My first ever Justin Bieber reference

Apparently he's been slowed down 800%, resulting in a work that has more in common with art-world sound than pop.  While the Sixth Circuit says that recognizability is irrelevant when it comes to sound recording copyright infringement, what might a different circuit say about substantial similarity?

Scholar digitizes his own library

Story here.  In many countries, this would be personal use, a category we don't really have here.  Fair use?  (I too can't avoid the visceral shudder that comes from the destructiveness of the process, which is why I'm unlikely to take up my husband's suggestion that we do the same.)

Organizational standing produces default victory for plastic bottlers

International Bottled Water Ass’n v. Eco Canteen, Inc., 2010 WL 3719313 (W.D.N.C.)

IBWA is a nonprofit whose members are bottled water producers, distributors, and suppliers in the United States and abroad.  Some of the members use bottles containing polyethylene terephthalate ("PET"), and others use bottles containing Bisphenol-A ("BPA").  Defendant Eco Canteen sells reusable stainless steel water bottles, which contain neither PET nor BPA. It ran ads claiming that drinking water from bottles containing PET and BPA posed health risks, and underscoring the cost and environmental impact of plastic water bottles.  IBWA complained, then filed a complaint with NAD, but then issued a press release about the challenge.  This violates NAD’s rules against publicizing NAD proceedings, and so the challenge was closed.  (Practice tip: make sure the PR folks know this rule!)  IBWA then sued for false advertising under the Lanham Act and deceptive trade practices under the North Carolina UDTPA.

Eco Canteen ultimately defaulted, but not before challenging IBWA’s standing, which was especially important in a default case because IBWA had the burden of demonstrating its standing to seek injunctive relief and damages. 

IBWA did not have organizational standing, the right to sue on its own behalf.  It argued that Eco Canteen’s ads had harmed its goodwill and reputation with the public.  However, it hadn’t alleged injury suffered by the organization itself.  IBWA contended that, because Eco Canteen’s statements disparaged plastic water bottles, that would likely cause economic injury by disparaging IBWA’s reputation.  “This theory might hold water [sic] if IBWA's goodwill and reputation depended on the general public's opinion.”   But IBWA doesn’t promote bottled water through its own ads, but rather by lobbying and enforcing its Code of Practice among members.  “There is no indication that the general public is even aware that IBWA exists.”  IBWA needed to allege a loss in revenue or a decline in membership resulting from the ads to establish actual injury; it didn’t.  Nor was IBWA’s abstract concern with the quality and safety of bottled water sufficient to confer standing.

IBWA did, however, have associational standing on behalf of its members.  Associational standing exists when (1) an organization’s members would otherwise have standing to sue in their own right; (2) the interests it seeks to protect are germane to the organization's purpose; and (3) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. IBWA’s allegations met this standard.  The allegations of harm to individual producers met the constitutional requirements for individual standing, and IBWA’s individual members would have standing under the Lanham Act, because they have a commercial interest that’s being harmed, and they’re in direct competition with Eco Canteen. 

While I think this is correct, it is not clear to me that a court applying the execrable Phoenix of Broward test should reach the same result—especially if there are a number of producers who aren’t members or if the court looked at the difficulty of apportioning damages across multiple producers.  Here, however, the test for associational standing only assesses whether individual participation is required for the relief requested, and it’s not required for injunctive relief.  Also, there was no indication of a conflict of interest among members requiring them to act individually to protect their own interest.  (Hmm.  Aren’t there other companies touting BPA- and PET-free bottles?  Are none of them members of the association?)  IBWA did not, however, have associational standing to assert damages claims or ask for disgorgement of Eco Canteen’s profits.

Because of the default, IBWA got injunctive relief and costs, but the court did not find that the allegations (which have to be taken as true) showed that this was an exceptional case, and so refused to grant attorneys’ fees.

Dastar bars claim alleging false advertising about authorship

Romero v. Buhimschi, 2010 WL 3724595 (6th Cir.)

