Time for the 12 O'Clock Boyz to go: court shuts down (c)/TM lawsuit against documentary & feature film about Baltimore bikers

Monbo v. Nathan, --- F.Supp.3d ----, 2022 WL 4591905, No. 18-CV-5930 (MKB) (E.D.N.Y. Aug. 26, 2022)

Late, but just showed up in my Westclip! Plaintiffs alleged that defendants’ 2013 documentary about an aspiring dirt-bike rider in Baltimore, titled “12 O’Clock Boys” and upcoming feature film based on it infringe their copyrights on their 2001 documentaries “12 O’Clock Boyz” and 2003 sequel “12 O’Clock Boyz: The Paparazzi Edition,” featuring the 12 O’Clock Boyz urban dirt-bike stunt group. Plaintiffs also alleged infringement of Monbo’s right of publicity, unjust enrichment, and violations of the Lanham Act and related Maryland trademark law. The court, in a careful opinion, rejected all the claims.

From PR newswire, apparently a still from the 2001 film

registered trademark

For the 2001 Documentary, Monbo “organize[d] a group of highly skilled dirt-bike riders” to participate in a scripted film “that would highlight the exploits of an ostentatious group of dirt-bike riders in Baltimore called 12 O’Clock Boyz.” Monbo allegedly coined the phrase 12 O’Clock Boyz “to describe the way in which riders would elevate the front of their bikes and ride only on the back wheels until their bikes would be perpendicular to the road or in the ‘12 O’Clock’ position.” The 2001 Documentary “sold 50,000 copies in two weeks and revolutionized the Baltimore dirt-bike culture,” inspiring a sequel and plans to make a third film. Plaintiffs allegedly used the 12 O’Clock Boyz trademarks since 2001 and registered the marks in 2016.

Nathan directed the allegedly infringing 2013 Documentary, which “tells the story of Pug, a thirteen-year-old child who wants to be a ‘12 O’Clock Boy,’ just like [he] has repeatedly watched in [the 2001 and 2003 Documentaries].” Plaintiffs claimed infringement, including “the character Pug, clips, the title card, concepts, feel, mood, theme, and approach.”

Defendants' 2013 documentary

Both parties’ works are “docu-fiction” set in Baltimore. Both the 2001 and 2013 movies begin with a news clip used “[t]o give [the] feel of a documentary”: the 2001 Documentary with “actual news footage from a Baltimore TV News segment” and the 2013 Documentary with the voice of “a real radio host.” Both include interviews with people sitting on the front steps of a house; transitions from riding scenes to interview scenes; a clip of the 12 O’Clock Boyz riding down the street, slow-motion shots of the riders; film of the riders from a moving vehicle; and the 12 O’Clock Boyz themselves. Both incorporate the theme of death: the 2001 Documentary pays respect to a rider, “Buck,” who passed away during filming, and the 2013 Documentary discusses Pug’s brother, Tibba, who passed away during filming of that work. In addition, a character called “Pug” appeared with his hat turned backwards in the 2001 Documentary and in the 2013 Documentary. Monbo choreographed scenes of the 12 O’Clock Boyz riding in formation that are similar to a scene used on the DVD cover of the 2013 Documentary.

In addition, seventeen minutes into the 2013 Documentary, the title card from their 2001 film appears, followed by “upward of thirty” excerpts from Plaintiffs’ films taken without permission. Monbo appeared as an actor in the 2001 and 2003 Documentaries, was interviewed in “[a]t least two” of the segments defendants used, and was not compensated for the use of his likeness. Defendants allegedly used editing tools to compress scenes that constituted “about 70% or more of” the 2001 Documentary into minutes of footage that then appeared in the 2013 Documentary.

In addition, the design of the title of the 2013 Documentary was allegedly similar to plaintiffs’ registered 12 O’Clock Boyz logo. Defendants also used 12oclockboys.com to promote and sell the 2013 Documentary, leading to the trademark infringement claims.

While the feature film apparently would not use the title 12 O’Clock Boys, plaintiffs still objected because the feature film makers allegedly filmed a script in Baltimore with the following plot:

Mouse wants nothing more than to be a part of the Midnight Clique, a tough group of Baltimore bike riders, who rule the summertime streets. As he navigates the challenges of coming of age in a complicated world, he learns the hard way that the choices you make early on can change your life forever.

Pug in the 2013 Documentary, like Mouse in the feature film, wants to be a veterinarian but also wants to join a group of dirt-bike riders; both feature skilled dirt-bike riders; and both are set in Baltimore. The feature film defendants allegedly infringed on plaintiffs’ mark by using “12 O’Clock Boyz” as a working title on IMDB and used “Twelve,” a “colorable imitation of Plaintiffs’ registered 12 O’Clock Boyz mark,” to promote their film.

While the court went through the works in detail, to give you a sense of the level of generality at which the copyright arguments are pitched, I’ll just share one comparison: The 2001 documentary begins, after the title screen, with a shot of a man riding a four-wheeler down a city street, front wheels in the air. A newscaster’s voice plays over the scene, stating “it’s the stunt every four-wheeler rider wants to master.” By contrast, the 2013 Documentary begins with footage of Pug in a van at night. A male radio host narrates, harshly criticizing “these little scumbags on these dirt bikes in our downtown.”

The court found the claims of direct, contributory, and vicarious copyright infringement time-barred because plaintiffs didn’t submit evidence of continuing infringement by the moving defendants within 3 years of the filing of the complaint. But also, the documentaries weren’t substantially similar, and, “even if the 2013 Documentary is substantially similar to the 2001 Documentary under the fragmented literal similarity test due its use of clips from the 2001 Documentary, Plaintiffs’ claim with respect to this documentary is barred by the fair use doctrine.”

The similarities in setting, theme, etc. were unprotectable elements, including “a local boy’s dream” to become part of the Twelve O’Clock Boyz.  “[I]t is a fact in the public domain that the 12 O’Clock Boyz are from Baltimore and ride in these specific locations,” as was “the presence of dirt-bike riders in the neighborhoods where they ride in real life” and “a scene of them riding in a group, as they do regularly.”

The dirt-bike riders in the 2001 Documentary, including Pug, were “stock characters” and not protectable elements. “The concept of skilled riders who perform daring stunts is not novel, and this basic character type flows from the theme of a work about dirt-bike riding. In addition, the characters are not developed beyond these attributes.” 2013 Pug “shares no similarities” with 2001 Pug “other than having the same name and wearing a backwards baseball cap. However, the fact that these characters share the same name does not by itself make them substantially similar.” And wearing a backwards hat is a “generic and generalized character trait[ ]” that is not protectable. But, limiting the force of these statements, the court continued that it was more significant that 2001 Pug was introduced as an adult with no exploration of how he joined, whereas 2013 Pug was the main character and protagonist “who faces conflict between the desire to join a group of dirt-bike riders and his aspiration to become a veterinarian, and the viewer sees Pug grow up over the course of several years, as his ambition remains constant and his riding skills develop.” They had a different “total concept and feel.”

The various shared filming techniques (starting with a news clip, filming in slo-mo and from a moving vehicle, transitioning between riding scenes and interview scenes, etc.) were likewise unprotectable as standard in the genre. “Plaintiffs do not have the exclusive right to make docu-fiction about dirt-bike riders, as methods of story-telling are not protectable.” Also, use of a single 2001 clip in which the 12 O’Clock Boyz are depicted riding down the street was not “qualitatively or quantitatively significant to the 2001 Documentary, and is therefore a de minimis similarity that does not, on its own, give rise to a finding of substantial similarity between the works.” Also, paying respect to someone who passed away during filming was “too general to be protectable,” and, as with other elements, there were “no similarities in the works’ treatment of this theme — the 2001 Documentary acknowledges Buck’s passing in a simple overlay at the end of the film, while the 2013 Documentary incorporates Tibba’s death as part of its plot and explores its impact on Pug.”

Ultimately, the 2001 Documentary was “an approximately half-hour-long series of loosely connected clips of 12 O’Clock Boyz riders displaying their riding prowess,” while the 2013 Documentary, nearly twice as long, was “a narrative work with a different tone, characters who are developed and whose relationships are explored, and a clearer and more complex plot that follows Pug across several years as he faces challenges and pursues his goal to become a rider.” This gave them a different “total concept and feel.” So too with plaintiffs’ 2003 Documentary.

