Watch me talk about fan fiction

I did an interview about fan fiction on Reason.tv.

The right hand doesn't know the left hand has DRM

One of the stars of SyFy’s Haven tweets that the best short fan video in advance of Season 3 (premiering in September) will get its creator an autographed set of Season 2 DVDs (which will also be released in September). In response to a fan who asks whether the footage should be original, he clarifies “We want a promo trailer like a commercial.”   Legitimately acquired source will have to be from DVD rips (for Season 1) or iTunes/Amazon downloads (for Seasons 1/2).  A few points: (1) nobody, on the show’s side or the fans’ side, is interested in anything but the quality of the resulting video, which includes both content and form and therefore requires high-quality source; (2) this contest presumes that fans will have ready access to clip-making software (or unauthorized downloads), and it’s doubtful that the people behind it gave a moment’s thought to that background reality; (3) this contest also celebrates the underlying truth that creative, engaged fans are a huge benefit for a mass media production, not a detriment.  So tell me again what’s wrong with a remix video exemption?

PS: Haven is fun and sf/fantasy fans should give it a try!

HT GK.

How to lie with statistics: Netflix percentages not false/misleading, just framed favorably

Cullen v. Netflix, Inc., 2012 WL 2906245 (N.D. Cal.)

(I am ignoring the ADA and related claims.)  Cullen alleged that Netflix engaged in false advertising under California law through omissions and misrepresentations about its streaming video library's closed captioning, which had the “effect of conveying to Netflix's deaf and hard of hearing members that Netflix would meaningfully subtitle its streaming library within a reasonable period of time.”  In fact, Cullen alleged, its streaming video library was effectively useless due to the small amount of captioned content, lack of support tools, and slow captioning rate.

“Meaningful” and “reasonably” were subjective and vague words of puffery.  The court looked at Netflix’s specific statements.  On a Netflix blog, a June 2009 entry said that Netflix would “expect to deliver subtitles or captions to Silverlight clients sometime in 2010, and roll the same technology out to each CE device as [Netflix is] able to migrate the technology.”  Cullen alleged that this falsely attributed failure to caption to technical difficulties, but didn’t sufficiently plead falsity.  The complaint alleged that other providers were captioning with existing tech, which Netflix also could have used, but “the fact that another, better technology existed does not contradict the representation that Netflix's captioning rate was limited by technical difficulties, much less state a plausible claim that Netflix's statement was false or misleading.”

Cullen also identified other statements between October 2009 and November 2010, such as that Netflix said it would “continue to work on closed captioning,” that there was “much more to come,” similar technology would soon be released for Netflix's other platforms, and closed captioning was offered on a growing number of titles. Again, the complaint failed to sufficiently allege falsity, since the complaint alleged that Netflix’s captioning did speed up at least a bit. 

Cullen challenged a specific February 2011 blog statement that there were “more than 3,500 TV episodes and movies” with subtitles in Netflix's streaming library “representing about 30% of viewing.  More subtitles are being added every week and we expect to get to 80% viewing coverage by the end of 2011.”  However, the complaint alleged that only 6% of the streaming video programming was captioned.  The court noted that the captioned percentage of total titles might be smaller, but Netflix gave figures for video viewed, which of course skewed popular.  (The court did reject Netflix’s argument that a “we expect” statement wasn’t actionable, since the caselaw didn’t exclude statements about future facts from the coverage of the California consumer protection statutes.)  In opposition to the motion to dismiss, Cullen argued that a reasonable consumer would assume that the number meant that 30% of titles were captioned and that 80% would be (after all, an individual consumer probably wants to know how much is available to her; even if every Netflix consumer watches Breaking Bad such that the show is a big percentage of Netflix’s streaming time, the consumer is more likely to want to go on to the next thing than to rewatch).  But the complaint didn’t allege that these statements were misleading by being usage-based, though the court did grant leave to amend.

Cullen also argued that failure to caption was an unfair practice under the UCL, creating a “deaf tax” “because the DVD-by-mail plans that provide sufficient access to video programming were sold at a significant premium to Netflix's streaming subscription.”  However, Cullen failed to allege facts about the utility/benefits of charging higher prices for the more accessible DVD-by-mail plans, and thus hadn’t plausibly alleged that the gravity of the harm outweighed the utility of the challenged activity as required to make the price difference immoral or unscrupulous.

