Surge in comparative advertising

AdvertisingAge on increasingly aggressive comparative ads, perhaps partaking of the flavor of the political season. I wonder about those Microsoft "I'm a PC" ads, especially the one (or ones?) that begin with a guy who looks a lot like Apple's John Hodgman. But then I see Apple's vicious counterattack ad and it's clear that Apple has chosen to compete in the market instead of making a bad initial interest confusion claim.

Terminator: the IP chronicles

John McCain's IP troubles have been more prominently discussed, but there's a bit of IP borrowing on the blue side as well.

deep copyright thought

Reading Jessica Silbey on IP’s gendered assumptions, I can’t help thinking about copyright strike suits (lawsuits filed alleging substantial similarity between an unknown’s work and a major hit): mother’s baby, father’s maybe. When unconscious copying can be infringing, paternity is ever-contestable, and authors are potentially like women impregnated by Zeus in the form of a sunbeam. Talk about the anxiety of influence.

recent reading: copyright and law & economics

Anne Barron, Copyright Infringement, ‘Free-Riding’ and the Lifeworld, LSE Law, Society and Economy Working Papers 17/2008

A vigorous assault on the law-and-economics copyright restrictionist project of (my respected colleagues and, I hope, friends) Mark Lemley and Brett Frischmann. Argues that economics simply can’t explain either authorial production or reader/consumer benefit, partly because it lacks a theory of preferences but mostly because it lacks a theory of social value not translatable to money, and copyright’s limits require such a theory. I am highly sympathetic, but I think it’s worth reading if you’re likely to disagree, just to see the argument well made.

Interesting CFP

Got this in my email just now:

Call for Papers

Digital Labour: Workers, Authors, Citizens.

A conference hosted by the Digital Labour Group (DLG), Faculty of Information and Media Studies, University of Western Ontario, October 16-18, 2009, London, Ontario, Canada.

'Digital Labour: Workers, Authors, Citizens' addresses the implications of digital labour as they are emerging in practice, politics, policy, and theoretical enquiry. As workers, as authors, and as citizens, we are increasingly summoned and disciplined by new digital technologies that define the workplace and produce ever more complex regimes of surveillance and control. At the same time, new possibilities for agency and new spaces for collectivity are borne from these multiplying digital innovations. This conference aims to explore this social dialectic, with a specific focus on new forms of labour.

The changing conditions of digital capitalism often blur distinctions between workers, authors and citizens more often than they clarify them. Digital workers, for example, are often authors of content for the increasingly convergent and synergistic end markets of entertainment capitalism – but authors whose rights as such have been thoroughly alienated. Citizens are often compelled to construct their identities in such a way as to produce the flexible and entrepreneurial selves demanded by the heavily consumer-oriented 'experience and attention economies' of digitalized post-Fordism.

How might we come to understand the breakdown of distinctions between labour and creativity, work and authorship, value and productive excess in the new digital economy? What is labour in an era where participation in the cultural industries is the preferred conduit to autonomy and self-valorization? What struggles do entertainment workers, information workers, and workers in an increasingly digitalized manufacturing sector share in common? What might recent theorizing on the infinitely malleable 'post-Fordist image worker' tell us about the nature of affective ties to states and other political formations in the twenty-first century?

Policy makers, along with workers and union activists from the entertainment, information and manufacturing sectors will assist academic specialists in assessing these and other crucial questions.

Papers, reading no more than 20 minutes in length, that address any ofthe above matters, or cognate ones, are now being solicited. Please submit your brief abstract by February 1, 2009, to Jonathan Burston at jburston@uwo.ca. An editorial board will examine all submissions and issue acceptances no later than March 15, 2009.

Can a NPE be a Lanham Act competitor?

Foboha GMBH v. Gram Technology, Inc., 2008 WL 4619795 (N.D. Ill.)

Gram and its CEO, Jess Gram, claim rights in “a process for molding and assembly of a plastic object using two rotatable molds.” Gram is a nonpracticing patentholder; the particular invention at issue here was the subject of a patent application filed in April 2003. Foboha alleged that Gram began claiming that Foboha was an infringer in 2004, long before a patent issued, and made further statements after the PTO’s notice of allowance in May 2006.

