Friday, August 05, 2022

Statements in Insider article were plausibly commercial advertising or promotion

Glamour Dolls Inc. v. Lisa Frank Inc., No. CV-21-00228-TUC-SHR, 2022 WL 3098042 (D. Ariz. Aug. 4, 2022)

Frequent IP claimant Lisa Frank is in court this time over a failed deal with a vegan cosmetics company, whose contract aspects I will ignore. The parties initially entered into a cobranding deal: GDI would make cobranded cosmetics in return for, inter alia, a guaranteed minimum royalty. Things fell apart as LFI demanded money but allegedly refused to approve the cosmetics, allegedly also communicating with other makeup companies during this period. LFI allegedly used the “concepts, designs and ideas” from GDI’s samples to launch a new line of products with a larger cosmetics company, Morphe. Insider Inc. published an article about LFI’s collaboration with Morphe; LFI’s statements therein are the subject of Lanham Act claims.

In the article, LFI’s representative said: “Unfortunately, Glamour Dolls completely failed to live up to our agreement, which includes their obligations within the Kickstarter campaign, failing to manufacture and deliver the products that our fans rightfully deserved,” the representative said:

The Lisa Frank Company knows how you feel, as we did not receive what Glamour Dolls promised us either. After many months of pushing Glamour Dolls to live up to its contractual obligations and deliver products—to our fans and retailers that ordered products—Lisa Frank Inc. reached the point of exasperation, terminated the agreement with Glamour Dolls, and contacted the Federal Government. To say we are disappointed by the events that transpired as a result of this license is an understatement.

By contrast, LFI was “excited about the upcoming collection” with its “trusted partners at Morphe” and it knew Lisa Frank fans would “love these quality cosmetics that bring the joy of Lisa Frank to life.”

Defamation per se: The statements in the article could reasonably bear a defamatory meaning.

Lanham Act false advertising: Were the statements “commercial advertising or promotion” even though not in a conventional ad? GDI plausibly pled commercial speech: “The statements in question … reference the Kickstarter products that never were made and seemingly promote LFI’s new line of products with Morphe. LFI’s representative also appears to have an economic motivation to promote the economic and financial success of Defendants, improve Defendants’ image, and create more exposure for Defendants’ new products with Morphe.”

What about puffery?  “Ultimately, the difference between a statement of fact and mere puffery rests in the specificity or generality of the claim.” The statements here weren’t “subjective claims about a product, nor are they a form of exaggerated advertising, blustering, or boasting upon which no reasonable buyer would rely.” LFI’s statements “might induce consumers to avoid Plaintiff’s products, as the statements depict the Plaintiff as a company that ‘completely fails’ to deliver products and abide by its promises. This is a quantifiable claim concerning Plaintiff’s undelivered products.”

Trade libel: Also sufficiently pled. GDI identified specific third parties “with which [it] had previously dealt and/or which had expressed interest in collaborating with [it] prior to the article’s publication” who “abruptly backed out and refused to speak or even communicate with [it]” afterwards.

Monday, August 01, 2022

In Nevada, no sale is necessary for false advertising liability if sufficient causation exists

R.J. Reynolds Tobacco Co. v. Eighth Judicial District Ct., --- P.3d ----, 2022 WL 3008304, 138 Nev. Adv. Op. 55 (Jul. 28, 2022)

The state supreme court denied mandamus against a district court order reinstating a deceptive trade practices complaint based on false claims about the safety of tobacco products. The applicant argued that the plaintiffs lacked standing to bring that claim against RJR because they never used RJR’s products (they smoked other makers’ cigarettes) and thus couldn’t show that they were victims of consumer fraud who sustained damages therefrom. However, the Nevada Deceptive Trade Practices Act creates a cause of action for “victims” of consumer fraud, and nothing in the statute required victims of consumer fraud to have used the manufacturer’s product. Plaintiffs also sufficiently pled that they were directly harmed by RJR’s false and misleading advertising.

To read “victim” to mean only a person who used the product “would needlessly narrow the remedial reach of the NDTPA, which is contrary to the liberal construction that applies to such statutes.” The court pointed out that “the plain language of the NDTPA contemplates situations in which liability may be found even when, like here, an individual did not actually purchase or use the product.” Liability attaches to those who “[k]nowingly makes a false representation” as to the product “for sale,” and the definition of “sale” explicitly includes an “attempt to sell” the product or service. “[I]ndividuals violate the NDTPA when they make a knowingly false representation regarding the product in an attempt to sell the product and the claimant suffered a direct harm from the attempted sale, regardless of whether the claimant purchased the at-issue product.”

Here, the plaintiff didn’t use RJR products, but pled that it violated the law by making “false and misleading statements” that denied cigarettes are addictive, claimed “it was not known whether cigarettes were harmful or caused disease,” advertised various types of cigarettes as either safe, “low tar,” or “low nicotine,” and made several other knowingly false statements regarding the potential health risks of cigarettes. The plaintiff allegedly relied on those representations to smoke generally, even though she did not smoke Reynolds products, which resulted in her cancer. The limit here is the direct harm requirement; there is no purchase/use requirement.

One justice concurred only in the denial of the petition for mandamus.

2d Cir. attempts to explain when puffery can be found as a matter of law

International Code Council, Inc. v. UpCodes Inc., 2022 WL 3008706, --- F.4th ---- (2d Cir. Jul. 29, 2022)

Discussion of district court opinion. ICC develops model building codes and standards; it sued a competitor, UpCodes, for false advertising (Lanham Act, NY GBL, and common law unfair competition). The court of appeals reversed the district court’s sua sponte dismissal (pre-motion letters converted to a motion to dismiss) and further ruled that ICC’s allegations mostly stated a claim. I will not discuss the procedure further.

When a local government adopts an ICC code, “it often does not publish the entirety of the code; rather, it codifies the code by reference and then publishes its own amendments.” ICC also publishes “Custom Codes” that integrate these amendments into its codes; it sells physical and electronic copies of both kinds of codes.

Although the public can view ICC codes for free on ICC’s proprietary platform, there’s demand for more than that, which is why ICC sells special access that allows, e.g., highlighting. UpCodes, meanwhile, allegedly charges its subscribers a premium to access versions of ICC’s publications with integrated amendments.

There were three challenged categories of statements: (1) representations relating to the accuracy of the codes available on UpCodes’s website, including claims that its codes were “always up to date,” and that the website “provides a complete understanding of relevant material,” (2) statements relating to UpCodes’s publication of codes with integrated amendments, including claims such as, “UpCodes hosts the adopted codes as enacted by the state or local jurisdiction,” and (3) statements relating to UpCodes being the sole source of codes with integrated amendments, including claims that UpCodes is the “only place where all the codes are kept up-to-date with all the amendments integrated natively into the code.”

ICC alleged that these statements were false: First, ICC alleged that UpCodes’ codes contained significant errors, from scanning; posting material as law when it hadn’t been adopted; omitting law; and failing to integrate various state and local amendments. Second, errors in amendment integration allegedly made UpCodes’s statements that it hosts codes as enacted by jurisdictions false. Third, ICC alleged that it also offers Custom Codes with integrated amendments, making UpCodes’ “only place” statement false.

[Reordered discussion to track this order.]

Accuracy statements: The district court found that claims of being accurate/up to date and claims that users would get a “complete” understanding of relevant material were puffery. The court of appeals found that, at this stage, the accuracy statements were properly alleged to be false and falsifiable, that is, not puffery, though the completeness statement was puffery (for different reasons than the district court concluded).