What about fragmented literal similarity based on use of clips from the 2001 Documentary (no clips from the 2003 Documentary were allegedly used)? Even accepting that substantial similarity was present (qualitative significance would be a fact question), fair use protected the uses.

The uses comprised eighty-seven seconds of the 2001 Documentary (3.7%), edited into seventy-five seconds—“a selection of stunts and two short interview segments.”

Defendants argued that the clips “were included to enable viewers ... to understand the impact of the legends appearing in the 2001 [Documentary] on Pug’s desire to mimic their feats, join the 12 O’Clock Boyz and to recapture Pug’s treasured memory of watching it with his brother, Tibba.”

The use was transformative because it put the clips into a new context: “a locally popular tape that had inspired Pug to start dirt-bike riding [with] personal significance to Pug because he had watched it, along with the 2003 Documentary, many times with Tibba.” Commerciality wasn’t a significant weight against this transformativeness.

Factor two was of little weight, especially since defendants reproduced the excerpts “to illustrate their effect on Pug, rather than because the stunts captured in the 2001 Documentary add creative value to the 2013 Documentary.” The original filmography in the 2013 Documentary “captures many similar stunts, at greater length, in higher-definition film.” Plus, the 2001 Documentary was already published.

Factor three: Except for about 12 seconds showing the 12 O’Clock Boyz title, every other excerpt was 2-4 seconds of longer stunt or interview segments, which was reasonable in light of the transformative purpose. The amount taken was “quantitatively small,” and could not substitute for the 2001 Documentary.

Factor four: Plaintiffs didn’t argue that they lost licensing fees; instead, they argued that they were losing purchases of their documentaries because the 2013 Documentary implied that the parties were associated. But the 2013 Documentary was not a market substitute, because it was transformative of a small portion of the 2001 Documentary. “[I]t is unlikely that potential purchasers of the 2001 Documentary would opt to acquire the 2013 Documentary in order to see the seventy-five seconds of clips from the 2001 Documentary in preference to the original.”

Right of publicity and unjust enrichment claims were preempted. (I’m not sure, but this might well be the most explicit statement there is that uses protected by fair use against infringement are also protected by preemption against ROP claims, where the claimant consented to be in the original.)

Preemption is less favored for right of publicity claims that “vindicate substantial state law interests,” such as those regulating false endorsements or otherwise protecting consumers. Where there is no such interest, and where a right of publicity suit, “although ostensibly an invocation of [a plaintiff’s] rights to control the use of his persona in publicity, is so devoid of the substantial interests protected by that right” that it is best described as a “thinly disguised” copyright claim, such a suit is impliedly preempted.

Monbo’s right of publicity claim was both expressly and impliedly preempted because it focused on use of his image in works covered by plaintiffs’ copyright claim. There was no false endorsement concern. “In the context of the film, it is unambiguous that he is depicted in an excerpt from the 2001 Documentary.” The excerpts were neither derogatory nor an invasion of Monbo’s privacy, and this use of a right of publicity suit “could substantially interfere with the utilization of a work in ways explicitly permitted by the Copyright Act, such as for uses that would qualify as fair use under 17 U.S.C. § 107.” Thus, this claim “does not seek to vindicate any substantial state interests distinct from those furthered by the copyright law” and was preempted by the Copyright Act.

So too with unjust enrichment, which was based on defendants’ copying. The Second Circuit has held that “[w]hile enrichment is not required for copyright infringement,” it does “not ... go[ ] far enough to make the unjust enrichment claim qualitatively different from a copyright infringement claim.”

Trademark etc. claims: Claims for infringement of a registered mark were untimely because they accrued before registration occurred. Lanham Act claims based on common-law rights were barred by laches. The court applied the analogous Maryland statute of limitations (three years); plaintiffs sent a threat letter in late 2014 and didn’t sue for over four years, giving rise to a presumption of laches (and time-barring the state law trademark claims). Plaintiffs offered no evidence in response, but, in light of their pro se status and the equitable nature of laches, the court also considered the merits.

The claims were based on defendants’ use of the phrase “12 O’Clock Boys” as the title for the 2013 Documentary and use of the 2001 Documentary’s title card in the 2013 Documentary, as well as twelveoclockboys.com.

Title of documentary: Rogers barred the claim, though the court made the now-usual mistake of saying that explicit misleadingness is determined by applying the Polaroid factors, which if taken seriously would mean there was no separate Rogers test at all. (For those not totally immersed in Rogers cases, the language about applying the Polaroid factors in a First Amendment-protective way comes from title-v-title cases, which Rogers itself excluded from its scope, and makes sense in that context—meaning that the court here uses the right test for the wrong reason.)

There was no explicit misleadingness here as to source or content. Before registration, the phrase “appears to have been descriptive and thus not particularly strong,” given Monbo’s argument that it was “a phrase coined by [Monbo] to describe the way in which riders would elevate the front of their bikes and ride only on the back wheels until their bikes would be perpendicular to the road or in the ‘12 O’Clock’ position.” Similarity of marks and proximity of goods favored Monbo, and bridging the gap was irrelevant. But there was no evidence of actual consumer confusion, despite the presence of both on the marketplace since 2013. And bad faith wasn’t present; when plaintiffs alleged infringement, defendants responded that they’d done an extensive trademark search and found no conflicts. Also, the 2013 Documentary was “a higher quality production,” making potential confusion less harmful. [OK, the court says less likely, but this factor, to the extent it has any reason to exist, is really about risk tolerance.] And the relevant consumer group was “assumed to be relatively unsophisticated because the item at issue, a film, is inexpensive and marketed to the general class of consumers rather than to experts.”

Under Polaroid via title-v-title cases, this didn’t add up to a “particularly compelling” likelihood of confusion. Also, “even if a significant number of consumers would not pay attention to the end credits of the 2013 Documentary, the end credits, as well as the promotional materials for the 2013 Documentary attached to the Amended Complaint as exhibits, clearly indicate that the producers of the 2013 Documentary are not the individuals who produced Plaintiffs’ films.”

Also, to the extent that the claims were based on failure to credit plaintiffs for the use of clips, those were Dastar-barred.

Use of the title card from plaintiffs’ documentary in the film’s content was nominative fair use. In the Second Circuit, this is assessed by using the Polaroid factors plus the Third Circuit’s NFU factors ((1) whether the use of the plaintiff’s mark is necessary to describe both the plaintiff’s product or service and the defendant’s product or service, that is, whether the product or service is not readily identifiable without use of the mark; (2) whether the defendant uses only so much of the plaintiff’s mark as is necessary to identify the product or service; and (3) whether the defendant did anything that would, in conjunction with the mark, suggest sponsorship or endorsement by the plaintiff holder). Since those are largely normative inquiries, they fit poorly with the majority of the Polaroid factors, which are framed in empirical terms, and—as the court here does—the only way to balance them is intuitively.

Here, the 2013 Documentary showed the title card of the 2001 Documentary containing the mark at the beginning of the excerpts from the 2001 Documentary. “They use the card to identify the film that Pug is watching, and they accompany that segment of the video with Pug’s narration that he used to watch the film with Tibba.” Nothing about that implied endorsement, “and, considered in the context of the 2013 Documentary having its own title and credits in a distinct font, the use does not confuse viewers as to the origin of the 2013 Documentary.”

Dilution: Failed for want of federal fame.

ACPA: The domain name was registered before plaintiffs registered their mark. The phrase was descriptive, and there was no evidence of acquired distinctiveness beyond plaintiffs’ use of the mark since 2001 and the existence of a 2003 article in a Baltimore newspaper describing the 12 O’Clock Boys and noting their documentaries. Thus the cybersquatting claim failed.

The court also dismissed claims against other defendants only involved with the feature film, which didn’t use the 12 O’Clock Boys name or have more than glancing similarities with plaintiffs’ documentaries. “[T]o the extent the plot of Plaintiffs’ works can be understood as one of inspiring young riders to join the 12 O’Clock Boyz, this is a general plot idea that is not protectable beyond the manner in which it is expressed, and, in any event, the Feature Film’s concept of a young boy who wants to join a dirt-bike group does not appear in Plaintiffs’ works — it only appears in the 2013 Documentary.”

