Commemorating 50 Years of the Copyright Act, part 2

The 1976 Copyright Act: Mostly Evolutionary, Not Revolutionary Tyler Ochoa

1790 Act adopted the Statute of Anne—not radical even though it was the first for the US. Similar here—major changes, but not radical. Expanded subject matter; protection on creation/fixation instead of publication and preemption of state law; automatic protection without preconditions (by amendment), reduced formalities, codified idea/expression.

But 1909 Act covered “all the writings of an author.” “Original works of authorship” aren’t that different. Likewise, lawyers didn’t necessarily take common-law copyright as seriously as federal copyright, but there was common-law copyright before the Act preempted it for fixed works. Moving the federal protection back to the date of fixation isn’t a huge change.

Formalities: some change.

Codifying idea/expression: It’s a good thing that we wrote it down because of the textualist turn, but it was an existing principle. Not a radical break.

Fair use: same thing.

Exclusive rights: again, evolutionary.

WFH: a reasonably big change in defining what can be WFH, rejecting instance & expense test (which he thinks was a mistake by the courts in the first place).

Duration/renewal: Motion pictures and musical works were heavily renewed, and most other things weren’t. Life plus 50 isn’t just an extension, it’s a fundamental change in measurement. And it’s a change that we haven’t felt the full impact of yet b/c we’re only 50 years out. None of the © granted in 1978+ have yet entered the PD (w/exception of some unpublished works by deceased authors).

Terminations: same idea as renewal term, but new opportunity b/c of unitary term.

Compared to what happened since the 76 Act: rise of computer programs, though the definition of literary works was written to allow them. BCIA: elimination of formalities; elimination of registration requirement for foreign works (subject to limited remedies). Architectural works; VARA; automatic renewal for works 1964-1977—works no longer go into public domain for failure to renew. NAFTA; TRIPS; Uruguay Round restoration—a radical change. Public performance rights for sound recordings. Term extension; DMCA adding 512, 1201, and 1202. Cumulatively this is a radical break with the past, but mostly after 1976. The 1976 act did change from incentives to publish towards natural right of author, but that was a change in principle with fewer radical changes than came later.

Moral Rights, 50 Years Later Xiyin Tang

Poised for a resurgence among concerns for human creators in a world of AI slop. Entrepreneurs are using TM, even trade secret, to protect rights far beyond VARA. Monty Python case is a classic example using TM—but the cause of action was a stand-in for moral rights, by the court’s own admission.

VARA has had limited success—limiting to fine arts likely fell well short of Berne requirements. Also US rights are waivable, though nonassignable. Only 84 adjudications of VARA claims, 71.4% of which dismiss the claims, often on procedural grounds. More concerning are cases that effectively chip away at the scope altogether, further neutering it. First Circuit held that VARA didn’t protect site-specific works of art at all—where the location is integral to meaning—based on the public presentation exception. But this was the type of art that formed the basis of the public justification for VARA in the first place—Richard Serra’s Tilted Arc. SDNY denying injunctive relief in Five Pointz; money is not a good remedy. And the 7^th Circuit found that site-specific art wasn’t just ineligible for VARA, but ineligible for © generally. But site-specific art is the exemplar of postmodern artistic practice.

Nonetheless, predicts that moral rights are posed for a resurgence. AI has led to a new insistence on human creation. Private deals w/AI: authors don’t just get a per-generation payment for summarizing their work, but a link to purchase—attribution. Decision holding that Wu-Tang Clan’s album was a trade secret—independent economic value comes from ability to exploit exclusivity to create an experience that competitors can’t. Secret art could therefore be trade secret art.

Terry Fisher: what about fan fiction and other interventions?

A: Artists care about originals. Maybe expansion of moral-esque rights could impinge on what people do w/a copy of the original, but the Wu-Tang example is about works that exist in an edition of one, and that’s what she’s concerned about.

Keynote Address: Authorship in the Shadow of the 1976 Act Paul Goldstein

AI challenges: believes that transaction costs are the key and that private or public deals can achieve them. But copyright dilution—competition with AI-generated works—should not be actionable because the ideal is that works should be priced as low as they can be without destroying incentives.

Points out that Jane Ginsburg showed that French copyright was initially utilitarian/incentive concerned; moral interests became important later. US: the author-protective provisions that Congress introduced in 1976 are important—a shift in the philosophical base of ©, according to Barbara Ringer, to make the primary beneficiaries of © individual authors.

What do authors want? To be recognized as the authors of their works. Consider Creative Commons, which found that attribution was so commonly desired that attribution became the default. Audiences also want this, which is why they go to concerts instead of watching from the comfort of home. They also want community—shared passion—but the main desire is authenticity, the knowledge that the tiny well-lit figure on the stage is their favorite performer, not a hologram. Authenticity is the consumer-side counterpart of the desire for attribution. Author & audiences meet and form a bond. But aura can be attached to multiple copies of identical objects—ubiquitous reproduction hasn’t led to the withering of aura, but strengthened our desire for it and created new strategies to produce aura.

But TM may overprotect attribution at the expense of popular culture—missing limited term and public interest exceptions. It’s not enough to exclude protection for generic elements; its exceptions for parody and the like aren’t vigorous enough. Presumably this was a concern in Dastar.

So now we need attribution in ©. 106A (VARA) should be replaced w/an exclusive right for all authors to claim authorship and object to distortion/mutilation/modification of the work, taken from Berne. Generative AI: a user who asks for a story in the style of Raymond Chandler justifies an attribution right. [Hunh? Doesn’t the user, by definition, know?] Style is not copyrightable, but we could draw the line more generously if there was only an attribution right, not a control right; the limited term would avoid the parade of horrors and parody would be allowed.

Lemley: there are lots of circumstances in which creativity requires that you not keep integrity. Tang’s answer was focused on individual copies/single copy works. But your moral right is broader. What do you do about fan fiction?

A: look to what other countries do. They valorize commentary and individual creation as much as the US does. French law has a robust exception for parody and pastiche.

RT: I don’t think that would work. Litigation culture is a big deal.

A: the motion picture studios are why we don’t have a moral right in this country. France, Germany, Canada etc. have moral rights and moviemaking—but the answer was the litigation culture in the US. Would love to see some empirical work on that. On the attribution right, would love to see a full-fledged empirical study of asking © litigants why they sued; integrity touches on vital interests. Turns in part on what the remedies are. One could fiddle with remedies like injunctive relief rather than monetary relief, though then you lose the contingent fee bar.

Barton Beebe: Scalia dismissed tracing the origin of Nile and all its tributaries—what if we recognized moral rights of author and all of those who preceded her and put a burden on her to state her sources? Religious traditions might support this.

Sprigman: other attribution systems exist, but Earth is for the living: part of art’s responsibility is to free itself from the past despite its influence. You are taking a side on what art should do; our perspective is from writers, but may not serve readers very well.

Panel 1: The Copyright Act and Technological Change

R. Anthony Reese: legislative response to digital technologies was the key in the midpoint period; last couple of decades saw less of that other than Music Modernization Act. Focusing on civil, not criminal, amendments. In 1980 we added a definition of computer program; not a big change. We’ve only added one exclusive tech based right—digital audio public performance for sound recordings. Not a response to tech but to political failure of the 1976 Act.

Some expansions to limitations—110 for distance education (not very helpful in pandemic); 111 Family Movie Act allowance for skipping naughty scenes hasn’t created a flourishing business model. But 114’s limits on nonsubscription broadcast transmission enabled HD over the air radio. Also bars on record rental, etc.

We’ve done a bunch of compulsory licensing, mostly tinkering to provisions already there like adding low-power TV to the cable ones already there. DAT licensing; some compulsory license for the digital sound recording public performance right; satellite retransmission licenses; modernization of mechanical licenses to include a blanket license for streaming & download. Copyright Office was not a fan of compulsory licenses but Congress is enamored of them in specific circumstances.

Remedies: 512 limits have been incredibly important. 408 preregistration, maybe has some effect (about 700 works/year); 504(c) allows willfulness to be presumed if you provide false domain name contact info in connection with © infringement.

Sui generis provisions: AHRA (desuetude/written so narrowly as to exclude general purpose computers just as they were about to become the way music was enjoyed), 1201/1202.

Amendments motivated as much by political/legal/market/social developments as by the new technologies themselves. Record Rental Act passed not b/c of CDs but because of shops that rented out tapes and encouraged copying; the worry was that it would get worse w/CDs but the business model already existed. Similarly, low-power TV was added not b/c it was new but b/c the FCC hadn’t previously authorized its deployment.

Jessica Litman: substantive approach is shaped by drafting method—to invite many of the stakeholders who know they’re interested to work out their differences and embody their compromises in statutory language. Overreliance on compulsory license is b/c it’s easier to reach a compromise. Even in the 1909 Act, courts had devised separate rules for different kinds of works; they wanted to incorporate exclusive rights shaped to works, but then that turned out to work really badly when new tech like movies came around. So 1976 Act tried for one size fits all rights, but then everyone needed bespoke exceptions to continue doing the legitimate things they’d done every day. They tried to make exceptions as narrow as possible so they couldn’t be used for anything else (e.g., jukebox exceptions). Insiders make the rules that they and © outsiders will have to follow—unfriendly to outsiders.

How does this method work for insiders? Their efforts make a lot of assumptions that may not pan out. DMCA is a good example. Implicitly incorporate promises about how insiders will treat one another. But none of the promises are legally or morally enforceable, so many get broken. Promises of publishers & distributors to creators turned out to be particularly vulnerable to breakage. Also: If you exclude outsiders from negotiations for as long as you can, you’ll miss important issues on the horizon that aren’t central to anyone sitting around the table.

Result: insiders came out believing that they’d significantly fortified themselves against scary new technologies, and as those have failed, we’ve seen © insiders adopting more combative negotiating postures & developing deep resentment about the interests they believe are eating more of the pie than they should be permitted to eat. Legacy © owners are earning more money than they ever have. But they are nonetheless looking at © with grievance and resentment b/c technical services delivering material are also earning a ton of money—instead of saying “big pie, wow, awesome!” they want that whole pie. That’s led some to believe they’re entitled to hoard rights, money, control, and market share by any means they can manage.