The accuracy statements included “[a]lways up to date,” “never work from outdated code,” implications that the website contained “all [relevant] code,” and “We are only [sic] place where all the codes are kept up-to-date with all the amendments integrated natively into the code.” The court of appeals didn’t decide whether “minor, superficial errors” would render these claims false, but, “by averring that its codes are completely up-to-date and comprehensive, at the very least, UpCodes ‘necessarily impl[ies] [the] false message’ that its materials are not missing entire sections of code or erroneously publishing material that it had not been enacted as law,” as alleged.

Whether these claims are puffery “requires a factual inquiry into how users interpreted UpCodes’s claims.” This conclusion followed because the Second Circuit recognizes two kinds of puffery: First, “[s]ubjective claims about products, which cannot be proven either true or false,” including “exaggeration[s] or overstatement[s]” that mention “nothing specific,” but rather amount to “general claim[s] of superiority” “expressed in broad, vague, and commendatory language” that are “considered to be offered and understood as an expression of the seller’s opinion only.” Second, “exaggerated, blustering, and boasting statement[s]” that are objective—and therefore technically provable—but “upon which no reasonable buyer would be justified in relying.”

Worth quoting in full because it is the most comprehensive attempt to explain the proper rule about evaluating puffery on a motion to dismiss that I have seen. I do not necessarily think it’s an accurate description of the overall case law, but it is certainly an attempt to put it on a more consistent path:

Whether a puffery defense against a false advertising claim can be resolved on a motion to dismiss depends in part on the type of puffery at issue: If the challenged advertisements fall under the first form of puffery—subjective statements of opinion which cannot be proven false—then courts treat them as non-actionable puffery as a matter of law. A plaintiff cannot state a false advertising claim based on such a statement because, by definition, it cannot be proven false.

On the other hand, when an advertisement might fall within the second form of puffery—statements that are provable but are so exaggerated that no reasonable buyer would be justified in relying on them—the court must evaluate how a reasonable buyer would react. This often requires extrinsic evidence of consumer impact. Such a fact-intensive inquiry typically should not be resolved on a motion to dismiss. In some cases, however, a statement may be technically false but so patently hyperbolic that any allegations that it misled consumers are facially implausible, thereby making the false advertising claim ripe for dismissal on puffery grounds.

To elaborate on that last bit: “If a bubblegum brand advertised that its gum permits chewers to ‘blow a bubble as big as the moon,’ the statement would be literally false, but it is facially implausible that any reasonable buyer could justifiably rely on that claim.” On the other hand, falsely advertising that the gum would allow users to “blow a bubble bigger than your own head,” it would be plausible that a reasonable buyer could be misled. “The statement might qualify as puffery, but only if consumer evidence introduced at summary judgment or trial showed that ‘no reasonable buyer would be justified in relying on it in navigating the marketplace.’” [So, is the factfinder supposed to use an objective or empirical reasonable consumer as the standard?]

Here, the claims of accuracy could be falsified. Thus, they could be puffery, but only if they are such “exaggerated, blustering, and boasting statement[s]” that “no reasonable buyer would be justified in relying” on them. And UpCodes’s assurances that its products are “[a]lways up to date” and that its users will “never work from outdated code” were “not so patently hyperbolic that it would be implausible for buyers to rely on them.” As a result, “UpCodes could prevail on its puffery defense only after introducing extrinsic evidence of the statements’ effect on consumers on a motion for summary judgment or at trial.”

Comment: Note one interesting thing that happens in this formulation is that puffery is now a “defense,” on which the defendant apparently bears at least the burden of production. I would think that the plaintiff must bear the ultimate burden of proof on falsity, but needing to introduce extrinsic evidence of effect on consumers is a pretty high bar. Is a survey required? Could general expert testimony suffice?

Anyway, we also learn that prior judicial treatment of words like “accurate” isn’t helpful “unless that word is used in a sufficiently similar context.” “Always” is puffery if it modifies an unverifiable attribute, and “up to date” could be subjective “when used as a comparator or superlative (e.g., ‘more up to date’ or ‘most up to date’),” but that’s not what was alleged here. [I really have no idea why comparative/superlative statements are any less factual than noncomparative statements; the underlying intuition is that consumers are less likely to believe such statements, but (1) citation needed, and (2) that conflicts with the conclusion the court just purportedly reached, which is that when something is technically falsifiable, not just hopelessly vague, you need factfinding before you can deem something puffery.] Anyway, UpCodes claimed that its products were “always up to date.” “We do not see how such a statement can be anything other than an explicit claim about the quality of its products.”

The district court understated the alleged errors when it held that “ ‘no reasonable buyer’ would take UpCodes’s representations of accuracy and completeness to mean that the codes are instantaneously updated and at all times error free” because “[a]s changes in law occur, some delay between the adoption of those changes ... and their publication on the UpCodes website is not only understandable, but expected.” ICC didn’t allege mere slowness, but blatant errors, such as publishing the entire “text of ICC’s model International Residential Code 2015 as the ‘Residential Code 2015 of Wyoming’ even though Wyoming has not incorporated the entire International Residential Code 2015,” and publishing eleven code appendices as part of the Building Code 2015 of Wyoming and two code appendices as part of the Wyoming Fire Code even though Wyoming had never adopted those appendices. “While it might be unreasonable for a consumer to think that UpCodes instantaneously updated every code as it was revised, one could reasonably believe based on UpCodes’s representations that its website would not include obvious omissions and inaccuracies such as these.”

Nor could a disclaimer of liability for errors and omissions on the website suffice at the motion to dismiss stage. “[T]he sufficiency of UpCodes’s disclaimer depends upon its effect on consumers, which raises factual questions that are not well suited for resolution on a motion to dismiss.”

However, UpCodes’s statements that its website provides “a complete understanding of relevant material” was nonactionable puffery because that was a mere subjective, unmeasurable statement of UpCodes’s opinion, dependent “on the cognitive abilities of the user and the nature of the project.” [Again, I think this is the court being unwilling to fully embrace the principles it announced. The natural reading of the statement, in context, is not that the site will magically pour understanding into every human that encounters the site. Instead, it is that the site will allow users to access a “complete” set of relevant codes.]

ICC also adequately alleged materiality, which generally “cannot be determined on consideration of a motion to dismiss.”  It was plausible that the allegedly false statements were “likely to influence purchasing decisions” “particularly because nearly all the challenged statements either assure the accuracy of complex legal codes, promote a central feature of UpCodes’s business (i.e., the integration of local amendments), or imply that ICC offers inferior services.”

Statements about integrated amendments: The district court held that “[t]he claim that UpCodes offers integrated amendments is not rendered false by the fact that ‘some but not all’ amendments are posted.” The court of appeals disagreed. Assuming the truth of ICC’s allegations about omitted statements, it was at least facially false for UpCodes to describe itself as the “only place where all the codes are kept up-to-date with all the amendments integrated natively into the code.”

Other relevant statements were also adequately alleged to be literally false by necessary implication, e.g., “UpCodes hosts the adopted codes as enacted by the state or local jurisdiction” and “UpCodes has integrated the local codes in jurisdiction [sic] like Pennsylvania and New York State,” necessarily implied that UpCodes integrates all local amendments made in those jurisdictions. The district court’s interpretation, that UpCodes might be promising only some integration, was implausible in context. And even if the statements were ambiguous, the district court should have considered misleadingness, based on allegations of consumer confusion.