As for trademark claims, stray references to “12 O’Clock Boys” or “Twelve” as a potential title of the film (ultimately titled “Charm City Kings”) were insufficient. “Twelve” was insufficient because there was no allegation plaintiffs had a valid trademark in that world. Nor was use on Wikipedia, IMDB, or advertising of “12 O’Clock Boys” as a potential title on Wikipedia, IMDB, or in advertising for the film enough given Rogers. “[T]he relevant population of consumers of the Feature Film — filmgoers — are not likely to confuse the source of the Feature Film and Plaintiffs’ documentaries, particularly given that both include explicit source designations.”

Sweepstakes rules trump arbitration agreement, 9th Circuit affirms

Suski v. Coinbase, Inc., --- F.4th ----, 2022 WL 17726673, No. 22-15209 (9th Cir. Dec. 16, 2022)

Affirming the district court, the court of appeals agreed that Coinbase’s arbitration agreement didn’t cover claims based on a sweepstakes it ran, which had a separate set of rules that didn’t compel arbitration. As the court described it:

When plaintiffs created their Coinbase accounts, they agreed to the “Coinbase User Agreement,” which contains an arbitration provision. They later opted into the Sweepstakes’ “Official Rules,” which include a forum selection clause providing that California courts have exclusive jurisdiction over any controversies regarding the sweepstakes. Plaintiffs brought claims under California’s False Advertising Law, Unfair Competition Law, and Consumer Legal Remedies Act against Coinbase and Marden-Kane, Inc., a company hired by Coinbase to design, market, and execute the sweepstakes.

First, the User Agreement did not delegate to an arbitrator the question of whether the forum selection clause in the Sweepstakes’ Official Rules superseded the arbitration clause in the User Agreement. Arbitrability “is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise.” Issues of contract formation may not be delegated to an arbitrator. The relevant delegation clauses gave the arbitrator the ability to decide disputes related to scope/interpretation of the agreement.

But the “scope” of an arbitration clause “concerns how widely it applies, not whether it has been superseded by a subsequent agreement.” Thus, the district court properly decided the issue, and was correct that the forum selection clause superseded the prior arbitration agreement. Under California law, “ ‘[t]he general rule is that when parties enter into a second contract dealing with the same subject matter as their first contract without stating whether the second contract operates to discharge or substitute for the first contract, the two contracts must be interpreted together and the latter contract prevails to the extent they are inconsistent.’ ” The integration clause of the earlier User Agreement didn’t preclude a superseding contract from being formed in the future. “By including the forum selection clause … the Official Rules evince the parties’ intent not to be governed by the User Agreement’s arbitration clause when addressing controversies concerning the sweepstakes.” Cases in which there was an arbitration clause and an arguably inconsistent forum selection clause in the same contract were inapposite.

Moreover,

as the district court explained, the Official Rules cannot be reconciled with the User Agreement. The Official Rules apply to all Sweepstakes entrants, including entrants who are not subject to the User Agreement because they used an alternative mail-in procedure. Despite Coinbase’s arguments, the Official Rules make no distinction between entrants who are Coinbase users subject to the User Agreement’s arbitration clause and those who are not because they used an alternative mail-in entry procedure.

Interesting question: can you make free entries subject to an arbitration agreement too? Or would that come too close to conferring a benefit on the sweepstakes provider, removing the free alternate means of entry that prevents the sweepstakes from being an illegal lottery?

Illinois court finds insurance coverage for alleged trade dress infringement

State Farm Fire & Cas. Co. v. Advanced Inventory Management, Inc., No. 1-22-0662, 2022 IL App (1st) 220662-U (Ill. Ct. App. Dec. 15, 2022)

The court of appeals reversed summary judgment in favor of an insurer, and ordered partial summary judgment for the insured, on the duty to defend in underlying litigation based on advertising injury coverage for trade dress infringement (depicting allegedly infringing products) in the insured’s advertising. The court of appeals remanded on whether State Farm had any duty to indemnify AIM for a settlement paid to resolve the underlying lawsuit.

The underlying suit was filed by Ethicon against AIM, alleging that AIM sold Ethicon surgical devices and other Ethicon devices that were either counterfeit, stolen, altered, expired, or misbranded. It alleged federal trademark infringement, false description, false advertising, and dilution and related state claims, including breach of an earlier settlement. It specifically alleged that AIM used Ethicon’s “Trademarks” and “Trade Dress” in “advertisements” and “in connection with the sale, offering for sale, distribution, or advertising” of Ethicon devices. The relevant policies provided liability coverage for personal and advertising injury. The exclusions excluded, inter alia, knowing violations, breach of contract, and advertising injury “[a]rising out of the infringement of copyright, patent, trademark, trade secret or other intellectual property rights. Under this exclusion, such other intellectual property rights do not include the use of another’s advertising idea in your ‘advertisement’. However, this exclusion does not apply to infringement, in your ‘advertisement’ of copyright, trade dress or slogan.”

The underlying complaint sufficiently alleged that at least some of the alleged infringement was of trade dress, and that some of the trade dress infringement occurred in advertising, which triggered the duty to defend. As usual, the exclusion for intentional acts didn’t apply to avoid the duty to defend, even though the underlying complaint was replete with allegations of intentional infringement, since liability could be established under the Lanham Act without intent.

Comment: The insurer's attempt is probably to distinguish the trade dress of an advertising format (a fairly natural coverage for advertising injury) from standard trademark infringement, but because--paging Mark McKenna--trademark has become so expansive and mushy, including allowing pretty much anything to be trade dress, and because it's pretty common for ads to depict the underlying product the defendant has to sell, writing that exclusion is very difficult.

claims to fill a gap in the market are puffery

Tracy Anderson Mind & Body, LLC v. Roup, 2022 WL 17670418, No. CV 22-4735-RSWL-Ex (C.D. Cal. Dec. 12, 2022)

Plaintiffs sued defendants for copyright infringement, violation of the Lanham Act, breach of contract, and violation of unfair competition law; copyright and breach of contract claims survived a motion to dismiss but the others didn’t.

Anderson alleged that she developed the Tracy Anderson Method—routines combining choreography, fitness, and cardiovascular movement—after decades of research, development, testing, and investment. Anderson is the founder and CEO of plaintiff TAMB, which offers choreography-based fitness and mat movement classes and owns copyrights to various media, including DVDs created by and featuring Anderson, that “express, relate to, or are based on, the TA Method.” One of TAMB’s subsidiaries employed defendant Roup for six years as a trainer and Roup signed an NDA covering  “nonpublic business and operation information, training materials and manuals, and transcribed methods ... including those comprising the TA Method’s proprietary choreography movements.” [Not sure how those could be nonpublic, but ok.]

You can guess what happened next: Roup left TAMB and founded a competitor.

The copyright claim was adequately pled: TAMB provided registrations for 19 motion pictures and alleged that defendants’ videos “infringe on [Plaintiff TAMB’s] copyrights by copying the choreography movements, sequences, and routines depicted in the [copyrighted works]; organizational structure and format of the [copyrighted works]; and aesthetic elements depicted in the [copyrighted works].” [Seems like there may be some idea/expression and merger issues forthcoming.] Defendants’ argument that “functional exercise movements are not copyrightable” could not be resolved at the motion to dismiss stage. [Some courts would at this stage compare the works and ask whether there was anything there that could be infringed, but not all.]

False advertising: Plaintiffs alleged that the following statements from Roup’s website bio were false or misleading: “I knew that there was something missing from the boutique fitness community, so I combined my passion for dance and love for fitness to create The Sculpt Society. I spent years teaching fitness and developing The Sculpt Society method before launching in 2017.” This allegedly falsely implied that (1) Roup developed the “TSS Method” over a period of multiple years, when she did not; (2) the “TSS Method” was created through years of science-based research, development, data collection, analysis, and trial and error, when it was not; and (3) the “TSS Method” is significantly different from the “TA Method,” when it is not.

“Claims that a defendant invented a product to fill a gap in the market, and the resulting implications regarding the innovativeness of a defendant’s product, constitute puffery rather than an assertion of fact.” The statement about the creation of TSS “conveys a general, vague, and unmeasurable assertion regarding inventorship and the innovativeness of Defendants’ products.” Likewise, Roup’s statement that she “spent years teaching fitness and developing The Sculpt Society method before launching in 2017” was another general and vague assertion of inventorship, and plaintiffs’ own argument was that Roup “spent years teaching fitness.” “Moreover, it is unlikely a reasonable consumer would rely on these statements as an objective, measurable statement of fact.” Because the statements were puffery, they wouldn’t mislead consumers to believe that the TSS method was created through science-based research or significantly different from the TA method.

