reckitt, based on the findings in Reckitt’s clinical trial data, the FDA concluded that “expanded use of this product [film] will result in significant abuse and diversion that needs to be considered.” FDA noted a “high incidence of drug unaccountability in subjects who completed the trial and those who were discontinued in each of the three clinical sites. This is predictive of the likely occurrence of diversion after the drug is approved and marketed.” Because the FDA found that Reckitt’s clinical study was poorly designed and conducted, it found that it was “not useful for demonstrating any difference in the safety profile or abuse potential of these two formulations [tablet and film].”

Reckitt also received reports that film could be dissolved in water and ingested through the nose, allowing misuse or diversion, but did not study whether users could inject or were injecting it. The employee responsible for collecting and reviewing data on abuse, misuse, and diversion, and pediatric exposures, told several Reckitt executives: “I am not aware of any data to indicate any differences in the abuse/diversion of Suboxone tablets versus Suboxone film.”

Nonetheless, Reckitt’s witness “testified that, despite the information in its possession, Reckitt’s objective was to get 100% of the highest ranking doctors to accept that the film is less abusable than the tablet because it could not be snorted.” At the time it released its marketing statements, Reckitt didn’t have any statistically significant evidence that film reduced the risk of misuse and diversion compared to tablets. There was also conflicting evidence about the risks of pediatric exposure specifically; FDA “specifically rejected any notion that film was safer than tablets with respect to pediatric exposure,” noting among other things that “because the film cannot be spit out (unlike a tablet) it is possible that a child who obtains access to even one dose might be more adversely affected than a child who obtains access to a single tablet.” A senior brand manager for Reckitt said internally that, based on subsequent studies by Reckitt, “[u]nder no circumstances can we make the claim that Suboxone Film is safer or better at reducing pediatric exposures than Suboxone Tablet.” Reckitt, of course, claimed that it had other evidence suporting safety superiority to tablets.

The Third Circuit has used the rule of reason to assess product hopping antitrust claims, and commented that “courts may need to be cognizant of the unique separation between consumers and drug manufacturers in the pharmaceutical market, especially in cases where there is evidence of extreme coercion of physician prescribing decisions or blatant misrepresentation about a generic manufacturer’s version of a drug.”

For purposes of summary judgment argument only, Reckitt conceded that it did everything that plaintiffs alleged and that its conduct was anticompetitive in nature, but that the purchaser classes’ claims still failed. The court disagreed.

Part of the successful theory was that, even though generic tablets have been cheaper than film for years, “Reckitt has retained its share of the market through its disparagement campaign.”

Because the Third Circuit has not presumed that false advertising inflicts de minimis harm as some circuits do, instead considering it as part of the broader picture of an antitrust case, the court evaluated the claims without any such presumption. The court also rejected Reckitt’s argument that actionable statements had to be “clearly or demonstrably false” or “blatant misrepresentations.”

Although “wrong, misleading, or debatable” statements can indicate competition on the merits, it doesn’t always do so: The Third Circuit has clarified that some falsities can destroy competition, including “making false statements about a rival to potential investors and customers.” Indeed, “in some cases, such defamation, which plainly is not competition on the merits, can give rise to antitrust liability, especially when it is combined with other anticompetitive acts.” Although that court referred to “blatant misrepresentation” in its prior discussion of pharma antitrust, “[n]o fair reading of these cases suggests that the Third Circuit was opining that only ‘blatant misrepresentations’ could be anticompetitive.”

A reasonable jury could find that Reckitt’s alleged false “safety story” campaign was plainly not competition on the merits, particuarly given that this wasn’t a stand-alone deception claim but part of conduct constituting an alleged illegal product hop, “an actionable scheme under the Sherman Act.”

Also, the court pointed out that the concerns in the out-of-circuit cases are about difficulties of proof of materiality/harm, but the regulatory context here offered a “unique separation between consumers and drug manufacturers.” “Given this separation, and unlike other industries where consumers can credit or discredit disparagement as they see fit, the ultimate consumers of the drug at issue did not have the opportunity to evaluate the statements and decide whether or not to rely upon them.” [Of course, I don’t think that matters—if the deception was material and harmful, then the theoretical possibility that doctors or ultimate consumers could evaluate the claims didn’t materialize and the market as a whole was harmed.]

Here, too, there was “evidence that Reckitt actively sought to deprive consumers of the ability to actively evaluate safety claims and make the choice between film and tablets.” Reckitt’s own expert “testified that, in the relevant period of 2010, physicians were less mindful of and more reliant on statements made by pharmaceutical companies and their representatives.”  Its own documents showed that many physicians viewed Reckitt as a “trusted advisor” and “relied upon Reckitt’s sales representatives for information and training.” Reckitt campaigned to convince doctors to stop giving patients a choice in the form of Suboxone and warned physicians to distrust patients who preferred tablets because those patients could be misusing or diverting the tablets.

Likewise, while other cases say that false advertising merely provides an opportunity for a competitor to counteradvertise (without ever requiring any empirical testing of that proposition), “the unique characteristics of the pharmaceutical market” made that unworkable. When Reckitt engaged in its campaign, the only relevant products on the market were Suboxone tablets and Suboxone film; there were no generic products and none could be legally advertised. “Reckitt remained the lone voice pitting one of its products against the other and controlling the entire flow of information to physicians, insurers, and the public. Accordingly, unlike in the cases upon which Reckitt relies, the alleged false advertising at issue actually eliminated the forum for competition in the advertising market.”

In addition, the regulatory context always matters. (Citing Trinko in what is perhaps an unusual way?) Given the FDA’s marketing rules, unsubstantiated safety statements (lacking substantial evidence or statistically significant data from head-to-head clinical trials) were deemed false/misleading. And plaintiffs produced evidence that Reckitt lacked the necessary evidence, and that its executives were aware of this when they made the claims. At the time, it hadn’t performed any clinical tests and had “only a subjective belief based on the characteristics of film, including unit dose packaging, dissolution rates, and strong adherence to the sublingual mucosa.” Nor did Reckitt have any data to suggest that film had less pediatric exposure potential. FDA disagreed with the safety claims. This allowed plaintiffs to survive summary judgment.

Reckitt argued that unsubstantiated statements didn’t violate antitrust law and weren’t “false” or “blatantly misleading” because there wasn’t definitive expert evidence either way.

Applying this reasoning in the context of the pharmaceutical market would make little sense. In the real world, pharmaceutical manufacturers must perform adequate studies and provide sufficient data to substantiate marketing statements about its drug. Reckitt’s legal construct would flip that burden and require that an antitrust plaintiff disprove the validity of marketing statements by the manufacturer. In other words, a pharmaceutical manufacturer could, as part of an antitrust scheme, make unsupported claims about its drugs without doing any studies to substantiate those claims but be insulated from potential antitrust exposure because no contrary studies exist.

Plaintiffs had evidence that Reckitt, experienced in pharma, understood the regulatory requirements, including the substantial evidence/substantial clinical evidence standard. “Yet, taking the facts in the light most favorable to Plaintiffs, Reckitt made the safety statements to the pharmaceutical industry disregarding whether they were true, thereby creating the false perception that it actually had statistical support for the claims.” A jury could believe that it wasn’t Reckitt’s technical violation of the FDA regulation that was anticompetitive, “but rather Reckitt’s false representation to the pharmaceutical community that it actually had scientific support for its claims.”

crypto lender plausibly violated UCL via unlawfulness and deceptiveness

Jeong v. Nexo Capital Inc., 2022 WL 3590329, No. 21-cv-02392-BLF (N.D. Cal. Aug. 22, 2022)

Nexo’s Crypto Credit service allows users to take out loans against cryptocurrency collateral. Jeong alleged that, in response to SEC action targeting Ripple/XRP and the cratering price, Nexo limited the use of Ripple on its platform, causing customers to default on loans taken out against XRP collateral. This allegedly breached Nexo’s duty of good faith and fair dealing and constituted a violation of California’s UCL. The court partially granted/denied Nexo’s motion to dismiss.

The false advertising parts: Jeong alleged that Nexo advertised to consumers that it does not own users’ collateral (e.g., “Clients retain 100% ownership of their digital assets.... Nexo’s clients can enjoy their crypto wealth immediately, without having to sell their digital assets.”) while acting otherwise—eventually invoking its ownership right over users’ collateral to justify liquidation of that collateral (e.g. “Taking into consideration the fact that ... Nexo acquires the ownership of the collateral while the Nexo crypto credit is outstanding, when liquidations are effected, Nexo disposes of its own digital assets rather than rendering services to its clients, as it is the case with the repayments and the standard Nexo exchange service.”).