Alleging false marking with particularity: difficult but perhaps not impossible

West v. Quality Gold, Inc., 2012 WL 2913207 (N.D. Cal.)

West owns nine patents relating to finger rings, and licenses them; as a result, he alleged, the finger ring industry has become “highly sensitive” to patents.  Quality, under the name Dura Tungsten, allegedly began advertising its finger rings as “patent pending,” then changed its catalogs to “patent pending USPTO 12,141,791 was granted,” allegedly conveying to the public and to competitors that it had exclusive righs in a lighter tungsten carbide ring and that others, including West’s licensees, couldn’t lawfully sell similar products.  In fact, the application had been published, not granted.  He sued for false marking (a claim that had to be substantially revised after the AIA) and false advertising under federal and California law.

The court dismissed the false marking claim for failure to plead with the requisite particularity under Rule 9(b), but indicated that this was a close case and that an amended complaint might well suffice.  For a false marking claim, Rule 9(b) means that a plaintiff can allege the identities of particular people in defendant’s company who knew that a particular patent used to mark products was expired, or alternatively can allege other facts from which intent to deceive can reasonably be inferred.  This could include suing a third party for infringement after the patent expired, or making multiple revisions of the marking after expiration.

West’s argument that intent to deceive could be inferred from the fact that Quality Gold “changed its catalogs to reflect that a patent had been granted when in fact the patent application in question merely had been published.”  But he simply alleged that Quality Gold knew or should have known that no patent had issued based on the publication notice; he didn’t allege that any individuals in particular knew that no patent had issued or facts from which such knowledge could be inferred.  Similarly, allegations that the defendant was a sophisticated company with patent experience were insufficient in themselves: intent could not be deduced merely from the marking itself.  However, West asserted a number of facts in his opposition brief and at oral argument that weren’t pled in the complaint, and incorporation of those facts might cure the pleading deficiencies.  For example, West’s counsel “discussed the history of West's patent enforcement efforts in the area of tungsten jewelry finger rings, West's interactions with particular persons associated with Quality Gold, and the manner in which a patent application is processed by the PTO” in greater detail; adding those facts could help, along with an allegation about the layout of Quality Gold’s advertising drawing consumers’ attention to the word “granted” in the claim, “The Dura Tungsten band was developed in 2006. Patent Pending USPTO 12,141,791 was granted and published in December 2009 worldwide.”

Quality Gold also argued that West hadn’t alleged the requisite “competitive injury,” a term the 9^th Circuit has yet to interpret in the AIA context.  One district court has required allegations that the false marking was “harmful to the plaintiff’s ability to compete with the defendant,” while another has required the parties to be competitors, vying from the same dollars from the same consumers.  Another court defined “competitive injury” as “predatory pricing, price discrimination, injury to competition, or loss of business opportunities.”  Here, West claimed that its licensees were direct competitors of Quality Gold, and that Quality Gold’s false marking resulted in lost royalty shares of sales and lost licensing opportunities.  Given that the Second Circuit, in Famous Horse, found that parties may be considered competitors for Lanham Act purposes “even though one is a retailer and the other a wholesaler, so long as ‘the goods they sell are in direct competition in the marketplace,’” the court found the competitive injury element adequately pled.

The California and federal false advertising claims were dismissed for reasons similar to the false marking claim, with a twist: Quality Gold alleged that these claims were preempted by the false marking provisions of patent law.  Preemption might not apply if the claims in question alleged bad faith.  But, as noted above, West hadn’t yet sufficiently alleged facts giving rise to an inference of bad faith.  Presumably an amended complaint could also fix this.

Authentic fakes

The NYT on a self-confessed forger who now still puts other artists' names on his paintings, but disclaims any fraudulent intent.  Talk about appropriation art.

Gripe site makes confusion unlikely, says court on a motion to dismiss

DeVere Group GmbH v. Opinion Corp., --- F. Supp. 2d ----, 2012 WL 2884986 (E.D.N.Y.)

I’m not a huge fan of Iqbal/Twombly.  But at the very least, sauce for the goose should be sauce for the gander; and also there can be well-justified rules against accepting a mere allegation that certain facts are likely to cause consumer confusion. 

