Hernando de Soto on property and the financial crisis

I thought this article in the WSJ was really interesting. De Soto argues that a lack of a recording system for derivatives is a key component of the problem:

[A]ggressive financiers have manufactured what the Bank for International Settlements estimates to be $1 quadrillion worth of new derivatives (mortgage-backed securities, collateralized debt obligations, and credit default swaps) that have flooded the market.

These derivatives are the root of the credit crunch. Why? Unlike all other property paper, derivatives are not required by law to be recorded, continually tracked and tied to the assets they represent. Nobody knows precisely how many there are, where they are, and who is finally accountable for them. Thus, there is widespread fear that potential borrowers and recipients of capital with too many nonperforming derivatives will be unable to repay their loans. As trust in property paper breaks down it sets off a chain reaction, paralyzing credit and investment, which shrinks transactions and leads to a catastrophic drop in employment and in the value of everyone's property.

Ever since humans started trading, lending and investing beyond the confines of the family and the tribe, we have depended on legally authenticated written statements to get the facts about things of value. Over the past 200 years, that legal authority has matured into a global consensus on the procedures, standards and principles required to document facts in a way that everyone can easily understand and trust.

The result is a formidable property system with rules and recording mechanisms that fix on paper the facts that allow us to hold, transfer, transform and use everything we own, from stocks to screenplays. The only paper representing an asset that is not centrally recorded, standardized and easily tracked are derivatives.

Of course, de Soto's claim that recording systems govern all valuable property rights is true for patents, but not for copyright (no registration required for protection, thanks, Berne Convention!) nor for trademarks--though one can expect the most valuable of both to be subjects of filing with the appropriate government office, so it's not as bad as all that.

Public Citizen's guide for citizen-bloggers

Public Citizen explains the guide as follows:

This is a guide for bloggers and non-profit organizations about writing with libel considerations in mind. The guide discusses the elementary principles of libel law and explains how to prepare for and conduct a pre-publication libel review. It is particularly importance to have a third party, not otherwise involved in the preparation of a report or blog post that criticizes individuals or organizations, compare all possibly-defamatory statements with the sources for those statements.

It should prove very useful to citizen journalists.

Dastar bars express misattribution claim

Pot Luck, L.L.C. v. Freeman, 2009 WL 693611 (S.D.N.Y.)

A very interesting case in which Dastar was used to bar what I would have thought was a claim for express misattribution not covered by Dastar (though disallowed by other doctrines). Maybe it’s the difficulty of articulating which doctrine ought to apply that made Dastar an attractive explanation for why plaintiff couldn’t win.

Anyway, on to the case: Pot Luck sued defendants to enjoin them from distributing, selling, or marketing the film High Times’ Potluck, to which Pot Luck owns the registered copyright. (The magazine High Times helped produce and finance the film; I take it that Pot Luck bears some relation to the magazine.) The claims: copyright infringement, along with Lanham Act and related state law unfair competition/fraud claims. Pot Luck had granted defendants an exclusive right to distribute the film, first in the US and Canada and later worldwide. Pot Luck alleged that defendants failed to distribute and promote the film as agreed under the licenses, wrongfully denied territorial licenses to third parties who wanted to distribute the film, and failed to pay Pot Luck.

For the copyright claim, the issue was whether Pot Luck’s claims were for infringement or for breach of contract, a question on which there is extensive Second Circuit precedent. The key was whether Pot Luck had rescinded any license to defendants; if so, it could sue for infringement, but if not, its remedies were in contract. Though Pot Luck alleged that it had made multiple demands on defendants, the licenses limit its right to rescind, granting defendants an “irrevocable” license. Such terms have been upheld under New York law. Thus, the court lacked subject matter jurisdiction.

On the Lanham Act claims, defendants argued that plaintiff lacked a protectable mark. The court, however, went in another direction. “Origin of goods” under Dastar means only the producer of the tangible goods, not the author of any idea, concept or communication embodied in those goods. As a result, “[t]he right to copy creative works, with or without attribution, is the domain of copyright, not of trademark or unfair competition. The failure to credit the true author of a copyrighted work is not a false designation of origin, but a violation of copyright.” Contractual Obligation Prod., LLC v. AMC Networks, Inc., 546 F. Supp. 2d 120, 130 (S.D.N.Y.2008) (quoting Freeplay Music, Inc. v. Cox Radio, Inc., 409 F. Supp. 2d 259, 263 (S.D.N.Y.2005)).

You might be wondering why the court is relying on cases about failure to credit when the problem here appears to be credit. This decision about maintaining the copyright/trademark boundary. Because there is no copyright claim, defendants can distribute the film without fear of copyright liability. (We’ll set aside the contract remedies.) That freedom would be unduly constrained if the defendants had to take the name of the film, or the filmmakers, off. In other words, it’s true that the film is High Times’ Potluck. If—which is far from certain—consumers believe that distributors need Pot Luck’s permission to distribute the film because the name itself implies permission, then we will nonetheless disregard that confusion as a matter of law. Any confusion is immaterial to consumers, who want High Times’ Potluck rather than wanting the identical “authorized” High Times’ Potluck. Among other things, the result in this case throws the old Beatrix Potter case, in which public domain images of Beatrix Potter illustrations were held to be protectable as trademarks when used on the cover of Potter books, into significant doubt.

