Reputation economies

Reputation Economies Symposium at Yale Panel I: Making your name online!

Moderator: Laura DeNardis: Online, this panel might look different: the audience could rate the panelists, remix them, etc. The moderator could allow the panelists to pay for placement; there would be ads.

Michel Bauwens: His P2P Foundation wants to understand P2P dynamics in every area of social life. Key feature: Self-organized; structures arise from individual choice.

Emerging models: (1) sharing content, for self-directed reasons – there are weak ties among sharing communities; platforms like Google offer the ability to share the content because individuals can’t do it themselves. Most of the people in those systems are not there for monetary reasons. And there is a risk of crowding out nonmonetary incentives if you integrate revenue-sharing mechanisms (Benkler). Monetizing a sharing economy is a wrong.

(2) Commons-oriented production. People working on common product, e.g., Linux or Wikipedia. They have to engage with each other. Instead of using proprietary platforms, they use something like an NGO. The NGO creates an infrastructure with enough viscosity to sustain the project without monetizing it. (Comment: I see media fandom, where fans create fiction, videos, art, etc. based on popular shows, books, and movies, as having strong “engagement” features because in practice fanworks reflect on and engage with each other, and of course fans provide each other feedback. This is true even though Bauwens would categorize fanworks, hosted by corporate platforms fans don’t own, into (1) – the Organization for Transformative Works is an attempt to give fanworks a protected infrastructure to keep it from corporate appropriation.)

(3) Crowdsourcing: partial integration of P2P dynamics into the corporate value chain.

Rishab A. Ghosh: Economically, reputation is information about goods/people that is not encapsulated in the price. The formalization of the market price mechanism is missing in informal economies, which hinders decisionmaking, entirely separate from issues of incentives. How do you decide which open source project you want to devote your time to? This exists in formal economies too because price doesn’t encapsulate everything of relevance to your decisions.

“Exchange rates” of reputation: the bigger you are, the better of a deal you get – Linus Torvalds gets more than twice as much reputation than a programmer who does half as much useful work. (This is detailed quite intriguingly in Ghosh’s position paper.)

We need better ways to segregate reputation, so that the very best Provencal restaurant in town doesn’t get overall bad ratings because most people just don’t like Provencal food. Online reputation systems today tend to treat reputation as a single objective fact, but reputation is subjective and we need to figure out how to handle this context-sensitivity.

Auren Hoffman: The amount of data being collected on you is growing rapidly. It’s been growing every year. The rate of growth is not slowing. The number of actors collecting data is also growing hugely – it’s not just the government, as in 1984. Opt-in systems never reach critical mass. Opt-out gets critical mass and high adoption rate quickly – everyone wants in on Doubleclick and Experian’s databases. Benefits of opt-out: readily accessible credit, microtargeting (less spam), cookie-enabled websites. Consumers so far have made this bargain. The problem is these exponentially increasing curves are hurting privacy, and users are starting to rebel.

Hoffman proposes a new bargain – he thinks it will either be consumer-driven or government-imposed. Three components: (1) you should be able to find and know your data wherever it exists – no one should know more about you than you do; (2) you should own it, and be able to opt out either totally or selectively; (3) you should be able to share your data – move it to any service you want.

Moderator: we’ve heard a lot about the negatives of this shift to peer reputation. What are the positive aspects?

Ghosh: Reputation is essential to everything we do – as more decisions get made without the information provided by market pricing, reputation is more important. It’s just not now being implemented by mechanisms that work the same online as offline.

Hoffman: Reputation is contextual – Bill Clinton can be a good leader and a bad husband. Yale has a good reputation, unless you’re from Harvard. Reputation is overall an unsolvable problem. Only chunks of it can be measured well – the FICO score is good at saying how likely you are to pay back borrowed money, but nothing else.