DeVere is an international financial consulting company that alleged rights in various deVere names.  Opinion runs PissedConsumer.com, which provides a forum for, you guessed it.  It advertises itself as a “premier consumer advocacy group,” and as a review website which allows consumers to “make better choices” and provides an “empowering” and “unbiased” view of companies and products.  Complaints about deVere are on deveregroup.pissedconsumer.com, which describes the company then has a section labeled “Devere Group Complaints and Reviews.” Review headings include “Devere stole my pension” and “Devere Lies Conmen–Fraudsters.” Google returns the deVere subdomain among the top results for searches for “deVere” or “deVere Group,” allegedly because of Opinion’s SEO techniques.

DeVere sued for trademark infringement for the use in text and in the subdomain.  Though deVere plausibly alleged that it had a valid mark, it couldn’t plausibly allege likely confusion, even initial interest confusion.

Several factors weighed against deVere’s claim.  First, the parties didn’t compete nor were they likely to bridge the gap.  Second, deVere failed to allege actual confusion.  Third, deVere failed to allege bad faith intent to confuse.  More to the point, courts have “consistently” held gripe sites unlikely to confuse because they convey critical messages.  “[T]here is no likelihood that a consumer visiting PissedConsumer.com would mistakenly believe that deVere sponsored or approved the contents of that website. The term ‘pissed’ in the website name is clearly negative, as is the commentary on the website about deVere's services--terms like ‘stole,’ ‘WARNING,’ ‘fraudsters,’ and ‘scams’ figure prominently.”  Confusion was simply not credible.

Initial interest confusion provided no help either.  Given the ease of retracing one’s steps online, initial interest confusion requires intentional deception.  In any event, defendant didn’t divert consumers from deVere’s website because deVere didn’t have a competing website.  PissedConsumer is a forum for customer criticism, not a provider of financial services.  IIC also requires close competitive proximity.  Thus there could be no plausible inference of intentional deception.

The court didn’t address the other factors, including the mark’s strength and the similarity between the marks, because they didn’t weigh heavily one way or another.

Eric Goldman worries that this won’t hold up on appeal, but I’m more hopeful.  Yeah, if I’d have been the district court, I’d have explained that strength/similarity didn’t have much weight in the particular context of a gripe site, but I don’t think this is a hard case, and as the court pointed out there’s now substantial gripe-site precedent, including a previous successful motion to dismiss in the Second Circuit.

Reading list: copyright and ratings

James Grimmelmann, Three Theories of Copyright in Ratings

Short and very good:

If ratings are facts, then they are discovered; the rater’s job is to investigate the world to learn the true facts about the subject.   If ratings are opinions, then they are created; the rater’s job is to produce a personal evaluation of the subject.  If ratings are self-fulfilling prophecies, then they are imposed; the rater’s job is to provide a vision so compelling it will be universally accepted.  The telos of a rating-as-fact is truth; the telos of a rating-as-opinion is authenticity; the telos of a rating-as-prophecy is power.

Copyright and disproportionate effects on images

A researcher tested the effect of copyright expiration via Wikipedia articles using images from Baseball Digest. 

That first metric -- length -- proved resilient to the copyright divide. Words are easy to rescue from private-ownership, and the Wikipedia authors simply rewrote the information still owned by the Digest. Every article, post-digitization, became on average much longer.
But Nagaraj found was that the availability of public domain material dramatically improved the article's images. Before the digitization, players from between '44 and '64 had an average of .183 pictures on their articles. The '64 to '84 group had about .158 pictures. But after digitization, those numbers dramatically changed: there were 1.15 pictures on each of the older group's articles -- but only .667 in the new group. More recent players, covered by privately-owned parts of Baseball Digest, had half as many images on their pages as did old-timers.And the effects of this -- of just having an image on the page -- cascaded to other metrics. "Out-of-copyright" players's pages saw a significant boost in traffic.

Tasting the trademark, very rich guys edition

Warren Buffett can't tell which is his favorite cherry-flavored beverage in a blind taste test.  Now, I want to emphasize that I'm sure he has a different experience when he knows the brand, as you usually do: I have no doubt that Cherry Coke tastes better to him because it's Cherry Coke.  His preference is real.  It's just also been created by branding.

H/T to ST.

Best title of the year so far

Andrew W. Torrance, Planted Obsolescence: Synagriculture and the Law.  Well played, Prof. Torrance.  Well played.

