As the Language Log explains, Stephen Colbert has urged his legions of followers to download a replacement entry for their copies of Merriam-Webster's Collegiate Dictionary, allowing them to show the new entry "truthiness" in an alphabetically appropriate place, though requiring the sacrifice of the entry for "try."
Assuming, as is possible in this case, that a single dictionary entry shows enough creativity to be copyrightable, have dutiful Colbert nationals created infringing derivative works? Has Colbert induced them to do so under Grokster?
Friday, December 15, 2006
Thursday, December 14, 2006
Buzz marketing's potential for deception
The FTC’s staff opinion letter on buzz marketing is here. Commercial Alert, whose request for investigation prompted the letter, has a moderately negative reaction here, calling it a giant Christmas present for word of mouth advertisers and Procter & Gamble in particular. As CA says, it does seem like P&G is ripe for an investigation on the FTC’s own announced standards – that failure to disclose can be deceptive if listeners are more likely to credit a source perceived as unconnected to the advertiser – because P&G’s network of what it says are approximately 250,000 teenagers are not required to disclose their promotional relationship with P&G as part of their brand-ambassadorial activities. Given the teenage market, which is profoundly affected by peer pressure, the potential for material deception seems quite high. This Washington Post story reports on a 2005 study reporting that “29 percent of participants age 20 to 34 and 41 percent of those age 35 to 49 said they would be unlikely to trust a recommendation again from a friend whom they later learned was compensated for making the suggestion.” I’m depressed that the percentage is that low, but it’s more than enough for materiality.
Tuesday, December 12, 2006
Milk: Primary jurisdiction does it good
Physicians Committee for Responsible Medicine v. General Mills, Inc., 2006 WL 3487651 (E.D. Va.)
Plaintiffs (either truthtellers or animal-rights crackpots, depending on one’s point of view; the district court’s is hinted at in the opinion) sued numerous dairy producers and marketing groups for violating Virginia consumer protection law. The court granted defendants’ motion to dismiss for failure to state a claim.
Plaintiffs targeted a campaign that began in 2003, urging consumers to drink milk as a healthy way to lose weight. E.g., “[i]ncluding 24 ounces of low fat or fat free milk every 24 hours in a reduced-calorie diet provides the calcium and protein to support healthy weight loss.” The cases were initially filed in state court, but removed and consolidated under the Class Action Fairness Act (in an indicator of CAFA’s importance, one was removed because, though it sought only injunctive relief, that relief would allegedly have cost defendants more than $5 million to implement).
Defendants made a number of arguments in support of their motion. The court found that injunctive relief is unavailable to private individuals under the relevant Virginia laws (a supportable conclusion, though the reference to a “‘longstanding cannon of statutory construction’” put an odd image in my head) and that the doctrine of primary jurisdiction requires dismissal to give the FTC and FDA a first shot at addressing plaintiffs’ complaints (a conclusion with which I strongly disagree).
Plaintiffs filed administrative petitions with the FTC and the FDA against the same defendants. To avoid the risk of inconsistent judgments, the defendants argued, the court should dismiss the civil actions in deference to the expertise and special competence of those agencies on issues such as “the probable economic impact on consumers” of the challenged ads and the scientific questions of the effects of dairy consumption on weight. The court agreed, even though a much more appropriate inquiry would have been a preemption analysis. Courts decide issues of false advertising all the time, including false advertising of health benefits; Lanham Act jurisprudence is largely about evaluating likely impacts on consumers. Where there is a true conflict between a judicial and administrative evaluation, preemption provides ways to resolve that conflict. Here, there are merely two paths to a result.
Also of note: The defendants also argued that the ads at issue are federal “government speech” and thus can’t be barred by any state law. The plaintiffs accepted the general proposition, but argued that there were factual issues about whether particular statements were government speech; the court agreed. This raises the fascinating point that, when federally supported speech is concerned, the First Amendment isn’t the only thing that can override state regulations of speech. The Supremacy Clause has a role as well.
Plaintiffs (either truthtellers or animal-rights crackpots, depending on one’s point of view; the district court’s is hinted at in the opinion) sued numerous dairy producers and marketing groups for violating Virginia consumer protection law. The court granted defendants’ motion to dismiss for failure to state a claim.
Plaintiffs targeted a campaign that began in 2003, urging consumers to drink milk as a healthy way to lose weight. E.g., “[i]ncluding 24 ounces of low fat or fat free milk every 24 hours in a reduced-calorie diet provides the calcium and protein to support healthy weight loss.” The cases were initially filed in state court, but removed and consolidated under the Class Action Fairness Act (in an indicator of CAFA’s importance, one was removed because, though it sought only injunctive relief, that relief would allegedly have cost defendants more than $5 million to implement).
Defendants made a number of arguments in support of their motion. The court found that injunctive relief is unavailable to private individuals under the relevant Virginia laws (a supportable conclusion, though the reference to a “‘longstanding cannon of statutory construction’” put an odd image in my head) and that the doctrine of primary jurisdiction requires dismissal to give the FTC and FDA a first shot at addressing plaintiffs’ complaints (a conclusion with which I strongly disagree).
Plaintiffs filed administrative petitions with the FTC and the FDA against the same defendants. To avoid the risk of inconsistent judgments, the defendants argued, the court should dismiss the civil actions in deference to the expertise and special competence of those agencies on issues such as “the probable economic impact on consumers” of the challenged ads and the scientific questions of the effects of dairy consumption on weight. The court agreed, even though a much more appropriate inquiry would have been a preemption analysis. Courts decide issues of false advertising all the time, including false advertising of health benefits; Lanham Act jurisprudence is largely about evaluating likely impacts on consumers. Where there is a true conflict between a judicial and administrative evaluation, preemption provides ways to resolve that conflict. Here, there are merely two paths to a result.
Also of note: The defendants also argued that the ads at issue are federal “government speech” and thus can’t be barred by any state law. The plaintiffs accepted the general proposition, but argued that there were factual issues about whether particular statements were government speech; the court agreed. This raises the fascinating point that, when federally supported speech is concerned, the First Amendment isn’t the only thing that can override state regulations of speech. The Supremacy Clause has a role as well.
Fraud on the FDA may disentitle a manufacturer from protection against state law claims
In re Medtronic, Inc., Implantable Defibrillators Litigation, 2006 WL 3420285 (D. Minn.)
This multidistrict litigation could have ended swiftly if the court had accepted defendant’s summary judgment motion arguing that plaintiffs’ state-law claims were preempted by the FDCA.
Medtronic makes implantable defibrillators for treating cardiac arrhythmia. As Class III medical devices, the defibrillators are intensely reviewed by the FDA, including a rigorous premarket approval process requiring the maker to demonstrate a “reasonable assurance” that the device is both safe and effective for the conditions set forth in its labeling. After approval, device manufacturers must self-report adverse events, defined as events that, if they recurred, would be likely to cause or contribute to a death or serious injury.
For summary judgment purposes, these are the facts: Medtronic’s defibrillators were approved in 1998, after which Medtronic systematically modified them. The modifications required supplemental applications to the FDA, which were reviewed less rigorously than the initial approval. In 2000, Medtronic sought and received approval for a new battery, which was a major change.
In 2003, as part of routine testing, Medtronic discovered a battery defect that caused the battery to short and discharge prematurely – batteries could lose their charge in days instead of years. Over the course of eight months, Medtronic continued to test and understand the shorting problem. Medtronic alleges that it didn’t notify the FDA, physicians, or patients during this period because it hadn’t received any field reports of actual failure, and assumed that the problem was limited to laboratory conditions. During this period, Medtronic sold thousands of devices with the potentially defective batteries.
Even without field reports of failure, Medtronic began to redesign its battery in spring 2003. Meanwhile, Medtronic sought and received approval for three additional models, each containing the old battery. Each supplemental application failed to inform the FDA about the shorting problem. In October 2003, Medtronic filed another supplemental application for three design changes to the battery, stating that the prior design had a “known failure mode” in which it shorted. The FDA approved the new battery that month. Even so, Medtronic didn’t notify doctors or patients about the old battery and continued to sell units with the old batteries.
In early 2004, Medtronic began to receive field reports of premature battery depletion, at which time it first reported adverse events to the FDA. By December 2004, there were nine field returns of prematurely depleted batteries. In February 2005, Medtronic first notified the public of the defective battery by sending out a “Dear Doctor” letter warning about the short. The next month, the FDA initiated a regulatory enforcement action against Medtronic, ordering a recall of 87,000 devices containing the old battery.
Against this background, plaintiffs seek damages for personal injuries under theories including negligence, strict liability, breach of warranty, misrepresentation, and violations of state unfair practices laws.
Plaintiffs provided the affidavit of Dr. Suzanne Parisian, a former FDA employee. She says that Medtronic omitted information essential to the FDA’s continued approval of the battery. “She points to specific post-marketing requirements, which she claims imposed upon Medtronic certain obligations which were not fulfilled, particularly concerning timely performance of post-marketing studies, timely submission of reports, and altering devices without prior FDA approval. The court assumed that these allegations were true for motion purposes.
The FDCA provides that states may not impose on medical devices any safety or effectiveness requirement “different from, or in addition to,” any applicable FDCA requirement. The key cases are Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996), and the Eighth Circuit Court of Appeals' decision in Brooks v. Howmedica Inc., 273 F.3d 785 (2001) (en banc). The court made the most use of Justice Breyer’s partial concurrence in Lohr, which explained the majority rule about whether general state tort law can be preempted in these terms: “if a jury were to find negligence in the use of a wire longer than one inch in the manufacture of a hearing aid when the FDA had required a two inch wire, there would be federal preemption as surely as if a state regulation were to impose such a limitation.” In Lohr, however, defective design, manufacturing, and labeling claims survived preemption because there were no specific federal requirements with which such claims could conflict. In that case, the device at issue was approved under the less rigorous premarket notification process, and approval simply reflected the FDA’s conclusion that a new device was substantially equivalent to a pre-existing device.
Lohr sets forth a two-part rule: (1) Are there any device-specific federal requirements? (2) If so, would the state common-law claim impose a requirement different from, or in addition to, the federal requirements? The Eighth Circuit considered those principles in the case of a product that had been through the full approval process, and found that it did impose specific requirements; thus, the plaintiff’s failure to warn claims would interfere with federal labeling requirements and was preempted.
As with Brooks, the court here concluded that the full approval process involves device-specific federal requirements. Once a Class III device receives approval, its maker can’t make any changes affecting safety and effectiveness without a further FDA approval. Thus, the key issue was question (2). To prove preemption, Medtronic needed to show that plaintiffs’ state claims “would require it to design, manufacture, or label its devices in a manner inconsistent with its PMA specifications.”
The court rejected the argument that FDA approval shields Medtronic from any state law claims at all. Medtronic failed to show how plaintiffs’ state law claims would actually impose conflicting requirements on it. Plaintiffs claim Medtronic violated FDA regulations, and their state law claims are premised on those violations. (For example, they claim that Medtronic improperly manufactured the devices and failed to comply with FDA reporting requirements.) Plaintiffs’ claims, if successful, allow additional remedies, but do not differ from or add to federal requirements.
It seems that the court's holding was driven by evidence which, if believed, could show that Medtronic withheld critical information from the FDA while seeking supplemental approvals. Given that Congress decided to regulate medical devices strictly, manufacturers can’t claim the benefit of FDA approval when that approval was obtained through subterfuge.
