IPSC: Copyright

Michael Birnhack

Whose Bratz Is It? The Integration of Copyright and Employment Law

Modes of cultural production: medieval patronage—sponsored creativity; 18^th century—romantic author; 20^th century—corporate, hierarchical production; 21^st century—peer production. But corporate model is still dominant, at least in some industries. Who should own the copyright made within a workplace context? How should the law intervene?

Bratz dolls: Mattel designer Bryant moved to MGA, which produced Bratz. Mattel won $100 million, including copyright infringement verdict; unclear what the copyright infringement was for (drawings?).

Miller: Supervisor of quality control lab at CP Chemicals, computerizing analytical data. At home, wrote software that assisted in calculations. He left the firm; ruling: employer owned the copyright.

US version: work for hire. Germans: ownership remains with the employee, who can allow exploitation for limited purposes and there are other restrictions which require case by case application. This shows that there is a spectrum between employer ownership and (inalienable) employee ownership. The German model is on the paternalistic side. In the middle: joint ownership, shop right, alienable ownership in author, and variants. So, where should we allocate ownership?

Tasini: authors supposedly won, but look what happened even before the decision: contracts were changed immediately on a global level—journalist friends of his working in Israel called him and asked why they were being asked to sign new contracts. NYT deleted 115,000 articles written by freelancers as a result of the decision. Lesson: even if the law intervenes, there will be a Coasean corrective transaction: smooth, immediate, and costless to the employer. The cost was externalized to the authors, who won the case but lost future rights, and to the public, which lost ability to get materials out of the NYT archive.

Look at employment law, not agency law, for lessons. Contrast to copyright law. Different concepts of copyright: efficiency/incentive; personality theory/moral rights; labor theory/Locke. Employment law: laissez-faire and fairness are dominant accounts. Employment generally features unequal bargaining power. This can be various kinds of market failures, resulting in employee’s inability to affect the contract. Internal factors: bounded rationality; information deficiencies. External factors: lock-in costs; labor market.

Solutions: allocation to employee? We could see this as a penalty default rule. For the employer to get the rights, the employee has to agree, and the salience to the employee is heightened: the employee will recognize that s/he has rights and will demand a premium to surrender them. However, with unequal bargaining power and other info problems, the employee will always surrender the rights without even reading the form; what’s the point of reading the form when you know you have to accept the terms?

Under copyright, incentive theory says that copyright corrects market failure by responding to the risks of producing works. He identifies two kinds of risks: production and marketing.

What are the typical cases? We should allocate ownership to the body that bears the risk. We should look for typical cases and avoid allocations that will immediately be corrected, e.g. Tasini allocations. Consider the employer, the employee, and the work. Is the employer in the content industry, or is it CP Chemicals? Is the employee hired to make works, or to do some other function? (Bryant was hired to make dolls, while Miller was hired to perform quality checks.) Proper result: Mattel should own the Bratz, but Miller should have owned his software. This is close to the current American work for hire doctrine, but is a more conceptually satisfying construct than relying on agency law.

Brian Carver

Why License Agreements Do Not Control Copy Ownership: First Sale and Essential Copies

I liked the paper and think it would be very useful to practitioners working in the area.

License/sale distinction is likely to come up in 3 cases in the 9^th Circuit: promotional CDs; Blizzard/WoW Glider; and AutoCAD software. The law is a mess because of failure to appreciate the distinction between copy ownership and copyright ownership. Promo CDs and AutoCAD: court held that resellers could use the first sale doctrine to avoid liability. Blizzard: court found defendant secondarily liable for infringement because people who buy WoW at Best Buy and have the CDs inserted into their computers are not owners of software.

The correct approach to copy ownership should be logically correct; must respect precedent; must respect congressional choices; and would hopefully make sense.

What does a “license” mean? Copyright owners are using it to mean “transfer a tangible object in which a copyrighted work is embodied, for a specified period of time or perpetually, without transferring title to the object, while providing some copyright permission.” But this isn’t one of the exclusive rights granted: the copyright owner has the right to distribute copies by sale, other transfer of ownership, rental, lease, or lending. This is a form of distribution that copyright owners just made up. They say it’s not a sale or other transfer of ownership, but it’s also not rental; nor is it lease or lending, which have to involve a predefined term of possession. It can’t sensibly be determined to be perpetual, but in these cases perpetual possession of the object is given.

So what are copyright owners doing? The entire notion of distribution by license fails. Solution: §202: ownership of a copyright is distinct from ownership from ownership of the material object. You can transfer a copy with no transfer of any copyright rights. The first sale cases: Bobbs-Merril etc. The SCt just affirmed patent exhaustion in Quanta, and we should respect the idea of preserving first sale, and also consider whether any of these contractual provisions are preempted.

It strains copyright’s public credibility to say that purchasers of the game disk don’t own the disk even when they can destroy it, throw it away, etc. Right approach: look at whether the buyer gets perpetual possession, which is the key distinction from a lease. Perpetual possession = sales.

Q: UCC has given rise to lots of sale/lease cases.

A: There are lots of things that don’t make it into these cases that courts should be drawing on.

Olufunmilayo Arewa

The Rise of Nollywood: Distribution, Business Development, and Intellectual Property

Nigerian film and TV industry emerged in the late 1970s, during a time of economic collapse. Grass-roots growth. No cinemas in Nigeria—people couldn’t leave their homes because of bandits. Cost of film led Nigeria to be leading user of digital film. 12 domestic films released in 2001 in Francophone Africa—the rest of the African market is small.

Nollywood: 40 movies/month and dozens of TV dramas, shot in Lagos. Melodramas, filled with adultery, bribery, and local mysticism. Bestselling Osuofia in London sold 500,000 authorized copies, possibly millions more. Filmmakers adopt new tech as soon as it becomes available, antithesis to typical African film production, which was expensive with gorgeous production values. $250 million business employing 200,000 people—interesting development model and democratization of cultural production. Also reflects size of Nigeria’s domestic market: 1 in 4 Africans is Nigerian.

Significant amount of political/social control and censorship of films in Africa. Will force changes to films. Nollywood deals with controversial topics not dealt with in print: corruption, HIV/AIDS, drugs, violence, but no sex.

There is no reliable electricity in Nigeria; a significant portion of the population lives on less than $1 a day. Price of single video CD is less than $2.5, $4 over the internet in foreign markets.

Why did it succeed? Domestic market; large pool of actors; drama of Nigerian life. Many films (44%) are in English, Yoruba and Hausa films also circulate in Africa. 2x the number of films released by Hollywood in recent years. Who watches them? People in Nigeria and other African countries; immigrants; Satellite cable channels—Africa Magic is 80% Nollywood. One Zambian said her children started to sound like Nigerians because they watched the films so often.

