Newsday not liable for stories/complaints about competing distributor

Conte v. Newsday, Inc., 2013 WL 978711 (E.D.N.Y.)

Conte, pro se, sued Newsday and a bunch of others for violating the Lanham Act and other laws (most claims were dismissed).  The false advertising claim was based on Newsday’s use of inflated circulation figures, which allegedly attracted more advertising dollars than the truth would have, and there was also a trade dress claim based on alleged imitation of Conte’s TV publication. In this opinion, the court granted summary judgment on the remaining federal claims to Newsday and related defendants and declined to exercise supplemental jurisdiction over the remaining claims.

Conte’s I Media was founded in December 2003; it published and distributed TV Time magazine, a “free, weekly, full color, gloss-coated, easy to read TV-listings publication containing articles and features related to television as well as crossword puzzles, cartoons and word games.” It was financed by selling delivery routes to independent distributors, who were supposed to recoup their investments through payments for each delivery of TV Time.  It was first published in late November 2004, and last published on May 1, 2005; only sixteen issues were published (there were some missed weeks).  Conte didn’t maintain corporate books or hire an accountant.  Newsday argued that no one paid to advertise in TV Time and Conte didn’t seriously attempt to sell ads in it.  In spring 2005, some of Conte’s distributors were contacted by investigators from the Nassau County DA’s office who were investigating him for fraud.  He testified that I Media failed for lack of cash flow, among other reasons.

Although Conte spoke with potential clients about paying to advertise in TV Time only after he learned about Newsday’s circulation fraud, he claimed to have spoken to a long list of potential clients about advertising in TV Week Magazine, a different I Media publication, before then. Indeed, he testified that he tried to capitalize on Newsday’s misrepresentation once he learned of it (e.g., emailing one prospect, “The reality is that Newsday is charging you a fortune for the sloppy product and phantom circulation that they give you”).

Newsday had its own TV-related publication, TV Picks, which was redesigned in various ways in 2004 and 2005; as part of the redesign, Newsday decided to use glossy paper stock for the cover, as it had done before 2004 under the name TV Plus; other companies such as the NYT and the NY Daily News also published TV guides on Long Island in that timeframe with glossy covers.

Consumers Warehouse, a Long Island company, had been advertising in Newsday for over 25 years and was contractually bound to advertise in Newsday’s TV publication through the end of 2005. The Consumers defendants learned of the new format in December 2004, including the fact that the footer at the bottom of the cover page would become ad space; the February 2005 edition of TV Picks featured a banner there for Consumers Warehouse.  One of Consumers’ principals found a copy of TV Time in his driveway and contacted Conte for a rate card; he viewed it as a potential way to reach non-Newsday subscribers since it was being distributed for free.  Conte never responded with a rate card but offered to place a full page ad as a courtesy in the next edition, an offer renewed twice. Ads for Consumers Warehouse appeared at least four times in TV Time, though Conte never sent an invoice and never received any written commitment to advertise therein.  Conte rejected Consumers’ offer to advertise in TV Time for 26 weeks for $50,000, though a woman who worked for Conte at the time testified that it was the only company willing to pay Conte for advertising at the time and that she tried unsuccessfully to convince him to agree.  Conte counteroffered for a larger amount, claiming to have other interested advertisers, and Consumers wished him luck.

Separately, a Newsday reporter, Harrington, claimed that he was approached by some of Conte’s distributors in May/June 2005, and he began researching a story.  Higher-ups testified that they weren’t involved in this investigation.  Harrington called Ram Marketing, one of Conte’s vendors, allegedly to verify its relationship with Conte.  The president stated that he didn’t remember the conversation and that it wouldn’t have affected his business relationship with Conte.  In July, Harrington attended a meeting of Conte’s route distributors and their attorney; the defendants contended that his sole purpose was to gather information. He also called Conte—in defendants’ version, to give him an opportunity to give his side of the story; in Conte’s version, as part of an extortion scheme.  Thirty-three of Conte’s distributors then filed a class action alleging that I Media was a fraudulent scheme.  Their attorney drafted the complaint without any assistance from Newsday. In September, Newsday ran Harrington’s articles “Distributors sue over TV Time” and “DA opens criminal probe into iMedia,” both quoting the complaint.  (Among other things, Conte subsequently filed an $8.3 billion lawsuit against Nassau County, the Nassau District Attorney, and various Assistant District Attorneys and investigators with the present court.)

Conte first contended that Newsday’s inflated circulation figures violated §43(a), causing advertisers to buy from Newsday instead of from Conte.

The Second Circuit has a pragmatic, case by case approach to standing—a plaintiff must show that it has a reasonable interest to be protected, even a future interest. A more substantial showing is required where there isn’t direct competition.  Here the evidence showed that Conte didn’t have standing:

It is undisputed that, for a period of time, Newsday inflated its circulation figures in the marketplace. However, it is also uncontroverted that plaintiff did not begin to solicit advertisers for his TV Time publication (the product that was allegedly in competition with Newsday's products) until after Newsday publicly acknowledged its misstatements and revised its circulation numbers. Accordingly, plaintiff cannot demonstrate a reasonable basis for believing that his potential to attract advertisers to TV Time was damaged by Newsday's false advertising.

Even extending his claim to an alleged diversion from Conte’s TV Week publication, another product for which he allegedly solicited advertisers during the period when Newsday was misstating its circulation, he failed to show likely injury or causation: he had no evidence that he would have sold more ads if Newsday hadn’t misstated its circulation.  His theory depended on multiple unevidenced speculations: that the inflated numbers allowed Newsday to set higher rates, then allowing it to offer discounts for long term exclusive agreements that prevented advertisers from advertising with I Media.  This was too attenuated a theory.

Separately, the court granted summary judgment on Conte’s false advertising claim for allegedly disparaging statements about him because the only evidence of potentially deceptive statements came from two Newsday articles, which aren’t commercial advertising or promotion.  

Even if there were other deceptive statements about Conte outside those articles, they wouldn’t have been part of an organized campaign to penetrate the relevant market and wouldn’t be actionable.  Conte argued that some of his route distributors were Newsday employee/agents, that those people made false criminal accusations about him, and that Newsday was liable for those statements.  Setting aside Conte’s agency liability argument, the allegation that they disseminated falsities was “simply conclusory and unsupported by any evidence in the record.”  His argument was based on an email from Harrington to an editor stating, “Got a call from a Newsday agent. He and around 25 other agents are in contact with the Nassau DA's office after the owner of a TV guide-type magazine they began distributing (not Newsday), from a Mellville company called Imedia, has stopped providing them with paper and the owner apparently has fled ... They believe the operation is a Ponzi scheme....”  This didn’t show that false accusations had been made, and even if the distributors conveyed their beliefs that Conte’s business was a Ponzi scheme, subjective opinions aren’t actionable.  Separately, even assuming that there were evidence that Newsday employee/agents made deceptive statements about Conte, no “rational” juror could conclude that they were made as part of an organized campaign to penetrate the relevant market, which was not I Media distributors but rather all potential route distributors. 

Finally, the court rejected the trade dress claim.  The claimed TV Time trade dress was comprised of commonly used, nonunique and functional elements: a glossy cover, off-the-shelf fonts/large font sizes in the title, and the design and layout of the advertising footer.  Though combinations can be protectible, the fact that a claimed trade dress is composed exclusively of common or functional elements invites careful scrutiny to prevent a single competitor from tying up a product or marketing idea. Here, there was no evidence that the combination of these functional and generic elements was anything but functional and generic.  Conte sought protection for the idea or concept of a glossy cover of an ad-supported magazine, and the Lanham Act doesn’t protect ideas or concepts. Even assuming that his trade dress was descriptive and not generic, there was no evidence of secondary meaning: no evidence of ad expenditures, consumer studies, unsolicited media coverage, sales success, or longterm use. Speculative assertions of copying don’t create secondary meaning, and even intentional copying doesn’t trigger any presumption of secondary meaning.  And even assuming that he had protectable trade dress, no “rational” juror could find likely confusion.  Similarity was dispositive: the titles TV Time and TV Picks were at best marginally similar from the common use of (generic) “TV”; Newsday added its house mark; the size of the periodicals differed; so did the date range format; so did the way the title was positioned with respect to the cover photo; so did how they were distributed (as a standalone and with Newsday, respectively).  The cumulative effect eliminated any likelihood of confusion.

Lack of substantiation can be false when advertiser claims substantiation

Hughes v. Ester C Co., --- F. Supp. 2d ----, 2013 WL 1080533 (E.D.N.Y.)