The court’s specific analysis of the failure to warn, implied warranty, and express warranty claims found them non-preempted. Of most note for advertising law purposes: Plaintiffs’ express warranty claims, based on Medtronic’s promotional statements and product literature, challenge Medtronic’s claims that its defibrillators were safe and highly reliable. Medtronic argued that its labeling was FDA-mandated, so any allegations about incomplete information are preempted. Though the FDA approves the label, Medtronic hadn’t shown that the FDA imposes requirements for promotional statements (and I believe it would be difficult for Medtronic to do so with the specificity required by Lohr, given that the FDA does not engage in rigorous review of most ads). In any event, express warranties arise from the parties’ representations, and requirements imposed by the warranty are created by the warrantor, not imposed by state law, and thus not subject to preemption.
As for the consumer protection claims, they are also based on advertising and promotional materials. Thus, a jury verdict wouldn’t conflict with the specific FDA approval of the devices and their labeling. Moreover, FDA regulations also specifically exclude state unfair trade practices laws from preemption.
So much for express preemption. What about the idea that a jury should not be evaluating whether Medtronic complied with the FDA’s requirements, given that the FDA has never found or cited it for a regulatory violation? In a careful analysis, the court found no implied preemption. Medtronic relied on Buckman Co. v. Plaintiffs' Legal Comm., 531 U.S. 341 (2001), which rejected independent enforcement of “fraud on the FDA” claims. Plaintiffs aren’t claiming fraud on the FDA as their cause of action. They claim to have been themselves deceived and injured by Medtronic’s misrepresentations and continued sales of defective devices. Plaintiffs can use evidence, if such exists, of Medtronic’s manipulation of the regulatory process in order to prove their tort claims, even though they can’t sue for fraud on the FDA. The states’ historic interest in regulating health and safety is further reason to reject implied preemption.
In a final section, the court raised the possibility that Medtronic’s actions might have placed it beyond the scope of FDA preemption entirely. Under the model set out by Congress, the manufacturer has the “highest duty” to make safe products. The FDA has only a limited ability to obtain the information it needs for approvals. Thus the manufacturer has a heightened duty to disclose relevant information. If plaintiffs are correct, Medtronic had an affirmative duty to disclose information about the battery flaw posthaste, but instead sought approval for more devices “bearing a medical Trojan horse.” That arguably placed it beyond federal preemption protection, given that failure to comply with a post-approval requirement such as adverse event reporting is a ground for revoking that approval. Returning to Justice Breyer’s one-inch wire/two-inch wire example, it is as if the manufacturer knew but failed to disclose that the FDA-required two-inch wire is “defective, corrosive and barbed” rather than safe and effective. At this point, Congress’s self-disclosure scheme has been subverted, and the protection it offers manufacturers is no longer justified.
This multidistrict litigation could have ended swiftly if the court had accepted defendant’s summary judgment motion arguing that plaintiffs’ state-law claims were preempted by the FDCA.
Medtronic makes implantable defibrillators for treating cardiac arrhythmia. As Class III medical devices, the defibrillators are intensely reviewed by the FDA, including a rigorous premarket approval process requiring the maker to demonstrate a “reasonable assurance” that the device is both safe and effective for the conditions set forth in its labeling. After approval, device manufacturers must self-report adverse events, defined as events that, if they recurred, would be likely to cause or contribute to a death or serious injury.
For summary judgment purposes, these are the facts: Medtronic’s defibrillators were approved in 1998, after which Medtronic systematically modified them. The modifications required supplemental applications to the FDA, which were reviewed less rigorously than the initial approval. In 2000, Medtronic sought and received approval for a new battery, which was a major change.
In 2003, as part of routine testing, Medtronic discovered a battery defect that caused the battery to short and discharge prematurely – batteries could lose their charge in days instead of years. Over the course of eight months, Medtronic continued to test and understand the shorting problem. Medtronic alleges that it didn’t notify the FDA, physicians, or patients during this period because it hadn’t received any field reports of actual failure, and assumed that the problem was limited to laboratory conditions. During this period, Medtronic sold thousands of devices with the potentially defective batteries.
Even without field reports of failure, Medtronic began to redesign its battery in spring 2003. Meanwhile, Medtronic sought and received approval for three additional models, each containing the old battery. Each supplemental application failed to inform the FDA about the shorting problem. In October 2003, Medtronic filed another supplemental application for three design changes to the battery, stating that the prior design had a “known failure mode” in which it shorted. The FDA approved the new battery that month. Even so, Medtronic didn’t notify doctors or patients about the old battery and continued to sell units with the old batteries.
In early 2004, Medtronic began to receive field reports of premature battery depletion, at which time it first reported adverse events to the FDA. By December 2004, there were nine field returns of prematurely depleted batteries. In February 2005, Medtronic first notified the public of the defective battery by sending out a “Dear Doctor” letter warning about the short. The next month, the FDA initiated a regulatory enforcement action against Medtronic, ordering a recall of 87,000 devices containing the old battery.
Against this background, plaintiffs seek damages for personal injuries under theories including negligence, strict liability, breach of warranty, misrepresentation, and violations of state unfair practices laws.
Plaintiffs provided the affidavit of Dr. Suzanne Parisian, a former FDA employee. She says that Medtronic omitted information essential to the FDA’s continued approval of the battery. “She points to specific post-marketing requirements, which she claims imposed upon Medtronic certain obligations which were not fulfilled, particularly concerning timely performance of post-marketing studies, timely submission of reports, and altering devices without prior FDA approval. The court assumed that these allegations were true for motion purposes.
The FDCA provides that states may not impose on medical devices any safety or effectiveness requirement “different from, or in addition to,” any applicable FDCA requirement. The key cases are Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996), and the Eighth Circuit Court of Appeals' decision in Brooks v. Howmedica Inc., 273 F.3d 785 (2001) (en banc). The court made the most use of Justice Breyer’s partial concurrence in Lohr, which explained the majority rule about whether general state tort law can be preempted in these terms: “if a jury were to find negligence in the use of a wire longer than one inch in the manufacture of a hearing aid when the FDA had required a two inch wire, there would be federal preemption as surely as if a state regulation were to impose such a limitation.” In Lohr, however, defective design, manufacturing, and labeling claims survived preemption because there were no specific federal requirements with which such claims could conflict. In that case, the device at issue was approved under the less rigorous premarket notification process, and approval simply reflected the FDA’s conclusion that a new device was substantially equivalent to a pre-existing device.
Lohr sets forth a two-part rule: (1) Are there any device-specific federal requirements? (2) If so, would the state common-law claim impose a requirement different from, or in addition to, the federal requirements? The Eighth Circuit considered those principles in the case of a product that had been through the full approval process, and found that it did impose specific requirements; thus, the plaintiff’s failure to warn claims would interfere with federal labeling requirements and was preempted.
As with Brooks, the court here concluded that the full approval process involves device-specific federal requirements. Once a Class III device receives approval, its maker can’t make any changes affecting safety and effectiveness without a further FDA approval. Thus, the key issue was question (2). To prove preemption, Medtronic needed to show that plaintiffs’ state claims “would require it to design, manufacture, or label its devices in a manner inconsistent with its PMA specifications.”
The court rejected the argument that FDA approval shields Medtronic from any state law claims at all. Medtronic failed to show how plaintiffs’ state law claims would actually impose conflicting requirements on it. Plaintiffs claim Medtronic violated FDA regulations, and their state law claims are premised on those violations. (For example, they claim that Medtronic improperly manufactured the devices and failed to comply with FDA reporting requirements.) Plaintiffs’ claims, if successful, allow additional remedies, but do not differ from or add to federal requirements.
It seems that the court's holding was driven by evidence which, if believed, could show that Medtronic withheld critical information from the FDA while seeking supplemental approvals. Given that Congress decided to regulate medical devices strictly, manufacturers can’t claim the benefit of FDA approval when that approval was obtained through subterfuge.
The court’s specific analysis of the failure to warn, implied warranty, and express warranty claims found them non-preempted. Of most note for advertising law purposes: Plaintiffs’ express warranty claims, based on Medtronic’s promotional statements and product literature, challenge Medtronic’s claims that its defibrillators were safe and highly reliable. Medtronic argued that its labeling was FDA-mandated, so any allegations about incomplete information are preempted. Though the FDA approves the label, Medtronic hadn’t shown that the FDA imposes requirements for promotional statements (and I believe it would be difficult for Medtronic to do so with the specificity required by Lohr, given that the FDA does not engage in rigorous review of most ads). In any event, express warranties arise from the parties’ representations, and requirements imposed by the warranty are created by the warrantor, not imposed by state law, and thus not subject to preemption.
As for the consumer protection claims, they are also based on advertising and promotional materials. Thus, a jury verdict wouldn’t conflict with the specific FDA approval of the devices and their labeling. Moreover, FDA regulations also specifically exclude state unfair trade practices laws from preemption.
So much for express preemption. What about the idea that a jury should not be evaluating whether Medtronic complied with the FDA’s requirements, given that the FDA has never found or cited it for a regulatory violation? In a careful analysis, the court found no implied preemption. Medtronic relied on Buckman Co. v. Plaintiffs' Legal Comm., 531 U.S. 341 (2001), which rejected independent enforcement of “fraud on the FDA” claims. Plaintiffs aren’t claiming fraud on the FDA as their cause of action. They claim to have been themselves deceived and injured by Medtronic’s misrepresentations and continued sales of defective devices. Plaintiffs can use evidence, if such exists, of Medtronic’s manipulation of the regulatory process in order to prove their tort claims, even though they can’t sue for fraud on the FDA. The states’ historic interest in regulating health and safety is further reason to reject implied preemption.
In a final section, the court raised the possibility that Medtronic’s actions might have placed it beyond the scope of FDA preemption entirely. Under the model set out by Congress, the manufacturer has the “highest duty” to make safe products. The FDA has only a limited ability to obtain the information it needs for approvals. Thus the manufacturer has a heightened duty to disclose relevant information. If plaintiffs are correct, Medtronic had an affirmative duty to disclose information about the battery flaw posthaste, but instead sought approval for more devices “bearing a medical Trojan horse.” That arguably placed it beyond federal preemption protection, given that failure to comply with a post-approval requirement such as adverse event reporting is a ground for revoking that approval. Returning to Justice Breyer’s one-inch wire/two-inch wire example, it is as if the manufacturer knew but failed to disclose that the FDA-required two-inch wire is “defective, corrosive and barbed” rather than safe and effective. At this point, Congress’s self-disclosure scheme has been subverted, and the protection it offers manufacturers is no longer justified.
Final NYU panel on dilution
Final discussion: James Whitman, Yale University: The comparativist’s perspective
Of course European law protects free expression, but it’s balanced against other constitutional values of reputation, honor, etc. It’s not the only constitutional value on the playing field. Whitman would have assumed that TM belonged to protection of personality, not property, which would make it easier to understand what’s going on here.
We talk about common versus civil law all the time but that offers very little help in dealing with the problems that arise with things like dilution. One possibly useful contrast: law oriented towards consumers versus law oriented towards producers. America had a broad consumer movement mid-20th century while Europe was consciously moving towards a producer orientation. There is of course no general or uniform consumer (or producer) interest. But producer-oriented law takes some producer interest as primary, and tends to asks questions about producer-producer conflicts, such as how to balance workers’ interests against capitalists’ interests.
An easy example of the contrast between producerist and consumerist interests is antitrust. The great shift in American antitrust law has been to focus on consumer interests – questions are resolved by asking about the economic interests of consumers, rather than of competitors. Until recently, European law was otherwise.