When you call © insiders together to write a statute to fix things, you get the MMA. Has some good things and some bad things buried in the middle—but most of this hoarding is currently coming at the expense of creators. They’re earning less, unlike the legacy industries. When we tell them to compromise on AI, this is also what we may expect.

Pam Samuelson: A happy story on the scope of software copyrights. Wasn’t initially clear whether machine executable code was copyrightable. Initial attacks on copyrightability had to be overcome, but scope was unclear—Paul Goldstein wrote early article expressing concerns about risks of monopolizing functionality. Suggested borrowing patent misuse doctrine.

Whelan v. Jaslow then gave super-broad © protection—early expectations about thin © to avoid protecting functionality were totally ignored. All of the “structure sequence and organization” was protectable if there was a modicum of creativity; everything should be protectable unless there was only one way to achieve it.

6 years of effort followed (Samuelson in the lead!) to get the results right. David Nimmer also wrote an article suggesting that more filtration was required. 2d Circuit adopted this in Altai requiring abstraction, filtration, and comparison. Filtering out unprotectable elements was a really significant advance and got us back to a relatively thin scope. Compatibility is unprotectable.

Fed. Cir. agreed w/dct that we should have © hearing like Markman hearing to do claim construction—another important development. So © turns out to accommodate software well, after struggle.

Mark Lemley: Imagine a collection of model weights that gives a possibility, but not a certainty, of generating an infringing copy: is that a copy? The statute’s answer is incoherent. The right to reproduce the work in copies; copies are copies when they’re fixed; fixed means the copyright owner authorized it. That doesn’t make any sense so nobody pays any attention. We use the same definitions for protectability and infringement, causing the problem. But we do use the part that says fixation means it has to be perceived, reproduced, or otherwise communicated.

The parties in AI cases take some extreme positions—models don’t include content; output is just a collage of intputs—neither of these things are true. Can extract Harry Potter verbatim w/a four word prompt from Llama 3.1. Extraction is possible for some works/parts and some models but not others. New work shows you can expand extraction if you go beyond verbatim extraction.  But again it depends.

Jane Ginsburg shows that you can retrain models to force them to regurgitate a work, and that makes it more likely that they’ll regurgitate other works, suggesting other works are latent.

Is a work latent in a model a tangible copy? It’s complicated. Models don’t store works directly, but encode weights reflecting relationships b/t words or syllables. You can make a copy of a picture using ones and zeros even though the ones and zeros aren’t the picture—deterministically, these are copies. But Microsoft Word doesn’t encode War and Peace even though all the necessary parts are in Word waiting to be put in the right order.

Information theory: can the work be extracted with less than the same information you already have? Compression algorithms: sometimes we can store less than all the info & use it to generate a work. Lossless compression is clearly a copy; lossy compression probably creates non-identical copies that are nonetheless still copies. Compression algos are still deterministic, though—same imperfect copy every time.

AI extraction is rarely deterministic. We can get a result 10% of the time; are the other 90% also stored in the model? That means more works are in the model than there are atoms in the universe. © hasn’t dealt much with nondeterministic copies. Kelly v. Chicago Park District comes closest—a garden is not ©able b/c it’s not deterministically fixed. Compare to video game output cases: you infringe by making a map used w/existing video game to cause it to be played in a new map even though the images aren’t contained in the map.

Kelly is probably wrong: most people would say a garden could be sufficiently replicable to be fixed. Game cases: predictable and replicable—the same map and characters would show up. Though now there are procedurally generated games where the map changes on the fly, but that still involves output. Not all the possible maps exist already in the game.

Challenge: sometimes it’s easy to get out—high degree of predictability and replicability. Sometimes it’s not really possible. Sometimes it requires a lot of work but can be done.

We should say that if it’s easy to get a work out, it’s probably worth saying it’s in the model. But if you have to know what you’re looking for, and keep trying until you get it, then we probably should not call it a copy.

Why this matters: if a copy is in the model, then making a copy of the model infringes the copyright in the underlying work. Meta is distributing the model weights to lots of people.

Maybe those models are fair use—probably be the right result, but harder to reach, especially after Warhol. Fact of intermediate copying might be important (even though he doesn’t think it should be).

In response to Tony Reese: maybe we could say they’re unfixed but derivative works which don’t require fixation. Reese” points out that the RAM copy cases about duration of presence in computer—not a great way to do it but we did do it. Also compare Google Books: how much of a book you can assemble by doing searches was relevant to the fair use analysis.

A: maybe that functional approach is practically the best way to go. If I can prove that it’s in there somewhere but it costs $10,000s to do that each time, that’s not a real way to get a “copy.” It is also really hard to resolve such questions as a matter of class actions—courts would like to have an answer, and an answer depending on a work by work, model by model analysis is not going to be desirable to them. Even if it’s the truth.

Tang: incidental copies in the course of streaming music, for example, raise similar questions.

Samuelson: a new round of cases about using YouTube performances—allegations of 1201 violations to say that scraping the video to use that data for training. Even if the stream itself wasn’t a copy, if you can make a copy from it, what to do? Should there be a meaningful distinction b/t access controls and copy controls? Reese said yes! (And he was right.)

Gellis: is vibe-coded software copyrightable?

Lemley: depends on how vibey you were! Maybe a selection and arrangement ©, though for code that will be less broad.

Samuelson: divinely authored works cases are also relevant.

RT: For Samuelson: courts often seem to divide over whether there are 2 ways to have a thin ©: the first way is that anyone who does the same thing can make a nearly identical work, but they can’t engage in reproduction; but the second and more controversial one is that anyone can copy chunks of the work as long as they don’t copy nearly the whole thing: Sedlik concurrences and Thomas’s dissent in GvO. Do you think that these are both examples of thin ©?

Samuelson: we’re close to a thin © but not as thin as Goldstein suggested (which was an exact copying standard). Dennis Karjala suggested a rule of exact copying being needed for infringement; emulating functionality is really important for freedom. Lotus v. Borland—that’s actually a case allowing copying the interface (that is, a chunk) as a method of operation. You still have to write/code the functionality independently. Fed Cir ©ability ruling in GvO was a real step backwards—wrong as a matter of law.

Lemley: Thin ©: if the test is virtual identity, one way to test is for really close identity (99% or close), but © in general protects protectable expression. One approach would be to say that identical copying of even a small fragment is infringing under this virtual identity standard; the other approach would require copying the whole work verbatim or close to verbatim. That will matter a lot where most of what I copied was not protectable.

Reese: part of the problem is that most courts dealing with this look to Feist, but Feist isn’t about either of those things. In these kinds of cases, not very much of what you put into your work is ©able, b/c you’re using facts/all you get is selection, coordination, and arrangement. Infringement means parsing carefully which thin part of your work is protected by ©, but that doesn’t say anything about whether partial copying infringes a thin ©. There’s no original understanding to look back to!

Commemorating 50 Years of the 1976 Copyright Act, Stanford Law School

The Copyright Act at 50: Evolution and Impact

Shira Perlmutter

Copyright Act took a long time, with input from lots of interest groups and attention to detail—hundreds of contending and overlapping interests were involved. Hard to imagine this process today. Desire to avoid need for constant amendment/future-proofing. But did they do enough? Didn’t create a general right to exploit the work publicly, which would have obviated the need for continued parsing the scope of each right, like public performance.

Some changes over time, most prominently the DMCA. More than codifying common law principles; tech-specific obligations. Less durable as business models evolved; might have unexpected consequences in Cox. [Hunh? Cox is not a DMCA case.] 1201: some provisions are highly detailed and technical, and outmoded. But the rulemaking process is flexible and fair-use based and has produced new exceptions. Allows © owners to rely more securely on TPMs, enabling the celestial jukebox. Fair use has also played a critical role as a flexible judicial tool. The bones are solid, even with AI.

Q: registration requirement is tough on creators. Can’t get protection [statutory damages] before infringement.

A: You can register—the issue is remedies.

Chris Sprigman: why do you think that it was ill-considered to add to fair use that unpublished status isn’t dispositive?

A: b/c courts had already walked back their overreading of unpublished status. Worried about accretion of more specific language in a statute that’s supposed to deal with rapid change. [Seems like a levels of generality issue; unpublished seems general enough to be robust.]

Sprigman: it’s always good when Congress talks back to the Supreme Court.

Laura Heymann: say more about moral rights?

A: A patchwork in the US; would love to see Dastar reversed and some additional protections provided.

Q: how to design AI training licensing framework?

A: Doesn’t have proposal but thinks it would be possible; easier in areas w/high value works. Small low value works w/authors who aren’t organized are harder. At some point there may be a statutory solution building on experience in the private sector with making a licensing system work.

Tyler Ochoa: Cox v. Sony?

A: Personal views! Shocked at how short the decision was and how little thought there seemed to be about the implications. Threw out decades of © law quickly w/o analysis. Repercussions well beyond the facts. Congress clearly intended to continue the separate treatment of © contributory liability from patent and aiding and abetting liability. [Don’t you know that only Supreme Court cases count? My line on this: “This is easy and you are all stupid” is a poor way to think in drafting most Supreme Court decisions.]

Do We Need a New One? William Fisher

Statute has grown by accretion, not revision, and only when there can be agreement by major stakeholders. Hypothesis: useful to start fresh. Draft from Oren Bracha, William Fisher, Ruth Okediji, and Talha Syed. A couple of points: Limit scope of adaptation right. Reproduction right/substantial similarity is almost overlapping with it, but matters when there’s no reproduction. Independent of exclusive rights of © owner, wants to have rights attached to, at least initially, authors rather than owners—right to attribution, generously defined, and to integrity, narrowly defined. Shorter duration. Compulsory licenses not just for music covers but for educational uses.

Sprigman: Why is remuneration for authors the first principle? The Court has said that’s a means to an end. Why not “vibrant creative environment”?

A: order isn’t meant to connote hierarchy, but worth thinking about. Utilitarianism isn’t the only goal; fair treatment of artists is also a goal.