California UCL fraud claims failed, because plaintiffs didn’t plead that they relied on Roup’s alleged misrepresentations. UCL unfairness claims failed because, in a competitor lawsuit, plaintiffs needed to argue that the alleged misconduct threatens an incipient violation of an antitrust law or has effects comparable to a violation of an antitrust law, and they didn’t.

Breach of contract claims survived.

Trademark (and privacy) question of the day, Elf edition

 I didn't think the image was real, but it seems to be sold:

Questions: (1) Imagine interpreting our society through this object. (2) Trademark risks? Are fake surveillance cameras and toys overlapping markets now?

FDA's graphic tobacco warnings unconstitutional, dct rules

R.J. Reynolds Tobacco Co. v. U.S. Food & Drug Admin., No. 6:20-cv-00176 (E.D. Tex. Dec. 7, 2022)

The judge who issued a nationwide injunction against the CDC eviction moratorium here strikes down the graphic cigarette warnings promulgated by the FDA as unconstitutional compelled speech because images have no inherent meaning and thus can’t be truthful, ignoring the relevance of the text next to them and the longstanding rules for interpreting commercial speech that consider context. The opinion suggests that perhaps the only constitutional mandatory images are actually just fonts: warnings written in imitation of childish handwriting.

The FDA’s previous attempt at congressionally mandated image warnings was also struck down. Among other things, the DC Circuit held that the first set of graphic warnings wasn’t “purely” factual under Zauderer because they were primarily intended to evoke an emotional response or because they offered advocacy rather than factual information about health effects.This is the second attempt. Congress gave HHS authority to issue rules adjusting the type size, format, color graphics, and text of any label requirements “if the Secretary finds that such a change would promote greater public understanding of the risks associated with the use of tobacco products.”

The new eleven warnings omit two ones allowed in the law (“Cigarettes are addictive” and “Quitting smoking now greatly reduces serious risks to your health”) and includes new warnings, not required by the law, about three health outcomes (amputation, blindness, and erectile dysfunction), based in part on a 2014 Surgeon General’s report that identified additional health conditions whose causal link to smoking was reported as established at the highest level of evidence.

The new rule claims an interest not only in reducing smoking, but “in promoting greater public understanding of the negative health consequences of smoking,” consistent with the language of the Tobacco Control Act. The rule pointed to “considerable evidence that the Surgeon General’s warnings go largely unnoticed and unconsidered by both smokers and nonsmokers . . . [and] have been described as ʻinvisible’  ”

In this court’s view, Zauderer

provides a standard of review more lenient than Central Hudson’s. Specifically, Zauderer rejects a “strict ʻleast restrictive means’ analysis” under which disclosure rules “must be struck down if there are other means by which the State’s purposes may be served.” Zauderer requires only a “less exacting” tailoring inquiry that asks whether disclosure requirements are “reasonably related” to the state’s interest.

But a disclosure still must not be “unjustified or unduly burdensome,” as well as being factual and uncontroversial.

The court didn’t need to decide whether Zauderer scrutiny is only allowed when the state is trying to prevent consumer deception, because these images weren’t inherently “accurate” and purely factual. This was so because the images could have many meanings.

“For expression to be ‘purely factual,’ it must be information with an objective truth or existence.” While words “can usually be classified by courts as either purely factual or as value-laden opinion” (a bold statement in itself, demonstrating how reification occurs in law by use of contrast), “imagery can be more prone to ambiguous interpretation.” (Citing a discussion of nonrepresentational art: Hurley v. Irish-American Gay, Lesbian and Bisexual Group of Boston, 515 U.S. 557 (1995) (noting the painting of Jackson Pollock as an example of expression without a “narrow, succinctly articulable message”).)

For example, the “verbal aspect” of the head and neck cancer warning made a a “falsifiable” claim.

But it is unclear how a court would go about determining whether its graphic aspect is “accurate” and “factual” in nature. The image may convey one thing to one person and a different thing to another. One person might view the image as showing a typical representation of the sort of neck cancer caused by smoking before a person could seek medical treatment. Another person might view the image as showing a stylized, exaggerated representation of neck cancer, perhaps in an effort to provoke repulsion. Others might interpret the depicted person’s gaze, in conjunction with the text, as expressing regret at her choice to smoke or the message that smoking is a mistake. All of those interpretations would be at least reasonable.

First, it is not really unclear how to determine the accuracy of representational images—courts do it in advertising cases regularly. The court is adding extra interpretations to the fundamental meaning created by the text plus image: this image represents a person with neck cancer. The additional speculations are all immaterial variants of the same thing (and could, for what it’s worth, be said of verbal warnings too—some people may interpret them as neutral informational claims while others may interpret them as directions not to smoke because of the negative consequences. The evidence for multiple interpretations of the implications of verbal warnings is quite strong, but that doesn’t make the verbal warnings unconstitutional because the implications of the factual claim are different from the accuracy of the factual claim, which difference is inherent in the idea of providing people more information for them to use if they want to do so).

The court found the imagery “provocative.” (Yeah, neck cancer sucks.) “As to each warning, it is not beyond reasonable probability that consumers would take from it a value-laden message that smoking is a mistake. For that reason alone, the graphics make all of the warnings here not ‘purely factual’ and ‘uncontroversial’ within the meaning of Zauderer.” This is nonsense. Warnings are often messages that disregarding them would be a mistake, because they warn of unpleasant things. Consider lead paint disclosures: Any fair reading of lead paint disclosures discourages living—especially with children—in a place with lead paint. That’s because it’s bad for children to be exposed to lead, which is important for people to know!

And here again the court pretends that there are messages that don’t imply “you should care about this message”: “For example, a map showing on which continent food was farmed, next to a disclosure naming that continent, would seem purely factual. And perhaps a stylized icon could be mere shorthand for factual information, such as a symbol denoting the presence of a given chemical in a product.” The first one is particularly laughable given the longstanding recognition of the selling power of geographical origin. And even the second one ignores that the point of disclosing the chemical is to allow some set of people to say “oh, I don’t want that!”

The court’s new standard—never mentioned in a previous case and impossible to satisfy for any claim because people vary in how they interpret claims, and there’s always some joker out there—is that the FDA must make a record-based showing that “each image-and-text pairing conveys only one, unambiguous meaning that is factually correct.” As to the heart disease warning, the court commented, “[c]onsumers may reasonably interpret the image in this warning as indicating that open-heart surgery, whose scars are shown, is the most common treatment for heart disease. But the court has no evidence of that assertion’s truth,” and in fact non-open heart treatment is more common. It was not enough for open-heart surgery to be “common” or “typical.” “Alternatively, the image could be reasonably understood as conveying that open-heart surgery is the best treatment for heart disease, even if not the most common. But that message would seem opinion-based, as opposed to a purely factual disclosure about an advertiser’s product,” and there was no record evidence that open-heart surgery was best. [That’s because the court made this meaning up! The text clarifies that this is about what smoking does, not how one should treat the consequences of smoking.]

It is important to recognize here that when, in Lanham Act cases, courts say that a message is “unambiguous” they do not mean that no person could conceivably interpret it differently or reach varying normative recommendations from the factual claim at issue. They find statements unambiguous without evidence of consumer perception—indeed, the point of finding a claim to be unambiguous under current Lanham Act doctrine is to avoid the need for any consumer perception evidence at all, because common sense is enough to say that an unambiguous message will be received by a substantial number of reasonable consumers, not every single one. So the court here is transforming the meaning of “unambiguous” to mean “impossible to misinterpret,” which is neither consistent with precedent nor a satisfiable standard.

The court applied the same logic to the cataracts warning: “the warning does not indicate whether it shows cataracts or blindness, both of which are mentioned. That alone creates a reasonable possibility of misinterpretation by some consumers.” [Why is that a material difference?] “[S]ome consumers may reasonably interpret the image as depicting [blindness as] the most common result of cataracts. But the court has no evidence of that depiction being accurate.”

For all the warnings, “[b]ecause of their capacity for multiple reasonable interpretations, consumers may perceive expression whose truth has not been established by the record.” Thus, Zauderer did not apply. [I know this is repetitive, but there was zero evidence in the Zauderer record that consumers would all interpret “costs and fees” in the same way. The whole point of the regulation at issue in Zauderer was that consumers didn’t generally know much about litigation costs.]