In June 2006, during a trade show, Gram demanded that Foboha license Gram’s technology. Gram made similar demands of other exhibitors. Foboha knew that the patent hadn’t been granted, and told Gram that the claims were invalid based on a prior art reference that wasn’t cited during the prosecution of the patent. The PTO issued the patent in July 2006, at which point Foboha filed a request for reexamination, which was granted in April 2007, invalidating the patent as either obvious in light of or anticipated by the prior art. In response, Gram added and amended its claims, which Foboha allged substantially changed the scope of the original patent claims.

In December 2007, Gram published a press release on its website stating that the reexamination “confirmed the patentability of the 10 original claims of the … patent, as applied to mechanical in-mold assembly processes. In addition the USPTO have [sic] confirmed the patentability of 6 additional new claims sought by Gram.... Upon completion of the reexamination process, Gram intends to enforce its valuable intellectual property rights to the fullest extent permitted by law.” Gram thereafter told one of Foboha’s customers that Foboha was infringing the patent. In a letter to Foboha, Gram falsely claimed that another company had already settled with it.

Foboha sued for federal false advertising, state unfair competition, and tortious interference. Gram initially argued that the Lanham Act claim was subject to Rule 9(b)’s heightened pleading requirement. District courts have divided on this issue; the court determined that the allegations sounded in fraud, because they were all allegedly committed “maliciously, oppressively, and fraudulently,” and thus 9(b) applied. Fortunately, Foboha supplied the necessary particularity for all allegations after June 2006.

However, the court applied a highly restrictive definition of “commercial advertising or promotion.” Under First Health Group Corp. v. BCE Emergis Corp., 269 F.3d 800, 803 (7th Cir. 2001), advertising must be communication widely disseminated to anonymous recipients, not face-to-face communication. “Direct communications, whether in person or by letter, are not commercial advertising or promotion as our Court of Appeals has defined those terms.” Foboha argued that Gram’s claims forced it to issue a press release to calm its customers, which implicated broad-based advertising. But Gram only communicated with customers at the trade show, and making allegations of infringement in person just doesn’t count.

I think this is overreading (and reading “promotion” out of the statute), and it’s inconsistent with rather a lot of Lanham Act caselaw allowing claims based on factual statements disseminated, by whatever means, to significant portions of the relevant consumer base. The letter to Foboha wasn’t commercial advertising or promotion because it didn’t target Foboha’s customers, but other communications with customers ought to count. The real problem here, of course, is standing: does a nonpracticing patentee compete with Foboha or otherwise implicate a competitive interest sufficient to trigger the Lanham Act?

The statements on Gram’s website, however, counted as advertising or promotion. (And this is why the face-to-face distinction is ridiculous. Given the industry at issue, there is no reason that anyone other than exactly the people likely to receive individual communications from Gram would be affected by the website. The only distinction between the website and the trade show statements is possible uncertainty of proof, but I’m not convinced that’s enough to justify Lanham Act coverage in one case and not the other.)

Anyway, the website discussed the reexamination and characterized the PTO’s conclusions in a way that favored Gram. A jury could conclude that the press release was false or misleading by implying that the original claims were upheld, when in fact they were rejected.

Foboha’s tortious interference claims also survived the motion to dismiss. Gram claimed competitor’s privilege. However, that couldn’t be resolved on a motion to dismiss, not least because Foboha specifically alleged that the parties don’t compete. (And again I wonder about Lanham Act standing.) Gram argued that they are competitors, because they both develop and design plastic injection molds, but merely engaging in some of the same activities and targeting some of the same customers doesn’t mean they’re competitors. Gram only sells the right not to be sued, which isn’t a product. Moreover, competitor’s privilege doesn’t cover wrongful means of interfering with a business, which might be present here.