Exclusivity of UpCodes’s services: UpCodes argued that it properly qualified its statement because “ICC’s own screenshot shows that UpCodes claims to be the only source of integrated codes only for ‘jurisdictions [that] do not provide integrated code books.’ ” But in other statements, UpCodes didn’t limit its claims to jurisdictions that do not otherwise provide integrated code books. E.g.: “States and cities enact critical amendments to the base codes. New York State has made amendment [sic] to the codes. UpCodes provides the only source to view these amendments integrated into the model codes.” But ICC pled that it also provides Custom Codes, including “New York building codes showing integrated amendments made by New York.”

Wednesday, July 20, 2022

Google public policy fellowships partnering with different tech policy organizations: applications open

Google has relaunched its Public Policy Fellowship program. This fellowship is designed to support organizations at the forefront of Internet and tech policy and enhance their research, analysis, and advocacy efforts. Google is partnering with the 12 organizations listed below:

  • The Aspen Institute

  • Bipartisan Policy Center (BPC)

  • The Cato Institute

  • The Center for Democracy and Technology

  • National Taxpayers Union Foundation

  • Open Technology Institute

  • Progressive Policy Institute

  • Public Knowledge

  • R Street

  • TechFreedom

  • Tech Policy institute

  • UnidosUS

The application is currently open. Interested students should apply to the fellowship before Friday, August 12th using this link

(c), TM, and other claims from busted partnership to sell colored copper fixtures

Chiusa v. Stubenrauch, 2022 WL 2793579, No. 3:21-cv-00545 (M.D. Tenn. Jul. 15, 2022)

The parties in this case are former business associates, which is one reason there are so many different claims. Stubenrauch is the controlling member of CV, which makes and sells unusually colorful “residential fixtures and d├ęcor made from aged and/or etched copper.” 

examples of finishes from opinion

Chiusa is the owner and operator of CC, which “create[es] commercial websites and sell[s] various products for manufacturers.”

The parties worked together to launch a website selling Stubenrauch’s copper lampshades and mirrors. They then agreed that Chiusa would create and operate a website,, marketing and distributing Stubenrauch’s copper sheets “to a new industry for copper countertops, bar tops and kitchen backsplash.” Though the parties went forward, “they never signed a formal written document memorializing and defining the nature of their business relationship.” [Reminds me of the recent Twitter meme: terrify your lawyer in five words. “There’s no written agreement” will do it.]

CC has a recent trademark registration for a design mark “consist[ing] of the stylized wording ‘COLOR COPPER.COM”, [with] a diamond shape between the wording ‘COLOR’ and ‘COPPER’ made up of four smaller diamonds, each diamond having a pattern inside of it,” COPPER.COM disclaimed.

Chiusa alleged that it was a normal supplier-distributor relationship, in which consumers would order through the website he controlled, Stubenrauch and CV would then fill the order and usually dropship the finished product directly to the customer using Chiusa’s shipping account except when they shipped to Chiusa who’d send it on.

After nearly a decade, however, Stubenrauch contacted another man, Wasser, about creating a new website for CV. Stubenrauch told Wasser that he was free to use photos and text from Chiusa’s website. Chiusa eventually discovered this and declined an offer to work with Wasser, who allegedly “proceeded to misappropriate the moneys coming in through the website while never delivering any copper products to customers,” eventually “abscond[ing] with the money.”

Chiusa, allegedly concerned for his own reputation, took down CC’s and also refused to sell the site to Stubenrauch. “In in an attempt to right the ship and offset his losses, Stubenrauch created a new website.” The new site,, apparenlty used many of the photographs that Chiusa had used and reproduced at least some portions of the original site’s text.

Chiusa has a copyright registration for the website obtained during this dispute. “The certificate expressly states that the ‘[p]revious version of the website’ is excluded from the registration, but that language is not accompanied by any clarification regarding which elements were new, and therefore (at least potentially) covered by the registration, and which were old, and therefore subject to the disclaimer.”  Chiusa also has a registration for a brochure, stating that he created “text, photograph(s), [and] artwork on p.1” therein. “The copy of the brochure deposited with the copyright office is 50 pages long and consists primarily of photographs depicting products and product features purportedly available from ‘’”

The site also uses a logo that is allegedly too similar to CC’s logo.

“Stubenrauch also allegedly created a new website directly competing with another of Chiusa’s ventures,” an “ancillary business selling various types of epoxy products over the internet” under the trade name ULTRACLEAR EPOXY. Stubenrauch’s epoxy website also used language that appeared to be taken directly from Chiusa’s site. There’s a similar copyright registration for this site.

Chiusa’s claims: willful copyright infringement; breach of the oral distribution agreement; trademark infringement, false advertising, trade dress/trade name infringement, and false designation of origin undre the Lanham Act; a Tennessee Consumer Protection Act claim; and conversion.

Copyright: Defendants argued that plaintiffs didn’t sufficiently identify protected elements of the websites and brochure, given that the registrations provided “little, if any, guidance for sorting the claimed elements from the non-claimed elements. Moreover, there are likely some elements of the underlying works that are not only not Chiusa’s, but are not protectable by copyright at all…. [S]imple facts and common turns of phrase that appear in marketing materials—for example, about the features of a material or technology—are not protected by copyright.”

The court noted that functional/utilitarian features of marketing materials might be excluded from protection, citing Star Athletica.

Given the pleading standard, dismissal at this stage was not warranted, even though defendants might well be right that many elements of the underlying websites were purely functional and/or factual and are not entitled to copyright protection. “[O]ther elements, such as the visual depictions and creative verbal descriptions included on the websites and in the brochure, are plausibly entitled to protection. While the plaintiffs could have been more precise in breaking down all of the constituent elements for which they are asserting protection, . . . plaintiffs have specifically identified at least some plausibly protected elements in the websites and brochure that were replicated in some of the defendants’ materials,” including specific photos from the Chiusa website.

Likewise, the epoxy website included “a number of full sentences that appear verbatim (or nearly so) on the plaintiffs’ site,” e.g.:

[UltraClear epoxy/DuraClear™ epoxy] boasts the most advanced level of shine, gloss, reflectivity, clarity and depth, and it locks in those optical qualities forever. The most sophisticated system of synthetic polymeric-based protection available. Our Commercial-grade epoxy is engineered specifically for Bar Tops, Tabletops & Countertops.

This text contained “some creative elements that are plausibly entitled to protection, such that outright copying would be prohibited.” In a footnote, the court noted defendants’ argument that the overlapping text was selected for SEO reasons, not expression-based reasons, but the court declined to resolve whether that mattered to protectability, “because the plaintiffs have sufficiently pleaded infringement of other elements.” Still, “the cited text is neither an unintelligible list of keywords nor separate from the user-facing portions of the websites, and the defendants identify no caselaw suggesting that such language becomes exempt from copyright protection merely because its author had search engine results in mind, among the other functions of the text, when writing it.”

Likewise, at this stage only, the court rejected the argument that plaintiffs failed to plead ownership of the copied elements. At least for the copper website and the brochure, the delay in registration could prevent any presumption of ownership based on the prima facie validity of the registration.  “The lack of that presumption, however, is primarily a hindrance to a plaintiff’s ability to make his case, not his ability to plead it. Regardless of any delay in seeking registration, a plaintiff can state a claim by sufficiently pleading actual ownership.” At this stage, the bare-bones allegations that the “copyrighted pictures, images, text, and artwork embodied” in the websites and brochure were “either created, taken, bought by, or assigned to” the plaintiffs were barely enough, given that it was plausible that plaintiffs might have come to hold the rights to different elements in different ways, e.g., Chiusa could have written some text himself, purchased rights to a photo, and commissioned another photo as a work for hire.