For whatever reason, the court didn’t talk about the copyright/trademark conflict, instead fixating on “origin.” Because defendants were the manufacturers and distributors of the physical copies of the film, the court ruled, consumers wouldn’t be confused about the “origin” of the film. Except that the possessive title High Times’ Potluck doesn’t identify defendant, the actual origin—it (allegedly anyway) identifies plaintiff!

The court compounded the weirdness by distinguishing Chambers v. Time Warner, Inc., 282 F.3d 147 (2d Cir. 2002) (a pre-Dastar case): in Chambers, the court of appeals allowed a §43 claim against mp3.com for using musicians’ names and likenesses to promote recordings offered on its site. But, the court here reasoned, mp3.com wasn’t the “origin” of the musicians’ names and likenesses, because mp3.com wasn’t the “original producer or distributor” of the musicians’ names and likenesses. That’s kind of shockingly muddled (even setting aside questions as to why the original distributor gets a pass, such that if defendants had been the second group Pot Luck contracted with the allegations would state a claim).

The whole point of Dastar was that if you produced the physical instantiation of a copy, you’re its “origin” for §43(a) purposes. Under this reasoning, perhaps customers’ computers were the origin of the particular instantiations of the names and likenesses at issue in Chambers, but let’s assume that mp3.com gets saddled with them. Mp3.com is then actually producing the copies of the names and likenesses, just like Dastar in Dastar. The court here is comparing tangibles to intangibles. But the basic reason that the court’s reasoning is so creaky is that the claim in Chambers is false endorsement/affiliation, like Pot Luck’s here. Such a claim might or might not survive Dastar. I don’t think Chambers is so easily distinguishable from the present case. Mp3.com had the recordings to offer, and it’s copyright’s job to police that, not trademark law’s. (If we want to go some sort of nominative fair use route, we might allow the names and not the likenesses, but it depends on the circumstances.)

This decision isn’t wrong; it’s just right for the wrong reason.

Anyway, the court moved on to dismiss Pot Luck’s “unfair competition” Lanham Act claim, reasoning that Pot Luck didn’t sufficiently allege either a trademark or a false advertising claim under that head. With the federal claims all gone, the state-law claims were dismissed for lack of supplemental jurisdiction, and the court denied leave to replead any of the federal claims. Pot Luck was granted leave to replead the state law claims if it could plead diversity jurisdiction, though the court warned that many of the allegations appeared insufficient on their face, and that injunctive relief was barred by the licenses.

Announcement: Fordham Symposium on Law in the Information Society

Intermediaries in the Information Society
March 27, 2009

PANEL DISCUSSIONS

Content and the CDA Immunity
When do—and when should—intermediaries receive immunity for user content under the Communications Decency Act? Panelists will discuss the status of CDA immunity, the standard for when an intermediary can be deemed a content provider after the Roomates.com and Craigslist cases, and whether the CDA immunity should be modified.

Why is Tiffany Blue? 3rd-Party Liability and the eBay Cases
Should online auction houses or other third parties be responsible for the sale of counterfeit goods? Panelists will address the ongoing series of attempts in the United States and Europe to extend the scope of vicarious liability and contributory infringement, as well as related issues.

The Social Impact of Intermediaries
What impact do intermediaries have on society and culture? Panelists will discuss the ways intermediaries have changed how information is created and communicated—and the ways that intermediaries may impact the future of the information society.

Intermediaries as Legal Filters
Should intermediaries be used to filter information? What impact will filtering methods such as deep packet inspection have on immunity and liability for intermediaries? Panelists will examine requirements for ISPs to block access to sites containing material deemed illegal, explore filtering done for business reasons, and consider a range of filtering purposes--from censoring speech to combatting child pornography to ranking search results.

Practical Tips for Advising Intermediaries
Practitioners will provide guidance about things to be aware of when advising intermediaries.

CONFIRMED SPEAKERS INCLUDE

Jack Balkin,Knight Professor of Constitutional Law and the First Amendment & Director of The Information Society Project, Yale Law School

Ian C. Ballon, Shareholder, Greenberg Traurig

Dr. Ian Brown, Senior Research Fellow, Oxford Internet Institute & Honorary Senior Lecturer, University College London

Dan L. Burk, Founding Faculty, University of California–Irvine School of Law

Eric Goldman, Associate Professor of Law & Director of the High Tech Law Institute, Santa Clara University School of Law

Wendy Gordon, Visiting Professor, Fordham Law School; Philip S. Beck Professor of Law & Paul J. Liacos Scholar in Law, Boston University School of Law

James Grimmelmann, Associate Professor of Law, New York Law School

Paul Gupta, Partner, Orrick, Herrington & Sutcliffe LLP

Thomas D. Halket, Attorney and Chartered Arbitrator, Halket & Weitz LLP

Samir Jain, Partner, WilmerHale

Nancy Kim, Associate Professor of Law, California Western School of Law & Visiting Associate Professor, Rady School of Management, University of California, San Diego

Helen Nissenbaum, Professor of Media, Culture & Communication & Senior Fellow of the Information Law Institute, New York University

Dawn C. Nunziato, Associate Professor of Law, George Washington University Law School

Joel Reidenberg, Associate Chief Academic Officer & Associate Vice President for Academic Affairs, Fordham University; Professor of Law and Director of CLIP, Fordham Law School

Susan Scafidi, Visiting Professor of Law, Fordham Law School

Rebecca Tushnet, Professor of Law, Georgetown University Law Center

Jay Westermeier, Of Counsel, Finnegan, Henderson, Farabow, Garrett & Dunner LLP

---

The symposium is open to the public.
Registration fee: $30 per person; $140 per person for practitioners who wish to earn CLE credits.

