Snowball effect of pharmaceutical snow job

Solvay Pharmaceuticals, Inc. v. Global Pharmaceuticals, 2006 WL 626079 (D. Minn.)

Defendant Global markets a (purported) generic alternative to Solvay’s pancreatic enzyme supplements, which are used to treat cystic fibrosis patients and others who don’t produce the proper enzymes to digest food. An enteric coating is supposed to ensure that stomach acid doesn’t entirely use up the enzyme activity of the supplement before it reaches the duodenum, which is where the enzymes are important. Solvay argues that manufacturing differences in formulation, blending, and coating of supplements can lead to different enzyme activity and release rates, even if they are truthfully labeled as containing the same enzyme content.

Global’s Lipram CR5, CR10, and CR20 compete with Solvay’s Creon 5, 10, and 20, respectively. Global worked to have major drug information databases characterize Lipram-CR as a generic substitute for Creon. Global also told pharmacists that Lipram is “equivalent” to, a "pharmaceutical alternative" to, a "true alternative to," and "the generic form" of Creon. (Although an NDA is pending for Creon, the products remain on the market; the FDA banned OTC sales of pancreatic enzyme supplements in 1995, while allowing prescription products to remain on the market until 2008, pending FDA approval.)

Global argued that it never advertised Lipram as an FDA-approved generic, bioequivalent, "therapeutically equivalent," or "pharmaceutically equivalent" to Creon. However, Global representatives testified that people in the business understand the terms "pharmaceutical alternative" and "generic alternative" to mean the same thing, and its pharmacy expert also stated that generic substitution required therapeutic equivalence. Moreover, Solvay’s surveys of retail pharmacists indicated that 89% of pharmacists agreed that a generic substitute must be therapeutically equivalent to the name-brand product and 93% agreed that the generic must be bioequivalent to the name-brand product. The court denied Global’s motion for summary judgment on literal falsity.

As is common in generic substitute cases, the court found evidence that the relevant consumers – here, pharmacists – understand "pharmaceutical alternative," "alternative," "generic alternative" and the like to mean equivalence. (The court’s acceptance of evidence of meaning to consumers is just another example of the fundamental unsupportability of the analysis in Mead Johnson & Co. v. Abbott Laboratories, 201 F.3d 883 (7^th Cir. 2000), which rejected consumer surveys about the meanings of particular words. For false advertising cases, a word means what consumers think it means.)

There was undisputed evidence throwing equivalence into doubt: Although Global markets Lipram as an "alternative" to “name-brand supplements (namely, Creon, Pancrease, and Ultrase), and the labeling specifies that these supplements are specially formulated to match each name-brand drug, the supplements all contain exactly the same active ingredients, but each wears a different name and label.” The court continued, in a vein that seems unpromising for Global: “Considering that fact questions exist as to whether Lipram even contains the same ingredients as Creon, the Court finds that genuine issues of fact exist as to whether Lipram could be as safe and effective as Creon or an alternative, substitute, equivalent, generic alternative, or comparable to Creon.” Likewise, there were factual issues as to whether Lipram had caused therapeutic failures and was an unsafe substitute.

As to damages, Global contended that Solvay’s surveys did not show that pharmacists had engaged in automatic substitution (substitution without consulting a physician, which some states allow pharmacists to do based on their own judgments about drug equivalence) because of Global’s advertising. Instead, doctors are proactively substituting Lipram for Creon. Certainly, Global argued, there wasn’t enough evidence to support Solvay’s claim for $60 million in damages. Solvay disagreed, pointing to its surveys showing many prescribing physicians claimed never to have heard of Lipram, indicating that substantial automatic substitution was going on.

Solvay also argued that Global’s false advertising was transmitted to physicians via pharmacists, who convinced the physicians to authorize substitution, so that even “non-automatic” substitution could be blamed on Global. The court adopted Solvay’s view of this “snowball effect”: sales of Lipram caused in fact by Global’s false representations could be counted as part of Solvay’s damages, even if the prescribing physicians had the false claims retransmitted by pharmacists.

Questions about the snowball theory: were the pharmacists engaging in commercial speech independently regulable under the Lanham Act or consumer protection laws? (Does it matter that the pharmacies make more profit from generics than name brands?) The court pointed to evidence that using pharmacists as de facto detailers for physicians was part of Global’s business plan – but suppose this was an expected but not specifically intended effect of Global’s marketing; would Global still be responsible for physicians’ prescriptions? Suppose, as seems likely, there’s a bit of a telephone effect when pharmacists promote Lipram to physicians; is Global responsible for the distortions added by pharmacists? It seems that their distortions could constitute false advertising – even if Global’s claims are strictly true, if they become misleading when transmitted through pharmacists, then all the harms of false advertising are present. If this bothers you, what’s the proper role of intent in false advertising cases generally? Alternatively, does the fact that the court uses the snowball theory to support a damages claim, but not as part of the basic false advertising case, provide a proper limiting principle?

There was some good news for Global: the court also denied summary judgment on its counterclaim for tortious interference with business opportunity. Global claimed that Solvay interfered with Global's relationship with the Cystic Fibrosis Foundation ("CFF"). Although Global had been working with the CFF “to determine whether Lipram would be stocked and listed on the formulary of its for-profit pharmacy subsidiary, Solvay hijacked its efforts by falsely notifying the CFF that generic pancrelipase products were illegal and subject to regulatory action.” Solvay was involved in drafting a memo sent to CF care centers and physicians nationwide that called generic pancrelipase products “illegal,” even though it knew that the FDA did not believe the marketing was illegal. Moreover, Solvay donated money to the CFF to ensure it would drop Lipram from its pharmacy. Though Solvay disputed these facts and added context of its own, the court found that a jury could decide in Global’s favor (presumably only if it rejected Solvay’s claims).

No remedy for expired gift cards in Ohio

Dawson v. Blockbuster, Inc., 2005 WL 3869181 (Ohio App. 8 Dist.)

Appellant Dawson sued Blockbuster based on 3 expired gift cards Blockbuster refused to honor. He argued that the expiration dates – which mean that Blockbuster can just keep money without rendering any goods or services – violate Ohio’s Consumer Sales Practices Act and Deceptive Trade Practices Act, constitute fraudulent concealment and unjust enrichment, and breach the implied convenant of good faith and fair dealing.