Bauwens: We’re used to kinship groups. New mechanisms allow affinity-based groups to get larger and to trust one another in ways they couldn’t before – traveling to a strange city to stay on a stranger’s couch. (Fandom again!) What doesn’t work, and maybe shouldn’t, is going from one’s slashdot reputation to one’s eBay reputation. There’s a danger of a lowest-common-denominator effect if too much linkage of reputation occurs. If you use everyone’s rating, you get the worst overall. But if you look at what the people you most admire have been liking, you do better. (Bauwens contrasts digg to del.icio.us here.)

Hassan Masum: Problems of information overload – how much information can we stand? Why do we think reputation is important – to enable distributed collaboration, to complement mass media POV, to search through masses of information, to feed our egos, to enable us to decide with whom to transact, or what?

How do we aggregate trust when it’s weighted, subjective, asymmetric, and context-dependent? (Asymmetry is an excellent, excellent point. I keep thinking that everyone here should look at LiveJournal’s friends mechanism; with filters, even mutual “friends” can implement asymmetric interest/trust in one another, though if you’re filtered out of an entry you won’t know about it unless you’re informed through other means. Trust is implemented by each individual through LJ filters, but usually not expressed to others; even the people on a journaler’s filter can’t see who else is on it with them – it’s a blogging BCC.)

Audience: would you rather be highly rated by a small group of peers, or the world at large? Are there areas in which we’re all experts? (Democracy?)

Exemplars: What would it take to pick the most useful voices? Amazon is trying a most useful negative/most useful positive review system, which sounds promising.

How does creation time and number of creators affect reputation? Realtime (chat) v. long-term (book, blog); solo (writing/programming) v. collaborative.

Beth Noveck: Reputation is not simply about risk (managing identity, authentication, offline/online distinctions). People have real economic opportunities to create value by working with strangers. Increasingly, online reputation isn’t the product of the individual alone, nor is it the product of the service provider by eBay, but it’s the collective product of the members who did the rating. It is those sharing communities that should decide the rules about the disposition of one’s reputation online.

Reputation can depend on specific transactions in a marketplace – the Amazon model. Limitations: you get sockpuppets, or you can’t succeed without already having transactions. There’s the Linked-In model of social connections, which depends on your friends participating in the network. There’s the resume model: just put it out there – but again that depends on who you are.

How do individuals without extensive experience in a particular community establish reputation and shore up their promises? How do they guarantee themselves? You need reliable sanctions for defection. How can we enable different social groups to coalesce into bonding groups, providers of insurance? (I’m not sure how this would work. As discussed above, being a good knitter doesn’t mean you’ll be a good eBayer, so how would your knitting circle vouch for you?) Assurance from micro-elites, backed up by real financial teeth, is the way to go.

In discussion, Noveck elaborated (and she's also written an article, as she notes in her position paper): she's interested in ways of bonding performance, say likelihood of showing up and having a good attitude on an assignment. General reputation -- the social interactions that are common subjects of gossip -- is less amenable to bonding.

Family Guy is lawsuit guy

Following on the heels of Carol Burnett's unsuccessful suit, Art Metrano has sued Fox over the use of his act in the Family Guy movie, Stewie Griffin: The Untold Story. (Clips for comparison at TMZ; you can also easily find them on YouTube.)

My quick assessment: The unfavorable Burnett precedent is redundant here. The copyright claim raises some interesting theoretical questions: the complaint treats Metrano's copyright as one in the performance of his "signature" gestures, not in any particular fixation; I'd very much like to see that registration certificate. To the extent that a performance/persona itself isn't copyrightable, and his copyright is in particular fixations, cartoon Jesus's performance of the same gestures may simply not be substantially similar in expression. Perhaps it's a claim to choreography? But in the end that workhorse fair use may make this irrelevant, especially given that Metrano claims that the appropriation casts him into disrepute.

I'm not quite sure why Metrano brought only federal dilution claims; he can't possibly win them -- for one thing, it may be enraging that the public now calls his act the "Jesus dance," because they associate it with the Family Guy clip, but that's pretty good evidence of absence of fame. His Lanham Act claims, by the way, are for the trade dress of his routine. Aesthetic functionality?