• Reduced rates available for academics, nonprofit/government employees, and Fordham Law alumni.
• Review Fordham Law's financial hardship policy for this symposium.

All events take place at Fordham Law School in the McNally Amphitheatre.
140 West 62nd Street | New York, NY 10023

Hofstra Conference on Energy and the Environment: Empowering Consumers

A Threat to Consumer Empowerment: Greenwashing

Me: I’m interested in how consumers understand advertising claims in general. The claims we are discussing here are strange from the perspective of early advertising theory – they’re not about individual use attributes like taste (experience claims). Most green claims can’t be verified by consumers, or even by a group of consumers – these are extreme forms of credence claims. Economic theory says that purely rational actors should discount credence claims entirely because they’re unverifiable. Given how common credence claims are, it’s evident that advertisers are not aiming at the market segment consisting of purely rational actors. And the empirical literature makes clear that credence claims work, if only because familiarity with any claims breeds trust in those claims. Among other things, memory of source decays faster than memory of claim, so eventually even ad skeptics start to credit the substance of ad claims.

Most people have only a vague notion of what a carbon footprint is, or lifecycle analysis, etc. And consumers know they don’t know. As Alan Levy says, buying a green product is an act of symbolism and faith. Worse still, there’s some evidence that consumers reward themselves for “good” purchases by indulging on some other metric—so if consumers think that a product is good for the environment, or otherwise morally good, on one axis, they will be satisfied and not necessarily ask about the other ways in which the product might be less than ideal, even for environmental reasons. A limited or distracting green claim can thus be just as persuasive as an unlimited one.

False advertising law may be of limited assistance in dealing with complicated green marketing claims. At least in the Lanham Act context, meaning private lawsuits between competitors, some cases hold that terms that consumers don’t understand, or only have vague expectations about, cannot be false because they don’t communicate specific enough information. Example: In one recent case, the court concluded that, although Mitsubishi designated its television set as a 1080p television set, the phrase 1080p “does not convey a specific claim that is recognizable to the targeted customer”—it just indicates a technologically sophisticated TV set. Another: when a vacuum cleaner maker made up a scale of vacuum effectiveness, but the scale had no external meaning, the court concluded that the scale couldn’t be deceptive because it didn’t tell consumers anything they understood.

For green marketing claims where consumers have no preexisting understanding of what the claim means or how it relates to other green claims, that might mean that only a regulatory standard, or maybe an industry standard, would be enough to set a baseline against which claims of falsity and misleadingness could be made. Knowledge from the FDA, courtesy of Alan Levy’s excellent summary of the research: Consumers generally don’t assume ads or labels are educational; they don’t look to Exxon for information about the environment. They are looking for product-specific information. Likewise, consumers don’t necessarily assume ads are reliable. They don’t carefully assess every claim – they know they can’t -- but they look for whether a claim is consistent with what they already know. This is the value of a positive brand identity: it makes claims automatically more credible.

What is a marketer to do? Dietary supplement makers use the news to provide information to consumers about what new products they should consumer because news is more credible. News outlets always need to fill the news cycle, and they often report what marketers tell them.

Consumers’ rules of thumb, all pointing to a regulatory solution: (1) Ubiquitous claims generate confidence that the claims have been vetted and are trustworthy. If McDonald’s and Burger King and Subway all make the same pitch about healthy meals, consumers will trust all of them more. (2) Marketing that uses the same format to convey information increases credibility. This is why the nutrition panel on food has been a huge success—it’s easy to use and it’s trustworthy; consumers don’t need to know how nutrient levels are determined or even how it was decided which nutrients should be labeled. And it explains why industry should (and often does) want a Green Guide. (3) Corollary: without a market standard, inconsistency signals ulterior motives and heightens skepticism.

Laura DeMartino, Assistant Director, FTC Enforcement Division

Enforcement isn’t the only FTC activity—business guidance, and support for self-regulation. Two simple rules: tell the truth and have substantiation for your claims. FTC looks at ads from the perspective of the consumer. Express claims are easy, but you also need to identify implied claims. FTC has Green Guides for businesses, but it isn’t an environmental agency. Its job isn’t to encourage “right” decisions, but to make sure that consumers can make their own choices.