The court of appeals upheld the trial court’s rejection of his claims. Essentially, Dawson isn’t a consumer because he received the cards as gifts, and anyway he should have read the terms on the cards. The only really notable thing about the case is that the opinion says that, since the interpretation of Ohio’s DTPA is supposed to track that of the Lanham Act and the Lanham Act doesn’t give consumers standing, neither does Ohio’s DTPA. It’s not clear that the CSPA and the DTPA prohibit different things with respect to false advertising, so it may not make a substantive difference.

The dissenter reasoned persuasively that, while gifts generally may not make the recipient a covered “consumer” under the CSPA, a gift card does, because it requires a further interaction with the seller. While concluding that the practice of having balances on gift cards expire quickly is unconscionable, the dissenter felt bound to hold that Dawson had no remedy in the absence of a specific state law.

More on what those specific state laws might be here, here and here. Apparently Blockbuster should have sent at least some of that money on to the state's unclaimed property fund, unless it's okay for Blockbuster to charge a fee for every month the card is unused and drain it that way. I had no idea.

The Trademark Infringement Diaries

Basketball Marketing Company, Inc. v. FX Digital Media, Inc., 2006 WL 616284 (E.D. Pa.)

Plaintiff, known as And 1, sued the promoters of a rival street basketball tour (a gentleman named Woodruff and his company, FX) and a player (Tim Gittens). And 1 makes and sells street basketball merchandise, including shoes, clothes and accessories, bearing its marks. It also sponsors the Mix Tape Tour, street basketball games featuring professional street players – in 2003, more than 150,000 people in 30 cities attended tour games.

Gittens was formerly with the Mix Tape Tour. He signed endorsement agreements requiring him to wear and use And 1 products exclusively, including any time he was wearing athletic gear or posing for pictures. He was allowed to participate in basketball games sponsored by other companies, but required to notify And 1 if any third party asked him to use the And 1 name or logos. Though his contract didn’t let him allow others to use the And 1 marks, it explicitly relieved him of responsibility for third parties’ uses.

FX sponsored Streetball Legends basketball games in cities the Mix Tape Tour didn’t visit; Gittens played in 6 of the 8 games at issue. The first game was organized with the help of a “sometime marketing consultant” to And 1, whom Woodruff believed to be an And 1 employee. This fellow promoted the games and arranged for and paid the players for the first few games. The second game was marketed as “featuring players from the And 1 Mix Tape,” and an And 1 employee attended. He told Woodruff not to call the games “And 1 Games” but otherwise complimented him. After the third game, FX and Woodruff stopped working with the marketing consultant, and Gittens arranged for and paid the players.

FX’s marketing materials stated that Streetball Legends “featured players from the And 1 Mix Tapes.” Other claims included: “You have seen the mixtapes, banging commercials and videos and now come see them live in person. The Hottest Street Basketball Team Ever!!!” (Note: This is an example of the dangers of nominative fair use. The first statement is true, but the second sounds awfully like a claim that this is the And 1 team.) Gittens provided FX with images of himself for T-shirts and flyers, but didn’t tell And 1 about the flyers or any of FX’s use of the And 1 trademarks in promoting the Streetball Legends games.

In addition, Gittens designed an autograph card featuring a picture of himself wearing And 1 apparel in order to promote himself and his businesses. And 1 knew about the cards, but Gitten handed them out at both Streetball Legends and official And 1 events.

And 1 alleged trademark infringement and false advertising, along with associated common law torts, as well as contributory infringement and breach of contract against Gittens.

Since the other defendants defaulted, the court only evaluated the claims against Gittens. It found no likelihood of confusion, largely because Gittens was entitled to use the And 1 logo on his autograph card, uniform, and photo. The court refused to attribute the use of the marks on the ad flyers to Gittens, and thus held they didn’t contribute to likely confusion based on Gittens’ use. (I’m not sure that’s entirely correct, since context matters, but given Gittens’ contractual entitlement – nay, mandate – to use the marks, the overall point seems right.) There was also no evidence of actual confusion for the two years during which Gittens worked with Streetball Legends.

The court refused to hold Gittens jointly and severally liable for FX and Woodruff’s infringement, because he didn’t provide substantial assistance to the infringement. Likewise, there was no contributory infringement since Gitten didn’t promote or facilitate the infringement and there was no evidence he even knew the use was infringing.

The court dismissed And 1’s false advertising claim separately: there was no evidence that any message Gittens conveyed was false. Even if the ad flyers made false claims, Gittens’ participation in handing out flyers isn’t the same thing as “presenting the message contained in them.” (Is the court treating Gittens like a newspaper or other disseminator?) His autograph card wasn’t false, since the picture of him in his And 1 uniform was contractually required, and there was no evidence of any deception.

As might be expected, And 1’s state-law claims also failed: it wasn’t a purchaser protected by the unfair competition statute; there wasn’t evidence of any contracts with third parties, so there could be no interference with existing and prospective contractual relations; and there was no unjust enrichment because And 1 didn’t confer relevant benefits on Gittens. And 1’s contract claims failed because the contract put Gittens under no obligation to inform And 1 of any third-party uses of And 1 marks; he was only obliged to inform And 1 if he was asked for permission to use the marks, which he wasn’t.

And 1 even failed to recover profits from Woodruff, based on his credible testimony that his profits were minimal. Given that Woodruff thought that And 1 knew of the use of the name, and thought he was working with an And 1 employee, the court also refused to award attorneys’ fees to And 1.

In fact, Gittens was entitled to fees from And 1, based on the court’s finding that the claims against him were brought in retaliation for a complaint he filed against it for breach of contract. And 1 knew that Gittens was playing for FX at the time, and it didn’t sue any other player in the games. It sued a month after Gittens brought his breach of contract claim. Thus Gittens, as a prevailing party, was entitled to a fee award.

Cultural Environmentalism at 10: Closing remarks

Boyle sums up, doing some conceptual housekeeping. (Shorter version from Joe Gratz here.) We have a whole bunch of projects, each responding to a different hope and different fear, collected under one umbrella. More conceptual clarity will help.

Here’s an attempt to clarify the papers’ themes: We fear unnecessary monopoly, deadweight social loss, and blocked innovation in thickets of rights. Deadweight social loss in drug pricing is called dead people – maybe it’s necessary loss, but it matters.

We worry about books rotting on shelves when they could be available to the world. Boyle is a member of the tribe that sniffs the rotting paper in libraries and becomes elated (me too!). We fear censorship, complex and simple. (For example, the use of copyright to stop Alan Cranston from translating Hitler’s Mein Kampf without redaction to show what he stood for, as opposed to the authorized English version with its anti-Semitism muted.)

