Fordham IP Law & Policy Conference: copyright in the morning

Fordham Intellectual Property Law Institute, Sixteenth Annual Conference, Intellectual Property Law & Policy

Orphan Works legislation in the U.S. and around the World

Moderator:

Steven J. Metalitz, Mitchell Silberberg & Knupp, Wash. D.C.

Speakers:

Prof. Willem Grosheide, University of Utrecht

Orphan Works Regulation: The European Perspective

Oliver Metzger, U.S. Copyright Office, Wash. D.C.

Orphan Works Legislation in the U.S.

Panelists:

Tilman Lüder, Head of Unit, Copyright and Knowledge-based Economy, DG Internal Market and Services, European Commission, Brussels

Jule L. Sigall, Senior Policy Counsel/Copyright & Trademark, Microsoft Corp., Redmond

Unfortunately, the subway delayed me so that I missed most of the initial discussion.

Metzger: Proposals to change the Copyright Office’s draft orphan works proposal:

Clearer guidance as to search criteria—you must follow leads that develop during the search even if they aren’t on your checklist of best practices

Incorporate best practices from industry

Certify electronic databases purporting to link PGS works to owners

If no info appears on the face of the photo, you still can’t just stop; you have to do something more

He classified some of the proposals as speed bumps: slowing down bad actors

Put definition of reasonable compensation in statute

User should have to plead orphan works early in litigation rather than during remedy phase

Attorneys’ fees if bad faith negotiation of reasonable compensation—persistent complaint of photographers was that their licenses are low value; taking statutory damages off the table makes lawsuits impossible

Limit orphan works protection to nonprofit or nonfiction uses

Q: Europe lacks a registration system; how do you solve orphan works there?

Lüder: Collecting societies! They have extensive databases and are work-specific. If you check with the photographers and painters, that would be diligent (if you went to the various member states). One option is an extended collective management of orphan works—escrowing compensation for orphan works (and expecting that the orphan’s owner will never show up, and eventually the money can be spent elsewhere). Sweden: if a collecting society represents a substantial number of Swedish authors in the field, the society is deemed to represent all those authors.

Other options: The Gowers report in the UK: create a copyright exception. Europe has to date seen this as a clearance issue—a difficulty in obtaining a license. But Gowers proposes an exception, which would require an amendment to the Information Society Directive. This probably is too ambitious. Another option is having some public body grant a license immunizing the user from anything but a reasonable royalty on future uses if the owner shows up. The problem is that there is no central body to do that right now.

Sigall: We need incremental change, not wholesale. Tinkers with remedies, not rights and exceptions; unintended consequences are greater with rights and exceptions—US correctly took the remedy approach in sec. 512 (comment: and we know of course there were no unintended consequences there!). This is a good change because it’s largely nondisruptive of current practices. To the extent a country already has collective rights organizations, you take advantage of them. Reasonable search as a requirement is adaptive and evolves over time, and is appropriate for a problem that spans all types of works and all types of users. Each sector has its own concerns that are hard to address with generalized rules.

Metzger: Even in music, one of the collecting societies proposed that music be entirely exempted because their databases were comprehensive. That painted a target on them: six comments replied that they’d searched and not found particular musical works, like Yiddish folk songs. Without a concept of virtual/extended representation, collecting societies will not be perfect.

Lüder: This is a particular concern with respect to materials of interest to archival uses, which are more likely to be left out of the databases.

Metzger, in response to question about photos: We allow group registration—you can send 1000 photos to the Copyright Office with no description, and so checking with the Copyright Office based on a description of the image will be useless. Registration just isn’t helpful. The Corbis database, however, might help you identify an image, and part of reasonable search for a photo might be doing that.

Jones, Access Copyright (Canada): Access Copyright plays a continued search function—looking for the copyright owner after the orphan works license has issued, and they’ve allocated over 50% of the royalties. They are using a staff of 5 librarians to search every year. Information that wasn’t available a year ago becomes available. (Comment: Available to an expert with significant resources to devote to the problem.)

Metzger: The investment decisions should be able to be made at a particular time—the printing press has to roll at some time. So the Office didn’t require any ongoing search that would retroactively undo the categorization. If you want to make a new use, you need a fresh search.

Comment: the idea was the collecting societies, not the users, would keep looking for the orphan work’s owner—that’s where the tech is playing an evolving role.

Metzger: That was a consideration in the Copyright Office, and it was why we didn’t want to fix the meaning of reasonable because tech and markets change over time.

Comment about EC: Trying to develop search guidelines sector by sector. Every country in Europe has elaborate film museums and archives; France keeps a register of all contracts relating to cinematographic works. So expect some guidelines.

Lüder: What happens if a work is recognized as an orphan in one country? Will there be reciprocity?

Metzger: The US approach is not to designate the work as an orphan, except via shorthand, but to designate a relation between a defendant/user and a work. So national status may be relevant to what a reasonable search is. So there’d be no particular way to recognize an orphan works designation from another country.

Access Copyright fellow: We issue licenses only in Canada. But research done in Europe would weigh heavily in deciding to issue a license. (Comment: It seems to me that Access Copyright could claim that a US user ought to pay it for a Canadian orphan work, and that failing to do so is unreasonable even if Access Copyright isn’t the copyright owner. I don’t know how that would play out—if that argument is accepted, then orphan works legislation would work like the Texaco and Kinko’s cases to encourage the development of collective licensing schemes even when the licensor doesn’t actually own or have rights to license many of the particular works at issue.)

Copyright Developments in Canada, Australia and New Zealand

Moderator:

Prof. Robert Burrell , University of Queensland, Brisbane

Canada

Prof. Daniel Gervais, Acting Dean of Common law, University of Ottawa

Recent Developments in Canadian Case Law

Parallel imports of chocolate bars, defeating the exclusivity of the Canadian licensee. There was no trademark claim because there was no difference in the products, which suffices under Canadian law, and so the Canadian licensee sued for secondary infringement. To win, Kraft Canada had to show (1) a valid copyright in logos; (2) sale of them; (3) if they’d been made in Canada by the actual maker (in this case Kraft’s parent company) they would have infringed the copyright. Kraft was successful at early stages, but the Supreme Court heard the appeal. Arguments: (1) the logos are incidental to the sale of the chocolate, and copyright shouldn’t apply; (2) Kraft’s parent company is the copyright owner; despite the exclusive license, they can’t infringe a copyright they in fact own.

There were several opinions; the only thing that all 9 agreed on was that copyright protects logos. Some argued that there was no legitimate economic interest in protecting the logo instead of the chocolate. If the reasonable consumer had to decide whether the logos are important to the transaction, the answer would be “no.” But 4 justices thought there was no primary infringement because the exclusive licensee could not sue its parent for infringement, and thus no secondary infringement.