“Eco-friendly.” The advertiser may mean that the bottle is made of recycled plastic, but the consumer may interpret it to mean that the production didn’t cause pollution. By using a broad claim, the advertiser may be conveying claims for which it lacks substantiation. Relatedly, don’t overstate claims: “50% more recycled content,” where the content increased from 2% to 3%: that’s likely to convey a false impression of a significant increase. If a claim is true but misleading, marketers can use qualifications or disclosures to limit the claim, but not by using footnotes.

“Biodegradable”: FTC requires it to break down in a relatively short time when disposed of in a conventional manner. Bunnies diaper ads said these diapers would decompose before your child grows up. FTC brought an enforcement action: Most trash ends up in landfills, which are designed to avoid biodegradation.

“Recyclable”: The product has to be capable of being collected/diverted from the solid waste stream, and there must actually be existing programs in a substantial majority of the communities in which the product is sold or a substantial majority of the population to which the product is sold. To consumers, recyclable means you can recycle this. FTC tested some qualifications, and found that marketers need to be really clear. “Check to see if recycling facilities exist in your area” did not inform consumers. You need to say: “Recycling programs may not exist in your area.”

What about “please recycle”? Doesn’t say recyclable. Research: when consumers see that, they think programs to recycle exist, so the same qualification is needed.

The Green Guides are under review. There are a lot of novel claims. For example: paint with an insulating quality that will decrease energy losses 40-60%--the FTC is now in court on that. Another claim FTC is acting against: advertiser’s device will turn any car into a hybrid. FTC can and will seek monetary remedies: not toothless.

Katherine Farrara, BBB, National Advertising Division staff attorney

Farrara had awesome slides! NAD does ~150 cases/year with seven staff attorneys, everything from personal computers to household cleansers to male enhancement products to animal husbandry. Green claims receive some play as well. The ondustry was quick to respond to consumers’ environmental concerns in the 1980s. They made useless product changes, overstated green benefits, advertised to people’s misconceptions, and occasionally just made stuff up. Example: Hefty “degradable” bags with green imagery. The problem: they went to landfills.

Another great one: less light for same money: replace your 100 watt bulbs with 90 watt bulbs!

Companies are making legitimate efforts to educate consumers and change products, but unfortunately there will always be some who aren’t. Consumers can’t distinguish accurate and inaccurate green claims; they simply lack the info.

Examples of recent NAD decisions raising recurring issues. (1) Ad for Panasonic plasma TVs: taking one attribute of the product and saying that it lacks lead/mercury, and LCDs do, thus plasma is environmentally friendly. But consumers think that “friendly” means good for the environment, or at least not bad for the environment. But plasma consumes more energy than same-size LCDs. NAD recommended removal of the “friendly” claim.

(2) Polygreen claims: 100% oxo-biodegradable. But consumers read that as biodegradable, which is not true.

(3) Natural claims. Arm & Hammer is trying: claims “100% naturally derived surfactants,” which wasn’t true because after processing the content was only 35%.

(4) False denigration: Companies spend money to create a green product, and then want to scare the crap out of consumers about how ungreen competitors’ products are. Series of ads, all including a dead thing soaked in formaldehyde; what was marketed was actually wood paneling, PureBond, for inside the home. “Formaldehyde is quite beneficial. Unless you happen to still be breathing.”
They can definitely advertise that their own product lacks formaldehyde, but they had no evidence that the level of formaldehyde in the competing products was harmful.

Elizabeth Glazer, Hofstra Law: Two sets of interests—consumers who have the right to make their own autonomous choices. And consumers as people in the world who are benefited by the environment being better. Greenwashing is bad. But we want to avoid disincentives for companies that try to be green.

Is there anything like reverse greenwashing? Can you imagine a product that doesn’t enhance its reputation by being green, and conceals it? [Rob Walker’s Buying In discusses pretty much this scenario, with American Apparel—doesn’t spend much time advertising organic fabric or good labor policies; advertises based on sex appeal.]

DeMartino: No one forces marketers to advertise anything unless they’re saying something misleading that requires a qualifying disclosure. On the first point, deterrence: that’s why we have Green Guides and not Green Rules—FTC doesn’t want to inadvertently chill claims.

Me: I don’t buy the idea that the point is to guarantee individual choice: making a standard encourages valuing it—USDA meat grading means that people value Grade A over other possible ways of evaluating meat; organic rules encourage production of food that meets the standard and discourage production of food that only has a small percentage of organic ingredients; disputes over whether dairy producers can use the label “rBGH-free” or whether that misleads consumers about safety (even if it also provides truthful information about environmental consequences). I've written about this.

Farrara: An ad campaign goes through a bunch of hands before reaching the public. The creatives, the lawyers—they fight about what they can and can’t say. The Panasonic lawyers probably cut back on the number of green claims in that plasma TV ad. People advertise green claims in order to make money.

Q: Small Vermont business: Chose not to use “biodegradable” on a cup when the cup met ASTM standards, because appropriate recycling was not available outside Vermont. Businesses need incentive to innovate, which is absent if you can’t market; and then municipalities don’t invest in composting facilities because they don’t think biodegradable products are out there. Chicken-and-egg problem.

Separately: Given how small the impact of a CFL is, especially on a clean grid, how is anyone supposed to substantiate a claim about energy?