Ambiguity: one way of defining consumer interest is low prices and shopping convenience. But another way of defining it, often in conflict, is the consumer’s interest in being paternalistically protected.
People think that consumerism is triumphing worldwide. But in the European case, it’s not so clear that the consumer interest – understood as an economic interest – is triumphing.
It’s silly to imagine that there are two different classes; everyone is both a consumer and producer. It’s very difficult to figure out who’s winning in any given case. Rather it’s a conflict over identity politics: who ought to matter more in a modern economy.
So what’s going on in Europe (France and Germany)? These are comparative, relative claims, not absolute one: we see more consumerism in the US and more producerism in Europe. We do see a lot of talk in Europe about the consumer, but the law that’s being produced in response is overwhelmingly consumer protection law, not oriented towards consumer economic interest or shopping convenience. The law of retail, for example: Despite lots of change, there’s a lot more regulation of retail than in the US, much of which is intended, despite the entry of large retailers like Wal-Mart, to protect small shops.
This looks like classic producerist law. It’s defended on consumer protection grounds, though. The French & German statutes identify the small retailers’s interests and the consumer’s interest in being able to choose between types of goods. Consumers are also being protected against deceptive practices and against “incitement” – overly low pricing that incites people to buy inopportunely. This is key because there is extremely limited consumer credit in France. Consumer protection of this kind leaves lots of room for the old kinds of producer protections.
Can you analyze TM in these terms? He thinks so. To the extent that Europeans are more open to dilution, that’s easy to fit into the producerist/consumerist box. If you justify the law on consumer protection grounds, you’re making the European move of justifying producer protection as a benefit to consumers. Americans are generally less receptive to producerist legislation, so lingering resistance is understandable.
To the extent we’re trying to defend antidilution legislation on “status goods” grounds, it’s similar to the justification that there should be a variety of goods available, from cheap to expensive. Thus we should suppress competition even when it would lower prices. The French & German legislation is interested in artisanal goods specifically though, while status goods will not necessarily be artisanal.
He imagines that it’s awfully hard to pull off a consumerist explanation of producer protections such as Jacoby has undertaken. Understanding consumer interest as an interest in low prices makes it kind of hard to understand TM at all.
You can reconcile all this with consumer interests: It’s really all about identity politics. What is a consumer’s identity? Low prices are not the only possible objective for consumer interests.
Zimmerman: Dilution is about protection for corporate owners’ rights to locate themselves in sections of my brain and not be disturbed in their sovereignty – this just seems creepy to an American.
Whitman: We seem creepy to them too.
Carroll: TM law enables product differentiation so that products don’t become commodities. The consumer interest is then fully satisfied; why add dilution?
Whitman: Differentiations aren’t all the same. The claim is that the artisanal sector needs specific protection to avoid perishing. He has some sympathy for this. Artisanal goods are much better in Europe – you can’t get a good baguette in NYC, which tells you a lot.
Jacoby: Creepy as it may sound, the picture of an owned brain is not too far off from what MRIs now show about neural networks in the brain. We do see physical correspondence between brand recognition and neurons. (Comment: There is a big difference between ownership and occupation. Providing a legal right to prevent others from ousting the TM owner from consumers' neurons is a huge leap from identifying parts of the brain where brands are remembered and processed. I do not understand why MRIs showing that the name Coke triggers good memories provide a sounder basis for dilution law than previously existed; we already knew that trademarks were associated with brand value in the mind -- where did we think that came from if not some physical correlate in the brain? Knowing where that correlate is doesn't change any of the normative questions.)
Mühlendahl: The European justification for harmonized IP is a single-market-based approach to create equality across nations. There is no consumer protection justification; IP enhances consumer welfare in the broadest sense but isn’t directed at doing so. You do this on a property theory, as for patent and copyright, creating an ecology of competition across legal systems.
Congratulations to Rochelle Dreyfuss and NYU on an excellent conference.
Of course European law protects free expression, but it’s balanced against other constitutional values of reputation, honor, etc. It’s not the only constitutional value on the playing field. Whitman would have assumed that TM belonged to protection of personality, not property, which would make it easier to understand what’s going on here.
We talk about common versus civil law all the time but that offers very little help in dealing with the problems that arise with things like dilution. One possibly useful contrast: law oriented towards consumers versus law oriented towards producers. America had a broad consumer movement mid-20th century while Europe was consciously moving towards a producer orientation. There is of course no general or uniform consumer (or producer) interest. But producer-oriented law takes some producer interest as primary, and tends to asks questions about producer-producer conflicts, such as how to balance workers’ interests against capitalists’ interests.
An easy example of the contrast between producerist and consumerist interests is antitrust. The great shift in American antitrust law has been to focus on consumer interests – questions are resolved by asking about the economic interests of consumers, rather than of competitors. Until recently, European law was otherwise.
Ambiguity: one way of defining consumer interest is low prices and shopping convenience. But another way of defining it, often in conflict, is the consumer’s interest in being paternalistically protected.
People think that consumerism is triumphing worldwide. But in the European case, it’s not so clear that the consumer interest – understood as an economic interest – is triumphing.
It’s silly to imagine that there are two different classes; everyone is both a consumer and producer. It’s very difficult to figure out who’s winning in any given case. Rather it’s a conflict over identity politics: who ought to matter more in a modern economy.
So what’s going on in Europe (France and Germany)? These are comparative, relative claims, not absolute one: we see more consumerism in the US and more producerism in Europe. We do see a lot of talk in Europe about the consumer, but the law that’s being produced in response is overwhelmingly consumer protection law, not oriented towards consumer economic interest or shopping convenience. The law of retail, for example: Despite lots of change, there’s a lot more regulation of retail than in the US, much of which is intended, despite the entry of large retailers like Wal-Mart, to protect small shops.
This looks like classic producerist law. It’s defended on consumer protection grounds, though. The French & German statutes identify the small retailers’s interests and the consumer’s interest in being able to choose between types of goods. Consumers are also being protected against deceptive practices and against “incitement” – overly low pricing that incites people to buy inopportunely. This is key because there is extremely limited consumer credit in France. Consumer protection of this kind leaves lots of room for the old kinds of producer protections.
Can you analyze TM in these terms? He thinks so. To the extent that Europeans are more open to dilution, that’s easy to fit into the producerist/consumerist box. If you justify the law on consumer protection grounds, you’re making the European move of justifying producer protection as a benefit to consumers. Americans are generally less receptive to producerist legislation, so lingering resistance is understandable.
To the extent we’re trying to defend antidilution legislation on “status goods” grounds, it’s similar to the justification that there should be a variety of goods available, from cheap to expensive. Thus we should suppress competition even when it would lower prices. The French & German legislation is interested in artisanal goods specifically though, while status goods will not necessarily be artisanal.
He imagines that it’s awfully hard to pull off a consumerist explanation of producer protections such as Jacoby has undertaken. Understanding consumer interest as an interest in low prices makes it kind of hard to understand TM at all.
You can reconcile all this with consumer interests: It’s really all about identity politics. What is a consumer’s identity? Low prices are not the only possible objective for consumer interests.
Zimmerman: Dilution is about protection for corporate owners’ rights to locate themselves in sections of my brain and not be disturbed in their sovereignty – this just seems creepy to an American.
Whitman: We seem creepy to them too.
Carroll: TM law enables product differentiation so that products don’t become commodities. The consumer interest is then fully satisfied; why add dilution?
Whitman: Differentiations aren’t all the same. The claim is that the artisanal sector needs specific protection to avoid perishing. He has some sympathy for this. Artisanal goods are much better in Europe – you can’t get a good baguette in NYC, which tells you a lot.
Jacoby: Creepy as it may sound, the picture of an owned brain is not too far off from what MRIs now show about neural networks in the brain. We do see physical correspondence between brand recognition and neurons. (Comment: There is a big difference between ownership and occupation. Providing a legal right to prevent others from ousting the TM owner from consumers' neurons is a huge leap from identifying parts of the brain where brands are remembered and processed. I do not understand why MRIs showing that the name Coke triggers good memories provide a sounder basis for dilution law than previously existed; we already knew that trademarks were associated with brand value in the mind -- where did we think that came from if not some physical correlate in the brain? Knowing where that correlate is doesn't change any of the normative questions.)
Mühlendahl: The European justification for harmonized IP is a single-market-based approach to create equality across nations. There is no consumer protection justification; IP enhances consumer welfare in the broadest sense but isn’t directed at doing so. You do this on a property theory, as for patent and copyright, creating an ecology of competition across legal systems.
Congratulations to Rochelle Dreyfuss and NYU on an excellent conference.
Monday, December 11, 2006
Dilution and free speech: further comments
At Rochelle’s kind invitation, I talked about my work on cognitive psychological explanations of dilution, which are offered in support of the consumer protection/mental search costs theory. I referred to Diane Zimmerman’s point (2): First Amendment doctrine makes it very hard to regulate non-false speech, but easier to regulate false speech at least when the speech is also commercial. Dilution turns out to target the Achilles’ heel of the true/false divide. In what way is the name “Tiffany Strip Club” either false or true? In what way is it an opinion? It isn’t even, I think, an idea. So we have no real guidance on which side of the line to put it – no positive theory of why it deserves full First Amendment protection, but also no negative theory based in First Amendment law of what makes it harmful. Relatedly, we have no good theory for distinguishing speech that changes preferences from speech that is misleading in that it leads people to make decisions based on bad reasons, reasons that we think are incompatible with their objective best interests. An increase in meanings that makes people have to think harder about “diluted” brands, or makes them like them less in the case of tarnishment, can be characterized as interference with preferences or a change in preferences, and it’s probably more consistent with recent First Amendment commercial speech doctrine to call it the latter. In that case, we should be deeply skeptical of trademark owners’ claims that the stability of meaning is a neutral principle or one that can justify suppressing others’ nonfraudulent speech.
Jane Ginsburg: The exclusions in the current act should deal with many First Amendment issues, so what problems are left?
Zimmerman: What’s a commercial use? Parodic trademark uses: if someone calls a coffee shop Lowbucks, she thinks there’s a speech issue. (See the recent Chewy Vuitton case, which was decided under general blurring theory rather than the idea that the exceptions applied, which they may well not have done.) She hopes it will be a very broad range, which will reduce the risks, but it’s not clear what will happen. State statutes also remain troubling.
My response invoked Cincinnati v. Discovery Networks: you can’t regulate commercial speech and not noncommercial just because it’s easier to regulate commercial speech; there has to be some nexus between commerciality and harm. Dilution law doesn’t have that; the exceptions swallow the rule. I just don’t think the law is rational enough to survive First Amendment scrutiny unless commercial dilution can be conceived of as misleading commercial speech.
Dianne Cahill: Babewatch/Baywatch – what if it’s on T-shirts?
I think it would be obviously noncommercial speech for First Amendment purposes; hard to tell if it’s a trademark use; harder to tell which rule wins.
Zimmerman: Right of publicity cases have put a lot of pressure on this, considering T-shirts, buttons, etc. as commercial uses, though courts may be starting to recognize that this is problematic.
Halpern: Congress enacted the TDRA with full knowledge of Kozinski in the Barbie case; one therefore has to intepret “commercial” in the First Amendment sense – anything other than the offering of a commercial transaction is excluded. That doesn’t deal with concerns over trade names (and things like Chewy Vuitton), but it means the law is narrow. The courts have also bought into Rogers v. Grimaldi, protecting artistic works with a higher threshold for confusion. Limitations have also been applied even to state dilution statutes.