Finally, Gram argued that the patent law preempted the claims because of insufficient allegations of bad faith. Plaintiffs are required to plead and prove bad faith even when it’s not an element of the underlying claim in order to permit patent holders to publicize and assert their patent rights without liability for unfair competition, even if they’re ultimately wrong about the scope of their rights. There’s a subjective and an objective component; the latter requires proof that the defendant’s statements were “objectively baseless.”

Foboha argued that it wasn’t required to plead bad faith because here there were no patent rights to publicize. However, here the PTO issued a notice of allowance, which meant that a presumptively valid patent was going to issue. Thus, the rationale for requiring bad faith applies, even to statements during the pendency of the reexamination. Foboha, however, sufficiently alleged bad faith for purposes of a motion to dismiss: Gram allegedly told Foboha and others that they were presently liable for patent infringement before the patent issued, a claim that was “objectively baseless.” After Gram substantially changed the patent’s scope, it kept making the same claims and issued a misleading press release. That was enough to plead bad faith.

Sizable damages award in NetQuote case

Following up on previous posts (this is the most in-depth post) on this somewhat unusual false advertising case: The claims were based on defendant's employee's submission of false insurance leads to plaintiff's site; defendant added insult to injury by then advertising that it had better-quality leads than plaintiff. NetQuote's attorney Dan Williams of Faegre & Benson reports that the jury returned a verdict in favor of NetQuote, awarding $1.6 million in actual damages and $3.2 million in punitive damages (plus $1000 from an individual defendant). Quite a good result for NetQuote, though given recent trends in punitive damages even a 2:1 ratio might be hard to sustain.

One reason dilution law will never do what it's supposed to

Who would have thought of the "Frypod" before Burger King came up with it? The variety of blurring uses is simply infinite, and Apple does better to count it as a measure of brand strength then to play Whack-a-mole with meaning.

Photo courtesy of Zachary Schrag.

Suggested DMCA reforms from Public Citizen

For those following the McCain/YouTube exchange, this may be of interest.

Organization for Transformative Works donation and volunteer drive

I'm a member of the board of the Organization for Transformative Works, whose mission is to preserve and defend fanworks. We are currently having a fundraising and volunteer drive, and I encourage interested readers to check us out:

Last month the OTW launched Fanlore, our wiki, which is being populated with new articles as we speak. The first issue of our journal, Transformative Works and Cultures, launched in mid-September. We have recently launched our new website, which means all OTW members can now access our news service via an RSS feed from our own blog. And the Archive of Our Own has entered limited public beta, and is filling up with stories even now! Four of our big projects have gone from dream to reality. ...

From October 13 to October 20, we invite you to make a donation to the Organization for Transformative Works. Every little bit counts, and whether you’re able to donate $10 or $500, your support means the world to us…and enables us to do the things we do.

If you have an interest in volunteering, please check out our Willing to Serve post as well. There are lots of opportunities for coders (we train coders!), graphic designers, lawyers, and people with other skills that can help us build a longterm, non-profit home for fanworks of all kinds.

Followup on YouTube/McCain interactions

EFF posts the letter YT sent in response, making a number of good points. Most notably, YT rejects the idea of giving certain channels more favorable treatment when responding to notices, agreeing that "U.S. Presidential election-related content is invaluable and worthy of the highest level of protection," but adding that "there is a lot of other content on our global site that our users around the world find to be equally important, including, by way of example only, political campaigns from around the globe at all levels of government, human rights movements, and other important voices."

As I expected, YT argues that it's the users who need to fight back: "You and our other content uploaders can play a critical role in helping us to address this difficult problem of takedown abuse. You are operating from the position of strength, with knowledge of exactly where the content in your videos comes from. You can file counter-notifications. You can seek retractions of abusive takedown notices. You can hold abusive claimants publicly accountable for their actions by publicizing their actions. You can hold claimants legally responsible for their actions by filing a lawsuit under 512(f)." While "position of strength" is a substantial overstatement, I do think that 512(f) and public debate over when takedown notices are appropriate will help facilitate what I hope is an inevitable recognition of the role of fair use in the DMCA process.