DeMartino: Have heard feedback on this issue of “recyclable”/biodegradable. But consumers have also reacted by saying that “recyclable” is a hollow call to action if recycling isn’t available, and use would lead consumers to discount the claim even when recycling was available. Qualifying claims may be your solution: the guides provide examples for marketers.

Q: Car manufacturers—how can all these different superiority/fuel economy claims be true?

DeMartino: EPA does require a label. After that, puffery kicks in—some claims are just not verifiable.

Q: Are there statutory changes that could help? Or is it a question of enforcement? There’s no private cause of action under the FTC Act. Should we increase penalties? Ads change minds even if they’re withdrawn.

A: I’m fond of standards, but they do have costs in controlling innovation. The nutrient panel means that it’s hard to convince people that they should pay attention to nutrients that aren’t on it. The EPA mileage estimates are wrong, but they’re still valuable insofar as they allow people to make comparative judgments between cars. (Though hybrids may change that.)

Farrara: People are anxiously awaiting the new Green Guides.

IP/Gender: Save the Date

Sixth Annual IP/Gender: Mapping the Connections
Female Fan Culture and Intellectual Property
April 23 & 24, 2009
American University Washington College of Law

Thursday, April 23, 2009 | 7:15 pm
Multimedia Show: “WeTube: Women Transforming Mass Media”
Francesca Coppa, Muhlenberg College | Jonathan McIntosh, Digital Artist and Media Activist

Friday, April 24, 2009 | 9:00 am — 4:30 pm
Opening Remarks
Rebecca Tushnet, Georgetown University Law Center

Topics:
Is There a Text in This Work? Transformation Beyond the Written Word
New Forms of Organizing: Women Reinterpret the Legal, the Educational and the Political
Cui Bono? Economic Contexts

Participants:
Ann Bartow, University of South Carolina | Francesca Coppa, Muhlenberg College | Casey Fiesler, Vanderbilt University | Melissa Tatum, University of Arizona | Robert Spoo, University of Tulsa | Tisha Turk, University of Minnesota | Ann Shalleck, Washington College of Law | Laura Murray, Queen’s University | Jordan Gilbertson, University of La Verne, College of Law| Karen Hellekson, Transformative Works and Cultures | Peter Jaszi, Washington College of Law | Kristina Busse, University of South Alabama | Abigail De Kosnik, University of California, Berkeley | Zahr Said Stauffer, University of Virginia School of Law

online registration, link to webcast and updates

Salad days for defendant who altered "best when purchased by" dates

United States v. Farinella, -- F.3d --, 2009 WL 615408 (7th Cir.)

A Posner opinion can be expected to entertain; if you’d rather read the whole thing, here it is. Farinella was convicted of wire fraud and introducing a misbranded food into interstate commerce with intent to defraud or mislead.

In May 2003, Farinella bought 1.6 million bottles of Henri’s Salad Dressing. The manufacturer-provided labels said “best when purchased by,” followed by dates from January to June 2003. In order to sell the dressing to dollar stores, Farinella pasted over the “best when” label with new labels using May or July 2004. Judge Posner called the government’s use of the term “expiration date” “false and misleading” in itself. In opening argument, the prosecutor said, “it’s a case about taking nearly two million bottles of old, expired salad dressing and relabeling it with new expiration dates to pass it off as new and fresh.... [N]obody wants to eat foul, rancid food.” Posner distinguished an expiration date—“the date after which you shouldn’t eat the product”—from “best when purchased by.” The salad dressing here is shelf-stable, and has no expiration date, or at least none of interest to anyone but the cockroaches who will survive the human race.

The reseller received some complaints about the relabeling, though none about taste or other qualities, and complained to Farinella, who said that he’d checked with the FDA and that the relabeling was okay. He was lying about checking with the FDA, and about some other things. But there was no threat to human health, or even evidence that the salad dressing deteriorated, even by the time of trial.

The FDCA defines “misbranded food,” but not specifically with respect to label dates. Farinella’s acts were criminal only if the label was “false or misleading in any particular.” There’s no FDA or FTC regulation of “best when purchased by” or of people who change the “best when purchased by” label. There was evidence at trial that Unilever picked its “best when purchased by” date based on tests, but no evidence of what was tested—Posner suggested it might have been taste.

Moreover, there was nothing in the record about what consumers think “best when purchased by” means. Without direct or survey testimony, there was no way to determine whether the redating was misleading. There was no evidence that the term has a uniform meaning in the food industry. The government contended that it was a synonym for “expires on,” but presented no evidence of this, and simply argued it to the jury as if the terms were synonyms.

There was no specific regulation covering this issue. “As far as the evidence shows, any firm in the chain of production and distribution that leads from the manufacturer to the ultimate consumer can make its own judgment of when the taste of the product is likely to deteriorate. For all we know, the date is determined less by a judgment about taste than about concern with turnover.” This was my thought—the “best” date might be one that leads to a certain amount of tossing out old but still usable product, though Posner then proceeded with standard invisible-hand reasoning to show that the producer would have some countervailing incentives as well. Posner also speculated that “best” dates allowed for price discrimination: wealthy consumers can buy before that date, and poor ones can buy after at a discount. But then is Farinella avoiding that price discrimination by deceiving consumers, who by hypothesis do consider the date material? No, because he sold in dollar stores, to price-conscious consumers who were willing to take the risk of lower quality. (But then why did he do it? Maybe price isn’t the only thing those consumers are looking for; maybe they’d rather not have to think of themselves as buying out-of-date food for their families.) Or maybe, Posner continued, the “best” date is a time-limited warranty, and if the product isn’t “best” through that date consumers are entitled to a refund.