We fear crippling the new social spaces tech enables by crippling the tech itself. We fear imposing a one size fits all IP scheme on developing countries in ways that are not only unjust but inefficient. We fear a world in which covert assumptions embedded in the IP system conceal distributional inequities we couldn’t defend if confronted with them directly.

We fear a world in which innovation is stultified because the industries threatened by upstarts are able to make challenges illegal and the upstarts can’t fight back because they don’t yet exist – that’s what it means to be pro-life for unborn industries.

We fear IP rules raising barriers to entry not just for innovation but for decentralization. There’s a very strong unacknowledged hearkening back to the original antitrust laws in this scholarship – we worry about concentrations of power. The fear is beyond the economic fear. I don’t want just one super media entity even if it is maximally incented to provide me with all the variation that a million would provide.

A different public domain, commons, and set of tools is implied by each of these fears. For some of them, we want free as in beer, others free as in speech. For some we simply want access, for some we oppose single-entity control over chokepoints. That’s confused people who say we lack a consistent notion. Instead we have a set of tools. We don’t want to reify anything; we don’t need a single notion of property, etc.

Thus, he shifted to our hopes: The Scottish Enlightenment version would be a rational IP policy based on evidence, with a presumption against government action. We are not just trying to build the black box of innovation, which will give us whatever the current distribution of wealth wants. Our general orientation: This stuff has changed my life and others’ in ways I couldn’t imagine and I can’t wait to see what it will disrupt next! The destabilization of power in a fermenting bubble is a strength of liberalism.

We hope for distributed innovation and culture not just because it works. And it’s not even just because of the decentralization of power. It’s a romantic hope that we could enable more widely a kind of homo ludens, a playing animal, because many of us have jobs in which we get to play with stuff and create stuff, and it’s really cool and amazingly fulfilling. We want that to be more widely available.

We don’t know how far these methods scale. Maybe they don’t scale far beyond the world of the virtual. We don’t know and we don’t want to foreclose anything. It’s reasonable to say the state shouldn’t pick; it’s also reasonable to say we should put a thumb on the scale of the side of freedom.

We are using these tools to create commons. Then we use the commons to build on itself – a virtuous cycle. CC shows why it’s exciting to be an entrepreneur – CC has gone from idea to real thing in a few years.

If hopes and fears require different inflections and tools, we don’t need a big theory. We need a bunch of little ideas that work. Maybe then things will take off in ways we never imagined, out of which new tools will come.

My closing remarks: What a great conference!

Cultural Environmentalism at 10: Molly van Houweling

Liveblogged.

Van Houweling addressed a criticism of Creative Commons and open source licensing, which is that they create more elaborate property rights schemes which later trip up people who are trying to navigate through a thicket of rights. Such restrictions pose “the problem of the future”: what happens if our understanding of the highest and best use of these works changes, and we’re still stuck with the licenses? She thinks this is a risk, but given that the background is copyright law, which has the same problems of uncertainty and constraint, the licenses are worth pursuing.

Peggy Radin (I understood her public/private point somewhat differently than Joe did): Copyright is distinct from a servitude because it’s imposed by law, not contract. Assault law is not a servitude on baseball bats, even though owners of baseball bats are constrained not to use them to beat people up. Servitudes are imposed by private parties, and democratic decisionmaking matters.

Radin’s always been rather worried about attempts to make restrictions run with the digital object, even for a good cause. Does the license really need to say “we own this copyright and there’s nothing you can do unless you understand our copyright”? There’s a possibility for backlash, because maximalists will like that better than open source folks.

Conservation easements required a democratically passed statute, as did marketable title statutes.

There is a utilitarian and nonutilitarian component of the freedom now versus freedom later debate. Should future generations be allowed to write on a clean slate? We can always rewrite the laws. Longlasting private arrangements from the past are harder to overwrite. (Comment: Can’t we rewrite the laws to disrupt the private arrangements?)

Yochai Benkler: Using the force of a metaphor as an analytical construct and example – the act locally move, from recycling to conservation easements. Molly invites us to take stock of a salient trend in the turn to “rolling our own,” protecting our work with licenses. She’s making her job too easy by comparing it to the baseline of copyright. The project has a movement building component and a cultural practices part and a licenses part licenses flow out of and reinforce cultural practices, and a movement comes out of licensing and relates to cultural practices. Licenses create these entities (GPLed code), and the movement reflects on law and tries to affect it. The problem with the future is easier with GPL and BSD but harder with Creative Commons (CC) because of potential internal clusters of different. Where is the balance? If you’ve got a much tighter license, you can rely more on the GPL to run the particular set of practices it encompasses but fewer people sign on and the background law covers more. Benkler doesn’t actually have a real guess about which is better for movement – more choice or narrower licenses.

Siva Vaidhyanathan's comments, on his blog.
Takeaway message: maybe small interventions are enough instead of grand theory. Restoring formalities, and GPL, are small ideas that can be spectacularly successful because of their modest goals.

Van Houweling: These techniques (collective production, licensing) are applied to science in ways that might help us cure cancer – or prevent us from curing it. Another project would be compare IP to the law of accretion: who gets rights to things they’ve built on other people’s property. Observers of IP might think property law is totally dense and doesn’t attend to ways in which it limits others’ autonomy – but property law can protect freedom to travel, freedom to eat, freedom to associate. Property law can help as long as we note unions and disunions between the fields.

Orin Bracha, responding to other comments: People dissatisfied with IP rules face a painful dilemma. CC and similar projects are usually second-best; the best would have been to change copyright law itself. We are trying to create cultural practices – not just stories, as with Tushnet’s paper, but practices to create ideology and political support for the first-best solution. (Comment: hunh? I could have sworn I was talking about practices. I suppose he means that fan creators are not consciously oriented towards changes in IP law, but I’m not sure that’s true, and I’m not sure that using a CC license makes you more likely to be activist in other ways.)

There’s a choice between radicalism and populism – go as far as possible and as open as possible, but hardly anyone will come if you do that.

Van Houweling: One premise of CC was that people were doing these nonproprietary creations anyway and we should get them out into the open. Recognition is helpful to the movement even if they were under the radar before.

Question: I’m concerned with the lack of safe harbors for very small uses, what happens if a relatively few lines of open source code get into software. Isn’t there a similar problem with CC licenses?

Van Houweling: Is this any different than copyright, which presents similar risks? Yes, because you’re not as likely to accidentally run across and reuse proprietary code as you are to accidentally reuse GPL code, so that is something to worry about.

Boyle: You can imagine people appealing to get an increase in rights so they can create a commons (my comment: e.g., GIs, as Sunder talked about – not all commons are open to all comers). What happens when the GPL goes from being what it is to the solution to everything – the GPL as a reason for enclosure? (See also Copyright Office report, relying on CC licenses to propose an attribution requirement in the law.)