Quality King doesn’t apply here: the labels were made elsewhere, so this fact pattern would have been infringement under US law.

Other trends: increasing use of statutory and punitive damages in copyright cases. One court added $40,000 in punitive above actual damages. In a case involving Microsoft, a court gave maximum statutory damages for each infringement, which was $500,000, plus $200,000 in punitive damages.

A federal court of appeals prevented the Copyright Board from certifying a private copying levy on digital audio devices based on the memory in those devices.

Justice William Vancise, Chairman, Copyright Board of Canada

What are “adequate reasons” in a Decision of the Canadian Copyright Board? To what Degree Should Appellate Courts Defer to the Expertise of Specialized Tribunals? And Do They?

Vancise is not happy about the last decision discussed by Gervais. The Board recently affirmed its earlier decision and provided more reasons for doing so.

Steven J. Metalitz, Mitchell Silberberg & Knupp LLP, Wash. D.C.,

Why Canada should be put on the Special 301 Priority Watch List for 2008.

Metalitz suggests that we shouldn’t get distracted by whose law is better (yeah, why should we do that?) or whose dollar is stronger; Canada has many nice features IP owners would like to see in the US, but there are also problems.

Two big problems: (1) Enforcement. Customs officials don’t have the authority to seize pirated/counterfeited goods without a court order, which is hard to get. There’s a general problem of lack of resources devoted to copyright enforcement. There’s a longstanding policy of not acting against retailers even though they’re often burning their own pirate copies. Sentences are often minimal; there’s no confiscation of proceeds of the crime.

(2) Modernization. WIPO Internet treaties are now 12 years old and Canada has done nothing. The Canadian government agrees—parliamentary reports recognize new laws are needed. We’re not talking about copying US law; many countries around the world have complied using legal regimes quite different from the US. It’s blinking at reality to say that a country that won’t comply with a 12-year-old treaty, with New Zealand the only other OECD holdout, is adequately enforcing the law against online piracy. Canada has the highest per-capita incidence of unauthorized file-sharing in the world, according to the OECD. Canada is a leading source of mod chips to circumvent access controls on video games.

Notice and takedown: Not strictly speaking required by the treaties, but many countries provide adequate and effective enforcement through a notice and takedown regime. Likewise, a growing consensus that P2P services induce infringement; should be made clear in Canada as well.

Howard Knopf, Counsel, Macera & Jarzyna LLP, Ottawa

How Canadian Copyright Law is already Stronger and Better than U.S. Law, and Why the U.S. Should Look in the Mirror Rather than at its “Special 301” Watch List

If the US could be on its own watch list, it would be.

There about 15 ways in which Canadian copyright law is better for copyright owners: broadcasters pay a lot more; small businesses, bars, restaurants etc. have to pay for background music as opposed to the US’s open defiance of the WTO; Canada has neighboring rights, worth $16 million/year in commercial radio alone (and given that Canada is about 1/15^th the size of the US market, that would be 15 times bigger if the US had it); blank media levy; educators pay more; moral rights; no work for hire doctrine; 3 dozen copyright collectives, most of which are subsidized by the government; fulltime copyright board subsidized by the government; no parody right; no timeshifting exemption; Crown copyright; no sovereign immunity for provinces as there is for US states. Irving Berlin’s works are going to be protected longer in Canada than in the US. US may also have a “making available” problem given how case law is developing in the district courts.

Canada’s government doesn’t take 301 terribly seriously. Putting Canada in the same company as Korea and China? Knopf has never seen counterfeit goods for sale openly on the street in Canada as on the streets of NYC and Washington. There was a bust of 250,000 counterfeit CDs just recently. Enforcement is fine.

Canada has no obligation to implement the WIPO Treaty. Bruce Lehman has said that DRM was a big mistake, and we shouldn’t repeat that. If the US lightened up, Canada might move towards it—we don’t need strong DRM, but perhaps consumer protection from DRM. Asking us to do DMCA-like provisions is wrong. The issue has become politicized, due to extensive lobbying.

Panelist: Richard Pfohl, General Counsel, Canadian Recording Industry Ass’n, Toronto

Neighboring rights etc. are irrelevant to two core issues: DRM and enforcement. Canada’s not as bad as Russia, but that’s not a recommendation. Virtually everyone else has ratified the WIPO treaties and Canada lags. (Comment: And if every other country jumped off the Brooklyn Bridge, would you want Canada to do it too?) There is business consensus on this—the Canadian Chamber of Commerce are allied with the Canadian creative societies. Canada did commit to implementing the treaties when it signed them, and governments have repeatedly committed to doing so. There may be no enforceable legal obligation, but Canada should not renege on its commitments.

Comment: The fact that it’s been 12 years should tell us how solid that “consensus” in business is. Also, P2P hasn’t been solved in countries outside Canada. Also, a country that took 102 years to ratify the Berne Convention can’t complain about a 12-year delay.

Pfohl: Short-term issues have gotten weighed down with a laundry list of what people want: the broadcasters want exemptions from the reproduction right, etc. in return for agreement on WIPO and the other big issues.

Knopf: Canada has a very successful music industry, compared to other industries in Canada and compared to other countries’ music industries.

Pfohl: Small companies have profit margins of under 1%, and there have been layoffs.

Comment: This is like South Park: No matter what the issue, blame Canada!

Metalitz: Your parliament agrees!

Comment: You’re just whining (this is a quote, not my summary); you don’t need parliament. Go and do your job as a lawyer.

Comment from a Russian lawyer: Russia has implemented the two treaties in the new civil code. It extends to TPM.

Knopf: There’s a legitimacy problem with special 301. The WTO said you can’t take unilateral action under 301. As Israel asked, how can the US complain about noncompliance with 301 when no one is under any obligation to comply with it?

Side comment: Interesting thing about the Kraft Canada case: the incidental use argument came from the judges, not the parties. 3 judges put copyright misuse squarely on the radar—that’s the next issue coming up.

Comment: Australia was on the watch list for two things: treatment of parallel imports (as to which there is no international obligation), and a judgment where a court had the temerity to ask US movie studios to prove they owned the copyrights in the movies they were suing over. Australians didn’t think those things were all that important.

Metalitz: The standard is not international norms, though that’s relevant, but whether there’s sufficient protection for US copyright owners. And Australia’s not on the watch list now. (But the commenter pointed out that past practice may influence current perception of 301.) Canada is out of step with the international consensus, which isn’t inherently wrong, but digital piracy in Canada is bad and getting worse.

Australia

Speaker:

Prof. Anne Fitzgerald, Queensland University of Technology Law School, Brisbane

Recent Developments

Criminal copyright enforcement is new and needs to be reviewed, because the courts dealing with the issues are generally inexperienced with criminal law, being commercial courts, so there will be problems of unfamiliarity with procedure as well as substance.