Business models: small budgets, $15-25,000 per film. Little control over distribution, much unauthorized distribution. If a film is a hit, it’s often insufficiently available because of limited DVD production capacity and poor Nigerian road infrastructure. Typically distributed in 15,000 DVDs with no copy protection.

Unauthorized distribution is a key element of Nollywood success, facilitating viral growth. Enabled by limited copyright enforcement in Nigeria. Nigeria generally indifferent to IP; will that change?

Was very useful in emerging business, but may be problem in maturing industry. 70% of revenue possible, it’s estimated, is lost due to piracy. Take estimates with grain of salt though.

Where is the real value in the supply and distribution change? Film producers should think about how to monetize piracy: embedded ads, strategies to profit from distribution to otherwise hard-to-reach audiences. Branding strategies to distinguish legit from unauthorized. Robust financing models and improving distribution networks more generally.

Cheng Lim Saw

The Case for Criminalizing Primary Infringements of Copyright Infringement - Perspectives from Singapore

Singapore has recently criminalized certain acts of infringement. New section implementing FTA with US. Lack of commercial motive is now irrelevant, as it is in the US. UK distinguishes between uploading and downloading—uploading a significant number of files may be punished criminally, but downloading may not be. European parliament has adopted the view that private infringement by personal, nonprofit purposes will not attract criminal liability. So jurisdictions worldwide are divided.

Why criminalize when civil penalties are available? He begins with the harm principle: criminalization is justified when activities cause harm. A serial downloader with tens of thousands of files causes significant economic harm to lots of copyright owners. Look what happened to the Virgin Megastore and Tower Records: economic losses. Also, disregard for IP will break down the IP system and its incentive functions as a whole.

It is also inherently immoral to infringe. Copyright is expressly recognized by statute as a form of personal property. The relationship between the owner and his property is moral, and founded on justice. An infringer has taken something that belongs to the copyright owner: unjustly enriched at the expense of a copyright owner, like the thief who steals a CD from a store. If it is morally wrong to steal for private, noncommercial purposes, then it is morally wrong to infringe.

He is not sure the RIAA’s strategy of stopping suing individuals is the right strategy for the future.

Mark Schultz: Some distinctions between physical theft and infringement: Potential for physical conflict; likelihood of lost commercial benefit to property owner; and clarity of offense.

A: We are really talking about infringements that are significant in extent, not single acts. Incorrigible downloaders = fair compromise.

Bonus post: Arlington, the Rap

Arlington: The Rap: Aside from being a largely accurate account of the Arlingtonian experience, this music video is notable for repeated visual and lyrical references to various brands—because it is a largely accurate account of the Arlingtonian experience. It’s good to know that the permission culture hasn’t stopped this free(ish) spirit from telling it like it is. Thanks to Jessie Bennett for bringing it to my attention!

IPSC: trademark and the consumer

Jeremy Sheff

Search Costs and Brand Equity in Trademark Law

Chicago School economics posit two justifications for TM: (1) by allowing owners to reap benefits of quality, provides incentive to invest in quality; (2) increase economic efficiency by providing information to consumers that consumers would otherwise have to expend resources acquiring, lowering consumer search costs and increasing social wealth overall.

First: is this true? Descriptively incomplete: oversimplified assumptions of rational consumer behavior. Second: what does it mean for law?

The model assumes consumers are looking to satisfy set preferences, matching options to preference set. Heart is a rational actor assumption, subject to standard behavioralist critiques of rational actor models. What are the actual decisionmaking processes of consumers? Literature on brand equity provides some evidence.

Marketing literature defines brand equity as the incremental value of a brand and the marketing efforts of the brand compared to an identical unbranded product.

This shares structural affinities with the law and economics model: the brand premium. Most branded products and services have a brand premium—Tylenol. (I wonder whether it makes a difference whether there’s brand premium v. other brands or only brand premium v. house brands—a lot of times Pepsi and Coke cost the same in the store/machine, suggesting no brand premium as between each other.) Brand premium includes physical and possibly psychological qualities, plus the value of the information conveyed by the brand. Law & econ: The more information the mark conveys, the less resources the consumer has to expend in searching, and the higher premium a consumer will be willing to pay. Importantly, the content of the information is irrelevant, as long as it’s info a consumer would use in search. The value of all types of information can be expressed in consistent units.

Marketers take a different approach. Two conceptual divisions: perspectives and methodologies. Brand equity is usually analyzed either from the perspective of the firm or from the perspective of the consumer (willingness to pay more). Methodologies: diverse approaches, but they divide generally into qualitative and quantitative. Qualitative approaches look at consumer psychology—what do consumers think? What associations do they have with the product, or not with the product but with the brand—value, luxury, social status, etc.? Perceived quality: a particular type of subjective evaluation. Brand loyalty: tendency to stick with previous brand, for whatever reason.

Some of these elements fit very well with search costs as a model, and some don’t fit at all. First, product attribute associations and perceived quality fit well. Relying on brand to provide product info. Non-product-based associations are harder, especially when the associations derive from advertising and not experience. Doesn’t want to get into advertising debate generally, but will engage with a couple of law & econ chestnuts: First, law & econ folks say that ads can’t deceive consumers for long, because consumers will react to experience. If ads get people to rely on emotion and intangible values, that’s just an expression of individual subjective utility, and we shouldn’t decide to discount subjective preferences. He might quibble with that as applied to status goods, but leave that aside.

What about brand awareness and brand loyalty? They influence purchase decisions because, all else being equal, we prefer the familiar over the unfamiliar. The market-leading brand in many categories is impossible to displace. Where familiarity is based on experience, we might not care much. But where familiarity is built primarily through ads, the costs of which are borne upfront by producers with the expectation of charging a brand premium, the search costs models have a problem. Producers have an incentive to get a foothold in consumers’ minds regardless of conveying any product information.

The degree of reliance on familiarity in purchasing isn’t consistent across product—low-involvement purchases are more likely to rely on familiarity; brand associations appear to be as important as familiarity in luxury hotel market; in cellphones, brand awareness seems to be key to decision to purchase branded over unbranded product.

Implications for trademark policy? First, insofar as TMs influence consumer decisionmaking as a result of marketing, the economic function of TMs isn’t a simple transfer of information provision from high-cost collectors (consumers) to low-cost providers (producers). Instead there’s also rent-seeking: familiarity has a payoff. Marketers are taking advantage of this feature of consumer psychology to obtain a higher brand premium without providing their part of their bargain: the information.

The variability across industries suggests we can’t base conclusions on purely theoretical foundations or a priori reasoning. Individual TM situations matter.

Mark Lemley: Can’t this be fit into search costs framework? True that ads drive

brand loyalty in nonrational ways dealing with a particular product. But is brand loyalty not rational in the long term, and information cost-forcing as well? I establish brand loyalty by buying the product and liking it, or people say good things, or I see it and it looks cool—all of which may have product/info-forcing incentives.