If Zauderer didn’t apply, Central Hudson or strict scrutiny did, and the warnings flunked even Central Hudson. The court didn’t decide whether “promoting understanding of the risks of smoking” was a substantial government interest, though seemingly expressed skepticism about that (because that wouldn’t require the government to show that behavioral change was likely, making the interest too “conceptual” to be substantial).

Instead, the disclosures were not “narrowly drawn.” “Rather than taking over half of a package’s face, the government may take advantage of other strategies such as increasing funding for anti-smoking advertisements in various forms of media, increasing funding for speakers and school instruction, and increasing anti-smoking resources in the government’s own communications.” This followed from NIFLA, as well as from the FDA’s own praise of its public-information campaigns, which allow “the ability to target particular groups in different channels of communication with different messages.” Even if current education wasn’t enough, NIFLA held that, “regardless, a tepid response does not prove that an advertising campaign is not a sufficient alternative” as a First Amendment matter. “NIFLA reasoned that the constitutional line is principled, not pragmatic: ‘The First Amendment does not permit the State to sacrifice speech for efficiency.’”

What does a tailoring requirement mean, then, if the fact that the alternatives don’t work as well does not show adequate tailoring? [I can recall this discussion in a very different context, US v. Playboy, and the answer seems to involve measuring the increment of improved furtherance of government interest against the increment of interference with a speaker’s own speech, but since those are incommensurable the measurement is always done implicitly and covertly, which is not very helpful to the rule of law.]

Also, the FDA didn’t consider smaller or differently placed warnings, because the statute specified size and placement. “But the First Amendment limits congressional action as much as agency action. So the lack of any such consideration in the record counts against the government.”

False advertising about a bankrupt competitor doesn't violate the automatic stay

In re Windstream Holdings, Inc., 2022 WL 5245633, No. 21-CV-4552 (CS) (S.D.N.Y. Oct. 6, 2022)

The district court reverses the bankruptcy court ruling (discussed here) that held that false advertising had interfered with the debtor’s estate in violation of the automatic stay.

Debtor Windstream and Charter are competing telecommunications service providers. After Windstream filed for bankruptcy, Charter launched a direct-mail advertising campaign directed at Windstream customers: “Windstream Customers, Don’t Risk Losing Your Internet and TV Services.” In relevant part, the ad said: “Windstream has filed for Chapter 11 bankruptcy, which means uncertainty. Will they be able to provide the Internet and TV services you rely on in the future? To ensure you are not left without vital Internet and TV services, switch to Spectrum.... Windstream has a 2-year contract. With Spectrum there are no contracts. Plus, we will buy you out of your current contract up to $500.” The back of the advertisement said, among other things, “Windstream’s future is unknown, but Spectrum is here to stay ....”

Charter was, Windstream argued, aware that Windstream’s bankruptcy was not going to result in any interruption of service to its customers. Windstream introduced evidence and testimony that the advertisement caused confusion among its customers, and caused it to lose several thousand customers. Windstream also introduced evidence that it offered credits and discounts, launched a corrective advertising campaign, and later launched an additional promotional campaign, all to mitigate the impact of this advertising on its business.

The bankruptcy court granted a TRO and preliminary injunction against the direct mail campaign, and ultimately determined that Charter was liable for violating the automatic stay through its advertising campaign, which the Bankruptcy Court described as “an act to control property of the estate, namely, the debtors’ customers or contracts with those customers.” The court found that Charter should be held in contempt for that violation and sanctioned it $19,179,329.45 for the losses caused thereby. In particular, the conduct that it found to violate the Lanham Act and similar state laws also violated the automatic stay:

[T]he violation of the Lanham Act and its state law equivalents is an act to control property of the estate, namely, the debtors’ customers or contracts with those customers, which would also constitute a violation of the automatic stay, given that those rights are protected by the automatic stay.... [T]he automatic stay was violated by ... interference with the Windstream entities’ contracts with their customers by the mailing campaign.

As the district court notes when it says that Windstream can still pursue its Lanham Act claims, and that it wasn’t addressing the quantum of damages, this means that Charter may ultimately get the same award through other means.

Still, the court held, Charter’s ads didn’t violate the automatic stay, and anyway there was a fair ground of doubt whether they did so, so contempt sanctions should not have been imposed.

The automatic stay is imposed to “protect bankruptcy estates by restraining any formal or informal action or legal proceeding that might dissipate estate assets or interfere with the trustee’s orderly administration of the estate.” Relevant “property of the estate” includes “all legal or equitable interests of the debtor in property as of the commencement of the case,” including a debtor’s interest in executory contracts, “and, in certain circumstances, intangible assets like goodwill.”

Executory contracts: “[A]n automatically renewing subscriber agreement, requiring notice of termination, would be an executory contract subject to the automatic stay.” But there wasn’t sufficient record evidence that Windstream’s customer contracts were of this sort. Regardless of the outcome of this question, however, Charter’s advertisements were not acts to “obtain” or “control” any such contracts.

Goodwill: Where the Bankruptcy Code protects goodwill as property of the estate, it “is typically tied to wrongful impersonation and/or involves goodwill associated with customer lists or trademarks. To the extent the advertising at issue here affected Windstream’s goodwill in the marketplace, it did so not through misuse of intellectual property (like a trademark) or proprietary business information (like customer lists or trade secrets), but through forward-looking representations about Windstream’s business prospects.” This did not constitute an act that “exercised control” over any goodwill cognizable as a property interest.

“Even assuming that Windstream had executory contracts with its customers, and that its goodwill in the marketplace is protected by the automatic stay, Charter did not violate the automatic stay unless its advertisements were ‘an act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate.’” This language didn’t clearly encompass solicitation of a debtor’s customers, “which one does not typically regard as ‘exercising control’ over ‘property.’”

The bankruptcy court agreed that advertising alone can’t violate the automatic stay, but distinguished legitimate advertising from false advertising that actionably interferes with contracts and goodwill. But why would some advertising constitute exercising control while other advertising didn’t? “The statute does not prohibit all conduct that harms or interferes with a debtor’s business, but only that which amounts to an effort to obtain or control estate property.”

In general, the stay covers “acts that impair, interfere with or destroy the estate’s interest in contracts or goodwill.” “But it cannot stay all such acts, or any attempt to compete with an entity going through reorganization would be stayed, whether wrongful or not.” The “exercise [of] control” could involve “litigation or other legal action that would, or did, indirectly destroy or transfer control of the debtor’s property,” including intellectual property. But seeking to influence consumer choice via false advertising “is clearly distinguishable from legal actions which would have the downstream effect of altering a debtor’s interest in real property, commercial contracts, or insurance contracts.” Cases involving trade secrets or confidential/proprietary information were also distinguishable.

Ultimately, false advertising is not clearly an act to “exercise control” over contracts or goodwill. Windstream argued that false advertising subverted customer decisions, putting Charter in control. “But even advertising that is not false or misleading can be, and often is, manipulative. And in any case, the customer is not property of the estate.” Wrongful or unlawful conduct is not inherently a violation of the automatic stay.

Moreover, even if the district court was wrong, there was a fair ground of doubt about whether the ads violated the automatic stay, so the bankruptcy court shouldn’t have imposed contempt sanctions.The conclusion that Charter’s advertising campaign “exercises control” over estate property was at least highly debatable. Contempt holding and penalty vacated.

ChatGPT experiments

Prompted by recent reporting and inspired in particular by Ian Bogost's piece, I fed ChatGPT some of the questions I ask my students, and I am not worried about it helping anyone pass a law school class at this point, though perhaps that will change. It's good at surfacing related, relevant concepts that you didn't mention, but that's about it.

Q: If the derivative works right were abolished, would anything important be lost? In your analysis, consider the role of substantial similarity.

ChatGPT, getting everything backwards:

If the derivative works right were abolished, it would have significant implications for the creative industries. The derivative works right is a legal concept that allows creators to build upon existing works in order to create new, original works. This right is important because it allows creators to build upon the ideas and creations of others, and it encourages creativity and innovation.

One of the main ways that the derivative works right is used is to create adaptations of existing works. For example, a movie studio might create a film adaptation of a novel, or a video game developer might create a game based on a popular TV show. Without the derivative works right, creators would not be able to create these adaptations without permission from the original creators.