Dreyfuss: Our idea of rights in gross/non-stockpiling of marks has a First Amendment dimension; as we allow rights in gross and property-like concepts, we move inexorably towards less concern for free expression, especially in commercial contexts where defendants are trying to communicate with consumers. In Europe it may be different, and in fact property concepts may be moving towards greater recognition of human rights.
Dinwoodie: Would the Gay Olympics case be decided the same way today? Does the copyright jurisprudence (Eldred) have any indications for us, in its discussion of traditional contours?
(My answer: The USOC would lose, at least 7-2.)
Zimmerman: Her gut feeling is that the Court has tended to see IP cases as isolated little bits not affecting the overall environment. Eldred contributed to a growing public and judicial awareness that you can’t look at these little carveouts, like taking “Olympic” and giving it to the USOC, without considering the overall impact on speech. The Moseley Court would not write the Gay Olympics case; it would take a broader view.
Kur: Free speech works differently in Europe. We normally expect that legislation contains within it everything you need to decide a case. The fact that France, the civil law country par excellence, found it necessary to go beyond its TM law and appeal to its constitution, shows that the problems are difficult and that, though resources exist to deal with free speech concerns, the TM law is not properly configured to deal with them.
She thinks the outcome of cases under US and European law will be reasonably similar, with good and bad decisions.
Carroll: The First Amendment protects freedom of association. The famous brand owner doesn’t want to be associated with a parodist etc. – shouldn’t it have the right? The Ivory brand is part of people’s self-definition. So why not prohibit people from opening the Ivory Hotel?
My answer: Because the free play of meaning has value and doesn’t need independent justification. The burden is on the regulator, not the speaker, as Zimmerman said. (What is the difference between giving Ivory a right against tarnishment to prevent negative associations and giving P&G a right against picketers outside stores selling its products? First Amendment negative association rights are about not having to take people or ideas into one’s intimate circles, and occasionally not into one’s communal organizations; they do not provide a right to avoid all “associations,” however defined.)
Heins: We still need to worry about dilution claims that don’t get to court and don’t get decided by Judge Kozinski. Gatekeepers in the world of expression, including insurance companies that require filmmakers to certify that every last image has been licensed before they’ll issue insurance. This allows pervasive control of speech without any plaintiff ever winning a dilution case.
Bone: If we suppose that the noncommercial use exception is expanded to cover the dilution version of Saderup, T-shirts in general will be okay under dilution law. In that case, plaintiffs may just shift over to likelihood of confusion claims, as in the Mutant of Omaha case (this is enabled by the fact that the use as a mark requirement is less well settled in confusion cases).
Zimmerman: This is a real risk, and should make us think about the definition of harm that we’ll accept in confusion cases as well.
Mühlendahl: There’s a difference between criticism, comparative advertising, etc. and simply using a mark to sell a different product. Why deny protection in the one case merely because you deny it in others? Isn’t American local free speech doctrine simply out of step with international law? No constitutional court in Europe would find local free speech doctrines to allow the Ivory Hotel. (I should say that I agree that mine is a local/doctrinal conclusion; one could have a perfectly well-functioning system of free speech that allowed silly laws. It is my contention, however, that First Amendment doctrine, moving as it has towards a regime that severely limits the government’s ability to regulate markets by controlling the speech that takes place in those markets, logically must imperil dilution laws.)
Kur: European cases in which free speech defenses are raised are in nontraditional cases.
Dreyfuss: Isn’t the Arsenal case troubling?
Mühlendahl: Not at all. Selling unlicensed goods when someone else owns the TM interferes with that person’s livelihood.
Dreyfuss: For us the idea that a fan can’t display loyalty without paying Arsenal’s price is troubling.
Mühlendahl: You can have your mother make you a jersey; a third party just can’t sell you the merchandise. (Comment: Why can’t Arsenal proceed against Mom, or Mum? She is helping you avoid the customary price and interfering with Arsenal’s livelihood.)
Kur: America was first to protect sports marks licensing. But go back to Justice Laddie’s point: This is not a use that tells anyone about commercial origin or licensing.
Mühlendahl: Laddie lost that one.
Christine Haight Farley: Victoria’s Secret was in the news – an environmental group argued they were destroying Canadian forests by sending out a million catalogs a day. Elizabethtown, KY where Victor’s Little Secret was, has a population of 15,000 and receives 39,000 VS catalogs. So the environmental group ran an ad with a lingerie-clad woman in angel wings with a chainsaw, surrounded by bags with the VS logo, “Victoria’s Dirty Secret.” VS didn’t sue for infringement or dilution, but instead agreed to change their practices. Why not sue? Is VS worried because of the new act’s exclusions (noncommercial use; nominative use)? Does VS think it didn’t benefit from the publicity of the last suit? It matters a lot whether you think of this as a TM case or a speech case. To a dilution true believer, this is a dilution case. You don’t need to harm VS to make a general point about catalogs. So it matters a lot what the presumptions and categories are. For true believers, strong marks are seen as simultaneously delicate. We should say that TM law just doesn’t have a place for such claims unless the defendant is using the mark as a designation of source for its own goods and services.
Ginsburg: There are many optimistic things to say about the TDRA exclusions. Unlike copyright’s fair use, they are specific and allow you to tell someone who sends a C&D letter to go to hell. They also have a potential to drive growth in TM, by referring to “any fair use, including nominative or descriptive use,” other than as a designation of source. These are all judge-made concepts for dealing with confusion law, now statutorily blessed. Also this raises the question of how broadly to read “as a designation of source.” If you want to use Lowbucks as your café name, you have a problem under this statute (raising the question of a constitutional right to free ride; this is where the US/EU breakdown occurs), but that’s a very narrow range. The spillover effects on confusion will be interesting to see.
Rochelle Dreyfuss on dilution
Rochelle Dreyfuss, NYU School of Law: Her general doubts about extensions of TM law including initial interest confusion, post sale confusion, and dilution, have been mentioned by many people. V’s Secret was good because it said “If you believe in dilution, show it to me – prove there’s a harm that needs to be alleviated.” The need for limits on TM is especially clear on the internet, where people are trying to attract audiences. In real space, people are sometimes allowed to “free ride” on others’ territory to reach audiences.
Other reasons for skepticism about dilution: TMs are capable of generating goodwill, but Schechter never asked whether people would buy Dupont shoes. The more dominant you make your mark, the less likely it is to be subject to free riding in distant markets.
The ultimate question about dilution is its effect on customers, which Jacoby addressed. Consumers’ rationality is bounded. Consumers may satisfice and not look further after a moment of recognition. That’s part of what TM holders are trying to capture: the ability to be able to present consumers with a product they’ll buy automatically. But the moment taken for the consumer to search through her own mind is when she considers other products and asks whether there’s a better product – when the unseen hand of the market rummages through her brain. So depriving consumers of that moment may not be efficient overall even if it helps the TM owner. If consumers aren’t going to compare products, there’s no need for goodwill, only a need for advertising/branding.
She questions the entire quest: the idea that we can get rid of overlapping usages and create a marketplace without confusion or dilution. Interjurisdictional cases, for example, will always be problematic. Different products start to converge, as with Apple Music/Apple Computers. Geographic indications overlap with TMs. Add to that all the exceptions that already exist allowing a mark to be reproduced by those who don’t own it: newsworthiness, political uses, fair uses, comparative ads, noncommercial uses. Consumers will always have to devote effort to deciphering marks. Is the thrust of dilution entirely wrong? Shouldn’t we be trying to figure out how to help consumers resolve ambiguity rather than quixotically trying to suppress it?
European perspectives on due cause and free speech
Brief discursion: Recent Court of London decision on comparative advertising. The claimant had static images that were registered marks using bubbles. There was strong secondary meaning for bubble imagery both static and moving. The defendant wanted to enter the claimant’s mobile telephony market and engaged in aggressive comparative advertising. It used different bubble imagery in its ads to compare itself to claimant. Comparative advertising in the EC must comply with a large number of conditions – it must objectively compare material features, avoid confusion, avoid discrediting or denigrating the competitor’s trademarks, and avoid taking unfair advantage of the competitor’s marks. The comparative ads used bubble imagery to suggest that the claimant’s services were much more expensive than the defendant’s. (There were three other ads comparing the services to other competitors’, also evoking their marks, but those competitors didn’t sue.)
This ad ran for 10 days and has turned into a legal WWIII. The London court approved the ad, but it will take another few years for it to make it all the way through the EC courts.
Annette Kur, Max Planck Institute, Germany: Famous EU case: Greenpeace did a “Stop E$$O ad.” A free speech interest obviously there conflicts with Esso’s TM right.
Ask the opposite question first: When does TM protection not interfere with other interests? (1) Where the supply of new signs is unlimited in principle; (2) where protection is necessary to secure truthful consumer information as to the commercial origin of goods or services. It follows that where the supply is limited (3-D forms, descriptive terms) and where there’s no concern for truth (as when there’s no confusion) there are reasons to be concerned.
Specifically, when the use is referential – indicating the source of what you’re talking about, but not the source of your talk – there are special concerns for speech.
EC law only directly addresses the dissimilar-products situation, but those cases aren’t particularly burdensome for countervailing interests, and so Kur isn’t going to talk much about them.
Extended protection for strong marks is also granted with respect to similar goods. This can be a problem for things like color and shape because the supply of those signs is more limited, and thus extended protection/broad definitions of likely confusion can hamper free competition. For example, the Nike swoosh case (D’Nickers) discussed earlier seems to give protection to a design element. A German case gives protection to the color violet for chocolate and found unfair competition/likely confusion when another party used violet for cookies. The protection here really went to an extreme.
Free speech interests: There are concerns involving parodic marks, such as Babewatch for videograms with sexually explicit content. Is that a use made “without due cause”? There is opportunity to argue in favor of parody, at least when the goods are dissimilar and extended protection is sought. When the marks are used for similar goods, however, difficulties arise because European law doesn’t have a specific parody exception or doctrine that incorporates due cause into the likelihood of confusion analysis.
The most prominent problems arise where “use as a mark” is doubtful, as in the Greenpeace campaign in which Greenpeace wasn’t using E$$O to sell goods. The meaning of “use as a mark” under EC law is unclear; the French court in the Greenpeace case didn’t even see it as a requirement. The ECJ has suggested we need use as a mark when infringement is an issue, and in the new “bubbles” case one issue will be whether the ad is using the bubbles as a mark. The general tendency is to assume that as soon as a mark is identifiable as someone’s mark then there is sufficient use as a mark. Once that is taken as established, there are only a few exceptions to liability. In the E$$O case there was a need to take speech interests into account, but no easy way to do so, so the court had to reach out to the French Constitution to dismiss the case.
Example from German case law: violet-colored post card with a poem on it, attributed to “Rainer Maria Milka” (Milka being the chocolate company with the violet wrapper). The German court had to refer to German constitutional principles of freedom of art to dismiss the case, rather than finding an internal TM perspective. This causes fragmentation because each country has its own free speech principles, and when it comes to community TMs there is no European Constitution in place to help out. The European Declaration of Human Rights is a possibility, but its applicability is unclear.
Once you’ve acknowledged constitutional rights play a role, they need to be taken seriously. You can’t just say we can ban the speech when we don’t like the form, or when the person who’s the target of the speech is offended. In German law, one decision pointed this out very clearly: the mere fact of commercial use is not a per se reason to be stricter with regard to the standards applied to the allowable language. Of course when consumers are misled or there’s serious harm to a competitor, that’s different, but just objection to the language isn’t sufficent.
