6th Circuit finds "5 Hour Energy" suggestive for energy shot; overbroad recall potentially misleading

Innovation Ventures, LLC v. N.V.E., Inc., --- F.3d ----, 2012 WL 4039843 (6^th Cir.)

Innovation (doing business as Living Essentials) alleged that NVE’s 6 Hour POWER energy shot infringed its trademark in 5-hour ENERGY.  After LE won a case against a different competitor, LE distributed a “recall notice” stating that NVE's “‘6 Hour’ energy shot” had been recalled.  NVE alleged that this constituted false advertising and a violation of the Sherman Act.  The district court granted summary judgment rejecting everyone’s claims; the court of appeals reinstated the trademark infringement and false advertising claims, but affirmed on the Sherman Act.

The PTO initially denied LE’s 2004 application for registration on descriptiveness grounds.  Starting in 2005, LE marketed 5-hour ENERGY nationwide.  In March 2006, NVE introduced 6 Hour Power:

On appeal, NVE argued that LE failed to show that it had acquired distinctiveness before NVE entered the market.  The district court emphasized the descriptiveness of LE’s mark as key in its award of summary judgment, but that was in the context of an infringement inquiry, not a protectability inquiry.  (The court of appeals noted that NVE has claimed in other litigation that 6 Hour POWER is inherently distinctive, a “contrast” in position, though presumably NVE would like to distinguish between power and energy.)  Unfortunately, the court of appeals erred in the basic test of descriptiveness: knowing the goods/services, is further inference or imagination required to connect the alleged mark to the goods?  That is why “apple” is generic for apples, descriptive for the color of lipstick, and arbitrary for computers.  Sadly, though the court began by noting that 5-hour ENERGY “simply describes a product that will give someone five hours of energy, it continued:

But that is not the end of such an inquiry. The first question one would ask is how would the energy be transferred? Through food? Through drink? Through injections? Through pills? Through exercise? Also, one would ask what kind of energy is the mark referring to? Food energy (measured in Calories)? Electrical energy? Nuclear energy? With some thought, one could arrive at the conclusion that the mark refers to an energy shot. But it is not as straightforward as NVE suggests. Such cognitive inferences are indicative of “suggestive” rather than descriptive marks.

As applied to a beverage, the “how” question is answered by knowing the goods; the “what kind of energy” is not answered by imagination but rather by basic knowledge of human physiology shared by average consumers who understand that neither electric shocks nor nuclear radiation are generally delivered, or desirable, via beverages.  “With some thought,” one could also arrive at the conclusion that the mark refers to socks, or batteries, or any other good (at least any other good as to which the term wouldn’t be deceptive).  Compare “Chicken Poop” for lip balm.  That’s both an actual example and arbitrary, though in the abstract, without knowing the product, one would probably assume it’s generic for chicken poop.  Or compare “Best” for anything.  Since you couldn’t figure out what the goods were from the simple term “best,” the court’s test implies that “best” is suggestive rather than, as it is, highly descriptive.  That’s why marks are not classified in the abstract, without reference to the goods or services for which they are claimed.  “Cognitive inferences” are properly only assessed in the goods/mark connection, not in inferring what goods might be named.

Regardless, the court of appeals held that 5-hour ENERGY was suggestive “‘because of the degree of inferential reasoning necessary for a consumer to discern’ that the ‘5–hour ENERGY’ mark relates to an energy shot.  The connection between ‘5–hour’ and ‘ENERGY’ is ‘not so obvious that a consumer seeing [5–hour ENERGY] in isolation would know that the term refers to’ an energy shot rather than, for example, a battery for electronics, an exercise program, a backup generator, or a snack for endurance sports” (citation omitted).  Thus, though the suggestive/descriptive line is hazy, the mark is suggestive and protectable.

The court of appeals then turned to the confusion analysis.  The district court found dissimilarity of the marks plus descriptiveness pivotal in its conclusion, along with NVE’s lack of intent to confuse.  LE focused mostly on intent, since there were diverging accounts of the origin of the name from NVE President Robert Occhifinto and former NVE Vice President Joe Palmeroni.  Occhifinto claimed that he chose the name because the caffeine’s effects last about 6 hours and because the rhyming scheme of an earlier product named “TOWER OF POWER” led them to use the term “POWER.”  The court thought this earlier product was a “convenient coincidence.”  (Okay, if the generic name of the category is “energy shot,” and they can’t use the term “energy” because it’s too close to a suggestive mark, then why isn’t “power” a distinct alternative?  In other words, why is the use of “power” any problem at all?)  Palmeroni testified that he investigated the growing energy shot market and that his market research focused on LE’s product, as it was “really the only one that we took seriously” and the one whose sales ‘were blowing up.”  In name choice, he testified that he focused on having a shot that was better than a shot that lasted only five hours.  He agreed that he believed that “the name 6 Hour Power was selected by N.V.E. to trade off of the success and reputation of 5–Hour Energy.”

The court of appeals thought that Palmeroni’s testimony wasn’t particularly helpful and reflected NVE’s search for ways to compete with LE, not to copy it.  “In fact, when Palmeroni raised possible issues relating to likelihood of confusion between the products, Occhifinto discussed ways to differentiate the products, e.g., using a different color, to eliminate possible grounds of confusion.”  NVE also challenged Palmeroni’s testimony, given that he was fired before it adopted the 6 Hour POWER name, though he was involved in discussing 5-hour ENERGY earlier.  Also, he’s involved in apparently vicious litigation against NVE on other matters.  Assuming its accuracy, this testimony still didn’t impress the court of appeals: the focus on 5-hour ENERGY “focused on its large market share and the need to catch up, rather than to copy it” and showed intent to compete, not to copy.

The court of appeals deemed likely confusion a close call.  But the factors were “so evenly balanced”—4 to 3 as the 6^th Circuit counts factors, with an additional factor not at issue—that “precedent counsels in favor of not granting summary judgment.”  (Perhaps oddly, the court of appeals didn't discuss the effect of the suggestiveness finding; but then, a borderline suggestive/descriptive mark can be considered relatively conceptually weak.) Comment: Other courts hold that it is perfectly fine to give heavier weight to certain factors, depending on the particular facts.  For example, imagine a plaintiff with a famous mark suing a direct competitor with a completely dissimilar mark: while a number, even a majority, of the factors would favor the plaintiff, mere counting wouldn’t reflect much about likely confusion.  But here, the district court gave little weight to much of LE’s evidence, including “a survey that used ‘highly leading questions,’ evidence of confusion from ‘third party witnesses,’ and forty alleged instances of consumer confusion. This was “the wrong posture to take on summary judgment.”  The case had to go to a full trial.

The court then turned to the false advertising claims.  Other parties made “6 Hour” energy shots—LE sued two others in separate cases over the “6 Hour Energy Shot” and “6 Hour ENERGY!” A court issued a preliminary injunction against the sale of 6 Hour Energy Shot and a recall order, but it found in LE’s favor on the trade dress claims; it didn’t find trademark infringement. 

 

LE thought that the recall order coming from the defendants didn’t go far enough—defendants didn’t send it to retailers who bought the product from third parties.  Thus, after the recall had been completed, LE “took it upon itself to send an additional recall notice … to 110,000 convenience stores and truck stops and to place a notice in retailer magazines.”  This notice said:

RECALL OF “6 HOUR” SHOT ORDERED

Court orders immediate stop to manufacturing, distributing and sale of 6 Hour Energy shot.

Dear Customer,

We are pleased to announce that we won a decision against a “6 Hour” energy shot that closely mimicked 5–Hour Energy®. The United States District Court, in Case No. 08–CV–10983, issued a preliminary injunction ordering the immediate recall of the “6 Hour” product, and told its manufacturer to stop making, distributing and selling it.

If you have any of the “6 Hour” energy shots in your store(s) or warehouse(s) contact the product's manufacturer or your distributor to return the product immediately.

DO NOT RETURN ANY 5–HOUR ENERGY ®. It can be difficult to tell 5–Hour Energy® apart from the “6 Hour” knockoff product….

The producer of 6 Hour ENERGY!, BDI, sued LE for false advertising based on this recall notice.  The district court in that case granted a preliminary injunction, since LE didn’t win a decision against “a ‘6 Hour’ energy shot” as stated, but rather won an injunction against the use of a confusingly similar overall trade dress.  The court there pointed out that LE could easily have avoided confusing consumers by identifying the actual manufacturer and product enjoined—as the court of appeals, indeed, did here (yay!) by including pictures.