Van Houweling: That’s a problem from the beginning with CC. People wanted a CC license for scientific data, except there are already no rights over scientific data. Are there other models for making commons other than building it out of property?

Cultural Environmentalism at 10: Me

My presentation was liveblogged here.

I need some time to absorb what I heard, so the only thing I’ll say now is that I borrowed “I invented fandom in my bedroom in 1980” from Francesca Coppa, who also invented fandom in her room. It's all about attribution.

Cultural Environmentalism at 10: Susan Crawford

Liveblogged here.

Some of my notes: Telcos claim ownership of the network, and thus the right to discriminate against packets which haven't paid for carriage -- which naturally entails detailed monitoring of traffic. Crawford pointed out that telcos’ interest in controlling the packets fits very well with the dreams of other incumbents, specifically copyright owners and the government – everyone in power now would love to be able to read your mail.

Sometimes people ask Crawford: Why do you care if one thing is faster than another because only one paid the telcos? Her answer is that people will stop using video that’s unsatisfactory – if it can’t go fast, people will ignore it. So it makes a huge difference to innovators.

Crawford draws parallels to Boyle’s work and to IP battles – the same kinds of arguments are made in communications. The arguments resemble those about why developing countries should adopt strong IP rights: because it’s not owned, the telcos say, the internet is a backwater. Let us surveil, and it will help Hollywood and law enforcement as it helps us. Likewise, there are similarities to the standard IP story’s denigration of indigenous content. A great deal of what’s interesting and valuable about the internet is individually created content: pictures, blogs, dreams, creative collaborations. This isn’t valued at all by network providers. Content is just supposed to be sent down the wire to couch potatoes.

Big open question: What does that mean in practice? The new public interest source of the FCC’s power should be insuring internet access – maybe make telcos public utilities. Also, we need to address who’s going to maintain this magical broadband network. We’re incapable of doing almost anything as a country, so why would we take this on?

It’s fashionable to criticize the early cyberutopians, but they were right about the possibilities. The problem is that we lack a cultural commitment to the decentralized, culture-creating version of the internet that would lead consumers to boycott broadband providers who don’t give us unfettered access to the internet. So we need government intervention.

Neil Netanel: Crawford says: the internet is us. In her view, it’s a global mind; a living ocean; it is the repository of our memories and thoughts; it is a being in its own right, with the capacity for self-reflection and liberty interests. It’s the romantic internet – us, but more than us. Netanel wants to part ways with this trope. As liberating as the internet can be, it’s not us and we’re not it. Millions lack food, medicine, and blogging software; the internet is often an easy way to forget real-world problems rather than a tool for real-world organization.

Where Netanel would look for metaphors would be the traditions of free speech, public discourse, Balkin’s democratic culture, Lessig’s free culture, Fisher’s semiotic democracy, Benkler, etc.

Crawford: The internet isn’t just a tool, because it enables persistent groups to form that have an impact. Sure, it makes no sense to privilege internet access over food, but Crawford can’t solve world hunger; she can maybe do something about communications law. Free speech isn’t enough. There are self-owned creatures in the ocean (giant squid); the same is also true on the internet, where there are collective, persistent human endeavors.

Julie Cohen: Naming the environment in Rachel Carson’s Silent Spring jumpstarted a movement, as Boyle did. Naming is only a beginning. Then you need to do the science – detailed descriptions of what the environment is and what harms it – and a normative story about what makes this environment good. Cultural harm, though, is in the eye of the beholder; it’s not simple to do the science. The normative theory needs therefore to do heavier lifting.

Carving out open enclaves is important, but the cultural environment won’t be saved a piece at a time; it has to be saved as a whole.

What makes the internet good? If the network is us, then it isn’t a separate entity at all. To say it has a life of its own is to say there’s a natural form of social order that the internet enables us to achieve. But it’s a social form, subject to path dependencies and other pulls. Simply to say that the network is us doesn’t tell us what’s good. A network of private goods would still be us, wouldn’t it?

Can “doing the science” help? In this case, that would mean richly detailed ethnographies of the experiences the network enables and the activities it supports. How do we link individuals to greater patterns, showing them what they’ll lose in the telco world? Crawford cautions against abstract claims about democracy – we need to link it to concrete experiences.

Cohen argues that the network enables the creation of meaning for individuals and groups. Blogs, affinity groups, and wikis are examples of how this gets done; private internets won’t enable the same kinds of self-constitution. Meaning also emerges from expression not conventionally understood as such – freedom to tinker – which will not be allowed by private internets.

Cohen points out that telcos are not stupid; they will enable all these activities she just mentioned, at least at first and at least to a degree. (See this very interesting New York Times story on that point.) How, then, can we assess options we aren’t given under private control? We need stories: ethnographies, romances and myths reminding people how meaning emerges from the uncontrolled and the unexpected. We need stories that foreground the importance of play.

Sociologists of culture have studied this for a while. Smart providers of internet services speak of constructing playgrounds. But playgrounds are for children. There’s a middle space between the controlled playground and chaos, which is the open network where adults decide what they’ll risk and do.

Larry Lessig called foul on Netanel – he would have a rule that you can’t criticize another scholar by saying “you’re not dealing with hunger”; we aren’t either. Blogs have changed the dynamic of how the media does its job. One way to characterize Crawford’s argument: the internet is an opportunity to change the power dynamics of how business as usual has been conducted.

Netanel: He didn’t mean to criticize Crawford for failing to deal with world hunger. The internet can be a powerful organizing tool, but that’s different from saying that the internet is us.

[Summarizing an interaction between Molly Van Houweling, Crawford, and Lessig: Pushed on nationalization, Crawford backed down, suggesting that we merely study the problem, but Lessig strongly suggested that the unknown losses would mount well before we could identify any specific entrant-strangling that would justify regulation, because new businesses just couldn’t get funding to compete with the telcos in the first place.]

Netanel: We don’t yet have the capacity to have P2P video, do we? The telcos aren’t investing in infrastructure to provide it, unless they can earn money.

Crawford: Japan and France managed it somehow. (I didn’t quite follow, but it was something like, all the Japanese telcos went bankrupt and requiring them to roll out broadband was part of the government’s rescue. This led to my comment, which was that, if we’re looking for examples of what we might lose if telcos are allowed to discriminate against unauthorized packets, we should look at what is happening in Japan and France, where speeds are much higher and unconstrained.)