A once-collaborative relationship between two researchers in the area of maternal-fetal medicine went sour, resulting in a lawsuit against one of the researchers and her employer.  Romero, a federal employee working at Wayne State, claimed that he’d been wrongly denied authorship credit for an article Buhimschi submitted for publication, an allegation that led the first journal involved to decide not to publish it.  A resulting Wayne State (where Buhimschi then was) investigation found that Buhimschi had committed misconduct on two counts, but found insufficient evidence on another count.  Romero objected to the last finding and to the recommended remedy (oversight of Buhimschi’s publications for two years) and tried to get Buhimschi’s later employer, Yale, in on it, but that didn’t work. 

Buhimschi appealed the findings too, and she also published a version of the initial paper elsewhere, with the journal stating that it would publish a correction if it was later determined that Romero deserved authorship credit.  Immediately thereafter, Yale University issued a press release crediting Yale researchers and a Yale team with the results of the research. The press release did not mention Romero or researchers at Wayne State. This press release, along with the manuscript itself, formed the basis of Romero's Lanham Act claim. Romero also sued for breach of contract (to be coauthors) and defamation (based on various statements made and transmitted to relevant parties during the investigation).

There was no consideration for the alleged contract, since Romero’s job required him to collaborate with Buhimschi.  And there was no defamation because there’s an absolute privilege for invited comment, and Romero invited the various statements at issue by filing his complaints and engaging with the journals at issue.

It’s the Dastar discussion that caught my eye.  This is an easy case under §43(a)(1)(A): there is no cause of action for false designation of origin for failing to give proper credit to Romero.  Some courts have also kicked out §43(a)(1)(B) authorship claims on various grounds; the one the court picked here was that authorship isn’t a component of the “nature, characteristics, [or] qualities” of the goods themselves. 

Of all the reasons to reject a §43(a)(1)(B) claim, this is the worst.  (“Commercial advertising and promotion” and materiality are the best.)  Authorship is intimately tied to the nature, characteristics, and qualities of the goods.  Consider the effect of the court’s rationale were a publisher to promote a book as a previously undiscovered play by William Shakespeare: an arrant fraud, but apparently not actionable in the Sixth Circuit.  Artificially constraining “nature, characteristics, [or] qualities” by trying to figure out what “really” makes up the goods, without reference to what consumers care about, risks substantial consumer deception.  Consider in this regard “dolphin-safe tuna.”  The tuna is the same no matter how many, or how few, dolphins were killed to obtain it.  But consumers care about, and will pay a premium for, how the tuna was caught, because they care about dolphins, and therefore how the tuna was caught is part of its nature, characteristics or qualities.

There is a strand of reasoning that says that the law shouldn’t assist consumers in making decisions based on conditions of production, because as consumers they only have legitimate interests in the physical qualities of the objects they buy.  But this (paternalist, and really condescending) position is inconsistent with our general commitment to consumer protection/sovereignty.  Douglas Kysar’s article on this topic is quite excellent.

All of which is to say that, if misattribution of authorship in commercial advertising and promotion that is material to consumers is not actionable, we should be clear that the reason is that we want to manage the copyright/trademark divide, not that there is some essence of a product of which authorship is not a part.

Responses not typical

The FTC now disfavors "results not typical," since research reveals that consumers don't process this disclaimer.  Typical results need to be disclosed.  As I found while preparing for my advertising law class, not every advertiser has reacted to this development--even some (franchises of) big names.

As I'm in the middle of teaching the class, I find myself particularly interested in the use of Guides to make policy when the Guides are admittedly not entitled to the deference due ordinary APA-style rulemaking.  Since the FTC isn't allowed to engage in such rulemaking, it uses a lot of Guides; the Guides are produced using a notice-and-comment procedure that strongly resembles at least the initial stages of APA-style rulemaking.  Formally, in an enforcement proceeding, the FTC would have to show a violation of Section 5 because the Guides have no independent authority; but the Guides would be due some deference in determining whether such a violation had occurred.  The underlying consumer research supporting the FTC's abandonment of the "results not typical" safe harbor would also be important, supporting the factual contention in any given case that use of that label doesn't disabuse consumers of the notion that they could expect the depicted results.  The new Guides say that an advertiser could avoid an enforcement action by having substantiation that its particular "results not typical" disclaimer somehow manages to work, unlike all the others.  I wonder whether we'll see that tried.