Of course this is all speculation, but Posner thought his speculations were “less implausible” than the government’s assumption that “best by” meant “expires on,” so that consumers “would not dream of buying the product no matter how steeply it was discounted” once the date had passed. That’s a pretty extreme requirement for consumers; does the existence of freegans who score food out of dumpsters mean that “expires on” is equally irrelevant?

Posner further found that the admission of an FDA employee’s testimony was improper. The employee testified that the FDA has a database of inquiries regarding the relabeling of food products, that he had looked in the database, that he had found no record of an inquiry from Farinella about relabeling salad dressing, and that the FDA requires supporting data before approving a request to change the date. But there’s no requirement of FDA approval—there’s no statute, regulation, written guideline or opinion setting forth this requirement. One employee’s opinion is insufficient to satisfy due process. And of course witnesses can’t testify about the substance of domestic law, either. Even worse, the testimony here was “not just improper and inadmissible but incoherent”—he didn’t know what the FDA says about “best by” dates, he didn’t know what “best when purchased by” meant, and he contradicted himself on whether the FDA had authority to regulate expiration dates.

Bottom line: In order to prove fraudulent misrepresentation, “ a jury must be given evidence about the meaning (unless obvious) of the representation claimed to be fraudulent.” (Ah, obviousness. So useful, and yet so tricky in practice.) Farinella was entitled to an acquittal based on insufficient evidence.

Then—and this is why there’s probably more interest in this opinion than in even the average Posner opinion—Posner went on to consider why Farinella had been convicted despite the paucity of evidence. He blamed a series of improper statements by the prosecutor in closing argument. First, she attacked Farinella’s exercise of his right to counsel, saying that he was trying to buy his way out of his crime.

Second, she linked the “best when purchased by” date to health and safety, for example telling the jury that the date “allows a manufacturer to trace the product if there is a consumer complaint, if there is illness, if there is a need to recall the product.” But there was no evidence this was true, either in general or in particular. She repeatedly raised the specter of unsafe food: “in spite of all this talk about the quality of the dressing, I don't see them opening any of these bottles and taking a whiff”; the defendant was indifferent to “safety”; “the harm caused by the fraud was to public confidence in the safety of the food supply”; the defendant sold “truckfulls of nasty, expired salad dressing.” These and other statements led Posner to warn that the conviction would have been reversed for prosecutorial misconduct had there not been insufficient evidence.

Amy Adler on moral rights

Amy M. Adler, Against Moral Rights, 97 Cal. Rev. 263 (2008). An excerpt:

This essay seeks to undermine the foundations of moral rights scholarship, law, and theory. My argument is that moral rights laws endanger art in the name of protecting it. Drawing on contemporary art theory and practice, I focus on the moral right of “integrity,” called “the heart of the moral rights doctrine.” This right allows an artist to prevent modification and, in some cases, destruction of his art work. As I show, the right of integrity threatens art because it fails to recognize the profound artistic importance of modifying, even destroying, works of art, and of freeing art from the control of the artist. Ultimately, I question the most basic premise of moral rights law: that law should treat visual art as a uniquely prized category that merits exceptions from the normal rules of property and contract.

Who's the patron saint of disappointed postulants?

Hoyle v. Dimond, 2009 WL 604899 (W.D.N.Y.)

Defendants operate the not-for-profit Most Holy Family Monastery (MHFM). Hoyle entered the monastery in 2005, intending to become a Benedictine monk. Defendant Frederick Dimond (who goes by the name Brother Michael Dimond, OSB) told Hoyle that MHFM dated to the 1960s and that Dimond was a Benedictine monk who supervised the monastery. Hoyle gave MHFM cash of over $65,000, then decided to become a postulate, which Dimond told him required him to turn over his worldly possessions to MHFM. Hoyle thus gave MHFM $1.2 million in stock, then executed a document stating he was to receive $750,000 if he left the monastery. He later found out that MHFM was not a Benedictine monastery, that Brother Michael was not a member of the Order of St. Benedict, and that he couldn’t become a Benedictine monk through MHFM. He sued to recover money he donated to MHFM in reliance on its representations regarding its affiliation with the Order of St. Benedict, alleging fraud, negligent misrepresentation, unjust enrichment, and money had and received.

Defendants argued that the court lacked subject matter jurisdiction under the First Amendment, because the dispute couldn’t be resolved without interpreting religious doctrine, specifically what it means to be “Benedictine.” Hoyle rejoined that the fraud issue was one of affiliation: were the defendants affiliated with the “universally recognized and sanctioned” Order of St. Benedict?