Q: like the use of lessons from laws around the world. Was that a reason to delete statutory damages, which aren’t available in many places around the world?

A: there are well-known specific defects in the US system of statutory damages. The substantial range for willful infringement per work becomes bizarre & punitive. There are workable models that would function more like liquidated damages in contracts. The functions of augmented damages, including incentives to bring suit, could be adequately performed by enhanced damages for abusive positions (doubling) and attorneys’ fees. Fees should be more likely for small creators and less likely for deep pocketed plaintiffs.

About Face: Deepfakes and the Misuse of Copyright Madhavi Sunder

Denmark is granting © in a person’s face to combat deepfakes. Incentives/progress/access aren’t just buzzwords but the raison d’etre of our law. But roughly a decade ago, things began changing, not just b/c of AI: using © as a tool to redress noneconomic social harm: safety, protection, dignity, reputation.

Denmark goes beyond using © to serve non © ends/do an end run around 230, as past proposals in the US have done (thanks for the shout-out) to expanding the scope of © beyond what it should cover.

Denmark’s amendment covers life of the author+50 years and protects all natural persons against digitally generated images of personal characteristics. Limitations for caricature, satire, parody, criticism of power, social criticism, etc. But this would cover foreign nationals as well. Includes a takedown right. Drafters suggest that the new right is not really copyright but personality right, and the law should be changed to be officially called the “Copyright, etc. Act.” [It’s ©, Jim, but not as we know it!] Attribution and integrity for authors is not the goal; broad dignity harms to individuals, society, and democracy.

EU is considering whether to adopt a similar proposal. US may be heading in a similar direction—Jennifer Rothman identifies convergence between ROP and ©. Digital replica report by Copyright Office suggests new laws are needed.

Faces and voices aren’t authored in the way © has traditionally required; we allow soundalikes. However, some people (Balganesh, Gilden) suggest that © has always had concerns with dignity. Likewise, the Court allowed photographers to own © in depictions of faces. This tension raises charges of unfairness, as in Moore v. University of California. Descendants of enslaved people can’t claim ownership of daguerrotypes of their ancestors; Prince, who decried ownership of his name and music, becomes the subject of a photographer’s © claim at the Supreme Court. Surveillance: your face belongs to us. The issue about face is not whether property, but whose property.

IP and blackface: Jim Crow was a minstrel character—“love and theft” of black dances and bodies—loved and despised, coveted and expropriated. Elvis painstakingly listened to recordings of Black artists on repeat so he could copy them, and Tennessee then called its voice ROP law the ELVIS Act—irony! Digital replicas are the next frontier. Abba has created a concert featuring digital replicas of their younger selves; they sang and danced in motion capture suits with monitors and cameras everywhere. This show will last as long as people will pay to see it.

Sunder’s about-face: She criticized the goal of efficiency in © and argued for considering other interests like semiotic democracy. Is this the same thing? No. © can’t be everything everywhere all at once. Doctrinal coherence matters. Doctrinal collapse b/t © and privacy has structural harms including threats to the rule of law. © is too consequential and long-lasting and easy-to-get to be careless about; statutory damages and notice and takedown are big deals.

© is about authors, whether you’re a high protectionist or low protectionist. In an age where we’re all curated online, we should have a low threshold for protection, but not create mutant copyrights far from the real thing.

Cathy Gellis: Implications for national treatment?

A: will think about it—interested in whether we’re replicating it for ourselves.

Lemley: is the right alienable in Denmark? © as a regime is usually about being able to sell rights.

A: all premised on consent.

Quasi-copyright and the Copyright Act, Rebecca Tushnet

My focus here is on 1201 and 1202. My argument is that their evolution in the courts shows something about the workings of the legal system and the incentives of both plaintiffs and judges.

As most of you know, 1201 prohibited circumvention of access controls and trafficking in technology that circumvented rights controls or access controls, with a variety of statutory exceptions that are essentially too complicated to be used, and a provision for allowing additional temporary exceptions after Copyright Office rulemaking, but only for the direct access control circumvention provisions not for the trafficking provisions, so you have to both have an exemption and somehow get the technical capacity to use the exemption which is illegal for someone to give you.

Tony Reese wrote a great article explaining the benefit to the copyright owner of characterizing a technological protection as an access control rather than a rights control – no individual circumvention is allowed in the absence of an exception– thus in every case, copyright owners plead that a TPM is an access control, and courts have uniformly accepted this characterization—so this supposed four part scheme of access and rights controls, direct circumvention and trafficking, quickly became a two part scheme involving only access controls. Rights controls immediately lapsed into desuetude.

Because of how broad 1201’s access control provision was it initially seemed to offer copyright owners broad new rights. This was especially important for manufacturers of machines that happened to have software in them—providing compatible products, for example, could be reframed as violating access controls. However, in two prominent decisions courts—using interpretive methodologies that would probably not be adopted today—interpreted 1201 to try to prevent its use to control markets that aren’t really based on the value of the copyrighted works; the major cases are perhaps tenuously based in the statutory language but they probably do track what Congress thought it was doing.

These two decisions, Chamberlain and Lexmark, dampened the appetite among many non-copyright-reliant manufacturers to use 1201 to try to control repair and resale. There’s a real case to be made that 1201 has importance for phones and apps, but it’s no longer a big part of copyright litigation.

In addition, the rulemaking process proved so exhausting that the Copyright Office decided to streamline it for existing exemptions. And because the trafficking provisions only cover traffickers, not customers of traffickers, people with exemptions use circumvention software they got from elsewhere and we all just generally ignore the issue in the exemption process. I would suggest that, at least for the time being, we’re no longer in a legal innovation phase with 1201.

Meanwhile, 1202 litigation has exploded. 1202 covers knowing removal of copyright management information that facilitates infringement or provision of false CMI, and although there were always a few cases about it, it has been discovered in the last decade—as causes of action sometimes are because lawyers are innovative—and gained new prominence in cases like the AI training cases. 1202 doesn’t require registration in order to get statutory damages and so questions about what constitutes removal of CMI or the relevant intent are actively being litigated. Pam Samuelson and her coauthors have written a good article about the arguments, but I just want to point out that lawyers have done exactly what they’re good at: pushing the boundaries of the law in order to achieve interests for their clients even when the more obvious claim—like copyright infringement—won’t work for copyright-specific reasons.

Given this increased use, it’s not surprising that we see countervailing theories attempting to limit the growth of 1202 cases. One court even recently dismissed a lawsuit brought under 1202(b)(1) against ChatGPT on Article III standing grounds—under the TransUnion case, 1202 can’t constitutionally authorize a private cause of action for internal CMI removal that goes no further—plaintiffs didn’t allege any actual harm beyond the removal of CMI in the training dataset, so they didn’t have standing to seek damages, and they didn’t plausibly allege that a substantial amount of their creative expression would appear in future results, so they didn’t have standing to seek injunctive relief.

I have some broader thoughts about this incredibly abbreviated account, based on Carol Rose’s classic article, Crystals and Mud in Property Law: Fools and scoundrels are the bane of the law because they make it unpalatable to follow the most natural understanding of a clear rule. Hard edged rules written into law—like the prohibition on circumventing access controls—predictably lead scoundrels to abuse their fellow citizens, as in Lexmark and Chamberlain, and subjects fools to disproportionate liability, especially where statutory damages are involved. Courts then understandably push back, inventing equitable limits and turning a clear rule into something more muddy. But muddy rules are expensive to navigate and create their own set of problems.

In Carol Rose’s story about real property law, legislatures eventually intervene to create a new and different clear rule designed to solve the problems created by existing fools and scoundrels under the previous regime. This works for a while and then the infinite creativity of humans, both good and bad, produces new fools and new scoundrels.

I think Rose’s story has key lessons for copyright. (1) Future proofing is something of a myth. It’s worth trying, because immediate obsolescence when a few facts about the market change is not good—I’m looking at you, vessel boat hull and mask works protection and 512(b)—but the idea that you can set and forget a law ignores the fact that lawyers and judges are human beings—at least for now—and human beings are collectively really good at finding ambiguity or opportunities for arbitrage.

(2) If we face a situation where we don’t trust that the legislature will intervene, or can intervene productively, then things get a lot harder. When that’s combined with a judicial approach to statutes that focuses on the dictionary meaning of specific words rather than an appreciation for the structure of the legislation and the context in which the legislature was operating, scoundrels are likely to prosper and fools are likely to be abandoned to their fates. I don’t have solutions but I am predicting a long roll in the mud.

Lots of interesting comments; I think both the legislative process (actual deliberation) and judicial concepts of the role (neither entirely free to disregard the statute in favor of the common law/equity nor laser focused on individual words in isolation from the structure and purpose of the law as a whole) need change from where they are.

Tony Reese pointed out that the Copyright Office testified in the legislative history that many things were "clear" but didn't need to be in the statute--should we revise to make those things explicit? I think the issue w/that is the fools/scoundrels problem--one reason you might not write out the exact wording is that you can't foresee what will happen when clever lawyers get their hands on it directly and treat a principle as a rule. This is a classic content moderation problem! 

court gives guidance on disclaimer placement, AI alterations in enforcement proceeding

InSinkErator LLC v. Joneca Company LLC, 2025 WL 4631972, No. 8:24-cv-02600-JVS-ADS (C.D. Cal. Nov. 24, 2025)

Previous discussion of this false advertising case. In a separate order, the court deals with other compliance issues than those below. It rejects the claim that the injunction requires Joneca-controlled search results to display the disclaimer as part of the result. Consumers will only be able to buy the product by clicking on the link and therefore will see the disclaimer as long as the underlying result page complies with the injunction.   

InSinkErator moved to enforce the preliminary injunction and the court granted the motion in part. The injunction barred “Joneca, its officers, agents, servants, employees, and attorneys, and all other persons who are in active concert or participation therewith and who have actual notice of the injunction” from “[m]aking any false and deceptive horsepower claims regarding Joneca-made garbage disposal products.” Joneca was further enjoined from “[a]ssisting, permitting, or causing to be made by any third party any false and deceptive horsepower claims ... including on retailer or wholesaler websites.” It was required to include the following disclaimer on all online listings of its products: “Horsepower claimed on package does not indicate motor output or motor power applied for processing.”