Deception at the farmer's market

An NBC affiliate investigates.

Esoteric statement can't found class action

Fine v. ConAgra Foods, Inc., 2010 WL 3632469 (C.D. Cal.)

The court denied Fine’s motion for class certification on her UCL, FAL, and CLRA claims.  ConAgra makes microwave popcorn.  In 2007, it announced that it was no longer adding diacetyl, which has been shown to be hazardous to health when heated and inhaled, to its butter-flavored microwave popcorn products. It redesigned packaging for its microwave popcorn to display the words “No Added Diacetyl.”  Fine alleged that she relied on these claims, but asserted that she was deceived because diacetyl is still present in the products.

The court found that Fine established standing by alleging injury—spending money on the popcorn in reliance on the statement on the packaging.  But she wanted a class of all purchasers, not all who relied on the statement.  Class definitions should be tailored to excluded putative class members who lack standing, so this was improper.

Regardless, the class was inappropriate for certification.  Fine properly alleged numerosity and commonality, but got hung up on typicality.  ConAgra argued that she failed to adduce facts that other class members have been injured by the same conduct, because the vast majority never read, let alone considered, the statement at issue, don’t know what diacetyl is, and don’t make purchase decisions based on its presence.  The court agreed.  Fine was seeking to certify a class that would likely include people with varying purchase rationales, so she didn’t establish that she was a typical representative of the class, which also made her an inadequate representative.

Even if consumers don't know what diacetyl is, isn't a message "no added diacetyl" necessarily an implication that diacetyl would be a bad thing to have in your microwave popcorn?  That might not be enough, but I wonder how we know that class members didn't read the statement, and why ConAgra put it on the package then.

Whirlpool generates more evidentiary rulings

If I were better at this I'm sure I could work up a Scylla and Charybdis joke.

LG Electronics v. Whirlpool Corp., 2010 WL 3613814 (N.D. Ill.)

And the hits just keep on coming!  This one’s about LG’s motion to exclude the testimony of Whirlpool’s expert Dr. Subbaiah Malladi.  After the Daubert hearing, the motion was granted on part and denied in part.

Dr. Malladi has an extensive background in mechanical engineering and studies how design specifications and consumer use lead to product failure, with experience with washers and dryers. He reviewed dictionaries, handbooks, and encyclopedias; bought the LG, Whirlpool, and other dryers marketed as steam dryers; performed various tests; and investigated how people use the word "steam" in magazines, patents, and advertisements. He was disclosed as an expert who would "evaluate Whirlpool's use of the word steam in connection with the performance of Whirlpool's Duet Steam Dryer relative to LG Electronics' (LG) claims." He opined that the Whirlpool dryer creates steam, as "authoritative references" and consumer publications use that word.

The court found his opinion relevant on the contested definitions of “steam”; his testimony, based on temperature tests of the dryer, will help the jury obtain a complete picture of what happens in the dryer.

Malladi also opined that the Whirlpool dryer is properly called a steam dryer because other home appliances and products similarly use the word steam.  LG argued that third party use was irrelevant, but Whirlpool contended that Malladi’s opinion was relevant to how the industry and consumers use the term.  The court reiterated its prior conclusion that Whirlpool had no authority on which to base its claim that competitors’ behavior is relevant to the alleged literal falsity of its own claims.  Moreover, even if this were an okay argument, Malladi isn’t the one to offer this opinion, because he provided no analysis.  He needed a recognized scientific method that was reliable and relevant; Whirlpool was essentially trying to use his status as an expert to present hearsay to the jury.  Malladi agreed during the hearing that he was “just reading literature that [he] found on the Internet to say that the discussion of steam is consistent with the definition of vapor arising from a heated surface.”  This opinion was excluded.