A: True perhaps of brand loyalty, but not of recognition/awareness, which is a separate driving factor. W/r/t whether those decisions line up in the long run with search costs, that may be true, but that’s an apology for the search costs model rather than an argument in favor—search costs model is wrong, but policy implications may be the same. Maybe, but given empirical variation across industries, that shouldn’t be enough.

Q: Rational if you want to minimize risk; following familiarity is a way to minimize risk.

A: This turns out to be signalling theory in ad theory: investment in ads is a signal. But does that justify TM protection? It may be that there’s a correlation to consumer decisionmaking, in which case that gets us close enough to a welfare-maximizing policy. But familiarity is sticky. Even if there is some discrepancy between familiarity and actual experience, the willingness to depart from the heuristic is inefficiently less—less than it would be if we were acting rationally.

My version of the reaction: I don’t think this paper can avoid engaging the debate about advertising generally. What if brand familiarity/awareness arises from quality/justified success? See in particular the law & econ defense of ad expenditures as reproductive fitness indicators: I can afford to advertise, thus I am a reliable brand. More broadly, you may have to engage with whether heuristics are efficient to hold the position taken by the paper.

Laura Heymann

Naming, Identity and Trademark Law

Part of larger focus on attribution. We want recognition as the source of our creative efforts, and thus attribution can function much like TM in providing consumers information about source. There are concerns with using TM to deal with attribution; broadening TM may further expand an already overexpansive doctrine. Also, we think of names as part of identity, and it feels a little unsavory to bring that into the commercial marketplace. We in the US ask “who are you?” not “what are you called?” as other languages often do—strong connection between name and identity.

The law, however, has treated the adoption and changing of personal names and the adoption and changing of TM very similarly, in a functional way. This provides reason to think of attribution in TM sense.

Instance of changing name to signal change in identity: When ValuJet flight crashed into the Florida everglades, and the company reemerged as AirTran. Breaking a negative connection; the law allows this. Or maintaining a name, but changing the characteristics—the law tolerates a fair amount of this as well. E.g., selling used/reconditioned goods.

Both regimes developed similarly. Personal names have both denotative and connotative functions—shorthand for a bundle of associations attached to a person. Likewise with trademarks. Names can also indicate gender, nationality, age (Agnes v. Britney), region. We’ve all seen studies where names make a difference in how resumes are evaluated. Names need not be unique—we can tolerate duplicates, like we tolerate multiple Deltas, as long as we can get the right person from the context.

Meaning is made by consumers: the associations are made by others, not by the named person.

The power of names: G.W. Bush liked to give nicknames to reporters; this was an exercise of power. Likewise over history various people have been forced to accept various new names.

Social agreement on meaning and functionality of names. Qualitex: Anything can be a TM, regardless of ontological category. What about personal names? Courts held that certain things cannot be names—requests to change names to 1069 or the roman numeral III or the letter R have been rejected. Fraught with potential for confusion. More recently, like TM doctrine, courts deciding personal name cases have allowed more changes--! and Zea (single name) have been allowed, so long as the name indicates a person.

Multiplicity of identities: fluidity. Even when surnames began to come into existence, they were functional and would change during life: John Williamson might become John Miller who might become John Westfield. We do change names fairly frequently to indicate certain things and to create certain multiplicity of identity: celebrities, individuals who undergo religious conversions, partners to a marriage (why the gender-neutral language, when the practice is decidedly not gender-neutral?), writers segregating scholarly from romance novel writing, registration for email accounts. Corporations do the same thing: Estee Lauder and Clinique; Philip Morris and Altria; Blackwater and Xe, etc. Is this deceptive? The law doesn’t have any problem with multiplicity so long as the name functions as an indicator of source at its particular moment in time. Courts have refused to set contracts aside just because contracting parties used to go by different names.

More TM analogies: People still get name changes rejected on deceptiveness grounds (Chief rejected as deceptive indicator of authority; names of other people adopted for misleading others into a belief in relationship or identity with a famous person—Peter Lorry) and scandalousness (Fuck Censorship). Santa Robert Claus was rejected because public has a proprietary right in Santa.

Flip side: change in characteristics, yet maintaining the same identity—reveals disjuncture between identity and meaning. A tiger has four legs, but a three-legged tiger is still a tiger. Champion Spark Plugs, Nitro Golf Balls cases—how many characteristics can you change and still use the same name? Possible insight from transgender cases.

Q: What about parents naming children? That would be more analogous to registration than adult name-change cases.

A: US doesn’t regulate initial naming choices, so we don’t get as many of those as legal controversies. Other countries do—is there a parallel between TM theories and naming theories across nations?

Q: Literature on psychology of naming—the importance to the namer, the parent who gets to bestow the name. Do those lessons tell us anything about all those clients who feel about their brand that it is their child? Maybe interesting parallels.

A: Yes, naming is aspirational in a lot of ways.

Lisa Ramsey

Brandjacking on Social Networks: Confusion About the Source of Information or Advertising

Unauthorized use of TM on social networks to impersonate brand owners. For a news provider like the NYT, might be an easy infringement case against a competing news provider using Twitter etc. But if the TM owner isn’t in the business of providing information, is there infringement? There’s no confusion about the source or quality of goods/services. So look at cases about sponsorship and free expression.

Someone registered Nine West Shoes on Facebook and claimed to hold model auditions—asked women to send pictures of their faces and their toes, along with personal information, for a chance to be a shoe model. Had a Nine West picture on the site and a link to the official site, though they used a gmail address.

Janet/ExxonMobilCorp on Twitter—started talking about Exxon’s plans, the Exxon Valdez, etc. Turned out she wasn’t an official source from Exxon, maybe an employee not authorized to talk; Exxon says some of the information was false. Could harm consumers—could turn them off from a product.

Malicious impersonation of people is a problem, as is impersonation of companies. Or a person might just think it’s funny to do.

Think about noncommercial speech cases. Impersonation v. using the mark in expression to talk about the markholder, satirically or otherwise. Impersonation: we might want courts to find infringement, whereas other situations should trigger speech protections. Clear parody: difficult to find infringement. Courts can draw the line between parody and impersonation. Disclaimers can help, but if it’s not clear to a reasonable number of consumers whether it’s really the mark holder, there’s a problem. Transparency and accuracy is important—people want to know who’s speaking.

Another consideration: should we require not only evidence of deception but also evidence of bad faith intent to harm the markholder? Texas passed a law making it a felony to impersonate someone else with intent to harm, defraud, intimidate or threaten any person. If someone’s impersonating you, maybe there should be a cause of action! But there is a tension with the First Amendment.

Social networks may overreact and prohibit all mention/use of TMs; an upside of more rules would be to make it clearer what social networks should do to avoid secondary liability. Companies themselves need to create rules for employees about blogging without authorization—which also has free speech implications; cf. Marines’ condemnation of Facebook and Twitter.