The district court in NVE’s case found that the recall notice was neither false nor misleading.  Because LE was awarded an injunction against the producer of an energy shot with the name 6-Hour, the notice was not literally false, even if it lacked clarity.  The court of appeals here found that the recall notice was almost—but not quite—literally false.

“First, the notice could be viewed as either ambiguous or false with respect to how the product is named.”  The notice used quote marks that could be read broadly to say that any energy shot whose name included “6 Hour” had been recalled and never referred to the product actually recalled in one complete phrase.  At the time, there were several other energy shots along with NVE’s with that phrase in the title, so this was important.  Relatedly, LE said that it had won a decision “against a ‘6 Hour’ energy shot.”  But that wasn’t literally true: it won a decision against the use of an overall product image—label and bottle.

Also, the use of the indefinite article “a” was a problem.  “a ‘6 Hour’ energy shot” suggests that there might be more than one, but at other points the notice used “any,” e.g., “If you have any of the ‘6 Hour’ energy shots in your store(s) or warehouse(s) contact the product's manufacturer”—whoever they may be—“or your distributor to return the product immediately.”  That suggested that any 6 Hour shot was subject to recall, as did the use of “the” to describe the recalled product.  As Justice Kagan has recently noted:

“Not an” sometimes means “not any” …. If your spouse tells you he is late because he “did not take a cab,” you will infer that he took no cab at all (but took the bus instead).… Suppose your spouse tells you that he got lost because he “did not make a turn.” You would understand that he failed to make a particular turn, not that he drove from the outset in a straight line.

Caraco Pharm. Labs., Ltd. v. Novo Nordisk A/S, 132 S.Ct. 1670, 1681 (2012). Because “what does this article mean?” must be answered “it depends,” the notice couldn’t be literally false.  Comment: This is skipping the follow-up: depends on what?  In the examples above, the context is provided by the nature of the question, not by further evidence of audience reaction; in none of Justice Kagan’s examples, including the ones I’ve omitted, was there any ambiguity in what the article meant in that particular sentence, because humans are context-making machines. Thus, it’s not enough to create ambiguity for a word to have multiple meanings in the abstract.  If I say “I ate an apple for lunch” to you (so you can’t hear capitalization or lack thereof), you could not seriously believe that there is any question about whether I ate a fruit or a computer, despite Apple’s fame.  Likewise, were a laptop to advertise MORE PROCESSING POWER THAN AN APPLE, without any indication that this was a joking reference to a piece of fruit, there’s no ambiguity.  The doctrine of falsity by necessary implication recognizes this function of context. 

That said, while I think this is a case of falsity by necessary implication, it’s a closer call than some others.  LE clearly took a victory against one competitor as a chance to harass a wider segment of the competition, and I’d be inclined to take into account that they easily could have specified more clearly.  In these circumstances, rather than—as the court of appeals did—ruling that this was only a factual dispute over misleadingness, I would leave it to the finder of fact to decide whether this “close question” involved literal falsity, misleadingness, or nonmisleading communication.  The court of appeals, however, held that misleadingness was the issue for the finder of fact.

The district court excluded as inadmissible hearsay all of NVE’s evidence that various unidentified retailers contacted them over the notice.  NVE only named one distributor out of over 100,000 retailers nationwide.  But its witnesses testified that NVE and its distributors received a number of calls “from convenience stores and truck stop retailers—the very people that received the recall notice—who wanted to return ‘6 Hour POWER.’ One NVE employee stated that the notice caused a ‘huge nightmare’ and the phones were ‘blowing off the hook’ with calls to return the product. NVE claimed that at least one sales program … ‘just died’ after the recall notice.”  One witness stated that she received “phone calls from brokers and customers and faxes of this legal notice sent to us and that's when the nightmare began.... [I]nitially, we started getting faxes and inquiries from our customer base, and then the phone calls just started pouring in from all little mom and pop shops all over the United States, you know, asking if they should pull our product.”  Others testified similarly about needing to send out notices to customers and being “inundated” with calls.  Emails a month after the initial notice indicated that there were continuing questions about sending back NVE products.

This was not inadmissible hearsay.  It was too heavy a burden to expect a sworn statement from a retailer who calls a distributor and claims confusion; the calls were relied on not to show the truth of the statements but to show the state of mind of the speakers.  “The fact that so many people called NVE immediately after receiving the notice at the very least raises a genuine issue of material fact as to whether a significant portion of the recipients were misled.”

LE said that these were non-actionable inquiries, not evidence of confusion.  But these weren’t mere inquiries; the testimony was that many distributors called to stop buying NVE’s product.  NVE claimed that after the recall, its sales growth for 6 Hour POWER dropped from 13.7% to 1.1%.”  “NVE's damages expert estimated that NVE lost $3.4 million in sales as a result of the recall notice. A jury could find that these were not just inquiries; they were calls that resulted in lost sales. All of these calls evidence a belief that ‘6 Hour POWER’ had been recalled. Had the callers lacked such a mistaken belief, such phone calls would not have occurred.”

NVE’s own corrective advertising was also relevant, not for its truth but to provide circumstantial evidence that some retailers believed that there was in fact a recall on “any of the ‘6 Hour’ shots in your store.” Together, there was more than enough evidence to survive summary judgment.

NVE also argued that the false advertising, along with other bad acts (including exclusivity requirements and registering 6hourpower.com and sixhourpower.com), violated the Sherman Act.  But NVE only presented evidence of damages from the recall notice.  False advertising isn’t actionable under the Sherman Act unless it’s so difficult for the plaintiff to counter that it could potentially exclude competition. “Isolated business torts, such as falsely disparaging another's product, do not typically rise to the level of a Section 2 violation unless there is a harm to competition itself.”  The Sherman Act protects competition, not competitors.  It was relatively simple for NVE to counter the recall notice by sending its own notices; that was enough to end the antitrust claim.  (Comment: I understand the desire to deal with false advertising on its own merits, given the existence of the Lanham Act.  The offered reason for excluding it from antitrust law, though—that false advertising generally doesn’t harm competition—contradicts the underlying theory of the Lanham Act, and in particular the idea that it was easy for NVE to fix the problem contradicts NVE’s evidence that despite its corrective actions it suffered millions of dollars in damages.  I’m just saying, a better reason would be better.)  So that was the only part of the district court’s decision that was affirmed.

Some statements in press release aren't commercial for anti-SLAPP purposes

Hawran v. Hixson, --- Cal. Rptr. 3d ----, 2012 WL 4009862 (Cal. App. 4 Dist.)

Hawran sued Sequenom and its directors Hixson, Lerner, and Lindsay over a press release about Sequenom’s internal investigation into its handling of test data, which it issued on the same day it filed a legally required disclosure to the SEC.  Hawran was Sequenom’s CFO from April 2007 until his resignation in September 2009.  In spring 2009, Sequenom publicly admitted that previously reported results for a diagnostic test for fetal Down Syndrome were mishandled by employees on its science team.  The stock price went down, lawsuits were filed, and Sequenom commenced an internal investigation led by a special litigation committee (SLC).  In April 2009, Sequenom issued a press release concerning the delay in the launch of the test due to the mishandling, and a day later filed a required form reporting to the SEC Sequenom's formation of the SLC and related information.   In June 2009, the SEC told Sequenom that it had had started an investigation.

In September, defendants “made Hawran an offer that if he resigned as chief financial officer, he would not be associated with the mishandling and would be separated from others involved in the test data mishandling,” and he resigned in reliance on those representations.  Three days later, Sequenom filed another form and issued another press release announcing the completion of the SLC's independent investigation.  This release said that Sequenom had failed to put into place adequate protocols and control for studies, but that the board had begun implementing remedial measures.  It continued that Sequenom had terminated its president/CEO and its senior VP of R&D.  And it said that Sequenom had obtained Hawran’s resignation along with one other officer.  “While each of these officers and employees has denied wrongdoing, the special committee's investigation has raised serious concerns, resulting in a loss of confidence by the independent members of the company's board of directors in the personnel involved.”  The relevant part of the SEC filing said the same thing.  Hawran alleged that this was defamatory (etc.) and that he’d actually been constructively fired for raising red flags related to tax reporting and board members’ fiduciary obligations.

Defendants moved to strike because the statements related to a matter of public concern and were connected to an SEC investigation; in addition, they argued that the statement that he denied wrongdoing was not defamatory and that the statement of lost confidence was opinion, as well as raising additional defenses.  As part of his argument that the press release was commercial speech not subject to the anti-SLAPP law, Hawran presented declarations indicating that Sequenom used press releases as promotional materials provided to the sales department, customers, investors, etc.