Malladi also opined that the Whirlpool dryer contains steam because Consumer Reports and Good Housekeeping referred to it as such.  LG argued that this was irrelevant, founded on hearsay, and not based on specialized knowledge; Whirlpool argued that it rebutted LG’s claim that Whirlpool’s products don’t create steam under any common and ordinary definition of the word steam within the washer/dryer context.  The court agreed this must be excluded: the underlying articles are inadmissible for the truth of the matters asserted therein, and reading them doesn’t require specialized knowledge or skill. 

Without knowing how Consumer Reports and Good Housekeeping came to use the term, there’s no reason to think that they didn’t just take Whirlpool’s name at face value—this could be evidence of deception as well as evidence of a broad meaning of steam.  Indeed, Malladi did not interview anyone at Consumer Reports, nor did he consider whether the articles’ authors were confused about the Whirlpool dryer.  “In essence, Whirlpool is attempting to circumvent the hearsay rules by having its expert rely on these publications to opine that there is steam in the dryer. Its effort fails.”

Similarly, Malladi was not qualified to opine on the significance of references to “steam” in patents.  He’d never drafted or interpreted a patent, is not an expert in patent construction, and didn’t know who drafted the patents; and he conceded that the patents he reviewed didn’t relate to steam dryers.  Even the LG patents weren’t sufficiently shown to be admissions by LG—Whirlpool offered no evidence that the inventors are or were LG employees.

The court also struck Malladi’s opinion that the Whirlpool dryer can relax wrinkles and reduce odors, because he only based his opinion on his own lay use of the dryer and a review of Consumer Reports and Good Housekeeping, without any testing or experience on the topic.

Malladi’s opinion based on the discussion of steam in the Encyclopedia of Chemical Technology, however, was admissible; LG’s disagreements went to weight (including whether he was taking the relevant language out of context) rather than admissibility.

Finally, the court rejected Malladi’s opinion that the difference between steam and conventional dryers was not their ability to produce steam while drying wet clothes but their ability to generate steam when dry clothing is placed in the dryer, because steam dryers are intended to relax wrinkles and reduce odors when dry clothing is placed in the dryer.  Though Malladi did examine steam dryers, he didn’t examine any conventional dryers or conduct wrinkle/odor testing in such dryers. He thus lacked a basis on which to compare steam dryers with conventional dryers; his opinion had to be excluded because it consisted of mere unverified statements.

trademark licensor liable for substantial participation in putting product on market

Lou v. Otis Elevator Co., --- N.E.2d ----, 77 Mass.App.Ct. 571, 2010 WL 3436833

In 1998, then 4-year-old Kevin Lou was severely injured in the PRC by an escalator made and sold by China Tianjin Otis Elevator Company, Ltd. (CTOEC), under license from the defendant, Otis Elevator Company (Otis). After trial, a jury returned a $3.35 million verdict for Lou, plus $3.3 million in prejudgment interest. Based on the evidence, the jury could have found the following: CTOEC is a joint venture with Otis and two Chinese companies for manufacturing in China elevators and escalators pursuant to Otis design standards and bearing the Otis trademark. Otis entered into a trademark license agreement and a technical cooperation agreement with CTOEC, allowing CTOEC to use the Otis trademark within China and furnishing CTOEC with Otis’s know-how, including a broad range of technical and managerial support. The escalator that caused Lou’s injuries was made by CTOEC. “It prominently bore the Otis trademark … and the escalator bore no other trade name or mark.”

The question was the applicability of the Restatement (Third) of Torts § 14, comment d, which is the current version of the “apparent manufacturer doctrine.” Liability may attach to someone who “puts out” a product. That could be read to require participation in the distribution or supply chain, but comment d to the Second Restatement §400, the parent of the Third Restatement’s §14, says that an actor “puts out a chattel as his own product” when it appears to be the manufacturer. Comment d goes on to explain that “one puts out a chattel as his own product when he puts it out under his name or affixes to it his trade name or trademark. When such identification is referred to on the label as an indication of the quality or wholesomeness of the chattel, there is an added emphasis that the user can rely upon the reputation of the person so identified.”