InSinkErator reviewed Joneca’s online product listings and found that the disclaimer was sometimes included in a tab that customers had to click into or scroll down to in order to obtain more product information. It argued that this wasn’t good enough.

Civil contempt requires clear and convincing evidence, that (1) the party violated a court order, (2) beyond substantial compliance, and (3) not based on a good faith and reasonable interpretation of the order. Violation of a court order is shown by the party’s “failure to take all reasonable steps within the party’s power to comply.”

InSinkErator argued that some of Joneca’s disclaimers weren’t “clear and conspicuous.” “Instead of appearing at the top of the page or in the first image of the product, the disclaimer sometimes appears in an expandable section containing product details near the bottom of the webpage.”

Joneca argued that the disclaimer was placed in the “first permitted or technologically feasible location given each retailer’s specific restrictions,” usually located next to an explanation of the product’s horsepower.

The court indicated that the spirit of its order “was that any reasonable consumer would come across the horsepower disclaimer before making a purchase” because horsepower is “one of the top purchasing considerations for garbage disposals.” “This is made evident by the inclusion of horsepower in the product title of every online listing shown to the Court.”

The court then provides some guidance that might or might not be generalizable:

For physical packages, the Court’s Order required the disclaimer to be bordered in red and affixed to the front of the package. It would thus be difficult for any consumer to purchase a physical unit without seeing the disclaimer. Any online disclaimer should be similarly conspicuous and immediately viewable just like on a sign or product package in a physical store.

A reasonable consumer may not click through all of the online product details before making a purchasing decision. Thus, to be sufficiently conspicuous—analogous to the disclaimer on a physical package—the online disclaimer must be immediately viewable to the consumer without additional navigation on the product listing. This means that the disclaimer must not be located only in a product description lower on the page or in a separate tab, but rather at the first feasible location at the top of the page. Where it is feasible, this should come in the form of a text entry in the product highlights. Otherwise, it should be added to the first product image immediately viewable to a consumer on the product listing page. Where the disclaimer is included at the top of the listing page in the product highlights, Joneca need not also include the disclaimer in the first product image.

Some of Joneca’s online disclaimers are not immediately viewable to consumers on a product’s landing page and thus Joneca hadn’t taken all reasonable steps to bring these product listings into compliance. Joneca argued that the various online product listing policies of its retailers prevented compliance. “But nowhere in Joneca’s declaration does it claim to have requested a variance from any retailer’s listed policy or otherwise sought an accommodation in light of this Court’s Order…. The potential for accommodation is underscored by InSinkErator’s submission of images of product listings from Home Depot’s website with text in the first image, despite the plain language of its policy disallowing such text.”

Thus, “Joneca must work with its retailers to modify the location of the disclaimer to conform to the above requirements in order to come into compliance with the preliminary injunction.” However, the court declined to find Joneca in civil contempt because it applied its initial disclaimer pursuant to each retailer’s online listing policy in good faith.

A footnote worried about AI page changes [yes, now every compliance person should have the same worries!]: “[T]o the extent a listing on Amazon or Walmart comes out of compliance, such as because of an AI-generated text box, Joneca should work with the retailer to include the disclaimer per the criteria listed.”

former TM owner states valid damages claim against licensee of current TM owner that drove it out of business via infringement

Wagner Zip-Change, Inc. v. Tubelitedenco, No. 23 C 05077, 2026 WL 673148 (N.D. Ill. Mar. 10, 2026)

Wild facts! Wagner was until 2021 in the business of selling sign lettering products, including its trademarked Jewelite Trim (also known as “trim cap”), “a plastic molding that adds dimension to cut-out sign letters.” It obtained an exclusive license to use the mark in 1987. It contracted with a third party, Vidon, for manufacture, and sold its products to distributors, which then sold them to sign companies and other end users. Defendants were among the largest distributors.

Vidon allegedly began manufacturing a knock-off version of Jewelite Trim. Tubelite then allegedly entered into a distribution agreement with Vidon. Tubelite allegedly (1) made false and misleading statements that Vidon’s knock-off trim cap was “the original trim cap,” that Vidon was just a “different name” for Jewelite, and that the product was “the exact same”; (2) used the Jewelite mark in connection with the sale and promotion of the Vidon trim product; and (3) filled at least several hundred customer orders for “Jewelite,” “Wagner Jewelite,” and “Wagner” trim cap with the Vidon product. Tubelite’s conduct allegedly “contributed greatly” to driving Wagner out of business, resulting in at least $4.5 million in lost sales. Wagner ultimately gave up its rights in the Jewelite mark, which was then assigned to Vidon.

Wagner sued Tubelite for violations of the Lanham Act and state law claims for unfair competition and tortious interference with prospective economic advantage.

Under these circumstances, the court rejected Tubelite’s argument that, though its use of the mark was confusing, Wagner couldn’t sue because (1) it’s not the current user of the mark and (2) Vidon is the mark’s current owner.

Wagner was suing for damages, not an injunction. Violation of its past rights gave it a cause of action. Cases requiring use for trademark rights “simply stand for the proposition that a plaintiff claiming infringement must show that it had rights in the mark when the alleged infringement took place.” It was enough that “Wagner had enforceable rights in the mark when Tubelite used it to sell Vidon’s products.”

For statutory standing, a plaintiff must (1) “allege an injury to a commercial interest in reputation or sales” that (2) “flow[s] directly from” the defendant’s violation of the statute. “Wagner easily satisfies that test, alleging (1) a commercial injury (loss of millions in sales) that (2) directly resulted from Tubelite’s misleading use of the Jewelite mark.” Nothing in Lexmark required a plaintiff to show current rights in the mark or likelihood of a future injury. “Nor would that requirement make much sense. Consider the consequences: defendants who appropriate another party’s mark so successfully as to actually drive that party out of business—as Tubelite is alleged to have done here—would effectively be immune from suit under the Lanham Act. That would be an exceedingly odd result.” Indeed, Lexmark itself commented that “a competitor who is forced out of business by a defendant’s false advertising generally will be able to sue for its losses.”

Tubelite also unsuccessfully argued that Wagner’s false association claim fails because Vidon, as the Jewelite mark’s current owner of record, has an incontestable right to use the mark. Incontestability had nothing to do with the issue here. Vidon acquired the mark after the alleged misuse of the mark took place. [Maybe Vidon has such a right, but it didn’t have such a right.] “Second, Tubelite—not Vidon—is the defendant in this action, and it has presented no legal authority to suggest that it can assert Vidon’s rights in its own defense.” Anyway, there were lots of exceptions to incontestability.

Sometimes dumb arguments make for bad explanations that omit nuance, but sometimes they lead courts to articulate the reasons for the rules, and that’s nice.

delay still defeats Lanham Act presumption of irreparable harm

Skillz Platform Inc. v. Voodoo SAS, 2026 WL 717220, No. 24-CV-4991 (VSB) (JW) (S.D.N.Y. Feb. 12, 2026)

Skillz sought an injunction against defendants’ allegedly false representations about not using bots, and against defendants’ use of bots, in their gaming applications. Skillz has showed up before litigating against other gaming companies’ bot-related representations. Its games including those where players can compete to win cash prizes in head-to-head, skill-bracketed tournaments that ban bots. Defendants run similar games and advertise themselves as, e.g., “fair” and “skill-based” games that are played against “real players” with “no bots allowed.”

The magistrate recommended against an injunction solely on grounds of delay. The relevant date for measuring delay was not the filing of the initial complaint, but at the time Skillz learned of the alleged harm. Even after filing, it waited seven weeks to move for a preliminary injunction. Without more evidence about when it first learned of the bot use, this “undercuts the sense of urgency that ordinarily accompanies a motion for preliminary relief and suggests that there is, in fact, no irreparable injury.”

In addition, the claims of irreparable injury were too remote and speculative to justify emergency relief. Although the parties do compete, Skillz didn’t show a logical causal connection between the alleged false advertising and (1) its own sales position or (2) the overall cash gaming market.

Skillz showed that its sales and market share decreased since 2021, but not that the alleged false advertising played any role in that beyond unsupported speculation by a self-serving declaration. So too with harm to the overall market. “Courts in this circuit have frequently rejected such speculative arguments in deciding whether to issue a preliminary injunction.” [Now do trademark infringement!]

Without evidence of harm to Skillz’ own reputation, as opposed to allegations that distrust was harming the overall market, money damages could redress any injury.

damages requirement trips up another false advertising case with sophisticated customers

Agilent Technologies, Inc. v. Axion Biosystems, Inc., 2026 WL 734986, No. 23-198-CJB (D. Del. Mar. 12, 2026)

Agilent alleged patent infringement and false advertising by Axion in the advertising of its impedance-based cell assay products. E.g., “The simple and sensitive assays of the Maestro Z accurately measure tumor growth and immune cell killing of 3D cancer spheroid models.” Agilent contended that the Maestro Z platform doesn’t actually accurately measure the impedance of 3D spheroids, but only of cells in contact with electrodes on a 2D surface. 

The court granted Axion’s summary judgment motion. Even assuming a genuine dispute on literal falsity and on whether the statements were fact, not opinion, Axion still prevailed.

“For a false advertising claim seeking injunctive relief, if a plaintiff can prove the statement in question is unambiguous and literally false—then actual deception or a tendency to deceive is presumed and need not be proven.” However, “where a plaintiff seeks only money damages for a Lanham Act violation”—regardless of whether the plaintiff is asserting that the statements are literally false or simply misleading—then “plaintiff must present proof of actual deception.” Axion sought both an injunction and money damages; for the injunction, actual deception could be presumed.

But there was not enough evidence of actual deception for misleadingness or damages. A consumer survey or other customer testimony “is not absolutely required if other evidence of actual customer deception exists.” Agilent’s own corporate representative testified about the purported experience of a prospective customer, but this was double hearsay, not admissible at trial. [Agilent apparently didn’t respond that this was evidence of state of mind subject to an exception.] She “could not recall [any] specific case” of customers saying that they wanted the feature at issue. “This vague testimony amounts to a conclusory assertion backed by no actual facts on the key point in dispute.” Nor did the court’s reading of the record support the idea that “Axion’s own collaborators, … who Axion stated are ‘representative of an Axion customer,’ were deceived.” Given their extensive experience with the products, “whatever views they came to regarding Axion’s products and their capabilities were surely gleaned from their own extensive research efforts.”