Finally, YT takes the opportunity to call for copyright reform: "we hope that as a content uploader you have gained a sense of some of the challenges we face everyday in operating YouTube. We look forward to working with Senator (or President) McCain on ways to combat abuse of the DMCA takedown process on YouTube, including, by way of example, strengthening the fair use doctrine, so that intermediaries like us can rely on this important doctrine with a measure of business certainty." I'd love to see more specific proposals from YT on this point.

Uncharmed: bitter litigation results in sanctions

Pandora Jewelry, LLC v. Chamilia, LLC, 2008 WL 4533902 (D. Md.)

The parties compete in the specialty jewelry market—they make charms that are designed to be strung together. Pandora sued Chamilia this time for false advertising, injurious falsehood, tortious interference, and unfair competition.

In 2006, Pandora sued Chamilia for patent infringement. Chamilia counterclaimed for tortious interference and antitrust violations. Pandora’s motion to bifurcate the trials and stay discovery on the counterclaims was granted, and thus Chamilia’s motion to quash a related subpoena for records was also granted.

Chamilia then sent a letter to a number of jewelry retailers, including many Pandora customers, misrepresenting (the court’s term) the granted motion to quash; it sent the same letter via email to a number of blind copy recipients. Pandora then filed the instant lawsuit. The court granted a TRO directing Chamilia to file a recipient list and issue a corrective notice. Months later, Chamilia sent another letter to jewelry retailers and email recipients about the PTO’s publication of a Chamilia patent application. This letter stated that the PTO’s publication acknowledged Chamilia’s “unique product offering” and indicated the patent would issue in 2007. Pandora amended its complaint to include this letter and moved for a preliminary injunction, which the court denied.

Then the court granted in part and denied in part Chamilia’s motion for claim construction, prompting yet another letter/email, and then an “anonymous” email that purported to come from a Pandora email account but was signed “The Chamilia Team”; both sides denied sending that email, but it was identical to the Chamilia email. And then an anonymous caller contacted at least six Pandora retailers and one Pandora sales representative to tell them that Pandora lost a patent lawsuit and that the retailers should remove Pandora ads from their stores or risk false advertising suits. Chamilia denied involvement. Chamilia also resisted discovery and failed to produce any relevant documents for some of the emails, maintaining that it had switched servers twice during the pendency of the litigation and that Pandora’s requests had been improper.

Despite these facts, Chamilia won summary judgment on the first letter/email, because Pandora couldn’t show any injury. Pandora couldn’t show a single diverted “or even disgruntled” retailer or any loss of reputation. This was telling because the first letter/email was the “most egregious” of the communications at issue, as evidenced by the court’s grant of a TRO and requirement of a corrective letter. (Jewelry retailers are hardy sorts, apparently.) Query whether the type of evidence deemed sufficient to sustain a multimillion-dollar award in the Payless case, testimony from marketing experts about inchoate harm to brand value and goodwill, would have changed the outcome here.

Likewise, Pandora failed to show that the second letter/email did harm. The court noted that Pandora never got a recipient list out of Chamilia, but there was still no evidence of injury. Though three retailers contacted Pandora about the letter, their mere queries fell short of the necessary injury in a Lanham Act claim. This absence of sales diversion and lost goodwill also doomed the tortious interference and injurious falsehood claims.

And finally, Pandora failed on its unfair competition claim because there was insufficient evidence of retailer confusion—just one retailer asking if Pandora knew anything about Chamilia receiving a patent. Though actual damage is unnecessary for this tort, the evidence was insufficient to show that Chamilia even jeopardized Pandora’s business.

Pandora did win monetary sanctions because of Chamilia’s spoliation, though it didn’t convince the court to draw adverse inferences on the substantive claims as a sanction.

McCain/Palin: copyright mavericks

Larry Lessig says the campaign's response to repeated notice-and-takedown requests is great: they call on YouTube to engage in fair use review of takedown notices against political campaign channels. To me, it seems like mere bluster (further comment deleted), because the campaign's assertion that YT wouldn't put its DMCA eligibility at risk by examining such notices for substantive merit before acting on them is, at best, unsupported in present caselaw. It is indisputable that a delay in restoring video after a counternotification has been filed is a really bad thing, but that's encoded in the DMCA itself, and if I were YT I'd want to stick with full compliance, especially as the Viacom suit drags on. Here's the countersuggestion: if the campaign is really serious about its First Amendment rights to use footage and other people's songs, then it should do what the EFF and Stanford's Fair Use Project have been doing and sue the people sending the notices for abuse of the DMCA. They're the ones causing the problem, right?