By the time of the Third Restatement, a majority of jurisdictions had recognized the rule of §400. There are three categories of cases: (1) a trademark licensor can be held liable as an apparent manufacturer if it exercised substantial control over the production of the product; (2) a trademark licensor may be held liable as an apparent manufacturer, despite having had little or no participation in the design or manufacture of a product, because of the likelihood that buyers or users of the product would rely on the trademark as an assurance of the product's quality; and (3) cases departing from (2) and declining to hold licensors liable where they had little or no involvement in design or manufacture. The court noted that the Lanham Act imposes quality control obligations on licensors, but courts generally have declined to base liability as an apparent manufacturer solely on the theory that trademark law requires supervision.

Against this background, comment d to §14 of the Third Restatement says: “Trademark licensors are liable for harm caused by defective products distributed under the licensor's trademark or logo when they participate substantially in the design, manufacture, or distribution of the licensee's products. In these circumstances they are treated as sellers of the products bearing their trademarks.”

The court held that this is not an unwarranted extension of the apparent manufacturer doctrine, but rather resolves the inconsistency between categories (2) and (3) based on the amount of involvement in the design or manufacture of the product. (I’d be happier with sticking strongly with (2), because the licensor should have to take the bitter with the sweet. The licensor obviously wants consumers to rely on the trademark, but then doesn’t want to take responsibility for the flaws of the licensee. It’s a natural impulse to want to externalize risk and internalize reward, but that doesn’t mean the law has to support that impulse.)

But there was still the question of whether Massachusetts should follow comment d. Until this case, no reported Massachusetts case had applied the apparent manufacturer doctrine to an entity outside the distribution chain. The court was persuaded, however, by cases from other jurisdictions which had done so. Thus, there was no error in the trial court’s instruction that a nonseller trademark licensor who participates substantially in the design, manufacture, or distribution of the licensee's products may be held liable under Massachusetts law as an apparent manufacturer. The instruction included the following language: “Substantial participation means participation and some importance in the design, manufacture, or distribution of the products bearing the corporation's mark as opposed to participation in merely minor, incidental, or trivial respects.” This result doesn’t ignore the separate corporate entities of the various entities involved; rather, the licensor is held liable as a result of its own role in placing a dangerous product into the stream of commerce.

The prejudgment interest award was also upheld as proper under Massachusetts law.

Mixed ruling on preemption in organic milk case

In re Aurora Dairy Corp. Organic Milk Marketing and Sales Practices Litigation, --- F.3d ----, 2010 WL 3564849 (8th Cir.)

The key issue in this case was whether the Organic Foods Production Act of 1990 (OFPA), 7 U.S.C. § 6501 et seq., preempts state consumer protection law:

The OFPA establishes national standards for the sale and labeling of organically produced agricultural products, and creates a certification program through which agricultural producers may become certified to produce organic products. The OFPA also provides for the accreditation of certification agents, who inspect producers and make recommendations to the United States Department of Agriculture (USDA) regarding certification. Pursuant to the OFPA, the USDA promulgated regulations, known as the National Organic Program (NOP), 7 C.F.R. pt. 205, defining which agricultural products qualify as organic.

One certifying agent, QAI, Inc., certified Aurora Dairy Corporation's dairy farm to produce organic milk. Aurora has never been decertified, though the USDA proposed revoking its certification in 2007 due to willful violations of the OFPA, including multiple cases of using nonorganic cows to produce “organic” milk, failure to produce and handle milk in accordance with regulations, and recordkeeping failures. Aurora and the USDA eventually entered into a consent agreement; Aurora agreed to retire and remove some of its allegedly nonorganic cows, ensure continuous organic management from the last third of gestation in one herd, reduce the size of its herds and ensure daily access to pasture, remove the certification from one of its facilities, address other issues, and submit to further review.

