Thursday, December 01, 2022

user manuals aren't "commercial advertising or promotion" but do have thin copyright

Santos Elecs. Inc. v. Outlaw Audio, LLC, No. 8:22-cv-827-JVS-KESx, 2022 WL 17328411 (C.D. Cal. Oct. 28, 2022)

Outlaw lost its bid for a preliminary injunction enjoining Santos, aka OSD Audio, from selling products containing user manuals that allegedly infringed Outlaw’s copyright, falsely represented OSD Audio products’ specifications, and falsely represented that OSD Audio and Outlaw’s products are similar. The parties compete in the market for audio products, specifically multichannel amplifiers, and sell online, including on Amazon.

Outlaw allegedly sent Amazon a complaint that claimed OSD Audio “stole[ ] [Outlaw’s] IP relating to custom images and written content” in its OSD5180 user manual; Amazon removed the product from its marketplace. OSD Audio denied Outlaw’s claims but redesigned its user manual, and Amazon reinstated the product. Outlaw then filed two more takedown notices, each of which led to a brief interruption in the availability of the product on Amazon.

OSD Audio then sued Outlaw under §512(f), and Outlaw counterclaimed for false advertising and unfair competition under the Lanham Act, copyright infringement, and trade libel.

Lanham Act: The user manual did not constitute “commercial advertising or promotion.” Outlaw argued that the OSD5180 user manual’s references to the product’s LED blue ring on the front panel and two-way remote manual / trigger switch were literally false because the OSD5180 does not posses these features. But “[n]ot all commercial speech is promotional.” Prager Univ. v. Google LLC, 951 F.3d 991 (9th Cir. 2020). “Statements in a user manual are ‘made to explain a user tool, not for a promotional purpose to penetrate the relevant market of the viewing public.’” Likewise, “OSD Audio did not publish the OSD5180 user manual for economic advantage, but rather to teach its customers how to use its product.”

Outlaw argued that consumers now make their decisions on the Internet, where they can view the manual concurrently with the description of the product. Nonetheless, “a manual’s primary purpose and driving use is still educational.”

Outlaw also challenged OSD Audio’s claims about OSD5180’s signal-to-noise ratio.  While OSD Audio advertised the OSD5180’s signal-to-noise ratio as 115 decibels on third-party websites, it conceded that the OSD5180’s signal-to-noise ratio is 104 decibels. Given this literal falsity, the court presumed that OSD Audio’s statements were material and actually deceived consumers.

But Outlaw presented no evidence of likely injury to itself from loss of sales or goodwill based on the signal-to-noise ratio misrepresentation. Outlaw relied on cases indicating that “where plaintiffs and defendants are direct competitors and there is a literal false statement by a competitor, actual injury may be presumed,” as well as on the 2020 amendment to the Lanham Act providing that likelihood of success on the merits generates a rebuttable presumption of irreparable harm. But it raised these arguments too late (after the court issued its initial denial).

I note that, in a crowded/multiplayer market, presuming injury from a falsehood about the speaker’s own goods is a heavier lift than presuming injury from a falsehood about the target, though in a concentrated market it seems much more likely that there’s not much difference in the effects of the two kinds of falsehoods. As for the 2020 amendment, many courts have yet to grapple with the fact that the modern likely confusion test doesn’t have a harm requirement as an element, while the modern false advertising test does. This means that a trademark plaintiff is never required to show any harm at all before showing likely success on the merits and benefiting from a presumption of irreparable harm, which seems like the wrong result, whereas a false advertising plaintiff will have to show some kind of harm unless Congress also intended to lift that burden (and can constitutionally do so).

 There was no separately cognizable unfair competition claim: “[w]hile Outlaw presents one example of a customer confusing the OSD5180 and Model5000, noting the amplifiers ‘look exactly the same’ and ‘have the exact same spec[ifications],’ there is no evidence this confusion resulted from the specific misrepresentation of the OSD5180’s signal-to-noise ratio.”

Copyright infringement: Outlaw was likely to succeed in showing that it owned a copyright in the manual. Although a user manual receives only “thin” copyright protection, a large swath of the instruction text had apparently been copied verbatim, and the photos and diagrams were also strikingly similar. Thus, Outlaw showed likely success on the merits of this claim.

Trade libel: This was based on a complaint made by an individual working for OSD Audio to Amazon claiming that an Outlaw Model7000x he purchased from the retailer was defective. This allegedly caused Amazon to remove Outlaw’s “Big Box” feature from the platform, a “function that allows Amazon customers to easily add products to a shopping cart instead of going through a multi-step process to add the product to their shopping cart.” But Outlaw failed to provide evidence supporting special damages, which is required for trade libel, and it didn’t provide evidence of falsity, only alleging that it tested and inspected the amplifier and found it to be wholly free from defects without providing evidence of the findings from these tests or inspections.

For the copyright claim, Outlaw didn’t show irreparable harm. OSD Audio showed that it changed the manual in response to Outlaw’s complaints, removing the similarities in design, font, color scheme, and text. “While Outlaw argues that it would still suffer irreparable harm because it has not been confirmed that the infringing manuals were not replaced in the physical copies, it does not identify any adverse effects that would result specifically from having the revisions only online.” Plus, Outlaw didn’t explain its delay in suing—the allegedly infringing manual entered the market in 2017, but Outlaw didn’t sue until March 2022, when OSD Audio sued it. A “long delay before seeking a preliminary injunction implies a lack of urgency and irreparable harm.”

As for false advertising, Outlaw submitted screen shots of Amazon customer reviews discussing the missing features of the OSD5180 as described by its former user manual, as well as online forum posts discussing the similarities of the OSD5180 and Model 5000. Herb Reed: “This evidence, however, simply underscores customer confusion, not irreparable harm.” “Without evidence demonstrating a loss of sales or goodwill, Outlaw fails to satisfy its burden of irreparable harm on its Lanham Act claims necessary for a preliminary injunction.”

The balance of equities tipped in Outlaw’s favor for the Lanham Act claim, but not for copyright infringement. Ultimately, no injunction.

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