New Zealand

Speaker:

Prof. Susy Frankel, Victoria University of Wellington, New Zealand

Discussed recent developments and the importance of parallel imports in New Zealand, which has been trade-focused and leery of having copyright expand to the extent that design rights would expand to interfere with trade.

New Zealand is considering TPM law only covering copy controls, not access controls, recognizing that it can be hard to distinguish those. But adding access is controversial: what’s the copyright justification? (Circumvention for making permitted copies would also be permitted, under the proposal. One reason this seems ok is that permitted acts are not broad; there is no broad fair use right.)

Panelists:

Prof. Peter Black, Queensland University of Technology Law School, Brisbane

Recent case, asserting crown copyright in surveyors’ plans. The legislature proscribes very closely what the plans must look like. As Fitzgerald explained, the issues were: (1) who owns copyright, the surveyor or the government? (2) Does the government have a license to use the plans, e.g. to create a digital database? Answer in the lower court: the surveyor, but the government has a license. The High Court will be hearing the case soon. The case recalls a discussion of whether crown copyright should be entirely eliminated.

Also Black mentioned the possibility of a “3 strikes and you’re out” rule for clients of ISPs caught infringing. It’s not clear how far that proposal will go, but it reflects a trend of increased crackdowns.

Time-Warner person: Are there protections against circumventing conditional access like cable or satellite? Why not protect the same sorts of distribution models via the Internet?

Frankel: Yes, there are such provisions, but TPMs are regarded differently. NZ has no immediate neighbors with a footprint that leaks.

Hidden Wolf not hidden enough

Paradise Canyon, LLC v. Integra Investments, LLC, 2008 WL 746919 (D. Nev.)

Plaintiff owns the Wolf Creek Golf Club in Nevada, which is highly ranked as a public golf course. It has four trademark registrations incorporating Wolf Creek, for golf-related services, vacation-related services, and restaurant-related services. Defendant Integra owns 33 acres adjacent to Wolf Creek. The land’s previous owners tried to develop a residential community named Wolf Creek Estates, but stopped when they got sued. Integra is now developing its own residential community, named Hidden Wolf. Integra's ads prominently display photos of the Wolf Creek Golf Course and focus on the development’s proximity to the club. For example: “WORLD-CLASS GOLFING ... in your own backyard. If you've had the chance to play golf at the Wolf Creek Golf Club in Mesquite, you certainly understand why it’s consistently rated as one of the best and most challenging golf courses in America. Wouldn’t you love to play this amazing course everyday--just by stepping outside your door? Well now you can. Hidden Wolf is an exclusive residential community at the peak of the golf course ….” As the pictures here show, the ads also show a stylized wolf head, which is similar to Wolf Creek’s logo.

Wolf Creek sued for false advertising and trademark infringement. Integra argued that Wolf Creek lacked standing to bring false advertising claims. Not engaging with the recent expansion of the Conte Bros. test, the court applied the Ninth Circuit’s “competitive injury” test – was the conduct at issue harmful to the plaintiff’s ability to compete with the defendant. Most false advertising cases hold that mere projected or planned competition is insufficient to create competitive standing, but the court here accepted allegations that (1) Integra’s ads would interfere with Wolf Creek’s ability to develop its own residential real estate community (or “partner with,” i.e., license, someone else to do so); and (2) Wolf Creek had discussed partnerships with other home builders, or could even build homes within the golf club itself. The fact that this is out of line with standard false advertising cases is not necessarily surprising; this is really a trademark case, whether styled as false advertising or not. But it provides grist for those arguing that § 43(a)(1)(B) protects those who hope to enter a market as well as those who already have.

Integra argued that its statements about proximity and relatedness to Wolf Creek were mere puffery. The court rejected this, because the ads “specifically attempt to create an association” with Wolf Creek. In context, the ads might be misleading by suggesting that Hidden Wolf residents willl have special access to Wolf Creek, even though their purchase doesn’t give them access privileges to Wolf Creek. This is material because of Integra’s target market. And plaintiff suffers harm because other residential developers will be less likely to partner with it because of “a perceived loss of exclusivity rights,” and because disappointed Hidden Wolf residents might get mad at Wolf Creek.

Before turning to the trademark claims, the court rejected Integra’s unclean hands defense. Though Integra presented its ads to plaintiff before litigation began and plaintiff didn’t object, its actual advertising was quite different from the proposed ads. The proposed ad did use the Hidden Wolf mark, but there was only one identifiable picture of Wolf Creek, taking up less than 1/8^th of a page. And the ad spent a lot more time on other desirable features of the development, including proximity to seven other golf courses, listed by name. In the actual ad, however, 80% of the space was taken up with a picture of Wolf Creek.

The infringement analysis proceeded well for plaintiff, mainly in the big three: strength, proximity, similarity. The court deemed Wolf Creek arbitrary (there’s apparently no geographic feature of that name nearby; that really makes it deceptively geographically misdescriptive, except for the fact that California Innovations emptied out that category—I’d say protectability requires secondary meaning, but it doesn’t matter in this case) and, though not “particularly strong,” had national rankings indicating goodwill and secondary meaning. Proximity of the goods usually means proximity in type; here the court found actual physical proximity, increasing the likelihood that consumers would perceive an association, whereas a development named Hidden Wolf in a different city would be less likely to be confusing.

The court found that the Hidden Wolf and Wolf Creek marks would be sufficiently different to avoid confusion if they weren’t in such close geographical proximity. “But they are.” Though the logos are different in the appearance of the stylized wolf, the font, and the typesetting, that was not enough to overwhelm the proximity factor. (Making this case an outlier compared to Barton Beebe’s set of cases—similarity is usually crucial.)

Other factors of note: Building lots are expensive, so consumers can be expected to exercise a great deal of care. But the court found a “high likelihood of initial interest and shorter-term confusion.” The use of the Wolf Creek marks and images “appear calculated to lure potential customers to its Hidden Wolf development based on the strength and the good will of Paradise Canyon’s Marks.” Sigh. Another unwarranted extension of initial interest confusion, offering no principled distinction between what Integra did and standard comparative advertising or nominative fair use. (Which is not to say that Integra should have won—but this rationale does not explain why one party could ever use another’s mark to signal what it has to sell.) Anyway, Integra’s disclaimer was tiny and overwhelmed by the focus on Wolf Creek in the ads.

Thus, Integra was enjoined from using a mark containing the word “wolf” or an image of a wolf in connection with its development, and from using pictures of Wolf Creek larger than 1/16^th of total page size in their promotional materials. However, Integra was specifically allowed to establish the location of its site, including language such as “next door to” or “within walking distance of” Wolf Creek.