Registering domain name/username: shouldn’t be enough to trigger her rule. You’d need content suggesting that you are the markholder.

Elizabeth Rowe: Consider phishing in this context: a site that isn’t Bank of America—damages on both ends (consumer and TM owner).

A: That would be one subset.

Rowe: Often in TM we say you can use another’s mark as long as there’s a disclaimer. Would it be ok to use Oprah’s name on FB with a fine print disclaimer?

A: Research shows disclaimers don’t work. So maybe you need a consistent way of indicating official status on a social networking site: Twitter has an “official account” indicator. Disclaimers can help; it’s a factor.

Comment: I worry about replacing the law of the horse with the law of Twitter. What Ramsey identifies as a desire for transparency and accuracy may differ as between Facebook and MySpace or other social networks; consider identity on Livejournal, where most usernames do not resemble personal names at all, and to use a personal name as a username is actually to make a fairly significant statement about one’s use of the service. Consider also danah boyd’s work on teens’ use of aliases and fake info. Courts are likely to be really bad at parsing the social context.

Query: why not require defamation standards to be met for noncommercial uses rather than bringing TM law into it? Also, why assume that a twitter name is a claim of identity? Sometimes that won’t be believable—I would want to make plaintiffs prove this, but I fear that courts will too often make the leap to presumption.

A: She would have a context-dependent rule—signing up for a username should be okay, but using an alias is not the same thing as using a deceptive name. There’s a TM injury. (This is also a type of injury recognized by defamation, though! The harm suffered by listeners in believing a false thing, as well as the harm suffered by the target of the attack.)

Q: Why push for law instead of governance by intermediaries? Facebook made initial choices to require real names, and that shaped the community that grew up.

A: You could argue assumption of risk—people on certain sites shouldn’t believe usernames. But sites have their hands full in figuring out what the rules are: should they require official verification from every user? The markholders aren’t deciding to use MySpace or not; they can still be harmed. (Unless, as argued, the consumers aren’t fooled by a MySpace page.)

McKenna: Injury to company doesn’t mean TM is the solution. TM is not a general purpose solution to bad behavior. Maybe this is deceptive trade practices. But squeezing the boundaries has unintended consequences.

A: She struggles with whether this should be an independent cause of action, like the Texas law, or within TM law.

(I think part of the problem is that Ramsey isn’t fully grappling with the question of when something that looks like an identity claim, “I am X,” will not be understood as an identity claim even if the content associated with it is not disclaimed or otherwise apparently distinct from what the TM owner would “really” say.)

Barton Beebe: see the Yes Men, who do these kinds of things—apologizing for Exxon Valdez, announcing that the WTO is dissolving, as if they were the official representatives—culture jamming that teaches people a Dadaist lesson. A disclaimer normalizes everything and snaps you back into the “real” world. Concerned with disallowing those kinds of practices.

A: Yes, it’s complicated. Tina Fey’s fake twitter account grew more popular when it was revealed as not really Tina Fey tweeting.

Beebe: Raises question of value of fakeness in political culture.

IPSC, first plenary session

IPSC

Abstracts and some drafts available at the website. As usual, an embarrassment of riches. I will miss plenty of stuff I’d like to see. And more standard disclaimers: I don’t do patents; my notes are idiosyncratic; these are all works in progress.

First Plenary Session

Thomas R. Lee - An Empirical and Consumer Psychology Analysis of Trademark Distinctiveness

Stands as a trademark expansionist: a traditional limiting doctrine ought to be abandoned, allowing protection of descriptive word marks so long as they’re presented in the context of a TM use. Consumer psychology is taken to support trademark restrictionist ends—McKenna: most of TM’s limitations come from premises about consumer understanding; Tushnet: cognitive science is attractive to TM law because it provides a psychological basis for it.

Some restrictionists saw psychology as a way to abandon intuition and stereotypes. More recently, restrictionists are retreating from the lovefest. We shouldn’t be so naïve as to assume that the psychology of consumer science will generate clear answers for such complex questions. But empirical uncertainty is no reason to abandon research—instability of the law ought to motivate our attempts to understand the mind of the consumer.

His research looks at the Abercrombie spectrum and in particular the role of descriptiveness. Wal-Mart: consumers are inherently predisposed to see an inherently distinctive term/symbol as a mark; it’s not reasonable to assume that consumers perceive a descriptive term as a mark. But how do judges know how consumers react to complicated stimuli such as a package?

In practice, the distinction between descriptiveness and suggestiveness is vague and arbitrary: “Chicken of the Sea” for tuna; LA for low alcohol beer; Pizza Rolls for snacks—depending on where you live, these are either descriptive or suggestive terms.

Thesis: descriptive marks, when presented in “trademark use” context, are inherently distinctive—likely to be perceived as source indicators. Law overvalues lexical meaning and undervalues semiotic meaning. People have “trademark” schemas that are based on location, size, typeface, and other non-lexical cues. What Lee calls a “trademark spot”: the place where the TM goes on a package.

Lee’s empirical work: looked at consumer perceptions of packages with descriptive terms and generic/suggestive/arbitrary terms put in the same place on all the packages. So: Fudge Covered Cookies tested for cookies, along with Chocolate Abundance, Celebrate, Map, Coriren and other terms. Results: only the generic term was perceived as non-source-indicating. There was no statistical difference between the other marks, whether they described ingredients or were laudatory or fanciful or anything else. Consumer perception is affected by non-lexical cues.

Second study looked at descriptive/suggestive distinction, using similar methods. Again, no statistically significant differences: all kinds were highly likely to be perceived by consumers as source indicators. Third study tried to identify a point at which the non-lexical cues might tip study participants to perceive source indicator v. descriptor. Placement, font, size, and other non-lexical cues about the terms: results show that semantic cues matter, but it takes a very tiny use before consumers stop perceiving terms as source indicating. (Note that the study didn’t seem to include a second, obvious TM, which may change the calculus—consumers probably do look for a TM, and I expect you’d get different results if the package already had “Duncan Hines” on it.)

Implications: we ought to look at tradmark use instead of the descriptive/distinctive line, which can be evaluated based on rules of thumb. Simpler, less administratively costly. If we believe the basic story of TM: Greater protection against consumer confusion. Greater protection of producer goodwill.

Principal objection: competitive need. He thinks there are answers to this. If you do think that’s driving the law, then we should make that the focus of the doctrine: instead of dividing between inherently and noninherently distinctive marks, we should ask directly the competitive need question: are these terms/marks essential to competition. That would look very different from the “descriptive” category—many marks like “wonderful” are not likely to be competitively essential. Also this is an occasional problem that doesn’t justify a blanket solution. It should be like genericide: when necessary, available to competitors.