I'm also not quite clear on the point of the common law misappropriation of name and likeness claim (distinct from the common law right of publicity claim). In particular, this may be Metrano's "signature" act, but it is neither his name nor his likeness. It's really a right of privacy claim, but I can't imagine that there is a valid right of privacy in a routine that one, well, routinely performs in public and posts on one's website (warning: music).

The future of copying

Deven Desai linked to this very interesting commentary on Kindle, Amazon's new(est) book reader. It is entirely worth reading on its own account; I would merely point out that it is an excellent example of commentary created entirely through copying and selection, coordination and arrangement. It is highly "transformative," in the language fair use cases encourage us to use these days, even though it is pure copying.

Apologies for the recent silence; I am trying to get other writing done, but I should be blogging the Reputation Economies symposium at Yale in a few days.

(edited to correct identity of linking party)

Against attribution rights

I had the privilege earlier this week of visiting DePaul as a Hosier Distinguished Scholar. I gave a talk about attribution rights, the subject of a forthcoming piece in the Utah Law Review – I had intended to write a proposal to grant some sort of attribution right, but the more I wrote, the less well it worked, so I ended up writing an argument against legal enforcement of attribution norms.

Here are some notes from my talk:

I frame the question as one of when law should intervene to enforce valid social and moral norms. This makes me think about the heartbalm torts, including alienation of affection, breach of promise to marry, and criminal conversation. These were largely eliminated in the first half of the 20^th century as legislatures and courts decided that human relationships were too complicated to reduce to write and wrong, and that the torts were being abused by the undeserving – gold-diggers, in that case. These two arguments are in some tension, but together proved persuasive in the decline of the hearbalm torts. I make pretty much the same two arguments against moral rights, and you could fairly question me on that.

The heartbalm torts offer a story of the de-legalization of morality. Another possible analogy might be employment at will, where we have moved from near-complete legal freedom to much less freedom; this can be described as the legalization of morality. Moral rights might be like that – proponents argue that attribution rights should be added to what authors can get through contract.

I identify three sets of arguments for attribution rights. First, there are arguments from authorial high-protectionists. The object of concern: authors. Potential bad actors: owners to whom copyright has been transferred and follow-on authors who may distort/violate a text. Goal: protect the author’s special relationship to the text.

Second, copyright low-protectionists. The objects of concern: audiences and works, not authors. We want to feed authors the minimum possible to encourage them to run in their cages, generating new works. Potential bad actors: copyright owners, who may suppress access and/or extract monopoly rents. Goal: Access. Copyright low-protectionism helps authors insofar as they seek dissemination of their works and credit for them, not control. Low-protectionism also sometimes encompasses compulsory licensing, providing compensation but not control.

Third, trademark-style consumer protectionists. The object of concern: consumers, not in their special role as audiences, but simply as market participants. Potential bad actors: Deceptive marketers, whether initial authors, copyright owners, or non-owner publishers, who may induce consumers to spend time or money inconsistent with their actual preferences. Goal: Enabling rational, undeceived choice.

Can an attribution right be defended on these grounds? I conclude that the second, copyright low-protectionism, is empty – it endorses attribution as a substitute for things it doesn’t like nearly as much, especially control. Copyright low-protectionists are author’s rights advocates, but (once a minimum of copyright protection exists sufficient to incentivize creation) only when authors’ rights don’t interfere with access.

For the others, attribution rights founder in two places: First, the separation of ownership and authorship in the American system. Because copyright is transferrable, and because so many significant works are works for hire, attribution would either create huge practical problems – the same problems that pop up in every joint authorship case – or would have to be limited to a subset of works that are more likely to have single identifiable authors. The practical problems of attribution in multiple-creator works exist even in highly developed and concentrated fields like Hollywood moviemaking, in which 1/3 of films go to arbitration about proper screenwriting credit and everyone involved ends up feeling cheated. Legal rights would just increase the number of battlefields; if experts can’t make the system work predictably after decades, juries and judges are unlikely to do better (and it’s no surprise that a case-by-case system is unpredictable, just like substantial similarity determinations). Among the quirks of creative production is that people routinely disagree about how much they contributed to a work or a project; ask any group, and you’ll get estimates of contribution that add to well over 100%.