ABA Antitrust section: Lanham Act roundup

Changing Rules in Competitor False Advertising Litigation

Session Chair and Moderator:

Bruce A. Colbath, Weil Gotshal & Manges LLP, New York, NY

Linda A. Goldstein, Manatt Phelps & Phillips LLP, New York, NY

Rebecca Tushnet, Georgetown University Law Center, Washington, DC

John E. Villafranco, Kelley Drye Collier Shannon, Washington, DC

We had a nice discussion about several trends in Lanham Act litigation, most notably the contraction of the availability of relief through doctrines like prudential standing, materiality, and the application of Dastar to preclude false advertising claims where a court thinks it unlikely that consumers care about origin. Colbath is more appreciative of courts’ use of a multifactor test to assess standing than I am; I think courts often make factual assessments at the pleading stage in order to conclude that there’s no standing (though this is a broader trend, of course).

Colbath also pointed to developments in the law of irreparable harm. When there is a presumption of irreparable harm sufficient to entitle a plaintiff to a preliminary injunction is pretty murky (though direct negative comparative advertising will probably get there). Money damages alone are insufficient, even when there’s explicit falsity about the defendant’s own product. I think this might have been a problem of testimony: if an expert in the field could truthfully state that people tend to stick with their brands, such that a lost sale will be sticky and thus harm the plaintiff’s goodwill in the long run, that should get around the “money damages alone” problem.

Villafranco and Colbath discussed Allied Domecq, calling it a terrific development for the NAD. The NAD’s own rules shut down its process if litigation begins. This allows companies to game the system by filing for a declaratory judgment after a competitor has already invested substantial time and resources in a NAD proceeding, which can be hard to explain to clients. The district court’s decision might change that strategic behavior. Villafranco suggested, however, that the result could easily have been different if there had been counterclaims. (I checked, and there were in fact counterclaims in Allied Domecq, which is even better news for the NAD.) Goldstein pointed out that greater deference to NAD could have an important effect on both sides’ strategic calculations, but cautioned that the district court’s deference might not be repeated outside of New York.

ABA Antitrust section: consumer protection roundup

ABA Antitrust Section Spring Meeting

Falsity Fallout: The Evolution of the Falsity Standard in Recent Advertising Cases

Session Chair and Moderator:

Christie L. Grymes, Kelly Drye Collier Shannon, Washington, DC

Lesley Fair, Senior Attorney, Federal Trade Commission, Washington, DC

On the FTC’s radar: (1) Health claims. The Q-Ray case involved 7 studies allegedly substantiating the health claims, but the FTC staff rebutted them all. An important issue: a product that works just because of the placebo effect can’t make a health claim. Judge Easterbrook was concerned that products that “work” because of the placebo effect would deter people from using treatments that actually work and also have a placebo effect. Easterbrook characterized Q-Ray’s alleged substantiation as “bunk” in the opinion.

Easterbrook said testimonials aren’t substantiation – they can’t prove cause and effect. This bolsters the FTC’s position that testimonials aren’t substantiation, but rather create the need for substantiation. The type of claim controls what type of substantiation is required: when you make health claims, you are likely to need double-blind placebo-controlled studies. This isn’t a heightened standard but an ordinary application of substantiation rules.

Childhood obesity and green claims are other FTC concerns.

(2) Promotional practices: do-not-call is here to stay. Recent settlements with Craftmatic, ADT, and Ameriquest resulted in a total of $7.7 million in civil penalties, involving things like using a sweepstakes form to request phone numbers and treating that as permission to engage in telemarketing. One of the cases involves a corporate VP individually: advertisers, take note.

Budget: alleged that Budget falsely claimed that those who returned cars with full tanks wouldn’t pay a fee, but those who drove short distances were charged for doing so. And when people complained, they were told they’d have to go back inside, which most people returning cars didn’t want to do. Company’s defense: additional fee was disclosed elsewhere; the FTC didn’t think that was good enough, both because it was confusing and because the “no charge” ad operated as a bait and switch.

Blue Hippo: For consumers with bad credit, promised a computer after making 13 automatic payments. But if in that time, consumers changed their minds for any reason, they couldn’t get their money back – FTC alleged that failing to disclose this clearly and conspicuously was a deceptive practice. Result: $3.5-5 million in consumer redress.

Rebates: FTC had a workshop on the subject. Soyo: ads said rebate checks would come in 10-12 weeks, but the 90-95% of consumers didn’t get their money within that time. InPhonic: consumers who turned in their rebate materials “too early” – company set up the rebate so that consumers had to wait 3-6 months to file. The effect on “breakage” as the industry calls it was profound. If they sent in claims before that, their rebates were denied. The FTC alleged unfairness.

Internet-based lead generators: ValueClick/Adaractive – little messages on websites saying “you’ve won X.” The FTC alleged that getting the free product required navigating a ziggurat of layers – starting with a requirement that consumers buy a small-ticket item, luring them in. But to get to the top, consumers had to buy an expensive satellite TV subscription or finance a car. There were significant civil penalties. The “Sound of Music” principle: When you promise something for free, you can’t require consumers to “climb every mountain, ford every stream, chase every rainbow” before they claim their prizes.

(3) Information security. ValueClick’s privacy policy promised certain levels of encryption and safety measures, yet its sites were vulnerable to a SQL injection attack. The FTC did not allege that this had lead to a breach. The FTC standard is reasonableness: it was unreasonable to fail to protect consumers from this foreseeable problem. Another case: American United mortgage papers were found in a dumpster; this violated rules that confidential consumer information should be securely destroyed, not dumped. The “Life is Good” website suffered a breach and names and credit card numbers due to a SQL injection attack, and the FTC alleged a violation.

FTC.gov/infosecurity offers a toolkit of materials for consumers. For law firms: you’re free to take FTC guides and disseminate them with the FTC’s name on them or with your own. (No attribution rights here!)

(4) Cautionary tale: Enzyte, the male enhancement product. FTC brought a case alleging that consumers were offered “free samples” that turned into automatic shipments and credit card charges, making it hard for consumers to cancel. Company officials were later criminally indicted and convicted. One defendant was convicted of conspiracy to obstruct FTC proceedings. There was a multimillion-dollar forfeiture.

Julie S. Brill, Assistant Attorney General, Vermont Attorney General’s Office

Montpelier, VT

The AGs have been active over the past year.

Subprime mortgages, of course. Many settlements for falsity in advertising and marketing from institutions like Ameriquest, but now there’s devolution from the big players to focus on the smaller players who’ve caused the biggest problems. Fifty-plus investigations pending into lenders and brokers, including Countrywide. Settlements define what mortgage terms are presumptively unfair. Scams from “mortgage rescue” operators are also a great concern; people in desperate circumstances are duped into signing over title to their houses. Other areas: statements by people in the secondary market; appraisers’ practices.