In addition, Jeong alleged that Nexo violated the unlawful prong of the UCL by offering loans in California despite lacking a California Finance Lender (CFL) License.

Previously, the court had dismissed a CLRA claim without leave to amend, finding that it was not plausible that Nexo offered “services” under the CLRA. However, it found that Jeong sufficiently pled misleadingness claims about “ownership.”

The court now found the breach of contract claim sufficiently pled.

UCL unlawful due to lack of license theory: Sufficiently alleged. Recall that the UCL’s “coverage is sweeping, embracing anything that can properly be called a business practice and that at the same time is forbidden by law.” The UCL “borrows violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable.” While Nexo argued that the CFL only covered “money” loans, with money defined as “a medium of exchange that is authorized or adopted by the United States or a foreign government,” that argument was pointing to the wrong section of the law. The CFL provides that “[n]o person shall engage in the business of a finance lender or broker without obtaining a license from the commissioner”:

Nothing in this provision suggests that engaging in the “business of a finance lender or broker” requires lending “money” according to a particular statutory definition. Under the CFL, a “finance lender” includes “any person who is engaged in the business of making consumer loans or making commercial loans.” “Consumer loan” is defined as “a loan, whether secured by either real or personal property, or both, or unsecured, the proceeds of which are intended by the borrower for use primarily for personal, family, or household purposes”—which again provides no insight on whether a loan must be in fiat currency. The definition of “finance lender” indicates that “[t]he business of making consumer loans or commercial loans may include lending money,” (emphasis added), but this is an inclusive definition—it does not suggest that a loan must be in fiat currency.

In keeping with the CFL provision that it should be “liberally construed and applied to promote its underlying purposes and policies,” one of which is “[t]o protect borrowers against unfair practices by some lenders,” Jeong wasn’t required to plead that his loan was in fiat currency. And he sufficiently alleged that his injury was at least in part due to Nexo’s lack of licensure.

This also allowed a UCL unfairness claim to proceed.

UCL false advertising: “Plaintiff has plausibly pled that a reasonable consumer would have been deceived by Nexo’s public statements about lack of ownership over users’ collateral given its alleged invocation of ownership to liquidate that collateral[.]” Nexo argued that it didn’t claim to own any collateral if a user wasn’t in breach of the loan-to-value collateral requirements, and owning users’ collateral after an LTV breach was consistent with a “traditional understanding of collateral under U.S. law.” The court was unimpressed and found Nexo’s position to clash with the alleged conduct and the language of the contract, which did claim ownership while the loan was outstanding. The court thus didn’t reach plaintiff’s other theories of false advertising, including that Nexo allegedly advertised that there are “#ZeroFees” associated with its services, but Jeong allegedly was charged fees when Nexo liquidated his XRP collateral.

But Nexo succeeded in keeping its class action waiver intact.

California Supreme Court reaffirms strict liability for false advertising in Serova

Serova v. Sony Music Entertainment, --- P.3d ----, 2022 WL 3453395, S260736 (Cal. Aug. 18, 2022)

Not bound by Article III, the California Supreme Court issued a ruling despite the parties’ settlement.

Serova bought Michael, “an album of music billed as Michael Jackson’s first posthumous release,” which promised “9 previously unreleased vocal tracks performed by” Jackson. Serova alleged that some of these tracks featured a Jackson imitator. She sued under the UCL and CLRA for misrepresentations on the album’s packaging and in a promotional video.

The Court of Appeal upheld an anti-SLAPP motion because the statements were noncommercial speech “directly connected to music that itself enjoyed full protection under the First Amendment” and “concerned a publicly disputed issue about which [the speaker] had no personal knowledge.” The California Supreme Court reversed.

The statements were “commercial advertising meant to sell a product, and generally there ‘can be no constitutional objection to the suppression of commercial messages that do not accurately inform the public.’” Not all marketing of artistic works is noncommercial speech. Specifically, and dealing with the most serious error in the lower court’s reasoning,

a seller’s purported lack of knowledge of falsity does not tell us whether that seller’s speech is commercial or noncommercial, and commercial speech does not shed its commercial nature simply because a seller makes a statement without knowledge or that is hard to verify. The First Amendment has long coexisted with no-fault false advertising laws.

There was also no copyright preemption.

Serova alleged that people familiar with Jackson’s voice, including family members (some of whom performed with him in The Jackson 5), disputed the authenticity of three of the album’s tracks. Sony, the publisher, allegedly offered the public “complete confidence in the results of our extensive research as well as the accounts of those who were in the studio with Michael that the vocals on the new album are his own.” The Jackson estate, urging the authenticity of the tracks, offered the opinions of “six of Jackson’s former producers or engineers, who reviewed raw vocals at a listening session; one of Jackson’s previous musical directors; one of Jackson’s vocal directors; two hired forensic musicologists; and two other industry professionals with connections to Jackson.” (The estate’s letter is not part of the case any more but provides context for Sony’s claims.)

Based on the parties’ arguments, the court considered only whether Sony’s speech was noncommercial. The parties agreed that the CLRA and UCL “can constitutionally restrict speech properly classified as commercial.” [The court did not need to resolve whether Sony could be compelled to say that the tracks “might not” contain Jackson vocals as a remedy.]

So, were Sony’s statements, “a brand new album from the greatest artist of all time” with “9 previously unreleased vocal tracks performed by Michael Jackson,” commercial speech?

The speaker—a seller promoting sales of an album—and the audience—potential buyers—supported categorizing the speech as commercial. Content is typically commercial if it makes “representations of fact about the business operations, products, or services of the speaker (or the individual or company that the speaker represents) ... for the purpose of promoting ... the speaker’s products or services.” This includes identifying “those affiliated with a product or service.” Whether there was a public controversy was not relevant; commercial speech routinely “relates to a matter of significant public interest or controversy,” and is not immunized from regulation thereby. As the US Supreme Court said in Bolger, “[a] company has the full panoply of protections available to its direct comments on public issues, so there is no reason for providing similar constitutional protection when such statements are made in the context of commercial transactions.” Here, the content of the statements, made in traditional advertising contexts, was commercial, touting “Jackson’s vocal contributions” to increase sales.

Sony argued that its statements were noncommercial because they pertained to art and identified an artist, whose identity “can be an important component of understanding the art itself.” “But if Sony’s assertion that Jackson contributed lead vocals affects consumers’ experience of Michael, this illustrates how misrepresentations about an artist’s contributions can harm consumers in ways that matter to them.” [Citing Dastar and Rogers; noting in a footnote that Dastar suggested that Lanham Act false advertising claims might sometimes govern statements about artistic provenance without raising any First Amendment concern.] As Rogers noted, artistic works “are also sold in the commercial marketplace like other more utilitarian products, making the danger of consumer deception a legitimate concern that warrants some government regulation.”

“Relief has long been available in California to unwitting purchasers of imitation art who relied on false representations about authenticity.” [Citing Smith v. Zimbalist, 38 P.2d 170 (Cal. Ct. App. 1934) (finding unenforceable the sale of a violin represented as a Stradivarius when buyer and seller were both mistaken and the violin was a cheap copy).] And, while Dastar took out the statutory foundation for some Lanham Act claims, “numerous courts have entertained false advertising claims premised on statements about creative contribution.” [citing both UCL and Lanham Act claims, including false advertising claims.]

“The reasons commonly given for why commercial speech is subjected to greater regulation — a commercial speaker’s close relationship to a product or service, profit motive, and the government’s traditional role in preventing commercial harm— still have relevance when an artistic product is marketed.” And there was no evidence of a chilling effect from allowing false advertising claims.

True, “[t]here may be instances where statements about artistic contribution, or artistic works more generally, are not offered to convey product information but are themselves part of an expressive enterprise, possibly parody or satire.” [citing Hustler v. Falwell and Mattel v. Walking Mountain] “And it is conceivable that an album seller might include, in liner notes, an essay theorizing about artistic contributions that is itself an expressive work.” Also, “artists might choose to obscure their identities for expressive reasons through pen names or pseudonyms.” But this case didn’t implicate those scenarios; it instead involved “an explicit promise of a superstar’s vocal contributions to a product,” which was commercial. [The distinction here, despite the framing as being about commercial speech, doesn’t seem to be about commerciality; it seems to be about falsifiability/materiality.]