The court cautioned that it was paying attention to the ownership issue, resolution of which would likely require “considerably more detail than they have pleaded.” Still, “defendants have not identified any caselaw suggesting that, in order to state a plausible claim for relief for copyright infringement, a plaintiff must plead not only ownership itself but also the detailed story of how the plaintiff obtained that ownership.”

Trademark: Defendants argued that “color copper” is just an ordinary and straightforward way to describe copper that has been treated to have a striking color. At this stage, the court need not resolve whether plaintiffs pled—or could prove—any rights in “color copper” the phrase on its own or, the registered design mark sufficed to plead ownership of a protectable mark. The registration was rebuttably presumed valid.

As to the phrase “color copper,” the court rejected plaintiffs’ argument that it was arbitrary. Plaintiffs reaosned that “a mere description of the copper would refer to it as ‘colored’ or ‘colorful,’ rather than using ‘color’ as an adjective.” [Note effects on the scope of their rights against descriptive uses.] No: “a grammatically flawed description is still a description. A consumer who heard the phrase ‘color copper’ would reasonably assume that it referred to copper that was, for some reason, not the ordinary color—and they would be correct.” Still, plaintiffs plausibly pled secondary meaning [at least of the design mark, I think[ and also plausibly pled that at least some of defendants’ materials infringed.

comparison of marks

The similarities in logos weren’t limited to the two-letter difference in the word element; both used descending font sizes, all caps, bright colors for “Color” or “Colored,” followed by a duller tone for “” And each logo used a pictorial design consisting of four squares in similar, although not identical, colors and patterns evocative of the underlying copper products; “indeed, the defendants’ logo of stacked squares looks somewhat like a person simply shuffled the plaintiffs’ logo squares together. It is entirely plausible that an ordinary, unsophisticated consumer could be confused by these similarities.”

Nonetheless, the court cautioned that “defendants’ arguments, although not sufficient to warrant dismissal of the plaintiffs’ claims, raise serious and real issues about the boundaries of the plaintiffs’ rights that may well persist in this case”:

The plaintiffs have no authority to prevent any competitor from using ordinary language to describe colorful copper. Nor do they have any right to prevent a competitor from adopting a non-confusing name or logo that, like theirs, evokes the features of multicolored copper products. There are, therefore, significant limits to what the plaintiffs can expect to prevent the defendants from doing. The court’s holding therefore should not be construed to suggest that the plaintiffs are likely to establish rights that are nearly as broad as they seek. What matters for the purposes of Rule 12(b)(6), however, is whether the plaintiffs have plausibly alleged some trademark infringement, and they have done so. The court therefore will not dismiss those claims.

A nice statement that should probably guide the parties’ discussions.

Trade dress: Plaintiffs didn’t provide much detail about what they meant by that; the epoxy websites looked nothing like each other. While the copper websites looked more similar, “most instances of resemblance arise out of the use of the allegedly copyright-protected photographs. While those uses may be illegal under copyright law, it is implausible that those photographs themselves are distinctive in the marketplace as signals of the origin of the underlying goods, and the First Amended Complaint provides no meaningful basis for reaching such a conclusion.” Given the breadth of trade dress, plaintiffs are under more of a burden to tell courts what they mean when they use the phrase in pleading infringement. In particular, they should, to the extent feasible, “separate[ ] out and identif[y] in a list” each of the “discrete elements which make up th[e] combination” of features that the plaintiffs seek to protect. They did not do so here, so the court dismissed the trade dress claims.

False advertising: The allegations identified “merely describe the supposed underlying trademark infringement.” The plaintiffs speculated that defendants made false claims about their epoxy, but didn’t include any factual allegations supporting that. The plaintiffs therefore have not identified any basis for supporting a claim for false advertising that is not wholly redundant with their trademark infringement claims.” Dismissed.

Trade name infringement: Not a separate claim. At this stage in our trademark jurisprudence, “a ‘trade name’ is not a distinct piece of intellectual property that can be ‘infringed’ distinctly from its protectability as a trademark.” It may be a distinct concept, but it does not create a distinct cause of action. Also dismissed.

False designation of origin: This, by contrast, is listed in the statute, but,

[a]s a practical matter, … the issue typically comes up ony when the nature of a particular allegation is such that there may have been a false designation of origin distinct from simply infringing on another’s trademark and creating confusion about a product’s source. For example, false designation of origin may come up, distinctly from trademark infringement, when a seller has falsely attributed a product to a particular geographic location or particular artisan. Allegations of that sort, however, are not at issue in this case.

So was this just another label for trademark infringement? The plaintiffs argued that they were alleging that “Stubenrauch and CV falsely designated themselves as the authors of the Infringing CV Website and the Infringing Epoxy Website, as well as the actual services offered on Plaintiffs’ Websites. Thusly failing to properly designate Plaintiffs as the author and the source of the services being advertised on Plaintiffs’ Websites is a material misrepresentation as to the origination of the Works embodied in the Infringing CV Website and the Infringing Epoxy Website which creates a likelihood of confusion that mistakenly causes the public to draw the conclusion that Mr. Stubenrauch and CV are the authors of the Works.”

Dastar definitively bars this kind of claim as to goods. Can plaintiffs successfully characterize this as a claim about services to evade Dastar? I think plainly not, given that consumers aren’t buying the service of website design from defendants, and defendants are in fact both the origin of the goods and of any services related to delivering the goods—the only things that consumers plausibly buy. The various Sound Choice cases are pretty clear on this point, which is reinforced by the fact that the only likely confusion actually alleged in the above quote is about the authorship of the works.

True, the reference to “services” allowed “a false designation of origin claim that is redundant with trademark infringement.” I think the court should have asked “which services have their origin allegedly falsely designated in this theory?”

Still, that doesn’t matter very much, and the court was very clear that any claim “based on a false statement of authorship of a creative work—like a website—should be brought pursuant to copyright laws, not the Lanham Act.” Thus, the false designation of origin claim was dismissed, without prejudice to plaintiffs’ ability to rely on “potentially overlapping arguments” in support of their trademark infringement claims. [A little confusingly stated, but I think overall it’s clear that the court will allow traditional trademark claims but not reverse passing off claims based only on the presence of copied material.]

TCPA: Defendants’ conduct was covered by the TCPA to the extent that it replicated the Lanham Act claim that survived. They argued, however, that plaintiffs didn’t sufficiently allege ascertainable loss, as required by the TCPA. Under that law, “[a]n ascertainable loss is a deprivation, detriment, or injury that is capable of being discovered, observed, or established.” This was a potential problem because the parties were not in competition by the time the defendants took their allegedly improper actions.

The plaintiffs were only ever in the colorful copper business because they were distributing the defendants’ products in conjunction with the defendant, and they stopped doing so in connection with the Wasser situation—not the later alleged infringement. The plaintiffs, at least according to the story told in the First Amended Complaint, did not have an independent competing operation that could be harmed by the infringement in real time. No sale has gone to the defendants that could have gone to the plaintiffs.

The court thought it was still “possible” to identify an ascertainable injury in such circumstances, but plaintiffs hadn’t done so. Conclusory language of injury “might be sufficient in a case in which the facts themselves make the nature of the underlying damages obvious. In this instance, however, more explanation was required.” Mere invasion of a right was insufficient under the TCPA without ascertainable harm.

I ask again, as I often do: why doesn’t this problem also defeat Article III standing for trademark infringement?

Breach of contract: Dismissed for contract reasons: plaintiffs didn’t explain what conduct constituted breach.