Aurora sold its milk to the retailer defendants. Class plaintiffs sued Aurora, the retailers, and QAI, alleging that the defendants failed to comply with the OFPA and NOP and that Aurora’s milk violated the law claiming to be organic when it wasn’t. In addition, plaintiffs alleged that Aurora and the retailers made other false statements:

several of the cartons featured depictions of pastoral scenes with cows grazing in pastures, and advertised the idyllic conditions under which the dairy cows lived. Aurora advertised, "As producers of organic milk, our motto is 'Cows First,' " and, "We believe that animal welfare and cow comfort are the most important measures in organic dairy." Wal-Mart represented its milk was produced without the use of antibiotics or pesticides, and [that] organic farmers are committed to the humane treatment of animals. Safeway asserted its dairy cows "enjoy a healthy mix of fresh air, plenty of exercise, clean drinking water and a wholesome, 100% certified organic diet." Target declared, "Our milk comes from healthy cows that graze in organic pastures and eat wholesome organic feed."

The plaintiffs also alleged false advertising off the carton, such as Costco’s Costco Connection magazine, which contained an article about Costco’s house brand (for which Aurora was a supplier) claiming that “The cows on the farm have quite the life. They feed on a balanced organic vegan diet and have access to organic pastures for grazing.” The cases around the nation were consolidated, and the district court granted the motion to dismiss.

The court of appeals affirmed the dismissal of all claims against QAI. There was no express preemption, because OFPA’s limited preemption provision was inapplicable (which was a factor in the conflict preemption analysis). The district court found field preemption, because OFPA is so comprehensive, but the court of appeals disagreed. The district court analogized to OSHA, under which the only way a state may regulate an OSHA-regulated issue is pursuant to an approved state plan. The court of appeals found OSHA dissimilar; OSHA requires states to submit plans to the agency if they wish to assume responsibility for development and enforcement of occupational safety and health standards with respect to which a federal standard exists. The OFPA, by contrast, requires states to seek approval from the USDA only if they want to operate their own organic certification programs. And OSHA’s just a lot more comprehensive, seeking to ensure safe working conditions for everyone, whereas OFPA is a certification program designed to create national standards. The states’ traditional consumer protection role was also relevant; preemption of that isn’t found lightly.

There was a conflict preemption problem, however. The district court found that Aurora’s federally valid certifications shouldn’t be subject to challenge under dozens of different state laws. Congress meant to replace the “patchwork” of existing state regulations with a national standard defining organic food, which included the certification scheme under which QAI is an accredited certifying agent. Thus, all claims against QAI are preempted. Aurora’s certification also allows it to sell or label products using the OFPA-regulated terms without penalty. There’s an administrative procedure for appeals of a certification agent’s decisions. “[T]o the extent state law permits outside parties, including consumers, to interfere with or second guess the certification process, the state law is an ‘obstacle to the accomplishment of congressional objectives’ of the OFPA.”

Plaintiffs’ claims were essentially that QAI should have revoked Aurora’s certifications. This was preempted because QAI couldn’t both comply with the OFPA and its regulations detailing the process for revoking certifications and with any additional state law duty to revoke certifications. Plaintiffs argued that QAI mislead the public when it allowed its “mark of excellence” seal to be affixed to Aurora’s milk, but that’s the mark identifying QAI as the certification agent, as required by the regulations.

For the same reasons, claims attacking Aurora’s certification were preempted. Class plaintiffs argued that defendants must be both certified and compliant with the underlying requirements to comply with the OFPA, but in light of the statute’s structure and purpose, compliance and certification couldn’t be viewed separately. The goal of establishing national standards would be undermined by an inevitable divergence in application by numerous court systems. Not only different legal interpretations, but also “different enforcement strategies and priorities” could fragment uniformity. (Note the difference in this analysis from other courts which find that state enforcement of a federal scheme does not conflict with the scheme, just increases the incentives to comply.) The only statutory penalty for noncompliance with the OPFA is a civil penalty of up to $10,000. “[A]ny attempt to hold Aurora or the retailers liable under state law based upon its products supposedly not being organic directly conflicts with the role of the certifying agent ….” Thus, claims based on Aurora’s and the retailers’ selling milk as organic when it was not are preempted.

Other claims, however, remained. State law challenges to the certification determination are preempted, but not state law challenges to the “facts underlying certification.” The defendants argued that, if OFPA certification is to mean anything, it must mean the certified products have met all the statutory and regulatory requirements. The court found this argument only superficially attractive. The court’s task was not to determine what certification means, but rather whether Congress intended preemption when the claims rely on proof of facts that, if found by the certification agent, would preclude certification.

