Conspicuous Consumers, NYU Engelberg Center

Welcome and Keynote: Nancy Mahon, SVP, Global Corporate Citizenship & Sustainability, The Estée Lauder Companies

Interesting talk; I learned that UK consumers respond well to claims that a product decreases the company’s carbon footprint, but US consumers aren’t interested in that and want to know about the effect on their own carbon footprint.

Sustainability in the Eye of the Beholder

Rochelle Dreyfuss, Engelberg Center on Innovation Law & Policy, NYU School of Law (moderator)

Anna Tischner, Jagiellonian University in Krakow: European TM law can override sustainability despite EU’s attempted commitment to carbon neutrality. Hermes won a case against an atelier that incorporated scarves into new clothes. But her research shows consumers understand that refurbished etc. goods have qualities not reflecting on the TM owner. Need more space for this. British case didn’t allow refurbishment to convert devices to electric, but only b/c the advertising was confusing—which is correctable, and thus perhaps a positive sign.

Maggie Chon, Seattle University School of Law: Discussed certification marks as ways to build consumer trust/purchase interest. Issues: standards represented by certification mark can be opaque; hard to figure out what they really require. Also, certifications can compete and have different standards—consumers aren’t equipped to figure out which “fair trade” marks are more stringent or less stringent.

Jessica Silbey, Boston University School of Law: Project w/Mark McKenna on interviews with designers: insist on design as a process, not an outcome; they want to unify form and function; and they consider themselves human-focused, oriented to solving problems. In the sustainability context, they want to act as moral entrepreneurs. Coherence, minimalism, sustainability, accessibility, and inclusivity are goals—coherence and minimalism seem aesthetic but they’re also about avoiding material waste. The last three are considerations they think necessary for good designs/progress: the ability for everyone to use the design. E.g., designing for an insulin pen that will actually be used (many people don’t take their meds). OXO dustpan designed to be used by all kinds of hands.

Aaron Perzanowski, University of Michigan Law School: Right to repair and sustainability—appliances, electronics, vehicles need fixing; can that be done outside authorized channels? Firms have strong incentives to assert control over repair process, which can be incredibly lucrative. Fixing cracked phone screens is $3 billion/year in US alone. Expensive repairs also drive new device purchases. 150 million mobile phones are discarded per year; 60 million metric tons of e-waste a year. About 70% of toxic waste in US landfills is e-waste. DMCA as a big problem; 1201 exemptions allow repair of, e.g., tractors, but no one is allowed to distribute a tool to others to do this, so farmers better be good programmers.

Patent law can also be an issue, as can individual component parts covered by utility or design patents, giving power over price and availability. Especially problematic given incredibly low standards for design patent—big uptick in auto parts as well as home appliances. Fed Cir did away with longstanding test for obviousness of design patents in GM v. LKQ; what that means in long term is not yet clear but could mean fewer low value design patents. Trade secrets are also an issue, but claimants can’t usually defend them—the info is generally ascertainable through simple reverse engineering. We don’t need to respect your wishes not to disclose info just b/c you’d make more money if you kept it to yourself.

TM too (already covered by other speakers). Biggest problem here is importation—exhaustion. But TM law prevents “material differences” and courts are much too eager to find such differences—a difference in warranty; existence of phone support (even for ball bearings). Nominative fair use does a good job in its lane, though.

So far we’ve passed right to repair laws covering 100 million people in US, including in California. Also worked on National Defense Authorization Act to get right to repair requirements in any purchase DoD makes.

Tischner: EU design law has a repair clause for spare parts. This allows independent manufacturers to make & sell parts that reproduce a protected design as long as it’s genuinely for repair. The real tension comes from TM law, not design law—the design law exception doesn’t apply horizontally across IP, so companies use TM to block repair and control markets. Surveyed professionals: saw logo on repair part as description of part, not indication of origin. TM law is also normative, but results of our and similar empirical studies should inform TM policy.

Q: do designers think about repair?

Silbey: They think about durability.

Perzanowski: there’s a tradeoff b/t durability and repairability, which we need to recognize and educate about. Sometimes the market recognizes this, as for cars. Not so much whether it’s designed for repair but who gets to do the repair there. Consider relatively direct regulatory intervention in design: mandating user-replaceable batteries on consumer electronics, for example. If Apple was required by law to make a swappable battery, it would probably do a really good job, but it won’t if it’s not forced to; we’ve already seen this work with USB-C.

The Consumer Scientist

Chris Morten, Engelberg Center on Innovation Law & Policy, NYU School of Law (moderator)

Fran Visco, National Breast Cancer Coalition: created a science education program for patient advocates: how to analyze clinical trials, interpret statistical information, understand the cell cycle—important for determining endpoints.