The limiting-works solution, by contrast, is bad because it would further entrench the devaluation of joint work and creative production in fields like moviemaking. That’s a theoretical objection, but I think it’s one that ought to resonate with authors’ rights advocates, and of course consumer protectionists are generally thinking about deception in precisely the types of mass-market works that are often works for hire, like (Stephen King’s) Lawnmower Man, so a work-limited right isn’t all that helpful.

Second, any attribution right that doesn’t allow suppression of a work is going to be ineffective a lot of the time. You can’t make people notice attribution (at least not without destroying a bunch of aesthetic value) and you can’t make them care. This is an obvious problem for consumer protectionists, and also I think a serious problem for authors’ rights advocates. If there is an important connection between author and text that ought to be preserved, ineffective attribution doesn’t further the artist’s right, which is one that goes to interpretation by the audience.

For more, please read the paper!

Chiasmus of the day

Gregory P. Magarian, Market Triumphalism, Electoral Pathologies, and the Abiding Wisdom of First Amendment Access Rights, 35 Hofstra L. Rev. 1373, 1391 (2007) (footnotes omitted):

Because conservative libertarians ascribe absolute legitimacy to market distributions, the mere possibility that an access rights regime might have disadvantages or might fail to achieve its aims suffices to condemn it. Conversely, conservative libertarians dismiss concerns about nongovernmental suppression of expression by invoking a rigid public-private distinction, which denies corporations and other private entities any legally cognizable capacity to undermine expressive freedom. Any attempt to ameliorate privately driven constraints on expression runs aground on the twinned convictions that government can only harm expressive freedom and that only government can harm expressive freedom.

"Vista capable": capable of confusion?

Apparently even one of Microsoft's marketers had some trouble explaining what "Vista capable" meant in the context of logos applied to computers that could only run Vista Basic, not the advanced features on which Microsoft's ads focused. Story here.

Fashion photos: despite brawl, copyright belongs to photographer

Tang v. Putruss, --- F. Supp. 2d ----, 2007 WL 2909459 (E.D. Mich.)

Plaintiff Tang is a photographer. Defendant Putruss is the principal of Maria’s Collection, which sells designer clothing, and defendant Pageantry publishes a trade magazine. Tang and Putruss arranged a photo shoot in August 2005. According to Tang, each photo used would credit Tang, and partial payment was made in advance. When the images were delivered and the balance paid, Tang was going to issue a license. Putruss gave Tang a $2000 deposit, leaving a $2000 balance.

At the photo shoot, more images and dresses were used than the parties anticipated. According to Tang, their agreement provided for extra fees for extra hours and dresses, such that his remaining fee was $5050, not $2000. A few days later, Tang sent two “associates” to pick up the balance and hand over the images, but Putruss refused to pay and forcibly took the DVDs on which the images were stored. Putruss was charged with assault and battery against one of Tang’s associates, and pled no contest.

Tang alleged infringement of his public display right. He also alleged that he told Pageantry that his images were unlicensed, but Pageantry still reproduced one in its Winter 2005 issue.

Among other things, the court ruled on questions of joint authorship and the number of works infringed for purposes of calculating statutory damages.

Putruss was involved with the photo shoot, selecting the models, the gowns, and the accessories for each. He also requested certain poses and made suggestions. Regardless of the extent of his contributions, however, Tang argued that they didn’t intend to be joint authors, and that his contributions were not independently copyrightable. The district court determined that it would apply the requirement that a person contribute independently copyrightable material in order to be considered a joint author, but in the end that wasn’t important, because the court found insufficient evidence of intent to jointly author the photos.