Courts can’t resolve controversies that require resolution of matters of religious doctrine. But they can decide disputes if they don’t have to rely on religious doctrine to do so, applying neutral principles of secular law. Hoyle has the burden of showing subject matter jurisdiction, and favorable inferences aren’t drawn in his favor. For purposes of the motion to dismiss, the court accepted the allegations that the defendants represented themselves as Benedictine; that defendants aren’t members of the recognized Order of St. Benedict; and that they convinced Hoyle to turn over his worldly possessions ot him on the false promise that he could become a Benedictine monk. Whether defendants are associated with the recognized Order of St. Benedict can be determined using neutral principles. The dispute is not between MHFM and the Order of St. Benedict, but between Hoyle and MHFM. But, if after discovery, it becomes clear that resolving the dispute would require ruling on religious doctrine, the question could be revisited.

Supplier turned competitor faces false advertising and trademark claims

Irwin Industrial Tool Co. v. Worthington Cylinders Wisconsin, LLC, 2009 WL 606218 (W.D.N.C.)

Irwin does business as BernzOmatic. It sued Worthington for breach of contract, unlawful price discrimination, Lanham Act violations, and related state law claims. According to the complaint, BernzOmatic makes tools, including hand torches and other gas combustion devices; it has registered trademarks for BERNZOMATIC and a recognizable trade dress including color. BernzOmatic is the market leader in consumer hand torches and cylinders. For over twenty years, Worthington’s predecessor Western supplied BernzOmatic with hand torch cylinders, which BernzOmatic then sold under its own brand. Worthington acquired Western in 2004, assuming its oblgiations under the contract between Western and BernzOmatic: Worthington would be the sole supplier of specified cylinders at set prices; BernzOmatic was the sole outlet for those cylinders; and BernzOmatic had the exclusive right to sell them to distributors and retailers.

In 2005, the parties negotiated a new agreement that allowed Worthington the exclusive right to sell cylinders to certain specified customers, and also allowed Worthington to terminate the exclusivity provisions of BernzOmatic purchased fewer than 14.25 million cylinders in a 12-month period. In 2007, Worthington notified BernzOmatic that it was terminating the exclusivity provisions, and that it considered BernzOmatic’s recent acquisition of Ultra Blue Technologies to be in bad faith, because Ultra Blue’s PowerCell products directly competed with sales of Worthington Cylinders. BernzOmatic didn’t contest the termination, but pointed out that Worthington’s own exclusivity rights were terminated as well, and argued that the PowerCell products were smaller and thus not covered by the parties’ supply agreement.

Shortly thereafter, Worthington notified BernzOmatic that it was terminating the entire supply agreement because of the purported breach arising from the PowerCell sales. BernzOmatic alleged that Worthington knew that there was no breach, and had known about PowerCell for over a year before raising it as an issue. Rather, BernzOmatic alleged, Worthington just wanted a pretext to avoid the price agreement and sell cylinders directly to mass merchants and others. Worthington then dramatically increased its prices, but BernzOmatic had no alternative sources and thus had to pay the new prices, disrupting its ability to supply its customers. When BernzOmatic found a new supplier, it still paid higher prices.

Worthington began selling its own cylinders in direct competition with BernzOmatic. They were substantially similar to the previous cylinders, including the same trade dress with a distinctive blue color for propane and yellow for MAPP gas cylinders.
(Here’s a website selling Worthington cylinders with a picture of what appears to be a BernzOmatic cylinder.) Worthington began advertising using a picture of a hand tearing away a BernzOmatic label on its hand torch cylinder, revealing a Worthington label underneath and states: “Uncover the name you've trusted all along … All the quality you've come to expect in hand torch cylinders is now available direct from the source.” BernzOmatic considers this disparaging. (Here’s a website stating that BernzOmatic has attempted to avoid products liability claims by blaming Worthington and its predecessor for making the cylinders.)

BernzOmatic alleged that the ad falsely stated or implied that consumers shouldn’t trust BernzOmatic, that they were really purchasing Worthington when they thought they were purchasing BernzOmatic, and that BernzOmatic is not the brand that they trusted it was. Moreover, BernzOmatic alleged that the ad was likely to cause confusion about affiliation, connection, association, origin, sponsorship or approval.

The court first rejected the “trust” claim. Nothing in the ad explicitly says that consumers shouldn’t trust BernzOmatic, nor could such a representation reasonably be implied. Indeed, the ad is flattering: BernzOmatic has been, and should be, trusted—and because Worthington is the “source” of BernzOmatic cylinders, so should Worthington.

Next, BernzOmatic alleged that the ad falsely stated or implied that consumers were buying a Worthington product when they thought they were buying a BernzOmatic product. Worthington argued that this statement was neither false nor misleading, because it was literally true. However, the ad could reasonably be read to imply that Worthington has been the source of BernzOmatic cylinders for the entire time that BernzOmatic has been selling them, but this isn’t true—Worthington took over only in 2004 and stopped in 2007, not “all along.” This was enough to state a false advertising claim. For the same reasons, BernzOmatic sufficiently pled a false or misleading association between Worthington and BernzOmatic to state a claim.