One example from earlier German law: the BMW TM was converted into a name that suggested becoming more sexually active, used on a sticker. It ended up in the chamber of the court that dealt with free speech, and the court said that the use didn’t target BMW’s performance in the commercial sector and thus couldn’t be prohibited. (Comment: note here how the cognitive/psychological theory breaks that distinction down – unrelated uses can affect evaluations of the TM owner.) People at the time were sure that if the case had gone to the commercial chamber it would have come out the other way; this is an example of how free speech concerns change the calculus a lot.
Nominative/referential use isn’t obviously a use made with “due cause,” but may be treated as a per se infringement as a use of an identical mark for identical goods. Comparative advertising, as with the cellphone service ad, raises similar problems.
Because there are no clear free-speech exceptions, we are left with many problems, such as: Is it admissible to sell scarves saying “I am an Arsenal fan” with truthful indications of source? That is, the seller goes beyond printing the logo and incorporates it into a truthful statement of fandom. What about using the logo on a book about the club? Selling paintings of players in their uniforms? Using the logo in an ad comparing Arsenal’s performance with that of its Chelsea rival?
NYU dilution confernence: Diane Zimmerman
Session 3: Countervailing considerations. Due cause, free speech and effective competition.
Diane Zimmerman, NYU School of Law: Zimmerman doesn’t do TMs, but has a longstanding interest in free speech. From that perspective, dilution looks odd, which may help explain American hostility to dilution. TMs are communicative goods. Thus they are potentially First Amendment subjects, and courts have begun to realize this when, for example, an artist incorporates a Barbie doll into a photograph.
The cases fall into a broader pattern: an upsurge of so-called food disparagement laws, which made Oprah Winfrey go to the Fifth Circuit to get off the hook for saying that she was off hamburger for life after learning about mad cow. Creeping into the cases is some discussion of how a use of a TM can be justified, which is similar to discussions of fair use in copyright. But note the posture: The reason you get a chance to use the mark is justification; absent that justification, you have no right to another’s property. From a First Amendment perspective, Zimmerman asks how a TM comes to be property in the first place. The Constitution recognizes copyright and patent, but not TM.
The Supreme Court treated TM like property in the Gay Olympics case, but that was decided at an unusual time, the nadir of protection for commercial speech. There was also still a failure to see that there was a relationship between things called “speech” and things called “property.” Since that time, awareness of the potential risks to speech posed by IP law has increased. She sometimes wonders whether V’s Secret was really a nascent First Amendment opinion as much as it was a statutory interpretation opinion.
What are the relevant First Amendment principles? (½) The First Amendment doesn’t like injunctions. (1) Individuals and entities are presumptively free to speak; one is not required first to offer a justification or a need to speak. The burden is on the regulator. (2) The burden of supporting the regulation will virtually never be successful when the speech is not false – if it is opinion, idea, or factually accurate. With commercial speech (advertising, which does not include all the things TM law assumes are “commercial”), it may be easier than regulating noncommercial speech, but it still requires more than a rational basis – a substantial interest backed by proof that the regulation both works and is limited in scope to the need identified. (3) Speech that is false or misleading has less claim to constitutional protection. There needs to be something more than falsity/misleadingness for regulation to kick in – where the falsity has led to some sort of palpable harm. Proof of falsity is a burden borne by plaintiff.
Thinking about dilution in this framework: The best analogy is one to dignitary torts such as defamation. Dilution looks different from even the pre-First Amendment common law tort of product disparagement, which was very hard to prove, requiring proof of falsity, damage, and intent. Constitutionalization of defamation law has not improved things from the commercial plaintiff’s perspective, because it requires proof of knowledge or recklessness and often proof of damage.
So, dilution may not have a legal leg to stand on. It is out of sync with comparable laws. No one has had any problem striking down “veggie libel” laws, even though we know that the 60 Minutes Alar program cost apple growers a lot of money. We know that there’s harm in such cases, but protections for free speech carry the day nonetheless. The trajectory of the Court’s commercial speech cases is that more and more is being asked of the state to justify regulations on commercial speech.
This may help us understand why dilution has generated so much tension in the courts. It’s not just that it’s a law looking for a justification – in other words, not just a policy concern. Rather, as we increasingly connect IP with free speech, dilution seems odder and odder. Zimmerman was amazed that courts aren’t raising free speech issues on their own, without prodding by lawyers, according to Long. It’s odd to have these little pockets of law that are unconnected to broader free speech doctrines.
Sunday, December 10, 2006
Barton Beebe and discussion on dilution
Barton Beebe gave a brief presentation on his empirical study of TM confusion cases and how the multifactor test for confusion plays out there, in contrast to Long’s paper on dilution. He only looked at reported cases, though.
Which factors are important? Which irrelevant? Do they tend in practice to stampede, that is, to be treated by judges as all pointing the same way? How are surveys used? What’s the role of inherent distinctiveness? The answers may be relevant to predicting results under the TDRA.
Highlights: 2d Circuit dominates, accounting for 33% of TM opinions, and the 9th Circuit was second with 16%. Impressive circuit variation – district courts preliminarily enjoined defendants 41% of the time in the 2d Circuit, but 69% of the time in the 9th Circuit. Of 331 district court opinions, 65 addressed survey evidence, 10% crediting that evidence and 7% ruling in the direction suggested by the survey. But in the big cases, survey evidence is presented; surveys are not evenly distributed. Only 6 cases drew an adverse inference from failure to present survey evidence. (I have direct experience with these last two statements, having worked on a huge case between enormous drug companies in which plaintiff had a dilution survey, defendant had a confusion survey, and the judge drew a negative inference from plaintiff's failure to conduct a confusion survey.)
Beebe found a curious result on inherent distinctiveness: judges use the Abercrombie spectrum about half the time, but are fairly wary of it. Actual strength v. inherent strength: Some cases found divergences between actual and inherent strength (one strong, the other weak), and in almost all of these cases, the commercial strength judgment trumped the inherent strength judgment. Beebe thinks this is a good thing. It goes to the TDRA’s fame factors, which include one empirical factor (actual strength) and a bunch of formal factors (inherent strength), which is sort of weird. Likewise with the blurring factors, one is empirical and the others are formal.
Key factors in confusion cases: Similarity is dispositive; defendant’s intent is almost dispositive. Then follows proximity of goods, actual confusion, and strength. Courts tend to stampede the factors in the direction of their decisions.
Kur: Is there any empirical data from the EU similar to Long’s work on US courts?
With respect to the Intell case, if consumers think (correctly) there are two companies with that name, so what? What harm does that do? Likewise, with the Wal-Mart case, is it surprising or troubling that consumers thinking about Wal-Mart said that the Wal*ocaust shirt made them less likely to shop there, given that they may have read the shirt as a criticism of Wal-Mart’s practices?
Hobbs: He isn’t aware of any statistics from the EC, but he’s particularly interested in the effect of disparity between goods and services. His intuition: the further apart the goods and services are, the harder it is to convince the tribunal that there’s any harm to the plaintiff or benefit to the defendant from a similar use. EC TM law won’t work as an algorithm; we have to treat it as identifying a series of factors to be weighed in any given case.
In CTM registration decisions, he detects a clear trend in favor of claimants who are seeking extended protection. But he cautions that the law in Europe doesn’t seem to be the same concept as the American idea of dilution: we are divided by a common language.
Long: Product similarity: She didn’t specifically measure that, but subjectively her sense is that people were much more likely to sue when the products were in similar or closely related markets. She’s not sure how that affected likelihood of success, though she can think of more injunctions granted in related fields than in unrelated ones. Also, courts are concerned about granting injunctions that would affect speech, as with Wal*ocaust. Courts were sensitive to that issue, but only to the extent to which the parties brought it up; free speech defenses depended on good lawyering, since courts weren’t willing to go out on a limb without support from the defendant.
Jane Ginsburg: Picking up on the Hobbs remarks, we don’t know what we mean by dilution. The Intel survey point is spot-on: knowing that two entities share the same name doesn’t show a link between them, nor does it show impaired distinctiveness unless we think that “more than one” counts as impaired distinctiveness, which is a completely circular definition.
Inherent distinctiveness is or should be relevant even though actual distinctiveness is the trump. If your mark consists of a descriptive term, you should get less protection even if it’s well-known, because the costs of extending protection to a descriptive mark are greater (even if the benefits are the same).
What fascinates her about Beebe’s study is the significance of intent, which she thinks should be irrelevant if we take consumer perception seriously. There’s always been the cute shortcut of assuming that that the defendant succeeded in its intent, but she thinks that’s facile. If intent is key, then we’re closer to Dinwoodie’s unfair competition regime perhaps than we pretend.
Jacoby: Distinctiveness is like pregnancy: either you are or you aren’t. (I’ve got to say, I wonder if the people who say there’s no such thing as being a little bit pregnant have actually been pregnant. There is a big difference between not pregnant and pregnant, but also a huge difference – medically, experientially, and legally -- between one month pregnant and nine. And while roughly 2/3rds of pregnancies will come to term in the absence of intervention, one dilutive use is not naturally going to progress to use on a zillion products.) If there’s a second Intel, then there’s a third and a fourth and you’re no longer distinct.
As for the “so what” objection: With respect to tarnishment, there is a dramatic impact from things like Wal*ocaust – as with the Anheuser-Busch “Michelob Oily” case, where people said they were much less likely to drink Michelob after seeing the parody ad. On a national level, the impact on customer patronage can be great. (Comment: No one followed up with the survey respondents and see how often they’d drunk Michelob/shopped at Wal-Mart three months after seeing the ads. Their unconsidered statements of future intent are terrible evidence of actual purchasing behavior.)
Michael Carroll: Given that dilution is always paired with confusion, is it the case that dilution works to bolster weak confusion claims – that is, is there judicial acceptance of or hostility to dilution when the plaintiff’s confusion case is weak?
Long: Courts are not necessarily hostile to dilution per se, because they don’t know what the heck dilution is. So courts are responding to particular plaintiff presentations. Early on, courts tolerated more TM owner behavior than they did later. Consistently, courts don’t like TM owners using dilution as a property-like theory. They’re also hostile to use of dilution to get a market advantage against a competitor. In the early days, there wasn’t as close a relation between the strength of confusion and dilution claims: you could have strong confusion claims and win on dilution anyway or weak confusion claims and win on dilution anyway. By the end, you get injunctions where the confusion claim is very strong or the confusion claim is very weak; you don’t get injunctions in the middle of the spectrum.
Mühlendahl: EU law seems to be developing in the direction of multifactor tests for similarity and for likely confusion. Intent isn’t a big part of the analysis because of the relative absence of discovery (not to mention the fact that rights are often assessed without use). So EU adjudicators end up relying heavily on inherent and acquired distinctiveness and abstract assessments of similarity.
Dreyfuss: Asked Jacoby to comment on the effects of changing the number of milliseconds it takes for a consumer to recognize a mark. A few nanograms of polonium just killed someone, so it’s not crazy to think milliseconds matter.
Jacoby: In consumer research, the first brand someone mentions is the one they’re most likely to buy. Anything that diminishes the speed of retrieval and makes a brand less likely to come to top of mind in a product category will correlate with decreased purchase likelihood. Consumers spend almost no time in front of a frequently purchased good – 4 seconds. Information provision does not equate to information impact; consumers don’t spend much time extracting information unless it’s a nonfrequently purchased good or service. Thus lookalikes may be enough to get purchases. It’s not the milliseconds but their ultimate correlates that are the issue, and research on that is ongoing.