Mark Lemley: Is this a challenge to the framework or can it be used within the framework? If Abercrombie sets up a framework of presumptions, maybe this shows it should be easy to show secondary meaning. Second: interested in finding that unquestionably generic term still gets 26% source significance response from consumers—does that have implications for how much recognition we should require in order to find secondary meaning?

A: Working on first question. His main reaction on point 2: a lot of stupid people out there. We need to net out some level of reaction. That’s a better question than throwing up our hands.

Lisa Ramsey: Free speech is a separate concern/cost. What about slogans? “Fair and balanced,” etc. Are those perceived as trademarks? Would your theory apply to services?

Lee: Hasn’t tested it. (This is related to my question of how ‘secondary’ marks are perceived on an already-branded package.) Also comes up when the mark is used aurally.

Q: What exactly are you testing?

Lee: The package, not the word.

Q: So did you vary the images? If you have Sun-Tost on a jar of jam, you’re making a marketing association of words and image—is there a confounding factor with the images?

Lee: We did use the same image for all of the cookies, and other products tested. He’s not trying to say anything about the Abercrombie spectrum with respect to likely confusion: may well be that descriptive marks are weaker when it comes to competing uses/likely confusion.

Comment: This is where the gap between empirics and doctrine shows: even if all this is true, the reasons that we care about leaving descriptive marks open for others to use are important—what happens to ITUs under this scheme? If we allow initial appropriation of a descriptive term by “trademark use,” what happens when someone uses the same descriptive term in the text of a keyword-triggered ad? If we accept this thesis, we need to reconfigure the doctrine so that uses that aren’t on a package aren’t “trademark uses”—which will make things very interesting to the trademark use debate, which in some ways overlaps with this thesis and is in some ways quite contrary to it.

Molly Shaffer Van Houweling – Author Autonomy and Atomism in Copyright Law

Users empowered by tech may be copyright casualties. Concern: misfit between copyright law made for sophisticated large entities and new creators with limited legal expertise: problems of complexity, expense.

She is interested in newly empowered creators as copyright owners: they don’t want to assign their copyrights—publishing themselves and retaining control over the copyright—CC, Columbia’s “Keep Your Copyrights” project for scholars and others, musicians who won’t sign with record companies.

She’s nervous about this: copyright might be too easy for creators to make stuff that’s automatically copyrighted and then retained by people all over the world. Adding a lot of complexity to the copyright environment: copyright atomism. Lots of people, worldwide, holding little pieces/microworks that really complicate the copyright landscape. Hypothetical: Wikipedia, an amalgamation of contributions from lots of individual copyright owners. Even when they’ve contributed minor changes they might be copyright owners. Wikipedia’s license allows many uses, but not all: imagine you want to go beyond the license—imagine the difficulty of negotiating with the multiple anonymous owners to do so.

Copyright doesn’t have to be atomistic, held by lots of individual copyright owners. Example: Star Wars mashup contest, inviting people to remix, but individual creators were not then atomistic owners, because the terms of service said that Lucasfilm would have exclusive rights to everything, solving some of the problems of atomism—if you want to mash up the mashups, don’t have to seek permission from all the owners.

(Boy, fair use is starting to look really good right now.)

This solution hasn’t been all that popular: Lessig called it “digital sharecropping.”

Problems of atomism have a historical pedigree: project explores that history. Atomism and responses to it. (Sounds a lot like Carol Rose’s Crystals and Mud (link goes to book version), the single best property article I’ve ever read.) Responses conflict with authorial autonomy, which is especially apparent in the digital age, where unfairness seems to abound, but atomism is a problematic alternative.

Atomism’s dimensions: (1) Proliferation—how many works are subject to copyright ownership? A function of number of works created and of protection requirements—elimination of formalities makes a huge difference. (2) Distribution: are the works owned by only one entity, as with Lucasfilm, or are they widely distributed among lots of people, raising transactions costs? (3) Fragmentation: as to any given work, into how many parts is it divided? Turns on questions like, what is the minimum size of creativity that qualifies for copyright protection—microworks. Also how customized and idiosyncratic the sticks in the copyright bundle are.

Stationers’ Company era: state-sanctioned printing monopoly in connection with licensing act. Rights allocated to limited pool of publishers who traded with each other and fragmented the rights in interesting ways. Not atomized because on the distribution score it was very limited—they were a small group of guys in London and information costs were not high. Control over atomism was solved by consolidation, which was a threat both to competition and to freedom of speech.

Next era: Statue of Anne/18^th Century England. Important innovation: initial copyrights allocated to authors, who could subsequently assign them to anyone. In practice, ownership was redistributed through private ordering to the same cozy club of Stationers. One lesson: law may not change atomism depending on conditions on ground. Eventually, authors started to retain some rights, chipping away at consolidation.

US: Ownership initially in authors, but generally assigned to publishers. But the publishers weren’t as consolidated as the Stationers. Also, rise of new types of highly collaborative works like encyclopedias.

Anxiety about atomism produced changes: work for hire doctrine; joint works were subject to undivided rights; “indivisibility” doctrine, creation of private groups to aggregate rights like ASCAP.

Authorial autonomy backlash in next major amendments: work for hire and joint work doctrines limited, indivisibility abandoned, formalities gradually eliminated, and termination of transfer right created (temporal fragmentation).

Internet age: proliferation of subject matter, no formalities. Distribution of ubiquitous authorship and retention of copyrights. Fragmentation: massive collaboration outside of work-for-hire context.

What does history reveal? This problem isn’t new. Recurring tension between autonomy and atomism. Law doesn’t always have impact on the ground. Private ordering and institutions are important to manage information and transaction costs. Strong norm of authorial autonomy may limit which types of legal and institutional solutions are available, so we have to look for solutions that won’t generate that (digital sharecropper) backlash.

So: instead of consolidation, coordination. Public licenses used by individual users—but that gives the problem of license proliferation/incompatibility. So we need some further coordination—license standardization.

Registration/notice as a solution—more information about license terms and owners could reduce confusion and transaction costs, if we deal with the information costs of atomism itself rather than trying to fix atomism. Need technological tools to make registration/notice requirements less onerous.

History is cautionary: hard to balance competition, free expression, and authorial autonomy with desire to avoid atomism.

My thoughts: I found the concept of atomism a little unspecified at the outset: I need more justification for distribution of rights as a concern. Why is individual ownership of a book atomistic compared to individual ownership of a house? In other words, for what purposes are books problematic units, and under what circumstances do we want it to be easy to collect the rights for the class of “books”? Probably not for the purpose of making films of them.

A: These problems come up in the tangible property context. Heller would say that atomistic ownership of a house is ok, but not atomistic ownership of a shingle.

Me: Yeah, but you also say that atomistic ownership of a book is a problem (that’s the point of the Stationers discussion, right?).

A: Yes, there are distinctions to be made.