Plaintiffs brought a putative class action against Ester-C, alleging that it misled consumers into thinking that Ester-C products were a form of immune system defense, misrepresented that Ester-C was a superior source of Vitamin C, and made its claims without credible scientific support. They alleged violatoins violations of Missouri's Merchandising Practices Act (on behalf of a Missouri class); violations of the CLRA, FAL, and UCL (on behalf of a California class); and violations under New York common law, including unjust enrichment, intentional misrepresentation, and negligent misrepresentation as to all class members (the court noted that there didn’t appear to be a conflict of laws as to these claims).

Ester-C’s products contain 500 mg of Vitamin C, more than eight times the recommended daily allowance, or 1000 mg (17x the RDA).  They also say that they contain Calcium, “C–Sorb Citrus Vioflavonoids Complex,” and “Naturally Occurring Vitamin C Metabolites.”  There are tablets, gummies, and a beverage mix.  They’re available at major drugstores.

The labels describe Ester-C as “The Better Vitamin C”; say it’s the “# 1 Pharmacist Recommended Brand”; and state “Immune Support,” “Ester-C provides your body with the immune and antioxidant support it needs to help keep you healthy and strong during times of seasonal change and the stresses of daily living,” “Antioxidant Support,” “Enhanced Absorption,” and “Make Ester-C part of your daily routine for optimal health ... no matter what time of year it is!”  Many of these or similar representations also appear on Ester-C’s website, on which an “expert” “claims he maintains a healthy and active lifestyle in part through the consumption of Ester-C,” and which claims that Ester-C increases absorption of vitamin C molecules, “making it easier for the body to transport [the vitamins] from cell to cell for numerous health benefits.”  Plaintiffs claimed that they relied on this language and that they wouldn’t otherwise have bought the products. 

Retailers’ marketing is allegedly similar: Amazon advertises an Ester-C product as “24 hour immune protection. [E]ster-C gives you powerful immune system support. [E]ster-C provides your body with the antioxidant protection it needs to help keep you healthy and strong....” Wal-mart claims, “[s]tay healthy with the Ester-C The Better Vitamin C Supplement Tablets,” and “[t]he Ester-C vitamin C 1000mg tablets also offer 24 hour immunity from day to day ailments like flu and fever.”  Defendants’ counsel noted that Ester-C isn’t responsible for other companies’ statements in marketing it (but see: vicarious/contributory liability) and that it has in the past reached out to ask other companies to remove language going beyond its own marketing and labeling representations.

Plaintiffs pled that the false claims increased sales and prices; a box of 90 Ester-C 500mg tablets costs about $8.44, while a comparable supplement typically costs about $7.00.  Moreover, they pled that defendants lacked credible evidence that Ester-C would work as claimed, and cited a publication by Oregon State University's Linus Pauling Institute that allegedly shows that it doesn’t work.  Plaintiffs also referred to various FTC actions against several of Ester-C’s competitors regarding claims to boost immunity/protect against illness.

The court found that plaintiffs had adequately pled their claims, despite Ester-C’s argument that they were merely alleging lack of substantiation, which isn’t privately actionable.

First, of course, we give a nod to standing.  The economic injury pled was sufficient injury in fact. Plaintiffs pled reliance, making their injuries fairly traceable to the alleged misrepresentations, and redressability would come from ending the allegedly deceptive marketing and from monetary relief. Ester-C argued that there was no standing because the plaintiffs didn’t say which products they bought or what representations they relied on, the express language of the complaint was to the contrary: they said they bought Ester-C, they noted the different types of Ester-C products, and they listed several examples of the representations upon which they allegedly relied.  These were Rule 9(b) arguments, not standing arguments.

The key issue was whether plaintiffs were really just pleading lack of substantiation with statements such as “[e]vidence ... indicates that Ester-C is not any better than other Vitamin C supplements at providing Vitamin C to the body,” and that “[d]efendants have no credible evidence that taking Ester-C will provide immune support or keep one from getting sick.”  The court agreed that lack of substantiation wasn’t privately actionable under the relevant laws, but found that plaintiffs had adequately pled falsity.  The court distinguished between unproven (not actionable) and disproven (actionable) advertising claims.  Studies that debunk the purported benefits of an ingredient can disprove advertising claims.  However, claims sounding in fraud must pass Rule 9(b), so the studies have to be specific enough.

The court also pointed to Bober v. Glaxco Wellcome PLC, 246 F.3d 934 (7th Cir. 2001), which held that, for a lack of substantiation claim to be a deceptiveness claim, the challenged advertising needed to imply substantiation.  (Note that this standard, which is that used by the Lanham Act, is potentially much broader: it recognizes the possibility that an ad claim might imply substantiation without coming out and saying “tests prove” X—especially in the health field, where consumers are likely to believe that scientific evidence is behind any given health claim.)

Here, plaintiffs did more than allege lack of substantiation by citing the Linus Pauling institute study, which was specific to the ingredients touted by Ester-C and “found no difference between Ester-C and commercially available ascorbic acid tablets with respect to the absorption and urinary excretion of vitamin C.”  “Given that Ester-C markets itself as ‘the Better Vitamin C’ and the ‘# 1 Pharmacist Recommended Brand,’ a study suggesting that Ester-C is not a superior source of vitamin C supplementation to the body than other market brands would, indeed, call into question defendants' representations.”  The study’s conclusion about Ester-C’s lack of superior bioavailability contradicts several statements on Ester-C’s website, which explicitly claims that Ester-C has “a unique and patented form of vitamin C” and that the product contains metabolites that “activate the vitamin C molecules making it easier for the body to transport them from cell to cell for numerous health benefits.” Plaintiffs alleged that these claims were false. 

In addition, plaintiffs’ allegations that defendants lacked credible scientific evidence challenged Ester-C’s express claims that clinical research supported its products.  For example, the website “expert” stated that he takes Ester-C “because it is gentler on the stomach and because of all the clinical research that supports the use of this product.”  Because Ester-C expresssly claimed substantiation, plaintiffs’ use of the Linus Pauling Institute study was sufficient to state a plausible claim of affirmative misrepresentation.  Lack of substantiation is deceptive when a claim implies (or here, outright states) that substantiation exists. Here, Ester-C made numerous claims of superiority to other products and superior bioavailability. 

Ester-C challenged the merits of the study, which wasn’t appropriate on a motion to dismiss.  And the study related to the claims on which the plaintiffs allegedly relied; defendants’ argument that the study only related to “absorption and urinary excretion,” not efficacy, was unpersuasive.  Ester-C’s label specifically claimed enhanced absorption and the like. 

Ester-C also argued that the references to FTC settlements for other products weren’t relevant because they were just settlements and because they targeted disease prevention claims.  Plaintiffs responded that, though Ester-C’s label didn’t expressly make cold/flu prevention claims, it implied them: it used a clock with circling arrows to imply “around-the-clock” immune support and stated: “Ester-C provides your body with the immune and antioxidant support it needs to help keep you healthy and strong during times of seasonal change and the stresses of daily living.”  They argued that a reasonable consumer reading that language, on a label already emphasizing Ester-C’s “better” vitamin C formula offering antioxidant and immune system support, could fairly interpret that as a cold/flu prevention message, since those illnesses are typically associated with seasonal changes. Again, this couldn’t be resolved on a motion to dismiss, even setting aside the FTC settlements as irrelevant.

Defendants argued that no reasonable consumer could receive a disease prevention claim because of the disclaimer, which stated: “This product is not intended to diagnose, cure, treat or prevent any disease.”  This disclaimer was indeed on the label, preceded by an asterisk, and several of the relevant statements on the label were followed by an asterisk. But disclaimers have to be examined in context with the allegedly misleading statements.  Similar to Williams v. Gerber Prods. Co., 552 F.3d 934 (9th Cir. 2008), the presence of the disclaimer didn’t mean that a reasonable consumer couldn’t be misled.  Reasonable consumers shouldn’t be expected to look beyond misleading representations on the front of the box to discover the truth in small print. Again, a motion to dismiss was the wrong place to resolve this, especially given other allegations about how the product was marketed.  For example, Walmart’s website allegedly promised “Stay healthy with the Ester-C The Better Vitamin C Supplement Tablets…. The Ester-C vitamin C 1000mg tablets also offer 24 hour immunity from day to day ailments like flu and fever.”  Even though those aren’t claims made by Ester-C, plaintiffs argued that they showed that even retailers interpreted the product as a cold and flu prevention product.  Thus, plaintiffs plausibly pled that a reasonable consumer could be misled into believing that Ester-C’s products could prevent or shorten the duration of colds or flu.