Put this way, the answer was no. Certification requires, among other things, preventive livestock health care practices, including sufficiently nutritional feed. Congress, the court felt confident, didn’t intend thereby to prevent states from enforcing animal cruelty laws if a producer was neglecting its animals, especially given the states’ historic roles in the area of consumer protection, fraud, and tort claims. Notably, “[c]ertification relies upon inspection and observation of only a portion of a producer's operations, and thus, the evidence which supported certification could, and very likely would, be different from the evidence which supports a state cause of action.” Also, the NOP allows alternative ways to satisfy many of its requirements, which suggests that Congress lacked intent to give preclusive effect to any particular determination.

Preempting state law claims unrelated to certification and certification compliance doesn’t advance the purpose of establishing national standards for organic foods. Nor does preemption of claims relating to facts underlying certification advance the cause of assuring consumers that organics meet a consistent standard. In fact, preemption of consumer protection law might diminish consumer confidence were consumers to become aware that the certifying agent didn’t suspend certification in spite of clear facts to the contrary and that there wasn’t anything that anyone else could do. Furthermore, “although broad factual preemption may increase organic production in the short term, consumers may well elect to avoid paying the premium for organic products upon realizing preemption grants organic producers a de facto license to violate state fraud, consumer protection, and false advertising laws with relative impunity ….”

(The court noted that preemption should not be broader for the retailers than for Aurora. Retailers are specifically exempt from the OPFA; it’s Aurora’s responsibility to maintain conditions supporting certification, and the retailers may have had a right to rely on the certification, and no duty to investigate Aurora’s compliance. But these are facts related to the retailers’ degree of fault. “Because the class plaintiffs' claims do not arise under the OFPA, the extent to which the retailers have fewer duties than Aurora under the statute suggests federal preemption is less, not more, applicable to the retailers than to Aurora.”)

The district court would need to decide which claims interfere with certification, and other issues with the consolidated complaint. Except for QAI, at least one claim against each defendant could survive preemption. Other than the “you said it was organic when it wasn’t” claims, claims based on representations made in marketing the milk fall outside the scope of preemption. Thus, Aurora allegedly “misrepresented the manner in which its dairy cows were raised and fed," and ommitted “material facts regarding the production of its 'organic' milk or milk products, specifically that ... the dairy cows were not raised at pasture." Likewise, the retailers allegedly misrepresented the manner in which the dairy cows were raised and fed, and Wal-Mart also allegedly advertised the milk as antibiotic- and hormone-free, while organic cows at Aurora were put in herds with ordinary cows and potentially subjected to injections of antibiotics and hormones. At this stage, there was enough pled to go forward.

A few minutes on false advertising

I came in very late to Arnold & Porter’s webinar Competitor False Advertising Litigation: A Mock Temporary Restraining Order Hearing, but I caught a couple of interesting points: David Mallen of NAD made the point that NAD puts the burden of substantiation on an advertiser because the advertiser is legally obligated (under the FTCA) to have substantiation before making a claim. Will evaluate implied claims without a survey, but often consider surveys. Always a little suspicious when an advertiser claims to have relevant evidence but doesn’t submit it; confidentiality is possible.

Mallen said ¼ to 1/3 of NAD cases are monitoring cases (self-identified). Hot issues: health claims, telecommunications, green claims; maybe endorsements, testimonials, blogs. Dietary supplement makers are trying to clean up industry, using self-regulation a lot recently.

On average NAD cases take 3-6 months, but NAD has been swamped and complex cases may take longer; one can expedite somewhat by waiving a rebuttal.

Judge Liam O’Grady made the point that judges are going to be more willing to proceed on a limited record when the relief requested is more limited: if the product has yet to launch/the ad campaign has yet to launch; if it would be easy to discontinue the advertising given how the advertising is delivered.