Marjorie Heins: The Michelob case got her interested in IP. It seems so clearly a critique of Michelob, and TM was used to circumvent defamation law. She thinks the Wal*ocaust website had a similar purpose. It’s worth pointing out that market harm resulting from criticism should not be the kind of market harm cognizable under IP law, just as we distinguish between kinds of market harm in copyright’s fair use analysis.
Sheldon Halpern: The Michelob court said that 20% of the respondents were confused and thought that Michelob was selling Michelob Oily – we are so much more comfortable talking about likely confusion. It’s with dissimilar goods that we get very uncomfortable. (Comment: Not sure who’s the “we” here.) In the “death of a thousand cuts” theory, any other use is going to constitute dilution; it’s standardless. So what would the EU do with a book called “Just Think About It”? That’s close to Nike’s mark.
Hobbs: To win, I would have to show theft of an advertising benefit, that the trigger function of Nike's TM gives the book selling power it wouldn’t otherwise have. There is authority that merely calling another’s mark to mind – a mere mnemonic effect – is not enough to trigger liability. But we have no idea, then, where the line is to be drawn.
Bone: To Long: what about possible settlement effects? (E.g., effect in the Intell case.) Especially with the initial success spike in cases, lawyers can use the changed legal rights to get different settlements.
Long: She controlled for that by including filed but settled cases.
Bone: Unless you have a really strong view of consumer autonomy, you don’t really care about confusion but about confusion’s harms. Confusion as to affiliation is just unlikely to do harm. Factors that are probative of harm, such as mark strength and defendant's intent, might be the most important.
Hobbs: Intent isn’t necessary to liability because the consequences are the same whether intended or not, but it’s a one-way proposition. Intent can be inculpatory – who knows better than a trader the mysteries of his own trade? One asks, could this have happened by accident? If not, why was it done? That line of inquiry leads you toward particular outcomes.
Herbert Schwartz: Judges make up their mind first and then evaluate the factors and the surveys later, and TM cases are much more that way than other IP cases. Judges feel very competent to decide TM cases based on their gut reactions. Brief comment on the Hershey case, with which he was involved: That was an unusual situation, both because it was a use on similar goods and because it involved the M&M mark which was itself so strong that it dominated when added to the trade dress.
Jacob Jacoby on dilution
Jacob Jacoby, NYU Stern Business School: His topic was the use of dilution research in court, and its potential applications to the new federal law.
Things that can be measured: fame, dilution by blurring, dilution by tarnishment, and (the opposite of blurring) free riding, possibly. He’s included free riding in his measures after Posner’s explanation in Ty v. Perryman.
Surveys can measure fame: “In your opinion, what are the most famous golf courses located within the US?” Used to establish fame in the Pebble Beach case, which was about both dilution and confusion. The question specifies fame and mentions the product category, but not the brand name. It relies on unaided recall and permits several answers.
With 13,000 regulation 18-hole golf courses, 87% of respondents mentioned Pebble Beach (1st most mentioned), 25% mentioned Pinehurst (4th most mentioned).
TM owners need to benchmark fame before dilution starts, since the statute says fame needs to preexist the diluter's actions.
Measuring blurring: Intel Corp. v. Intell Management & Investment Co. (2004; settled out of court). Defendant is developing major high-rises in NYC right now and does development nationwide. Intel has a very high brand value; Business Week ranked it as the 5th most valuable brand in the world.
Universes to test: real estate brokers/agents, tenants and prospective tenants of Class A commercial properties.
A typical survey approach uses one interview to expose respondents to the mark then measure dilution. His objective: better simulate real-world events. First part: expose the Intell name as universe members would come across it in promotional materials, showing respondents 3 sets of materials about developers, in person, for a study ostensibly about developers. Intell was changed to Ibell in the control group.
4-7 days later, a different firm called the respondents for an ostensibly different telephone survey. Initial questions used “Chevrolet” to ask whether consumers knew whether only one company used the mark “Chevrolet.” Then they were asked about the name “Allied” and whether it was associated with only one company. Then they were asked about “Intel.”
If exposed to Intell, 11.4% said that they knew of two companies, whereas the Ibell respondents were unanimous that they knew of only one company. That seems like evidence of blurring.
Now, Intell operates under the name Extell pursuant to settlement.
Wal-Mart case: a guy who sells promotional goods like T-shirts and has a website using the term “WAL*OCAUST,” with a blue background. The shirts were enjoined, and the guy is now using WAL*QAEDA. One Wal*ocaust shirt uses the term above a German eagle with its talons on a smiley face like Wal-Mart uses. Test shirt: Zal*ocaust with eagle over yellow ball.
So how does this fare under the new statute? Blurring allows the court to consider “actual association between the mark or trade name and the famous mark,” or the mental/associative link in psychological terms.
Question Jacoby asked in the survey: If anything, what does this shirt make you think of? What it is about the shirt that makes you think that?
93.2% thought of Wal-Mart (based on the Wal- and the star)
21.5% shown the control, which was a pretty minimal change, thought of Wal-Mart
71.7% net association
What about tarnishment? Actual harm or economic injury need not be shown. So, in this survey, respondents were asked whether the shirt made them more/less likely to shop at Wal-Mart (and given multiple options including neither more nor less likely, and options were rotated). 20.5% (test) v. 2.5% (control) said they were less likely to shop at Wal-Mart as a result of seeing the shirt.
What not to do: Hershey v. Mars trade dress case. The case required two surveys, first for secondary meaning of Reese’s trade dress, and second for blurring. Test protocols for the first used just the colors and layout, not any actual words. 94% of respondents associated the trade dress with Reese’s even without words (and without font!). Only 2% thought that the altered trade dress of the Peanut M&M’s was M&M’s, while 49% thought it was Reese’s. The court rejected this survey even though it accepted that the trade dress has secondary meaning, reasoning that no one goes out to buy the altered products without the word marks. He should have tested the product as it was sold in the marketplace.
Conclusion: The foundations of TM law are essentially psychological in nature. He’s written extensively about this.
Geoffrey Hobbs on dilution
Geoffrey Hobbs, QC, The Inner Temple, and Appointed Person, UK Patent Office (hearing appeals from the Registrar of Trade Marks): If you have 20 TM lawyers, you will get 35 theories of what dilution is – it’s essentially incapable of definition.
EU legislation appears to create 3 bases for liability: (1) Identity of sign & goods = presumption of existence of confusion. (2) The marks are different in one dimension or another, but there’s still a likelihood of confusion, which concept has received expansive definition in the ECJ. (3) Extended protection, which was optional but was adopted by all member states, for cases in which the marks are similar but the goods/services aren’t.
You could conceive of this as a core of protection (presumption) with a penumbra (likelihood) and then a second penumbra. The second penumbra would involve nonconfusion, but still implicate the harms which confusion can bring, justifying a remedy. There are generally two types of harm: the defendant can attract business by using the mark (how does this harm the plaintiff if the plaintiff is a noncompetitor?), and the defendant can generate aversion to the mark by mishandling the product/service. These things can happen without confusion.
That penumbral theory turned out to be too simple – the ECJ deleted the word “not” from the provision for extended protection covering situations where the goods/services are “not similar.” Now any mark with a qualifying reputation is entitled to the remedy of extended protection no matter what the accused goods/services are. If you have a reputation, you win if you have confusion and you win if you don’t have confusion.
People persistently allege confusion and fall back on extended protection, but this is gradually changing to a default to an extended protection claim. Significant is the low level of reputation required – it doesn’t require the mark to be “well-known” under the Paris Convention. You just need enough reputation to have a customer base/secondary meaning. It becomes circular: if you have enough of a reputation to be injured by the defendant, you have a claim. It’s a self-fulfilling prophecy.
Next question: how close is too close? It’s conventional to say that identity/virtual identity is the strongest claim, and differences between the marks make the claim harder. But there can be a lot of differences and still a successful claim: the D’Nickers sign was unregistrable because of the Nike swoosh, even though there was not enough similarity to give rise to a likelihood of confusion. 
(Comment: to an American, this sounds crazy -- we think of dilution as requiring more similarity than confusion, precisely because the right is broader.) Hobbs suggested that a lower standard of similarity in extended protection cases is the inexorable requirement of the absence of a confusion requirement. Unless the superior courts put a brake on this, extended protection will continue to proceed in this fashion.
Extended protection is very useful. It gets rid of overtechnical assessments of similarity for infringement purposes. Now, you don’t have to get so worked up about comparing the marks and just find general similarity. If someone sells Genuine Fake Rolex watches, there’s no coherent claim of confusion, and it’s a relief not to have to try to prove confusion.
Next battleground: Whether Moseley will spill over to the EU. Dilution liability is ultimately incapable of proof. A court opposed to liability can always raise difficulties of proof. The crucial word from the case law, infuriatingly vague, is “link” – is there a “link” between the two marks? With translation issues, perhaps the right thing to do is speak of a “connection” in the mind of the consumer. The Adidas court picked up on both of these, speaking of situations in which similarities lead the public to “make[] a connection between the sign and the mark, that is to say, establishes a link between them.” Nobody knows what that means, but it is circular: courts treat the link as existing if consumers’ mindset changes in a way that produces the consequences we don’t like (free riding or damage to reputation). (My comment: Of course free riding or damage to reputation are generally not proved with evidence but presumed, so the idea that there is something real underneath is kind of delusional.)
The assessment is essentially psychological – what impact will the sign have on peoples’ minds? When we find confusion, we’re again making a psychological assessment. The problem: we know too much. By the time we ask the question, we know there’s a question, but other people may not, and we somehow have to try to put ourselves in a position of ignorance, which is difficult. Courts simply don’t like the concept of a psychological assessment, and that’s why they recoil from extended protection. Calling for straight-up unfair competition analysis is a response, but it wouldn’t solve this ultimate problem: what is going on in a particular case?
Mechanisms of proof: He described a German colleague’s belief that dilution was essentially a matter of law. One uses the hypothetical “average consumer” for the purposes of testing whether a defendant has gone too far. He doesn’t like this imaginary “average consumer.” We’re looking for people whose real-world thoughts we can take into account. This will come to a head in the EU, because English courts are analyzing the matter differently from German and others.
Surveys: We must learn to live with and love them. But they substitute the causation of the questionnaire for the causation of the defendant’s use in the marketplace. There is no survey that can’t be destroyed by analysis. There’s another reason surveys fail: Judicial self-preservation. The judge wants to be the one to rule on liability, not have the survey do so for him/her. Thus, the judge will always do an independent analysis and find “support” for it in the survey.
Experts: Practical experience on brand extension work is key. Anyone who works on brand extension can tell you that it can be done right or wrong – if done right, the defendant will steal value; if done wrong, the defendant will harm the plaintiff’s reputation.
Clarisa Long on dilution
Session 2 of the NYU conference on dilution: Protection in practice: Legal and evidentiary tools for defining the scope of dilution law.
Clarisa Long, Columbia University School of Law: What we see with dilution is push and pushback between Congress and the courts of roughly equal magnitude, and relatively quickly; we don’t see this in patents (where courts have been dominant) or copyright (where Congress has been dominant). In TM, courts have been actively shaping the law and Congress has responded.
Long has done empirical work on enforcement of the FTDA over its first 9½ years, looking at reported cases, set forth in greater detail in her excellent article on the subject. Except for willful dilution, the only remedy in a dilution case is an injunction, which makes a nice empirical on-off measure of success. There’s a sharp and steady decline in willingness to grant injunctions for dilution. It starts at about 54% just after enactment, going down to 12% by 2005. She also sampled 742 unreported dilution cases from 10 district courts around the country with the largest TM dockets. In unreported cases, the same pattern repeated: almost 50% at the beginning, down to 14% by 2005.