Conversion: Dismissed because all allegedly appropriated property was intangible and not subject to the conversion cause of action. Even ignoring the preempted copying-copyrighted-material allegations, registering a different, similar domain name does not constitute conversion of an existing domain name.

Tuesday, July 19, 2022

Amicus in Capitol Records v. Vimeo

 Addressing the proper standards for knowledge & right and ability to control under the DMCA. Amicus available here. Thanks especially to Laura Heymann, who did the lioness's share of drafting.

Monday, July 18, 2022

Is a merchandising right part of TM? one PA judge thinks probably not

Pennsylvania State Univ. v. Vintage Brand, LLC, No. 4:21-CV-01091 (M.D. Pa. Jul. 14, 2022)

Penn State sued Vintage for selling screen-printed items with old Penn State logos. Vintage counterclaimed, alleging that Penn State’s registrations were invalid and should be cancelled on account of the ornamentality of the use. The court declined to dismiss the counterclaim for cancellation, reasoning that a symbol on goods does not identify a third-party source of the goods if it merely “creates an association” with the trademark owner.

Penn State has a 1984 registration for the word mark PENN STATE for lots of stuff; it also has a registration for the “Pozniak Lion,” which Vintage Brand alleged was used as a school logo until it was phased out in 1987. Penn State registered this image in 2017 for use on metal novelty license plates and apparel. And it has a 2017 registration for the Penn State seal, which displays the Pennsylvania Coat of Arms ringed by the University’s name and date of founding, for various apparel and drink-related goods.

Vintage pled that each was “used as mere decoration, printed in large font and in a prominent location, and [do] not serve to identify Penn State as the source or origin of the goods”; that “[o]n information and belief, consumers perceive . . . [the marks] to be merely a decorative feature of the goods and not an indication of the source of the goods”; and finally that their “overall commercial impression . . . is purely ornamental or merely a decorative feature[,] . . . [and they] do not identify and distinguish Penn State’s goods from those of others and, therefore, do not function as a trademark.”

Though Vintage had the burden of showing invalidity, it had pled sufficient facts to indicate that it could meet this burden. (The court noted that it understood that Vintage was making an “as applied” challenge to the categories of goods at issue, not a challenge to the entirety of the registrations. I’m not sure this term is applicable. If the registrations for those categories are subject to cancellation, that’s not “as applied”—the registrations would be gone in those categories, presumably on failure to function/abandonment grounds. The reality, as the court noted elsewhere in its discussion, is that scope and protectability are entwined in this case: the key issue is whether Vintage can put the matter across the front of T-shirts, etc., not whether Penn State could get a valid registration for its marks used as marks.)

Using traditional ornamentality analysis—whether the matter was serving “solely as attractive ornamentation” and not “also as a symbol that identifies and distinguishes a single source”—the uses here were plausibly ornamental. Placement considerations—positioning on the goods as if they were the communication/decoration consumers wanted, rather than in the traditional “brand spots”—favored ornamentality. But even with that placement, the matter could still identify the source of goods. Nonetheless, it was plausible that “consumers believe that the essence of these marks is to signal their support for the University, not that the University has produced, approved, or guaranteed the quality of the item.” There was no bright-line rule making it implausible that consumers would perceive the matter as anything but a trademark indicating origin of the goods, as opposed to a signal of their own preferences.

Implicit in the court’s discussion of “affiliation” is the correct point that affiliation can easily be unidirectional. If I wear a Georgetown sweatshirt, I am indicating my support for/feelings of affiliation with Georgetown. But Georgetown is indifferent to me, and no reasonable consumer would look at me and think I represent Georgetown—otherwise all that collegiate licensing, where they let anyone who pays walk out the door with branded gear, is a massive naked licensing scheme. So use to signal the consumer’s “affiliation with” or “support for” an entity does not necessarily mean use that signals formal affiliation on the entity’s side.

The court discussed many merchandising cases and found that, with the exception of Boston Pro. Hockey Ass’n v. Dallas Cap & Emblem Mfg. Inc., 510 F.2d 1004 (5th Cir. 1975), they insisted that a trademark must function as a source-indicator; signifying merely a mark’s own presence on goods was insufficient. Even the Fifth Circuit, the court noted, has subsequently claimed that Boston Hockey was about source confusion and thus a fact-dependent inquiry about source identification (“the analysis turns not on whether consumers tie the symbol to the trademark holder, but on whether they tie the product to the trademark holder”). This is consistent with the basic premise of trademark protection. (The court noted some similar language from the TTAB, and similar walking back.)

Where “the mark itself is the product,” it performs a “non-trademark function.” The key question is whether it also performs a trademark function of signalling source. And this, the court ruled, was a factual question not amenable to resolution on a motion to dismiss given the allegations of the counterclaim, even though Penn State might ultimately succeed on the merits. “[T]rademark law requires more than a mental association between the trademark and trademark holder. … [T]he consumer must instead believe that the trademark indicates that the trademark holder is the source, sponsor, or is otherwise affiliated with the good—a question of fact.”

The court ended with some observations drawn from the scholarly literature criticizing a broad merchandising right. Trademarks aren’t supposed to incentivize creation; they are supposed to indicate source. In the absence of that function, monopolization is a bad, not a good. Dastar provides a hook for questioning a broad merchandising right, given its statement that “origin” “should not be stretched to cover matters that are typically of no consequence to purchasers.” Moreover, in the absence of an “official” claim, the proper remedy may be a disclaimer. The court referred to “recent Supreme Court cases” as supporting this conclusion (citing Bonito Boats, Kellogg, Traffix, and Stiffel)—super interesting to me because First Amendment cases strongly support a disclaimer remedy, outside the narrow trademark context.

The court pointed out that the facts remained for development, but might still support a disclaimer remedy given that consumer confusion might result from misunderstanding of the law, rather than confusion about specific factual situations:

Though the data is now decades old, early N.F.L. trademark cases saw consumer confusion rates above 50%. These results are not determinative here and can certainly be quibbled with at the margin….

But the case for a disclaimer rather than an injunction lies at the base, not the margin. Consumer-survey data taken at the same time as the N.F.L. cases showed widespread belief among consumers that “[n]o product can bear the name of an entertainer, cartoon character, or some other famous person unless permission is given for its use”—a belief that appears to have come from what they thought the law required. The circularity is apparent: the law only offers protection if there’s belief, yet the belief comes from consumers’ (mis)conception about the law. It would seem perverse to award market exclusivity based on a fake-it-until-you-make-it approach. If consumers’ confusion stems from their incorrect belief that goods bearing Penn State’s emblem must be licensed, shouldn’t that belief be corrected, not perpetuated?

Good question! The court indicated its interest in factual development both of the actual confusion question and the source of any consumer confusion, indicating that confusion based on miscomprehension of the law would likely be redressed by a disclaimer.

“The modern collegiate trademark- and licensing-regime has grown into a multibillion-dollar industry. But that a house is large is of little matter if it’s been built on sand.”

I’ve been saying for a while that the transformation of the federal judiciary along ideological but IP-indifferent lines is going to lead to large and unpredictable changes in IP doctrine. Here is one possible example.

Friday, July 15, 2022

Likely confusion alone justifies liability but not damages or profits in exercise equipment case

Max Rack, Inc. v. Core Health & Fitness, LLC, 2022 WL 2751685, --- F.4th ----, 2022 WL 2751685 (6th Circuit Jul. 14, 2022)

The court of appeals, over a dissent that would have upheld everything, upholds a jury confusion verdict on fairly thin grounds, and upholds the trial court's rejection of the jury's damage award, but rejects a profits enhancement/attorneys’ fee award to avoid double-counting and reliance on theories that would not be sufficient to uphold the underlying jury verdict. So a lot of interesting discussion of what suffices for a profits and damages award.