Hilary Koch, Advocate for people living with diabetes: continuous glucose monitors existed, but couldn’t be monitored remotely—advocates like Koch created an open source solution for this. Likewise, devices didn’t talk to each other; created open solution for that. Able to sleep through the night for the first time in 10 years! Huge improvement in diabetes management. Non-FDA approved device was better than anything on the market b/c patients came together to make it themselves. Everyone had to make it themselves (adding software to FDA-approved devices) to avoid FDA [and 1201?]. But someone was available to provide advice 24/7. Now there’s an FDA approved device to talk to other devices, and one reason is b/c of the earlier patient-based devices. Non-approved devices are also still out there and ahead of the FDA-approved devices thanks to patient scientists.

She also had a really interesting discussion of how each patient’s experience is different and they’re experts on their own experiences and need more control: women want information on how their menstrual cycles affect them and want to be able to press a button on their device to flag this; many hospitals don’t allow insulin pumps, but today’s insulin pumps take care of everything and this rule makes diabetics terrified to go into hospitals for other issues.

Steve Woloshin, Dartmouth Geisel School of Medicine: patients are often underrepresented in product design, testing, and regulatory approval. Communication with patients to understand what the products (tests, devices, drugs) do and how to use them is vital but it’s often an afterthought. DTC ads: oversight is spotty and they aren’t required to tell you how effective they are. Covid home test kits example: Although they did test the instructions, which was good, they didn’t test whether people understood what results they were getting—have to use Bayes’ law to understand the chance that you’re infected, given a positive or negative test result. It’s easy to get wrong and the instructions didn’t explain it at all. Empirical tests showed that 33% of people in a high risk group (symptoms, exposed to someone with determined covid) would not understand the risks of a negative result. Were able to reduce that to 14% with revised instructions, and to decrease unnecessary quarantine decisions. An untested communication can be as dangerous as an untested drug.

DTC ads: Billions of dollars spent on them; people see 9 drug ads/day. But they overstate benefits/downplay harms/overstate certainties. There’s a lot of opportunity to make ads better but the system is reactive/slow. FDA announced that it will revisit DTC ads. Dozens of warning letters about ads, largely b/c visual messages were allegedly misleading (take this drug and you’ll be able to climb mountains). Good start, but tip of iceberg. Basic problem: ads fail to tell consumers how well the drug works. Often unclear what outcomes the drug treats, or even conditions. Quantify the outcome! Same for common serious harms.

Current regs say you have to discuss benefit, but benefit just means indication under current rules—so if you say “decreases cholesterol” you’re done. But does that affect your chance of having a heart attack? Does it cut it in half from 2% to 1%? Something else? Nothing in current regs about quantifying benefits or harms; nothing about pretesting ads for accurate communication. Should have a drug facts box like a nutrition facts box.

Charles Duan, American University Washington College of Law: standard IP incentive theories don’t explain open source innovations here, which involve huge amounts of effort donated to the community. People who change their diets to improve their health are also experimenting on themselves—self-motivation is very important. Need to think about how to regulate open source devices, where there isn’t a wealthy drug company behind them.

IP Rights as a Signal to Consumers

Jeanne Fromer, Engelberg Center on Innovation Law & Policy, NYU School of Law (moderator)

Chris Cotropia, University of Richmond School of Law: Do patent claims matter to consumers? No, not really. There’s a false marking provision in patent law that seems to think that they might. Patent is more about communication between competitors/producers, less about consumers. Patent’s justification: Incentive for invention, and for commercialization. Get the new, useful, nonobvious thing created and produced. But can communicating to consumer create a direct feedback effect?

Notice statute: can’t get patent damages unless infringer has notice. Can be actual, or constructive by marking the patented product. The audience is not the consumer, but competitors. False marking statute, though, has consumers in mind—can’t mark product as patented or patent pending if that’s not true; initially empowered qui tam actions. Theory was a consumer oriented theory—that there was potential harm to the consumer. Lots of people engaged in false marking b/c they had, e.g., plastic molds; the patent would expire and they’d keep using the molds. Entrepreneurial lawyers started suing; then AIA changed the law to require competitive harm from the false marking. So, what information are consumers getting from the patent marking?