The trial court granted the anti-SLAPP motion in part, finding that Hawran’s causes of action arose communications covered by the anti-SLAPP law; the commercial speech exception didn’t apply.  But, as to Hawran's defamation, invasion of privacy and UCL causes of action, Hawran had demonstrated a probability of prevailing on those claims, and defendants had not established the applicability of any privileges.  The court of appeals affirmed.

The most notable part of the ruling is the interpretation of the commercial speech exception.  When a defendant meets the threshold burden of showing its speech is covered, the plaintiff must then show that the commercial speech exemption applies (or establish a probability of prevailing on the underlying claims).  Here, defendants’ speech was protected as a writing “made in connection with an issue under consideration or review by ... any other official proceeding authorized by law ....”  However, the anti-SLAPP law does not apply to a cause of action arising from commercial speech when

(1) the cause of action is against a person primarily engaged in the business of selling or leasing goods or services; (2) the cause of action arises from a statement or conduct by that person consisting of representations of fact about that person's or a business competitor's business operations, goods, or services; (3) the statement or conduct was made either for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person's goods or services or in the course of delivering the person's goods or services; and (4) the intended audience for the statement or conduct [is an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer].

This exemption is narrowly construed.

Here, the court of appeals agreed that Hawran didn’t show that the allegedly defamatory portions of the press release were representations of fact about Sequenom’s business operations, goods, or services.  Hawran argued that the press release was “almost exclusively devoted to explaining what went wrong in [Sequenom’s] operations concerning the development and testing of a new genetic product and the operational steps [defendants] were taking to address the problem, and to announce a conference call to discuss these matters with investors, customers and other interested parties.”   Thus, Hawran said the press release was commercial speech as in Kasky v. Nike.

Defendants argued that the press release was made in order to comply with mandatory NASDAQ reporting requirements and that the allegedly defamatory comments within it didn’t satisfy (2)-(4) of the exception’s requirements.

The broad purposes of the press release didn’t matter: the question was whether the allegedly defamatory portions of the press release were “representations of fact about [Sequenom's] ... business operations, goods, or services.”  Merely being accompanied by factual representations about the defendant’s business operations isn’t sufficient to put a statement inside the exemption. Hawran’s claims were based on the statements concerning his resignation and purported denial of wrongdoing, not the statements about the deficiencies of Sequenom's test protocols and controls, or Sequenom’s remedial measures.  What about the statements that Sequenom obtained Hawran’s resignation and that he denied wrongdoing?  They “arguably may broadly concern or relate to Sequenom's corporate events or business decisions,” but the exemption should be construed narrowly, so they still weren’t about Sequenom’s business operations, goods, or services.  The same was true of the statement that the investigation resulted in a “loss of confidence … in the personnel involved.”  That was “about” the SLC’s investigation and the board’s reaction.  Nike v. Kasky was not to the contrary, being a case about the meaning of commercial speech under the First Amendment and not under the anti-SLAPP statute.

Because failure on one element meant there was no exemption, Hawran had to show a probability of prevailing on the merits, which he did at this stage for his defamation, invasion of privacy, UCL, and breach of contract claims.  (This is a “minimal merit” standard requiring only enough for the plaintiff to go forward, not a summary judgment-type standard.)  Defendants’ claim to absolute privilege for either a fair and true report of an official proceeding to a public journal or a statement made pursuant to an official proceeding failed; the press release was neither even though it tracked statements required to be made to the SEC.  It was also not covered by the conditional privilege for statements made without malice on subjects of mutual interest, since it was distributed widely, not just to the investing public or those with a proprietary interest.

Since the statements had a per se defamatory meaning that was plain on the face of the document, proof of harm to reputation was unnecessary.  Defendants argued that the statement that Hawran denied wrongdoing was not defamatory, and that the other relevant statements (the investigation raised serious concerns, and those concerns resulted in a loss of confidence by the independent members of the board in “the personnel involved”) were opinion.  But in context, there was a defamatory meaning, and the statements weren’t just opinions, mere impressions, or evaluative statements made, for example, in the context of an employee performance review.  They were “statements of matters that can be proven or disproven concerning Sequenom's business decisions and the consequences of the SLC's investigation.”  And they were made in a press release supplementing mandatory SEC disclosures.  “Such formalized statements in press releases are usually intended to be factual, as opposed to rhetorical, persuasive, or evaluative.”  Given the context of Sequenom’s trouble with substantiation and supervision in its research program, and the remedial measures and other terminations reported, an average person reading the whole press release would see the damaging implication that “Sequenom sought and obtained Hawran's resignation because Hawran was among the group of officers and employees somehow involved or responsible for the identified failures and deficiencies of the … program and failed company procedures.  The statements suggest that Sequenom possessed undisclosed, and provably false, facts concerning what Hawran actually did or did not do at Sequenom to implicate him in the wrongdoing.”

Defendants also argued literal truth: “Hawran ultimately admitted in opposition to the motion that it was literally true that Hixson told him in a meeting that Sequonom's board had lost confidence in him.”  But there was still a potentially false implication.  Hawran denied any involvement with mishandling scientific data, and Sequenom’s filing with the SEC didn’t directly suggest that he was among the personnel in whom Sequenom lost confidence.  This, combined with Hawran’s allegations about his prior whistleblower-type complaints, suggested that Sequenom’s motives may have been unrelated to the scientific misconduct; that’s the type of dispute that can’t be resolved at this stage. The evidence didn’t establish truth as a matter of law. 

Falsity, historical fact, and who's qualified to find it

Sovereign Military Hospitaller Order of Saint John of Jerusalem of Rhodes and of Malta v. Florida Priory of Knights Hospitallers of Sovereign Order of Saint John of Jerusalem, Knights of Malta, The Ecumenical Order, --- F.3d ----, 2012 WL 3930668 (11^th Cir.)

This case is of interest not primarily for confirming that there’s really no such thing as fraud on the PTO any more, but for the majority/partial dissent dialogue on historians/experts in courts of law.  The parties are two religious(esque) orders who both claim descent from the Knights of Malta.  The district court cancelled the plaintiff’s (the Order’s) marks and found against it on its other claims, including false advertising.  The court of appeals reversed the cancellation and therefore the infringement claims, but affirmed on the false advertising claim.

Quick review of complicated terminology: the plaintiff Order “is a religious order of the Roman Catholic Church that undertakes charitable work internationally.”  The defendant Florida Priory is an ecumenical charitable organization, associated with a parent (the Ecumenical Order) incorporated in the US in 1911.  The infringement claim is obvious; the false advertising claim is related, as the Order alleged that the Florida Priory, through its parent, falsely claimed a historic affiliation with Plaintiff Order going back to the eleventh century.  I won’t recite the history according to the parties; I’m going to skip to the legal analysis, though it should be remembered that the analysis depends in significant part on the testimony about the history.  The Order’s historical testimony came largely from its representative Geoffrey Gamble and Dr. Theresa Vann, a professor of history at the College of St. Benedict/St. John’s University specializing in medieval history.  The Florida Priory’s historical testimony came largely from the current Prince Grand Master of the parent Ecumenical Order, Nicholas Papanicolaou.  His account diverged around 1798.

The district court based its finding of fraud on the PTO on the conclusion that the Order was aware of the Ecumenical Order since as early as 1983 but failed to disclose that fact to the PTO, deliberately choosing a declarant who wasn’t aware of the existence of the Ecumenical Order.  Fraud means knowingly false, material representations of fact with an intent to deceive the PTO; it must be shown by clear and convincing evidence.  The court of appeals narrowed its focus to the intent of the individual declarant, which isn’t actually required by the concept of subjective intent—other areas of the law have managed to determine the intent of a corporation—but made fraud impossible here, since the declarant didn’t know about the Ecumenical Order at all.  Willful blindness wasn’t enough, even though that standard is used in other areas of IP; courts should be cautious before importing standards from one area of IP to another, and patent and trademark lack the necessary historic kinship to justify translating the standard for patent infringement to trademark application.

Moreover, the declarant must know and believe that others have a right to use the mark or a mark confusingly similar thereto.  As long as the declarant subjectively believes the applicant has a superior right to use the mark, there’s no fraud.  (How would Leo Stoller fare under this standard?)  There was no evidence that either the Order or the declarant believed that the Ecumenical Order or the Florida Priory had a superior right to the marks.  (While this saves the registrations, isn’t it going to be fatal to any response to a laches defense?  If in fact there was knowledge as early as 1983—which the court of appeals accepted only for these purposes and expressed some doubt about—the Order has sat on its rights for a very long time.  I imagine there’s a dispute over whether evidence has become stale, given the parties’ attention to history, but I can also imagine a strong argument that specific evidence about the Order’s knowledge of the Ecumenical Order has been lost due to the passage of time; it seems likely that some of the people around in the 1980s are no longer available to testify about what they knew.)  Anyway, even if the Order knew of the Ecumenical Order in 1983, the Order claimed use in commerce in 1926 and 1927, and so it could justifiably believe that its marks were superior based on their first use dating back to the 1920s. Cancellations reversed.