So how did all those FDA surveillance documents get into the open?

Check out Doctor Science's ideas--if the googlebot got access through Gmail or Chrome, that would say some very interesting things about privacy.  (Also, of course government officials are going to use Gmail accounts if that's convenient for them.  Security would be so easy without the people!)  Revised slogan: two can keep a secret if neither of them uses Gmail.

9th Circuit rejects settlement for wrong cy pres beneficiaries and excessive fees

Dennis v. Kellogg Co., --- F.3d ----, 2012 WL 2870128 (9^th Cir.)

The court of appeals rejected a class action settlement that included distributions of money and food to unidentified charities, had $2 million in fees, and offered class members at most $15 (which doesn’t seem like a necessarily too-small number when you consider the product, but read on!).  First, the cy pres distribution was insufficiently specified/related to the plaintiff class and its false advertising claims.  Second, the attorneys’ fees were excessive.

In 2008, Kellogg began making claims that its Frosted Mini-Wheats cereal was scientifically proven to improve children’s cognitive functions, e.g, “Does your child need to pay more attention in school?... A recent clinical study showed that a whole grain and fiber-filled breakfast of Frosted Mini-Wheats® helps improve children’s attentiveness by nearly 20%” and “An independent research group conducted a series of standardized, cognitive tests on children ages 8 to 12 who ate either a breakfast of Frosted Mini-Wheats® cereal or water. The result? The children who ate a breakfast of Frosted Mini-Wheats® cereal had a nearly 20% improvement in attentiveness.”

These claims were false and misleading.  The court’s opinion doesn’t mention the FTC action, though obviously that was a spur to the follow-on class litigation.  Class counsel went to mediation with Kellogg and agreed, in principle, to settle a multistate class action.  Kellogg agreed to a $2.75 million fund.  Class members submitting claims would receive $5 per box purchased, up to $15.  (The claims period has closed, and apparently the total submitted claims were about $800,000.)  Remaining funds would be donated to “charities chosen by the parties and approved by the Court pursuant to the cy pres doctrine.”  In addition, also following cy pres, Kellogg aggreed to distribute $5.5 million “worth” of specific Kellogg food items to charities that feed the indigent, but the settlement didn’t specify the recipients or indicate how the food would be valued.  Kellogg also agreed to refrain from claiming that Frosted Mini-Wheats was clinically proven to improve attentiveness, but was allowed to claim that “[c]linical studies have shown that kids who eat a filling breakfast like Frosted Mini–Wheats have an 11% better attentiveness in school than kids who skip breakfast.”  (Better than Kellogg did with the FTC!)  Finally, Kellogg agreed to pay attorneys’ fees and costs of up to $2 million.  With notice and administrative costs approximated at $391,500, the parties valued the settlement at $10,641,500.

The district court certified the class, preliminarily approved the settlement, and approved class notice, published in Parents magazine and other sources, including 375 websites.  The district court approved the final settlement as fair and reasonable despite the objections; objectors appealed.

Appellate review of settlements is usually limited, but where class counsel negotiates a settlement pre-certification, courts must be vigilant for signs that class counsel allowed self-interest to infect the negotiations.  The district court must comprehensively explore the factors and give reasoned responses to nonfrivolous objections.

Cy pres allows settlements to be redirected when proof of individual claims would be too burdensome or distribution of damages too costly.  Still, it must retain some connection to the plaintiff class and the underlying claims to be the “next best” distribution to giving the funds to class members.  There must be a “driving nexus” between the class and the cy pres beneficiaries, which is determined by looking at the objectives of the underlying statute and the interests of silent class members.  The settlement here failed to satisfy those standards.  The UCL/CLRA are designed to protect consumers; feeding poor people has little or nothing to do with the purposes of the underlying lawsuit or the plaintiff class involved.

Kellogg’s counsel argued that the donations were related to the underlying class claims because the case was about “the nutritional value of food.”  That wasn’t true.  The complaint didn’t allege that the cereal was unhealthy or lacked nutritional value.  It alleged false advertising.  “Thus, appropriate cy pres recipients are not charities that feed the needy, but organizations dedicated to protecting consumers from, or redressing injuries caused by, false advertising.”  (Public Citizen? The Institute for Public Representation?  ChangeLab Solutions?)  It wasn’t enough to provide charities to be identified at a later date, even with court approval then: the whole settlement needed to be reviewed.  Cy pres distributions raise particular dangers of self-interest and whim.  “This record leaves open the distinct possibility that the asserted $5.5 million value of the cy pres award will only be of serendipitous value to the class purportedly protected by the settlement.”