Another important aspect of the derivative works right is that it helps to protect creators from accusations of copyright infringement. In order to determine if a work is infringing on another's copyright, courts often look at whether the new work is substantially similar to the original work. If the derivative works right were abolished, it would be much harder to determine if a new work was infringing on an existing one, and this could lead to confusion and legal uncertainty.

In conclusion, the derivative works right plays an important role in promoting creativity and innovation, and protecting creators from accusations of copyright infringement. Abolishing this right would have significant negative implications for the creative industries.

Johns Hopkins says the dumbest thing about trademark I've seen in a while

 "Every use of the JHU Name and Marks conveys an association with JHU and potentially affects the institution’s reputation," says the university's policy linked to in this report on JHU's request for a disclaimer on Real Housewives of Potomac, which apparently features a JHU professor as one of the cast members. Of course, the university itself recognizes that's patently stupid by requesting a disclaimer from the show (which by its own dumb logic would "convey an association" too). (FWIW, Harvard's policy, while no slouch at all, stays mostly in is lane and recognizes the obvious fact that many uses don't require permission, which is good news for the T stop etc.)

So, Johns Hopkins, did my use of your name convey an association with JHU?

This reminds me of the ASU v. Doe case in which ASU advanced a theory of liability that would make students and prospective students infringers if they used #ASU to describe themselves or their destination online.

ct orders injunctive relief against misleading rewording of geographical origin claim

Republic Technologies (NA), LLC v. BBK Tobacco & Foods, LLP, 2022 WL 17477602,  No. 16 C 03401 (N.D. Ill. Dec. 6, 2022)

A jury found that BBK aka HBI engaged in unfair competition and violated the Illinois Uniform Deceptive Trade Practices Act (IUDTPA) in its packaging and promotional activities for its tobacco rolling paper products. Republic sought a permanent injunction against various public statements; the court mostly granted its request.

At trial, Republic alleged that HBI engaged in false advertising under the Lanham Act, unfair competition, and violations of the IUDTPA. HBI counterclaimed that Republic infringed its copyrights and trade dress. The jury found for HBI on one of HBI’s copyright infringement claims and one of its trade dress claims, and awarded HBI $979,620 in lost profits and $40,000 in statutory damages. It also rejected the Lanham Act false advertising claim, but found unfair competition and IUDTPA violations by HBI. “Because the jury was instructed not to consider the question of damages as to the unfair competition and IUDTPA claims (and plaintiffs cannot seek monetary damages under that statute, Republic was not awarded any monetary damages.”

Republic sought a permanent injunction, disgorgement of profits, and attorneys’ fees, but this opinion concerns only the injunctive relief. Republic satisfied the general requirements: success on the merits, irreparable harm, equities favoring it, and public interest against false advertising.

HBI represented that it had stopped making or would stop making a number of the challenged statements, including that HBI’s RAW “Organic Hemp” papers are the “World’s Only” or “World’s First” organic hemp rolling papers; that HBI contributes its funds or sales to a charitable entity called the “RAW Foundation;” that HBI’s RAW rolling papers are “100% wind powered;” and that HBI or its principal invented rolling paper pre-rolled cones. [The list is longer and varied enough that it starts to look like a habit.]

The jury didn’t make specific findings about which statements it based its verdict on, so the court relied on the evidence at trial. “Republic is likely to be harmed in the future absent an injunction because the Court finds that HBI’s untruthful or at least misleading statements are likely to cause consumers to choose HBI’s products over Republic’s products on the basis of those statements (for example, that a portion of HBI’s profits are donated to a non-existent charitable foundation, or that HBI’s papers are made in a historical town by craftsmen).”

The remaining contested assertions involved HBI’s statements that its products were “made in Alcoy, Spain, the birthplace of rolling paper.” Republic presented evidence that HBI’s paper is not actually made in Alcoy, Spain, but is bulk-produced in France, then converted into booklets in the village of Benimarfull, Spain.

HBI still wanted to refer to Alcoy by adding a period in the middle of its claims: “Made in Spain. Alcoy, the birthplace of rolling paper,” and “With genuine RAW® paper from Spain. Alcoy, the birthplace of rolling paper.”

The court first rejected HBI’s argument that Benimarfull was part of the “Alcoy region.” Even if it were (which was not shown), the paper is made in France, not Spain. And the advertising implies that the paper is made in Alcoy. Moreover, past advertising specifically mentioned the “city of Alcoy.” “In short, HBI’s advertising activities were a clear effort to take advantage of the city of Alcoy’s history in the production of tobacco rolling papers, without HBI actually making its own paper there.”

Thus, while accepting some proposed edits to the injunction, the court declined to include language allowing HBI to “refer” to “existence of the Alcoy region of Spain or the fact that the town of Benimarfull is located in the region referred to as Alcoy and part of the judicial district named Alcoy.”

As the court explained, “it is not so much that the description of Alcoy as the ‘birthplace of rolling paper’ is problematic—it is its placement directly after the statement that the rolling paper is made in Spain.” HBI’s new language, “Made in Spain. Alcoy, the birthplace of rolling paper,” “merely switches two words and adds a period” and “does not change the plain intent and import of the statement, that the paper is made in the city of Alcoy, Spain.” This was still misleading (and silly unless making the connection to Alcoy was the purpose).

HBI also asked to add language making clear that, though it agrees to discontinue the listed statements in its promotions, packaging, and advertising, it does not consent that those statements were or are false. Falsity isn’t an element of an IUDTPA or unfair competition violation as long as HBI engaged in conduct which “creates a likelihood of confusion or misunderstanding.” Given that there were multiple challenged statements and the jury didn’t specify, and that HBI agreed to discontinue most of them, the court granted this request.

However, the court didn’t remove “implies or suggests” from the requirement that HBI “permanently refrain from making any statement or communication, or engaging in any promotion or advertising activity that states, implies, or suggests [the listed language].” HBI argued that this language fails to “describe in reasonable detail ... the act or acts restrained or required,” as required by the Federal Rules of Civil Procedure, provides too much room for interpretation, and would invite future motion practice.

Republic countered that removal would open the door for HBI to continue making misleading statements in principle by using slightly different language, like “changing a punctuation mark here or a preposition there.” E.g., though HBI would be enjoined from specifically stating that its papers are “made with natural hemp gum,” it could still say that its “gum is made from natural hemp.” Under the circumstances— “HBI’s addition of a period to a misleading statement” in “an obvious attempt to continue implying that its rolling paper is made in Alcoy, something which is not true”—as well as an instance in which HBI’s principal defied a court order by posting online about the case during the trial, the court found “a proclivity to attempt to evade court orders.”  Courts “have affirmed broadly-worded injunctions against parties that have demonstrated a tendency to evade or violate court orders.”

In addition, the court preserved the language “HBI further agrees that all advertising or promotional statements … shall either clearly constitute permissible opinion (e.g., that something is ‘great tasting’) or be factual statements for which HBI maintains tangible, objective, verification.” This was a fair statement of the law and one that HBI itself previously promised, but it argued that this sentence was only meant to be a “general aspirational statement.” Still, “it should not be objectionable to agree to follow the law.”

HBI also sought relief from notifying its customers of the order. HBI’s customers couldn’t be enjoined because they were not shown to be in any sort of privity with HBI or act “in active concert or participation with” HBI. Thus, “providing notice of the injunction to these third parties could actually further expose them to liability” and the court did not require it. [What happens when Republic publicizes it? Also, Republic’s point that liability is usually strict seems well-taken, though there is definitely a strain of Lanham Act cases, which IUDTPA might follow, saying that retailers aren’t liable if they don’t repeat the claims on the products they sell.]

court accepts survey universe of respondents who'd logically be interested in D's products despite possible overbreadth

Kodiak Cakes, LLC v. JRM Nutrasciences, LLC, 2022 WL 17340660, No. 2:20-cv-00581-DBB-JCB (D. Utah Nov. 30, 2022)

Extensive discussion of Lanham Act survey admissibility, finding this trademark survey admissible. Kodiak Cakes sells “Protein Power Cakes” products: pancake and waffle baking mixes with added protein. It currently has the second bestselling pancake mix brand in the United States by dollar sales. Kodiak Cakes sued JRM for trademark infringement and unfair competition based on its use of KODIAK SPORTS NUTRITION for nutritional supplements such as protein power.

Kodiak Cakes’ expert Prof. David Franklyn conducted two Squirt/Modified Lineup surveys, an Eveready survey, and a brand recognition survey, all four of which were run online two times.