After that, the court turned to Rule 9(b), and found it satisfied: the complaint adequately provided the “who, what, when, where, and how” of the alleged fraud.  They identified the products at issue, the specific alleged misrepresentations, where the misrepresentations were made (particular retail stores and on certain pages of the website), the time period at issue including specific purchases, the nature of the deception, and the reasons that the claims were allegedly fraudulent.  This was enough for the California CLRA, FAL, and UCL claims (the court found that plaintiffs had successfully pleaded violations of all three prongs of the UCL: unlawful, fraudulent, and unfair).

Similar results obtained with Missouri’s Merchandising Practices Act, which requires an ascertainable loss of money or property (and a product bought for personal, family, or household purposes).  Likewise with the NY claims for unjust enrichment, which doesn’t require a direct relationship between the parties, and intentional misrepresentation. Plaintiffs adequately pled that Ester-C knew the claims were false when made by pointing to the lack of substantiation, the Linus Pauling Institute’s study, and the FTC settlements.  The parties disputed whether the court could consider whether reliance was justified on a motion to dismiss.  In this case, the court couldn’t conclude as a matter of law that consumers couldn’t reasonably rely on the cited statements. 

As for the NY negligent misrepresentation claim, this requires that the defendant have been careless “‘in imparting words upon which others were expected to rely and upon which they did or failed to act to their damage,’ and where the author of the statement has ‘some relationship or duty ... to act with care’ vis-à-vis the party at whom the statement is directed.”  This requires a special or privity-like relationship as well as justifiable reliance, which the court found to be related issues: a court considering reliance under NY must consider “whether the person making the representation held or appeared to hold unique or special expertise; whether a special relationship of trust or confidence existed between the parties; and whether the speaker was aware of the use to which the information would be put and supplied it for that purpose.” 

Here, the court found that it could infer a special relationship between the parties, because Ester-C’s marketing allegedly held it out as having a special expertise on the products’ purported health benefits, including the “Ask an Expert” section of the website.  That page also stated that Ester-C “has good clinical research and is the easiest form of vitamin C to take in my opinion because it is non-acidic. The company is also completely committed to clinical studies.”  The label also at least suggests “some level of medical or scientific backing for its claims.”  Thus, it was plausible that Ester-C understood that its marketing would “would be used by consumers for the purpose of evaluating Ester-C in comparison to the numerous other brands of vitamin supplements on the market,” and that it knew that it was “targeting individuals who generally lacked the scientific or medical background necessary to carefully assess and truly evaluate Ester-C's assertions before purchase, and who would have to trust the representations as stated in Ester-C's marketing.” This was sufficient to infer a special relationship under NY law.

Bruce Lee right of publicity claims survive summary judgment

Bruce Lee Enterprises, LLC v. A.V.E.L.A., Inc., 2013 WL 822173 (S.D.N.Y.)

BLE sued AVELA, its director Valencia, Urban Outfitters, and Target for alleged violations of Bruce Lee’s right of publicity/trademark rights through the unauthorized manufacture and sale of t-shirts bearing his image.  The court staves off defeat for AVELA, but I wouldn’t say it looked good.

There turn out to be issues of fact about whether Lee was domiciled in California or Hong Kong when he died, which would affect the nature of his publicity rights.  There were also issues about the chain of title for the publicity rights, which BLE didn’t sufficiently prove at this stage.  In addition (but not posing any particular problem for BLE here), the rights to Lee’s films are managed separately.  For products featuring movie titles or still images from a film, third parties need licenses both from BLE and from the film rightsholder.  For images only without reference to a particular film, BLE alone is the licensor.

AVELA acquired images and photos related to several of Lee’s films.  Valencia sold movie posters with Lee’s images and licensed others to use those images since 1983.  In 1996, Valencia started X One X to license images, including Lee’s, to third parties, something that AVELA now does too.  AVELA has licensed Lee’s image for use on a variety of products, including t-shirts, posters, and bobblehead dolls.  BLE produced evidence indicating that Valencia was aware of BLE’s rights—AVELA’s licensing agent forwarded him a communication from a licensee about the “need” to get BLE’s approval.  Defendants claimed that AVELA doesn’t permit licensees to use the words “Bruce Lee” on goods.  AVELA, of course, has been sued for use of other images.   Among others, there’s the Betty Boop case (victory for AVELA) and the Wizard of Oz/Gone With the Wind case, Warner Bros. Entm't, Inc. v. X One X Prods., 644 F.3d 584 (8th Cir. 2011) (characterized by the court here as a victory for AVELA).

This case began when a BLE employee saw a shirt printed with Lee’s likeness at Target, and investigation discovered another at Urban Outfitters. Both said “Bruce Lee” or “B. Lee” on the hang tag and AVELA on the neck tag. Target sold 140 Bruce Lee t-shirts in California, while Urban Outfitters sold 4,980 shirts California and elsewhere in the United States. The image on the Urban Outfitters shirt is allegedly not a film still, but from marketing for the film Game of Death.

AVELA counterclaimed based on a C&D sent by BLE to one of its licensees that allegedly caused the licensee to terminate their agreement; the court got rid of the counterclaims because BLE was reasonable in making claims about its rights.

Housekeeping: BLE’s common law right of publicity claims were dismissed because only statutory rights are postmortem, and common law unfair competition claims against Target and Urban Outfitters also went because BLE made only conclusory allegations of bad faith.

The court denied defendants’ motion for summary judgment on the statutory right of publicity claim and partially granted BLE’s motion.  Defendants argued that the right of publicity, as applied, violated due process because Valencia had been selling Bruce Lee merchandise since 1983. The court disagreed, because Valencia never had a vested right to sell the images; he never “believed he owned” them, and at best believed he had a right to use them without paying a licensing fee.  That wasn’t enough to be a vested interest or to trigger due process.  Plus, the state’s interest was significant: it protected celebrity personas from unauthorized exploitation, “a concern of particular importance in California given the number of entertainers living in that state.”  California thought it was important enough to vote for retroactive protection, after all.  (That sound you hear is my teeth grinding.  Ordinarily, the fact that someone wants something doesn’t inherently make an interest in giving it to them “significant.”  Also, apparently no one has a vested interest in the Bible, or in the works of Shakespeare, since they’re open to all comers.)

The court also rejected defendants’ preemption argument because there was no § 301 preemption; the court did not analyze conflict preemption.  BLE argued that it wasn’t seeking to protect movie posters or images associated with the films, but rather “the image of Lee himself.”  (Those are the same thing here.)  Defendants can use publicity photos or other materials associated with Lee’s films, but they can’t commercially exploit “Lee’s name, image, and likeness.”  Lee’s persona and likeness weren’t within the subject matter of copyright.  (Note also that the statutory right of publicity doesn’t actually protect “persona”; that’s been kind of a big deal in California.)

You see, in other cases where courts have found preemption, the plaintiff’s likeness was “fixed in a tangible medium” and thus subject to copyright protection. (Citing Jules Jordan Video, Inc. v. 144942 Can. Inc., 617 F.3d 1146 (9th Cir. 2010) (finding right of publicity claim preempted when claim was based entirely on misappropriation of various DVDs and plaintiff's performance therein, not his persona); Laws v. Sony Music Entm't, 448 F.3d 1134 (9th Cir. 2006) (finding right of publicity claim preempted when allegations focused on voice recording, not persona).) By contrast, BLE’s claims were “wholly” based on unlicensed use of Lee’s “name, likeness and persona rights,” which aren’t within the subject matter of copyright.  Even if the t-shirt images come from films (*cough* fixed in a tangible medium of expression *cough*), “while use of the photographs themselves may be permitted under the Copyright Act, use of Bruce Lee's image, likeness, and persona subject Defendants to liability for violating Lee's right of publicity.” 

(Here, the court manages to omit the one thing that really is outside the subject matter of copyright: the use of the name on the hang tags. I’d argue that both the First Amendment and conflict preemption allow the expressive use of public domain images on T-shirts, and then that the First Amendment/nominative fair use allow the hang tags, but by not noticing that the infringement of “persona” here comes by way of reproducing an expressive work, the court skips over the niceties entirely.)