In addition, Sony’s claims weren’t inextricably intertwined with or adjunct to an expressive work. True, several California cases have held that “the truthful use of a name and likeness to promote an expressive work cannot support a claim for violation of the right of publicity,” but another held that, where advertisements “did not reflect any character or portion of” an expressive work and instead “contained a fictitious critic’s favorable opinion,” the advertisements were not entitled to heightened protection as adjuncts to an expressive work and were instead subject to consumer protection laws. [citing Rezec v. Sony Pictures Entertainment, Inc., 116 Cal.App.4th 135 (2004); cf. Keimer v. Buena Vista Books, Inc. 75 Cal.App.4th 1220 (1999) (holding that “even promotional materials on book cover reflecting false claims of book could be commercial speech”). A footnote noted that Keimer, which concerned material directly excerpted from the underlying book, “has been criticized as insufficiently protective of free speech,” but given that Sony’s ads didn’t reproduce the music from Michael, the court declined to address that criticism “or, for that matter, address the full contours of a doctrine governing the promotion of expressive works.”].

Charles v. City of Los Angeles, 697 F.3d 1146 (9th Cir. 2012), also held that “although a television program was itself noncommercial, expressive speech, a billboard advertising the program was commercial speech, because “speech inviting the public to watch” a program “is not inherently identical to the speech that constitutes the program itself.” [This was in the context of billboard time/place/manner regulations, which don’t involve truth/falsity as the relevant line between lawful and unlawful speech, and thus pose different questions about the risks of liability.] Charles pointed out that “the principle motivating California’s protection of advertisements adjunct to expressive works ‘is the need to protect advertisers from tort actions that would otherwise threaten the ability of publishers to truthfully promote particular works’ by accurately conveying the content of those works, even when that content is itself false.” Protecting advertisements for protected works is “justified only to the extent necessary” to achieve this purpose.

But Sony’s identification of Jackson as lead vocalist wasn’t covered by this principle. “No legal command nor law of nature compelled Sony to include what, for present purposes, it concedes are false claims ….” The alleged falsehoods were “distinct from, rather than adjunct to or reflective of, any artistic expression on Michael. Serova is not suing because Michael’s artistic expression has spilled over into promotional advertising, but because she believes Sony falsely advertised the lead vocalist.”

Sony offered an even broader argument, one that I think should be rejected even if you think that this opinion is wrong about the relationship between the artistic content and the claims here. Sony argued that its statements couldn’t be commercial because their truth was not “readily verifiable,” and that Sony’s knowledge of the controversy didn’t give it knowledge of falsity. The Court of Appeal adopted this argument, which is why it is very important that the California Supreme Court rejected it.

False advertising laws cover representations of fact made to promote products or services, without requiring that covered representations be made with personal knowledge or be readily verifiable. True, the traditional justifications for regulating commercial speech include that it is relatively more verifiable than noncommercial claims “in that ordinarily the advertiser seeks to disseminate information about a specific product or service that he himself provides and presumably knows more about than anyone else,” as Kasky said (emphasis added). But that doesn’t mean that personal knowledge or ready verifiability is always required. The court here pointed out that the statements held regulable in Kasky were about subcontractors’ operations, not its own—it was the connection to Nike’s own operations that made Nike’s speech commercial. Nike was likely in a position to verify those statements, but that wasn’t required.

Moreover, it seems problematic to assess the commercial or noncommercial content of speech by measuring a speaker’s level of personal knowledge. For example, if we correlate knowledge with commercial speech, then two identical promotional statements might face differing regulations because of something invisible to consumers: the speaker’s mental state. Also, if actual knowledge were the standard, that knowledge could be easily avoided.…

Looking at the speech’s ease of verifiability, as opposed to its falsifiability/not being puffery, was similarly mistaken. Consumer protection laws incentivize commercial speakers to verify their claims. “And it is when statements about products or services are hard to verify that the need for consumer protection may be strongest.”

Moreover, whether Jackson sang lead vocals “may be more easily verifiable” by Sony “in exactly the sense that justifies commercial speech regulation more broadly. … Few were likely better positioned to identify the Cascio tracks’ singer than Michael’s producers and sellers, who had not only profit motive, but also access to and business dealings with the album’s primary creators.” Sony had an incentive to secure any necessary licenses and warranties, and it allegedly claimed to have “overwhelming objective evidence” of authenticity, “a message at least in tension with its present claim that verifiability was unattainable.” Expert disagreement about product characteristics doesn’t change the fact that sellers can be presumed to know relatively more about the product than anyone else. Difficulties of proof at trial don’t render promotional speech noncommercial.

Sony could argue that its speech was not sufficiently false or misleading to be regulable, but that’s a separate liability question, not a speech classification question. [In other words, even puffery is commercial speech—as Charles implicitly accepts, at least for billboard regulation.]

The court rejected Sony’s related argument that strict liability for its speech would wrongly chill expression, a revival of a claim made in Kasky. Strict liability regulation of commercial speech is common and has been for a hundred years. It exists in the CLRA, the UCL, the FTC Act, and the Lanham Act. Fault requirements have been applied to torts that cover noncommercial speech, but “the leeway for untruthful or misleading expression that has been allowed in [these] other contexts has little force in the commercial arena.” As the US Supreme Court has said, “[a]ny concern that strict requirements for truthfulness will undesirably inhibit spontaneity seems inapplicable because commercial speech generally is calculated. Indeed, the public and private benefits from commercial speech derive from confidence in its accuracy and reliability.”

Penultimately, what about the album title, Michael, and artwork, featuring images of Jackson? These might be expressive and inextricably intertwined with the underlying work, but the court didn’t need to reach that issue given the framing of the case.

Finally, Sony’s answering brief to the state supreme court raised, for the first time, copyright preemption, arguing that challenges to a court’s subject matter jurisdiction can be raised at any time. Whether or not this was true, the underlying argument was wrong. Consumer deception was an extra element avoiding preemption, and Serova’s claims didn’t depend on who owned what, nor did she seek to enjoin reproduction or distribution of the sound recordings. [§1202 preemption might have made for a more interesting argument there.]

Court reduces NY GBL statutory damages award to avoid unreasonableness in Joint Juice case

Montera v. Premier Nutrition Corp., 2022 WL 3348573, No. 16-cv-06980-RS (N.D. Cal. Aug. 12, 2022)

Montera sued Premier on behalf of a class for its marketing of Joint Juice. A jury found Premier liable for violations of NY GBL sections 349 and 350 and found actual damages to the class of nearly $1.5 million, representing full refunds of the money they paid for Joint Juice. Plaintiff then sough statutory damages in the amount of $50 per unit sold for violations of GBL § 349 and $500 per unit sold for violations of GBL § 350, as well as prejudgment interest. “A reduction of statutory damages is permitted under Supreme Court and Ninth Circuit law, and is warranted in this case because the calculated amount of statutory damages, $91,436,950, is ‘so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable,’” especially given that statutory damages can’t be obtained in class actions in NY state court. The court thus reduced statutory damages to a bit over $8.3 million, but awarded prejudgment interest of nearly $4.6 million, calculated as class members’ claims accrued.

The court also refused to decertify the class or grant judgment as a matter of law. “[D]espite the possibility of recoveries in the thousands of dollars for class members, the class action remains a superior device for resolving claims in this case.”

The court had previously ruled that statutory damages would be calculated on a per-unit basis, since a violation of the law

occurs when a consumer views the label and purchases the product. This means a plaintiff may experience multiple violations of the statutes. Indeed, Premier marketed its product to encourage consumers to drink the product regularly and to make multiple purchases. Consumers were repeatedly exposed to the label, and repeatedly made the choice to buy the product.

Much of Premier’s argument was that statutory damages would be so high as to be unconstitutional in this case, but that couldn’t show that an award of statutory damages on a per unit basis would be unconstitutional in every instance. “Indeed, it is easy to imagine products for which the statutory damages to be awarded on a per unit violation would be much closer to the actual unit price, such as some smartphones or car tires.”