Max Rack invented a piece of gym equipment, the Max Rack. For years, Max Rack sold Max Racks through licensing agreements with defendant Core. “When Max Rack’s last patent expired, however, Core Health decided to compete against Max Rack by selling an identical machine under a new name—the ‘Freedom Rack.’” It was produced by the same Chinese manufacturer and was thus substantively identical.

Max Rack alleged two kinds of infringement during this transition: Core allegedly continued to sell “Max Racks” without authorization, and attempted to sell Freedom Racks by using the “Max Rack” name. “A jury agreed, awarding Max Rack $1 million in damages and $250,000 in Core Health’s profits.” The jury also found that the infringement was intentional. The district court upheld the liability finding, doubled the profits award, and granted attorney’s fees to Max Rack. This appeal followed.

Continued manufacture and sale of the Max Racks after the agreement expired was a traditional ex-franchisee situation; the other accused uses basically were failing to purge every reference to the Max Rack from the Core website and user manual even after the transition to the Freedom Rack. For example, there was evidence that “Core Health waited until over a month after the agreement’s expiration to update its website and other marketing materials.” When they did try, they missed some references. (The court appears not to understand that search engines may not be immediately updated, and refers to evidence that a Google search showed “a link to Core Health’s website with a caption underneath the link that used the ‘Max Rack’ name” after the agreement expired. But there were other instances that really were on Core’s website after the relevant period, including a couple as late as trial.)

Although Core had six months to sell off any units it had started making before the expiration date, it sold another 24 later than that, and 9 units whose label it changed to “Freedom Rack” before shipping. It also didn’t pay Max Rack royalties for 238 sales within the six-month period. Before trial, it did pay up for those 271 sales, paying royalties for the 238 and its profits for the remainder, plus interest.

Freedom Rack remains the only machine on the market like the Max Rack; the plaintiff has not licensed another producer.

After trial, the district court denied Core Health’s motion for judgment as a matter of law or for a new trial, upheld the $250,000 profit award and doubled it because of Core Health’s conduct during discovery, awarded Max Rack attorney’s fees, and enjoined Core Health from using the Max Rack mark without acknowledging that it is registered to Max Rack. But it overturned the $1 million in damages because there was no evidence of actual confusion.

Underlying legal violation: The court assumed that the state law matched the federal law in requiring likely confusion, which seems correct, even though the court chided the parties for lumping all the claims together.

This case wasn’t a typical infringement case where multifactor confusion analysis is required. One part was a distinct claim “that a holdover licensee has continued to use a licensor’s mark after their agreement expired,” which follows a “more categorical” rule: “proof of continued, unauthorized use of an original trademark by one whose license to use the trademark had been terminated is sufficient to establish ‘likelihood of confusion.’ ”

The jury could reasonably have found that Core Health violated the licensing agreement by selling Max Racks after that agreement expired. The admitted sales of 24 Max Racks outside the six-month liquidation window were enough for a finding of intentional infringement. [The court doesn’t consider the difference between services and goods here—the franchise cases involve services, not lawfully made goods, which implicate first sale, especially since Core doesn’t seem to have been operating under the Max Rack name.] Payment of the profits on those units reduced Core’s monetary liability, but not the violation. “In addition, the jury reasonably (if just barely) could have found that Core Health began to manufacture Max Racks after the agreement expired in November 2015.”

The district court, however, relied instead on theory two: continued use of “Max Rack” on Core’s site. But the evidence of this was “relatively insubstantial.” First, it was legal error to rely on evidence that a third-party reseller used the Max Rack mark when selling Freedom Racks on its website, given that Max Rack neither asserted a contributory liability theory nor developed evidence for it (indeed, the evidence showed that Core told resellers about the change).

Second, a Google search for “Max Rack” produced a “hit” to an unidentified page on Core Health’s website (see note above) and, third, a stray “Max Rack” reference remained in the Freedom Rack owner’s manual. Though evidence of Core’s continued use of the mark was “close,” it was enough to create a likelihood of confusion for purposes of finding a violation of the Lanham Act, albeit not enough to justify a damage award.  “To prove a violation, Max Rack needed to show only that Core Health’s use of the Max Rack name would likely confuse consumers over whether the Freedom Rack was affiliated with the owner of the Max Rack mark in some way. Max Rack did not need to show actual confusion or past injury.”

And there was no dispute that there was some continued use of the mark, even if accidental, including an outdated photo of a Max Rack with a partially concealed “Max Rack” logo on a black bar. Arguments that these uses were minor and harmless went “more to whether Max Rack established damages than to whether it established a violation.” [Again I ask whether this is consistent with current Article III standing jurisprudence.]

These references could “perpetuate the ‘perception that’ [Core’s] Freedom Racks were affiliated with the Max Rack brand,” given that the goods were the same, the parties were “potential” competitors, and the mark was identical. “Indeed, if we accepted Core Health’s argument that these uses of ‘Max Rack’ did not violate the Lanham Act because they were trivial, Core Health could continue with them indefinitely. Max Rack would remain powerless to stop Core Health from, say, using the picture of a Max Rack to sell its Freedom Racks.”

The court went out of its way to say that plenty of uses of “Max Rack” would have been fine, such as in comparative advertising or in claims that the Freedom Rack was identical to the Max Rack, or even that “Core Health used to make the Max Rack for Max Rack, Inc.” But the actual references weren’t procompetitive, unlike those hypotheticals. [Suppose Core put a disclaimer on each page that said: “Core Health used to make the Max Rack for Max Rack, Inc.” Any remaining references to the Max Rack instead of the Freedom Rack on this page should be disregarded.” Sufficient?] “Whether innocent or not … the references still could have created a likelihood of confusion.”

Under the circumstances, Core was, just barely, not entitled to a new trial. This was so even though the jury was exposed to inflammatory arguments about the parties’ “addendum” agreement that purportedly entitled Max Rack to perpetual royalty payments even after patent expiration. When Core acquired the assets of its predecessor in interest, it concluded—correctly—that this addendum was unenforceable under well-established patent law, and Max Rack didn’t even bother to assert a violation of the addendum in its suit. Nonetheless, at trial, Max Rack brought it up a lot; counsel referred to Core’s noncompliance with this invalid addendum as “fraudulent,” and the jury asked about whether it was enforceable during deliberations. Still, given the high standard for reversing a denial of a new trial, Core failed, especially since the court’s instructions explained that the jury need not consider the addendum’s legality and that Core had correctly interpreted the law. The jury’s damages award was already overturned, and the trial court could reasonably conclude that there was no spillover requiring a fully new trial, especially given that Core admitted that 24 sales post-agreement were infringing.

Profits award: The $250,000 “had a reasonable basis in the evidence when read against the Lanham Act’s burden-shifting approach to proving profits.” Core didn’t challenge the “abstract conclusion that equity allowed for a profits award,” only the sufficiency of the evidence, and the evidence was sufficient. Max Rack had only a modest burden to prove Core’s “sales.” Even considering the issue de novo, there was sufficient evidence.

Core had some points in its favor. Core sells many different weightlifting machines; it “likely” wouldn’t be enough for Max Rack to put in evidence of Core’s total sales to shift the burden. “Instead, a plaintiff likely must show some connection between the identified ‘sales’ and the alleged infringement.” But the court didn’t need to decide whether “stray references” to “Max Rack” on Core Health’s website tainted all Freedom Rack sales and allowed Max Rack to seek Core Health’s profits for those sales, because the profits award could have been tied to Max Rack’s alternative infringement theory: that Core Health sold over 200 Max Racks without authorization; its own figures suggested that it $188,787 in profits on 218 Max Racks sold in 2016. “Max Rack also poked holes in the validity of Core Health’s cost figures, suggesting that its inflated numbers hid its true profits.” Thus, the jury’s award could have rested on the ex-franchisee theory.