On the record before it, the court was unable to conclude that the images were in the public domain because it couldn’t tell “who or what is depicted” in the t-shirts at issue.  Anyway, even if defendants were right, “Plaintiff's complaint is that the t-shirts use Bruce Lee's persona—his likeness and presence as a martial artist, not his films or the characters he portrayed therein—without authorization from BLE. The rights in Lee's persona and likeness are not fixed in a tangible medium, and do not fall within the subject matter of copyright.”  (Again, that’s a §301 preemption argument, not a conflict preemption argument.  And if a claim based on a reproduction of a performance is preempted when the performance is fixed in a video or sound recording, it’s sheer nonsense to say it’s not preempted when fixed in a photograph.  I have never seen a credible attempt to explain what differs as between a sound recording and a photo from the perspective of the relationship between the right of publicity and copyright. There may well be an unacknowledged discrimination against photographers going on, on the theory that they aren’t really doing anything that adds value, but that doesn’t even match up with copyright ownership (since the performer rarely owns the sound recording either).)

So, partial summary judgment was warranted on the core issue of a rights violation, though issues remained as to Lee’s domicile at death and ownership of the rights. Even if the images were otherwise subject to copyright protection, BLE would have an independent cause of action arising from the use of Lee’s image and likeness.

However, BLE wasn’t entitled to a preliminary injunction. It didn’t establish irreparable harm.  “Injunctive relief may well be warranted when the unauthorized use of a celebrity's likeness damages his marketable reputation. BLE has not shown, however, that the allegedly infringing merchandise had any negative effect on its business apart from reducing its revenue, nor has BLE produced any evidence showing how the infringing items have reduced the value of Bruce Lee's likeness.”

Similar results obtained on the Lanham Act claims: genuine issue of material fact on ownership; genuine issue on likely confusion. While the Second Circuit found confusion unlikely as to a calendar featuring numerous photos of baseball players, including three of Babe Ruth (one on the cover), the situation here was different.  Lee’s image wasn’t just one of many and was the primary reason a consumer would buy the shirt. Also, AVELA’s name was only on the neck tag, not immediately apparent.  Lee’s death “will affect the likelihood that the shirts would create consumer confusion; but does not totally bar BLE's Lanham Act claim.”

The court replaced the term “mark” with “persona” in its multifactor analysis, but also found that many Polaroid factors were “inapplicable” in a celebrity endorsement case.  The relevant factors included “the level of recognition Bruce Lee has among purchasers of AVELA's t-shirts, the similarity between Bruce Lee's likeness and the likeness used by AVELA, the level of actual consumer confusion regarding who endorsed the t-shirts, AVELA's intention in selecting Bruce Lee's image, the quality of AVELA's products, and the sophistication of t-shirt purchasers.” 

Summary judgment in favor of BLE was inappropriate because all BLE provided was “conclusory” statements that the t-shirts featured an image resembling Lee and had hang tags using his name. “While the Court agrees that consumers may believe these images to be of Bruce Lee, Plaintiffs have not established that consumers would believe Bruce Lee or his estate endorsed AVELA's products.”

But summary judgment for defendants was also inappropriate, despite their survey (modeled after one used in a similar case against AVELA involving images of Bob Marley).  Individuals planning to buy graphic tees at Target or Urban Outfitters were shown either the shirt sold by Urban Outfitters or a control shirt, which had an Asian male in a martial arts costume without Chinese characters (which appeared on the test shirt) and no “Bruce L.” hang tag.  Net confusion ranged from 11.6% to 12%, confusion regarding permission or approval ranged from 8.9% to 10.1%, and confusion regarding endorsement ranged from 7.5% to 7.9%.

The court found that the survey alone was insufficient to warrant a grant of summary judgment absent corroborating evidence. McCarthy says, “Figures below 20% become problematic because they can only be viewed against the background of other evidence weighing for and against a conclusion of likely confusion.”  The court did not elaborate on what other evidence it meant.

Defendants also argued descriptive fair use. But they used Lee’s likeness “‘as a symbol to attract public attention,’ which is considered use as a mark.” It wasn’t credible to argue that the images were used descriptively.  (Descriptive of what?  Of course that takes us down the rabbit hole: the shirt describes what it is, which is a shirt with a picture of Bruce Lee on it; the very question to be answered is who ought to control that.)  “[T]he use of Bruce Lee's likeness and name was intended to sell the t-shirts, not describe them.”

This result also meant that the NY unfair competition and unjust enrichment claims survived, except that unjust enrichment was dismissed as to Target because Target didn’t sell any t-shirts in New York.

Materiality still required even if falsity conceded

Turfgrass Group, Inc. v. Carolina Fresh Farms, Inc., 2013 WL 936750 (D.S.C.)

Plaintiffs sued Carolina for violation of the Plant Variety Protection Act, false advertising under the Lanham Act, and breach of contract arising from their agreement for the sale of a PVPA-certified variety of centipede grass called TifBlair.  Carolina was allowed to sell TifBlair until Turfgrass ended their agreement in 2006; afterwards, according to plaintiffs, Carolina unlawfully continued to sell TifBlair. I’m only going to discuss the Lanham Act claim.

The court declined to grant plaintiffs summary judgment.  The issue was that Carolina continued to use marketing materials describing TifBlair simply by changing the name of the grass to Carolina Green.  Plaintiffs argued that the descriptions in the marketing materials were particular to the properties of TifBlair, causing confusion about the attributes and quality of TifBlair versus Carolina Green.  Carolina admitted that it didn’t develop any new variety of centipede grass and that Carolina Greeen was merely its branding name for common centipede.  This “arguably eliminate[d]” any factual dispute over the falsity of Carolina’s marketing statement that “In 2007 Carolina Fresh is proud to introduce Carolina Green centipede, a new variety developed for improved ...” However, other elements of a Lanham Act violation remained disputed, specifically materiality, deceptiveness (not really clear what that means if this is a literal falsity case), and whether plaintiffs suffered harm.  Also, there was a genuine dispute over whether the language really did describe unique properties of TifBlair.

Wells Fargo receives an education in abandonment

Wells Fargo & Co. v. ABD Ins. & Financial Services, 2013 WL 898140 (N.D. Cal.)

Wells Fargo sued ABD for trademark infringement (under various names; the court concluded that the heart of its false advertising claim was that ABD’s name was a misrepresentation of affiliation, and thus was the same as the trademark claim).  The ABD mark was first used by Alburger Basso de Grosz Insurance Services, founded in 1990, which changed its name to ABD Insurance and Financial Services in 1997. In 2007, Wells Fargo bought the company and all its assets, including its mark. In 2008, Wells Fargo changed its name to Wells Fargo Insurance Services. Wells Fargo didn’t renew its ABD trademark registrations.

Defendant de Grosz, the son of one of the original founders of ABD, worked at ABD between 1994 and 1999. In 2011, he learned that the ABD mark had been cancelled and filed an ITU for the mark.  He called another defendant, Hetherington, who was then working for Wells Fargo, about his intent to use the mark.  “The parties do not agree as to Wells Fargo's response to this call …. Hetherington, having left Wells Fargo in January 2012, joined the new ABD company.”  In mid-2012, between 60 and 75 former Wells Fargo Insurance Services employees joined ABD, allegedly soliciting Wells Fargo customers and using Wells Fargo proprietary information.  (There’s a related state suit alleging claims for breach of the duty of loyalty, intentional interference with economic relationships, intentional interference with potential economic relationships, unfair competition, conspiracy, and breach of contract.)

Wells Fargo moved for a preliminary injunction against the use of the ABD mark.  It argued that, in 2009, it “chose to focus its use of the ABD brand as secondary to the famous Wells Fargo brand” and changed any business material (such as business cards, letterhead, etc.) that used ABD “as the primary or sole entity name.” However, Wells Fargo alleged that the “ABD brand did not disappear,” noting that its business cards, customer presentations, voicemail systems, and business faxes still reflected a (secondary) “tie” between Wells Fargo and ABD.  It maintained the ABD email domain and redirected traffic from the ABD website to the Wells Fargo website.

Wells Fargo identified evidence of confusion: “four customer emails from July 2012, all containing questions regarding the link (if any) between Wells Fargo and the new ABD company”; an instance in August 2012 in which an insurer was confused about whether Wells Fargo or ABD was the broker of record for one of its customers; and a January 2013 subpoena from a law firm served on ABD in connection with a state lawsuit, in response to which ABD returned a Certificate of No Records and explained that it “picked up the [ABD] name but that Wells Fargo had the records.”

Wells Fargo further argued that “even in an industry where consumers may be sophisticated and careful decision-makers,” no amount of consumer care can prevent confusion between two companies with identical names.