Thus, claims requiring actual deception failed. The remaining claim (literal falsity/injunctive relief) failed for want of a showing of injury.  

Agilent’s damages theory wasn’t based on any lost sales or reputational damage, and instead focused solely on prospective corrective advertising costs. The Third Circuit “does not place upon the plaintiff a burden of proving detailed individualization of loss of sales” as “[s]uch proof goes to quantum of damages and not to the very right to recover.” And the parties compete directly. Still, there was no real evidence of harm: the testimony was “so vague, conclusory, and/or inadmissible that it cannot be good evidence of anything.” [Now do trademark infringement!]

drug makers face rocky road in making claims against sellers of compounded weight loss drugs

Three different cases reading Lexmark differently but mostly kicking out claims:

Eli Lilly & Co. v. Aios, Inc., 2026 WL 836624, No. 25-cv-03535-HSG (N.D. Cal. Mar. 26, 2026)

Eli Lilly sells Mounjaro and Zepbound, GLP-1 inhibitors containing tirzepatide. These are the only FDA-approved medicines containing tirzepatide in the United States, and the FDA has not approved any tirzepatide product in oral or compounded form.

Defendant operates telehealth platforms focusing on drugs for weight loss, including compounded tirzepatide. Eli Lilly alleged that its Fella telehealth platform engaged in the unlicensed practice of medicine: For example, the non-physician founder allegedly “frequently tells customers that he can help increase their dosage amounts of Fella’s knockoff drugs if they contact him or his non-physician customer success team directly.” Fella also allegedly changed patient prescriptions “en masse,” based on Fella’s business needs, rather than individualized patient needs. Many patients allegedly learned that their prescription now contained an additive “not through their doctor but rather when their prescription arrived from Fella Health.” Eli Lilly alleged that these weren’t “personalized prescriptions”—rather, Fella is offering “an untested, unapproved, one-size-fits-all drug” to patients without complying with the California Medical Practice Act’s requirement that prescriptions be made with “an appropriate prior examination and a medical indication.”

Eli Lilly also alleged deceptive conduct with claims such as “[o]ur science-backed methodology delivers results that outperform traditional weight loss methods”; “[o]ral tirzepatide is the same active ingredient as the compounded injectable (tirzepatide)”; and “[o]ur advanced oral Tirzepatide treatment, developed through cutting-edge research, offers a safe and effective solution tailored to support your weight loss journey and overall health.”

Eli Lilly alleged that Fella knew these statements were false. In a Reddit post, Fella’s Head of Customer Sales wrote that “oral [tirzepatide] can be fairly ineffective (though not totally ineffective), and some may experience more GI discomfort due to daily administration.” One of Fella’s customer success leads wrote that “[t]he oral version is less effective than the injectables, but it’s still better than not being on the medication at all.” Fella’s founder wrote on Reddit that “oral [tirzepatide] is slightly less effective than subcutaneous.”

But Fella’s website states that oral tirzepatide is “science-backed” and that Fella uses a “science-backed methodology,” while its Head of Customer Sales wrote that patients generally lose 15% of their body weight in one year on oral tirzepatide. Eli Lilly alleged that oral tirzepatide has never been studied in clinical trials and that Fella has no science at all supporting its oral product. The statistic cited by Fella on its female-targeted Delilah website, that patients using oral tirzepatide experience a weight loss average of “22.5%,” was derived from Eli Lilly’s clinical trial on injectable tirzepatide, not oral or compounded tirzepatide.

Eli Lilly sued for violations of the UCL, FAL, and Lanham Act, along with civil conspiracy.

Fella argued that Lilly lacked standing because they weren’t competitors and Eli Lilly couldn’t allege “something very close to a 1:1 relationship between [Eli Lilly’s] lost sales and the sales diverted to a defendant.” The court disagreed: Lexmark directed the court to use the zone of interests test and proximate cause, both of which Lilly properly alleged.

Lilly alleged that “Fella’s unfair, deceptive, misleading, and false practices, including its false and misleading statements, cause irreparable harm to Lilly’s brand and customer goodwill by promising results that consumers cannot obtain from Fella’s product,” and, because Fella relied on Lilly’s studies on its product, consumers would also think that Lilly’s product would be that bad. Plus, Lilly alleged injury to its commercial interest in sales. E.g., on Reddit, one of Fella’s customers said he “was on zepbound” until mid-November 2024, but “stopped” when the medicine became too expensive and eventually switched to Fella. Lilly also had standing under the UCL and FAL, but only as to false advertising, not to the UCL claim based on allegedly unlawful corporate practice of medicine. “Eli Lilly does not plausibly allege how Defendants’ claimed lack of authorization to practice in itself causes it any injury.”

Commercial advertising or promotion: It was plausible that the Reddit posts were made for the purpose of influencing customers to buy Fella’s products. Although this was a closer question than statements on Fella’s own website, the Reddit statements “tout Fella’s success with statistics, refer to Fella’s oral and injectable tirzepatide products, and adequately reflect an economic motivation, such that the allegations support a reasonable inference that ‘the economic benefit was the primary purpose for speaking.’”

However, Lilly struggled with its literal falsity arguments, since “lack of substantiation” is not itself a valid theory under state or federal law. For example, Lilly alleged that Fella’s statements regarding its patients typically losing 15-22.5% of their body weight were false because those statements are in reality based on the results of Eli Lilly’s clinical trials, which were performed on injectable and non-compounded tirzepatide. And it’s true that a plaintiff can show falsity by showing that even reliable tests do not establish the proposition asserted by the defendant. “But here, Eli Lilly has not alleged that Fella made any representation regarding the specific basis for its statements about the weight loss results typically achieved for its patients, and Eli Lilly does not allege any contrary facts (as opposed to the purported lack of supporting facts).” Lilly didn’t plausibly allege that Fella’s statements about the existence of rigorous “research” and “testing” were false just because oral tirzepatide has never been subject to the particular mechanism of a clinical trial or study. [Seems like a consumer survey should be relatively easy to do to find deceptiveness even if not literal falsity.]

The only allegedly false statements sufficiently pled were those made in connection with Fella’s promotion of “personalized treatment plans.” Whether defendants actually personalize customers’ treatment was capable of being proven true or false, not puffery.

Novo Nordisk A/S v. Amble Health, Inc., No. 4:25-CV-01048, 2026 WL 776100 (N.D. Ohio Mar. 19, 2026)

The parties allegedly are competitors in the sale of drug products containing semaglutide. Novo Nordisk sells the only FDA-approved medicines containing semaglutide in the United States, Amble is a telehealth company that sells drugs purportedly containing semaglutide, produced at compounding facilities. Novo Nordisk alleged that these compounded drug products are mass produced and create a higher risk to patients than Novo Nordisk’s medicines, because the FDA does not conduct pre-market reviews of compounded drugs for safety, quality, or effectiveness.

The complaint also alleged that Amble’s ads falsely claims that its drugs are personalized: “tailored to you,” and are “tailored to your personal goals,” with “personalization” of “active ingredients, dosage, and form of a medication to meet an individual’s personal needs.” The complaint alleged that, to the contrary, the compounded drugs were “ordered in bulk and sold to patients off the shelf.”

The court found that Novo Nordisk didn’t plausibly allege injury in fact. The complaint alleged sales diversion as well as reputational harm because compounded drugs might “undermine the reputation for quality and safety established on Novo Nordisk’s FDA-approved medicines.”

But defendants’ use of “personalized” didn’t plausibly threaten to harm Novo Nordisk’s reputation. “At base, [Plaintiff] appears to argue the mere fact a medication is compounded makes it an inferior version of an FDA-approved product with the same active pharmaceutical ingredients. But compounding is a federally recognized and regulated pharmaceutical practice ….” Novo Nordisk needed at least facts supporting an inference that Amble’s compounded medication fails to meet consumer expectations, which it didn’t. Nor did it plausibly allege that any of Amble’s customers were harmed by the compounded medication “such that they could draw unwarranted conclusions about the safety and efficacy” of Novo Nordisk’s drugs.  Although Novo Nordisk pled that “the FDA has received reports of adverse events, some requiring hospitalization related to overdoses from dosing errors associated with compounded ‘semaglutide’ products,” dosing errors don’t show that the term “personalized” in and of itself has led to any patient diversion. [The court is weirdly going back and forth between reputation and sales diversion.]

Even with Article III standing, Novo Nordisk didn’t properly allege statutory standing via the proximate cause element: The “personalized” message didn’t plausibly cause the harm. Compounded medications require prescriptions, and the physician’s prescribing decision, not the ads, was the proximate cause of the patient using the compounded medication instead of Novo Nordisk’s product.

Eli Lilly & Co. v. Willow Health Services, Inc., No.: 2:25–cv–03570–AB–MAR, 2026 WL 639976 (C.D. Cal. Feb. 3, 2026)

Eli Lilly alleged its medicines are backed by rigorous science and quality controls. It has FDA approval for two injectable tirzepatide-based medicines. At the time of the complaint, there was no FDA-approved oral tirzepatide. Willow operates a telehealth platform that markets and sells weight-loss treatments directly to consumers. Willow offers compounded tirzepatide products, including an injectable formulation and an oral formulation.

The FDA allegedly has expressed particular concern about compounded GLP-1 drugs, many of whose components are manufactured by facilities that are not subject to the same regulatory oversight as domestic manufacturers. It has warned about dosing errors, adverse events, and the use of unapproved salt forms in compounded tirzepatide products. 

Willow allegedly marketed its products as clinically validated and comparable to, or superior to, Lilly’s FDA-approved medicines: that its tirzepatide treatment has undergone “extensive testing,” is supported by “science,” and produces significant weight loss outcomes. Imagery of physicians and references to board-certified doctors allegedly reinforced the impression of medical endorsement.