The parties also disputed whether Montera had to present evidence of actual damages; because the statutes allow a plaintiff to recover the greater of actual damages or statutory damages, that meant that both had to be determined and compared, so Montera was directed to prove actual damages at trial, which also assisted in the constitutional argument. The jury was only asked about actual damages, since statutory damages were a question of law for the court.

When it comes to statutory damages, “[a] statutorily prescribed penalty violates due process rights ‘only where the penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.’ ” Relying heavily on Justice Ginsburg’s dissent in the case that directed federal courts to apply federal class action rules to NY state claims for statutory damages, the court reasoned that “the New York legislature views the aggregation of those penalties across a class as a punitive measure.” Thus, this case was different from others involving high statutory damage awards, where the legislature had intended statutory damages to be available to classes.

But how is a district court supposed to adjust the damages? There isn’t much guidance, just some arbitrary numbers. The court looked at the Seventh Circuit’s direction “to start from harm rather than wealth, then add an appropriate multiplier, after the fashion of the antitrust laws (treble damages) or admiralty (double damages), to reflect the fact that many violations are not caught and penalized.” United States v. Dish Network L.L.C., 954 F.3d 970 (7th Cir. 2020).

Because the NY legislature wanted to avoid punitiveness, it was appropriate to consider punitive damage award precedents, which consider: “(1) the degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases.” Montera’s request for over $91 million would be more than 61 times greater than actual damages, and grossly excessive. This was so despite “significant evidence of reprehensibility,” included repeated actions/continued marketing of joint health benefits to people seeking relief from joint pain and arthritis, despite evidence of Premier’s awareness of “numerous” studies pointing to lack of benefit. However, the harm was “purely economic”—consumers wasted money but weren’t physically harmed. [The court didn’t consider whether they might have delayed other treatments.] The court did mention “the intangible harm of lost hope.… Premier Nutrition may not have targeted people with financial vulnerability, but it did target people in pain who were desperate for relief. Thus, the reprehensibility factors point in both directions.”

The ratio of statutory to actual damages was “immense,” not near the single-digit ratio the Court has decided is okay. And the third due process consideration is “not quite applicable here,” because it is, in fact, “civil penalties authorized or imposed in comparable cases,” which would seem to be applicable-but-pro-plaintiff, but again, NY didn’t want that to happen, and it was arbitrary to allow higher recoveries in federal court.

So the court awarded $8.3 million, corresponding to GBL § 349(h), $50 per unit sold. “This award of statutory damages is approximately 5.59 times greater than the amount of actual damages.”

While federal courts have declined to impose prejudgment interest for statutory damages, those cases mostly involved federal causes of action; NY law provided for it regardless of the source of the damage award.

In its renewed motion for decertification, Premier’s only new argument was superiority: now that it was on the hook, individual claimants (if they bothered to sue) could get more in statutory damages on a per transaction basis because—as Premier requested—the court limited the statutory damages available in a class action. But “[e]ven a recovery in the tens of thousands of dollars would not necessarily be sufficient to pursue an individual claim in this litigation, as such a recovery still ‘pales in comparison with the cost of pursuing litigation.’” Montera was required to provide “significant amounts of scientific evidence and retain numerous experts. It is unclear how an individual plaintiff would be incentivized to undertake those costs, even if the possible recovery was in the tens of thousands of dollars.”

statements about legality are only factual if the law is really, really clear

Azurity Pharms., Inc. v. Edge Pharma, LLC, --- F.4th ----, 2022 WL 3335823, No. 21-1492 (1^st Cir. Aug. 12, 2022)

Many FDA-related false advertising claims about pharmaceuticals are preempted because of the special role FDA plays in regulating them, but not all, as this case explains, applying Pom Wonderful to the pharmaceutical context.

Azurity sells a hydrochloride vancomycin drug that received FDA pre-market approval. Edge is a drug compounding company that sells a hydrochloride vancomycin drug that competes with Azurity’s, but that has not been given pre-market FDA approval.

Azurity sued Edge under the Lanham Act and a Massachusetts consumer protection law, Mass. Gen. Laws. ch. 93A for falsely advertising that Edge is not in violation of section 503B of the FDCA, which authorizes drug compounders who meet certain conditions to market their compounded drugs without first obtaining FDA approval. In addition, Edge allegedly falsely touted its vancomycin drug as superior to Azurity’s.

The district court dismissed the claims because they would require the court to interpret the FDCA and interfere with FDA’s authority; the court of appeals affirmed the dismissal of the main 503B-related claim and vacated as to the superiority claim.

Pre-approval isn’t required for some compounded drugs made in outsourcing facilities, as detailed by 503B. Among other things, an “outsourcing facility” may not compound a drug that is “essentially a copy of one or more approved drugs,” and Azurity alleged that this was the situation here.

Edge made various statements about being a “503B Outsourcing Facility” that was “registered,” “inspected,” and “compliant” with, inter alia, FDA regulations and guidelines. It also stated that “commercially available options are not ideal for use in the hospital setting,” which Azurity alleged was a false superiority statement.

Without ruling on preclusion, the court of appeals affirmed the dismissal of the non-superiority literaly falsity claims on the ground that claims about the legality of a product or service, made by a nonlawyer, are usually not factual in the absence of “clear and unambiguous” guidance from appropriate authorities (usually regulators), adopting reasoning from other circuits. Coastal Abstract Service, Inc. v. First American Title Insurance Co., 173 F.3d 725 (9th Cir. 1999); Dial A Car, Inc. v. Transportation, Inc., 82 F.3d 484 (D.C. Cir. 1996).

“Essentially a copy”: Azurity argued that the rules here were sufficiently clear and unambiguous to found its claims, given nonbinding FDA guidance about the meaning of “essentially a copy.” It argued that, as to each element the FDA said it would consider, it alleged facts that would mean a violation. But there was no ruling by the FDA or any court that Edge had in fact violated section 503B by engaging in conduct barred by the “essentially a copy” provision. Nor was there a binding ruling by an agency or a court about the meaning of the “essentially a copy” provision itself with respect to what the “applicable factors” were for determining whether two drugs are identical or nearly identical. [Azurity offered a different theory of violation, relating to whether the compounded drug offered a “clinical difference,” but the complaint didn’t allege facts related to that theory. The district court could consider whether to allow amendment on remand, and also consider whether preclusion would also apply to this theory.]

Misleadingness: Azurity’s theory was that while Edge’s representations that it is a “registered” outsourcing facility might be literally true, such representations gave health care providers the false impression “that Edge complies with state and federal law,” including “[section] 503B.” But, for the same reasons, this wasn’t a misleading representation of fact.

Azurity also alleged that Edge was acting unlawfully because of a different provision of 503B, which restricts compounders from using a “bulk drug substance” unless the substance/compounded drug is listed by HHS as one a compounder can make.

The court noted that the theory—there’s a list, and Edge’s product isn’t on it—was factually distinguishable from the “regulatory compliance statements are just opinion” cases. Given the requirement that outsourcing facilities can’t market a compounded drug without preapproval “unless” the substance, or the drug, appears on a relevant list, “there is no interpretation necessary” to determine what it takes to comply with the law. “[T]he statutory provision at issue is of a kind that is unusually susceptible of being clear enough on its face as to what condition it establishes for the scope of the condition to be a fact.” Nor was there any contradictory agency interpretation; to the contrary, the only available agency guidance identified vancomycin hydrochloride as not on the list, and noted that a compounding entity that compounds something that is not on the list “does not meet the conditions of section 503B(a)(2).”

So the compliance statements were plausibly literally false. [Though a court could conclude that the statements represented only that Edge complied with the law “as the FDA said it was going to enforce it.”] Azurity also alleged that Edge’s claim to be “registered” with FDA was misleading, for the same reasons, but didn’t plead nonconclusory facts about misleadingness. Because it didn’t explain how or why the statements could mislead consumers about Edge’s conduct with respect to bulk drug substances specifically, its claim failed.

What about preclusion of the literal falsity claim? The FDA hasn’t made enforcement of the bulk drug substances rules a policy priority, as it has stated in its interim guidance. Edge thus argued that, “because the FDA has indicated that it does not intend to take action against outsourcing facilities compounding drugs by using vancomycin hydrochloride, the FDCA precludes the claim at issue.” Thus, to allow the claim would “directly conflict[ ] with the agency’s policy choice” or otherwise “undermin[e] an agency judgment,” under Pom Wonderful.