The opinion usefully recites quality control measures for online surveys, including barring participants from taking the survey on a mobile device to ensure they had a clear view of the stimuli, removing any survey takers who entered gibberish into the open-ended responses were removed, and removing any survey takers who took any survey in less than half the median survey completion time or longer than four times the median survey completion time.

The survey screened for US respondents over 18 who had purchased protein powder or foods with added protein in the past 12 months or were likely to do so in the next 12 months.

Survey one showed respondents six images of products with added protein presented in random order: Oikos Triple Zero Yogurt, Kodiak Cakes Power Cakes, Protein Pretzel Sticks, Kodiak 1Whey, Quest Peanut Butter Cups, and Modern Table Mac & Cheese. In the control cell, the Kodiak name and bear logo had been removed from the shrink band around the cap of 1Whey. Respondents were asked whether they thought any of the products came from the same company/were affiliated and, if yes, why they said that, and could answer “yes” up to four times.

test

control

one display of products

In the test cell, 34% of participants indicated two or more products were from the same (or affiliated or connected) company. In the control cell, 22% of participants did so. But 19% of test cell participants linked the parties’ products, while in the control cell, only 2.3% did so, so Prof. Franklyn concluded that the survey showed a 17.5% level of confusion. [This suggests that, in the test cell, 15% of respondents linked products not in suit, while in the control cell,  19.5% did so, suggesting fairly high levels of noise since those products should have behaved the same in both cells.] In the test cell, 52 out of 53 respondents who linked the parties’ products explained that they thought the two products were related because of the presence of the word “Kodiak” on both products. In the control cell, no respondent explicitly said “Kodiak” as a reason for believing there was a relationship between the products.

Survey two had slightly different products and showed respondents six images of websites offering products with added protein. The questions were the same. The results were similar, with responses running a few points higher across the board; Prof. Franklyn calculated 19.7% net confusion.

Survey 3 was an Eveready survey in which respondents were asked to review an image of 1Whey protein powder; the control again had Kodiak and the bear logo removed. Respondents were asked “What company makes or puts out this product?” and why. They were also asked whether they believed the product is sponsored or approved by another company, is not sponsored or approved by another company, or “I don’t know or have no opinion” and, if yes, asked what other company and why, and asked the same question except with “business affiliation or connection.”

77% of respondents in the test cell responded “Kodiak,” while only 1% of respondents in the control cell did so. When asked what other products were made by the company shown in the image, 14.2% directly referenced products by Kodiak Cakes.

Survey four was a brand recognition survey with generally favorable results for Kodiak Cakes.

The court found that Prof. Franklyn was generally qualified and that the surveys were the product of reliable principles reliably applied. The proper universe is potential buyers of the junior user’s goods or services. While a survey that “provides information about a wholly irrelevant population is itself irrelevant,” usually “the selection of an inappropriate universe will lessen the weight of the resulting survey data, not result in its inadmissibility.”

While the survey targeted individuals over 18 years of age who had either purchased protein powder or foods with added protein in the past 12 months or were likely to in the next 12 months, JRM argued that this was inappropriately overbroad, because its products are protein supplements, not “foods with added protein,” and its target market is 18–35-year-olds. Although this was a logical criticism, in that foods with added protein appear to be a separate product category from protein supplements, consumers of foods with added protein seemed likely to be potential buyers of JRM’s goods given the similarities of the products. “Notably, had the survey screened for whether the potential participant had or intended to purchase protein products, rather than specifying ‘foods with added protein’ and ‘protein supplements,’ the screened participants would have remained consistent—but the hook for Defendants’ argument would have disappeared.” [I’m not convinced that’s true, since then the definition might have been overbroad, but ok.]

Ultimately the potential buyer universe did not need to be defined as granularly as JRM argued. It would have been overbroad to include “respondents who were not in the market for protein food products of any kind (for example, people interested in building muscle mass through exercise alone and not diet)” or “purchasers of food,” but that’s not what happened here. Nor was the survey underinclusive by excluding an entire category of defendant’s purchasers.

In contrast to “surveys that were so overinclusive as to drown out any probative value: there was a probability that none of the participants were potential consumers of the junior user’s products,” even if the survey included only past and potential purchasers of “foods with added protein”—the senior user’s goods—there was “a significant likelihood that that same market will be interested in the junior user’s goods: also protein-focused.”

painful vaccination is injury for NY GBL purposes

DeCostanzo v. GlaxoSmithKline PLC, 2022 WL 17338047, No. 21-CV-4869 (GRB)(AYS) (E.D.N.Y. Nov. 29, 2022)

DeCostanzo’s putative class action alleged that GSK’s ad campaign for the whooping cough vaccine Boostrix misled consumers into believing the vaccine would help prevent transmission of the disease to infants when in fact it increases the risk of unwittingly transmitting the disease (because Boostrix-vaccinated people may acquire and transmit whooping cough despite being asymptomatic). She brought claims under NY GBL §§ 349, 350, state consumer protection statutes, the Magnuson-Moss Warranty Act, breach of express warranty, breach of implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, unjust enrichment, fraud, and negligent misrepresentation. The court dismissed the unjust enrichment claim as duplicative but otherwise denied GSK’s motion to dismiss.

First, accepting that she was required to exhaust administrative remedies in vaccine court under the National Childhood Vaccine Injury Act of 1986, she’d done so (this basically just requires submitting a petition, waiting 240 days, and withdrawing the petition, a workaround approved by previous court cases). Nor did the primary jurisdiction doctrine apply, even though the FDA found Boostrix “safe and effective” when approving the vaccine and the CDC recommends adults get a Tdap vaccine, especially if they are around infants.

Whether GSK engaged in a deceptive practice or false advertising was “well within the conventional experience of judges and only indirectly involves technical matters regarding vaccine efficacy which are within the ambit of the agency’s expertise.” The claims turned on GSK’s marketing of Boostrix, not the FDA or CDC’s licensing or promotion of the vaccine. There was also no substantial danger of inconsistent rulings “since the FDA has already found that acellular pertussis vaccines such as Boostrix do not prevent transmission.”

Did plaintiff allege cognizable injury? She didn’t pay for the vaccination, which was covered by insurance. She alleged injury because the vaccine created “a defective immunity to pertussis that will last the remainder of [her] li[fe],” she received a “painful injection of various substances” she would not have otherwise received, she “expend[ed] time and resources to seek out and obtain Boostrix, paying, directly or indirectly, in whole or in part, for Boostrix,” and she has suffered the emotional injury of fearing she will spread the whooping cough because “the product has actually rendered [her] more likely to spread pertussis.”

The court accepted that “a painful vaccine shot in the arm which she would not have received but for GSK’s allegedly misleading ad campaign” was a cognizable injury. However, a price premium theory was unavailable since she didn't pay, and the deception itself couldn't satisfy the injury requirement. Although the risk of transmitting whooping cough to others was arguably too speculative, another alleged injury was “the defective immunity which currently renders her vulnerable to asymptomatic infection, which “is a cognizable injury because it is a biologically disadvantageous condition.”

I don't quite get the defective immunity theory. If she hadn't gotten the shot, wouldn't she have had an equally defective non-boosted immune system? I guess the idea is that if she wasn't boosted and got sick, she'd be symptomatic and know it--but that's not really the same as having a presently defective immune system.

user manuals aren't "commercial advertising or promotion" but do have thin copyright

Santos Elecs. Inc. v. Outlaw Audio, LLC, No. 8:22-cv-827-JVS-KESx, 2022 WL 17328411 (C.D. Cal. Oct. 28, 2022)

Outlaw lost its bid for a preliminary injunction enjoining Santos, aka OSD Audio, from selling products containing user manuals that allegedly infringed Outlaw’s copyright, falsely represented OSD Audio products’ specifications, and falsely represented that OSD Audio and Outlaw’s products are similar. The parties compete in the market for audio products, specifically multichannel amplifiers, and sell online, including on Amazon.

Outlaw allegedly sent Amazon a complaint that claimed OSD Audio “stole[ ] [Outlaw’s] IP relating to custom images and written content” in its OSD5180 user manual; Amazon removed the product from its marketplace. OSD Audio denied Outlaw’s claims but redesigned its user manual, and Amazon reinstated the product. Outlaw then filed two more takedown notices, each of which led to a brief interruption in the availability of the product on Amazon.

