using competitor's images in comparative advertising is fair use even when appearance isn't being compared

 I Dig Texas, LLC v. Creager Servs., LLC, 2023 WL 3066119, No. 22-CV-0097-CVE-JFJ (N.D. Okla. Apr. 24, 2023)

“This case arises out of alleged misuse of copyrighted images, eventually leading to a dispute … that resulted in false business reviews, malicious e-mails, and mutual efforts to interfere with each other’s business.” The court ends up kicking out all the federal claims and remanding to state court to resolve novel issues under the Oklahoma Deceptive Trade Practices Act.

The parties compete in the market for skid steer attachments and other products. Creager sells Montana post drivers (made in China) that compete with the Texas post drivers sold by IDT (advertised as made in the USA).

IDT created an ad for its products using two images of Montana post drivers for which Creager later obtained a copyright registration. The IDT ad displayed the two images next to the phrase “Made in China” inside a red circle with a line drawn through the words.

The parties had other disputes, including accusing each other of posting false reviews of the other. An IDT-related person admitted that he posted a review about Creager under the name “Karen Sideshow” alleging that Creager falsely advertised its products as “made in America,” and the post promotes the Texas post driver sold by IDT, as well as additional reviews about Creager using other false identities.

Creager also alleged that IDT contacted vendors who sell Creager’s products and made defamatory statements; the one that seemed to have an impact was to third party LJD, claiming that Creager was using LJD’s name in “defamatory advertising against my company,” advising that LJD could be “tangled up in litigation.” LJD therefore reduced the amount of business it conducted with Creager until it could determine how the litigation between Creager and IDT was resolved. Creager sent a letter to third party Semper Fi, an IDT consignee, stating that the owner “got in bed with a snake” and his recent bad decisions would “put [his] life in turmoil,” referring to a “tax thing” that Semper Fi’s owner interpreted as a threat to report him to the IRS for tax evasion. There’s more, including public disputes on Craigslist.

Creager alleged that IDT falsely advertised that its products are made in the US, when in fact IDT’s Texas post driver comes in a premium and economy model, and the economy model is wholly made in China while the premium model is partially manufactured in the United States, but the power unit is manufactured in China and the product will not function without the power unit. At least two IDT ads, though, specifically state that the power cell of the Texas post driver is manufactured in China, and “attempt to distinguish IDT’s products from other distributors that sell products wholly made in China.” [I note the headline is not that nuanced, though the rest of the post is.]

IDT removed its “Made in USA” advertising in the first 8 months of 2022, and its on-line sales increased during that time period.

Copyright infringement: This was permissible comparative advertising, which is fair use:

[I]t is clear that IDT used the images to compare its own Texas post drivers to the Montana post drivers sold by Creager, even if IDT’s advertisement does not include a picture or image of its own product. The comparison being drawn by IDT has less to do with the quality or features of the products but, instead, IDT is using the copyrighted images to suggest that customers should purchase IDT’s products based on where the products were manufactured. Due to the type of comparison being made, the lack of images of IDT’s products does not detract from the comparative nature of the advertising, and the Court finds that the purpose of IDT’s use of the copyrighted images was for a permissible purpose to compare IDT’s and Creager’s products.

The nature of the work didn’t disfavor fair use, since they were not particularly “creative or artistic” but were made to sell post drivers. The ads used the entire images.

The “most important” factor was market effect, and there was none. “The Supreme Court has expressly rejected the application of a presumption of market harm in cases when the duplication or use of a copyrighted work was for a commercial purpose, and the Court will not presume that IDT’s actions harmed the market for or value of the copyrighted images.” Creager never attempted to license the images or otherwise value them, other than to testify that no amount of money would justify licensing to a competitor for this type of ad. There was no evidence that a marketplace actually exists for the copyrighted images or that the images have any independent value.

Lanham Act false advertising counterclaim: IDT argued that, at most, its “Made in USA” statements were ambiguous.

The FTC says:

A product that is all or virtually all made in the United States will ordinarily be one in which all significant parts and processing that go into the product are of U.S. origin. In other words, where a product is labeled or otherwise advertised with an unqualified “Made in the USA” claim, it should contain only a de minimis, or negligible amount of foreign content.

But not all courts agree that “Made in the USA” statements are sufficiently clear and unambiguous to constitute a statement of literal fact for the purpose of a Lanham Act claim. Some of IDT’s claims were clear and unambiguous: it advertised “100% American Made Skid Steer Attachments,” and it includes a “Made in USA” logo on its website and certain ads. Its post on Craigslist.com states that its premium model is manufactured in the United States, except for the “imported nitrogen power cell,” and IDT clearly stated that its economy model is “fully Chinese built.” Another ad asks consumers if they “[w]ant a post driver MADE in USA,” and IDT goes on to explain that its premium post driver is manufactured “in house,” except for the imported nitrogen power cell.

The details are repeated and clear, but the intro ("USA made post driver") is less so

The court didn’t need to resolve whether the FTC’s guidance should be applied directly, “because the Court is not dealing with vague or unsubstantiated claims that IDT’s products are wholly manufactured in the United States.” Instead, the ads made specific claims and “expressly inform[ed] consumers that part of the product originates from outside the United States. The FTC standard appears to apply to more general claims that a product is manufactured in the United States…. “While IDT’s advertising does make general claims that it sells products ‘Made in USA,’ this representation is supported by specific disclosures about its products.” Thus, Creager failed to show falsity or misleadingness.

Because the parties were asserting novel arguments that social media posts or online advertising can constitute an unfair trade practice under Oklahoma law, the court remanded the remaining claims to state court.