Initiatives: Iowa’s foreclosure rescue hotline; State Foreclosure Prevention Working Group. The problem is, as we’ve seen, getting the servicers actually in touch with homeowners. Once that happens, half can work out a solution.

The AGs have found that most problems in subprime occur before a rate reset, which means that the loans were inappropriate, teaser rates aside.

Health care. Oxycontin: 26 states plus DC settled with Perdue Pharma for $19.5 million over allegations of off-label marketing and failed to disclose abuse and diversion risks. Guidant defibrillator: 35 states plus DC settled for $16.75 million over a redesign, when they continued to sell 4000 defective devices while knowing they were subject to shorts. Guidant agreed to do more disclosure and add $1 million to its warranty program. Pharmaceutical benefit managers: grease the wheels between pharmacos and employers by purchasing large volumes and negotiating rebates; they engage in aggressive “switch” programs to save money. Settlement with Caremark: 28 states plus DC, $38.5 payment to the states, plus reimbursement to consumers for costs they may have occurred in switching statins.

Product safety, especially lead. California recently sued a large number of major toy manufacturers, alleging that they knowingly exposed consumers to unlawful quantities of lead and failed to disclose the risks. Alcohol drinks: “Cocaine,” advertised as “speed in a can.” Illinois and Connecticut AGs ordered it removed from shelves in May 2007, while Texas obtained a preliminary injunction against it.

Insurance and securities: As baby boomers age, annuities will be a bigger issue in consumer protection. Settlement between Aetna and NY: Aetna developed a doctor ranking system that they represented was based on quality, but really it was based on cost to the insurer.

Privacy and Information Security: The states followed FTC action on Choicepoint, and there are lots of state privacy laws. The AGs have been very concerned about social networking sites, especially age verification. E.g., requiring MySpace to rapidly move into age and identity verification, and getting MySpace and Facebook to focus on complaints about inappropriate conduct and contacts. 49 states also reached agreement with AOL about how it dealt with people who sought to cancel service.

August T. Horvath, Heller Ehrman LLP, New York, NY

Highlights in competitor and consumer lawsuits:

Axcan v. Ethex: Claims of drug equivalence—FDA rules didn’t preempt the lawsuit because the definition of equivalent can be derived without reliance on the FDA; Horvath is a bit bothered by the result because there was no evidence of what the relevant consumers understood “equivalent” to mean.

Brooks v. Topps Co.: Claims that a story about a baseball player’s nickname was false weren’t actionable.

CKE v. Jack in the Box: defendant’s TV ads contrasted their sirloin hamburgers to “Angus” burgers, where the ad suggested that the sirloin area of a cow is better than the “angus” area of a cow, relying on the play with “anus.” The district court found this wasn’t false, rejecting a consumer survey. Other restaurants advertise “Angus” beef but don’t explain why that’s a good thing, and Horvath thought the ads were a funny way of showing the meaninglessness of the “Angus” label.

Morton Grove v. National Pediculosis Ass’n: a nonprofit sued over an allegedly competing lice comb. Defendant claimed that it wasn’t a commercial competitor, but the court agreed that it sold a competing product, even if the sales went to fund nonprofit activities.

The seduction industry: men who teach other men how to meet and seduce women. Parker v. Learn the Skills Corp., 2008 WL 108674 (D. Del.), alleging that one such teacher set up a hate site about the other. The judge found the statements not false but opinion, and to be about the competitor rather than the competitor’s services. Because the statements were “juvenile,” there was no Lanham Act claim, though Horvath considers this a bit of a non sequitur.

Proctor & Gamble v. Ultreo: disclosure of substantiating surveys.

Russian Standard Vodka v. Allied Domecq: A love letter to the NAD.

DirecTV case: Horvath called attention to the court of appeals’ finding that the website comparison was puffery because the cable picture was so obviously fuzzy. He pointed out that, given that everyone accepted that digital cable and satellite HD are equivalent, it’s not clear why this isn’t an exaggeration of a false claim and thus still false.

Cert. was just denied in the Phoenix of Broward case. Petitioner had argued (correctly) that Conte Bros. is only supposed to increase the scope of Lanham Act standing, not shrink it when applied to actual competitors.

Barbara’s Sales, Inc. v. Intel: Changing from Pentium 3 to Pentium 4 is not inherently a statement of improvement, and even if it were, that would be too vague to be actionable.

Druyan v. Jagger (SDNY): a lawsuit against Mick Jagger & others because Jagger cancelled a concert when he got ill, even though the concert promoter offered a ticket for another performance. The disclaimers on the concert ticket were adequate: dates and times may change without warning; the concert might not take place as scheduled. The plaintiff had no recourse for her incidental and consequential damages. You can’t always get what you want.

Lawsuits against Coca-Cola over Enviga have foundered on failure to allege ascertainable loss.

Pervasiveness of conduct: L.A. Limousine v. Liberty Mutual Ins. Co. (D. Conn. 2007): screwing up one insurance claim doesn’t violate consumer protection law; you need to allege a course of conduct. Another NJ case involved a seller who sold the same car to many different people—Slavick v. McKinney (N.J. Super. A.D. 2007)—the trial court found that defendant wasn’t in the “business” of selling cars, but just sold this one car many times. The court of appeals reversed because he’d sold other cars before.

McKinnis v. Kellogg USA (C.D. Cal. 2007): based on a couple who wanted to buy healthy products for their kids, and argued that Froot Loops was deceptive because it contains no fruit. They lost because the ingredients are on the box, and “Froot” is not fruit. The same people sued over Trix, Fruity Cheerios, GoGurt, and Kix. The same result: you’re allowed under the FDCA to describe the “flavor profile” – what it’s supposed to taste like.

A word on expert witnesses: MySpace sued a spammer who registered 11,000 profiles; defendant proferred a witness to testify on consumer perceptions and social networking sites, but the witness was an aerospace engineer. The court gave his testimony no weight. MySpace v. Wallace, 498 F. Supp. 2d 1293 (C.D. Cal. 2007).

Parker v. Howmedica, 2008 WL 141628 (D.N.J.): NJCFA claim over a squeaky artificial hip. Emotional distress isn’t an available source of damages; if you just lived with the squeak, you have no remedy.

When you can sue medical practitioners: Michael v. Mosquery-Lacy: a woman who had peridontal work done sued because she repeatedly asked her provider not to use animal bone, only human bone, in her jaw reconstruction, but the provider used cow bone instead. The court allowed the case to proceed, but said she’d have to show damage to property at trial, not just distress over the presence of cow bone. Usually medical practice is off limits, but here the representations are at issue, as distinct from medical practice. Contrastingly, a Conn. case, Rosenberg v. Langdon, refused to allow a malpractice-type claim to be recast as consumer protection when the plaintiff suffered burns.