The court reviewed prior cases involving photographs. In SHL Imaging, Inc. v. Artisan House, Inc., 117 F. Supp. 2d 301 (S.D.N.Y. 2000), the court found that the defendant frame manufacturer was not a joint author of photos taken by a photographer hired to take photos of framed mirrors. There, the photographer selected all the equipment, arranged the lighting, and chose the framing. The manufacturer’s selection of subject matter and right to control the photos were insufficient, especially in the absence of other evidence such as joint credit or copyright notices on the work. In Brod v. General Publishing Group, Inc., 32 Fed. Appx. 231 (9th Cir. 2001), by contrast, the court found joint authorship, where the defendant asked the plaintiff to take photos of vintage TVs for a planned book. Along with coming up with the idea, the defendant arranged the composition, directed the plaintiff to change camera angles, and enhanced the images; he even looked at an initial Polaroid test photo of each image and made suggestions before the plaintiff took the final version. This was sufficient artistic control to be a co-author. Moreover, the plaintiff “deferred” to the defendant and listed the completion date in the copyright registration as the date the book was completed, providing objective evidence of an intent to co-author.

The court found Putruss’s level of artistic control closer to that in SHL Imaging than Brod. Though Putruss offered suggestions that Tang accepted, he didn’t exercise “a high degree of control.” He was responsible for the subject matter of the photos, not the taking of the photos themselves. The court specifically noted that Tang supplied the photographic equipment – a use of professional status to indicate authorship – and arranged the lighting.

Moreover, Putruss lacked objective indicia of an intent to be joint authors. The parties’ contract was silent on authorship, but made clear that the images would be delivered when payment was received. Tang’s ability to withhold the images indicated that there was no intent to be joint authors. Tang’s other actions shortly after the shoot – registering the copyright in his name, telling third parties not to run the photos -- are consistent with sole authorship.

However, Putruss had an implied license to use the images on the first CD, the one Tang voluntarily delivered to him with the intention that Putruss could copy and distribute them. Tang’s remedy for Putruss’s failure to pay for those is a breach of contract claim.

The court ruled, based on the existence of a single registration and the “independent economic life” doctrine, there was only one “work” for damages purposes. Photos of models wearing Putruss’s line of dresses have no independent economic value, even if each photo has artistic merit. They were taken at a single session, by a single photographer, for a single purpose. So Tang is only entitled to one award of statutory damages for the photos as a whole. Thus, the implied license finding above amounts to a finding that Putruss had a license to sample a particular portion of the work, but not to use other portions.

Harder, better, faster, cover.

I was listening to 30 Seconds to Mars cover Kanye West’s Stronger, and it occurred to me that covering songs that, in the original, contain samples is not an easy matter. Stronger samples Daft Punk under license. 30 Seconds to Mars does not sample Kanye or Daft Punk, just sings both parts, so it has no problems with the sound recording copyright. In addition, the musical work Stronger is subject to a compulsory license. But the musical work excerpt from Daft Punk wouldn’t be – unless there’s some theory that the voluntarily licensed incorporation of the Daft Punk musical work into Stronger allows compulsory licensing of the entire new work.

I wonder what the contract says about Daft Punk’s participation in royalties from the musical work; if Daft Punk gets a share, isn’t that an argument that it shouldn’t also be entitled to demand a voluntary license from anyone who covers the song? If Daft Punk does have separate rights against a cover artist, then there’s a way around the musical work compulsory license: make sure your musical work has a voluntarily licensed portion from another song, and then no cover can proceed without another voluntary license. (That presumes, of course, that eliminating the licensed portion would fundamentally change the musical work. If it wouldn’t, the cover can proceed, sans sample.)

This isn’t just limited to sampling, of course. Anyone who covers My Sweet Lord is also, according to precedent, copying He’s So Fine, but not in a way subject to the compulsory license. Bridgeport Music, I believe, has already noticed this issue. Indie rockers ironically covering hip-hop, take note.

There's just no way to make "chicken by-products" sound appealing

Which is why pet food makers who use them don't like to mention them, I presume.

Hill's Pet Nutrition, Inc. v. Nutro Products, Inc., 2007 WL 4105571 (C.D. Cal.)