In opposing a preliminary injunction, defendants mostly argued abandonment, which requires a discontinuation of use with intent not to resume. Even a single use can avoid abandoment, but that use has to be bona fide use of a mark in the ordinary course of trade, not merely token or sporadic usage. The evidence of abandoment:

(1) Wells Fargo formally merged ABD into Wells Fargo Insurance Services as of January 1, 2009, thereby ending the separate existence of ABD; (2) Wells Fargo emails and other internal documents show that it intended to “retire” the ABD name as of January 1, 2009, and Wells Fargo instructed its employees that “the ABD name can no longer be used,” that any “stationery, brochures, and other sales materials” bearing the ABD name should be recycled, and that the ABD name should be removed from voicemail messages and email signatures; (3) Wells Fargo did not renew the federal trademark registration for the “ABD” mark; and (4) Wells Fargo did not maintain the “ABD” trade name with the California Department of Insurance, and was therefore prevented from offering insurance services in California under the name “ABD.”

The court noted that the formalities of registration and maintenance weren’t as important as actual use. And while the internal documents showed a clear intent to stop using ABD, abandonment requires actual cessation of use, not just an intent to cease use.  Wells Fargo argued that, even after January 2009, it continued to use the ABD name on “business cards, customer presentations, ‘broker of record’ letters, payment processing, voicemail messaging systems, and even business faxes.”

But a closer look at these materials wasn’t very helpful to Wells Fargo.  While “ABD Insurance and Financial Services–A Wells Fargo Company” appeared as a footer on some presentations, it was accompanied by ABD’s expired California license number.  This suggested that the footer was a mere remnant from before 2009; at that point, Wells Fargo had no right to offer insurance services using that license. Another presentation mentioned ABD only as part of customer testimonials; the presentation was from March 2010, but there was no evidence about when the testimonials were given. ABD was likewise mentioned “in an historical context” in other presentations, e.g., “Wells Fargo Insurance Services USA, Inc. (formerly ABD Insurance & Financial Services) is now ranked ...”  Similarly, the business card Wells Fargo submitted contained an outdated license number, address, phone number, and email address, and the solicitation emails sent by its employees mentioned ABD in the context of the Wells Fargo acquisition.

Wells Fargo also maintained domain name registrations containing ABD, and used ABD and related terms as keywords in its metatags. It also submitted correspondence and checks from customers using the ABD name; Wells Fargo continued accepting such checks into 2012.  (I’d be surprised if Wells Fargo turned many checks away.)  Declarations from employees also (identically) stated that “[m]any clients and the marketplace continue to associate Wells Fargo's Bay Area insurance brokerage business with the ABD name and the ABD business.”

The key issue was whether these post-2009 uses were “bona fide” use in trade.  The court concluded that, at least for purposes of meeting the heavy burden required for a preliminary injunction, Wells Fargo hadn’t shown it was likely to succeed on this argument. The court was persuaded by Cascade Financial Corp. v. Issaquah Community Bank, 2007 WL 2871981 (W.D.Wash. Sept. 27, 2007), involving a bank that rebranded from Issaquah to Cascade but continued to process Issaquah withdrawal slips and checks, maintained Issaquah domain names, and advertised using Issaquah.  In Cascade, the court found that defendants were likely to succeed on their abandonment defense, particularly given that Cascade had “taken affirmative steps to encourage its customers to stop using the Issaquah Bank name.” 

There were striking similarities to this case, in which Wells Fargo tried to rebrand ABD.  “Like Wells Fargo, Cascade did not maintain the corporate status of the company that it acquired, instead choosing to operate its business under one name. Like Wells Fargo, Cascade maintained the domain names of its acquired company, but redirected website traffic to its own website. And like Wells Fargo, Cascade continued to accept documents bearing the acquired company's name from its customers.”  Wells Fargo’s post-2009 users were either residual or in the context of historical background, not uses in the ordinary course of trade.

The court also analyzed the evidence of actual confusion. The customer emails were immediately after the launch of the new ABD website, not evidence of continuing confusion. As for the subpoena, that doesn’t show ordinary consumer confusion, but rather a mistake about the possession of certain corporate records.  “While this may be some evidence of confusion, it is certainly not evidence of consumer confusion.” 

This also bore on the degree of care exercised by purchasers.  Defendants argued that their business was relationship-driven and offered declarations from two customers stating that they chose ABD based on their relationships with brokers who left Wells Fargo for ABD and weren’t confused.  “Insurance brokerage is not an industry where customers make purchases on a whim, and can be easily fooled by the name of a company.”  One unsolicited email, for example, came from a customer to one of the Wells Fargo-to-ABD employees.  The customer learned that the broker had left Wells Fargo and sent an email to his personal email address, expressing a desire to “explore what to do and determine what's in the best interest of our plans.” The customer noted that “Wells Fargo is anxious to keep our business,” but made clear that he “value[d]” the ABD people “much more as individuals than as Wells Fargo employees.”  It might well be true that Wells Fargo lost many customers to ABD.  But that wasn’t evidence of losses due to confusion.

As for intent, which Wells Fargo contended was strongly in its favor, the court noted that “it does seem clear that defendants chose the mark to signal some sort of link with the original ABD company, and not merely as a way to ‘honor their fathers and their legacies.’” But Wells Fargo put too much weight on this factor and on its employees’ alleged betrayal. Its allegations were far more relevant to its state court lawsuit.  Because Wells Fargo didn’t show any examples of consumer confusion after mid-2012 (I believe the court made a typo here and have corrected it to be consistent with the rest of the opinion), and because customers were likely to exercise a high degree of care, the Sleekcraft factors weren’t decisively in its favor despite ABD’s bad intent.  (An outlier, per Barton Beebe, whose empirical research found a bad intent finding highly correlated with a plaintiff victory.)

Confusion and degree of care was also directly relevant to the (un)likelihood of irreparable harm. “The fact that all cited examples of consumer confusion occurred in the weeks immediately following ABD's launch further supports a finding of no irreparable harm. To the extent that Wells Fargo was harmed by any confusion that occurred in those weeks, such harm can be remedied by monetary damages.”  Injunction denied.

JAMA article not commercially disparaging, given scientific oversight

HipSaver, Inc. v. Kiel, --- N.E.2d ----, 2013 WL 932155 (Mass.)

HipSaver, which makes medical devices that are supposed to reduce the risk of hip fractures in the event of a fall, sued Kiel for commercial disparagement from a 2007 article in the Journal of the American Medical Association that concluded that a hip protection device (not HipSaver’s) didn’t improve outcomes. Kiel conducted the clinical trial that formed the basis for the article and was its lead author.  The study described the trial, analyzed the data, and concluded, among other things, that the trial “confirm[ed] the growing body of evidence that hip protectors are not effective in nursing home populations.”

The trial court granted Kiel’s post-discovery motion for summary judgment, and the court granted HipSaver’s application for direct appellate review.  Finding no error, the court affirmed, while taking the opportunity to discuss the elements of commercial disparagement.

Kiel “has done research on osteoporosis, falls, and related bone fractures; has published over 125 papers in peer-reviewed journals; and is regarded by others as an expert on hip protectors.”  He received a multimillion, 5-year grant from NIH to study the efficacy of hip protectors, given that the findings of at least 12 earlier studies had been mixed.  He conducted a trial for two years involving over 1000 patients at 37 nursing homes in 3 states.  Residents wore a pad on one hip, but not the other, so they were their own controls.  About 20 months into the study, the review board recommended termination “due to lack of efficacy and the low probability of being able to demonstrate efficacy in the remaining years of the study.”  The study ended and the researchers wrote up the results for JAMA, which is of course a highly respected and widely circulated journal.  JAMA undertook a 7-month peer review process before publishing.

HipSaver argued that Kiel knew or had reason to know that the product he tested had a different, inferior design to HipSaver’s product; that readers wouldn’t know this; and that they’d believe that the article applied to all hip protectors.  The trial judge ruled that HipSaver didn’t show falsity: its proposed expert testimony that the clinical trial’s design was flawed didn’t necessarily mean that its scientific conclusions were false.  Also, HipSaver hadn’t shown intentional falsity or reckless disregard for truth.

The court began by noting the differences between commercial disparagement and defamation; the former targets harm to the economic interests of the injured party arising from false, disparaging statements about the party’s property, usually a product or service.  The line between commercial disparagement and defamation can be difficult to draw; false statements about a business’s lack of integrity or dishonesty can be defamatory.