Death sentence for domain names?

I don't generally link to the Trademark Blog, because I assume that if you're reading this you're reading that, but Marty has a great post heralding the death of the URL for advertising purposes and concluding that "the domain name system is damage and the trademark community should route around it." And it gives me the opportunity to share a picture I took in Greenwich Village several years ago:
See also "Google 'Pontiac' to find out more."

Although I am skeptical that domain names will actually disappear, I agree that search terms are useful additions to the internet user's arsenal. (Alternate post title: "U RLY?")

Organization for Transformative Works membership drive

Membership is now open for the Organization For Transformative Works. Membership confers a warm fuzzy feeling and the right to vote in board elections; OTW services, including the archive, will be free for anyone to use. I am tremendously excited to be part of the OTW, creating a resource that is both noncommercial and structured to persist, complementing and reinforcing the more informal structures in fandom.

FDA preemption revisited

Healthpoint, Ltd. v. Allen Pharmaceutical, LLC, 2008 WL 728333 (W.D. Tex.)

Plaintiffs make XenaDerm, a wound-healing ointment. They alleged that they’ve tested it and marketed it so as to build brand awareness. Defendants make AllanDerm and market it as a generic equivalent to and substitute for XenaDerm. Plaintiffs claimed that this was false and misleading; defendants have no studies showing bioequivalence or therapeutic equivalence, nor did they test their product with the same rigor as XenaDerm was tested. Plaintiffs also alleged that AllanDerm is in fact inferior to XenaDerm. As a result of defendants’ acts, they claimed, AllanDerm and XenaDerm have been linked in drug dispensing databases and price systems, which pharmacists use in deciding what to dispense when filling a prescription. However, plaintiffs claim to need discovery to find out the details of the sales pitches, since much of the marketing for the products at issue occurs “under the radar” in “targeted communications with drug wholesalers, retailers and others.”

Defendants filed a motion to dismiss, claiming that resolution of the claim would require interpretation of FDA regulations. Plaintiffs responded that false and misleading representations of generic equivalence are actionable under the Lanham Act, and the FDA’s definition of equivalence provides guidance for courts in such circumstances.

The court declined to require a Lanham Act false advertising claim to be pled with particularity under Rule 9(b). Here, the complaint adequately alleged a specific false or misleading representation: the statement or implication that AllanDerm is a generic equivalent of XenaDerm.

Moreover, after an extensive review of the case law, the court concluded that FDA jurisdiction did not preclude the claims here, at least not at this stage of the case. There’s no bright-line test for distinguishing allowable claims from those that require direct application or interpretation of the FDCA or FDA regulations. Merely putting a product on the market can’t, as a matter of law, constitute a false implication of FDA approval, but other drug- and device-related claims may be actionable under the Lanham Act.

Defendants argued that plaintiffs could only win if the products are not in fact equivalent, and that only the FDA could decide that issue. Plaintiffs responded that, in fact, even if the FDCA did not exist, it would be possible to evaluate the truth or falsity of defendants’ advertising. The cases are, at best, confused about whether plaintiffs (1) must establish the standard for equivalence used in the industry, separate from the FDA definition; (2) may use industry or FDA definitions; or (3) must use the FDA definition. But they agree that a falsity claim is sustainable under the Lanham Act. In the end, defendants aren’t free to make false or misleading claims simply because a federal agency regulates drugs. Even if plaintiffs rely on the FDA definitions of equivalence, the court might not have to interpret those regulations in ruling on the merits. Thus, though it left open the option of revisiting the issue as the exact contours of plaintiffs’ claims emerged, the court refused to dismiss the claims at the pleading stage merely because they related to drugs within the purview of the FDA.

Consumer protection in the driver's seat

Craig & Bishop, Inc. v. Piles, --- S.W.3d ----, 2008 WL 746496 (Ky.)

Christy Piles and Charles Warner sued defendant Craig & Bishop, a used car dealer, under the Kentucky Consumer Protection Act (KCPA) and won a jury verdict. The relevant facts: Defendant advertised a 1997 Mustang for just under $5000. Warner and Piles (aged 19 and 20 respectively) went to the dealership, which copied their drivers’ licenses, ostensibly to check their eligibility for financing. After that, they were told the Mustang had been sold. They were then shown a 2000 Camaro for $14,000; when they expressed concerns about the price, the salesman said, “I guarantee I can get you into that car if you like it.” They couldn’t make a cash down payment, but could trade in Warner’s car, valued by the dealership at $1000. They told the salesman that they couldn’t afford more than $250 a month, at 8% interest, for no more than 5 years.

As it turned out, Warner had insufficient credit, so the loan was to be in Piles’ name only.

Plaintiffs drove the Camaro home after Warner signed the title of his car over to the dealership. Piles signed “a number of documents with seemingly conflicting terms,” including ones that referred to the sale as a cash transaction. The dealership asked her to sign a blank contract with financing terms to be filled in later, but she refused (good for her!). Over the next few days, the dealership tried to find financing for Piles, but couldn’t find anyone willing to lend the full amount. The dealership told Piles and Warner that they’d need to pay $3000 to make up the difference; they told the dealership that, as they’d said before, they couldn’t. Piles decided “she wanted out of the deal.” The dealership offered to finance the remaining $3000 itself, and eventually to knock $3000 off the price, but Piles refused. They tried to return the Camaro and reclaim Warner’s car twice over the next several days, but were told the keys were in a locked safe to which no one present had access, and the dealership threatened to call the police on them when the discussion turned heated.

Defendant’s sales manager eventually told plaintiffs that the car had been sold, and that they needed to pay the full $14,000 by the end of that day or suffer repossession. They returned the Camaro to the dealership, along with a (presumably nasty) letter from their lawyer. They then sued for conversion, violation of the KCPA, and common-law fraud.

The dealer appealed the verdict for plaintiffs, arguing that Piles and Warner weren’t entitled to the protection of the KCPA because they never completed a purchase, and the statute protects a person who “purchases or leases.” The Kentucky Supreme Court disagreed; the law is broad enough to cover people who (1) took the product, at least for a time, (2) following a period of negotiation, (3) after giving value in the form of the trade-in. The KCPA doesn’t require a binding contract.

The Supreme Court declined to reach the issue of whether the appeals court erred in vacating the common-law fraud verdict in plaintiffs’ favor, which that court did because it concluded that predictions of the future (here, whether Piles could obtain financing at desirable terms) couldn’t constitute common-law fraud, regardless of whether they actually deceived consumers. The court also declined to decide whether such predictions could violate the KCPA, since the issue was procedurally barred and plaintiffs had testified to a wide range of deceptive conduct, from the Mustang bait-and-switch to lies about the location of the trade-in car to threats of repossession if plaintiffs didn’t immediately pay in full. The court did comment: “Given [the] broad range of protection [under the KCPA], the argument that sellers could never be held liable on future predictions is suspect, especially where the future predictions might relate to the seller's own conduct or other events under the seller's control.” Once again, consumer protection law appears broader than common-law fraud; no surprise, since that was its point.