However, doubling the award was an abuse of discretion. Congress specifically barred using a profits adjustment as a penalty; it can only be done to compensate, because “a fact finder might sometimes have trouble identifying the precise amount of profits generated by a defendant’s infringement.” It would be improper to rely on a defendant’s bad faith or on discovery violations that didn’t interfere with calculating its profits. Although the district court properly noted that the law bars punitive enforcement, it based the increase on Core’s “evasive discovery conduct” in terms of documenting its product costs. However, the court granted Max Rack’s motion to exclude nondisclosed evidence from trial, preventing Core from showing some of its costs. It was then double-counting to use that conduct to enhance the profits award: that excluded evidence would have benefited Core, not Max Rack, and so the exclusion increased the chances of overcompensation, not undercompensation. Max Rack had no difficulty proving Core’s total sales. There was therefore no compensation-based rationale for doubling the award. Answering the dissent’s objection that maybe the excluded evidence would have shown lower costs and higher profits, the majority notes that “Max Rack itself moved to exclude any further cost evidence…. That decision effectively amounted to a second sanction for Core Health’s failure to produce its cost evidence.” Matters would have been different if Core had refused to turn over sales data.

The court of appeals also affirmed the district court’s decision to vacate the jury’s $1 million damages award. Rejecting Max Rack’s argument that Romag signalled that no bright-line rules should be required in this area, the court reaffirmed the traditional rule that a damage award requires some evidence of actual loss, not just of likely confusion. This can be evidence of lost sales (not available here, since Max Rack had no competing product), lost royalties (not available here since Core paid them before trial), lost goodwill (not available here because the products were always made by the exact same Chinese manufacturer; there was nothing “inferior” about what customers got so they couldn’t have “soured” on Max Rack’s brand), or damage-control costs, e.g. “advertisements clarifying that the owner has no affiliation with the infringer” (none here).

Before awarding marketplace damages like those for lost sales, “courts generally require a plaintiff to show that an infringing mark has actually confused some consumers about the mark’s affiliation with the plaintiff’s good (not just that it is likely to do so). Because juries might have trouble quantifying these losses, this actual-confusion evidence helps ensure that they at least exist.” But damage-control costs wouldn’t require this, nor would royalty-based damages if due, since royalties provide an objective measure of damages.

Under these circumstances, neither of Max Rack’s theories sufficed to recover damages. The royalties/profits from 262 Max Racks sold without authorization were paid before trial, with interest, and the profits award from 9 machines that the jury could have found were sold to consumers as “Max Racks” but shipped as “Freedom Racks” were already paid-for with the profits award; damages would be an impermissible double recovery.

Max Rack’s second theory, that Core Health sold an unknown number of Freedom Racks by keeping “Max Rack” references on its website, failed because there was no evidence of actual consumer confusion from these “minor” uses. Nor was there evidence of other harm to Max Rack, given its failure to produce a competing product. “Max Rack would have made no sales regardless of Core Health’s conduct.” And since the Freedom Rack was identical to the Max Rack, there was no “goodwill” injury that could have resulted from an inferior product’s use of its name.

Romag said that willfulness was only important, not required, for a profit award because such a “categorical requirement” was inconsistent with § 1117(a)’s text.

Max Rack asks us to treat actual confusion in the same way because § 1117(a) does not list actual confusion in the text either. But we need not decide how Romag affects the traditional actual-confusion prerequisite for marketplace damages. Even if we treated actual confusion as an “important” factor, Max Rack identifies nothing to show that Core Health’s stray references to “Max Rack” caused it harm. No matter the governing legal standard, Max Rack’s speculation of harm would not suffice to justify a damages award.

Max Rack argued that other courts have presumed actual confusion (and shifted the burden to a defendant to disprove it) when the defendant has intentionally deceived the public by using a deceptive mark or comparative false advertising. But the jury’s finding of intentional infringement “rests most reasonably on Core Health’s continued sales of Max Racks in violation of the licensing agreement, and Max Rack already received full compensation for those sales. No reasonable jury, by contrast, could have found that Core Health’s few extraneous references to the Max Rack mark in its Freedom Rack advertisements were intentional (rather than accidental).” So the court didn’t decide whether this rule applied either.

Attorneys’ fee award: Also an abuse of discretion because the discovery misconduct didn’t meet the standard for exceptionality under the totality of the circumstances, where “nothing about this case looks unusual.” Max Rack did not have a “noticeably stronger” “litigating position” given Core’s payment of a lot of profits/royalties before trial. Its two infringement theories after those were removed were both “thin” on evidence: “close to the hazy border dividing what a jury can (and cannot) reasonably find.” Likewise, Core didn’t litigate in an unreasonable manner; its discovery failure mostly harmed itself. And Max Rack distorted the litigation with repeated inappropriate references to the addendum. “In short, if this case warranted attorney’s fees, we fail to see what case would not.”

The district court “relied on precedent that it read as creating a bright-line rule permitting fees if a defendant’s intentional infringement continued after the plaintiff sued.” But this was error given Octane Fitness, and, again, the intentional infringement finding “reasonably rested on Core Health’s unauthorized sales of Max Racks,” which “ended well before the trial.”

A dissent would have affirmed the district court in full because it’s theoretically possible that the jury would have revised its estimate of costs downwards with other evidence and because Core should have removed all references to Max Rack earlier.

Trademark injury, irreparable harm, and statutory standing: what is going on?

Trial Lawyers College v. Gerry Spence Trial Lawyers College at Thunderhead Ranch, 23 F.4th 1262 (10th Cir. 2022)

Mostly a TM case, with some interesting stuff going on. There are either two dueling boards or two separate entities at issue; the district court granted a preliminary injunction to some board members against co-members. The court of appeals held, among other things, that the district court was within its discretion to find irreparable injury and to enjoin certain representations, but abused its discretion as to ordering removal of certain sculptures (incorporating the claimed mark) from the contested facility where co-members conducted lawyer-training programs.

The Trial Lawyers College trains trial lawyers; its board splintered into two factions, known as the “Spence Group” and the “Sloan Group.” The Sloan Group is the plaintiff, alleging trademark infringement and related claims.

At the time of decision, pre-TMA, there was no presumption of irreparable injury. But the district court properly found a significant risk of harm that couldn’t “be compensated after the fact.” The logic of the presumption of injury reflects the difficulties of showing irreparable harm in trademark infringement cases; the district court could reasonably find irreparable harm from the Sloan Group’s evidence of efforts to “differentiate the College from competitors,” including “registration of trademarks, investment in branded merchandise, and restrictions on use of the College’s name when alumni give presentations,” plus evidence of likely confusion from the Spence Group’s ads referring to its own program as the “Trial Lawyers College,” displaying the College’s trademarks, sending mass emails to the “GerrySpenceTrialLawyersCollege@Thunderhead Ranch” listserv, identifying members of the Spence Group as the “Directors” of the College, and using a misleading signature that incorporates the College’s name.