She took out domain name cases to see if cybersquatting was the cause, but the same general result persisted and in fact became more pronounced.
Questions: What kind of doctrinal moves are courts making? And why are TM owners bothering to bring cases? If the enforcement is dropping that fast, the parties should internalize that and the quality of claims that are brought should improve.
For the first few years, courts say: "we don’t like the result in this case, but we’re following the terms of the statute." From 1999-2001, you start to see more rhetoric saying that Congress can’t have intended this result, refusing to grant an injunction but not really explaining why. After that, judicial creativity starts to reveal itself and courts add flourishes: no protection for non-inherently distinctive marks; no protection for trade dress; no protection without actual dilution; etc. Courts also steadily raise the ground level by raising fame requirements.
Why are parties continuing to bring dilution claims if they know or should know the deck is stacked against them? Purely subjective sense: The quality of the claims did rise a little, but not enough to offset the downward slope of judges’ unwillingness to grant injunction. Nobody pleads dilution as a standalone claim. It’s with at least one other thing, usually confusion, along with state unfair competition/tort claims. The marginal cost of pleading it is just very low. The cases are moves to maintain market positions; plaintiffs are using dilution law as a form of competition law.
Without exception, by the end of her studied period, the only time courts would grant injunctions was when there was some sort of counterfeiting/consumer protection issue.
In the TDRA, Congress pushed back – not all the way back to 1996, but strengthening the statute in some ways and internalizing other limitations adopted by courts (such as the bar on niche market fame). One thing that’s received less discussion is that Congress specifically provided for protection of trade dress, rejecting the First Circuit’s rule against same. Free riding is now out as a theory on which courts can base protection. Of course there’s still room for courts to interpret and push the statute around. Use in commerce will create many future opportunities for interpretation.
Predictions: Surveys are going to be back in. This statute is more likely to be stable than the FTDA. Courts have less ground on which to push against the statute, but at the same time it gives them interpretive leeway (on what counts as blurring), so courts may not feel the need to carve out some territory for themselves by just making up new requirements.
Specific issues: the weight of inherent distinctiveness; clever theories of what constitutes blurring and tarnishment, which may allow courts to expand or contract protection; use in commerce.
What concerns her the most: how courts will interpret and apply the exceptions for speech/expression.
My thought: The three-part story of mechanical application giving way to creative judicial invention of new requirements is a bit like the story of DMCA anticircumvention law.
McDonald's brief and reply in 11th Circuit appeal
Prior posts here and here. Again courtesy of appellants' lawyers, I have put the McDonald's brief and the appellants' reply here. Among other issues, the parties debate whether I am an extremist pundit or a respected academic. Probably more important is McDonald's argument that intervening cause, in this case fraud by the agency McDonald's employed to administer its prize scheme, can absolve McDonald's from liability for its ads that stated (falsely, because of the fraud) that anyone had the chance to win large sums. Unsurprisingly, I am sympathetic to appellants' reply that fraud by McDonald's own agent is not the type of intervening cause that can excuse liability, even assuming that the Lanham Act recognizes an exception from its strict liability scheme for "intervening causes."
There isn't much case law on point. There may be an analogy to various rules on comparative advertising. For example, the FTC requires that comparative price advertising be based on truthful comparisons to prices that are actually being used by competitors in the area. A comparison of an electronic store's current prices for flatscreen TVs to its competitor's prices of 6 months ago, for example, is likely to be deceptive because of the substantial drop in prices over that period. This is a case where the ad is false because of an independent cause -- the change in the competitor's pricing -- and courts should have no problem holding that such an "intervening cause" cannot excuse the advertiser's liability. Cf. LensCrafters, Inc. v. Vision World, Inc., 943 F. Supp. 1481, 1491-92 (D. Minn. 1996) (defendant’s comparative “This Week’s Eyewear Price Check” using its competitor’s prices from weeks, and even months, before could be literally false, even with a small print listing of the actual survey dates).
There isn't much case law on point. There may be an analogy to various rules on comparative advertising. For example, the FTC requires that comparative price advertising be based on truthful comparisons to prices that are actually being used by competitors in the area. A comparison of an electronic store's current prices for flatscreen TVs to its competitor's prices of 6 months ago, for example, is likely to be deceptive because of the substantial drop in prices over that period. This is a case where the ad is false because of an independent cause -- the change in the competitor's pricing -- and courts should have no problem holding that such an "intervening cause" cannot excuse the advertiser's liability. Cf. LensCrafters, Inc. v. Vision World, Inc., 943 F. Supp. 1481, 1491-92 (D. Minn. 1996) (defendant’s comparative “This Week’s Eyewear Price Check” using its competitor’s prices from weeks, and even months, before could be literally false, even with a small print listing of the actual survey dates).
Saturday, December 09, 2006
Graeme Dinwoodie and discussion on dilution law
Graeme Dinwoodie, Chicago-Kent School of Law: His comments focus on the 1995 US law, which contained an inappropriate interpretation/assimilation of international law, specifically the Paris Convention's article 6bis. This partially explains what happened in 1995. The law was enacted with no theory of dilution.
There are product-based limits on TM rights and geographic limits (rights are national in nature). Both sets of limits have been loosened in recent years and discussion about them has converged, though the EU has kept them more separate.
National rights reflect the political realities of sovereignity, trumping the real geographic borders of consumer understanding. Article 6bis creates an exception to territoriality by requiring protection for well-known marks if a junior use would create confusion as to similar goods. This was more important in registration-based systems than in the US, which recognized common-law marks.
Product-based limits on TM have been dissolved by the expansion of actionable types of confusion as well as by the rise of dilution. Dinwoodie has argued that TM law should proactively work to shape consumer expectations and refuse to recognize certain types of confusion, but it’s plain that TM confusion law has expanded according to concepts of consumer understanding. 1995’s dilution law, by contrast, was not generated by a change in consumer concepts but a change in the volume of brand value.
TM owners claimed, and Congress wrongly accepted, that dilution protection was required by articles in the 1994 TRIPs agreement, which require protection against uses of well-known marks on “dissimilar goods.” But these articles are explicitly stated to be extensions of 6bis – they are not dilution provisions, but an extension of protection to new types of confusion – confusion regarding services (6bis covers only goods) and confusion regarding dissimilar goods.
Why did Congress make this mistake? Strategically, it helped TM owners get what they wanted. And the language was slippery, letting “well-known” be confused with “famous.” This sort of adding by interpreting is common: 6bis doesn’t require protection of well-known marks without regard to use, whereas WIPO’s interpretation of 6bis says that use is irrelevant. And the US has put similar requirements into a bunch of trade agreements, making it a new part of actual law.
Advocates of dilution have simply piggybacked on a doctrine with similar terminology but a standard confusion rationale. Thus they didn’t have to offer a rationale for dilution protection, just an argument that we should fulfill our international obligations. There was no need for a theoretical construct of dilution. And in 2005 again, all we were doing is trying to interpret Congress’s intent in 1995 rather than creating a coherent intellectual defense of dilution. There still is no connection between the theory of dilution and the statute we now have.
One consequence: in the absence of a theory, courts will still be able to show hostility to dilution. Scholars have offered theories of dilution, but the law is only barely congruent with, e.g., Schechter’s theory. For example, Schechter’s theory of uniqueness would only protect fanciful or coined marks, but the TDRA takes the law in the opposite direction.
Or, if you buy the search costs theory (which he doesn’t, since the theory skips over the question of whether the benefits outweigh the costs), it’s not clear that famous marks are extra vulnerable to interference with search costs. In fact, they may be less vulnerable than medium-strong marks. In the EU, the threshold is “reputation,” which is a much lower hurdle than famousness or 6bis “well-known”ness, and that’s more consistent with a search costs theory. But the TDRA takes the law in the opposite direction again, restricting protection to famous marks.
Likewise, the search costs theory can explain blurring, but not tarnishment, which is now enshrined in the statute.
This incoherence will allow courts to narrow the law to avoid creating rights in gross. V’s Secret offered some easy tools to do so, but others remain.
There are some cases where dilution has worked, revealing its true character – dilution law is a protection against unfair competition and dishonest commercial practices. Dilution worked really well as a substitute for ACPA until that law was enacted, prohibiting cybersquatting. The Paris Convention’s Article 10bis, on unfair competition, is a better source for an international obligation. “Taking unfair advantage of the distinctive character or repute of a mark,” as the EU version goes, is more honest. We should do something like that rather than put a grab-bag of actions within the trademark system, which inevitably distorts what is actually unfair competition. (For example, it creates weird problems of what counts as “use” as a mark for dilution purposes, which has spillovers into confusion analysis.)
But yet again the TDRA goes in the opposite direction by shutting off new forms of dilution, such as an independent cause of action against free riding.
A cautionary note: the US system of regulating competition less heavily may make unfair competition-based dilution less appropriate than it is in the EU, where free riding generally is more disfavored.
In sum: whatever good the TDRA does still leaves it open to a very uncertain future.
Rochelle Dreyfuss: What is the political economy of dilution? Why aren’t TM owners more resistant, given that dilution can be used against them?
Dinwoodie: There is a strategic calculation that mostly the big companies are going to win, and can buy off small companies. The 2006 amendment preempts state and federal dilution actions against federally registered marks, which also helps big TM owners. (Though note that INTA opposed any preemption at all.)
Mühlendahl: TM owners have been supportive of the EU approach, because unfair competition law isn’t harmonized as TM law is. The academic community was also supportive.
Dreyfuss: Was that for harmonization/unification reasons or a normative assessment of the merits?
Mühlendahl: The German influence was very high. And all countries voluntarily adopted the dilution provision, which was optional.
Bone: He’s dubious about letting judges rove around figuring out what’s unfair. By eliminating the TDRA, it might have value, but unfair competition begs the normative question of what’s unfair, and judges tend to think they know it when they see it. But judges don’t always agree. Judgments of unfair competition are often primitive kneejerk intuitions rather than well-thought-out – and the question becomes one of institutional competence; should judges be figuring this out piecemeal? Public choice problems with legislation mean that we’re choosing between two evils, but he’s still skeptical of judges.
Barton Beebe: What is Dinwoodie’s idea of unfair competition? We don’t have the “unfair advantage” language, meaning that judges are limited to dilution and tarnishment, or perhaps even to §43(a).
Dinwoodie: He agrees that descriptively unfair competition is unavailable under the TDRA. It shouldn’t be, though. Judges are better than legislatures because they make fact-specific interpretations that don’t turn into broad property rights. Even with bad decisions like PETA, which took eight years to dissipate, you don’t get the same stare decisis effect that legislation inevitably has.
Sheldon Halpern: It’s Kafkaesque to try to make an irrational statute rational. He doubts that the drafters intended to limit the scope of dilution to prevent a tertium quid like free riding, but that’s what happened when they were trying to define blurring and tarnishment. The task is to find ways to prevent this emerging right in gross from being unfairly applied. Halpern trusts judges more to prevent egregious results, especially since Congress isn’t about to repeal §43(c).
Bone: Initial interest confusion was created by judges, not Congress. Post-sale confusion was created by judges, not Congress. He can go on. The most egregious forms of unfairness are ones to which Congress will respond, as with ACPA. Would we live with cybersquatting until Congress acts? He thinks that’s a reasonable price, especially since Congress might act faster if courts say they can’t. Clearly there are areas in which one must give discretion to judges, but a broad unfair competition action risks substantial costs, not because judges are bad but because the problems are difficult and specific rules have broad and unintended consequences. Thus, though he likes judges, he doesn’t like a general unfair competition right.