Massachusetts follows the Restatement (Second) of Torts, supra at § 623A: “One who publishes a false statement harmful to the interests of another is subject to liability for pecuniary loss resulting to the other if (a) he intends for publication of the statement to result in harm to [the] interests of the other having a pecuniary value, or either recognizes or should recognize that it is likely to do so, and (b) he knows that the statement is false or acts in reckless disregard of its truth or falsity.”  This includes an “of and concerning” requirement, and also requires special damages in the form of pecuniary loss.

The court here agreed with the trial judge: “any purported design defects in the clinical trial were acknowledged by Dr. Kiel in the article, and did not necessarily render the challenged statements false.” The article fully described the hip protector used, acknowledged that differences between the clinical trial and previous studies “may have resulted from the type of hip protector used,” and explained several possible limitations of the clinical trial. The conclusion recommended future studies of new hip protectors.  The statement that the study “add[ed] to” or “confirm[ed]” the “growing body of evidence” of ineffectiveness wasn’t false even if the design of the clinical trial was flawed.  HipSaver didn’t allege that Kiel inaccurately interpreted or reported the data. (Thus, the court had no need to reach whether the fact/opinion divide works in commercial disparagement as it does in defamation, where a statement cast as opinion can be actionable if it implies the existence of undisclosed defamatory facts.)

What about whether the statements were “of and concerning” HipSaver?  Allowing a plaintiff who isn’t really identified to sue poses a threat of chilling speech.  “Of and concerning” can be shown by proof either “(1) that the defendant intended the words to refer to the plaintiff and that they were so understood or (2) that persons could reasonably interpret the defendant's words to refer to the plaintiff and that the defendant was negligent in publishing them in such a way that they could be so understood.”  If the publication doesn’t use a person’s name or other readily identifiable descriptions, extrinsic proof is required that a third person understood the reference.  And where a group is targeted, “an individual member of the defamed class cannot recover for defamation unless ‘the group or class is so small that the matter can reasonably be understood to refer to the member, or ... the circumstances of publication reasonably give rise to the conclusion that there is particular reference to the member.’”

HipSaver wasn’t mentioned in the article, and the hip protector studied wasn’t commercially available, while HipSaver’s product was. The article gave a lengthy and detailed description of the device studied, which had distinct materials not present in the HipSaver product, and which was only for one hip, while HipSaver doesn’t make a one-hip product. The reference to “hip protectors” generally being ineffective was insufficient to conclude that Kiel was specifically discussing HipSaver’s product. HipSaver alleged that it was the second largest manufacturer in the US, but at least 22 other companies make hip protectors, and HipSaver had no third-party evidence that others understood the article as referring to or being about HipSaver and its product. Indeed, HipSaver’s president/CEO stated that it was unlikely that the hip protector described in the article could be confused with HipSaver's product. “Simply put, the article cannot be understood as referring to HipSaver, either expressly or by clear implication.”

What about knowledge of or reckless disregard for falsity?  (There was no need to adopt the description “actual malice” because the current standard was clear and precise. Also, here HipSaver was a limited purpose public figure because it injected itself into the debate over the efficacy of hip protectors through its ads and sponsorship of its own research. More broadly, in any commercial disparagement claim, the plaintiff must show knowledge/reckless disregard no matter whether the plaintiff is a public or private figure.)  HipSaver didn’t argue that Kiel fabricated data, but rather that he ignored or concealed evidence suggesting that the design of the clinical trial was flawed and therefore must have published with reckless disregard.  Not so.

The court emphasized the “scientific oversight” that was integral to both the trial and the article.  The NIH appointed a review board for the study; four institutional review boards assessed the trial protocol (ed. note: though they shouldn’t have been reviewing for correct design!); JAMA put the article through peer review, which resulted in changes in response to reviewers’ comments. Given the conflicting results of earlier trials, Kiel used a different clinical trial to address deficiencies in earlier studies. “It is generally understood that scientific research is not characterized by perfect theories, flawless studies, and desired results. Rather, the hallmarks of scientific research are continuous inquiry, testing, debate, disagreement, and revision.” 

The challenged statements were Kiel’s interpretations of the accurately reported data.  “That concerns may have been raised about the chosen design does not mean that Dr. Kiel entertained serious doubts about the truth of the challenged statements as they were a reflection of the achieved results.” The article “candidly” discussed the flaws and limitations of the clinical trial, including whether the chosen pad was the best possible design and whether results from 1-sided hip protectors would generalize to 2-sided protectors.  There wasn’t sufficient evidence of reckless disregard.

The court nonetheless analyzed whether HipSaver showed that Kiel intended, knew, or should have known that publication would result in pecuniary harm.  As evidence of Kiel’s knowledge, HipSaver pointed to the fact that the name of the particular device used in the clinical trial was removed prior to publication because of an email from the maker of that device, who said that including the name “might lead us to be involved in costly litigation and loss of market share.”  Also, a HipSaver principal also sent an email to Kiel: “From what I am hearing about Fall Guard in the nursing homes ... your study will be just another nail in the coffin of the hip protector product category.” Kiel responded: “FallGard is superior to your untested product. You are the biggest scam artist. The nail will not be in any coffin but your own.” The court agreed that these communications showed that Kiel recognized and understood that publication likely would cause makers of hip protectors, including HipSaver, pecuniary harm.  (Note the relationship here between knowledge of likely harm and “of and concerning.”)

In a footnote, the court rejected HipSaver’s argument that Kiel’s failure to disclose in the grant application his financial ties to pharmacos that make drugs to promote bone density showed reckless disregard for the truth.  But HipSaver didn’t show that bone density drugs compete with hip protectors in the market, or that Kiel’s research on such drugs biased or otherwise affected his clinical trial here.  Also, HipSaver contended that Kiel’s characterization of HipSaver’s principal as a “scam artist” showed that he was ready to make statements without factual foundations.  “Although this intemperate personal comment may have reflected Dr. Kiel's dislike for Goodwin, it was not evidence of Dr. Kiel's attitude toward the truth or falsity of the challenged statements.”  (What we say in email is not what we say in JAMA, though as this case shows we sometimes have to defend them both in public.)

Finally, the court considered whether HipSaver showed special damages.  Where feasible, this requires showing specific losses of sales to identifiable customers. There’s an exception when a false statement has been widely disseminated and it would be impossible to identify particular customers who chose not to buy the plaintiff’s products; in such cases, plaintiffs can rely on circumstantial evidence of lost markets as long as they eliminate other causes. They must still show that the disparaging publication was the direct and immediate cause of that pecuniary loss. (In a footnote, the court noted that some jurisdictions allow a similar showing of harm without wide dissemination as long as the plaintiff can show a decline in business or lost growth opportunities and can eliminate other possible explanations for the decline.  The court left the possible adoption of this broader exception for another day.) 

HipSaver argued that, as the second largest manufacturer in the US, it bore the full brunt of the ineffectiveness statement. But HipSaver didn’t get any information from its customers about their purchasing decisions. The JAMA article was widely disseminated, though.  HipSaver used expert testimony to claim lost sales. But the experts didn’t opine that the alleged lost profits were a direct and immediate result of the article, rather than other factors.  HipSaver didn’t analyze the impact of prior clinical studies—allegedly “well-known” as important sales drivers—some of which had also been negative.  It didn’t show whether any competitors had also experienced losses after the article was published, which would have suggested a causal relationship. Plus, there were other causes of loss: HipSaver had sued its largest competitor for false advertising several years before the JAMA article.  It claimed that the sales impact had ended long before the JAMA publication, but as of 2007, HipSaver had been “completely frozen out of every private sector nursing home and health care facility chain and every private distribution chain,” “frozen out of all the major catalog distributors and resellers of hip protectors,” and still had “no ability to access the private health care distribution and facility chains.” Thus, HipSaver didn’t show that the false advertising wasn’t a cause of lost sales.

Dawn Donut inapplicable to reverse confusion

Boldface Licensing + Branding v. By Lee Tillett, Inc., No. CV 12-10269 (C.D. Cal. Mar. 11, 2013)  

Boldface began the nationwide rollout of a cosmetics line under the mark KHROMA BEAUTY BY KOURTNEY, KIM AND KHLOE (the celebrity Kardashian sisters).  Tillett sought to enjoin the use of the mark because of its registered KROMA mark for cosmetics, and provided evidence of confusion (or at least evidence of uncertainty—Tillett solicited these statements, but the court accepted them as evidence of likely confusion).  The court granted an injunction; I’ll leave aside most of the likelihood of success analysis because I think the most interesting parts of the opinion discuss injunctive relief.

