Calcium supplement class action

For some reason, West apparently just added Folbaum v. Rexall Sundown, Inc., 2004 WL 3574116 (N.J.Super.A.D.), a case upholding an individual claim against the defendant for false advertising of "Calcium 900," a supplement which only delivered 900 mg of calcium if you took three pills. Though the back of the bottle advised taking "three (3)" for the suggested adult usage of 900 mg, the plaintiff testified she didn't read the back and believed that she was taking 900 mg in each pill. Though the court upheld a jury verdict under the New Jersey Consumer Fraud Act, it reversed the class certification on the ground that class members were only united by a state of mind (the state of having been fooled by the supplement's name). Although a NJCFA plaintiff need not prove reliance, she must prove causation linking the false claim to some harm suffered; those who purchased the supplement understanding that each pill had 300 mg suffered no ascertainable loss and thus could not properly be part of the class.

My calcium supplement is called "Calcium 1000," and requires 4 pills to get to the 1000 mg level; a bottle of 180 therefore lasts 45 days. Apparently Folbaum's limited success was not enough to get supplement manufacturers to change their ways.

Pleading requirements and Lanham Act claims

Is a false advertising claim under the Lanham Act subject to the heightened pleading requirements for fraud under the Federal Rules? Judge Joyner of the Eastern District of Pennsylvania considered this surprisingly unlitigated question in H.H. Fluourescent Parts, Inc. v. DM Technology & Energy, Inc., 2005 WL 2972986. Citing a handful of other cases, Judge Joyner ruled that Lanham Act false advertising counterclaims are not purely fraud claims and thus need only satisfy the "short and plain statement" requirement of Rule 8, rather than the heightened pleading requirement of Rule 9.

Drug pricing

A new decision in Pennsylvania's case against drug makers for inflating prices, Commonwealth ex rel. Pappert v. TAP Pharmaceutical Products, Inc., PDF here, 2005 WL 2875116 (Pa. Cmwlth. 2005), rejects the drug companies' arguments (with a minor exception for six drugs) and allows the state's case to proceed.

Pennsylvania's claims are based on allegedly inflated prices charged by the drug companies to various state purchasers, including Medicaid. The state argues that the companies used a published "Average Wholesale Price" (AWP) that was up to hundreds of times what an actual average wholesale price was, and that the state relied on the representation of AWP. State reimbursement rates to physicians are based on the AWP; if there is a difference between the AWP and the price the physician actually pays for the drug, s/he can pocket the difference. Inflated AWP thus provides physicians an incentive to prescribe the drugs with the greatest "spread." In addition, the companies provided free samples to physicians, and the state alleges that the companies knew that physicians were charging the state as if they had paid. The companies are accused of unjust enrichment, misrepresentation or fraud, violations of the Unfair Trade Practice and Consumer Protection Law (UTPCPL), and civil conspiracy. This is one of several similar lawsuits (Pennsylvania has even already settled some of its Medicaid claims).

Yesterday's decision upheld the sufficiency of an amended complaint, which had been amended to satisfy Pennsylvania's pleading requirements for fraud-type claims. Among the arguments of interest: the companies claimed that they never made any representations that the published AWP was factually the average wholesale price. What, they didn't pinky swear that something called the "average wholesale price" was in fact the average wholesale price? The court had little difficulty finding that the complaint sufficiently alleges that "persons for whom this information is relevant would have a reasonable basis to rely on the reported AWP as being something more substantial than a number selected arbitrarily." With respect to the misrepresentation/fraud claims, the companies claimed they had no duty to disclose the fact that the AWP was not the average wholesale price, thus characterizing the state's claim as one for non-disclosure. The court rejected this position, agreeing that the evidence could establish that no one expected AWP to really mean average wholesale price, but finding that the complaint sufficiently alleged that submission of figures called "AWP" to publishers was a representation of something like the actual average wholesale price. Relatedly, though there is evidence that the state should have known that AWP wasn't in fact average, factual disputes exist about whether the state justifiably relied on the published AWPs.

Illustrating some of the differences between the statutory and common-law bases for consumer protection claims, the state's UTPCPL claims differed from simple misrepresentation -- the state alleged, inter alia, false representations of source or sponsorship; advertising goods with intent not to sell them as advertised; and making false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions -- the latter two being specifically prohibited types of conduct. Advertising with intent not to sell as advertised presumably targets "bait and switch" tactics, but on its face covers the allegations here as well. The price reductions provision of the statute presumably targets fake "going out of business" or "50% off" claims.