OSD Audio then sued Outlaw under §512(f), and Outlaw counterclaimed for false advertising and unfair competition under the Lanham Act, copyright infringement, and trade libel.

Lanham Act: The user manual did not constitute “commercial advertising or promotion.” Outlaw argued that the OSD5180 user manual’s references to the product’s LED blue ring on the front panel and two-way remote manual / trigger switch were literally false because the OSD5180 does not posses these features. But “[n]ot all commercial speech is promotional.” Prager Univ. v. Google LLC, 951 F.3d 991 (9th Cir. 2020). “Statements in a user manual are ‘made to explain a user tool, not for a promotional purpose to penetrate the relevant market of the viewing public.’” Likewise, “OSD Audio did not publish the OSD5180 user manual for economic advantage, but rather to teach its customers how to use its product.”

Outlaw argued that consumers now make their decisions on the Internet, where they can view the manual concurrently with the description of the product. Nonetheless, “a manual’s primary purpose and driving use is still educational.”

Outlaw also challenged OSD Audio’s claims about OSD5180’s signal-to-noise ratio.  While OSD Audio advertised the OSD5180’s signal-to-noise ratio as 115 decibels on third-party websites, it conceded that the OSD5180’s signal-to-noise ratio is 104 decibels. Given this literal falsity, the court presumed that OSD Audio’s statements were material and actually deceived consumers.

But Outlaw presented no evidence of likely injury to itself from loss of sales or goodwill based on the signal-to-noise ratio misrepresentation. Outlaw relied on cases indicating that “where plaintiffs and defendants are direct competitors and there is a literal false statement by a competitor, actual injury may be presumed,” as well as on the 2020 amendment to the Lanham Act providing that likelihood of success on the merits generates a rebuttable presumption of irreparable harm. But it raised these arguments too late (after the court issued its initial denial).

I note that, in a crowded/multiplayer market, presuming injury from a falsehood about the speaker’s own goods is a heavier lift than presuming injury from a falsehood about the target, though in a concentrated market it seems much more likely that there’s not much difference in the effects of the two kinds of falsehoods. As for the 2020 amendment, many courts have yet to grapple with the fact that the modern likely confusion test doesn’t have a harm requirement as an element, while the modern false advertising test does. This means that a trademark plaintiff is never required to show any harm at all before showing likely success on the merits and benefiting from a presumption of irreparable harm, which seems like the wrong result, whereas a false advertising plaintiff will have to show some kind of harm unless Congress also intended to lift that burden (and can constitutionally do so).

 There was no separately cognizable unfair competition claim: “[w]hile Outlaw presents one example of a customer confusing the OSD5180 and Model5000, noting the amplifiers ‘look exactly the same’ and ‘have the exact same spec[ifications],’ there is no evidence this confusion resulted from the specific misrepresentation of the OSD5180’s signal-to-noise ratio.”

Copyright infringement: Outlaw was likely to succeed in showing that it owned a copyright in the manual. Although a user manual receives only “thin” copyright protection, a large swath of the instruction text had apparently been copied verbatim, and the photos and diagrams were also strikingly similar. Thus, Outlaw showed likely success on the merits of this claim.

Trade libel: This was based on a complaint made by an individual working for OSD Audio to Amazon claiming that an Outlaw Model7000x he purchased from the retailer was defective. This allegedly caused Amazon to remove Outlaw’s “Big Box” feature from the platform, a “function that allows Amazon customers to easily add products to a shopping cart instead of going through a multi-step process to add the product to their shopping cart.” But Outlaw failed to provide evidence supporting special damages, which is required for trade libel, and it didn’t provide evidence of falsity, only alleging that it tested and inspected the amplifier and found it to be wholly free from defects without providing evidence of the findings from these tests or inspections.

For the copyright claim, Outlaw didn’t show irreparable harm. OSD Audio showed that it changed the manual in response to Outlaw’s complaints, removing the similarities in design, font, color scheme, and text. “While Outlaw argues that it would still suffer irreparable harm because it has not been confirmed that the infringing manuals were not replaced in the physical copies, it does not identify any adverse effects that would result specifically from having the revisions only online.” Plus, Outlaw didn’t explain its delay in suing—the allegedly infringing manual entered the market in 2017, but Outlaw didn’t sue until March 2022, when OSD Audio sued it. A “long delay before seeking a preliminary injunction implies a lack of urgency and irreparable harm.”

As for false advertising, Outlaw submitted screen shots of Amazon customer reviews discussing the missing features of the OSD5180 as described by its former user manual, as well as online forum posts discussing the similarities of the OSD5180 and Model 5000. Herb Reed: “This evidence, however, simply underscores customer confusion, not irreparable harm.” “Without evidence demonstrating a loss of sales or goodwill, Outlaw fails to satisfy its burden of irreparable harm on its Lanham Act claims necessary for a preliminary injunction.”

The balance of equities tipped in Outlaw’s favor for the Lanham Act claim, but not for copyright infringement. Ultimately, no injunction.

plaintiffs fail to show Lexmark proximate cause where D's statements were part of a larger public controversy

McNeil v. Mount Carmel Health Sys., No. 2:20-cv-258 (S.D. Ohio Nov. 29, 2022)

Plaintiffs, eight former Mount Carmel nurses and one former Mount Carmel pharmacist, worked with and around a Dr. Husel, whose employment termination and subsequent criminal proceedings were highly publicized. Plaintiffs alleged that Mount Carmel engaged in a false advertising campaign aimed at convincing the general public that Dr. Husel, with plaintiffs’ assistance, either harmed or killed up to 35 actively dying patients with excessive pain medication. They sued for defamation, wrongful termination, and false advertising under both the Lanham Act and the Ohio Deceptive Trade Practices Act. The court found lack of statutory standing on the Lanham Act claim and declined to exercise jurisdiction over the state-law claims.

Some additional facts: The PR firm retained to help strategize about the investigation into Dr. Husel’s dosing practices advised Mount Carmel of a concern that it lacked policies or standards governing medications and dosages in connection with withdrawals of non-palliative care for dying patients. The firm “noted that criminal charges against Dr. Husel or any of the nurses would be helpful to Mount Carmel and Trinity Health’s public perception.” Eventually, the public PR strategy included the key message “The acts of this doctor, along with the involved clinical staff, were a clear violation of how we care for patients at Mount Carmel.” The PR strategy identified key audiences including both internal (e.g., Mount Carmel’s board, executive leaders, and employees and doctors) and external (e.g., patients, regulators elected officials, local and national media, and Catholic leaders). Along with other public comments, Mount Carmel announced that “48 nurses and pharmacists,” a group encompassing all the plaintiffs here, were “under review” and had been placed on administrative leave. It eventually announced that its investigation was complete, and that it was terminating a number of involved employees. Media coverage also generally mentioned the staff, and so did lawsuits, although a number of nurses were dismissed from lawsuits.

Plaintiffs alleged that, as the result of Mount Carmel’s public statements, each one of them “faced significant impediments to obtaining similar work following his or her exit from Mount Carmel.”

The alleged damage to their professional reputations was damage to a commercial interest that brought plaintiffs within the zone of interests covered by the Lanham Act. But proximate cause was a fatal hurdle. The statements made by Mount Carmel were only part of the public discourse: “numerous parties made numerous public statements concerning Dr. Husel, making it ‘impossible to trace a straight line’ from Defendants’ statements to the media to the employment decisions of Plaintiff’s prospective employers.” [Here the court recounts lots of attacks on Dr. Husel, but the quoted materials don’t mention the staff, by name or otherwise, which makes reliance on them a bit thin.] “Plaintiffs fail to explain why Defendants’ statements, rather than the plethora of other attention-grabbing public statements (many of which arose from separate investigations into Dr. Husel), determined the hiring decisions of Plaintiffs’ prospective employers.”

Likewise, prospective employers “exercised their independent judgment” when declining to hire plaintiffs. [This seems to directly conflict with Lexmark, which points out that false advertising always involves a consumer deciding to act differently because of [allegedly false] information and that this decision can’t therefore remove proximate cause.] But plaintiffs couldn’t “disentangle the alleged reputational harm caused by Defendants’ statements from the other public statements discussed above, as well as the ‘unique combination of internal and external variables’ that drive hiring decisions.”

The remaining claims were thus remanded to state court (removal had been based on the Lanham Act claim).