Jim Gibson: Proliferation and formalities are hugely linked: bring back formalities, and many of these problems disappear entirely—get rid of a huge swathe of copyright owners at the outset.

A: That’s right. But what if we made it so easy to comply with formalities that they didn’t decrease the number of owners? Even so, formalities would help fix information problems.

Q: Free Software Foundation projects require assignment of copyright, and aren’t being accused of being digital sharecroppers—why not? Because their interests are aligned with those of individual contributors. And they’ve given assurances—e.g. in bylaws—about how the rights will be used. Good solution?

A: Yes. Part of the motivation for the paper was the “digital sharecropping” trope: isn’t the consolidator performing a useful function? Can we have consolidation consistent with authorial autonomy?

Elizabeth Rowe – Contributory Negligence, Technology, and Trade Secrets

Trade secret cases these days usually involve some sort of digital misappropriation—misuse of emails or other computer tech.

Courts second-guess whether putative owners did enough to keep the alleged trade secret secret: did the putative owner take reasonable efforts to keep its secret? Query: should the greater risks to trade secrets in a digital world change the way courts evaluate reasonableness? In other words, should reasonableness be pegged to a “should have known” standard? Now that anyone can walk off with 900 pages of documents in a USB drive, we need to reexamine what security measures are reasonable. This indirectly places a higher duty of care on owners because the risks of misuse of tech are foreseeable. (I see an analogy here to the TM cases that say likelihood of confusion is simply easier to find in the Internet age because everyone now uses the same marketing channel: online.)

Uniform Trade Secrets Act: the information must be the subject of efforts that are reasonable under the circumstances to maintain the secrecy. Restatement of Torts: intent to protect trade secret is insufficient; actual effort is necessary. In any case, the inquiry is fact-intensive.

Currently hard to predict outcomes. Some courts say password protection is enough; others say it isn’t, nor is firewall protection or other technical measures. Courts need to pay greater attention to technical measures, rather than traditional facilities-based measures. It is foreseeable, now, that people will use technical measures to extract trade secrets. So there needs to be risk analysis and steps to address risks to claim a trade secret, rather than a claim after the fact.

Relevant factors: nature of business/industry. Size matters. Nature of secrets: can’t be one size fits all. If it’s source code, maybe only developers should have access; customer lists have to be handled differently.

Justin Hughes: Given tech changes, won’t precedent about what tech works be outdated within a few years?

A: This isn’t about a checklist of passwords, firewalls, etc. Rather, she is proposing an approach: start with risk analysis, then do something to address the risks worth addressing. Facilities based measures, tech measures, human factors—all must be considered.

Q: But the implication seems to be you need a case by case analysis, depending on the circumstances. One relevant consideration would have to be the value of the trade secret.

A: Yes. Value is tied to reasonable efforts. Some courts say, rightly or wrongly, “if it were that valuable to you, you would have taken steps to protect it.” Her approach is already consistent with trade secret doctrine. But businesses aren’t doing enough and courts are letting them get away with it, jumping straight to misappropriation.

David Fagundes & Jonathan Masur – Costly Screens, Value Asymmetries, and the Creation of Intellectual Property

Patents are expensive to get, $25,000 for a typical patent, and two years’ wait. And yet there are still plenty of bad patents. What to do? Increase fees and spend more money increasing quality of examination? Decrease fees and allow easier registration because we’re not getting enough bang for our buck?

We think of patent as a costly screen: it weeds out potential patent rights that holders don’t believe are more than $25,000—we’re talking orders of magnitude, not real precision here. (I’d think you’d have to factor in optimism bias as well, and other factors that may lead people to push for patents—Pam Samuelson on patents as signal to investors.)

Private value: what the right is worth to the holder; social value: what the underlying invention is worth to the world. Second cut: high value v. low value; the line is determined by the cost of getting the patent. So you can have a 4x4 matrix of values. Desire: have high social value inventions/works and deter low social value inventions/works. The problem is that the cost of the screen works on the private value, not on the social value.

So, the canonical products of a patent system—pharmaceutical patents, etc. are high private/high social value. Blocking patents and valid but non-novel patents are high private (you can get big settlements from them)/low social (they just threaten other people) value. Low social value/low private value patents: canonical patent thicket; nuisance patents. If patents were easier to obtain, there’d be more of these; and the thesis is that there are essentially no high social value/low private value patents that we’d gain in return, so the screen is a good idea.

Copyrights by contrast arise often costlessly and inadvertently: easy to create. Have the potential to restrict future production, though.

There are a lot of high private value/high social value copyrights: reasonably commercially successful works of authorship, including Harry Potter. Win/win: we enjoy a work of authorship and it makes money for the author. Are there high private value/low social value copyrights? We think there are essentially none. Because copyright is relatively thinner and weaker than patent, a work generating only low social value cannot allow owners to extract high private value. (Ask Google about the judgment it just lost in Argentina for allowing people to find a model’s picture.)

Low private/low social value works: insignificant or inadvertently protected works, like doodles on cocktail napkins. Low private/high social value works: lots of these, they posit, exist—thinly copyrighted works like directories, influential commercial failures that are generative of other works.

Meaning: this is a reason that costly screens are as bad an idea in the copyright setting as they are good in the patent setting. Counterfactual: if copyright looked like patent, costing $25,000 for an examination. You’d screen out a lot of works that copyright is designed to create—lots of spillover-creating works of low private/high social value.

One difference between the grids: easier case in patent, because there were no members of the low private/high social value quadrant. Here you might ask about the benefits of getting rid of the junk in the low private/low social value. But we think those are mostly insignificant—doodles, shopping lists (blog posts like these?). But members of this set could be problematic, but we’re not concerned because of copyright’s thin nature—lots of ways to engineer around possibly blocking members of this quadrant: fair use, idea/expression. (This response strikes me as having trouble with a key issue of copyright today, dealing with corpuses—as Molly van Houweling’s presentation indicates.) We tolerate these because we want things like news photos, copyright treatises, and other things that don’t generate lots of monetary return but do have a lot of public benefit.

What if copyright only cost $10,000, like a trademark? The losses would still be too high. What if it were trivial? E.g., make registration a prerequisite for vesting copyright. But this would still have an impact—a risk not worth taking.

Takeaway: pushes back against certain substantive proposals for copyright and patent. Underappreciated advantages of costly screens for patent; underappreciated advantages of cheapness for copyright. Might also help point to a unified theory of IP process (which just happens to exclude TM, that red-headed stepchild).

Lemley: Leaving the bottom left box empty in patents presupposes a perfectly functioning capital market for patents. Small inventor needs to raise money; can s/he do that? See that by pushing on question of how high screen should be. $100,000 fee—how sure are you there’s nothing in that box. Second, distinguish between low social value/irrelevance and negative social value. If it’s just that they were irrelevant, we’d be indifferent. There has to be harm for us to care.