It's a nice piece of political theater, dragging the intermediary into the matter from the notice recipient's side--usually it's the copyright owner who wishes to recruit the intermediary to do its policing. And if it succeeds, I'll be very impressed. But I'm not sure it's supposed to succeed.

A catfish by many other names

The NYT has a feature on the raising and marketing of catfish in a global market, touching on issues of false advertising (what is a catfish?), GIs (including the use of "Cajun" on fish not raised in the US, as well as country-of-origin labeling), and branding (including US growers' decision to switch to the name Delacata in an attempt to leave the catfish wars behind).

Limited warranty defeats fraud claim, not consumer protection claim

Koch v. Greenberg, 2008 WL 4450273 (S.D.N.Y.)

Koch sued Zachys Wine & Liquor Stores and other defendants for fraud, negligent misrepresentation and violations of New York consumer protection law. Koch bought nineteen bottles of wine from Zachys for a total of $3.7 million at two auctions in 2005 and 2004. He discovered that they were counterfeit in 2007 when he hired a noted wine expert to review his cellar.

Koch received auction catalogues describing the bottles and argued that the catalogues represented that the wine being auctioned was genuine and was accurately described. The catalogues contained a provision labeled “Conditions of Sales & Limited Warranty.” This explicitly disclaimed any warranty and said all sales were “as is.” In addition, the catalogues invited prospective buyers to examine the wine before bidding. Koch chose not to do so.

Reasonable reliance is required for both fraud and misrepresentation claims. A general, boilerplate disclaimer of representations can’t defeat a fraud claim. At the same time, a party can’t justifiably rely on a representation that has been explicitly and specifically disclaimed. Here, the disclaimer covered “correctness” of the catalog description, as well as the “description, size, quality, condition, rarity, importance, provenance, exhibition history, literature, previous storage conditions or historical relevance of any property.” Such disclaimers have been held sufficient to protect auctioneers in New York against similar claims.

There is an exception to the rule if the allegedly misrepresented facts are peculiarly within the defendant’s knowledge. Courts consider the buyer’s sophistication and the accessibility of the underlying information. Here, Koch is a serious collector of rare wines with access to noted wine experts. Moreover, he made no effort to examine the wine before bidding nearly $4 million. He argued that he was at a comparative disadvantage because he couldn’t taste the wine, but then neither could Zachys. He also argued that there was no evidence that a mere visual inspection would have sufficed, because it wouldn’t have revealed a key fact: that the collection from which it came had counterfeit wine. But there was no evidence Zachys knew about the previous inspections finding such counterfeits. Whatever observations led Koch to his present conclusions were equally available to him before the auction.

Under New York General Business Law Sections 349 and 350, however, the analysis was different. Those sections ban “deceptive acts or practices” and “false advertising.” Explicit disclaimers don’t protect sellers against liability. Zachys argued that this case turned on a private contract dispute and didn’t involve conduct directed at consumers at large. GBL claims must involve “consumer-oriented” deceptive conduct; the acts need not be repetitive or recurring, but they must threaten a broad impact on consumers at large, which means they must have the potential to affect similarly situated consumers. Here, the auction wasn’t a private contract for a single-shot transaction. Instead, Koch alleged that Zachys offered counterfeit wine to the public at two separate auctions and widely disseminated catalogs making false claims. If the allegations of the complaint are true, then other people may well have been harmed.

Zachys also argued that Section 349 shouldn’t apply to a complex transaction involving knowledgeable and experienced parties and large sums. But just because he’s wealthy and sophisticated doesn’t deprive Koch of legal protection. Further, Zachys argued that the wine here was like securities—an investment product, which courts have excluded from Section 349’s coverage. But even very expensive wine is a consumable “good.”