The court of appeals disagreed. The FDA didn’t preapprove the statements at issue. And Pom Wonderful found no preclusion “even where an FDA regulation governed some aspects of the challenged label.” The case for no preclusion was stronger here, where no FDA regulation governed the kinds of statements outsourcing facilities can make in advertising, and Edge would not be subject to inconsistent obligations. Relatedly, this wasn’t an attempt to enforce the FDCA directly, but a false advertising claim.

Edge relied on the Federal Circuit’s holding that “a complainant fails to state a cognizable claim [based on alleged violations of the Lanham Act] where that claim is based on proving violations of the FDCA and where the FDA has not taken the position that the articles at issue do, indeed, violate the FDCA.” Amarin Pharma, Inc. v. Int’l Trade Comm’n, 923 F.3d 959 (Fed. Cir. 2019). But that case actually involved an “unclear” statutory question requiring FDA expertise, not a clear statutory interpretation. “[T]he FDA’s choice not to enforce the terms of this provision against outsourcing facilities that use such bulk drug substances does not mean that the terms of the provision are less than perfectly clear.”

Claims based on the superiority statement failed as puffery. Even assuming the statement necessarily implied that Edge’s product was “ideal for use in the hospital setting” and Azurity’s wasn’t, Azurity’s argument for falsifiability presumed that reasonable consumers would measure “ideal-ness” by whether there was FDA approval. But Azurity didn’t explain why that would be what reasonable consumers would do, nor did the statement itself mention FDA approval. “Because there are, perhaps, many other factors that go into whether a drug is ‘ideal for use in the hospital setting,’ such as ease of administration or reliable supply of the drug in large quantities, that FDA approval itself may not have a bearing on, we see no reason why FDA approval is the only measure by which a consumer of these drugs would measure the ‘ideal-ness’ of them.” Nor was “ideal” specifically measurable.

Although preemption, not preclusion, is the appropriate doctrine for the Massachusetts state law claims, the analysis was functionally the same and the district court was affirmed/vacated as to the same claims.

when is a trademark licensee's use of a TM deceptive to consumers?

Puma v. Wal-Mart Stores East, LP, No. A-1-CA-38023, 2022 WL 3221810, -- P.3d – (N.M. Ct. App. Aug. 9, 2022)

Interesting case about trademark preemption. The Pumas alleged that defendants violated the New Mexico Unfair Practices Act based on their purchase of a Black & Decker-branded coffeemaker.

Based on Black & Decker’s reputation, the Pumas thought the coffeemaker would be better than the lower-priced store brand and paid more for it as a result. However, Black & Decker did not in fact design, manufacture, distribute, or warrant the coffeemaker. Its maker, Applica, paid royalties to Black & Decker for the right to use the name and trademarks in selling small kitchen appliance. “[A] consumer reading the information on the Coffeemaker’s box would not know of any relationship between Black & Decker and Applica.” The coffeemaker evidently proved unsatisfactory, and the Pumas sued.

The district court certified a class of those who purchased the coffeemaker at a New Mexico Wal-Mart store from 2009 to 2013, approximately 40,600 members. The district court, after a bench trial, found that defendants’ conduct constituted an “unfair or deceptive trade practice.” It awarded $300 in statutory damages and attorney fees, but because the class could not establish actual damages, it was not entitled to damages.

The court of appeals affirmed the finding of a violation of the UPA against an argument that the Lanham Act preempted the claim. Defendants started with 15 U.S.C. § 1055, which allows related companies to use registered marks, including “any person whose use of a mark is controlled by the owner of the mark with respect to the nature and quality of the goods or services on or in connection with which the mark is used.” 15 U.S.C. § 1127. They argued that B&D could grant a license and be protected as long as the owner exercised quality control. And they argued that they had done so because their licensing agremeent “mandated that Black & Decker exercise control and oversight to ensure the Coffeemaker met Black & Decker’s quality standard.” [Side note: that’s not enough if they didn’t actually do it!]

But anyway, the conduct could still violate the UPA, which is “remedial legislation for consumer protection,” and which courts interpret “liberally.” “New Mexico cases have historically interpreted the UPA to focus exclusively on consumer protection, protecting innocent consumers.” By contrast, the Lanham Act protects “persons engaged in commerce” and does not allow consumers to bring claims. Interpretation of the UPA is supposed to be “guided by the interpretations given by the federal trade commission [(FTC)] and the federal courts.” Reading the latter phrase to include all federal court decisions, including Lanham Act decisions, “would produce a direction so broad as to be practically meaningless.”

Defendants’ position that, “so long as the quality associated with the Black & Decker brand is maintained, failing to indicate the ultimate source or manufacturer of the Coffeemaker cannot constitute an unfair or deceptive trade practice under the UPA,” conflicted with the UPA’s list of unfair/deceptive acts, such as “causing confusion or misunderstanding as to the source, sponsorship, approval or certification of goods” and “representing that goods ... are of a particular standard [or] quality ... if they are of another.” “The language of these subsections indicates that the Legislature intended that representations as to a product’s source could be a basis for liability under the UPA, independent of that product’s quality.”

In a footnote, the court found that the argument that the Lanham Act constituted a regulatory safe harbor/generally preempted the claim insufficiently developed.

So, was there sufficient evidence of an unfair trade practice? The district court relied on three statutory prohibited practices: “representing goods ... as those of another when the goods ... are not the goods ... of another,” “causing confusion or misunderstanding as to the source, sponsorship, approval or certification of goods,” and “using exaggeration, innuendo or ambiguity as to a material fact or failing to state a material fact if doing so deceives or tends to deceive.”

As to the first, defendants argued that this wasn’t a case of passing off, since B&D collaborated with and permitted its licensee to use the mark. And they argued that “neither the Coffeemaker nor its packaging affirmatively stated that Black & Decker designed, manufactured, distributed, or warranted the Coffeemaker.”

The court of appeals disagreed. The trial court made factual findings that the Pumas were actually deceived as to the source of the product. “Even if we assume that, by virtue of the trademark licensing agreement between Applica and Black & Decker, Defendants’ use of the Black & Decker trademark on the Coffeemaker could not alone constitute active misrepresentation as to the source or manufacturer of the Coffeemaker, Defendants have not adequately addressed the district court’s reliance on [another part of the consumer protection law], which provides that ‘using ... ambiguity as to a material fact or failing to state a material fact if doing so deceives or tends to deceive’” can constitute an unfair or deceptive trade practice.” Thus, the presence of the trademark plus the absence of any disclosure on the product or the advertising could deceive reasonable consumers about either (1) the relationship between Black & Decker and Applica; or (2) that the product was in fact a product of Applica, rather than of Black & Decker. The court pointed out that the name, “Black & Decker 12 Cup Programmable Coffeemaker” “emphasized that the ‘Black & Decker’ name was an important characteristic of the Coffeemaker; these statements tended to deceive a reasonable consumer, and Defendants knew or should have known that potential purchasers of the Coffeemaker would likely regard information about the Coffeemaker being a Black & Decker product as material.”

The court emphasized that it was not holding “that the use of a trademark by a licensee pursuant to a trademark licensing agreement by itself constitutes an unfair or deceptive trade practice,” or that individual or widespread licensing was “per se irrelevant” to the inquiry. Nor was evidence of the quality of the licensed product “per se irrelevant.” Rather, the court of appeals was simply holding that the Lanham Act did not govern the UPA claim, “and that, under the circumstances of this case, Defendants’ knowing and willful use of ambiguity as to material fact, which tended to deceive a reasonable consumer, constituted an unfair or deceptive trade practice.”

This liability victory didn’t result in big damages, though. The court of appeals found that the district court didn’t err in denying damages for unjust enrichment. And it reversed the district court’s decision to award the Pumas attorney fees related to class certification.