The court also found it “curious” that the district court canceled the marks even though it found that they were not likely to be confused with those of the Florida Priory. Fraud requires a showing that the applicant's representative knew that other organizations were using the mark “either in an identical form or a near resemblance.” Thus, the finding on the confusion issue was inconsistent with the disposition of the fraud claim.

The court additionally noted that “no entity in this scenario has even been misled by the purported nondisclosure at issue.” The examining attorney at the PTO found a mark registered by an entity associated with the Ecumenical Order and required the Order to distinguish itself from that prior registration. The PTO therefore knew about the prior uses allegedly concealed from it, so it couldn’t have been misled.

The district court’s subsequent finding of no likely infringement based on the remaining mark was based on visual dissimilarity: the Florida Priory's symbol contained a cross and crown that Order's mark did not.  The court of appeals held that the district court erred in focusing solely on visual similarity and not making factual findings on the other factors, and that it should also conduct a confusion analysis for the now non-cancelled marks.

Turning to the false advertising side of the case: this claim was based on the Order’s position that the Florida Priory didn’t share any history with, and had no connection to, the historic Order of Malta, but that its appeal to the Order’s pre-1798 lineage and record of charitable activities was likely to deceive consumers.  The district court faced the “monumental” task of adjudicating this distant history:

The testimony of Plaintiff Order's witnesses advised that The Ecumenical Order—and therefore The Florida Priory—had no connection to Plaintiff Order and that no split ever occurred in the long history of Plaintiff Order as an organization. The testimony of The Florida Priory's witnesses, however, sought to establish that as a result of Napoleon's 1798 invasion of Malta, the original Order of Malta essentially ceased to exist. They advised that other religious orders connected to that parent group sprung up, two of which are Plaintiff Order and The Ecumenical Order. In their eyes, The Florida Priory connects to The Ecumenical Order, which connects to the original Knights of Malta, just as Plaintiff Order is connected to the original Knights of Malta.

The district court basically agreed with the Florida Priory.  The Order argued that this was error, since defendant’s witness Papanicolaou wasn’t qualified as an expert, whereas Dr. Vann was qualified.  The majority found no clear error.  The Order basically argued that Papanicolaou's testimony wasn’t based on reliable evidence, but he testified as Prince Grand Master and presented history-related testimony in “much the same way” as the Order’s representative.  He stated that he possessed the Ecumenical Order’s archives; that he’d read history books about it; and that he’d seen the Ecumenical Order’s records, which are located in other countries.  The Florida Priory submitted the texts on which he relied, as well as the minutes of the 1908 meeting of the Ecumenical Order in New York, which tended to support his version of events.  “We are reluctant to conclude here that the head of an organization is incompetent to testify about the history of the organization, especially when the opposing party had the opportunity to fully cross-examine and challenge his credibility on all aspects of his testimony” and when the Order used similar testimony.  True, Dr. Vann testified that there was no connection between the Order and the Ecumenical Order, but Dr. Vann testified on cross-examination that she didn’t have and hadn’t reviewed any records from Russia after 1789 (where the alleged connection came from), and hadn’t asked to see the Ecumenical Order’s records.  A book on which she relied was published by the Order.  Given the evidence, the district court’s decision was “ultimately a matter of credibility in light of the documentary evidence presented.”

This was not a true judgment of history: “The federal courts do not sit as a final arbiter of historical fact, and a serious scholar would probably be reluctant to cite to a district court's findings of fact as a definitive statement of history.”  Given the evidence, the court of appeals wasn’t left with the “definite and firm conviction that a mistake has been committed.”  Without “definitive evidence that establishes that the parties are not connected,” the majority affirmed.  In part this was because, the majority thought, the Order didn’t properly make the argument that Papanicolaou had to be qualified as an expert in order to testify about the history of the Ecumenical Order.

The state law claims were disposed of similarly, with a caution to the district court “to refrain from consulting outside sources on the Internet that have not been cited, submitted, or recognized by the parties.”  It was unclear “to what extent the district court relied on its own, extra-record Internet research into similarly named organizations, to conclude that The Florida Priory's unregistered marks are not likely to be confused with Plaintiff Order's word marks.” 

However, the court declined to order reassignment of the case on remand, despite instances in which the judge disparaged the parties, the witnesses, and their work.  As to the parties, the district court “struggle[d] with the parties' characterizing themselves” as charities given the “unimpressive” amount of money they raised for charitable purposes; the court thought that members of both were “more interested in dressing up in costumes, conferring titles on each other and playing in a ‘weird world of princes and knights' than in performing charitable acts.” Also, the judge opined that it was “tragic” that all Dr. Vann had done in her life was study the Knights of Malta and their records.  While deeming these remarks “wholly inappropriate” and “offensive,” reassignment was not justified because they didn’t show actual bias in favor of or against one of the parties over the other; given the fact-intensive nature of the case, reassignment would also require duplication of resources.

Judge Pryor dissented on the evidentiary issues relating to false advertising:

Special dangers attend the introduction of testimony about history in judicial proceedings. “[W]hen a historian, whose methodology is unsound, is placed before a [factfinder], the historian has the ability to paint a picture of the past as he or she so desires. And this, in turn, has the potential to change and shape the way the public views, interprets, and understands the past.” Holly Morgan, Comment, Painting the Past and Paying for It: The Demise of Daubert in the Context of Historian Expert Witnesses, 44 Wake Forest L.Rev. 265, 29495 (2009).

Judge Pryor would have found clear error because there was no competent evidence of a shared history between the Order and the Florida Priory share a history prior to 1798.  Papanicolaou lacked personal knowledge, obviously, and he wasn’t qualified as an expert either.  A nonexpert can offer opinion testimony in the absence of personal knowledge only if the testimony isn’t based on scientific, technical, or other specialized knowledge within the scope of Rule 702, but Papanicolaou’s testimony was based on specialized knowledge of history.  The dissent would have held that the Order didn’t abandon its objection because it consistently maintained that the Florida Priory hadn’t provided admissible evidence of a connection and that Papanicolaou was no more qualified than anyone else who’d read a history book.  The dissent also rejected the “two wrongs make a right” suggestion of the majority; Gamble’s similar testimony in favor of the Order wasn’t challenged, but could have been.

The dissent was not willing to conclude that the head of an organization was competent to testify about the organization’s history under these circumstances, given the Federal Rules of Evidence.  There was no “head” or “institutional knowledge” exception to the rules that ordinarily require non-experts to have personal knowledge.  The dissent suggested that the majority’s principle would, for example, allow a governor to testify in a voting rights case that there was no history of official discrimination in the state, even as to events that occurred long before he was born; or allow the present chief of a Native American tribe to testify that land was the ancestral home of his tribe.  “And, in the light of the broad language the majority employs, the rule might also permit the chief executive officer of Delta Airlines to testify, based on the institutional knowledge of the business, that a plane crash did not result from pilot error even though he holds a law degree instead of a degree in physics or aeronautical engineering.”

The dissent found this error serious.  The record, it thought, established that the Order was “an ancient Christian organization that operates charitable hospitals and performs good works around the globe,” and without Papanicolaou’s testimony, the record showed that the Florida Priory played no part in those good works.  “The real issue is whether the district court based its findings about history on the testimony of a serious scholar. The district court cannot rely on the testimony of a lay witness about ancient history. The district court must instead rely on the testimony of an expert to make findings about history, which is the province of serious scholars.”  The dissent would have found that the Order had shown falsity.

That's where the light is

Ah, dysfunctionality (no, not the Mark McKenna kind).  I could pay the Copyright Office over $300 for it to search its records (publicly available online already, thanks to the University of Pennsylvania), to confirm that the copyrights in the lamps at issue in Mazer v. Stein were, in fact, not renewed, and then $30 more to get a picture of the lamp base they have at the Office.  Or I coud buy one of the darn things off of eBay for less money and take as many pictures as I wanted.  On the one hand, the Office has a professional photographer, which I am not.  On the other, it’s an annoying amount to pay for a search with a foreordained answer, and at the end of the eBay option I’d have the actual lamp (which, of course, might break, and then I’d feel bad, so maybe it’s not as big a plus as I initially thought).  Decisions, decisions.  On the plus side, the research on this has provided me with a picture of the ad run by the defendant copier, so that’s neat.

Just who's being paternalist?