The state Supreme Court also affirmed the award of punitive damages and reinstated damages for the inconvenience suffered by plaintiffs. Applying de novo review, $50,000 in punitive damages was appropriate, given the significant reprehensibility of the conduct at issue, and given that this was not a huge multiple of the actual damages of $8600 (which would have been larger if the trade-in had been worth more).

Fellowship opportunity for budding IP academics

For those interested, I received the following announcement:

The Kernochan Center for Law, Media and the Arts at Columbia Law School is accepting applications for a fellowship program to support future legal academics interested in the field of copyright and authors’ rights. Fellows will have the opportunity to spend one to two years in residence at Columbia Law School. They will spend approximately half of their time working on their own research, and the other half working with members of the Columbia Law School IP community on Kernochan Center projects, e.g., studies undertaken by the Center’s Program for Intellectual Property Studies and Law Reform, organizing conferences and workshops, etc. It is expected that fellows will produce an independent work of scholarship that will position them to enter the job market for full-time academic employment.

Fellows will receive a stipend of approximately $50,000 plus benefits, eligibility for subsidized housing, and space to work at the law school. In the event that subsidized housing is unavailable, fellows will receive a housing allowance.

The fellowship will commence in September 2008. Applicants should be 2-5 years out of law school and planning a career in academia. To apply, please send a cover letter, resume, writing sample, proposal for scholarly research (5-8 pages), two letters of recommendation, law school transcript and a list of additional references by April 30, 2008 to:

June M. Besek
Executive Director
Kernochan Center for Law, Media and the Arts
Columbia Law School
435 West 116 ^th Street, Box A-17
New York , NY 10027

Columbia is an equal opportunity and affirmative action employer.

Dioramas in the Washington Post

The Washington Post's second annual Peeps diorama contest produced 37 finalists, most of which raise copyright and/or trademark issues. I hope the Post consulted its IPeep lawyers.

Low-res transformativeness

Quick, what's this a picture of?

(If you can't tell, pull back and try again.)

Adam Connelly paints pictures of pornographic images, pixellated so that it's our minds, not the paint, providing the salacious details. He says: "Drawing its subjects from the vast pool of freely-available Internet porn, my work delves into issues of public and private identity, privacy, censorship, information sharing, and information awareness." He doesn't mention copyright (though his site claims absolute control over images of his paintings, ignoring the possibility of fair use).

Assuming that some of the images he copied were not licensed for commercial derivative re-use, would he still have a fair use defense? It's pretty clear that he would, given the change in meaning and the change in quality of reproduction--this is the art-world version of Google Image thumbnails. Plus he's starting with images of naked women, and sex is a great subject for fair use.

Deception about defamation

This story, College Gossip Site Under Scrutiny, reports: “New Jersey prosecutors have subpoenaed records of JuicyCampus.com, a Web site that publishes anonymous, often malicious gossip about college students…. JuicyCampus may be violating the state’s Consumer Fraud Act by suggesting that it doesn’t allow offensive material but providing no enforcement of that rule — and no way for users to report or dispute the material, New Jersey Attorney General Anne Milgram said Tuesday.” The state got involved when a student “came forward who had been terrorized by posts on the Web site that included her address. Prosecutors have subpoenaed information from JuicyCampus on how it is run, citing concerns about ‘unconscionable commercial practices.’”

If the unconscionability is that they allow, even encourage, defamation, this will be a tough sell given §230’s preemptive scope.

On cyberprofs, discussion centered on whether the site’s Terms of Service might be deceptive in purporting to ban defamatory and other abusive content while the site’s owners are actually not policing at all. In response, one participant pointed to another portion of the ToS:

6. No Pre-Screening or Regular Screening of Content.

You acknowledge that JuicyCampus does not pre-screen Content, but agree that JuicyCampus shall have the right (but not the obligation) to access, re-arrange, modify and remove or restrict access to any Content on the Site in its sole discretion and without notice or compensation.

So that might change one’s reasonable expectations.

Under the recent eBay case, § 230 does not immunize JuicyCampus from false statements about the content of its site. However, as the list discussion indicated, § 230 could still protect JuicyCampus. Section 230(c)(2) states that

No provider or user of an interactive computer service shall be held liable on account of—

(A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected ….

The preemption theory is that, by requiring JuicyCampus to enforce its conduct rules, state law would create an incentive to not have any conduct rules at all. Congress wanted to make it more attractive for ISPs to engage in private censorship, so applying state consumer protection law would conflict with that objective.

I don’t think there’s direct preemption. The gravamen of the alleged deceptive conduct is not that JuicyCampus takes any “action” voluntarily to restrict access, etc., but rather that it says it will and then won’t. Just as Congress wanted to make it attractive for ISPs to censor by ensuring that they’d be free from publisher liability whether they monitored content or not, Congress wanted sites to actually monitor. A site that pretends to do so in order to attract business isn’t giving Congress the benefit of its bargain. That said, there could still be conflict preemption if we believe that application of consumer protection law will deter sites from having acceptable conduct policies, as Congress desired (I personally doubt that; such policies are too attractive for other reasons, including attractiveness to advertisers).

Fundamentally, Congress didn’t anticipate problems like this – Judge Kozinski’s hypothetical harassthem.com, not so hypothetical after all, or advertisers soliciting user-generated comparative ads that turn out to defame the competition. I do think we’re going to need to revisit § 230, though what we should replace it with is much harder to say.

Upcoming conference: IP/Gender

An event near and dear to my heart, AU's IP and Gender: Mapping the Connections event is coming up on April 4.

Here is some information from the organizers:

The symposium will take place at the WCL campus, 4801 Massachusetts Ave NW, room 528, 10am-4pm. Lunch will be served to all registered participants.

In the Spring of 2004, the WCL Program on Information Justice and Intellectual Property, Women and the Law Program and Journal of Gender, Social Policy and the Law sponsored the initial effort to bring scholars together to focus interdisciplinary attention on the interplay between intellectual property and gender. In that first year, a group of scholars who study intellectual property law or feminist theory, most of whom had not previously analyzed the connections between their disciplines, began a process of mapping the contours of a path of exploration. The workshop primarily occurred behind closed doors and operated as an intense brainstorming session abut what future work in this area might become.

The following year, we built on the discussions from that first workshop by holding a public program highlighting the work of two scholars writing in this emerging area, Ann Bartow and Sonia Katyal. These two scholars published their work in the American University Journal of Gender, Social Policy, and the Law, which has remained a steady partner of the symposium in the years since.