The court upheld the state's "source confusion" claim on the theory that the companies' conduct "created confusion or misunderstanding as to the source of the drugs, such as when a doctor uses a sample drug he received at no cost to himself and administers the drug to a patient who assumes that 'the source of the drug is Defendants' commercial sales channels.'" I'm not sure how this states a claim, since a causal connection between that confusion and any harm the state suffered when paying patients' claims seems lacking -- and I'm not sure a patient would find the channels of commerce material, either.

Given the amounts at stake, these drug pricing cases are surely far from over.

New mission; new false advertising case: Listerine

I am going to try to blog recent false advertising cases, in the fashion of the TTABlog and similar sources of topic-specific updates.

Today's entry is Whalen v. Pfizer, Inc., 2005 WL 2875291 (N.Y. Sup. 2005), a follow-up to the successful Lanham Act suit against Pfizer by McNeil-PPC, the largest seller of floss, for PFizer's ads claiming that Listerine is as effective as floss at controlling plaque between the teeth. While the court enjoined the ads at McNeil's behest, the consumer class action so far fared less well. The New York state court rejected class certification, reasoning that commonality was lacking because there was no one message that the members of the class all saw; indeed, the class plaintiff couldn't remember a specific Listerine ad she saw.

According to McNeil v. Pfizer, the consumer ad campaign was limited (I believe to three TV ads and a shoulder tag), all of which made the challenged claim, so it's hard to see why the class doesn't define itself. It's not as if this was a 20-year campaign, interspersed with other campaigns. The class plaintiff's faulty memory is more important. The decision indicates that she was very poorly selected and had no memory or knowledge of the basic claims of Pfizer's ads: "during her deposition, Whalen, the proposed representative of the class, admitted that she could not identify any commercial which influenced her to purchase Listerine. Furthermore, in open court, she admitted that she could not recall seeing any of Pfizer's alleged deceptive marketing ads, and that she was unfamiliar with the actual suit pending before this court."

In addition, proof of harm would have to be shown for each individual, making certification inappropriate. The putative class representative, for example, used Listerine before and after the ads ran, and also continued to use floss, suggesting she wasn't damaged by any falsity but was just being loyal to her brand. Even though plaintiffs need not show reliance on the false representations under NY consumer protection law, they must show harm. (Presumably this means they must show that the overall ads, if not specifically the false parts of the ads, caused a purchase, or in this case caused them to forego flossing.)

Furthermore, since the claim in this case is that consumers could be harmed if they switched from flossing to Listerine, only those consumers who did floss regularly could be harmed -- non-flossing consumers who believed the Listerine message wouldn't suffer the same damage. As to consumers whose only harm was economic -- they bought the product as a result of the false ads -- it would be hard to prove this harm because they probably didn't keep receipts. (This reasoning strikes me as contrary to the purpose of consumer class actions generally, which is to aggregate claims that in the individual case are too small to worry about but together are more substantial and market-distorting; by their nature, these claims are ones for which consumers are unlikely to keep records.)

Just as the consumer protection claims failed for want of commonality, so with plaintiff's unjust enrichment claims. Plaintiff failed to adequately explain her theory of damages, and she herself continues to buy and use Listerine, which makes her claim of damage hard to understand. Interestingly, the court suggests that it is the continued use of Listerine that defeats commonality, since the court would have to conduct an individual inquiry to see whether consumers continued to use Listerine even after they knew of Pfizer's misrepresentations. This seems a dangerous line of thought to me -- it suggests that a popular product, which many people are already using, can make misrepresentations with near impunity, since it will be very hard to show a change in market share, and since the advertiser can rely on habit to continue sales even when the challenged campaign goes off the market.

Finally, for the reasons mentioned above, plaintiff flunked the typicality requirement, and the court did not believe that she was a representative who'd fairly and adequately represent the claims of the class. The court agreed that a class action would be superior to other forms of litigation had the plaintiff shown commonality, but she didn't.

Consider the more general tension between the class certification standards -- which require proof "that each plaintiff was reasonably deceived by the defendant's misrepresentations and was injured by reason thereof" -- and the Lanham Act standard, which allows competitor standing by showing a general likelihood that the competitor is harmed by the advertising. A competitor gets probabilistic standing, but not a class. Is this the right way to go?

Two great tastes that taste great together

Two of my enthusiasms, plastination and copyright, meet. It is an interesting, possibly exam-worthy question: if I skin and preserve a body in the same pose as my rival plastinator, have I infringed his copyright in a sculptural work? I am inclined to think that the pose is the idea and using a different body prevents infringement, but the case law is far from certain -- the case about taxidermy forms, in particular, would seem to provide my rival with a colorable claim. (Side note: the body would be a useful article, I think, but its precise configuration might be conceptually separable from its utility. Ah, the puzzles of copyright law.)