Hill’s, maker of the very Science Diet I feed my cat, sued competing pet food producer Nutro for, among other things, false advertising. A couple of points: a statement on Nutro’s “Health Lesson” ad display that its Complete Care “offers the optimum combination of premium ingredients” was nonactionable puffery. Hill’s also challenged various statements allegedly implying that Complete Care doesn’t contain animal byproducts, but did not show admissible evidence of consumer deception. Likewise, as to Nutro’s MAX Cat product, the court granted summary judgment on the claim that Nutro’s ad display falsely implied that chicken by-products are unhealthy for lack of evidence of deception, but, based on a consumer survey, allowed Hill’s to proceed against the alleged implication that MAX Cat doesn’t contain animal by-products.

The court also denied summary judgment regarding the statement that MAX Cat’s chicken meal is made only from those parts “you’d feed your own family,” based on an industry organization’s pet food labeling guide, which states that such claims are “false and misleading unless the entire product, itself, meets the USDA and FDA standards for feeds edible by humans.” Industry consensus is rarely used to show falsity, much less misleadingness, but it can happen.

Hill’s also claimed that Nutro infringed Hill’s “Nature’s Best” mark by using “Nature’s Very Best Ingredients” on its displays and “The Best of Nature” on its packaging. The court granted summary judgment in favor of Nutro based on the weakness of the “Nature’s Best” mark. The court referred to the absence of evidence of actual confusion and “obvious dissimilarity” in sight, sound, and meaning, but neither of those would have been all that helpful if not for the high descriptiveness of the mark. The court also noted differences in the parties’ house marks, and pointed out that Nutro’s slogan is actually “The Best of Nature. The Best of Science. The Best of Health.” Taken as a whole, it wasn’t likely to confuse.

Giving thanks to the Consumer Law & Policy Blog

Misleading holiday food items here.

Deceptive advertising case leads to aggressive advertising

Anti-lawyer advertising, that is, when a dispute over Hogan & Hartson's work on a Colorado state deceptive advertising claim against one of its clients led to a lawsuit and some bitter anti-Hogan newspaper ads.

Nip/Sucker: Reality TV as advertising

On the heels of a recent decision immunizing a radio station from liability for the professionals highlighted/advertised by its programs, the LAT runs a story on the promotional effects of reality TV for doctor-stars, and the skewed perceptions of those doctors' expertise and the risks of plastic surgery produced thereby:

Even as shows such as "Doctor 90210," "Extreme Makeover" and "The Swan" have thrust telegenic doctors into the limelight, it remains unclear what standards networks use in selecting the physicians -- or how closely they check credentials.

.... Meanwhile, their rank-and-file colleagues and the American Medical Assn. are growing worried that reality-TV doctors and the producers of the shows distort what plastic surgeons do by over-hyping the results and downplaying the pain, complications and risks associated with surgery. The shows and their celebrity doctors, they contend, mislead consumers into thinking cosmetic surgery is not much more complicated than buying a new dress.

"TV is looking for the best doctors who will show well and get ratings. They have to have looks and personality," said Dr. Valerie J. Ablaza, a board-certified plastic surgeon in Montclair, N.J. "But there are no criteria for evaluating their medical credentials. That's a big problem."

.... In the first study documenting the influence of shows such as "Extreme Makeover," researchers found that reality TV shows directly influence first-time patients who decide to have cosmetic plastic surgery. The study was published in the July issue of the journal Plastic and Reconstructive Surgery.

"These folks were really avid watchers and believed what they saw on TV was a reflection of reality," said Dr. Richard A. D'Amico, president of the American Society of Plastic Surgeons and chief of the department of plastic surgery at Englewood Hospital and Medical Center in Englewood, N.J.

In the less enthralling real world, however, results are not always predictable. A 2004 study published in Plastic and Reconstructive Surgery of procedures performed in office-based surgical facilities found that serious complications occurred in one in 298 cases and deaths in one in 51,459 cases.