That's the provocative question posed by Behavioral Advertising: The Offer You Cannot Refuse, by Chris Hoofnagle et al.  Abstract:

At UC Berkeley, we are informing political debates surrounding online privacy through empirical study of website behaviors. In 2009 and 2011, we surveyed top websites to determine how they were tracking consumers. We found that advertisers were using persistent tracking technologies that were relatively unknown to consumers. Two years later, we found that the number of tracking cookies expanded dramatically and that advertisers had developed new, previously unobserved tracking mechanisms that users cannot avoid even with the strongest privacy settings.

These empirical observations are valuable for the political debate surrounding online privacy because they inform the framing and assumptions surrounding the merits of privacy law.

Our work demonstrates that advertisers use new, relatively unknown technologies to track people, specifically because consumers have not heard of these techniques. Furthermore, these technologies obviate choice mechanisms that consumers exercise. We argue that the combination of disguised tracking technologies, choice-invalidating techniques, and models to trick the consumers into revealing data suggests that advertisers do not see individuals as autonomous beings. Once conceived of as objects, preferences no longer matter and can be routed around with tricks and technology.

In the political debate, “paternalism” is a frequently invoked objection to privacy rules. Our work inverts the assumption that privacy interventions are paternalistic while market approaches promote freedom. We empirically demonstrate that advertisers are making it impossible to avoid online tracking. Advertisers are so invested in the idea of a personalized web that they do not think consumers are competent to decide to reject it. We argue that policymakers should fully appreciate the idea that consumer privacy interventions can enable choice, while the alternative, pure marketplace approaches can deny consumers opportunities to exercise autonomy.

What does "healthier" mean to consumers?

The CJR discusses the issue in the context of new research that disaggregates nutrition and pesticide residue on organic produce, but is widely being reported as if nutrition were the only important determinant of "healthier."

Mathematically impossible claims aren't literally false

CytoSport, Inc. v. Vital Pharmaceuticals, Inc., 2012 WL 3881599 (E.D. Cal.)

Defendant VPX released Muscle Power, a protein shake, and CytoSport sued for infringement of its Muscle Milk mark and trade dress (including layout and font) for the same products, along with false advertising.  The products were both marketed in octagonal tetra-packs, “one of the few available FDA approved packages available for ready to drink protein drinks.”  Their prices and target markets were similar.  The challenged Muscle Power ads depicted a woman nursing a child with the caption, “MILK IS FOR BABIES, MUSCLE POWER IS FOR MEN!” and claimed that Muscle Power contained 600% less sugar and 183% less fat than Muscle Milk.  After CytoSport won a preliminary injunction on the trademark claims, VPX introduced a new product that didn’t resemble Muscle Milk, but the case continued, including on VPX’s false advertising claims centered around the use of “Milk” to name a non-dairy product.

The parties submitted conflicting survey evidence on likely confusion between the products: one found 4.1% confusion and the other 25.4% (I’ll let you guess which was which), and CytoSport employees also provided declarations about customer source confusion.

VPX’s false advertising counterclaim relied heavily on an FDA warning letter that preliminarily determined that “Muscle Milk” was deceptive as containing no milk.  VPX also used deceptiveness as an equitable defense to enforcing CytoSport’s mark, and sought cancellation of the mark (available despite the mark’s incontestability since deceptiveness is a ground for cancellation at any time).  To date, the FDA hasn’t followed up on its 2011 warning letter with a final determination.

The court excluded a VPX survey about use of the Muscle Milk mark on a product that contains no milk.  The survey showed respondents three brand names without accompanying trade dress or product images: Muscle Milk, ProMan-X, and Lean Body. The survey asked if each product contained a lot, some, or no protein, creatine, and milk. There was no “I don’t know” option.  While Lean Body is also a protein drink, ProMan-X is a “male enhancement” supplement.  The answers showed an unacceptable level of guessing.  For ProMan-X, 98% of respondents said it contains protein, 92% creatine, and 68% milk, but it has none of these. As for Muscle Milk, 80% responded that it contained milk. The survey expert admitted in his deposition that respondents were guessing.  VPX failed to show that the survey comported with accepted principles of surveying, and thus it was excluded.

On the other hand, VPX’s confusion survey was admitted; the criticisms went to weight rather than admissibility.  The confusion survey asked respondents to examine a container of Muscle Power and determine who made the product. CytoSport argued that it failed to replicate market conditions, failed to determine whether or not respondents were aware of CytoSport or Muscle Milk before asking them questions, and failed to identify respondents who believed that the Muscle Power product was actually Muscle Milk.  But CytoSport didn’t dispute that the survey was conducted using an approved format (it’s an Ever-Ready survey), relevant, and conducted according to accepted principles.  The court found the criticisms persuasive, but that was ultimately for the jury.

Turning to the false advertising claims, the court first found the Lanham Act counterclaim barred by deference to the FDA under the recent Pom case.  VPX’s primary evidence was the FDA warning letter.  (Thus, if there had been non-excluded evidence of falsity and materiality independent of the FDA issues, this might have been a different case.)  “The FDA is aware of CytoSport's labeling and has not acted. If the FDA determines that CytoSport's use of the term ‘Muscle Milk’ is misleading to consumers, despite the ‘Contains No Milk’ disclaimer on the label, it will act to enforce the labeling requirement.”  The warning letter itself was informal and advisory.  Any Lanham Act claims were barred until the FDA issued its decision.

On the other hand, the state law claims weren’t barred to the extent that state law requirements were “identical” to FDA requirements, as the FDCA specifically allows.  So while federal courts won’t interpret the FDCA or FDA regulations for Lanham Act purposes, they may have to do so for state-law false advertising claims.

CytoSport argued that the state law claims were barred by the statute of limitations, but VPX didn’t suffer any harm (triggering standing) until it introduced a competing product, and it counterclaimed well within the FAL/UCL four-year statute of limitations measured from then.

Fortunately for CytoSport, competitor FAL/UCL claims are judged by Lanham Act standards (except for the preclusion part—is your head spinning enough yet?), and VPX didn’t have enough evidence of falsity or materiality.  Along with the FDA warning letter, VPX offered as evidence of deception the PTO’s initial rejection of the mark MUSCLE MILK ACTIVE; NAD’s decision to refer CytoSport to the FDA and FTC for refusing to participate in a proceeding with Nestle on this issue; preliminary actions from Canadian IP authorities; and CytoSport’s decision to add a “Contains no Milk” disclaimer, which it has also registered as a mark.  None of this was enough to show unambiguous falsity—the decisions were all preliminary and the disclaimer wasn’t an admission of previous deceptiveness.  Without the VPX survey, CytoSport’s expert report was uncontradicted, and it tended to show that consumers were no more confused by Muscle Milk’s label than by a generic control bottle label.

Materiality was a separate problem.  There was no evidence that a mistaken belief that the product contained milk would cause consumers to choose Muscle Milk over the alternatives.  And it followed that VPX couldn’t show harm, since without materiality there can be no harm—something I really wish trademark cases would recognize!

Thus, all VPX’s counterclaims, including the cancellation claim, failed for want of admissible evidence supporting them.

However, CytoSport’s motion for summary judgment on its infringement claims was also denied.  VPX was still allowed to raise deceptiveness as a defense.  (I’m not sure why, if no reasonable jury could find in its favor on the cancellation claim, a reasonable jury could find in its favor on the defense, but ok.)  Also, there were material issues on likely confusion.  As to mark similarity, VPX noted that there were many products in the protein supplement market using “muscle,” and the PTO allowed both marks.  But the similarity in fond and placement of the marks on the packaging was strong, and the PTO didn’t have marketplace evidence in front of it. Still, VPX raised a genuine issue of material fact.  A reasonable jury could look at “power” and “muscle” as the key words, and CytoSport’s argument also rested at least in part on its trade dress claims, as to which it hadn’t sought summary judgment.  Trade dress was relevant in creating the context for comparison, but “what confusion stems from the similarity of the marks and what confusion stems from trade dress is primarily a question for a jury to answer.”

Likewise, actual confusion was disputed given the competing surveys; the jury could also regard the CytoSport employee statements about consumer confusion as de minimis.  Intent was also in dispute.  VPX’s CEO looked at every tetra-pak packaged protein shake before choosing the Muscle Power design; CytoSport argued that this should lead to an inference of intent to copy. VPX responded that it ran comparative ads disparaging Muscle Milk, which was evidence of intent to distinguish.  A reasonable jury could go either way.  Considering the packaging of every protein shake on the market doesn’t necessarily lead to an inference of intent to copy.  The CEO “may have intended to create a package that was an amalgamation of many competitors' designs or merely a design that met existing industry expectations.”