Cultural Environmentalism at 10: Madhavi Sunder

Madhavi Sunder, liveblogged by Joe Gratz.

Points I wrote down: Geographic indications (GIs) offer the possibility that local artisans can stay in place, and not have to give up and move to the cities for modern work. She told the story of Mysore silk saris, whose makers updated the look after they got a GI designation, learning how to get the traditional sheen on new – but natural – colors like lilac. (Query: did the GI spur this? Can’t other producers copy the new colors and designs, but not the GI?)

GIs are particularly suited to recognizing poor people’s knowledge. GIs are collective and relatively cheap to acquire. There are many limitations to the Indian GI law – for one thing, it only protects knowledge if it’s related to the land. But people aren’t fixed like that; they move and intermarry – we need more recognition of the dynamics of culture. Also, there are always traditional hierarchies within a group; who benefits from new rights for the group is a big concern. There are also free speech concerns and competition issues. The basic economic question is are these good overall if the Indian poor protect Basmati rice but can’t make whiskey?

Boyle of course knows that the public domain is socially constructed, not a reified negative of property. He was writing when economic language was hegemonic. Today, we can discuss distributional and social effects without the language of neoclassical price theory. WIPO now accepts the need for a development agenda. Traditional IP wants more goods (books, drugs) but doesn’t ask who makes them or how they’re distributed – we can.

Terry Fisher (slightly expanded compared to Joe’s account; at this point I realized I could take notes on my laptop and I didn’t know he was liveblogging): Sunder’s paper shows the continuing power of the related themes of environmentalism and the public domain, as well as the hazards of those metaphors.

In the 17^th and 18^th centuries, a common depiction of Native Americans was noble savages, living on but not altering the land. This idea, in Europeans’ minds, justified displacement by productive Europeans. Because they devalued living lightly on the land, this image justified imperial expansion. William Cronon had a different criticism: It got the facts wrong. New England before the Europeans was cultivated, an enormous garden, modified by Indians to suit their own ends. In particular, they removed underbrush to enable game to graze and Indians to hunt more effectively. Given this new perspective, we have to reconceptualize the nature of the injustice of conquest – it’s not the displacement of conservation by nonconservation, but displacement of one civilization by another. Sunder’s paper makes a similar move: traditional knowledge is no more stable, raw, or unproductive than the environment created by North American Indians.

Fisher offered some possible responses: suppose we modified TRIPs to require recognition of a defense to patent infringement that the raw material used by the developer of a patented product or process had been extracted in violation of local laws. Ordinary patent cases would then be able to check patentees’ compliance with natural resources laws of poorer countries, putting teeth into an existing system that has no bite. This would confer upon tropical countries power to select from a wide range of ways of defining knowledge rather than relying on WIPO or the US Congress to do so. They might adopt best practices, operate as cartels, or do something else. Our responsibility would not be to advise them on what IP should be but advise them on options on configuring their local system, some of which might be IP but others not.

Imagine another international norm: each member country shall recognize as a defense to copyright infringement that an infringed work constitutes a reproduction of a work registered in a database, the terms of which are defined by the laws of each country (unless the infringed work was licensed). The database would include things like kente cloth, traditional forms of dance – copyright owners couldn’t assert copyright claims against others unless they made deals with groups determined by the states of origin.

This would take a step towards a global, rather than nationally harmonized, copyright scheme, but one dependent on formalities, the lack of which is one of our biggest problems.

There is a hazard: in jurisdictions like Guatemala, indigenous groups represent significant political power; when they’re smaller and more vulnerable, we may perpetuate injustice. But it’s unlikely that we can solve that with a top-down system. The best response to that continuing difficulty is to recognize the importance of political activity at the national level rather than resting our hopes on WIPO.

Arti Rai: Sunder’s big claim is that we should move beyond utilitarian thinking in our IP scholarship. Many of those here have done so, many of us haven’t. There is a focus on wealth maximization in IP scholarship. It’s done in response to maximalist claims – we need to engage people on the same plane as their arguments or we won’t be convincing.

We shouldn’t caricature law and economics, which doesn’t necessarily focus on wealth maximization. Welfare economics can take into account distributional considerations, though one has to be willing to make interpersonal comparisons of utility to do that. The most recent comprehensive attempt to provide a normative foundation for law and economics, Kaplow and Shavell, explicitly adopts a welfarist model and talks about the importance of distributional effects.

WHO has mobilized around quality-adjusted life years that could be increased by spending on poor people’s health – economics can be helpful to our goals. But it is much harder to track social welfare than it is to track dollars, so the metrics are controversial. If we’re going to have our arguments taken seriously, we need quantitative measures – a human development index for IP. Relatedly, IP regimes for poor people are subject to charges of creating another anticommons. To answer those claims, we need explicit arguments about social welfare.

Institutional competence: IP may not always be the best mechanism for dealing with social welfare and distribution. We don’t have to think it should be dealt with only through the tax system, but in the US system, pharmaceutical issues are probably best addressed through insurance.

Sunder’s smaller but significant point: Equating traditional knowledge with a domain that must be conserved has the unfortunate effect of making it seem static.

Poor people’s knowledge is not written down, and under US law unwritten foreign knowledge can’t serve as prior art. It’s a rule of evidence to prevent false claims for prior art; courts are skeptical even about evidence of domestic unwritten use. But developed countries seem to agree that we should end discrimination against foreign unwritten prior art.

We like to centralize rights in a single holder – which is problematic, but does reduce transaction costs. GIs allow some knowledge to be owned collectively; we need to do more work on ways of thinking about modifying Western IP systems to allow collective knowledge, for example for work done between firms. Prepatentable information can be worked on and owned collectively.

Sunder’s responses to comments: Most IP scholars haven’t taken advantage of welfare-based economics, and we should. We should also look to social and cultural theories for why we create and what the social meaning of our creation is. There is a convergence of intellectual property, identity politics, and internet protocol – what does it mean to have social movements turning to IP (intellectual property)? We need a better understanding of IP as a mechanism for structuring social relationships, not just for producing goods. What kind of culture do we want to create?

Yochai Benkler objected to the idea that IP could be good for the poor if designed with them in mind. Just because we can recharacterize the crumbs that fall from the table of the IP system as IP-based doesn’t mean IP gives the poor value. Sunder makes an empirical claim: Women will not be beaten if we give them IP protection, because their work will be of more value. Benkler doesn’t believe it; he thinks it’s better to work on a global coalition to roll back this regulatory system.