Willow also allegedly claimed that its product is a “premium” blend that delivers “better results” than tirzepatide generally. Then it reiterates that its medication undergoes extensive testing. Lilly alleged that, in fact, Willow has no clinical studies supporting these claims, and no testing has been conducted on Willow’s compounded products to demonstrate safety or effectiveness. 

Willow allegedly marketed its drops as effective and, at times, superior to injections, but no clinical data supported the effectiveness of any oral tirzepatide product.

And Willow allegedly misrepresented that its medications were custom, “personalized,” and tailored to each patient’s unique needs, rather than standardized formulations delivered to all patients. Willow’s intake questionnaire “purports to assess whether Willow’s treatment is appropriate” but recommends its medication to all users regardless of the information provided.

After Lilly sued, Willow added a disclaimer to its website stating that its products are not FDA-approved and have not undergone clinical trials, but Lilly alleged that this bottom-of-page statement didn’t affect the overall message. Lilly also alleged that survey conducted by the National Consumers League found that many consumers incorrectly believe  thatcompounded GLP-1 drugs are FDA-approved and clinically tested. Willow’s advertising allegedly mirrored the types of statements the FDA has identified as false and misleading in warning letters sent to compounders and telehealth companies: “clinically proven,” “backed by extensive clinical research,” and “personalized.”

Lilly alleged that Willow’s marketing falsely equates its untested compounded products with FDA-approved medicines, diverting sales and harming Lilly’s reputation. It further alleged that adverse events associated with compounded tirzepatide products are often mistakenly attributed to Lilly’s medicines, further damaging its goodwill.

Statutory standing: “[T]he test forecloses suit only when a plaintiff’s interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress authorized the plaintiff to sue.”

“If the plaintiff can demonstrate that the defendant is a direct competitor, there is a presumption of a commercial injury to plaintiff sufficient to establish standing.” Willow argued that wasn’t a direct competitor of Lilly evidenced by the fact that Lilly didn’t have direct evidence of lost sales and it actually had an increase in sales of Mounjaro and Zepbound. Lilly argued that the presumption of commercial injury conferred by direct competition couldn’t be rebutted. [Gotta say, that seems correct for the motion to dismiss stage.]

The court recognized “a split of authority in the Ninth Circuit on whether a presumption of commercial injury arising from direct competition is sufficient on its own to establish standing, or whether a plaintiff must also allege concrete facts demonstrating lost or diverted sales.”

Lilly alleged that Willow’s conduct “results in potential patients being lured away” and that “Willow[’s] ... materially false statements ... influence consumers’ ... decision to purchase Willow’s [drugs] instead of Lilly’s FDA-approved medicines.” Lilly also alleged that the products compete at “similar prices” causing consumers make purchasing decisions “based on factors other than pricing, including comparative safety and effectiveness.” These allegations, together with the presumption arising from direct competition, were sufficient to plead commercial injury.

What about proximate cause? A plaintiff “ordinarily must show economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that that occurs when deception of consumers causes them to withhold trade from the plaintiff.” Proximate causation may be adequately alleged when “there is likely to be something very close to a 1:1 relationship between” a plaintiff’s lost sales and the sales diverted to a defendant.

The court seems to read this Lexmark quote as a requirement rather than an example. But if I plausibly allege that my competitor & I would likely have split the sales garnered by a competing false advertiser, it’s got to be the case that I have standing. It’s not the 1:1 relationship that creates proximate causation but that, although the parties are at distinct parts of the value chain (as the parties were in Lexmark), a 1:1 sales relationship can justify finding proximate causation—a legal rather than factual conclusion—at a greater competitive distance than a more unbalanced/hard-to-prove loss ratio would have.

Reading Lexmark that restrictively, Lilly still failed to plead “a direct causal link between any advertisement by Willow and a patient choosing a compounded medication over Lilly’s product.” “Critically, regardless of advertising or patient intent, obtaining a prescription medication requires a physician to prescribe it. The physician’s prescribing decision, not Willow’s advertisements, is the proximate cause of the patient using the compounded medication instead of Lilly’s product.”

Lilly objected in vain that this ruling would categorically eliminate Lanham Act claims for prescription drugs. You still need “allegations showing a direct link between advertising and lost sales,” taking into account “the fact that prescriptions, a foreseeable and legally required step, determine whether a patient can actually obtain the product.” [Honestly, I’m not sure how hard this would be for Lilly to plead. The whole point of these services is that they contract with doctors to prescribe exactly what the services offer. A patient who contacts a doctor through one of these services is extremely likely to end up with their products. I don’t think Lilly should have to plead it, but it seems very plausible.]

CEO/sole owner is liable to bankruptcy estate for deliberate false advertising campaign that ended in bankruptcy

In re Vital Pharmaceuticals, Inc. (VPX Liquidating Trust v. Owoc), 2026 WL 822473, No. 22-17842-PDR, Adv. Pro. No. 24-01009-PDR (Bkrcy. S.D. Fla. Mar. 24, 2026)

This is an interesting case about false advertising and individual officer liability in bankruptcy. The court begins:

Corporate officers who breach their fiduciary duties do not become immune from accountability simply because they are also the only stockholders. Florida law imposes fiduciary obligations on directors and officers for the protection of the corporation itself—not for the benefit of any particular class of shareholders, and not subject to waiver by a sole owner who later finds it convenient to argue that no one was harmed but himself. When those obligations are breached and the corporation is driven into bankruptcy, the right to enforce them passes to the trustee or liquidating trust.

Owoc was VPX’s founder, sole shareholder, sole director, and CEO. A jury found that his and VPX’s false advertising of energy drinks was willful and deliberate, resulting in a judgment approaching $300 million.

At its peak, VPK generated over $1 billion in annual revenue, but its commercial success was based on claims about a proprietary ingredient that Owoc called “Super Creatine.” VPX falsely advertised that it offered significant physical and mental health benefits. VPX had “no corporate will separate from Mr. Owoc’s own.”

Because the jury was instructed that “VPX and/or Mr. Owoc acted willfully if they knew that their advertising was false or misleading or if they acted with indifference to whether their advertising was false or misleading,” its willfulness finding “necessarily encompassed a determination that Mr. Owoc either knew that the advertising was false or acted with indifference to whether it was.”

The judgment was one of the principal reasons for VPX’s bankruptcy filing; the resulting trust sought to hold Owoc liable for breach of fiduciary duty arising from the false advertising.

This claim requires: (1) the existence of a fiduciary duty; (2) a breach of that duty; and (3) damages proximately caused by the breach. Collateral estoppel applied to prevent Owoc from relitigating whether he willfully and deliberately engaged in false advertising of Super Creatine.

As VPX’s sole director and CEO, Owoc owed VPX fiduciary duties of care, loyalty, and good faith. A breach under Florida law requires at least gross negligence, which is “synonymous with engaging in an irrational decision making process.” The false advertising jury’s findings were preclusive: “A director who causes the corporation to engage in a years-long false advertising campaign that he knew was false, or acted with indifference to whether it was false, is the precise ‘knowing and deliberate indifference to the potential risk of harm to the Company’ that … breaches the fiduciary duty of care.” The damages were the judgment entered against VPX. Thus, there was liability (quantification of damages was for later).

The court rejected Owoc’s arguments, including that VPX was in pari delicto (equal fault) with him and thus barred from making the breach claim. The court disagreed: the doctrine “is not a tool for the powerful to insulate themselves from the consequences of their own misconduct.” It was designed for situations when two parties were independently at fault, voluntarily engaged in the same wrongdoing, and then fought about their relative entitlements arising from that shared wrongdoing. “In that situation, a court steps back and says: we will not sort this out.” It follows that, “when the parties were not independently at fault, when the plaintiff was not a voluntary wrongdoer, or when the very nature of the claim is that the defendant wronged the plaintiff rather than that both wronged each other,” the doctrine doesn’t apply. That was the case here.

While a bankruptcy trustee cannot sue third parties for their role in wrongdoing if the corporation itself was an equal participant (given that corporations can’t act without individual humans so the humans’ wrongdoing is attributed to the corporation), “an agent’s misconduct is not imputed to the principal if the agent was acting entirely in his own interest and adversely to the interest of the corporation.” “VPX’s liability in the Monster False Advertising Litigation was the legal consequence of Mr. Owoc’s own conduct being attributed to the entity he wholly controlled. The jury’s finding of willfulness against VPX reflects Mr. Owoc’s willfulness, not some independent institutional decision by VPX to deceive.”

Allowing Owoc to point to the fact that the law attributed his acts to VPX as a shield against accountability to VPX would be “to let fiduciaries immunize themselves through their own wrongful, disloyal acts—a “transparently silly result.” And if Owoc could do it here, so could every sole owner-operator, which would “systematically immunize the most powerful actors in closely held corporations from the most fundamental obligations corporate law imposes on them.”

Nor did the business judgment rule protect Owoc because of the breach of fiduciary duty. “This is not a case of a business judgment gone wrong — a risky but good-faith marketing strategy that backfired. It is a case of a director who caused his corporation to make claims he knew were false or misleading, or acted with indifference to whether they were false or misleading. The rule was not designed to shield such behavior.”

court dismisses vague false advertising counterclaims but allows challenge to Wonderful's pistachio trade dress

Wonderful Co. v. Nut Cravings Inc., No. 1:21-cv-03960 (MKV), 2026 WL 818073 (S.D.N.Y. Mar. 24, 2026)

Wonderful sued Nut Cravings for infringing its pistachio package trade dress. This opinion deals only with Nut Cravings’ counterclaims, which mostly survive except for false advertising.

Wonderful has a registration for its packaging: a design “consist[ing] of black three-dimensional product packaging having a rectangular shape with transparent semi-circular curved sides, the word ‘WONDERFUL’ in white with a design of a ‘heart’ in place of the letter ‘O’ appearing across the top of the packaging and the word ‘PISTACHIOS’ in green appearing vertically in the middle of the packaging” for “processed nuts.”