The whole settlement had to go in one piece, though the parties could negotiate a new settlement or litigate.  If they settled, they’d need to clear up other vague aspects, such as how the $5.5 million “worth” of food would be valued (at oral argument, Kellogg’s counsel said wholesale, but the settlement didn’t specify), how Kellogg would account for it (in terms of tax deductions), and whether there would be any measure of “additionality” given that Kellogg already donates food and money to charities: “can Kellogg use previously budgeted funds or surplus production to offset its settlement obligations? Again, the settlement is silent, and we have only Kellogg's statements as to its future intentions.”

The attorneys’ fees were a separate problem: they were unreasonable, granting counsel a disproportionate share of the settlement compared to the benefit to the class.  Though 25% of a common fund is the benchmark in the 9^th Circuit, not every fee award under 25% is necessarily reasonable.  Where that’s too much, courts should use the lodestar method, beginning with hours expended multiplied by a reasonable rate, then applying a risk multiplier based on factors like the length of the proceedings and the risk involved.  “Considering that (1) the parties moved for settlement approval only three months after class counsel filed the amended complaint, (2) the settlement results in vaporous benefit to the class members and is flawed at its core, and (3) class counsel's financing of the litigation and investment of time were rather limited, we hold that the district court's reasonableness finding is implausible.”

Short proceedings don’t always require lower fees, and counsel must be allowed a premium over normal hourly rates for winning contingency cases.  But the most important factor here, at this juncture, were the “results achieved for the class and the lawyers' limited investment of time and money.”  Given the cy pres awards, there was no reasonable certainty that the distributions would benefit the class (which suggests that picking a better cy pres recipient would change this calculation).  The injunctive relief would last only three years.  “And class members, assuming they were aware of the litigation and submitted claims, will each receive the paltry sum of $5, $10, or $15.”  (Now, that objection doesn’t make much sense: class actions are for small claims, which for the same reasons are less likely to be closely tracked by members of the class.)

By contrast, $2 million was “extremely generous to counsel,” even accepting the valuation of the common fund as over $10 million.  “At the time the plaintiffs moved for settlement approval, class counsel had spent 944.5 hours working on the case. If the case had been litigated on an hourly basis at the attorneys' ordinary and uncontested rates, the total fees would have come to $459,203. The requested award, however, is about 4.3 times this lodestar amount.”  That was “quite high, particularly in a case that was not heavily litigated.”  Given the minimal investment and minimal relief, the award wasn’t reasonable.  The court also doubted the fund was really worth $10 million.  Plus, $2 million was over $2100 per hour.  “Not even the most highly sought after attorneys charge such rates to their clients.”  The fact that the attorneys also worked on the appeal didn’t help, since the appeal was their fault for negotiating such a flawed settlement.  “If and when the issue of fees is again before the district court, the court shall consider all of the circumstances of the case as they exist at that time, including time wasted in preparing a stillborn settlement, in finally determining a reasonable award of attorneys’ fees.”

some of it's made up, and some of it can't be quantified

This infographic on Firefly is fun because all things Firefly are fun, but I noticed this bit particularly:

So, if the makers of Outlaw Star had sued alleging that Firefly was substantially similar because a girl with unusual abilities given to her by the government who was secretly (and nakedly) transported in a cargo box was revealed in a cliff-hanger in the first episode--what should the result have been?  I actually find "coincidence" perfectly plausible--but a lot of strike suit plaintiffs don't.

Goldman & Tushnet on Advertising and Marketing Law

With Eric Goldman, I’m thrilled to announce the release of our casebook:  Advertising & Marketing Law: Cases and Materials.  We are publishing the book as a DRM-free PDF download at Scribd for only $10.  As Eric says, it’s “870 pages and nearly 400,000 words of advertising and marketing law nirvana—a massive 40MB file chock full of photos (especially depicting the ad copy at issue), edited cases, explanatory narrative, tables/charts, diagrams and more.  You’ll laugh, you’ll cry, and you may even want to do a jig.”  The detailed table of contents is available at Scribd.  You can buy it for $10, which we think is a bargain.