Turning to those disparaging ads: CytoSport argued that VPX’s claims that Muscle Power had 600% less sugar and 183% less fat than Muscle Milk were literally false because they described mathematical impossibilities.  The parties agreed that Muscle Milk contained six times more sugar and 1.83 times more fat than Muscle Power.  VPX argued that a reasonable jury could find that the ads conveyed a “colloquial” message that Muscle Power contained 1/6th the sugar and 100/183rds the fat of Muscle Milk.  “Mathematically nonsensical” claims couldn’t be literally false.  A reasonable jury could find that innumerate consumers would receive a truthful message, so there was no literal falsity (though misleadingness was apparently preserved for trial).

VPX sought a motion to stay until the FDA acted, which might allow it to use the deceptiveness of CytoSport’s mark as a defense.  The court disagreed, because the FDA’s standards were different from Lanham Act standards (how?) and the FDA’s reasoning was already laid out in the warning letter (which could be presented to the jury?).  I’m still a bit confused how this defense will work given the rejection of the FDA-based claims.

AU TM roundtable, part two

Interesting how much we talked about territoriality in various ways here.

Paper 5: Greg Lastowka, “Nominative Fair Use Still Doesn't Make Sense”

He’s taught nominative fair use a bunch of times, and doesn’t enjoy it because it doesn’t make sense.  It’s gained new prominence because of its inclusion in the TDRA; many have a favorable attitude towards it as a counterpart to classic fair use.  To be clear, fair use is a good thing; being able to refer to others’ marks in expressive use is a good thing. The problem is that nominative fair use hasn’t done well in serving that purpose. In fact it seems to have been counterproductive, eclipsing prior common-law developments that provided those shelters and did so in a way that effectively precluded those doctrines from showing themselves—not for a skilled lawyer, but for a more average defendant’s lawyers.  Grand Theft Auto: court eventually gets around to a First Amendment defense; but in other cases court sees only NFU as a possible defense and rules for the P because that doesn’t apply.

Fair use carves out breathing room as an exception to the scope of TM.  NFU makes no sense as a substitute for likely confusion, since that’s about the scope of the right and not a defense.  (I don’t think this is right—it’s about a normative statement that no actionable confusion is likely as a matter of law.  I agree that it’s weird to talk this way about likely confusion, but that’s the fault of the wacky concept of likely confusion we have now, especially since it’s materiality-free.)

There were lots of pre-New Kids cases finding for the defendant but they weren’t called NFU.  The question was whether they were fair uses carving out space—privileged despite confusion—or situations where there was no confusion and that’s why the use was fair.  Counter-history: defenses might have developed differently and better for defendants in the absence of this overarching concept.

Summit Media: Bella’s jacket case.  Defendant should’ve won that one.  And (I think this is what he thinks, but I’m extrapolating) NFU distorted that by making it possible to find D took too much of the mark (which was in a jacket that D had itself created!).

McGeveran: the idea is, show us that you should be on the NFU track and we’ll give the D a different, meetable burden—not a burden to disprove confusion.  True, some 9^th Circuit courts won’t comply with how the test should work, but that’s kind of true of the 9^th Circuit generally.  NFU is flawed but better than the alternative of not having it.

Lastowka: the alternative universe to New Kids could have a more robust First Amendment defense, as the district court in New Kids initially did.  Post-Tabari, it’s the plaintiff’s burden to show the absence of the three factors once the D makes the initial showing.  If the P shows D used too much, does it automatically win on likely confusion?  Tabari does seem to suggest that.

McGeveran: though in actuality the judge is going to consider whether confusion is likely.

Lastowka: Grand Theft Auto case rejects NFU, then goes to Rogers because they’re not the same mark.

McGeveran: there’s a difference between identifying problems with nominative fair use, with which he agrees, and saying that a world without it would be better for defendants. Not yet buying that second part.

Lastowka: does nominative use eat up the territory of referential uses?  Grand Theft Auto case says it doesn’t because Rogers remains available, but then how much sense does it make to have NFU in the first place?  (Expression v. traditional advertising may have something to do with the differences here—NFU is problematic perhaps because it spans both types of uses, whereas Rogers is for expression that isn’t standard advertising.)

Ramsey: maybe separate out comparative advertising, advertising for spare parts/used goods/accessories, etc. and have narrower doctrines.  Or go even bigger and have a trademark use requirement.  Can the things covered by NFU be dealt with in other ways? 

Lastowka: the best way to define scope of TM is to look for material confusion as to source.  He’s with creating fair uses that allow material confusion as to source when First Amendment values or competition dictates that leeway is required.  As an umbrella doctrine, though, the third step of NFU can be read as a restatement of the likely confusion requirement.  Why do we need a requirement of “need” to refer to mark?

Discussion—“need” really means “is it a referential use, given that you’ve chosen to talk about the P”?  (With the exception of the terribly reasoned Hyundai/Louis Vuitton case—though this does make Lastowka’s point that the way the test is framed invites error.  That argues more for restating the test than getting rid of it, though.)

McGeveran: Rogers and NFU are, today, pretty similar in how they work. 

Lastowka: but as a substitute for likely confusion, NFU seems dangerous.  If it has interpretations and requirements that aren’t consistent with likely confusion, and the D flunks the NFU test, then it seems to be liable even without the standard likely confusion analysis.

McGeveran: higher burden on P, though, and cheaper to litigate.

Farley: why is it a higher burden on P?  Tushnet says NFU is a way to eliminate survey evidence.  But the second and third prongs are openings for the P to suggest that there’s confusion.  Tushnet and McGeveran say we don’t have to think about what the audience thought, but we want to know what the audience thinks.  (I think that’s actually not true—we do care about D’s intent a lot; we also create rules that allow us to skip evidence about a particular mark or use because we think the average presumptive result will be more accurate, as in Wal-Mart.)

Carroll: Kozinski is a common law lawyer—he likes these tests.  He created NFU in the context of mushrooming of factors in TM generally, as with likely confusion; then the legislature gets into the act with the TDRA.  Stripped to the basics, what is the legal conclusion that’s relevant?  What types of evidence are relevant?  These factors point to types of evidence. But it’s not enough to identify those types; we have to think about how litigation actually happens and burdens Ps & Ds. How do we sort sheep and goats and get rid of some cases early?  There’s a rigidity to the NFU factors that lacks the necessary suppleness—trial courts tend to be mechanical because they don’t want to get reversed, especially not for failing to consider factor 8 of a 10-factor test.  Functionally: we should figure out the most effective switches to turn liability off.

Lastowka: what Kozinski was trying to do was create breathing space but when he spells out the factors he does create this rigidity.  To a trial court judge, factor three looks like a likely confusion test.  It doesn’t sound like a broad test.

Lunney: could do the Rogers move and say “needs to be explicit,” instead of factor three. 

Lastowka: Rogers is explicit that we tolerate some risk of confusion to protect speech.  (And for comparative advertising etc., then, we tolerate some risk of confusion to protect competition.)

Farley: maybe an interesting comparison to what Kozinski did with reverse confusion: he explicitly eliminated certain factors from the multifactor test; Tushnet says NFU is a way of doing the same thing (specifically, survey evidence/evidence of actual confusion) for other types of uses but maybe it needs to be done more explicitly.

McGeveran: your thesis seems to be: a parallel universe without NFU would be better.

Lastowka: District court in New Kids used the First Amendment.  Wouldn’t that have been good?

McGeveran: Rogers is getting better, but was in hibernation at the time.  So it’s a tricky thing to make these counterfactual arguments.  Not seeing why this particular innovation made things worse.

Lastowka: Jardine: we turn it into a substitute likely confusion test and put the burden of disproving confusion on defendant.  That leads directly to KP Permanent.

Lunney: that burden-on-defendant rule already applied in the 9^th Circuit for descriptive fair use—preexisted New Kids.

RT: why is comparative advertising okay?  Why is advertising used goods ok?  Is it because it’s not confusing (an empirical claim) or because it’s important?  What nominative fair use might have precluded was a real account of that (though Louboutin suggests courts aren’t good at giving an account of where TM stops anyway; they just rule that it does stop).  Here’s an example of a use of nominative use that deals ambiguously with confusion.