.... Adds D'Amico about celebrity TV doctors in general: "TV doctors, to me, are the most dangerous, because they may or may not have the true credentials or the expertise. . . . But the public perceives they have credibility because they are on TV."

Mixed ruling for chiropractors against insurers

Encompass Insurance Co. v. Giampa, --- F.Supp.2d ----, 2007 WL 3359703 (D. Mass.)

Plaintiff sued five people (one named Edward Kennedy, but not the Senator of that name) and two businesses that provide chiropractic services, alleging fraud in obtaining insurance benefits for services that were excessive, unnecessary, or never even provided. Defendants counterclaimed based on the lawsuit and an accompanying press release, alleging defamation and libel; intentional interference with advantageous business relations; unfair and deceptive acts or practices under Massachusett’s Chapter 93A; and false advertising in violation of the Lanham Act.

The court dismissed all the counterclaims except the defamation/libel and Chapter 93A claims based on statements in the press release that could fairly be read to characterize the defendants as criminals.

In 2005, based on an extensive investigation, Encompass sued defendants for fraud, RICO violations, etc. Defendants contend that Encompass lacked a good faith basis for its claims. Two days after filing suit, Encompass issued a press release, “Boston Area Chiropractors Named in Million-Dollar Fraud Case.” Among other things, an Allstate VP (Allstate operates Encompass) stated, “these judgments against criminals range from individuals to sophisticated organized crime syndicates,” and the press release continued: “In addition to financial victories, Allstate and Encompass SIU work closely with local, state, and federal authorities for criminal investigation and prosecution--resulting in arrests around the country, taking criminals off the street.” The press release was disseminated in the trade and by various media outlets.

Encompass argued that it was entitled to the absolute litigation privilege. Though this privilege covers statements made in connection with filing and prosecuting a lawsuit, it doesn’t absolutely cover press releases like this one. Unreasonable and unnecessary statements outside the lawsuit can negate the privilege. Here, plaintiff not only repeated the complaint’s allegations, but added “statements about its investigation, the costs of insurance fraud to consumers and the insurance industry, and Encompass' commitment to fighting fraud and prosecuting criminals.” In fact, statements to newspapers and in press conferences are generally excluded from the absolute privilege, since protection for such statements is not necessary to further the policy of encouraging full investigation of claims and communication of those claims to the court and other parties.

The Lanham Act claims, however, faced an obvious standing barrier. Whatever the test applied, defendants couldn’t show any competitive injury.

To state a claim for defamation, plaintiff must allege both falsity and negligence. The court found these elements sufficiently pleaded at this stage of the litigation, but only “to the extent that the statements describing insurance fraud as a crime, discussing Allstate's financial victories against criminals and describing Encompass' efforts to take criminals off the street could reasonably be interpreted as falsely accusing the defendants of criminal behavior.” Those statements on their face don’t concern the defendants, but in the context of the whole press release, they could reasonably be seen to falsely impute criminal behavior to defendants. There’s nothing in the record suggesting criminal charges have been or could be brought, so defendants satisfied their pleading burden.

Statements of the amount in controversy and the length of the pre-suit investigation, however, were true and thus not actionable, even though defendants alleged that Encompass “grossly exaggerated” the nature of the case and the amount in controversy. Even if the complaint had no basis, Encompass actually did ask for $1.8 million in damages, so calling the lawsuit an "$1.8 million case" is an “unrefutable statement of fact.”

Fault was adequately alleged, because state of mind can be averred generally. Encompass retains other defenses, like the fact/opinion distinction, but those have to be argued on summary judgment.

Defendants also asserted claims for intentional interference with business relations between themselves and their patients, prospective patients, and other insurance companies. These were dismissed because defendants failed to allege intentional interference, even though plaintiff’s knowledge of those relationships can be inferred from the pleadings. Though the counterclaims allege “wrongful” interference, and even intent to damage their reputations, there are no allegations that Encompass intended to interfere with business relationships.