Masur: True, we believe that there is a strongly effective and well-functioning capital market for patents. Second, true that framing matters: we do mean that there are negative-value patents, and few negative-value copyrights.

Comment: The problem I have with the argument is that it assumes that low private value, high social value copyrighted works would not be created without copyright as an incentive. Both history and logic counsel against this conclusion.

There’s some conceptual confusion over what’s getting screened out by barriers to exclusive rights: the invention/work or the exclusive right. Compare the paper draft at p. 31, “screenlessness generates social welfare by assuring the creation of works with low private value but high social value; but what if that welfare is overborne by the social costs of permitting the creation of countless low private value, low social value copyrights” (emphasis added)—clearly that’s about the rights and not the works—with p.33, “our thesis is about the incentives of authors at the moment of creation,” which is about the works and not the rights. See also p. 35: “The costlier the screen, the more likely it is that authors will decline to create works whose low private value they deem too low. … In copyright, … erecting costly screens raises serious concerns about precluding the creation of works ….” (emphasis added). The part that hasn’t been proved, and indeed that is counterintuitive given the account of how low private value works get created—scribbles on cocktail napkins, emails, and the like—is that copyright has any significant incentive role to play in the creation of such works.

Counterthesis: costlier screens like notice and renewal would get us the valuable works without the deadweight loss of the rights.

Fagundes: It’s always true that people will create for nonmonetary reasons. Our paper speaks only to individuals who create works for profit, which isn’t the universe of creators.

Sprigman: We’re talking about $35. That’s pretty low. You make relatively weak claims about social costs once we’re down to $35. It’s difficult to predict private value ex ante—this may make the loss of works less than you expect from a fairly low screen—people are making a bet. Second, when we get down to works that have low enough private value to make the $35 not worth it, they’re created as gifts anyway. We’re down to a category where monetary incentive reward expectations break down. Final question: orphan works as a costly screen? Whole class of works whose creation requires finding lots of unfindable owners; that operates as a costly screen.

Fagundes: Orphan works is orthogonal—we’re interested in why people choose to create in the first place. A work may migrate from high private value to low private value over time, making it an orphan. We think that even at the low level it’s still important.

Masur: We agree that $35 doesn’t change the mix of works. But we’re not weeding out anything we’re desperate to weed out—we’d need a justification to change the screen.

Q: Doesn’t registration give you the best of both worlds? Can take a wait and see attitude.

Fagundes: we agree. Registration now is fine; changing to increase formalities would be problematic.

Masur: We think the current copyright screen is zero because copyright vests automatically on creation.

Release bars false advertising and other claims

Hauf v. Life Extension Foundation, --- F.Supp.2d ----, 2009 WL 1833460 (W.D. Mich.)

Sometimes it seems like the only way to win a false endorsement case is to have permission, since courts don’t worry overmuch about actual confusion or the nature of the use. Fortunately for defendant here, permission is what it had. Some background from the motion to dismiss here.

In 1993, Hauf bought shark cartilage from defendant for her son Barrow, who suffered from brain cancer. He recovered, and defendant published Hauf’s testimonial in its magazine. In 2001, Hauf wrote defendant’s co-founder: “I would like to get with you [sic] on the life extension foundation. I feel your products are wonderful. If you could please give me a call ... I would like to work out something with you in regards to recommending your products.” She thereafter updated her testimonial and signed a release giving defendant “the irrevocable right to use my name (or any fictional name), picture, portrait, digital image, or photograph in all forms and media and in all manners, including composite or distorted representations, for advertising, trade or any other legal purposes, and I waive any right to inspect or approve the finished product, including written copy, that may be created in connection therewith.”

At Hauf’s request, defendant ceased publishing her testimonial in 2005. She and Barrow sued for false endorsement/association, false advertising, and violation of their right to privacy.

Defendant argued that the release barred both plaintiffs’ claims because Barrow admitted that his mother had his permission to use his name.

The court found the release clear and unambiguous. “[T]here is no broader classification than the word ‘all.’” Coupled with a waiver of the right to inspect, the court was convinced that the release covered all the challenged conduct, even though Hauf argued that she only intended for her testimonial to appear in defendant’s magazine, which was the only thing that had occurred in the past, and did not intend commercial use. Defendant’s marketing directors also stated in depositions that their practice was to have any changes to a testimonial reviewed by the person who provided it. Still, that wasn’t enough to avoid summary judgment. The terms of the relase were unambiguous, so any contrary inferences she drew were subjective and irrelevant.

Consent negated key elements of all the claims. Among other things, the court reasoned that the release precluded state-law false advertising claims because Hauf’s permission included permission to issue a version of the testimonial she didn’t inspect or approve. Now, if the FTC came after defendant for violation of its rules on endorsements, Hauf’s permission to distort her testimonial would be no defense. In fact, it’s precisely the problem of advertisers writing their own “endorsements” that the FTC’s rules are targeted against, because the advertiser can falsely increase its credibility by putting its own words in the mouth of a seemingly distinct entity. However, Hauf isn’t the one suffering the injury from that—consumers are—so I understand the reasoning that the contract prevents her from complaining.

One could reason that, to the extent the contract allows real distortions of the testimonial, it is void as against public policy, but the court didn’t suggest that there was a question whether the changes here rose to the level of deceptive distortions. See § 255.1(b) (“The endorsement message need not be phrased in the exact words of the endorser, unless the advertisement affirmatively so represents. However, the endorsement may neither be presented out of context nor reworded so as to distort in any way the endorser’s opinion or experience with the product.”) Note also that defendant’s cessation of use of the testimonial, despite the release, was good business, but the FTC Guides arguably allow continued use over Hauf’s objections if Hauf wasn’t a celebrity or an expert: § 255.1(b) also says “An advertiser may use an endorsement of an expert or celebrity only as long as it has good reason to believe that the endorser continues to subscribe to the views presented.”

Amicus brief in Salinger

Along with Tony Falzone and others out at Stanford, I wrote an amicus brief in the pending Salinger/60 Years Later case, on behalf of the American Library Association, the Organization for Transformative Works, the Association of Research Libraries, the Association of College and Research Libraries, and the Right to Write Fund. Tony discusses the issues here; he is focused on the standard for preliminary injunctive relief, which is quite important, but I am even more concerned with the cramped definition of transformativeness adopted by the district court. I hope both will be addressed on appeal.

Fair and balanced: battle of the credit giants

Fair Isaac Corp. v. Experian Information Solutions Inc., 2009 WL 2252583 (D. Minn.)

There are three major credit bureaus in the US: TransUnion, Experian, and Equifax. They have 100% of the market for aggregated consumer credit data, which they use to generate credit reports sold to lenders. Because credit data reporting is voluntary, and individual lenders have different agreements, each bureau often reports somewhat different aggregated credit data for the same consumer.