FleetCor fleeced small businesses, court rules on summary judgment

Federal Trade Commission v. FleetCor Technol., Inc., --- F.Supp.3d ----, No. 1:19-cv-5727-AT , 2022 WL 3273286 (N.D. Ga. Aug. 9, 2022)

The really enraging thing about this case is that it breaks no new legal ground, and illustrates exactly why FTC needs a strong mechanism to get consumer redress in a reasonable period of time. FleetCor promised savings on diesel purchases. It collected hundreds of millions of dollars from businesses, often run by unsophisticted individuals/people with limited English, through false advertising, a barrage of undisclosed fees that were concealed from customers by not being shown on bills—some not were even buried in vague contractual language—and unwarranted late fees from people who actually paid on time. Among many other things, FleetCor advertised that businesses could issue drivers “fuel only” payment cards in order to get greater protection against misuse, while internally acknowledging that the cards weren’t capable of limiting purchases to fuel only—in one case, a driver bought $200,000 in Speedway gift cards using the FleetCor card. And there was a misleading CO2 emissions fee of 5 cents a gallon that they tacked on (done on an opt-out basis rather than opt-in to raise revenue, so how that even relates to CO2 emissions is a good question).

The court granted summary judgment to the FTC on both deceptiveness and unfairness, and held the CEO, Ronald Clarke, individually liable given his control and knowledge (to give you a sense, he called reports of deceptive practices “fake news” and reassured investors about customer complaints but gave no direction to subordinates to resolve the complaints).

The FTC can’t use this case to get monetary redress, but there is a suspended administrative proceeding at the agency that perhaps can do something to help the victims eventually. I won’t go through the evidence the court reviewed both of the deception/unfairness and the suffering and loss it caused, but I will quote a few paragraphs from the discussion of injunctive relief to give you a sense of the conduct:

Here, the mountain of evidence presented by the FTC demonstrates that FleetCor’s violations were far-reaching. FleetCor’s ads were not “isolated inciden[ts] of deception” but rather left customers consistently feeling swindled and misled. FleetCor’s misleading fee practices were even more pervasive. Not only were these recurrent, but the “degree of scienter” involved is plain. Nearly a dozen internally commissioned studies and surveys, plus dozens of emails of high-level employees, establish that FleetCor was well aware that customers were being hoodwinked. More than that, there is unrefuted evidence in the record that the conduct was intentional — and that it came straight from the top. [citing CEO’s request for “opportunities to get more late fee revenue in 2018 .... thru a higher rate, less/no grace days, etc, etc.”]

The record indicates that FleetCor’s deceptive advertising and unfair fee practices were ingrained in the fabric of the company for years.

Further, Defendants have in no way “recogni[zed] the wrongful nature of their conduct” and, as the business is still fully operational, the “occupation” surely “present[s] opportunities for future violations.” 

Beyond these sprawling prior violations, there is demonstrable record evidence — contrary to Defendants emphatic position — that FleetCor’s unfair practices persist. For example, FleetCor’s own internal study from 2020 found that, of individuals who “attrited” (i.e., stopped using FleetCor cards), “53% felt misled and 26% claimed fees were not accurately described or disclosed.” FleetCor has not provided any evidence that it has implemented an affirmative disclosure process or that it does not automatically opt customers in to fees for “programs” they have not requested. And while the specific advertisements at issue in Count I–III are no longer circulated, such voluntary cessation is not adequate to protect against future violations where FleetCor is easily able to put forth similar ads anew.

Congress could help the victims, and the others that the FTC is tasked to protect, by restoring the agency’s ability to get consumer redress in court. It should do so posthaste.

 

 

IPSC Closing Plenary Session: IP In the Courts

 Automating the Uncertain Judge

Courtney M. Cox

Ignoring uncertainty is wrong. An ideal judge aims at proper outcomes, and if they ignore uncertainty they ensure error, sometimes serious error. Ignoring strength of belief won’t always result in error but sometimes it will. Rule-driven and data-driven models both need to grapple with uncertainty. Jurisprudential tools & doctrines exist, along with rational methods for coping with uncertainty. More research is needed.

Q: can a data-driven machine be a legal realist? If the idea is to take into account sufficient social context, the training data is the beginning but not the end of decisions, won’t it converge on rule-based formalism?

A: Probably a machine can respond to whatever it had for breakfast. Underlying the Q are the difficulties in the data: what judges had for breakfast causing variations is baked in, which is commonly discussed in the context of bias. We at least have a sense of what we want to control for or what they’re doing wrong, but work has been started on that; here, with uncertainty, there’s not a lot of work figuring out when a judge is doing something for jurisprudential reasons or because they’re uncertain about which method of textualism to use.

Silbey: What’s the difference between uncertainty and highly contextual analysis?

A:  Probably related.

Q: why not program different versions, one that tries to minimize transaction costs, one that tries for legal realism, etc. and pit one against the others?

Some discussion; she showed a diagram about judges who were committed to different theories of jurisprudence (e.g. originalism, pure natural law) with different degrees of confidence, and used that to show a model of how those judges would evaluate overruling Plessy/deciding Brown as it was decided. I didn’t really end up convinced that this was doable or descriptive of uncertainty in judging at the jurisprudential level as opposed to the factual level.

Schedule A Defendants

Eric Goldman

Complaint doesn’t list actual defendants; schedule A. Often sealed; often contents are Chinese manufacturers who are alleged counterfeiters. Similarity to Doe defendants—one advantages is plaintiff can use the revelation of identities of defendants as leverage to get settlement, as in the porn/© cases. Another option: list them in the caption; making joinder concerns more obvious. No confidentiality of Ds’ identities—defendants can coordinate; asset freezes may not work.

Location by state, per Bloomberg Law: ~3000 in Illinois, ~500 in NY, 374 NJ, long tail. About 3000 default judgments, 688 voluntary/joint dismissal, 44 admin dismissal, 33 trial/judgment entered, 15 contested dismissal, 15 summary judgment, 2 other. Where unsealed, about 218 defendants per case, meaning that Emojico sued over 10,000 defendants in one year. Most of the cases are TM (3000).

Concerns: Robo-pleading; problems with service/how do we know it’s working properly; personal jurisdiction—we know that harm in jurisdiction is not enough, and addresses may not be listed; joinder/filing fee issues—how are the parties related enough to all be on the same complaint? Very few judges raised it on their own.  Sealed defendant lists: a red flag b/c we can’t track what’s going on in courts that way—the rejoinder is that we need to seize their assets, but we don’t get unsealing even when there is no concern/seizure is accomplished. Emojico dismissed defendants who showed up to fight back. All this is ex parte. Judges used to adversary process can allow lots of errors to creep in if the other side doesn’t show up.

The point is not to litigate, but to get the court order to take to a place like Amazon, which will shut down the entire business and not just the targeted conduct. The judge doesn’t know this and things look like they’re going pretty well to the judge.

What do we do? Judicial education? FRCP?

Emojico targets people selling mugs that have emoji on them advertised as “Emoji Gifts Birthday Present”—rubber-stamped as TM infringement every step of the way in court and by Amazon. This is worth fighting back against.

Lisa Ramsey: Lifeguard licensing also claims to own rights in “Lifeguard” and cross. When someone fought back, they dropped the case and the court denied an attorneys’ fee request. So we need something to be done.

Lemley: Defendant class actions do exist—there are protections for the class, judges have to sign off, could be expanded.

A: loves that idea b/c it would force evaluation of commonality between the parties, which is worth looking for.

Felix Wu: how much do substantive claims matter? Troll usage is bad, but can imagine legitimate usage by mass infringers.

A: needs to consider more—horrified by the procedural aspects.

The Class Action as Licensing and Reform Device

Xiyin Tang

Google Books settlement was rejected; quasi-legislative provisions were more for Congress. Have there been other settlements in class actions that tried to obtain a release not just for past harms but for forward-looking uses. Relatively few 1938-1990: 7. Three filed by the same person, head of ASCAP; another performance rights; composers. From 1990-2000, 22 class actions. Tech was a driver. Many were attempting to address new tech uses. Cahn v. Sony, SDNY 1990, was about audio tapes; settlement wasn’t monetary but promise among settling parties to pursue subsequent legislation, resulting in Audio Home Recording Act. Frank Music v. Compuserve, SDNY 1993, for liability for ISP for infringement by users. First settlement in copyright class action providing for future royalties. Pre-512; Compuserve testified in Congress multiple times about the need for safe harbors, and their class action experience alerted them to the uncertainty in law/need for legislative resolution.

Ferrick v. Spotify, SDNY 2018: licensing the long tail of songwriters/publishers; claim was that they shouldn’t have used the NOI compulsory licensing process, esp given that Copyright Office couldn’t keep up with the volume—work by work process wasn’t tenable for music streaming; settlement provided a lot of framework for Music Modernization Act.