The court explained that it was well aware that granting an injunction mid-rollout could cause millions of dollars in losses.  But it was also convinced that withholding an injunction would destroy Tillett’s business, about which Boldface knew before it began the rollout, through reverse confusion. Because Tillett’s rights were superior, the balance of hardships favored Tillett.

According to the court, “Boldface moved forward with its multi-million-dollar product rollout using a trademark it knew was similar to Tillett’s registered mark based upon the thinnest of reeds: as few as 13 days of silence from Tillett after receipt of Boldface’s July 18 email.” It admitted that it could have changed the KHROMA BEAUTY marks then without serious harm, but forced ahead even when the PTO agreed, by refusing to register KHROMA BEAUTY, that the marks were too similar.  Boldface thus brought the injury on itself.

Boldface then argued that Dawn Donut should limit the scope of the injunction to markets in which Tillett presently does business. But Dawn Donut only applies when the junior and senior user are in geographically separate areas, with no present likelihood that the federal registrant would expand into the junior user’s market.  Here, Tillett sold cosmetics online and across the country, had promoted them in nationwide media, and had explored a deal with a UK retailer in the hope of using that deal to get further US retail deals.  This demonstrated a present likelihood of expansion into areas occupied by Boldface.

“Perhaps more important,” applying Dawn Donut to this reverse confusion case would do significant harm to Tillett’s nationwide rights arising from its federal registration.  Dawn Donut makes sense in forward confusion cases, but not with a nationwide junior user who will cause the senior user to lose the value of its mark and control over its reputation.  If the junior user was free to occupy the entire rest of the country, that presence “could be significant enough to eliminate the registrant’s identity, goodwill, and reputation even in those areas the registrant occupies,” and even if the registrant persisted, it would have no incentive to expand into territories already occupied by the junior user. While it would be entitled to an injunction on entry into each market, “it would likely have to expend significant time and money to dispel the confusion created by the junior user’s prior presence.  And by that point, it may be too late.”  Preventing reverse confusion by a nationwide junior user required a nationwide injunction.

Santa Clara Internet Law WIP part 4

Speech #3

Jane Bambauer / Is Data Speech?

Any time the gov’t prevents you from knowing something for the purpose of preventing you knowing it, the 1A is implicated: a negative right to create knowledge.

Definitions: Intentionally recorded information is data; information is an objective representation of something that happened. Examples: handwritten notes, photos, server data.

How can server data be speech if no one has examined the data? When gov’t regulates data, legal rules cluster around two lifecycle phases: data in transmission (diagram shows stick figure requesting data and other stick figure saying “sure,” which is clever and not entirely reflective of the less explicit transactions that gov’t tends to regulate) or data being collected.  This data is so similar to other forms of celebrated speech that it isn’t a close issue. Data in transmission is speech in the case law.

What about collection? Strong strand of precedent treats collection as nonspeech conduct.  Most scholars assume that collection can be regulated without 1A problems, and Bambauer was one of them until recently.  On reflection: Dietemann v. Time, Inc., involving a quack exposed by Life magazine; reporters surreptitiously recorded what was going on.  9^th Cir. held reporters had 1A right to report and observe, and even to publish the photos, but no 1A protection for surreptitious recording of the photos/sound. That seems bizarre on reflection, though it’s how the cases lie.  How can the 1A shield the reporters’ minds and notes but not new tech that records and preserves in a more reliable way? And how can transmission be speech while the creation of the transmitted thing isn’t speech?

When the gov’t isn’t trying to prevent dissemination, it’s trying to prevent creation of knowledge, which is troubling.  Her position: A right to create knowledge: freedom from state action that purposefully interferes w/knowledge.  Does the gov’t intentionally/purposefully interfere w/the creation of knowledge? If yes, scrutiny follows.

Borrows from a thought-centric framework, Seana Shiffrin.  Hasn’t been applied to data privacy yet. Gov’t shouldn’t interfere with the creation of new thoughts; free speech makes no sense without that predicate right. Data has uprooted bad ideas, like the idea that ulcers were caused by stress. Moneyball taught us that scouts don’t have an “eye” for talent. The belief that homo sapiens killed the other hominids has been refuted by DNA evidence.  Public good theories: self-interested demands to limit speech tend to overwhelm the public good. See that in data privacy—earlier article on this.

Deliberative democracy: others point to cases in which speech relating to public concern gets the most scrutiny; protection drops off.  This isn’t a conception of the 1A she can get behind; limiting the scope of speech rights gives the gov’t the opportunity to decide what we should be concerned about. Even Brandeis wouldn’t have had such a narrow view of the 1A—was a great follower of John Dewey and thought that we all need customized, private self-education to be well-informed.  (Was that privacy tort Brandeis or some other Brandeis?)  Lending data seemed private but is now central to our understanding of what happened in the housing crisis.

Self-determination/autonomy: privacy of course often seeks to promote exactly these same interest by giving us safety/security to experiment.  Julie Cohen’s vision for autonomy through privacy is here.  She is very concerned with these autonomy interests.

What the gov’t can do under her thesis: can protect important interests in seclusion and confidentiality; prohibit certain uses of information even when a company knows something about its consumers—if there’s something wrong with a particular transaction, like discrimination.

Q: Dietemann: does the case come out differently if he was in an office rather than his house?  Students think so. Is that right?  If so, isn’t it less of a data collection case?

A: maybe, but the reason it’s right is that houses are related to seclusion interests. It’s not that the 1A doesn’t apply but that it might be outweighed.

Q: are you arguing to only protect the collection of the data or is it more important to disseminate it?

A: both important, independently

RT: If data is speech, then disclosure of data is forced speech.  This has significant implications.  For example, from the paper: “[The person whose data is collected], too, is free to gather data and make judgments about the best creditor or best prospective mate.”  The rich as well as the poor are free to sleep under bridges! Note also that this is not true: the corporation will be able to protect its privacy, and trade secrets, under the very right not to disclose that the claim of data as speech enables.

A: wants to think about compelled speech more; the doctrine is a mess. Can’t defend trade secret law; we need to fix that too.

RT: But fixing one and not the other has distributional consequences. Further from the paper: “generalizing based on categories … Without it, we must choose either arbitrariness or unconscious, unaccountable generalizations. There are no other options.” I worry about dichotomies presented this way. I thought many complaints about “generalizing based on categories” went to the way in which such generalizations are, in practice, arbitrary (redlining) and unaccountable (the camera points one way).  Accountability is not a predicate for First Amendment protection by Bambauer’s theory.  [Bambauer also posits that Big Data will have to be good because otherwise it won’t work well—I have some questions about how to apply that promise to, say, the models that brought us securitized subprime lending and the resulting AAA-rated CDOs.]

A: we have lots of disclosure laws that pass scrutiny. Compelled speech doesn’t need to have the same breadth that the negative right against interference w/knowledge creation would.

Q: if you support the intrusion claim, don’t you have to distinguish gathering and dissemination?

A: we have confidentiality rules and torts that do survive scrutiny; we’d do the same thing with intrusion.

Q: we’d have to redefine accounting law—a lot of laws about accounting; securities disclosure.  [Making you create data is interference with knowledge creation.] Is attorney-client privilege constitutional?  Do we do strict scrutiny on each to keep them in place?  Right now, a lawyer selling her client list would be a major violation of the law, as would a doctor selling her list.

A: if it’s speech, we do the scrutiny, and a compelling interest can win.

Q: but dozens of laws are on the rocks; the implications are far broader than privacy laws.  Underselling how sweeping this is.

A: links back to compelled speech.  But no one’s telling you you can’t do wacky accounting if you want.  (Though you will go to jail unless you use GAAP in various disclosures, at least if we put people in jail for accounting fraud any more.)  Compelled speech doesn’t mean that the bookkeeper can’t also do something creative with the numbers. 

Q: but that would often be fraud if it doesn’t reflect reality.

Q: maybe that would fall under prohibited uses of data.

Q: data isn’t mostly about privacy. Data is pervasive; business law is hugely about data. If narrow tailoring is required for any regulation of data, that’s superbroad.

Wu: are you requiring strict scrutiny?

A: no.

Wu: well, the other moving part is the level of scrutiny.  You may be ending up with much more scrutiny than you intend—think about affirmatively suggesting forms of scrutiny that don’t exist under 1A law.  [Of course, Fred Schauer does the foundational work on this issue of boundaries and expansion, and Vincent Blasi’s pathological perspective is relevant as well.]