Sunder responded: The domestic violence example from her paper is meant to show that we need to think about how our rights are interrelated – women who lack material rights to their novel cultural contributions (which could fit easily in to the IP system but are being ignored) are poorer and weaker than if they had such rights. The absence of protection amplifies the social effects of the existing system. Sunder is for a robust public domain, but wants to investigate how the rhetoric might not include everybody. We can’t be so afraid of expanding new IP rights when it may be just in some cases to grant them. That’s the problem of the binary between IP and the public domain.

James Boyle expressed what he termed a crude political fear, which closely tracked the Benkler-Sunder exchange: There are two schools of thought in WIPO – (1) optimistic: the traditional knowledge initiative can show the narrowness and blindness of current IP conceptions, which need to bring together effects on environment and other distributional issues; and (2) cynical: access to knowledge is a threat to WIPO, and traditional knowledge protections are the bone to be thrown. The latter position is, “you can have your little beans, just give us more – more DMCA, more database protection, more.” In this situation, the question is not whether you or I could come up with beautifully crafted rights drawing on some non-effeciency-maximizing metric. Rather, the way that it’s developing at WIPO is that lots of people think it’s great to open Lemley’s can of worms and split the “access to knowledge” people with the promise of rights for some.

Sunder: (1) Her primary aim is to engage with access to knowledge: what is the development agenda we’re crafting? We don’t want to fall into the same traps as the existing system. Access to knowledge in one aspect is about distributing the knowledge goods of the West to the South/East – getting them the drugs/the texts. But we should also think about the future: how to build the capacity to produce knowledge, because that’s where wealth is going to come from. (2) Broadly, about fear: Deconstruction was scary, now it’s not. Cultural analysis is scary now, maybe it won’t be in ten years.

Maggie Chon: These comments illustrate how fear of maximalism has shaped our beliefs. Sunder’s project is looking at IP from poor women’s perspective, but we get resistance to that based on our fears of what others will do. What’s important in the work is bringing those outside stories – people who’d like the incentivizing effects of IP, however defined. Artisans do need protection from cheap copies made in China. (My thought: so did Bonazoli want protection for her heart spoons; this is an old, old argument in IP and, for that matter, globalization. And Sunder recognized this with her point about whiskey – those cheap copies in China are made by poor people too, and they might object that your art is my dinner.)

Cultural Environmentalism at 10: Introduction

I spent the weekend at the Cultural Environmentalism at 10 conference. It was wonderful.

Larry Lessig introduced the conference: Ten years ago saw developments that we thought would be foundational – John Perry Barlow’s statement, the Communications Decency Act, the 1996 Telecom Act – which are now irrelevant, and Boyle’s book, which is still foundational, helping shape the politics of IP. This conference celebrates the beginning of a movement that continues today. Questions: how shall we architect IP? How should we think about the disciplines within which we approach IP?

James Boyle: liveblogged by Joe Gratz.

A couple of things I wrote down, expanding on Joe's account: Boyle says that he came up with a metaphor that described well what others were doing. Getting credit is like wrapping other people’s presents and getting called Santa. (Here he’s engaging in the practice of disclaiming credit appropriate to academia!)

The environmental metaphor was about making visible the invisible, about linking communities of interest, so that they saw common roots of their struggles in concepts of private property that ignored externalities and scientific theories that assumed we could tamper with a species or place with impunity. The political movement had to be connected to academic themes about complicated ecological connections, externalities, and humility about intervention. The environmental movement succeeded in making these ideas accessible to high school students.

In terms of scholarly aims: There’s more history to be done, such as how the philosophical differences between droit d’auteur and common law countries have successfully been submerged at the international level.

Perfect price discrimination – selling the same work for ¼ rupee to a poor Indian and $1000 to a Park Avenue socialite – is attractive to elite policymakers but will never survive in politics. Too many people think it’s not fair.

Non-DMCA case about printer cartridges

In re HP Inkjet Printer Litigation, 2006 WL 563048 (N.D. Cal.)

Plaintiffs sued HP for false representations about its printer cartridges. Specifically, they allege that HP’s “smart chip” technology, which can provide alerts via email or cellphone, deliberately misinforms consumers that the ink level is low when substantial ink remains, causing consumers to buy more ink. The cartridges also allegedly have an undisclosed, preprogrammed expiration date after which they won’t work, even if ink remains. Moreover, the technology interferes with consumers’ ability to buy from third-party manufacturers.

HP argued that the plaintiffs failed to allege they themselves suffered harm from this conduct; the court agreed and granted leave to amend. The court rejected HP’s argument that the plaintiffs failed to identify HP’s allegedly misleading statements with sufficient particularity; the plaintiffs pointed to several statements in HP’s advertising describing the “smart chip” features, touting them as consumer-friendly and saying things like “SureSupply … provides alerts via email or cell phone when toner or ink is low.” Comment: if low ink isn’t actually the trigger, that’s explicitly false, though the complaint appears to cast this as a failure to disclose limits on the chips, using phrases like “Absent from HP’s marketing material is any mention of …” and “HP has deliberately withheld … information ….” For once, this seems like underpleading the claim.

Plaintiffs’ unjust enrichment claims also survived, though the court dismissed their breach of implied warranty claim for lack of vertical privity and held that their breach of express warranty claim didn’t sufficiently identify the precise warranty terms on which they allegedly relied.

Grandfathered pediatric drugs: compare and save, or compare and be deceived?

PediaMed Pharmaceuticals, Inc. v. Breckenridge Pharmaceutical, Inc., 2006 WL 544525 (D. Md.)

This case involves an unusual situation: competing prescription drugs that haven’t been through the FDA’s extensive evaluation and testing scheme, because the active ingredient has been used since before that scheme existed. Plaintiff PediaMed focuses on developing medicines for children. It makes Viravan-S (active ingredients: a nasal decongestant and an antihistamine), using a patented process that allegedly allows for sustained release, masks the taste better, and results in fewer impurities. PediaMed has heavily promoted Viravan to doctors.

Defendant Breckenridge is a generic drug company that produces a generic version of Viravan under the name . V-Tann’s advertising materials state: “Compare the active ingredients in Viravan-S.” Defendant markets primarily to drug wholesalers, distributors, chain drugstores, and pharmacists. The labels on both products list the same amounts of the two active ingredients.

PediaMed asserted that the two medications are not pharmaceutically equivalent because of differences in the amount of active ingredients and the variation from ideal accepted by Breckenridge (80%-120% of the label amount in any given batch, while PediaMed accepts only 90%-110%). Also, Viravan is made with United States Pharmacopeia/National Formulary ("USP")-grade ingredients, while V-Tann contains non-USP grade active ingredients – except that, the court noted, there are no USP standards for these active ingredients, so Viravan’s active ingredients are also non-USP. Moreover, the manufacturing processes differ. Defendant didn’t test V-Tann for bioequivalence before launching it.