Defendants’ counterclaims for violations of Chapter 93A (barring unfair or deceptive acts or practices) survived to the extent that they were predicated on the allegedly defamatory statements in the press release, but not to the extent they were based on the lawsuit. Though filing a frivolous lawsuit can violate Chapter 93A, defendants failed to allege any specific facts supporting the claim of frivolity or ulterior motive.

Radio nowhere: no duty to investigate program sponsors

Park v. Korea Radio USA, Inc., 2007 WL 3358139 (Cal. App. 2 Dist.)

Plaintiffs gave money to two investment companies but the companies diverted the funds for their own use. Plaintiffs here sued the two radio stations on which the companies had investment programs, alleging negligent endorsement and promotion of the companies as qualified and trustworthy.

Specificially, plaintiffs alleged that the defendants gave the companies “free radio time during prime commuting hours” to advertise themselves. During the programs, company “hosts” gave financial advice, answered listener questions, and solicited new business. The stations produced content for the companies’ programs, including by providing employees to play the roles of ordinary consumers and provide voice commentary during the programs. When listeners called the stations, defendants referred them to the investment companies. The complaint alleged that the radio stations promoted and endorsed the companies “as licensed experts in the fields of financial planning and investment advice” and that the radio stations knew or should have known that listeners would rely on this endorsement, given that the stations were dominant media with extraordinary influence in the Korean community and understood the expectations of that community.

Thus, the stations allegedly breached their duty to exercise due care “by failing to investigate whether the hosts were licensed, by failing to determine if the hosts were investing plaintiffs' funds as represented, and by failing to warn listeners that defendants took no responsibility for the hosts' actions.” Also, the stations negligently made express and implied misrepresentations about the investment companies’ qualifications and experience.

The court determined that there could be no negligence because the defendants owed no duties to the plaintiffs. A publisher is not liable for simply failing to investigate an advertiser’s product or claim, nor for failing to warn of potentially false advertising. There were no formal endorsements of the investment companies, nor explicit representations that the stations had researched the companies and had faith in them. (I’m not sure this gets at participation in creating program content, but perhaps station employees only did “and now a word from our sponsor”-type statements.) “Because defendants never undertook the task of vetting or recommending the hosts, no duty to plaintiffs arose.”

Moreover, “merely printing an advertisement in a magazine does not constitute an endorsement of the product because there is neither a representation about the product nor a specific effort to promote it. By the same reasoning, the mere fact that defendants engaged the hosts to broadcast financial shows did not equate with an endorsement of their services or a warranty of their integrity.” In fact, the court continued, “no reasonable listener would infer an endorsement simply because a radio station broadcasts a program.” If only courts in right of publicity/trademark cases would be so careful about finding implied endorsements!

Even prominence in a niche market such as the Korean community cannot substitute for an explicit endorsement. (This does raise questions about cultures in which explicit statements are disfavored, but messages nonetheless readily understood. I am reminded of work on patent inventorship disputes that involve claimants other than native-born Americans who argue that cultural norms prevented them from making explicit inventorship claims.)

The court emphasized that this wasn’t a case about money lost because of reliance on bad investment advice or other broadcast contents. Instead, this is about the “patina of legitimacy” conferred on the investment companies by the radio stations. But there’s no duty for the broadcaster to monitor its hosts’ actions to ensure they invested the money as advertised.

More trademark than trademark

The NYT Magazine’s Consumed has a story about Last Exit to Nowhere, a British purveyor of T-shirts advertising fictional brands from (largely American) films, including Blade Runner, with the Tyrell company's slogan More Human Than Human. (Battlestar Galactica interpretation here.) The T-shirts would cost an American about $45 with shipping, though if you’re willing to draw from the smaller screen, you can get shirts on the same theme much cheaper from Television Without Pity (blogged about here). The Consumed story makes the point that the recognizable fictional brands mock branding while also engaging in it at the level of reference to the original movie, and not all the TWoP shirts make that double move, but I still like them a lot.

A “PK Tech” shirt would win my undying gratitude, personally.