Mass tort settlement as regulation: global peace. Here, though, the rights aren’t necessarily recognized in substantive law, which leads to the filings in the first place—the class actions are gap-filling. Will continue as new tech uses challenge ©.

Q: CAFA?

A: Proceduralists worry about Ps getting too little and © folks worry about Ps getting too much. But courts are supposed to scrutinize settlements more carefully, which is significant.

Sprigman: Public info: Spotify relied on Harry Fox early on, before NOI—Harry Fox would match what it could. Over time they would rematch and pay out arrears for new matches. The plaintiffs said paying arrears wasn’t allowed. What’s the reaction? Harry Fox lost its place—it’s not the central player now that it was then. Statutory damages made this messy: damages were either very payable or astronomical, and it was very difficult to know the range. Another source of uncertainty: there was a claim that for normal streaming (no copy) there was no digitial phonorecord delivery, which meant there was no license needed, which created uncertainty on the other side. So both parties had an incentive to get the process fixed and NOIs rationalized.

A: HFA is owned by the music publishers so the fact that they could not actually get it together to figure out who owned what was also significant.

The Solicitor General’s Mixed Record of Success Before the Supreme Court in Copyright Cases Pam Samuelson

Started w/significant contrast b/t SG’s brief in GvO and the outcome. Likewise the SG supported Georgia against PublicResource.org. Compared to the patent side the SG does not have a great record of success on substantive © issues. OSG has won two cases for the US (Eldred & Golan) & lost one (Dowling). Justices have more confidence in how they thought about © for themselves, especially with Breyer and Ginsburg.  SG filed only 2 amicus briefs in 20^th c private litigant cases (CCNV, Quality King), but amicus in all but 2 of 21^st century cases—pretty big shift. Procedure/remedies, SG analysis or close prevailed in 5 of 6 cases. Substantive: didn’t agree with SG 9 times. In 4 cases agreed with SG about who should prevail but not about why, different/narrower. 4 cases: disagreed with both who and why. One 4-4 split in Costco v. Omega, where SG failed to persuade SCt to rule in Omega’s favor. Also did not prevail in 2 remedies cases. Where the divergence was only on analysis, not outcome: Grokster, Aereo. Divergence, but not huge: CCNV, Star Athletica, Kirtsaeng II (atty fees).

In only 2 of 18 majority opinions did majority cite approvingly to SG arguments—it was Ginsburg. In 3, explicitly criticized SG: Quality King, Kirtsaeng I, and Star Athletica. But mostly just ignored SG, especially in substantive interpretation cases. Contrast w/other studies of SG influence and citation rates.

On average, SG espoused high protectionist views. One reason: growing influence of Copyright Office lawyers on SG briefs. CO lawyers are on 5 substantive briefs and 3 procedure/remedies cases, and also advise the SG.

Why ignore SG? SCt likes its own decisions, including older ones like Bobbs-Merrill.

When should the SG file in private cases? Not as often, absent CVSG or direct implications for CO procedures in registration—Star Athletica or Fourth Estate—or effects on foreign relations/border enforcement—Quality King/Kirtsaeng. Constitutional challenges (though they didn’t file in Felner or Allen v. Cooper). But they shouldn’t file in substantive cases like GvO, Warhol v. Goldsmith. They too often ignore the public interest.

Dan Burk: increased unwillingness to defer to the executive, which might be a bad thing overall.

A: note that the CO is not an executive agency, which should complicate things. And it stayed out in the 20^th c. IPEC, USTR, and © group in the USPTO all reinforce the CO’s high protectionism, so it would be good if they reached out to other entities. No real federal interest.

Burk: EPA’s views on how statute should work should be weighed even in private litigation.

Silbey: cynical explanation—where they practiced before?

IPSC Breakout Session 5: IP Theory & History/Creation and Morality

Copyright’s Higher Pleasures

David A. Simon and Patrick Goold

Refining © utilitarianism in the vein of John Stuart Mill so it wouldn’t be fit for swine. Qualitative hedonism. Critiques of utilitarianism can be normative: IP can/should be shaped to foster attractive culture, etc. Epistemological: Although utilitarianism sounds nice, it’s difficult to calculate and the complexity makes it difficult/impossible to get real answers about law. Interpretive: Progress clause has been misunderstood to focus on quantity not quality.

Mill distinguished between higher and lower pleasures. This gives room for values; preference-based evaluation is likely to include values we care about, like democracy. Probably can’t know whether copyright is empirically justified, we can still study copyright empirically and understand how it will be difficult.

Zahr Said: Great inquiry, but consider who you’re citing discussing critiques: 7 out of 8 men, two people of color by her count. The field especially in the critiques of L&E is far more diverse—Madhavi Sunder, Maggie Chon, Betsy Rosenblatt, Ruth Okediji, Anjali Vats, Mala Chatterjee, Shubha Ghosh, RT, others—why aren’t those others represented?

A: we’re trying to look at people who have directly engaged with utilitarianism directly. [Sunder’s book does extensively.]

Rosenblatt: Hierarchy of pleasures might increase distributional problems by heightening discrimination against the subaltern. That doesn’t mean it’s not productive. But you have to contend with/explain why you think this isn’t an approach that further marginalizes those with nonhegemonic preferences.

A: primary criticism leveled against Mills is elitism; we think we have ways to grapple with it.

Chatterjee: There are non elitist critiques about how to evaluate pleasures and compare them in intensity as well as quality; suspicious of those w/normative critiques of preference satisfaction will be satisfied with a story that ties democracy/speech’s value to the fact that they’re pleasurable any more than tying them to the claim that we prefer them b/c that’s missing the point from their perspective: they matter as independent goods.

A: question is are you sneaking the value in through the back door? Are the higher pleasures infinitely superior and always trump any quantity of lower? Or are they a lot better? Or are they just different? We will try to address those points.

The Macroeconomics of Intellectual Property

Eric E Johnson

Most of us think about microeconomics with L&E: supply and demand curve, allocating production/consumption. Its goal is economic efficiency. Macroeconomics is about, fundamentally, growth. Most scholarship in L&E is about micro. Solow model of growth as function of three things: labor, capital, and something else (innovation/change). At some point, growth from capital investment plateaus, and further growth requires innovation. Your fourth tractor may not do much given what you have to plow; your capital may need to replace worn-out capital investments like bridges. The something else may be called the effectiveness of labor or innovation.

Additional work: Overtaking principle: w/sufficient rapid compound growth, economic inefficiency and even distributional justice is rendered unimportant. Fertility: some innovations are fertile leading to more innovations. Separation principle: separate fertile from infertile innovation; strong IP should apply against producers/consumers, but weak IP should apply against innovators.

His critique: (1) Implementation is implausible

(2) Compound growth assumption is unjustified/contraindicated; innovation is not equal to dollars, and inequality is a headwind aginst innovation)

(3) Argument is self defeating: the fertile innovation most needing IP incentives is what most requires freedom from IP to allow further innovation.

Macro should have precedent: Macro captures the key “progress.” Stakes are very high at the macro level—future of humanity. Macro can make a difference—e.g., software should be seen as enabling other sectors. Policy default should be rebuttable presumption against IP for innovation, b/c exclusive rights are sticky; can hurt progress. Prizes, awards, grants, intrinsic incentives should be our first choices.

Rosenblatt: Is it possible to take a macro approach that is also a social justice focused distributional approach?

A: We should first think macro, rather than assuming that everything will take care of itself. It doesn’t assume away justice concerns. If we think about economics, this is what we should do.

Anupam Chander: Can this be done at the proper level of generality? Economics is useful when it makes predictions we can test. Are the macro models testable or provable? For policy prescriptions like prizes, are we looking at macro concepts to test them? Not sure.

A: Tries to address this in paper. Trying to be modest; agree that economic approaches need a lot of rigor. Real world of policymaking is that economic stuff is thrown around without that rigor. W/o acceding to that, wants to reframe: if doing this, need to be thinking bigger picture and not assuming that efficiency will take care of everything we need in society.

[RT: I’d look at Eric von Hippel’s work on innovation wetlands: goes to both implausibility (there is not a distinction b/t consumers and innovators) and inequality effects of what Johnson call separation—denigrates people who are not seen as capable of producing new things even though in fact that’s where new things often come from.]