Maryland law follows the FDA, whose Orange Book allows substitution of a generic for a brand name drug if there’s therapeutic equivalence, which requires the same active ingredients, dosage form, method of administration, and strength or concentration. The generic has to meet the same quality and purity standards, but may differ in such characteristics as shape, flavors, preservatives, and expiration date. However, V-Tann isn’t in the Orange Book, since Viravan was grandfathered into the pharmacopoeia. If the original/brand name drug is grandfathered, the drug that claims to be the generic equivalent doesn’t have to go through an abbreviated new drug application (requiring a demonstration of therapeutic, pharmaceutical, and bioequivalence), and thus doesn’t end up in the Orange Book.

PediaMed alleged false advertising and unfair competition under the Lanham Act, common law unfair competition, and tortious interference with its business relationships with distributors, pharmacists, etc. It also requested a declaratory judgment that pharmacists may not lawfully fill prescriptions written for Viravan with V-Tann.

The FDA has sole and exclusive jurisdiction to enforce the FDCA. But the federal courts have jurisdiction over false advertising claims. Which is this? Mylan Laboratories, Inc. v. Matkari, 7 F.3d 1130 (4th Cir.1993), the relevant circuit precedent, is not quite on point because it dealt with a non-grandfathered drug, as to which the FDA had made a determination of equivalency. The court found that PediaMed could litigate whether Breckenridge’s claims of generic or pharmaceutical equivalence are false because that doesn’t require the court to interpret any FDA rules or reject an FDA determination. However, PediaMed’s claims based on the argument that the V-Tann label is literally false because it misstates the amount of the active ingredient fall within the FDA’s exclusive jurisdiction over labeling and are precluded. Breckenridge’s unclean hands argument, which alleged that Viravan was poorly manufactured and adulterated, suffered the same fate.

But Breckenridge had another unclean hands argument: PediaMed falsely advertised Viravan – though its advertising suggests children prefer Viravan, PediaMed never conducted any testing to support this claim, and it uses fictitious testimonials. The court found that Breckenridge hadn’t shown it was harmed by the false advertising, so it couldn’t invoke the unclean hands defense. (This seems weak to me: unless there are a lot of competitors in the market, Breckenridge seems like the obvious target of PediaMed’s superiority claims; if those claims are false, Breckenridge has suffered harm from them.)

PediaMed argued that Breckenridge’s “compare” statement was a literally false claim that the two drugs are equivalent and pharmacists may substitute V-Tann for Viravan at will. PediaMed also submitted survey evidence showing that, when 150 pharmacists reviewed Breckenridge’s specification sheet, which states “compare the active ingredients,” 51.3% believed the two drugs to be pharmaceutically equivalent.

While PediaMed argued that all four differences mentioned above make the drugs non-equivalent, its expert witnesses only opined that the different amounts of active ingredient and different specification ranges mattered.

Breckenridge argued that its claims were true. The manufacturing process concededly starts with more active ingredient than stated on the label, but time and loss during processing account for that; in testing, the actual amount of active ingredients in the finished product ranged from about 110% to 114% of the label. As to specifications, Breckenridge argued that, given that the active ingredients are not in the USP, other federal regulations provide authoritative guidance; those regulations require a drug to have at least 100% of its stated active ingredients. For a non-USP drug, only a manufacturer can determine appropriate ranges, because of variations in production processes; Breckenridge argued that its range was within industry standards. In addition, it argued that PediaMed had no tests to show that PediaMed’s process was unique or distinguishable from standard manufacturing processes.

Finally, Breckenridge argued that “compare” is not literally false because it has many possible meanings, citing Zoller Labs., LLC v. NBTY, Inc., 111 Fed.Appx. 978 (10th Cir.2004) (there is more than one reasonable interpretation of "compare to the ingredients"). The court distinguished Zoller, however, because it involved advertising claims made to the general public, not claims made to pharmacists, who may understand the word "compare" as having certain specific connotations.

Thus, the court concluded that there was a dispute of material fact. Both sides’ evidence showed that some deviation from the amount stated on the label is acceptable, although the parties dispute what is the acceptable amount of deviation, how to calculate it, and whether the end result allows Breckenridge to claim that V-Tann is equivalent and therefore substitutable.

PediaMed’s request for a declaratory judgment that it’s unlawful for pharmacists to substitute V-Tann for Viravan was inapt because it hadn’t named any pharmacists in the suit.

Read all about it -- please, we need the numbers

Crab House of Douglaston, Inc. v. Newsday, Inc., --- F.Supp.2d ----, 2006 WL 522456 (E.D.N.Y.)

This case began with circulation misstatements by two Long Island newspapers, Newsday and Hoy (a Spanish-language paper launched by Newsday) – they’d overstated circulation by 40,000 daily/60,000 Sunday and 15,000/4,000, respectively. The supposedly independent auditor (ABC) tasked with monitoring actual sales wasn’t and didn’t. Two of the individual defendants even created a computer program called “Fudge ABC” to simplify the fraud. The court pointed out that “Newsday reported the scheme in its own pages.” That didn’t stop the lawsuit, though, filed as a class action on behalf of advertisers who’d overpaid for advertising, which is priced in part based on circulation.

The court dismissed RICO claims against a number of defendants for failure to allege the necessary elements – RICO, no less than ERISA, has become a “complex and reticulated statute,” for which you may read “mess” if you like. Perhaps some RICO-savvy blogger will analyze the decision, but I haven't the heart.

Plaintiffs' Lanham Act claims were dismissed because they were not plaintiffs' competitors. Standing under the false advertising portion of the Lanham Act requires a competitive injury, not an injury to the plaintiff in its role as consumer, which was what happened here. (Note: federal courts made this requirement up, because they didn't want to be small claims court for disgruntled consumers. Understandable, yet hard to find in the text of the statute, especially given that there's no such competition requirement for trademark. Harm to "commercial interests" could be in the statute and cover both trademark and false advertising. It just isn't.)

So the state law claims were dismissed, presumably to be refiled in state court.

Off to California; that's the end of this posting barrage, which reflected a backlog.

I'm your only plumber but I'm not actually your plumber

Just Water Heaters Inc. v. Affordable Water Heaters and Plumbing, Inc., 2006 WL 449136 (N.D.Cal.)