Terry Pratchett on free speech theory

Terry Pratchett, the great fantasist, has just released another Discworld book, Thud!, about immigration and racial tension as played out among the trolls and dwarfs of Ankh-Morpork. In the process, he has a character restate one of the great problems of free speech theory -- a sort of concise Kent Greenawalt moment.

Lord Vetinari, ruler of Ankh-Morpork, begins: "'... A wise ruler thinks twice before directing violence against someone because he does not approve of what they say.'"

Watch Commander Sam Vimes thinks, in response, "He himself directed violence daily and with a certain amount of enthusiasm against people, because he didn't approve of them saying things like 'Give me all your money' or 'What are you going to do about it, copper?' But perhaps rulers had to think differently."

You should read the book because it's good; Pratchett is perceptive and humane as well as darned funny.

Mattel Toys, infringement inducer?

So Mattel is coming out with this videocamera for kids, the Vidster, allowing them to shoot digital video, presumably including video in a movie theater. Given what the Supreme Court said about the evidentiary effect of Grokster's choice of name, was Vidster really a smart branding choice?

Wertham is unsurprised

Gay Batman watercolors served with cease & desist letter. The pictures are still on the Artnet site for now -- some are not work-safe. These are all apparently "Gay Batman watercolors," though most of the pictures are simply "nude Batman watercolors" -- the kiss/snuggling, both of which are portrayed clothed, make the solo nude portraits gay, I guess. Understandable in headline shorthand, of course, and consistent with the usual meaning of male nudes/males tantalizingly half-clothed, but still interesting to me.

Thanks to Eve Tushnet for the link.

Picker's Mobblog

I'm participating in this week's discussion of Fred von Lohmann's Measuring the DMCA Against the Darknet. My contribution so far, discussing media fans as part of the Darknet, is here.

Indefinitely Renewable Copyright: Batman versus the Utility Monster

I recently read a draft of a forthcoming article by Dennis Karjala on congestion externalities as a justification for extending copyright terms indefinitely, at least as long as their owners assert an interest in controlling them. The argument advanced by Judge Richard Posner & Professor William Landes, sketched out here, is that there is a relevant sense in which a copyrighted work is subject to scarcity: if people are overexposed to it, they may get sick of it and it will lose its value, like an overgrazed plot of land. Karjala does an admirable job of debunking this theory, explaining both why this is unlikely to be a common scenario (Santa, anyone?) and why, even if the theory were true as to individual works, it would not suggest that society was in any way worse off when consumer preferences shifted from overexposed works.

My own interest is specific to a particular way in which Posner and Landes suggest a work may lose value, which might be called confusion or dilution rather than simple congestion or overexposure. The value-loss mechanism involves characters who can appear in multiple contexts, like Harry Potter or Superman; it has very little application to many types of copyrightable works. As Justin Hughes argued before them, Landes and Posner assert that, absent a single owner, different versions of Harry Potter will spring up, and his image will be diffused and/or tarnished, so people will no longer be as interested in him, even in the original format. Just as someone who’s seen L’HOOQ can no longer look at the Mona Lisa with untainted eyes, someone who’s read about Harry Potter and the Mary Sue Bloodbath can’t enjoy the original in the same way. Crucially, this is not just a harm to the copyright owner, but a harm to the class of readers who really did like Harry Potter the way Rowling wrote him.

I’m fascinated by this class of readers, who I concede exist (at least for some works). I think of them as J. Geils readers, from the 80s hit “Centerfold” – “My blood runs cold/My memories have just been sold/My angel is a centerfold.” The memories of the original work are retroactively tainted by exposure to the new work. This characterization of “originalist” readers may be unfair of me, because though the J. Geils song expresses real anguish, it’s also the anguish of a jerk – he’s upset that a girl he had a crush on, who owed him nothing, has apparently changed.

And that, of course, is one of the big problems with using copyright owners’ rights to protect the interests of originalist readers – copyright owners have visions of their own about how best to exploit the copyrighted work, and even about what the real Harry Potter would do. DC Comics authorized the Batman TV show and all the varied Batman movies, at least one of which would have to give a Batman purist fits. Anne Rice and J.K. Rowling are prominent examples of individual authors whose artistic visions have diverged with some fans’, leaving the fans feeling betrayed and violated. (Let’s not even start talking about the later seasons of The X-Files or Buffy the Vampire Slayer.)