Study by Alexander Billy & Neel Sukhatme: convinced drugstores to let them enhance marking on actually patented products in some drugstores and not others; they found essentially a perfect null effect. Tried again on Mechanical Turk with vignettes and found the same null effect. Do find that “patented” label leads survey respondents to think that the product was more innovative; didn’t translate into willingness to buy. Another study, Gavin Milczarek-Desai & Derek E. Bambauer: showed ads, some said patented, patented pending, Consumer Reports supports, or nothing, and found no variation, but “patent pending” may have a slight effect on reported willingness to buy. His own study: crowdfunding campaigns. Found same (lack of) effect. Patent label didn’t change success right, but “patent pending” had higher success rate. In lab, people are 2x as likely to invest in a project that says “patent pending” as opposed to “patented” or nothing. Consumers are just looking at the products and deciding if they want to buy. Why might “patent pending” be different? Might seem even more innovative—haven’t even had time to get a patent yet! But we don’t know.

Jacob Noti-Victor, Cardozo Law: Copyright side—copyrights are also not strong signals to consumers. There may be a theory that the © next to a work confers legitimacy, but hasn’t seen empirical studies. Maybe video game industry achieved some legitimacy by using ©? But we do know that consumers don’t know what © means when they see it.

©’s human authorship requirement and effects of AI: enabled or even manufactured consumer-facing signals of things consumers do care about, such as authenticity. There’s no authorship for computer generated works as such—long tradition of not recognizing nonhuman authorship. Trickier when there’s a human and an AI system. Human prompting isn’t sufficient for human authorship, CO says, even with detailed prompt engineering/iterative prompting. Office based this on a reading of the law and the mechanics of the technology—there’s too attenuated a connection b/t the prompt and the final output; the prompter can’t predict or conceptualize the expressive output—there’s no requisite causation/connection b/t idea and expression. Like Chapman Kelly garden case where 7^th Circuit says a garden is too unpredictable to be ©able. But there can be protection for human selection, coordination, and arrangement of AI products—curatorial decisions around AI content, not AI content itself; will be thin copyright.

Office’s choices here are coextensive with consumer preferences for process: preferences tied to the means of production and not solely to the output. Fair trade coffee. Consumers are more likely to want to buy non-AI work; this isn’t just squeamishness but ethical priorities and desire for authenticity that affects consumer decisionmaking especially in aesthetic contexts. Authenticity can have dark sides, but it’s also a way to acknowledge the social role of art and its role in moral identity/self-identification.

Office requires disclaimers of AI generated material. Registration potentially provides info to consumers. Could be a good record, assuming copyright claimants are telling the truth. But more can be done.

Mark McKenna, UCLA School of Law: Most obvious way IP rights might signal to consumers is by being a marketing tool: claimant advertises it has an IP right to show the product is meritorious or unique compared to other products, and that might work even w/o a clear idea of the content of the right. The patent evidence is interesting; maybe there’s an analogy here to how some colleges publicize percentage of faculty w/terminal degrees and others don’t feel the need to do so; maybe at the top end, producers assume you know they’re innovative (Apple) and don’t prioritize patents.

GIs: could also publicize the characteristic of a good as being (supposedly) geographically  unique.

What about feedback loops where existence of rights feeds back into scope of rights? TM: b/c those rights depend on consumer understanding, but consumer understanding can be shaped by their beliefs about what law allows/requires. The existence of rights depends on consumer understanding, b/c it determines whether there’s been trademark use, or secondary meaning to make it a TM; the scope of rights depends on consumers’ beliefs about what others are allowed to do. The rules on secondary meaning give a lot of weight by actions taken by putative owner to claim the existence of rights: creates incentives to publicize claims—the nature of putative mark’s presence in ads matters a lot. Matters even more when the claimed matter is complex; courts will often condition protection on “look for” advertising—to call it out from the background noise.

Claims of rights in relation to certain kinds of uses of TM can also shape consumer understandings in ways that turn out to affect legal scope. This is true at the retail level—particular uses of a particular mark, like NFL’s assertion of extremely broad rights in “Super Bowl” TM. Threatens bars, churches, community organizations that advertise they’ll (legally) show the Super Bowl. Even if there’s no suggestion of sponsorship other than the use of “Super Bowl.” These are paradigmatic nominative fair uses and shouldn’t be w/in the scope of the NFL’s rights, but the NFL has been unbelievably successful with these threats, so most references are to “the Big Game,” which itself is both cause and effect of consumer beliefs. But by the same logic, NFL can claim rights in “the Big Game.”