If you want to get a sense of the entire book, we’ve posted a free sample chapter (Chapter 12 about publicity rights and endorsements) to SSRN.  Full chapter list:

Chapter 0: Preface

Chapter 1: Overview

Chapter 2: What is an Advertisement?

Chapter 3: False Advertising Overview

Chapter 4: Deception

Chapter 5: Omissions and Disclosures

Chapter 6: Special Topics in Competitor Lawsuits

Chapter 7: Other Business Torts

Chapter 8: False Advertising Practice and Remedies

Chapter 9: Copyrights

Chapter 10: Brand Protection and Usage

Chapter 11: Competitive Restrictions

Chapter 12: Featuring People in Ads

Chapter 13: Privacy

Chapter 14: Promotions

Chapter 15: The Advertising Industry Ecosystem—Intermediaries and Their Regulation

Chapter 16: Case Studies

Eric has a number of things to say about the book and about teaching advertising and marketing law.  Short version: every law school should have this course; many lawyers—especially those representing small clients—need to know this material; it’s also a good “horizontal” course showing students how various areas of law overlap and fit together and helping them think about the big picture.  For professors (including adjuncts), it’s also just fun, and we will provide plenty of supporting materials, including notes/slides/rudimentary teaching manual/the IP Teaching Resources Database, chock full of examples for use in teaching.  Anyone interested in teaching the course should contact Eric or me.

how standing cuts down class actions

Granfield v. NVIDIA Corp., 2012 WL 2847575 (N.D. Cal.)

Some of the subtler moves against class actions, along with some of the more blatant ones, have to do with standing.  This case features both.  Granfield, a citizen of Massachusetts, alleged that NVIDIA made defective graphics processing units (“GPUs”) for a variety of manufacturers, and that her computer suffered permanent damage because of that.

To display images, a computer’s CPU sends messages to the GPU, connected to the motherboard.  A GPU package has a die (silicon chip) soldered onto the substrate of the circuit board via bumps of solder that carry signals and power.  When a GPU is turned on, the die becomes hot and heats the substrate.  In 2006, NVIDIA began experiencing cracks at the substrate-to-bump interface, and began using high-lead solder in an attempt to fix the problem, but it allegedly made the problem worse.  Also, NVIDIA allegedly used an underfill material incapable of withstanding ordinary operating temperatures, so it couldn’t hold the bumps in place and computers stopped performing their ordinary functions.  The results: corrupted video images, distorted lines, garbled characters, and complete monitor/display system failure.  HP allegedly investigated in 2006 and found the causes, but NVIDIA refused the blame, even in 2007 when HP provided NVIDIA with “overwhelming” evidence.  Likewise, Dell allegedly notified NVIDIA of defects by early 2007, but NVIDIA still shipped defective GPUs.

The court dismissed Granfield’s claims under California law (following Mazza) and every state other than Massachusetts for lack of standing, since she made her purchase in Massachusetts.  She did plead a violation of Chapter 93A.  She alleged facts indicating that NVIDIA’s sale of GPUs that it knew would cause damage to the computers in which they were installed was an unfair business practice.  Even if NVIDIA wouldn’t have had to disclose the defect under a common-law fraud standard, the consumer protection law covers more than common-law fraud. She couldn’t, however, maintain a breach of implied warranty claim, because she didn’t allege that the GPUs at issue were “goods” as the term is used in the commercial code.  Rather, they were components of a good and not detachable from the rest of the computer at the time of sale.

Finally, and getting to the more subtle but equally significant use of standing to constrain class actions, the court dismissed claims “based on alleged defects in products other than the product that [Granfield] purchased” for lack of standing.  Of course, taken literally, this idea guts the class action entirely: she only purchased one computer; the rest of the class purchased the others.  The idea is that other people purchased one of eleven other models of NVIDIA GPU named in the claim, and so she didn’t have standing to represent them, even though she seems to have alleged that the defect was the same in all models.  This shouldn’t be a standing issue; it should be and previously was an issue of whether the class claims were sufficiently unified/representative.  Because of the comparative subtlety of this standing argument, it’s not clear that courts accepting it have understood the extent to which they’ve diverged from previous precedent.