Another way I think of originalist readers – again, without much sympathy, even though their anguish is concededly genuine – is as utility monsters. There are a couple of ways to define utility monsters – one example is a person who gets so much pleasure from hurting other people that, if we just want to maximize utility, we should let him hurt those people. But a utility monster can also be someone who gets so much pleasure from monopolizing resources that we should let him have those resources even though that means other people will starve. He might be indifferent to the starvation rather than actively pleased by it, but again pure utility maximization gives everything to him and nothing to everybody else. If it is in fact true that originalist readers get enormous utility out of having just one Harry Potter and no others, then Harry Potter is a scarce resource because of their preferences and they may be utility monsters, even if they don’t wish to harm people who like multiple ways of looking at Harry Potter.

Defining the class of originalist readers this way raises the issue of whether their preferences are really likely to outweigh the preferences of others who like or tolerate variety. Utility monsters are often more theoretical than real – your preference for torture probably doesn’t outweigh my preference for not being tortured. I strongly suspect that the same is true with variation-intolerant readers versus variation-tolerant readers. Most of us are happier being able to pick the Batman we like even though we’re aware of the existence of other Batman versions. Even people who are originalist in the sense of thinking that Miller’s Dark Knight is the only worthwhile one usually don’t suffer so greatly from the mere existence of Bat-Mite and Bizarro Batman (or fan-fictional versions of Batman having an affair with Superman) that their pleasure in the “real” Batman is destroyed. Thus, I think Hughes, Landes and Posner are wrong empirically (as well as theoretically, in that I’m not sure we should give any weight to someone’s preferences about what other people should read – another classic problem of utilitarianism).

Same planet, different worlds

I guess I have some sympathy for the nostalgia for physical books expressed by this type of article. After all, I not only label and file my nonfiction books using Library of Congress categorization, I surround myself with fiction alphabetized by author, and I have a rationale for so distinguishing fiction from nonfiction. But then I get to something like this:

Computers are helpful, but the stacks cultivate intuitive bookish instincts. Those instincts may not be quantifiable, but they produce discoveries that the rational structure of electronic databases almost inevitably preclude. It's like in Star Wars when the ghost of Obi-Wan Kenobi tells Luke Skywalker to turn off his computerized targeting system and "use the Force" instead.

And I have to wonder how "Professor Benton" thinks the stacks got organized in the first place -- perhaps by the (presumably intuitive) library fairies? What makes the LoC catalogers (or, in the case of old Widener holdings, Harvard catalogers) better at making serendipitous connections than Google's algorithms, which I've also known to produce fascinating juxtapositions for various searches? This sort of sentimental rubbish makes me turn more and more to Clay Shirky's "Ontology is Overrated," about the kind of multiple-user-generated information that can be used to organize digital information in interesting and useful -- yes, even serendipitious -- ways.

Steve Burt pointed me to the following story, in which the Edgar Rice Burroughs estate threatens to sue a New Zealand publisher over a novel in which Tarzan grows up to become Elvis. New Zealand's term is life plus fifty and Burroughs passed away in 1950, so fair use is unnecessary as a defense of the novel in New Zealand -- but the estate has nonetheless threatened suit if the publisher reprints the novel in New Zealand (or sells it in other countries). I wish I knew what was the basis, other than unmitigated gall, for the threat against reprints in New Zealand. Perhaps trademark?

I've been trying to follow the Grokster commentary, though I'm sure I've missed a lot. I was moved to respond by Tim Wu's confidence that iTunes would have nothing to worry about if it came out with "Rip. Mix. Burn." today. As I understand it, he sees iTunes as safe-harbored by Grokster because it uses encryption to avoid infinite filesharing and has a deal with the music industry, which presumably shows good faith as well as making a lawsuit unlikely in the first instance.

Basically, though Tim's analysis, as always, makes interesting reading, I think he's conflating iTunes with the iTunes store. As others have pointed out, one fills one's iPod mostly with music that isn't purchased from the iTunes store -- I am a heavy iTunes store user, I suspect, and I have slightly under 300 songs in my "Purchased Music" sublibrary, out of a total collection of over 6700 songs.

"Rip, Mix, Burn" promoted iTunes, not the iTunes store. "Rip" only matters if you have CDs, since purchased iTunes files come preformatted for iTunes. Purchased, DRM-protected music can't be shared without either circumvention or quality-diminishing re-encoding, but iTunes does nothing to limit massive distribution of all those mp3s it encourages you to rip from your own collection (or download from others' to fill that nice big iPod). There is no encryption on ripped files, no deal with the record industry on ripping, and I just don't see which "safe harbor" helps immunize "Rip, Mix, Burn" in particular. This is not important for iTunes, since as a business matter Apple is unlikely to get sued. It's important for the next music player startup that doesn't happen to have music deals in place already, that maybe wants to make money just through the player without having an associated music store.