Dreyfuss: A court at least has to look at the facts of a particular case, which Congress doesn’t.
Annette Kur: Americans wonder more about the rationale for dilution than Europeans, perhaps in part because of the pressure on Europeans to harmonize. Schechter was of course citing a German decision, so we started from similar places. We’ve both moved away from uniqueness to fame/reputation. Also, Schechter emphasized that protection must be granted against use on dissimilar goods and in the absence of confusion, but these are two different things. In Europe we’ve always been extremely concerned about the dissimilar goods part, whereas in America the nonconfusion part has been more problematic. It’s easier to grant protection against dissimilar goods because it’s easier to identify harm in some circumstances. Another difference: Europe is more ready to protect against a pure taking advantage of the mark even in the absence of damage. In the Rolls Royce case, for example, Rolls Royce didn’t suffer harm from being used as a symbol of luxury, but it was an unfair free ride anyway.
David Bruce Wolf: Before the Lanham Act, there was a national law of unfair competition. Section 44 of the Act does talk about unfair competition (and Dinwoodie says was to some extent inspired by the Paris Convention), but for some reason all our energy has gone into §43.
Dinwoodie: If that sleeping giant awoke, it could change things a lot.
Tony Reese: We’re selling federal judges short if we think statutory definitions of blurring and tarnishment are going to stop them from adding new things – judges were happy to use the old definition against cybersquatting and free riding. Since we don’t have a good theory of what blurring or “impairing distinctiveness” is, we can shovel a lot of things into blurring that might otherwise have been called tertium quid/free riding.
Dinwoodie: Read textually, it seems that courts can ignore the statutory blurring factors. Courts can surely do this, though it’s likely to create an apparatus of multiple factors.
Mühlendahl: German law is full of general clauses given content by courts, such as businesses having an obligation to conduct business in “good faith.” But it depends on the experience of the judges, which differs across jurisdictions. Given these differences, it’s a good idea to spell out the rights in the European context and have the ECJ around to resolve persistent conflicts.
Rights in gross: This has never been a problem in Europe, where many countries don’t care about a use requirement, much less assignment in gross. There’s no international exhaustion, allowing an infringement action against an unfaithful licensee where there is no confusion.
Geoffrey Hobbs: Avoiding rights in gross was part of English law, and getting rid of the doctrine was a big deal. But the idea that there are no rights in TMs as such is a quirk of history having to do with long-ago theories of court jurisdiction. Sooner or later it will disappear in the US too.
There are product-based limits on TM rights and geographic limits (rights are national in nature). Both sets of limits have been loosened in recent years and discussion about them has converged, though the EU has kept them more separate.
National rights reflect the political realities of sovereignity, trumping the real geographic borders of consumer understanding. Article 6bis creates an exception to territoriality by requiring protection for well-known marks if a junior use would create confusion as to similar goods. This was more important in registration-based systems than in the US, which recognized common-law marks.
Product-based limits on TM have been dissolved by the expansion of actionable types of confusion as well as by the rise of dilution. Dinwoodie has argued that TM law should proactively work to shape consumer expectations and refuse to recognize certain types of confusion, but it’s plain that TM confusion law has expanded according to concepts of consumer understanding. 1995’s dilution law, by contrast, was not generated by a change in consumer concepts but a change in the volume of brand value.
TM owners claimed, and Congress wrongly accepted, that dilution protection was required by articles in the 1994 TRIPs agreement, which require protection against uses of well-known marks on “dissimilar goods.” But these articles are explicitly stated to be extensions of 6bis – they are not dilution provisions, but an extension of protection to new types of confusion – confusion regarding services (6bis covers only goods) and confusion regarding dissimilar goods.
Why did Congress make this mistake? Strategically, it helped TM owners get what they wanted. And the language was slippery, letting “well-known” be confused with “famous.” This sort of adding by interpreting is common: 6bis doesn’t require protection of well-known marks without regard to use, whereas WIPO’s interpretation of 6bis says that use is irrelevant. And the US has put similar requirements into a bunch of trade agreements, making it a new part of actual law.
Advocates of dilution have simply piggybacked on a doctrine with similar terminology but a standard confusion rationale. Thus they didn’t have to offer a rationale for dilution protection, just an argument that we should fulfill our international obligations. There was no need for a theoretical construct of dilution. And in 2005 again, all we were doing is trying to interpret Congress’s intent in 1995 rather than creating a coherent intellectual defense of dilution. There still is no connection between the theory of dilution and the statute we now have.
One consequence: in the absence of a theory, courts will still be able to show hostility to dilution. Scholars have offered theories of dilution, but the law is only barely congruent with, e.g., Schechter’s theory. For example, Schechter’s theory of uniqueness would only protect fanciful or coined marks, but the TDRA takes the law in the opposite direction.
Or, if you buy the search costs theory (which he doesn’t, since the theory skips over the question of whether the benefits outweigh the costs), it’s not clear that famous marks are extra vulnerable to interference with search costs. In fact, they may be less vulnerable than medium-strong marks. In the EU, the threshold is “reputation,” which is a much lower hurdle than famousness or 6bis “well-known”ness, and that’s more consistent with a search costs theory. But the TDRA takes the law in the opposite direction again, restricting protection to famous marks.
Likewise, the search costs theory can explain blurring, but not tarnishment, which is now enshrined in the statute.
This incoherence will allow courts to narrow the law to avoid creating rights in gross. V’s Secret offered some easy tools to do so, but others remain.
There are some cases where dilution has worked, revealing its true character – dilution law is a protection against unfair competition and dishonest commercial practices. Dilution worked really well as a substitute for ACPA until that law was enacted, prohibiting cybersquatting. The Paris Convention’s Article 10bis, on unfair competition, is a better source for an international obligation. “Taking unfair advantage of the distinctive character or repute of a mark,” as the EU version goes, is more honest. We should do something like that rather than put a grab-bag of actions within the trademark system, which inevitably distorts what is actually unfair competition. (For example, it creates weird problems of what counts as “use” as a mark for dilution purposes, which has spillovers into confusion analysis.)
But yet again the TDRA goes in the opposite direction by shutting off new forms of dilution, such as an independent cause of action against free riding.
A cautionary note: the US system of regulating competition less heavily may make unfair competition-based dilution less appropriate than it is in the EU, where free riding generally is more disfavored.
In sum: whatever good the TDRA does still leaves it open to a very uncertain future.
Rochelle Dreyfuss: What is the political economy of dilution? Why aren’t TM owners more resistant, given that dilution can be used against them?
Dinwoodie: There is a strategic calculation that mostly the big companies are going to win, and can buy off small companies. The 2006 amendment preempts state and federal dilution actions against federally registered marks, which also helps big TM owners. (Though note that INTA opposed any preemption at all.)
Mühlendahl: TM owners have been supportive of the EU approach, because unfair competition law isn’t harmonized as TM law is. The academic community was also supportive.
Dreyfuss: Was that for harmonization/unification reasons or a normative assessment of the merits?
Mühlendahl: The German influence was very high. And all countries voluntarily adopted the dilution provision, which was optional.
Bone: He’s dubious about letting judges rove around figuring out what’s unfair. By eliminating the TDRA, it might have value, but unfair competition begs the normative question of what’s unfair, and judges tend to think they know it when they see it. But judges don’t always agree. Judgments of unfair competition are often primitive kneejerk intuitions rather than well-thought-out – and the question becomes one of institutional competence; should judges be figuring this out piecemeal? Public choice problems with legislation mean that we’re choosing between two evils, but he’s still skeptical of judges.
Barton Beebe: What is Dinwoodie’s idea of unfair competition? We don’t have the “unfair advantage” language, meaning that judges are limited to dilution and tarnishment, or perhaps even to §43(a).
Dinwoodie: He agrees that descriptively unfair competition is unavailable under the TDRA. It shouldn’t be, though. Judges are better than legislatures because they make fact-specific interpretations that don’t turn into broad property rights. Even with bad decisions like PETA, which took eight years to dissipate, you don’t get the same stare decisis effect that legislation inevitably has.
Sheldon Halpern: It’s Kafkaesque to try to make an irrational statute rational. He doubts that the drafters intended to limit the scope of dilution to prevent a tertium quid like free riding, but that’s what happened when they were trying to define blurring and tarnishment. The task is to find ways to prevent this emerging right in gross from being unfairly applied. Halpern trusts judges more to prevent egregious results, especially since Congress isn’t about to repeal §43(c).
Bone: Initial interest confusion was created by judges, not Congress. Post-sale confusion was created by judges, not Congress. He can go on. The most egregious forms of unfairness are ones to which Congress will respond, as with ACPA. Would we live with cybersquatting until Congress acts? He thinks that’s a reasonable price, especially since Congress might act faster if courts say they can’t. Clearly there are areas in which one must give discretion to judges, but a broad unfair competition action risks substantial costs, not because judges are bad but because the problems are difficult and specific rules have broad and unintended consequences. Thus, though he likes judges, he doesn’t like a general unfair competition right.
Dreyfuss: A court at least has to look at the facts of a particular case, which Congress doesn’t.
Annette Kur: Americans wonder more about the rationale for dilution than Europeans, perhaps in part because of the pressure on Europeans to harmonize. Schechter was of course citing a German decision, so we started from similar places. We’ve both moved away from uniqueness to fame/reputation. Also, Schechter emphasized that protection must be granted against use on dissimilar goods and in the absence of confusion, but these are two different things. In Europe we’ve always been extremely concerned about the dissimilar goods part, whereas in America the nonconfusion part has been more problematic. It’s easier to grant protection against dissimilar goods because it’s easier to identify harm in some circumstances. Another difference: Europe is more ready to protect against a pure taking advantage of the mark even in the absence of damage. In the Rolls Royce case, for example, Rolls Royce didn’t suffer harm from being used as a symbol of luxury, but it was an unfair free ride anyway.
David Bruce Wolf: Before the Lanham Act, there was a national law of unfair competition. Section 44 of the Act does talk about unfair competition (and Dinwoodie says was to some extent inspired by the Paris Convention), but for some reason all our energy has gone into §43.
Dinwoodie: If that sleeping giant awoke, it could change things a lot.
Tony Reese: We’re selling federal judges short if we think statutory definitions of blurring and tarnishment are going to stop them from adding new things – judges were happy to use the old definition against cybersquatting and free riding. Since we don’t have a good theory of what blurring or “impairing distinctiveness” is, we can shovel a lot of things into blurring that might otherwise have been called tertium quid/free riding.
Dinwoodie: Read textually, it seems that courts can ignore the statutory blurring factors. Courts can surely do this, though it’s likely to create an apparatus of multiple factors.
Mühlendahl: German law is full of general clauses given content by courts, such as businesses having an obligation to conduct business in “good faith.” But it depends on the experience of the judges, which differs across jurisdictions. Given these differences, it’s a good idea to spell out the rights in the European context and have the ECJ around to resolve persistent conflicts.
Rights in gross: This has never been a problem in Europe, where many countries don’t care about a use requirement, much less assignment in gross. There’s no international exhaustion, allowing an infringement action against an unfaithful licensee where there is no confusion.
Geoffrey Hobbs: Avoiding rights in gross was part of English law, and getting rid of the doctrine was a big deal. But the idea that there are no rights in TMs as such is a quirk of history having to do with long-ago theories of court jurisdiction. Sooner or later it will disappear in the US too.
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