It also claimed unregistered trade dress in: (1) “a predominantly black package”; (2) “a bright green accent color”; (3) “use of sans serif font for the word ‘PISTACHIOS’ ”; (4) “use of capital letters for the word ‘PISTACHIOS’ ”; (5) “semi-circular curved ‘window’ cut outs showing pistachios”; and (6) “the WONDERFUL mark.”

Nut Cravings uses a black and green color scheme for its pistachios, has the phrase “roasted salted pistachios” written in all capital letters, a sans-serif typeface, and a rectangular simulated-window on the front of its package. It alleged that each of the elements that overlap with Wonderful’s is generic and functional for packaging of processed nuts.

Nut Cravings plausibly alleged that the trade dress (registered and unregistered) was functional, thus stating a claim for invalidity of the registered mark. Although a combination of functional elements can in theory be nonfunctional, “the fact that a trade dress is composed exclusively of commonly used or functional elements might suggest that that dress should be regarded as unprotectable or ‘generic,’ to avoid tying up a product or marketing idea” (also citing Laurel Road Bank v. CommonBond, Inc., 18-cv-7797 (ER), 2019 WL 1034188, at *6 (S.D.N.Y. Mar. 5, 20219) (noting that “where each element is functional and the elements work in tandem to create an advertisement that is readable and eye-catching, [plaintiff] is not likely to meet its burden that the Trade Dress is nonfunctional”)).  

The counterclaim plausibly alleged that only the Wonderful mark was nonfunctional. The presumption of nonfunctionality afforded by registration is rebuttable. Nut Cravings alleged that black and green provide a non-reputation related benefit of an aesthetically pleasing appearance, with black separately indicating high quality and green separately indicating the product is related to “nature, health and/or pistachios.” It cited pleading numerous reports and publications explaining the benefits of the use of these colors for food packaging. It further alleged that numerous other processed nut products use green and black for their packaging and provided 36 specific examples.  “[A] color on packaging may be functional in a given industry.”

Nut Cravings also alleged that the other elements—capital letters, sans-serif font, and transparent windows on the package—are functional and provide non-reputation related benefits for food packaging. All-caps is allegedly commonly used to denote simplicity and/or premium quality; sans-serif font is allegedly commonly used to assist readability; transparent windows are allegedly commonly used to “entic[e] customers, enhance[e] product visibility, and/or display[ ] the freshness of items inside.” These are all non-reputation-related benefits that courts have found to be functional in similar contexts. E.g., Laurel Road Bank found the use of sans serif font in advertising campaign to be functional as it “enhanced legibility and readability” and that the use of “large text catches a viewer’s attention” and is also functional, and Kind LLC v. Clif Bar & Co., 2014 WL 2619817, (S.D.N.Y. June 12, 2014), held that the use of a transparent window on food packaging for food bars serves a functional purpose “of revealing the bar within.” In reversing the dismissal of Wonderful’s claims in this case and finding nonfunctionality plausible, the Second Circuit even noted that “the transparent windows in the packaging [ ] arguably serve the functional purpose of allowing a consumer to view the pistachios being sold.”  

So too with genericity, although the allegations were thinner. That’s what discovery is for.

False advertising: Nut Cravings alleged that Wonderful misrepresented that the packages contain more edible pistachios than actually included. It pointed to nineteen online consumer reviews complaining of a significant number of empty shells in Wonderful pistachio products. Nut Cravings alleged that consumers expect that packages of in-shell processed nuts will include substantially only editable nuts within shells, and that “almost all of the advertised weight” is edible, and that the deception here caused consumers to pick Wonderful over Nut Cravings.

But conclusory allegations that false advertisements caused a claimant to lose sales are insufficient. None of the cited customer reviews mentions Nut Cravings or says that the customer otherwise would have purchased from them absent the allegedly false statements.  Nut Cravings didn’t even allege that every bag misrepresents its net weight due to a significant number of empty shells. The court wasn’t willing to give every pistachio producer a claim against Wonderful without more allegations.

Meta's AI assistance to advertisers defeats Section 230, court says

Bouck v. Meta Platforms, Inc., No. 25-cv-05194-RS (N.D. Cal. Mar. 24, 2026) 

Does offering AI enhancements to deceptive ads constitute participating in what makes them illegal for purposes of avoiding section 230? This case answers "yes, relatively easily" and it should be raising flags in a lot of boardrooms.

Plaintiffs here are victims of a pump-and-dump scheme involving shares of a Chinese penny stock. The scammers initially targeted them on Facebook and Instagram through advertisements for investment groups promising handsome returns. For example, in one ad, Kevin O’Leary— “a businessman well-known for his role on Shark Tank”—appears to advertise a private group in which stock tips are shared. In another, Savita Subramanian—Bank of America’s head of U.S. equity and quantitative strategy— “looks to be promoting” spots in a “free trading training” group that boasts “95% accuracy” and 30-40% daily returns. 

Plaintiffs sued Meta for aiding and abetting fraud; negligence; breach of contract; violation of the California Unruh Civil Rights Act, Cal Civ Code § 51; and unjust enrichment, along with promissory estoppel and breach of the covenant of good faith and fair dealing as alternatives to their breach of contract claim. The court allowed the claims for aiding and abetting fraud, negligence, and unjust enrichment to proceed.

Section 230: An “information content provider” is “any person or entity that is responsible, in whole or in part, for the creation or development of information provided through . . . any other interactive computer service.” If Meta was sufficiently involved in the “creation or development” of the fraudulent ads, the court reasons, then those ads were not just “provided by” the scammers—they were also provided by Meta. Under 9th Circuit precedent, a website helps to develop unlawful content “if it contributes materially to the alleged illegality of the conduct.”

Plaintiffs’ allegations of material contribution depended on three tools Meta offers to advertisers. (1) Flexible Format: “Meta automatically optimizes the ad and shows it in the format that Meta predicts may perform best” by “selecting the specific images and other content that will be included, the layout, the platform (Facebook or Instagram), and how the ad will be displayed to a particular user (e.g., in the user’s feed, as a story, etc.).” (2) Dynamic Creative: This tool “takes multiple media, such as images and videos, and multiple ad components, such as images, videos, text, audio, and calls-to-action, and then mixes and matches them in new ways to improve . . . ad performance.” This “allows the advertiser to automatically create personalized creative variations for each person who views the ad, with results that are scalable.” (3) Advantage+ Creative: Meta uses generative AI to apply “creative enhancements” to optimize advertisements, including AI-generated text and images. “The alterations may include modifications to images (such as applying different text overlays or modifying the image background), generating variations of the ad’s text to target different audiences, and inserting ‘Call to Action’ buttons, such as a link to purchase a product or join a WhatsApp group.”

The complaint alleged that scammers used these tools at least to create different variations of ads featuring Ms. Subramanian. That was enough to plead the existence of a dispute over whether Meta “contribute[d] materially to the alleged illegality of the advertisements.” “Plaintiffs have averred that Meta participated in the construction of the ads by literally generating, using artificial intelligence, the images and text in the advertisements. That degree of participation is not protected by section 230.” In other words, “optimizing the appearance of an ad to drive engagement” was enough of a contribution to the ads’ illegality to preclude section 230 immunity. Pleading the ability to create “AI- generated text and images” “is more than enough to aver ‘that the tools affect ad content in a manner that could at least potentially contribute to their illegality.’”

Meta argued that its tools were “neutral” and that offending content was exclusively provided by the scammers. But 230 allows services to “structure the information provided by users,” not “to create the information itself.” Plaintiffs alleged that “Meta created the offending information by generating some of the false statements that tricked them into the investment scheme.”

If a scammer tells Advantage+ Creative “that he is interested in an ad promising astronomical weekly investment returns, Advantage+ Creative will spin up a slew of ads that include the provided language and other language, images, and videos it decides will be effective in promoting the user’s chosen message.” Indeed, a journalist from Reuters asked for an ad asking users if they were “interested in making 10% weekly returns.” Advantage+ Creative “generated a slew of ads saying just that and new ads with language like ‘Tired of living paycheck to paycheck? Break the cycle and start earning steady weekly income with our proven system.’ The reporter did not come up with that (patently fraudulent) language; it was all Meta.” It was at least plausible that some of the illegal content (i.e., the fraudulent statements in the ads) was created by Meta, not by the scammers.

Aiding and abetting fraud: “California has adopted the common law rule that [l]iability may ... be imposed on one who aids and abets the commission of an intentional tort if the person ... knows the other’s conduct constitutes a breach of a duty and gives substantial assistance or encouragement to the other to so act.” Meta argued that it neither had knowledge of the scammers’ conduct nor substantially assisted in the execution of their scheme. Plaintiffs alleged that Meta has been repeatedly subject to lawsuits stemming from similar schemes; that Meta itself acknowledged the proliferation of fraud using public figures and celebrities’ images; and that Meta had an “ad review system” in place to screen ads for “violation of [Meta’s] policies.”

Meta responded that knowledge that fraud is occurring generally on its platforms could not have given “actual knowledge of the specific primary wrong” at issue in this case. “In a vacuum, that argument has merit. Under California law, knowledge that something illegal is occurring on a defendant’s platform does not establish that the defendant knew of the particular illegal conduct that injured the plaintiff.” But the court accepted allegations “that when Meta saw the ads in its ad review process, Meta acquired actual knowledge of their fraudulence.”

What about the moderator’s dilemma?  “To be sure, in many cases a defendant could not be charged with actual knowledge of fraud simply because the fraud passed through a routine review process. For that reason, many cases arising in the financial fraud context have required a plaintiff bringing an aiding and abetting claim to show that the defendant had some extra knowledge about the primary fraudster in order to create an inference that the defendant knew of the fraud and passed it through the review process anyways.” But here, “no extra knowledge is required. That is because the advertisements are facially ridiculous.” [This seems like it will create a bit of a problem on the back end of proving classic fraud—where is the reasonable reliance?]

Thus, an ad showing “Savita Subramanian, one of Wall Street’s most respected market observers, purporting to offer stock tips in a WhatsApp group,” not through her employer Bank of America but promoting something called “AI Investment.” “She” touted daily potential returns that were roughly three to four times the average annual return of U.S. equity markets, all for free. “Even a cursory look would warrant suspicion that the ad is fraudulent….  If Plaintiffs succeed in convincing a jury that this ad (and others that are equally preposterous) passed Meta’s ad review process, the jury would be entitled to infer that Meta had actual knowledge of the fraud at the time the ads went out to its users.”