This really matters, though, for the next industry; we know a lot more about what the digital music industry will look like in the future than we do about digital video.

Of course if anticircumvention technologies are deployed successfully, it might not matter much at all, since they provide an easy workaround for all this kerfuffle about contributory infringement.

This is a copy of what I posted at SCOTUSBlog's Grokster discussion:

While I was not involved in Grokster, I do have a clear bias: Justice Souter, for whom I clerked, is the very model of a thoughtful, committed and careful jurist, and thus I am inclined to support any proposition he endorses. (Though maybe not his apparent appreciation for Modest Mouse.)

That said, I am concerned that not every court is as careful as Justice Souter – this was a problem with his opinion in Campbell v. Acuff-Rose, which quite clearly says that satire can be fair use (though it has comparatively less advantage in the fair use analysis than parody does) but which has widely been overread to say that parodies win fair use defenses, but satires don’t. I fear that similar uncertainties will follow the Grokster ruling. In fairness, though, I can’t imagine a plausible majority opinion that wouldn’t leave many thorny questions.

The previous posts have made a number of excellent points which I’ll try not to reiterate, though I adore Kathleen Sullivan’s image of “strangling little iPods in their cradles.” I don’t quite get Charlie Petit’s idea that the Betamax involved “authorized source material and authorized distribution channels” whereas Grokster doesn’t. Except for unreleased pilots such as “Global Frequency” and bootlegs, the music and TV shows available through peer-to-peer networks came from authorized source material and authorized distribution channels (CD stores and broadcasts). Then they got moved to forms the copyright owners didn’t authorize and couldn’t control – a lot like TV shows got moved to blank videotapes.

This leads into my big questions: What would this opinion really have meant for the VCR? Would “See any TV show you want to, anytime you want to see it” or “build a library” count as enough obvious encouragement of librarying – which was not found to be fair use – to justify a finding of contributory infringement? (I’m still looking for a copy of the “build a library” ad, unfortunately.) What about “any TV show” in the context of pay cable, which again was not analyzed as fair use when the Court looked at time-shifting free broadcast TV?



Moving onward, what would a responsible lawyer tell Apple about “Rip. Mix. Burn.” after today? Does that clearly promote infringement?



How about Sourceforge, which distributes Azureus, a major BitTorrent client? Let me make clear that Sourceforge offers BitTorrent software, not torrents or files – it seems to me trivial even in the pre-reversal 9th Circuit to establish that sites hosting unauthorized torrents are contributory infringers. Sourceforge is not such a site. It offers only the peer-to-peer technology, naked and pure. Except: drill down into the description on the site a bit, and you get this: “The RSS Feed Scanner is an automatic RSS feed parser which is highly configurable and allows unnattended operation via its advanced filtering capabilities. .... The filter strings can be easily edited via the graphical configuration tool, and each filter can also support targeting of specific episodes within a series of the same titles (for example in downloading episodes of shows).” So maybe not so pure after all. Maybe this means that Sourceforge is a black hat, despite initial appearances, or that this particular plugin is inherently infringement-promoting. I would definitely not rest easy tonight if I ran Sourceforge.

Another question is whether the decision, which is explicitly targeted at “devices” including software, will have spillover effects on non-device-related conduct. Already in the Napster/venture capitalist litigation and in the Canadian P2P litigation questions have been raised about whether someone who enables sharing of files on her computer is encouraging infringement by those who download those files. If all she does is enable (or fail to disable, depending on how her file-sharing software is configured) uploading, has she done enough to be liable for others’ infringement? This may not be all that important if the copyright owner’s right of distribution is broadly defined, but the scope of the distribution right remains unsettled.

Relatedly, I’ve long wondered whether this PBS lesson plan, which encourages the creation of unauthorized derivative works and even their dissemination on the Internet, constitutes contributory infringement. That page has plenty of “solicitation that broadcasts a message designed to stimulate others” to create unauthorized copies (slip op. at 20). Many people will, of course, think that most or all of the resultant art is fair use – but fair use is not usually what people want to rely on when copyright owners’ lawyers come around. If I encourage you to create mash-ups of existing songs, believing that at least some of the time the results will be fair use, have I induced infringement if, some of the time, the results are infringing?

Justice Souter doesn’t get into this question, because Grokster conceded that unauthorized copying using its software would be infringement, but it could become important for other technologies, including a future “Rip. Mix. Burn.” campaign.

The fan fiction discussion is now available as a mp3 file here. I come in near the end, about 3/4 of the way through. It was an interesting discussion, though I wish we'd gotten to talk more about post-Star Trek developments, particularly shows and movies that do have strong central female characters.