This was enough to find a risk to the College’s reputation and goodwill. Though this harm could at least partially come from “the loss of valuable board members and the suspension of in-person programming because of a global pandemic,” that just made it difficult for the Sloan Group to quantify its harm, which is consistent with a finding of irreparable injury. Likewise, while a 10% drop in donations was quantifiable in money, it could also serve as evidence of irreparable harm—that “the Spence Group’s confusing statements and advertisements have undermined the distinctiveness of the College’s trademarks.” Likewise, although inquiries from alumni weren’t necessarily evidence of actual confusion, they could show likely confusion and support an irreparable harm finding.

However, the district court “went too far by requiring the Spence Group to remove two sculptures. The sculptures appeared at a ranch, owned by a member of the Spence Group, which the College had previously used for programs. The sculptures included a logo registered as (1) the cattle brand for the ranch and (2) the trademark of the College.” This was a mandatory injunction and not justified by the situation, given that training programs at the ranch were already suspended due to the pandemic; a prohibitory injunction “disallowing training programs at the ranch as long as the sculptures remained visible to attendees” would have been ok.

The district court also enjoined the Spence Group from purporting “definitively to be [the College]’s true Board unless and until such time as the state court makes a ruling to that effect” and using “linguistic plays on words or various terms associated with The Trial Lawyers College to create or cause confusion as to whether [the Spence Group] [is] acting as The Trial Lawyers College.”

This didn’t go beyond the Lanham Act’s scope, since it imposed “restrictions to prevent confusion over the entity owning the trademarks.”

One subsequent ruling: 

Trial Lawyers College v. Gerry Spence’s Trial Lawyers College at Thunderhead Ranch, 2022 WL 2718075, No. 1:20-cv-80-JMC (D. Wyo. Mar. 29, 2022)

Dealing with some counterclaims, notable for assumptions made about harm in the context of statutory standing that at least are in tension with claims in the irreparable harm context like those in the court of appeals opinion.

Two individual defendants, including Spence, counterclaimed against plaintiff and its board members. The counterclaims allege among other things that the counterclaim defendants tried to benefit from Defendant Spence’s name and likeness to promote “their ‘version’ of TLC,” including by using videos of him on a Facebook page seeking donations. They also allegedly solicited monetary donations purporting to preserve Spence’s “dream” and made false statements about his wishes, e.g., “Would Gerry Spence have let this happen?” [I note that strong evidence suggests that the answer is “yes.”] They alleged violations of the Lanham Act (false endorsement and false advertising) and misappropriation of name/likeness under state law.

After getting rid of individual counterclaim defendants on personal jurisdiction grounds, the court rejected the Lanham Act counterclaims on standing grounds.

Article III injury must be (1) a concrete and particularized injury-in-fact that is (2) fairly traceable to the challenged action and (3) likely to be redressed by a favorable decision. The false association/false advertising claims based on Spence’s name sufficiently alleged Article III injury for standing purposes by alleging the existence of confusion and reputational harm, even without further facts alleged “explaining how his reputation has suffered or detailing expenses they have supposedly incurred to dispel any myths.” This also sufficed to put the counterclaimants within the Lanham Act’s zone of interest.

Was this commercial speech? This is a mischaracterization—the real question is, was this “commercial advertising or promotion”? The court (understandably considering itself bound by bad Tenth Circuit precedent) confused the analysis by using the outdated-after-Lexmark version of the test that asks whether the parties were in commercial competition with each other, but that didn’t end up mattering either, since they plausibly were, given that “Defendants’ use of Plaintiff’s Mark for a different entity after all sparked this entire civil action.”

Arguments applicable to all Lanham Act claims: (1) Does the Lanham Act protect all uses of Spence’s name? Even without a registration, Spence’s name is protectable if it serves as a source identifier, which it plausibly does, given his alleged reputation for trial lawyer services.  ETW v. Jireh is not to the contrary—it didn’t refuse to protect Tiger Woods’ name. Also, that situation, where Woods asserted rights against a painter who depicted one of his victories, was “very much unlike the business dispute we have here, where two groups are essentially fighting over control of a business. Defendant Spence seemingly has more interest in protecting his name from competitors who offer the same type of services (lawyering skills) than a random artist who painted a portrait of him in the courtroom.” [An example of the practical merger of protectability and scope: this is part of the analysis that concludes that Spence alleged a protectable interest.]

Likely confusion: The court identified four sources of alleged confusion: (1) Plaintiff posted videos of Spence on its Facebook page; (2) it advertised with the cattle brand and falsely claimed a continued connection to Thunderhead Ranch; (3) its executive director listed her employer as “Gerry Spence Trial Lawyer’s College”; and (4) that it sent fundraising emails seeking monetary donations, expressing a desire to “preserv[e] Gerry Spence’s dream” and stating, “Would Gerry Spence have let this happen?”

Plaintiff argued that its uses weren’t false or misleading because of Spence’s long-time association with Plaintiff. “The Court agrees that Plaintiff’s continued use of the videos on Facebook neither misleads nor likely confuses consumers.” Spence founded Plaintiff and taught trial skills for Plaintiff, and the videos were created during that relationship. “No facts alleged show that Plaintiff’s use of Defendant Spence’s image in that context misleads or confuses the public or is likely to do so. Instead, the facts alleged show that the video identifies Defendant Spence’s actual association with Plaintiff as a past instructor.”

The other uses didn’t suffice because “Defendants have nowhere alleged how Defendant Spence, or his new trial university, has suffered from Plaintiff’s use of his name based on his past affiliation with Plaintiff.” Without such injury, there was no statutory standing (the court mistakenly characterizes this as part of the zone of interests inquiry, not the separate proximate cause inquiry). The counterclaimants didn’t allege facts showing that they suffered injury. Merely conclusorily alleging “actual damages and irreparable harm and damages” to “reputation” or expenses incurred to “dispel the myths [Plaintiff has] dispersed” were insufficient. “At bottom, Defendants plead such vague allegations regarding damages that we cannot infer a cause of action under the Lanham Act from their complaint.” Serious question: how does this standing reasoning match up with the presumption of irreparable harm from likely confusion under the TMA?

Likewise, the state-law claims for appropriation of name or likeness failed for want of sufficient allegations of injury. “The Restatement and other states who have recognized this tort … require the plaintiff prove damages he or she has suffered to state a claim upon which relief can be granted.”

Wednesday, July 13, 2022

IP on vacation in Vancouver

 As is my hobby, I took some pictures of IP-relevant things. I still haven't personally encountered cannabis products imitating national brands, though.

Mining museum emphasizing US patents acquired, which is an interesting datapoint about the influence of US patents extraterritorially.

Is this Karuna can too close to Coca-Cola?
Love this "no name" branding (registered trademark)!
This all-red chocolate shoe probably doesn't fall within the scope of Louboutin's rights, though I don't know the situation in Canada.
LV-esque chocolate handbag.
The next images are from UBC's anthropology museum: Linda Vallejo, Brown Belongings (series). Artist's statement in English: "Brown Belongings represents ten years of concentrated work on visualizing what it means to be a person of color in the United States. These works reflect what I call my 'brown intellectual property'--the experiences, knowledge, and feelings I have gathered over more than four decades of study in Chicano/a and American Indigenous communities." Behind the Coke bottle, a quote from the artist with her name in Coca-Cola font.
Ester Hernandez, Sun Raid (2008). Artist's statement in English: "In 2008, I created a new version of Sun Mad, entitled Sun Raid, which talks about the new face of farm workers who are now mostly indigenous peoples from Oaxaca. Although these migrant workers are very much needed to harvest our crops, they are totally disrespected and have become scapegoats for our failed economic policies. Many have become targets for Immigration and Customs Enforcement agents' raids and deportation. We have globalized money, trade, and commerce, but we haven't globalized fairness toward work and labor."