Morality/Creation

Loyalties and Royalties

Sarah Polcz

Songwriters often share credit equally, even when contributions are not equal; this is associated with higher quality and no lower royalties. Being friends first is associated with more equal shares. Friendship seems to be outweighing economic self-interest industry-wide.

In 1.2 million co-written songs, a significant percentage of all registered with PROs, 63%, are split equally.

Music groups with gold records: of those that wrote own songs, coded which split equally or favored the larger contributor. Equal splitting was associated with more sales and more Grammy awards, even controlling for other factors. Prior friendship was strongest predictor of equal split.

Experiment asked about fairness between songwriters with prior relationship v. met through an ad. Friends preferred equal split.

Implications: courts could reinterpret control to mean control over one’s contributions. Could look at Al-Muhammad dicta, where control might not be important for words and music in song. Industry-specific rules could be developed. Relation may be more important than self-interest in predicting economic decisionmaking.

Their own explanations: explicitly disclaim prioritizing own economic self-interest. I don’t want to win all by myself. I want to win all together. I want everyone to be rich. It’s not a meritocracy.

Sometimes it’s not about words on page, but support that got you there. Didn’t want to draw distinctions in ways that would be required to allocate credit. Connections were more important—it’s our song, on our record. The band is us. They wanted semi-permeable boundaries between themselves and the band, and sharing credit is one way of doing that very concretely.

[“Against economic self-interest” compared to what? E.g., if they weren’t friends they wouldn’t have a hit band. So is equal splitting against economic self-interest? Isn’t it possible that unequal splitting is against bands’ economic self-interest, or failing to keep friends in the band is? How do we know that both arrangements—one with friends, one with colleagues—aren’t efficient for their own situations [on basically theory of the firm grounds]? Relatedly, how does that give us any insight into situations that didn’t go well, like Al-muhammad, where there was no agreement to give credit in the beginning?]

A: the point of comparison they had in mind was whether they’d push for more credit for themselves—it’s their reference point, but the consequences of proportional split are not certain.

Fagundes: instead of self-interest, you might distinguish wealth maximization from welfare maximization; they are maximizing welfare in the short term even if not wealth though they might also be maximizing wealth in the long term if sharing equally makes for better creation.

Generalizing from music is difficult: the group identity of a band may not exist for screenwriters who don’t feel themselves to be a unified entity, or other collaborative works with dozens of people working on a film or software.

A: agree it’s difficult to generalize, so could be a basis for industry-specific rules. Songwriting is usually just two or three and that may matter to the control rules.

Q: what if someone had been burned before? Did you hear from people who had past disputes or problems?

A: didn’t analyze interview data through that lens, but anecdotally they seemed to take each collaboration as they came and justified whatever practice they were using in each situation.

Based on a True Story: Life Story Rights, Modularity, and the Propertization of the Self

Dave Fagundes and Jorge Contreras

Inventing Anna: claims to be a true story except for the parts that aren’t. Docudrama is a popular genre dating to the early 20^th century. Life story rights go for five or six figures, but the problem is that they don’t exist: what he means is that there is no doctrine of intangible property law that gives us private control over the facts that comprise the content of our lives, as long as you don’t suggest endorsement or association, defame the person, or disclose private facts. The small number of people who sue tend to lose, including b/c it’s hard for well-known public figures to bring these causes of action.

Why do Hollywood studios pay money to acquire rights that don’t exist? Historical writing, trade publications, discussions w/lawyers in Hollywood. Four functions: (1) Serve as grant (authorization), which has in terrorem effects on subject—if you don’t like the proposed depiction, the studio holds up the agreement and says “you signed it away.” (2) Include waiver/covenant not to sue covering both plausible and implausible claims like ©. This is still present with documentaries, which don’t involve life rights but often do involve waivers. (3) Bargaining for amenities—cooperation, details, access to materials like photos or diaries, or leaving the production alone/nondisparagement. In 2012, Equinox released unauthorized biopic of Winnie Mandela and she said it was garbage and nobody went to see it. (4) Exclusivity—don’t work with another studio; some others say you can’t write articles/talk to reporters—not clear whether enforceable. Some subjects say they knew it wasn’t enforceable, but you hope subjects don’t know that or go along anyway.

Normative takeaway: origin story: Ellickson said you need a stable community over time. Entertainment industry is close-knit and so there is social capital and these transactions do occur over time—they found one agreement from 1940 Sergeant York—docudrama about WWI hero. There is a high degree of compliance, maybe b/c of reputational sanctions, or in terrorem effect of agreements.

Complex process is easier to replicate if you make it modular. Increasingly studios are tolerating some creative control for subjects, which didn’t happen 10-20 years ago. Modularity enables transactional efficiency. Also consistent with lay intuitions about self-ownership. Can leverage identity for profit. Mike Tyson was furious when Hulu made an unauthorized biopic: you have stolen my life rights.

Skepticism: good for parties, but systemic effect has third party costs to the public—extralegally erodes spaces that law preserves for public use, like facts being in the public domain.

Lemley: interested that you didn’t say anything about the ROP. Worth noting that lots of people have relatively recently filed suits and even won in lower courts, though not on appeal, on the theory “you did a biopic on me.” Is this also about uncertainty about whether the ROP might apply? Sarver, de Havilland, etc.

A: paper discusses ROP and our conclusion is that, like defamation/privacy, it’s hard to win.

RT: How do studios decide which people/characters need to sign? Does whether they’re villains matter?

A: paper discusses this—life rights deals often relate to sources, not people. How important they are to the story—if they’re not a big character, you get a simple release. One move many studios make is that life rights deals include provisions for main characters that they have to make best efforts to go get releases from other people in their lives. Being a villain doesn’t seem to matter.

Q: do insurers require it?

A: insurers want it, as do distributors. Lawyers know that the lawsuits are likely doomed. One thing they say is that it’s a practical matter: $100,000 for distribution and insurance is an easy. Some carriers say they could allow project to go forward, but it’s priced so the premium goes up significantly.

A Matter of Facts: The Evolution of the Copyright Fact-Exclusion and its Implications for Disinformation and Democracy

Jessica Silbey

Feist conjures the fact exclusion from a lot of cases that don’t say “facts” and the Constitution and the statute, none of which say facts. The argument is not that Feist was wrong, but its reasoning is insufficiently clear today to answer some key questions about the exclusion of facts from ©--copyrightability of codes/standards enacted to law; catalogs, evaluations, digital archives; what is authored original expression is contested/contestable. Not just about access to information and free speech, but also about the nature of truth and knowledge. Where does the fact exclusion come from? Institutional production of knowledge/maintaining authority of institutions to produce reliable facts—legal institutions, journalistic institutions, scientific institutions, etc.

Paper excavates the precedent, which is not about facts. Legislative history of 102(b) is voluminous and mentions facts twice, once in irrelevant way and once in a way talking about labor theory of copyright that Feist rejects. Intellectual history of debates from 1880s-1930s, debates about philosophy, law, and emerging social science about production of knowledge in disciplines. “Fact” was highly contested—universal truths or situational—and always contested until the discipline became deterministic. Anchored in pragmatist movements responding to earlier philosophers.

Facts are institutionally produced/products of institutionalized processes but that does not mean they are copyrightable. Facts produced through these processes are reliable but the processes should be knowable and disciplinarily grounded. The absence of legislative history may be the result of contestation over the authority of the disciplines producing facts—as they become solidified as fact-producing institutions, facts become facts, and the idea of factness becomes more generalizable.

Payoffs: Facts as part of larger public domain that needs to grow and not shrink. © needs to support the institutions that produce facts, which may not mean protecting their outputs—it may mean staying away. Think about how facts can support the public interest. Help us reframe difficult cases like database cases or evaluation cases. Story of institutional authority, not individuality and judgment; we could ask whether the institution producing the work is asking for a kind of authority with coercive force—which Durkheim called a social fact in 1880.

We don’t call it the knowledge/expression dichotomy, and Baker v. Selden is important, b/c it’s disciplinary knowledge that matters—that produces deterministic and reliable knowledge—that’s what the exclusion is for.

Samuelson: 103(b) excludes data by excluding preexisting material—they thought they took care of it in that.

Maggie Chon: French distinguish between connaissance and savoir, knowledge and verified knowledge.

A: we used to have that nuance but the lack of nuance is politicized today in a way that is very worrisome. Doesn’t want © to get in the way of the debate about which institutions are authorized to produce knowledge.