Meta made the obvious point that its ad review is not human review, and that automated systems don’t have the intuitive knowledge that allows this conclusion from a “cursory look.” The court found that response “confounding.” “It was Meta’s decision to use technological review tools to screen ads, and it does not now get to claim it had no idea what was going on because it tasked some software program with doing the first pass.” But … Meta did have no idea what was going on, in the sense of having specific knowledge. This really is a decision to allow general knowledge to count for liability; it penalizes Meta for having automated review instead of no review. Given that human review at Meta scale is … let’s say unlikely … then allowing this generalized knowledge to count is another blow against large online services generally.

The court also found that it was plausible that Meta acquired knowledge that it was aiding and abetting a fraud “well before the ad passed through a review system.” “At the moment a scammer asked Advantage+ Creative to generate an ad using a celebrity, a secret chat room, and the promise of unfathomable riches, there is at least a fact question on whether Meta acquired knowledge that it was aiding and abetting a fraud.” After all, “even routine operations may constitute substantial participation if done with knowledge.”

Breach of contract: Meta didn’t impose a binding contractual obligation on itself to do anything, only a duty on its users not to pollute Meta’s platforms with scam investment ads. For similar reasons, alternative claims for promissory estoppel and for breach of the covenant of good faith and fair dealing failed.

But negligence survived for the reasons above.

California’s Unruh Act provides that all individuals, regardless of race or national origin, shall be “entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever.” Plaintiffs alleged that Meta’s advertising tools targeted ads featuring celebrities and investors that shared their race or national origin to make it more likely that they’d engage with the ad and succumb to the scam. “In general, a person suffers discrimination under the [Unruh] Act when the person presents himself or herself to a business with an intent to use its services but encounters an exclusionary policy or practice that prevents him or her from using those services.” Targeting is not exclusion, so there was no violation.

Unjust enrichment also survived.

CA6 interprets literal falsity narrowly but says materiality implements the standing requirement, yay

Victory Global, LLC v. Fresh Bourbon, LLC, --- F.4th ----, 2026 WL 836221, No. 25-5173 (6^th Cir. Mar. 26, 2026)

Lower court decision discussed here.

Victory Global, d/b/a Brough Brothers claims to have become the “first” African American-owned company to distill bourbon when it opened its physical distillery in 2020. But Fresh Bourbon counters that it was the “first” because its owners physically distilled their brand at another company’s distillery two years earlier. Brough Brothers sued for Lanham Act false advertising, but failed to identify any unambiguously false statements or evidence of deception. The court of appeals affirmed the grant of summary judgment to Fresh Bourbon.

Brough Brothers sold their its batch of bourbon under the Brough Brothers label in 2020. The bottles truthfully disclosed that they were distilled in Indiana. On New Year’s Eve in 2020, they distilled their first bourbon in Kentucky.

Fresh Bourbon distilled using another distillery’s space starting in 2018; eventually, Fresh Bourbon’s employees knew what they were doing and got “free reign” [sigh] of the Hartfield distillery. It first sold its bourbon made at Hartfield in 2020, using Hartfield’s federal license to sell to distributors. The label stated: “Distilled and Bottled by Buchanan Griggs Inc. Paris, Kentucky For Fresh Bourbon Distilling Company[.]” Fresh Bourbon owned the recipe for this bourbon, and Hartfield agreed not to make it for others. Eventually, Fresh Bourbon opened its own distillery and distilled its first batch either in late 2022 or in early 2023.

“Given that Brough Brothers and Fresh Bourbon developed side by side, various sources have made different claims about who came first.”

“If a defendant makes a literally false statement, the defendant can identify no possible framing in which one could consider the statement true.” [This is an overstatement—we can always imagine secret definitions that make a statement true.]  By contrast, a misleading statement “requires a reader to engage in some mental processing to determine its truth or falsity.” [Also wrong: the whole point of falsity/misleadingness is that the reader does not know the truth by way of the statement. A misleading statement requires some inference that leads the reader to a false conclusion; the mental processing is the process of determining what the statement is saying.] “If, for example, an ambiguous statement is true under one interpretation but false under another, the statement qualifies as potentially misleading (not literally false). The same rule covers a technically true statement that lacks important details.”

The court noted that other circuits have split over whether the false/misleading line matters to materiality. Now here’s a line I like a lot: Materiality “implements the statutory causation requirement because a business is not ‘likely to be damaged’ from a claim that will not affect a consumer’s decision on which product to buy.” The court declined to weigh in on the split here (correctly recognizing that the Fifth Circuit had mistakenly cited it as already having resolved the issue; indeed, the Fifth Circuit cited its misunderstanding of other courts’ holdings as the reason it adopted a separate-evidence-for-materiality requirement; the split emerged from a game of Telephone).

Anyway, Brough Brothers bet it all on literal falsity. But none of the categories of challenged statements met the “high” bar for literal falsity.

First: The first to African Americans to “distill,” “produce,” or “develop” Kentucky bourbon since the Civil War. For example, Fresh Bourbon’s profile on X called the company’s bourbon the “first ... developed grain to glass by African Americans in the state of Kentucky.”

Brough Brothers’ expert conceded that it was “impossible to verify” whether other African American distilleries existed before these two companies because of the history of ignoring Black history. “At least with respect to other bourbon makers, then, Fresh Bourbon’s statements are not ‘verifiable’ as false on this record.” So the alleged falsity was the message that Fresh Bourbon made bourbon at its Lexington distillery before Brough Brothers made bourbon at its Louisville distillery, when the truth was that Brough Brothers obtained its distilling licenses and made its first batch of bourbon at its own distillery in December 2020 before Fresh Bourbon completed the same tasks years later. “If, then, the challenged statements unambiguously suggested that Fresh Bourbon opened its physical location before Brough Brothers, they would likely be literally false.” 

But there was another “reasonable” reading [applying the correct standard rather than the “any reading” standard]: “that Fresh Bourbon’s agents made its Kentucky bourbon first—no matter the physical distillery at which it did so.” And that was true. Fresh Bourbon’s founders participated in the distilling process at the Hartfield distillery starting in 2018. During this time, Brough Brothers sourced their bourbon from Indiana and did not help this producer in the distilling process. Under these circumstances, there was ambiguity.

Brough Brothers argued that a party does not “distill,” “produce,” or “develop” bourbon unless the party obtains licenses to open a distillery.

But this technical claim has no place in the “literally false” calculus—which requires a “bald-faced” lie. Fresh Bourbon’s use of these verbs does not meet that high standard. In ordinary language, one would naturally say that a party distilled or produced bourbon when the party put the raw materials into a still and took the other steps necessary to create the alcoholic beverage at the end.… These verbs also would remain accurate even if the party lacked a license.

The legality claim thus “conflicts with the ordinary understanding of the words.” And the facts showed that Fresh Bourbon’s team did more than buy bourbon on Hartfield’s license; they physically participated in the distilling.

Second: “[C]onsidered to be the first black-owned distillery in Kentucky.” This phrase came from the Kentucky Senate’s resolution praising Fresh Bourbon in February 2020, to which Fresh Bourbon’s website links. Brough Brothers argued that it opened its Louisville distillery before Fresh Bourbon opened its Lexington one, making this literally false.

But there was no evidence that Fresh Bourbon itself ever claimed to have opened the first African American-owned distillery in Kentucky. That the Kentucky Senate “considered” it to be the first, even if misleading, wasn’t literally false. Also, “distillery” could mean different things in different contexts. Although both dictionaries and Kentucky law define the term as meaning a place where distilled spirits are made, “consumers do not necessarily flip open a dictionary or check statutes when evaluating products.” And Fresh Bourbon introduced evidence that companies often call themselves a “distillery” even when they are “having a spirit bottled for” them by others. Brough Brothers itself registered the name “Brough Brothers Distillery” in 2018—years before it opened its physical location. The resolution itself suggested that this was how the Kentucky Senate used the term, because it stated elsewhere that Fresh Bourbon had “announced that they plan to build” a physical distillery in Lexington. “[I]t would have made little sense for the resolution to refer to Fresh Bourbon’s (unconstructed) venue as the first.” Under the understanding of “distillery” that means a company that sells bourbon, Fresh Bourbon sold Kentucky-made bourbon while Brough Brothers still sold Indiana-made bourbon, so that was true.

Brough Brothers argued that Fresh Bourbon drafted the resolution and was thus responsible for it, but the Senate didn’t use the language that they drafted, which didn’t include the challenged statement. Thus the court didn’t resolve the question of whether a state Senate resolution could be attributed to a private party for Lanham Act purposes.

Likewise with other claims; the Senate resolution also said that Fresh Bourbon “produces bourbon in the state of Kentucky with an African American Master Distiller, the first in Kentucky since slavery[.]” Brough Brothers argued that this statement was literally false because the putative master distiller lacked the qualifications: “20+ years of experience operating a distillery,” according to its expert. The putative master distiller “worked full time at a bank and merely had an interest in bourbon as a hobby before he took the job with Fresh Bourbon.” But the record showed that whether a producer qualifies as a “master distiller” was opinion not fact; as one witness said, the term is “more of a symbol” that some distillers coined in their marketing to become “rock stars with the bourbon people.” He testified that there is “no set experience level” or “no set anything” for that matter; the claim that a master distiller must have 20 years’ experience would disqualify Brough Brothers’ own master distiller. Brough Brothers’ expert conceded that it “[b]asically” boils down to “a matter of opinion,” which is fatal to a Lanham Act claim.

The court also declined to hold that these statements added up to falsity by necessary implication. Unfortunately casting doubt on whether the circuit actually recognized the doctrine, it understandably refused to “combine statements from different sources into one ‘overall marketing scheme.’” Context is vital, but “we have never treated every advertisement that a business has ever made as the relevant ‘context.’” Even considered together, however, the challenged statements were still ambiguous.