This effect can also work at the wholesale level—entire categories of uses like merchandising—50 years ago no one thought universities had the sole right to use university marks on T-shirts. Madison, like every other college town, was full of T-shirts featuring UW marks, some of which predated UW’s own use on t-shirts. But a major campaign branded these as counterfeits; leveraged relationship with university bookstores to control major apparel companies. Strategy seems to have worked; many people now believe the law requires university permission even though no one thinks the university is responsible for the quality of the t-shirts. PTO even made up the “secondary source” rule: use on the front of a T-shirt functions as a mark if the mark is known in some other setting. Created ©-like rights in anything related to them, justified by reference to the consumer understanding they’ve created. Can also be used for, e.g., mid-century modern design—association of design w/designer can be leveraged into “source” claims for the actual furniture.

Consumer understanding can be shaped, and some claimants are well situated to do so and have strong incentives to do it; but we shouldn’t hand over the game to claimants.

Rebecca Tushnet, Harvard Law School

I decided to frame my part of this panel as “can claims of IP rights mislead consumers in a way that triggers general advertising law?” I’m going to start with two requirements of false advertising law that don’t generally apply to IP rights. First, federal false advertising law targets only false or misleading statements in “commercial advertising or promotion.” This is probably not a big barrier for the kinds of claims at issue here, but it’s worth keeping in mind: use instructions, as discussed in the previous panel, might not be advertising (though it likely depends on the product). Second, materiality: to be actionable, a false or misleading statement has to be the kind of statement that is likely to affect consumers’ decisions, as opposed to TM law, which doesn’t require materiality for infringement.

As we already heard, materiality is often a problem in litigating alleged IP-related falsehoods, including false patent marking – most of the time, consumers don’t really care about patent rights. In addition, a Supreme Court case, Dastar v. Twentieth Century Fox, limited the scope of the federal Lanham Act in a way that turns out to be relevant to IP-related signals. That case interpreted the language barring any "false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which ... is likely to cause confusion ... as to the origin ... of  goods" to mean only references to physical origin, rather than the source of ideas or expressions embodied in a product.

Lower courts have subsequently held that Dastar limits the scope of federal false advertising law b/c representations about IP rights aren’t representations about physical origin; thus, falsely stating or implying that your music is properly licensed does not constitute a false representation covered by the act. Courts also interpret many state consumer protection laws to be coextensive w/the Lanham Act, though it’s possible to argue that some are broader. There is also a limiting case where the representations are not just about IP rights but also state or imply facts about the physical product: Crocs, Inc. v. Effervescent, Inc., No. 2022-2160 (Fed. Cir. Oct. 3, 2024).

Crocs sued competitors for patent infringement; defendant Dawgs counterclaimed for false advertising about the characteristics of the primary material Crocs uses to make its footwear products, a material it promoted as the “patented,” “proprietary,” and “exclusive” “Croslite.” But “authorship, like licensing status, is not a nature, characteristic, or quality, as those terms are used in Section 43(a)(1)(B) of the Lanham Act.” By contrast, “here, the false claim that a product is patented does not stand alone. Dawgs presents allegations and evidence that the falsity of Crocs’ promotional statements is rooted in the nature, characteristics, or qualities of Crocs’ products.” So the question will generally be whether the statement about IP rights conveys a factual claim about the more tangible characteristics of the good (or service) at issue.

Finally, I want to introduce as an additional framing point that law, including product liability law, often doesn’t require TM licensors to take responsibility for their products even when consumers might expect that and even when the TM probably drove the sales—arguably false advertising should not accept this result. Example: Troncoso v. TGI Friday’s Inc., 2020 WL 3051020 (S.D.N.Y. Jun. 8, 2020)

Troncoso purchased a bag of snack chips labeled “TGI Fridays Potato Skins Snacks,” mistakenly believing the chips to contain real potato skins given that the restaurant chain TGI Fridays sells a Potato Skins appetizer that includes the flesh and peel of the potato. But, even though the TGIF branding is probably what led consumers to have a lot of their expectations about the product, and even though the court found that the product was plausibly deceptive, the trademark owner was off the hook. The court said: “TGIF may be liable for that misleading labeling under GBL §§ 349 and 350 and principles of common-law fraud only if it engaged in making the misleading labeling.” The allegation of licensing “does not suggest that TGIF was involved in any aspects of the labeling beyond its own trademark, which Plaintiff does not allege is misleading”

It’s an example of IP rights—the right to license the mark to others—as false signals. I’ll end with a potentially contrasting case: Puma v. Wal-Mart Stores East, LP, No. A-1-CA-38023, 2022 WL 3221810, -- P.3d – (N.M. Ct. App. Aug. 9, 2022) 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. The district court, after a bench trial, found that defendants’ conduct constituted 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.” I tend to believe we’d be better off if we held TM owners more clearly to their bargain—when they license in order to make a product more attractive, we should recognize that the TM is helping to sell the licensed product and thus hold them jointly liable for quality.