Randy Miller, A&P: Sometimes you have to draw a line in the sand even if the direct economics don’t work out, to let the competitor know you will litigate, to stave off worse behavior down the line, even knowing it will cost a lot of money and suck up a lot of marketers’ and lawyers’ time and energy.

By the way, if you’re interested in advertising law but not following the ABA Private Advertising Litigation Subcommittee of the Antitrust Section, you should be! The free updates are great and there are a bunch of continuing education events like this one.

Jobs at EFF

The EFF is looking for a senior copyright lawyer, an activist, and a web developer. I have to admit, I've never seen a job called "activist," but it sounds awesome.

Today's dilution hypothetical

Or go for the gold: can one construct a plausible confusion argument from this Arthur Murray "So you think you can't dance?" ad?

Fan studies: sports edition

Mike Madison has a great post on Steelers fan memorabilia. The quoted materials make the point that many people look down on sports fans, ignoring their creative and curatorial work. Good point; and also, try being a media fan sometime!

Website scraping claim survives Dastar defense

Cvent, Inc. v. Eventbrite, Inc., Case 1:10-cv-00481-LMB –IDD (E.D. Va. Sept. 15, 2010)

Interesting case with a lot of different claims based fundamentally on Eventbrite’s contractor “scraping” Cvent’s online database. Eventbrite moved to dismiss everything but the copyright claims, and succeeded in kicking out the CFAA and similar Virginia state law claims, along with breach of contract claims, because Cvent’s browsewrap terms of use were insufficient to bind Eventbrite. But the court reached a different conclusion on the Lanham Act claims, adding another case to the ever-growing pile of weird readings of Dastar.

The court reasoned that the complaint “does not assert that Eventbrite has passed off its ideas as its own, but rather that Eventbrite has re-branded and re-packaged its product (the CSN venue database) and sold it as its own.” The court admitted that the “tangible goods” language of Dastar was confusing, and “tends to suggest that electronic products are not covered by the Lanham Act,” but the Court was trying to distinguish “goods and products offered for sale (which receive Lanham Act protection) from any ‘idea, concept, or communication embodied in those goods’ (which are protected only by copyright laws)” (citing Dastar, 539 U.S. at 37).

So close! The Court was clear that repackaging Fox’s DVDs as Dastar’s own would violate §43(a), but also that—to avoid conflict with copyright law, among other things—if Dastar made its own copies (which it did), then §43(a) had nothing to say about that. By definition, Eventbrite’s site (allegedly) contained Eventbrite’s copies of Cvent’s data. The product Eventbrite was offering was Eventbrite’s copies, not Cvent’s copies, and thus squarely within Dastar. Recall that one of the options Dastar rejected was to hold defendants liable only for exact or near-exact copying (wholesale appropriation), which is the same thing as saying that Dastar rejected holding defendants liable when the product they were selling was entirely copied. The court thought that Cvent’s claim was based on Eventbrite’s product—but to the extent that “product” means anything other than “data,” it means “protectable expression,” which gets us back to the copyright conflict the Dastar court managed by saying that §43(a) wasn’t concerned with non-physical source.

The court even spoke of the Lanham Act claim as an acceptable “alternative” to its copyright claim. Presumably, the court meant that there’d be a Lanham Act claim if all Eventbrite copied was unprotectable facts. It cited J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition 5 27:77.1 (2006) ("In many cases a Lanham Act false designation claim accompanies a copyright infringement claim in the complaint because it is unclear if the copyright is valid, is owned by this plaintiff, or is infringed. The Lanham Act claim is included as a back up in case the copyright claim fails."). But that highlights the reason that Dastar established its bright line: in many cases, there shouldn’t be a backup claim. If you can’t win a copyright claim because the only thing the defendant copied was uncopyrightable, whether because it’s in the public domain or for some other reason, then you shouldn’t be able to win a Lanham Act claim based only on that copying. If you could, then the Lanham Act would create exactly the illegitimate type of quasi-copyright Dastar rejected. To win a Lanham Act claim, you should have to show confusion as to source/sponsorship of the goods or false advertising.

Anyway, this also allowed the unjust enrichment claim to survive.