Paper 6: Glynn Lunney, “Trademarks and Consumer Welfare: The Unrepresented Interest”

Even if courts generally get it right, what goes on outside the courtroom is more significant—big settlements are problems.  Congress basically got the Lanham Act right, but over the years courts progressively made it worse.  Every once in a while Congress intervened, often to recognize how wrong courts had gotten it—trade dress is an example (“symbol” was put in the Act in 1943 to exclude trade dress, but now it’s been read in the reverse fashion).  He’s never seen a trade dress case where consumers are better off with a monopoly on the design; word marks are different.  1962 housekeeping amendments: courts said it meant that any confusion at all was actionable, but that wasn’t true—it was an attempt to standardize four different statements of likely confusion previously in the statute, and to encompass potential consumers, and the “housekeeping” characterization made clear that it wasn’t supposed to be a radical expansion. But that didn’t stop courts from construing it as such.

Cycle of trade dress protection: every 30 years the SCt has to come along and stop lower courts. Kellogg; Sears/Compco; then the Court’s own Two Pesos mistake has to be corrected by Wal-Mart.  What’s going on?

Law and economics scholars argue that judges are trying to adopt efficient rules. Many judges don’t think they’re doing that. Even if they were, do they really have the right information given the subset of activity they see?  Only a few persist to litigation, and it’s a biased sample. Even if the rule is efficient for that sample, it won’t be efficient for the broader population.  Nonmotivational law & economics approach: if you get an efficient rule, parties will settle and stop suing because individual interests are always limited.  So only if there’s a larger efficiency problem will one party have an incentive to stick it out rather than settle.  Difficulty here is that if only one party has a continuing stake in the legal rule, the rule will eventually favor that party almost inevitably.  Will spend more on litigation: e.g., Louis Vuitton.  D only cares about this one case and wants to get out inexpensively.  Looking at TM, you see these things.  One bad decision: Boston Pro Hockey—and we’re stuck with it; Ds drop out/let it stand.

Good decisions like Pagliero get distinguished/challenged until they tend to become relatively less important, even though the interests on the other side (I want exclusive rights in a pretty design) are not strong.  May be an information issue: SCt tends to do a better job, and that may be because you tend to get relatively good, information-rich amicus briefs.  Opportunity to bring forth the consumer interest.  Not sure what to do about the problem. Consumers are too dispersed to benefit from direct consumer standing.

My comments: Some Ds are repeat players: P&G actually has a much greater interest in a balanced TM law than New Kids on the Block does.  Big portfolio = much less likely to like state law dilution, for example. (Fame is fine.)  Possible theory: There has also been a corrosive spillover from right of publicity in particular, where Ps aren’t ever likely to be Ds? 

Paper says: “In any given case, a trademark owner usually has more to gain by prevailing than a group of would-be defendants who want to enter a market that the trademark owner is seeking to control.”  Perhaps consider expressive uses as a potential area where Ds are developing an understanding that they have to fight just as hard?  This may even fit into the paper’s idea that Ds are less likely to fight when the gains will be dissipated by competition—a D with a copyright has something to protect, e.g., a video game. Google is separate kind of repeat player, also expressive, also with its own IP to protect.

Solutions: as always, consider false advertising law for consumers.  Tort law: make TM owners responsible for torts of licensee.  You might stop getting some claims to control markets.

Lunney: there definitely are repeat Ds—Google, Wal-Mart—one reason Wal-Mart came out the right way was that this was Wal-Mart’s business model and they wanted to maintain the ability to copy.  Might have had stronger interest in pursuing the litigation than Samara Bros.

McGeveran: Expressive uses do involve categories of Ds have noticed that they need to fight.  Cases that have reached decision almost always often involve big entertainment companies (or Ds represented by Public Citizen).  Doesn’t share Lunney’s belief that trade dress was a wrong turn.  Even if you’re less pessimistic about TM than Lunney, the paper has something to say, but might want to consider how to speak to that audience.

Laura Heymann: Does information-sharing matter?  People post C&Ds online—do they fight harder?  Do they educate each other?  Transaction costs of litigation—reputation etc. may also matter.

Lunney: some clients see PR as a benefit and not a cost.  Suing may be bad for your reputation or good; being sued may be good for your reputation.

Calboli: UK jurisprudence—lawyers can be disciplined for bringing bad cases.  Even though TM is considered property, you don’t see the nutty cases we see in the US; lawyers are more conservative.  Confusion standard in the US, but dysfunctional litigation/favors deep pockets.  Commercial defamation as a way to respond to bad claims?  Some way to get into the plaintiff’s pocket, or the attorney’s pocket.

Lunney: Hard to say should we adopt UK system wholesale, but the contrast may help prove that private interests do influence legal development; hard to imagine that economics works differently though different incentives may be present.

Heymann: consider insurance coverage—another party with a long-term interest.

Lunney: We don’t have a general design right because auto insurers said that it would increase the cost of auto repairs and went to Congress to block it.  Most insurers today are cost-plus businesses, so may not have much to say about the TM rule.  (I note that most will deny coverage for claims in this field.)

McGeveran: is issue preclusion in the model?  If it’s a case where the result in case #1 will be preclusive against P in future, P’s stake will be even higher.

Lunney: often room to argue. Losing Chewy Vuiton doesn’t deter Louis Vuitton from arguing that the next case is infringing, and perhaps gives it more incentive to do so to limit the rule of Chewy Vuiton.

McGeveran: so are there ways to harness doctrine to be more preclusive in ways that put more P skin in the game?

Bartholomew: areas of TM that “force” policing of the mark—did TM owners actually like this?

Lunney: Yes, TM owners were in favor—they only wanted abandonment in the bill, not genericity. They wanted the rule to be that if there was policing there could be no genericity; policing was in their control, but consumer understanding isn’t always.

Creativity is efficiency: when producers can experiment with “Who Dat” merchandise they offer lots of alternatives and that’s good for consumers.

Farley: how do cases stick (become the general rule) or not stick (disappear from general legal understanding of the rule)?

Lunney: the model isn’t clear on that.

Farley: seems like the theory is that defendants just drop off.

Lunney: hasn’t seen a well-funded D fight Boston Hockey in years.

Silbey: a lot of the good cases are cases where someone has engaged in expressive/nonintentional conduct and just decides to stand by their guns—e.g., Eat More Kale.  Cost/benefit calculations don’t come into it—these are not people who are thinking in rational actor terms.  To think about reform, have to think about these Ds too.  Classes of actors are much more coalesced in Veblen goods cases.  Boston Hockey is easy to adjust your model to if you’re in the sports apparel industry; you don’t have to like it but you can go about your business; you don’t care about consumer welfare writ large.  Other rules won’t stick because people aren’t actually looking at the case law—not worrying about trade dress, not worrying about expressive uses. Example: Bridgewater Candle—the copier was not thinking it was against the rules to copy the general business model and sales tactics.

Carroll: different information gaps/flows.  What info is the TM system putting out to participants about their ex ante decisions?  How do you get info to judges if you’re using the common law?  Perhaps some admin agency that can do factfinding.  Bring back the Office of Technology Assessment!  In TM, would that be in the FTC?  It wouldn’t necessarily need to participate in every case as consumer advocate but could make factual findings about general consumer understandings.

Lunney: note that once you have Boston Hockey, unsuccessful licensees become unsympathetic defendants.

Paper 7: Mary Wong, “New gTLDs” (with Jacqueline Lipton)

ICANN: we thought it was worrisome to have panelists all over the world making decisions, not just under the UDRP but the new Uniform Rapid Suspension System for slam-dunk cases and a totally new different procedure, Legal Rights Objection Process. We don’t know how it will work or whether it will govern future new gTLDs.  Whatever problems the UDRP has had, mostly the tweaks have been procedural, and the substance has been left alone.  Question: are courts a better place?  There are problems with legislation and treaties; so what are we going to do?

We found, looking through the research, is that UDRP studies were done pretty early.  Up until about 2003, there were tons of articles and hair-tearing.  That’s gone down a lot.  ICANN wants to review everything from UDRP to new procedures at once; she thinks that’s a monumentally difficult task especially given the political forces/inadequacies of consumer representation.

RT: why are we spending so much time and energy on new gTLDs?

Wong: It’s not really clear. The argument has changed over time.  The initial argument was worry over loss of control over .brand.

Grinvald: isn’t it a moneymaking endeavor?

Wong: that’s not the formal reason. Not just about competition and choice, but expanding the universe of available names; unpacks Google monopoly on search (but there’s an equally good argument that it increases Google’s monopoly).

Heymann: think about how this intersects with Qs of search. If the goal was to open the internet, could just create gTLDs that don’t communicate: .1234 for example.  Is it really contemplated that I should guess “ford.complaint” when I’m looking for a complaint site about Ford? 

McGeveran: who would do that?

Carroll: almost half the students use the location bar not Google.

McGeveran: but for search when you don’t know where you’re going?