[So does this theory of what’s subject to strict scrutiny mean that bans on marijuana based, at least in part, on claims that pot makes kids willing to try other drugs—that is, it creates new thoughts about other drugs—are subject to scrutiny? I agree with Wu that level of scrutiny needs attention; the easy answer is that the harms of marijuana use are sufficient even without that knowledge-based justification.  But it’s generally possible to regulate from a harm perspective.  E.g., from the paper: “Even hostile work environment claims based on adverse insults and aggressive or provocative speech attempt to regulate based on the effects on the victim rather than on the immorality of the speech itself.” I don’t find this distinction persuasive, once you change the strawman word “immorality” to “discriminatory content”—I had this discussion with Felix Wu before.]

Anupam Chander and Uyen P. Le / The Free Speech Foundations Of Silicon Valley

Le: Free speech helped create cyberlaw; the internet helped realize the vision of the First Amendment.  The 1A as industrial policy.  We aren’t making the case for a new Lochnerism. By focusing on expressive core of internet, we hope to restrain any libertarian vision.  Paper shows how the 1A helped configure American cyberlaw: CDA §230, DMCA, and a bit on privacy. We look at current threats.  SOPA/PIPA, operation In Our Sites where civil forfeiture/seizure were used against alleged copyright infringement, turning into prior restraints.  Global efforts to control the internet through the TPP, which also permits seizure/forfeiture and expands criminal copyright law/secondary liability.  Also the ITU, which recently considered proposals implicating speech—ability to identify speakers; relevance of national security; possibility of charging for internet traffic so that the sender pays. These aren’t domestic laws, but the US could be given int’l obligations.

Chander: the 1A isn’t a trump. But its role as normative force hasn’t been recognized throughout cyberlaw.  We’re also saying that it’s not the lonely blogger that we first envision, but actually intermediaries, whose role hasn’t been recognized. Readers are important, and the ability to connect people comes from intermediaries.  Disintermediation was thought to be the role of the internet, but it turns out it’s really intermediaries, and cyberlaw is configured in recognition of their role, just as NYT v. Sullivan recognized the role of speech intermediaries.  (See Marvin Ammori.)

Andrew Gilden: how does this account deal with Eldred and Golan?

Chander: Lessig et al. argue that speech interests should cause us to get rid of these extensions. SCt decided that the 1A wasn’t really at stake.  We have a piece on Golan—much of the activism was internet-driven; the relationship to those cases is one we should think more about. Not ultimately central to what was happening on the internet.  Activism bait, but not central to business models.

RT: Talk to me about what Evgeny Morozov would say about internet exceptionalism and people just wanting to keep government out of their business, using free speech as a bludgeon.

Chander: has a paper on Morozov’s last book—Jasmine Revolutions.  Morozov says people use the internet for porn; they get distracted and don’t use it for more ennobling pursuits. Extreme examples.  He says that if Burmese monks had the internet, they would’ve been less active protestors.  His skeptical view is overdramatized. We’re arguing not for exceptionalism but for realizing the 1A’s promise, one never realized by handbills or by the NYT.  Internet doesn’t deserve unique protections even though we should recognize its unique role.

John Tehranian & David Levine / It’ll Break Your Heart Every Time: Baseball, the Internet and Romanticism

Tehranian: When you look at Flood v. Kuhn, SCt gives absurdly detailed history of the game; case involved a player who didn’t want to be traded. SCt had to decide whether baseball continued to have an antitrust exemption. Yet the decision doesn’t discuss the history of labor relations in the game, or race relations, setting up the denial of his claim.  Delegitimizes Flood through its analysis, while ignoring the change in “commerce” that had occurred during the period; the old precedent about the antitrust exemption came from a very different constitutional order, but the Court didn’t recognize that. Highlighted his high salary, not his claims for the exploitation of his labor.

Levine: same romanticism in Citizens United. Court has equally romantic statements about the internet as in baseball. Core of majority opinion waxes poetic about internet’s ability to balance speech playing field right now.  (So Evgeny Morozov does have a point, eh?)  That’s not true given the realities of political campaigning. The Court assumes a level playing field—a blog post can be as effective as a corporate media buy. They say they don’t want to hurt the progress of the internet by denying it the ability to seek its fruition by balancing corporate speech. Prompt disclosure provides citizens with the information needed to hold corporations and politicians accountable. As someone who writes about gov’t and private secrecy, he’s highly dubious.

Both baseball and internet are held up as great for the country, but SCt views them through rose-colored glasses.

Tehranian: romanticism invites a failure of imagination. The Court held that baseball absolutely needed the reserve clause, preventing free agency, and therefore needed the antitrust exemption to protect the integrity of the game. Proven unequivocally untrue when baseball was forced into free agency. During the 1980s, baseball had more competitive balance than in decades; revenues exploded. The romanticization/desire not to change can lead to blind adherence to precedent or flagrant disregard of precedent.

Q: is this something you expect to find whenever the SCt does something flagrantly wrong?  You think the SCt is wrong and reasoning screwily; aren’t those likely to be correlated?  (Compare Dan Kahan’s Harvard Forward and the responses to it.)

Levine: courts tend to play around with claims about the internet; maybe these results would happen anyway. But to the extent we have data available and used in ways that are irrelevant or ignored, we have a parallel.

Tehranian: true, could argue this whenever you think the Court is wrong. Interestingly, Flook’s deference contrasts with Roe v. Wade and other contemporaneous decisions—deference is strange.

Gilden: romanticism may be inherent to how you make arguments as lawyer and judge—offer a steady state that needs protection. It’s indeterminate: you can make romantic arguments on both sides of same-sex marriage.

Tehranian: fair enough—need to ferret out strategic use to sell a decision v. an actual explanation. Flook involved Justice Blackmun really, really believing in the narrative he offered.

Luna: to what extent are you observing the cause or an effect covering for another cause that is less easily observable? Would be useful if you specified a bit more what kinds of values you would include as romanticism.  Are you thinking of particular ideologies?  Conservatism?  Tradition?

Ochoa: the story of the Founders is romanticism—any reference to Founders’ intent could be read that way.  Skeptical that you’ve identified something unique; they ignore data all the time.

Joseph A. Tomain / Online Privacy: First Amendment Analysis of an Opt-In Regime

Problem with proliferation of ads and marketing on and offline.  Current proposals—European Data Protection regulation; FTC proposals.

Are current online data collection practices misleading?  He thinks so. Is the gov’t interest substantial?  Yes, individual privacy.  An opt-in requirement directly advances the gov’t interest, and not more extensive than necessary since online data collection is still permissible.

Sorrell: law burdens disfavored speech by disfavored speakers—that can’t possibly be right if commercial speech doctrine survives. Court said that detailers/pharmacos have a right to communicate in an effective and informative manner—but does that give you a right to reach people you don’t otherwise reach?  Not workable.  Also, are these communications even informative? Tamara Piety’s Brandishing the First Amendment distinguishes between information and propaganda.  Default rule should comport with the preferences of most people—opt-in before data collected. Prior cases have given surprisingly little attention to opt-out v. opt-in—opt-out was more historical accident than purposive.

Sorrell could be impediment to opt-in regime, but shouldn’t be under Knox v. SEIU which allows it.

Ochoa: why is this speech?  Facts are in the public domain for copyright, anyone can copy them.  Is collecting facts speech?

A: he thinks so, when Google uses my search to present ads.

Ochoa: if collecting data isn’t speech, you don’t need a 1A analysis.

Bambauer: this is automatic, not really “collection.” Opt-out is really data destruction.  Not about collection, but data that is use-restricted.

Q: information is not itself harmful—people can perceive their best informations if they’re well informed.  Sorrell says it’s about the benefit of consumers.

A: Va. Pharmacy was about drug price ad. Sorrell wasn’t about consumers; it was about providing info to marketers.

Q: but Sorrell was premised on the idea that information (not the data transmitted between the parties, but rather other information related to their data) would get to consumers. The real issue is the ability of consumers to make choices; you can constrain the availability of information at the point of collection.

A: difference between info and propaganda: marketers aren’t telling me stuff in my best interests.

Q: so you’re comfortable w/gov’t drawing line between persuasion and propaganda?

A: I have problems with large private actors making those decisions too.

RT: Re: misleadingness—if misleading, can be banned outright; careful about the standard for what counts as misleading. Also note Lauren Willis’s important work on companies securing opt-ins through clever design.

Q: Europeans don’t allow monopolists or people w/market power to count as opt-in consent.  But DC and 10^th Circuits go in opposite ways on opt-ins; DC in Transunion v. FTC held that opt-in was just fine, while 10^th held it was unconstitutional.

Q: Consider costs to people who don’t value their privacy.