Plaintiffs sued defendants for, among other things, copyright infringement, false advertising, and fraud. According to the complaint, plaintiffs "have applied for copyright registration with the U.S. Copyright Office covering the protectible content of stickers containing emergency water heater shutdown procedures." Hmm … any guesses about defendants' possible reasons to dismiss the copyright claims? Anyway, defendants are copying, modifying and selling these emergency stickers. Moreover, defendants have been including statements with their materials designed to mislead consumers into thinking they've previously done business with defendants. In particular, Affordable sent stickers with new telephone numbers to customers with instructions to place stickers over Affordable’s old stickers – except, of course, they weren’t Affordable’s old stickers, they were plaintiffs’. Customers were thus deprived of contact information for plaintiffs and simultaneously induced to think they’d been dealing with Affordable all along. (This is a false advertising claim that is a trademark claim in all but name.)

There's no jurisdiction over a copyright claim until the copyright has been registered. There's a split over when jurisdiction attaches: when a certificate issues, or when the registration is pending. Surprisingly, the Court of Appeals for the Hollywood Circuit has yet to weigh in (or maybe it's not so surprising – mature industry players tend to get their registrations in as a matter of course), and the district courts are not in agreement (no reason to be ashamed -- panels on the Ninth Circuit are not always in agreement). This district court picked the side with which I agree – that the issuance of a certificate is a prerequisite to bringing an action.

Plaintiffs’ unjust enrichment claims would ordinarily be preempted by the Copyright Act, but the false advertising claims offered an alternative basis to sustain the claim. Plaintiffs also claimed that defendants’ false statements violated the California Business and Professions Code’s prohibition on fraudulent deceit, but they failed to plead that consumers suffered an injury in fact and lost money or property because of the deceit, as required by the law, so the court dismissed that claim. Likewise with plaintiffs’ fraud claim – they failed to plead how they relied on any of defendants’ representations to their detriment.

The Lanham Act claim, however, survived. Though the court found that plaintiffs had only minimally alleged the elements of false advertising based on defendants’ instructions to place their sticker “over our old sticker,” they had done enough – even though the statement may not be literally false, it is “plausible” that it could mislead or confuse consumers. Comment: I’m not sure what’s minimal about this. If the facts are as plaintiffs allege, this seems to be a calculated scheme to capture plaintiffs’ goodwill through the false implication – I would say necessary implication, since “our old sticker” can have no other meaning in this context – that defendants are the people with whom customers have already been doing business.

In any event, plaintiffs requested a preliminary injunction, including the transfer of the phone number on the stickers to them. The court denied the injunction – which seems right, since there’s no mention of any evidence being submitted either way.

False Advertising Case Alert from Proskauer

Lawrence Weinstein, Co-Chair of Proskauer's Trademark and False Advertising Practice (who kindly sent me a copy of one of the ads involved in the Clorox Leaky Goldfish case), has a new client alert here about an important Massachusetts case cutting back on the ready availability of consumer class actions in that state.

We advertising law folks have to stick together, if only because we'll be confused and saddened if we try to hang out with the "ad law" crowd.

NY appellate court keelhauls Pirate's Booty settlement

Klein v. Robert's American Gourmet Food, Inc., --- N.Y.S.2d ----, 2006 WL 240592 (N.Y.A.D. 2 Dept.)

This appeal was brought by an objector to the certification of a nationwide settlement class for fraud and violation of, among other laws, New York's General Business Law, sections 349 and 350, which cover deceptive advertising. The defendant sells snacks known as Pirate's Booty, Fruity Booty, and Veggie Booty (celebrated in a Salon article here as "crack for babies"). The lawsuit, like others in California, Florida, and New Jersey, began after the Booties were revealed to have higher fat and calorie contents than the label indicated – more background here.

The proposed settlement involved $3.5 million in coupons for defendant's snacks, for about 20% of the retail price, distributed so as to result in the redemption of approximately $780,000 per 6-month period. In addition, the snacks were to be tested for fat and calorie content at regular intervals and the results reported to class counsel for four years. Finally, defendant would pay up to $790,000 in attorney's fees.

The lower court conditionally certified the class for settlement purposes only. The appellant was the plaintiff in an individual action in New York who became a member of the class and objected. Her objections included that the settlement didn't provide enough value for the class and that the proposed fees were excessive. When her objection was rejected, she sought to opt-out; this led the defendant to argue that she lacked standing. Then she rescinded her opt-out, but the lower court agreed with the defendant. The appellate court concluded that she had standing both because her opt-out notice was defective and untimely and because she opted back in before the final deadline.

New York class actions work pretty much like federal ones. The appellate court, acting as guardian of absent class members, had three concerns. First, the class definition. Except for GBL § 349, all the causes of action required proof of reliance. But the class encompassed all purchasers during the relevant period, even though some – perhaps many – of the buyers would have bought it even if they'd known they were getting 8.5 grams of fat instead of 2.5. Given that there was no reason to adopt a fraud-on-the-market theory here, the class definition was too broad. And there was no record evidence supporting the trial court's conclusion that common issues of law and fact predominated, since reliance would be determined individually.

The GBL § 349 claim doesn't require proof of reliance, but is strictly limited to purchases made in New York, while the class is a US class.

Doesn’t this reasoning make it impossible for deceptive trade practices cases to be litigated or settled as class actions? No, the court says: The existence of individual issues is just one of several factors to be weighed by the court. But the record here doesn't show the trial court considered that factor at all, so remand is required.

Second and independently, the reasonableness of the settlement is at issue. There was no indication that the proposed discount coupons had any intrinsic cash value, or that they could be assigned, aggregated, or transferred in any way, which made it harder to find that they provided definite value to the class. Moreover, the settlement didn't propose to distribute the coupons directly to the class, but instead to the general public. Where it's difficult to locate class members or distribute funds directly to them, this cy pres distribution may be a "useful complement" to more traditional formulas. But the record didn't show that the trial court considered the alternatives, and this is particularly troubling because the coupons are unlikely to benefit class members with the most serious grievances.

After all, the defendant changed the label, not the fat and calorie content. People who relied on the misrepresentation are unlikely to buy the correctly labeled product.

Though this also required remand, the court made a very important point: given the absence of proof of purchase, the cost of litigation, and the individually modest sums at stake, many of the class members would face significant obstacles litigating individually and might not pursue their claims at all. (As is true of almost any consumer class action.) This broadens the range of reasonableness against which the settlement's value should be measured.)

Third, the court was concerned about the attorney's fees because the record was insufficient to show the value of services rendered.

So, it was back to the trial court. Any bets on a final settlement?