In 2006 and 2007, the symposium expanded into full-day workshops with multiple presentations by scholars applying feminist theory insights to the full range of intellectual property doctrines and policies. Scholars have used the forum to develop ideas on the impact on intellectual property on gender-related imbalances in wealth, cultural access, political power, and social control; to explore relations between creative production and gender; to analyze the effects of stereotyping and feminization and masculinization of intellectual property stakeholders; to uncover the gendered development of IP doctrines and doctrinal categories; and to apply feminist jurisprudential insights to the teaching and practicing of intellectual property law.

This year, the IP/Gender: Mapping the Connections Symposium will be the grandest yet, featuring fifteen presenters or commenters from two continents, open to the public and webcast live on www.pijip.org.

The full schedule of panels, links to past articles and other information can be found at http://www.wcl.american.edu/pijip/ipgender.cfm

Plagiarism detection is fair use

Turnitin is a plagiarism-detection service. Schools using Turnitin require students to submit papers through Turnitin’s system, which compares their papers to Turnitin’s database and, if there’s a suspicious match, generates a report for the relevant teacher. Schools can also choose to allow their students’ papers to be added to the database to improve Turnitin’s ability to detect among-student cheating. Plaintiffs objected to Turnitin’s approach and sued for copyright infringement based on papers they’d been required to submit as a condition of receiving school credit.

The district court ruled against plaintiffs.

The court enforced Turnitin’s clickwrap agreement, which stated that users agreed not to hold it responsible for any damages they suffered from using the site, even though (1) plaintiffs included statements on their submitted work that they didn’t agree to Turnitin’s terms (too late; the clickwrap said it was the sole agreement); (2) plaintiffs were infants when they submitted their papers, and thus able to disaffirm contracts (but they can’t both benefit from the contract and disavow it, and they benefited by submitting their papers—this seems fishy to me, though I’m not an expert in this area, since most if not all contracts signed by minors will have benefited them in the past); and (3) plaintiffs claimed duress (the duress came from third parties, their schools, and Turnitin’s not responsible; anyway, plaintiffs could have gone to private school, or moved, if they objected so strongly to their schools’ plagiarism policies).

Independently, the court found Turnitin to be engaged in a fair use. The purpose of the use was “highly transformative,” as the originals were created for educational and creative purposes, and Turnitin’s use was merely to look for plagiarism. (See Tony Reese’s discussion of transformative purpose versus transformation of the work.) The nature of the work was of lesser importance because Turnitin didn’t use the creative aspects of the work. And Turnitin’s use didn’t diminish the incentive to be creative, but rather protects creativity by deterring plagiarism. Thus, factor two is either neutral or favors fair use. (Not sure what incentives are doing in factor-two analysis, but okay.)

The third factor, the amount of copying, is neutral or favors fair use (!): though Turnitin copies the entire work, Turnitin limits access to copies to cases in which there’s a suspicious match, and the scope of its copying is consistent with its legitimate use, detecting plagiarism. (Usually, the number of people who have access to copies is not a factor in the fair use analysis, because the inquiry is the amount of the copyrighted work copied, not the number of copies created, but especially in new technology cases considering limitation of access certainly makes sense.)

Finally, there was no effect on the market for the work. Turnitin doesn’t make the papers publicly accessible; by preventing plagiarism, Turnitin even preserves the marketability of the papers. Plaintiffs argued that Turnitin destroyed their ability to sell term papers to sites that buy and resell such term papers, but (1) in depositions, they disavowed that market because they saw it as cheating, and (2) “to accept Plaintiffs’ argument would contravene the public benefit underpinnings of the Copyright Act and would run counter to the Copyright Act’s purpose of encouraging creative, original work.” (In other words, that’s a bad market. Term papers ought not to be written for compensation; copyright’s incentive function would be a harm to the kind of creativity that ought to exist in that sphere.) Plaintiffs also hypothesized that using Turnitin might lead to false accusations of plagiarism if they later submitted the same work to a publication that also used Turnitin, but they provided no evidence that this would occur, and Turnitin would allow easy verification that the works were actually their own.

I used Turnitin as an exam question last year; only about half the class deemed Turnitin’s business model to be fair use, which just goes to show, I suppose, that where you stand depends on where you sit. There's something here about the use of copyright claims to express what are really moral objections--many students perceive the system as operating on a presumption of guilt and reinforcing an antagonistic, rather than a cooperative, relationship between teachers and students.

Fortunately for plaintiffs, the court rejected Turnitin's rather aggressive counterclaims. The court didn’t force plaintiffs to indemnify Turnitin for its costs, since that part of its terms wasn’t explicitly part of the clickwrap agreement. And the court rejected Turnitin’s counterclaims for trespass to chattels, violation of the Computer Fraud and Abuse Act, and violation of the Virginia state-law CFAA analogue, which were based on the fact that one plaintiff faked a password to get access, on the ground that these claims all required direct harm to Turnitin’s computer system, which had not occurred even if Turnitin suffered consequential damages.

Diebold wins one voting machine battle

Avante International Technology Corp. v. Premier Election Solutions, Inc., 2008 WL 686324 (E.D. Mo.) (Magistrate’s report)

Plaintiff alleged that Diebold Election Systems, now known as Premier, and Sequoia Voting Systems, violated the Lanham Act and the Illinois Deceptive Trade Practices Act by making claims about the capabilities of their voting machines, specifically about whether their machines complied with Illinois state requirements. This occurred, plaintiff alleged, because it owns a patent that is the only way to comply with Illinois state requirements. With respect to Sequoia, plaintiff alleged in the alternative: either Sequoia infringed its patent, or its machines don’t comply with Illinois law and thus it made false and misleading representations.

The report found plaintiff’s allegations against Sequoia too conclusory to survive a motion to dismiss. Its allegations against Diebold/Premier were more specific: Premier represented to Illinois customers that its equipment complies with state requirements, but that’s false, and Avante therefore lost sales and royalties.

Premier argued that Avante lacked standing, regardless of whether the court adopted a requirement of direct competition or the Conte Bros. test. The report agreed. Avante didn’t allege that it had tried and failed to sell its election equipment in Illinois. Indeed, Avante alleged that it isn’t certified by the Illinois Board of Elections, and thus can’t sell in Illinois. Thus, it’s not the “commercial competitor” required by the Lanham Act.

Likewise, the state-law claims failed. State deceptive practices law doesn’t apply to conduct that complies with “conduct in compliance with the orders or rules of or a statute administered by a Federal, state or local governmental agency.” To be sold in Illinois, any party’s equipment would have to be certified by the Board of Elections. If defendants were certified, there could be no claim under state law. If defendants were not certified, there could be no damages because the uncertified party could not sell its products.