Carroll: too early to tell.  Consumer attention remains the scarce resource online. ICANN’s original argument was tech infrastructure limited gTLDs; the geeks thought that was silly and they won.  From the brand owner’s perspective, new territory opens up in the race for attention.

Wong: they say they have to go deal with the new gold rush.  Now it’s clear that the gTLDs themselves aren’t a big problem—they’re so expensive that no squatter is going to register .louisvuitton.  Now they’re worried about the second-level domains: policing, enforcing, monitoring.  ICANN board was convinced that was a major issue.

Carroll/Ramsey agree: even using Google, people may use domain name to check relevance in the results. 

Carroll: new gTLDs could diminish Google’s power, but if they’re confusing then Google becomes more powerful.

Heymann: but if Wal-Mart gets walmart.complaint, then the signaling function of the domain goes away.

Wong: UDRP review will be relatively easy because it’s a contained universe. Big issue: should ICANN care?  Segregating some words into okay and not okay—dictating not just who should have the words but what should go into the sites.  ICANN has tried to avoid becoming a regulator of what speech is ok.

Ramsey: could .brand function as a certification?

Lastowka: how could it be different than cartier.com/reseller?

Silbey: might have different semiotic meaning.  Could also change depending on what happens.

Grinvald: need to think more about procedural justice: do panels have precedent, do they follow particular laws, do we need to worry about high complainant win rate?  Is this mirrored in other international initiatives—ACTA, TPP, shifting away from established judicial processes to administration.  Louis Vuitton’s GC: very excited about using the ITC to stop conduct they don’t like.  That is a deliberate, scary strategy; very confident about ability to use private forums to better advantage than public courts.  Cheaper, quicker, less chance for due process.  So ICANN developments reflect this larger movement.

Calboli: there are different approaches to free speech internationally that matter--.gay, .islam, .church.

Wong: Saudi Arabia has objected; objections can be not just to the gTLD but to the people running it.  This is an exception to territoriality, and the move to private systems can simultaneously contribute to fragmentation even as it internationalizes.

There will always be a demand for more, greater rights. There will never be enough. ICANN is the target now because TM owners don’t want to spend money on defensive registrations.

Lastowka: seems like a replay of original domain name system—fear of initial anarchy that has to be sorted out.  But does it make sense from a consumer confusion standpoint?  People can learn on the internet what domain names mean or don’t mean.  But what about the governance issues?  Are there cases about “are you .edu enough to get an .edu domain”?  Who can curate?

Wong: historical accidents.  ICANN doesn’t govern .edu; Educause does and regulates pretty strictly.  Others, like .aero, .mobi are not so successful, but over time some have successfully negotiated with ICANN to open the scope of their operations.  New gTLDs: answer depends on registry agreement with ICANN. We expect many are going to try to renegotiate the standard agreement; see a lot of variation depending on the nature of the gTLD.  Wong would rather have chaos than ICANN deciding what kinds of users are okay.  But .com/.org/.net have lost much of their signalling function.

Carroll: allow creation of company towns (unless ICANN puts rules in place).  (I don’t see how that’s different from giving me a gmail.com address.)

Wong: ICANN was never supposed to be a regulator, though, so it’s weird that it’s now making these decisions.

Ramsey: .xxx was accused of extortion—you could pay to prevent anyone else from registering a string.  Could change the fee for do-not-register.  ICANN should retain the ability to influence what the registrars are doing, otherwise they can run the company town and get rid of anyone they don’t like—getting rid of all the gay porn on .xxx.

Carroll: businesses could be lured in and then trapped.

RT: but they already are on Facebook, Amazon, Silbey adds eBay.

Carroll: this makes the potential worse.  (Hmm. Not sure I’m convinced.)

McGeveran: if the justification for new gTLDs is to open up new spaces, the fact that the hypothesized behavior is basically the same as what’s already happening on Facebook etc. is troubling.  Query: how important will it be for an entity to get entrée into the .islam space in order to be considered credible?

Farley: well, these companies are spending a lot of money to make it important.  Companies are looking around and thinking that they have to get in now if they’re going to get in at all, because the rules might change.

McGeveran: those are people with existing presences who want to maintain exclusivity; then there is the question of the tenants in those spaces; quite different sets of interests.

Wong: is it worse that there will now be book.amazon controlled by Amazon, which Amazon can allocate to sellers or to itself, or is there something different if Amazon owns .book?  Similarly, Google owning .google v. .search.

McGeveran: it’s all about whether the tenants control the landlord.

Ramsey: we want to know what laws apply, since this is operating in a space that is both private and international.

Discussion of expressive value of these designations: we just don’t know!  Regulating with an eye toward the future is hard.

Paper 8: Christine Haight Farley, “The Forgotten Trademark Treaty: The Pan-American Convention”

It’s a treaty in force, being applied in member states by US corporations, but we don’t know about it here. It’s not as if there are so many TM treaties with substantive rights that this one just got lost. It’s a 1929 treaty, and its first successful use was in 2000.

Why so ignored?  History/timing of this treaty and what’s happened in the US with treaty implementation. At the time, there was an understanding that a specific set of rights set out in a treaty would be self-executing. But the default has shifted against self-execution. 

Why you should care: because it is self-executing.  The SCt has said so (though possibly in dicta).  Art. 7 and 8 doesn’t really need legislative implementation; drafters’ intent seems to have been self-execution.  The Lanham Act used to name the Pan-American Convention but was deleted with housekeeping amendments (to genericize it to treaties). 

Rights are also very interesting.  There are sections on GIs and unfair competition, which are different from other int’l agreements.  But she’s focused on Art. 7 & 8 priority rights, which are radical.  Enough to be a mark, not well-known, and if someone in another country is aware of the mark they’re precluded from using the mark in a country in which you haven’t done anything or advertised.  One TTAB case used a constructive knowledge standard. It’s not a bad faith standard.  Pardo’s case: guy had an address 20 blocks from a Pardo’s restaurant in Lima, and that was enough (though in that case the script was also very similar).

Also the standard was not confusion but interference—like double identity.

Probably never anticipated Latin American businesses taking advantage of their rights in the US; rather the idea was to attract US businesses to Latin America. Over the years, US corporations have made successful claims.  History is more complicated than just US oppression, though.  GIs, and our agreement to them, are interesting example of that.  Complete tearing down of territoriality principles in the Americas.  The international registration, with a bureau in Havana, which is now defunct, was supposed to do that.  Art. 7 & 8 don’t require a registration instrument, but still attack territoriality/use.

Lunney: Tea Rose/Rexall case, before fed TM law, said that under the law of Kentucky if there was knowledge of Mass. that the Ky. user couldn’t be a good faith user.  Similarly looking to an outside jurisdiction to foreclose rights inside the territory.  Why isn’t that the same as the international approach here?  He doesn’t think that the Persons case follows inevitably from territoriality.

Silbey: but was there evidence of impending expansion? 

Farley: doesn’t think the case holds that if he had knowledge then he wouldn’t have been able to get a valid mark. 

Discussion of whether it would matter if there was secondary meaning in the jurisdiction of the junior user versus knowledge of secondary meaning in the distant jurisdiction.  I have always taught the Rexall/Tea Rose case as one about distance, with good faith not an element—if there’s no secondary meaning in your jurisdiction, then it’s perfectly fine to use a good idea for a mark you’ve seen elsewhere.  Lunney teaches that there is also a good faith/lack of knowledge requirement.

Farley: this convention is a change from “the sovereign decides how rights are acquired in its jurisdiction.”  Makes rights without use/consumer knowledge possible.

Heymann: Art. 7 & 8 also do say “upon compliance with requirements established by domestic legislation” and “in accordance with the legal procedure of the country.”  So how does that play out.

Farley: thinks this is pure procedure, but will investigate.

Ramsey: suggest what it would take to meet our obligations, if this is yet another treaty we’re not complying with, e.g., the Berne Convention.

Farley: will try to show difference in rights in careful comparison between this and Lanham Act.

Ramsey: can you protect GIs through TM under this?  We may have said we were already doing enough.

Farley: Brazil in particular had strong negotiators; they were ratifying earlier versions of this convention that the US didn’t ratify. US comes down with a memo that is not discussed, but is passed, and then the US joins. Trying to figure out what was going there.  But there was interest from Latin American countries, perhaps for creating a trading union—perhaps because of the ongoing Paris Convention.

Silbey: students often reject territoriality, perhaps because of the internet. The paper poses a challenge—maybe good faith doesn’t matter any more.  Maybe it’s not such a radical extraterritorial right if brands are likely global.  (Seems to me that we have to decide what we want to do for the vast majority of brands—the long tail, almost none of which are famous—versus the few that are at the “fat head.”)