Query: would this be the same result if the nominative fair use test were applied? In the 9^th Circuit at least, nominative fair users don’t have to speak with exquisite precision. In the 3^rd, by contrast, nominative fair use requires an accurate statement of the relationship between the parties. “All along” might be inaccurate, though it’s a bit vague.

Google Book Settlement at Georgetown

Last week, Georgetown held a symposium on the Google Book Settlement. I was unable to attend, but Siva Vaidhyanathan and James Grimmelmann spoke, and you can see their presentations at this link. I wish I'd been able to go to this and the Columbia symposium on the same issue--good summaries at the LibraryLaw Blog. With many of the commenters, I share a deep feeling that the publishers active in the settlement shouldn't be getting paid for orphan works; that's much more insulting, in a very real way, than Google or re-users getting paid for them, because the publishers not only aren't the owners of the orphan works, they're the competitors.

Reading list: trademarks as false advertising

J. Shahar Dillbary, Trademarks as a Media for False Advertising

I saw this paper presented a few weeks back. Here's the abstract:

This article explores an unnoticed aspect of trademark law which in some circumstances constitutes a license to cheat. Trademark law protects consumers against the seller who passes off his product as another’s (interbrand fraud). But it does not protect consumers from a seller that uses its own trademark to misrepresent its own product (intra-brand fraud). False advertising law protects consumers against intra-brand fraud, but only if the seller uses a descriptive term. This is the license to cheat: If a seller uses a non-descriptive mark to sell its product, no cause of action arises under the law of false advertising (because the mark is not descriptive) or trademark law (because there is no passing off). The article explores how an alternative conception of the economic function of trademarks can be used to understand the informational value of trademarks and their advertising function. After identifying circumstances appropriate for legal intervention the article concludes with a proposal for a new interpretation to the Trademark Act that addresses this troubling situation.

The seven dwarves of menopause

Dave Wieneke pointed out that images of Disney's Seven Dwarves are circulating along with an apparently popular meme naming the seven dwarves as menopausal symptoms. Of course Disney doesn't own "seven dwarves," but as he notes, a lot of times the list is accompanied with that particular Disney image. My quick Google found it back as far as 2006. Wieneke found a pharmacy ad reproducing the Disney dwarves; here's a hand-embroidered sweatshirt doing the same. It just goes to show that even Disney can get overwhelmed by a meme.

Conference announcement: Gender on the Frontiers

Columbia Journal of Gender and Law

presents its Triennial Symposium:

April 10, 2009 9:30 am- 5:00 pm

Room 107

Jerome Greene Hall

Columbia Law School

For registration information, please email jrngen@law.columbia.edu

Women Crossing Borders, 9:30 am

* Soraya Fata, Staff Attorney, Legal Momentum

* Sharmila Lodhia, Post-doctoral Fellow, Santa Clara University

* Jenni Milbank, Professor of Law, University of Technology, Sydney (Australia)

* Catherine Dauvergne, Associate Professor of Law, University of British Columbia

Traditional Institutions through a Non-Traditional Lens, 10:40 am

* Angela Irvine, Principal Researcher, Ceres Policy Research

* Eva Ryrstedt, Associate Professor of Law, University of Lund (Sweden)

* Sarah Valentine, Associate Law Library Professor, CUNY School of Law

Real Queer Advocacy: Intersection and Divergence, 11:45 am

* Libby Adler, Professor of Law, Northeastern University

* Tony Varona, Professor of Law, American University

Keynote Address, 12:45 pm (luncheon in Jerome Greene Annex)

* Dean Spade, Assistant Professor of Law, Seattle University

Legally-Constructed Gender and Sexual Identities, 2:30 pm

* Jessie Hill, Associate Professor of Law, Case Western Reserve University

* Khiara Bridges, Fellow, Center for Reproductive Rights - Columbia Law School

* Barrak Alzaid , MA Candidate Performance Studies, New York University

* Shankar Prasad, Chief Marketing Officer, AKOS Health Systems, Inc.

* Carrie Nordlund, Assistant Professor of Politics, Lake Forest College

Women Committing Crimes: Gendered Conduct Outside the Law, 4:00 pm

* Rebecca Tushnet, Professor of Law, Georgetown University

* Francesca Coppa, Director of Film Studies, Muhlenberg College

* Linda Fentiman, Professor of Law, Pace University

* Benedetta Faedi, Graduate Fellow and JSD Candidate, Stanford University

Final panel will be followed by a reception in Case Lounge, JG 701, 5:00 pm.

Organization for Transformative Works membership drive

In its first year, the OTW has done a number of wonderful things: built Fanlore, a fan-run wiki; launched a journal, Transformative Works and Cultures; submitted comments to the Copyright Office in support of a DMCA exemption for vidders and other fair users; begun the Vidding History project; and coded a new fanworks archive, the Archive of Our Own--from what we can tell, one of the largest woman-run open source projects extant--that is now in closed beta (anyone can read and comment; new accounts for posting fanworks are limited) and hoping to move to open beta in the next year. With so many of the spaces where people congregate on the internet in profit-seeking hands, it's vital to keep some alternatives alive. The OTW is one of those alternatives, building a nonprofit infrastructure. Your donation is tax-deductible in the US, too, so please come on by.