Fair Isaac developed an algorithmic credit scoring model, which lenders use to evaluate individual consumers. These FICO cores quickly came to dominate the credit scoring market, representing from 74% to 94% of various segments. But Fair Isaac typically doesn’t sell FICO scores directly to lenders or consumers because it doesn’t have direct access to the aggregated credit data. Instead, it has scoring agreements with the credit bureaus, allowing them to sell FICO scores to lenders and consumers, typically as a part of a bundle with a credit report containing the underlying aggregate data. Fair Isaac has developed variants for each bureau, and it gets a royalty on each sale.

Fair Isaac’s royalties represent a significant component of the bureaus’ cost of doing business, so the bureaus developed their own in-house credit scoring models. But they were largely unable to convince lenders to switch away from FICO. Lenders prefer the tri-bureau nature of FICO scores, which account for the differences in aggregate credit data among bureaus. The credit bureaus are unwilling to share their data, so they can’t make their in-house scores into tri-bureau scores.

The bureaus met to discuss developing a tri-bureau score in 2003-2004, allegedly with the goal of eliminating FICO scores from the market. The problem was that if one bureau acted alone in trying to switch, there’d be a huge risk of losing customers who wanted continued access to FICO scores to the other bureaus. Thus, a consultant recommended that the bureaus “act in concert.” (Given that Fair Isaac’s antitrust claims were dismissed, I have to wonder what it would take to have a smoking gun for antitrust purposes these days.) Anyway, in 2006 the bureaus announced the VantageScore scoring model, based on all the bureaus’ data, to which all three bureaus had 1/3 ownership and a license. The bureaus have claimed superior predictive power for VantageScore compared to FICO, because VantageScore has unmatched access to all three bureaus’ data sets, uses a single algorithm rather than three modified algorithms, and uses “characteristic leveling” so that the results are consistent no matter which bureau’s data set is used.

Fair Isaac sued for antitrust and Lanham Act violations. The court granted summary judgment to defendants on the antitrust claims because Fair Isaac lacked standing, proving to me that antitrust law is even worse off in this area than false advertising law, and holding that Fair Isaac hadn’t shown sufficient injury because VantageScore only has a couple of percentage points of market share.

Of interest to me, Fair Isaac alleged that the VantageScore 501-990 scoring range is confusingly similar to the trademarked FICO scoring range of 300-850. (Why start above zero? Is it just too mean to give someone a score of 0? There’s probably a behavioral psych reason why this increases access to credit.) Fair Isaac also alleged false advertising.

Trademark: Fair Isaac has several registrations for the 300-850 range for credit scoring and related services. Defendants argued that the mark wasn’t distinctive, attempting to rebut the presumption of distinctiveness conferred by registration. First, the court concluded that the mark was descriptive. Though there are cases (wrongly) finding suggestiveness when the mark alone isn’t enough to identify the goods/services, the court went with the (correct) majority view that descriptiveness is assessed from the perspective of a person who knows the context—the goods/services at issue. In context, the 300-850 range is descriptive, even though it doesn’t precisely map to the actual ranges Fair Isaac provides to any of the bureaus (397-871, 368-839, and 407-829). Fair Isaac employees agreed that the 300-850 range was approximately the range of actual credit scores. Fair Isaac also uses the range descriptively: “A FICO score is a 3-digit number ranging from 300-850 that represents your credit rating,” etc. Look at those ranges—so even someone with terrible credit will get a score around 100 points above the announced minimum. Again, it’s hard to resist the conclusion that something is going on with anchoring and other perceptual quirks, and that the something has to do with loose credit.

Fair Isaac argued, indeed, that the ranges were arbitrary and that any other range could have been selected. But that’s not the key to descriptiveness of a number that encompasses all three actual scoring ranges. Nor is the Court persuaded that the term 300-850 is more than merely descriptive simply because the range of 300-850 applicable to FICO scores was chosen arbitrarily and any other range of numbers could just have easily been selected. “[T]he pivotal question is whether the term was chosen arbitrarily in light of the nature, ingredients, qualities, and characteristics of the product.” The court didn’t cite the extensive PTO precedent that numbers are descriptive, but still got to the result: Fair Isaac needed to show secondary meaning. (Now, registration of a descriptive term should result in a presumption of secondary meaning, at least if the registration was granted on the basis of secondary meaning; all the Fair Isaac registrations were filed as ITUs but granted as use-based marks, and I haven’t looked up whether Fair Isaac submitted evidence of secondary meaning.)

Defendants argued that Fair Isaac didn’t promote the mark as a brand, and that their survey showed only 2% of respondents associated the mark with a single source. Fair Isaac argued that secondary meaning could be inferred from defendants’ copying of similar three-digit ranges, and from evidence of confusion: “customers complained when they realized the credit score they had purchased was Trans Union's or Experian's in-house score or a VantageScore credit score rather than a FICO score.” Intentional copying and confusion are evidence of secondary meaning; thus, the court found genuine issues of material fact on the issue, meaning the court didn’t at this point need to consider Fair Isaac’s alternate licensee estoppel argument that the bureaus couldn’t be allowed to challenge the validity of the marks they license.

Fair Isaac also alleged infringement based on defendants’ purchases of keywords containing Fair Isaac trademarks; defendants argued that there was no infringement because the resulting ad text didn’t include Fair Isaac trademarks. But the caselaw, unfortunately, doesn’t support this argument. There can still be likely confusion; it’s an issue for a factfinder, and Fair Isaac has an expert who opined that confusion was likely.

False advertising: defendants said some allegedly false things about (1) whether an appreciable number of lenders actually use in-house credit scores and VantageScore credit scores in making lending decisions and (2) VantageScore’s predictive ability compared to other scores on the market. Fair Isaac argued that less than one percent of lenders used Trans Union’s in-house score, nobody used Experian’s in-house score, and no lender used VantageScore when the statements at issue were made. The court, however, determined that the statements didn’t convey an implied message that an appreciable number of lenders used in-house scores or VantageScore in making lending decisions. The statements were things like: “Most lenders would view your creditworthiness as very poor,” “Know where you stand no matter which credit bureau your lender checks,” “the same type of score that lenders see,” and “Most lenders offer their ‘good’ rates to consumers in this category.” These simply convey that the score is “indicative” of how lenders assess creditworthiness, and at a minimum are capable of more than one reasonable interpretation, thus not literally false or false by necessary implication.

As to VantageScore’s predictiveness, the statements at issue included that VantageScore “allows credit grantors to evaluate consumer creditworthiness with significantly greater precision,” is “more predictive than what’s in the market,” is “the most accurate scoring algorithm attainable,” and is based on the “most up-to-date information available.” Fair Isaac submitted evidence that FICO scores sometimes outperformed VantageScore in head-to-head testing, and that more often and not there is no significant difference in predictive power. The court found that these were vague, subjective representations of superiority: puffery.

Thus, the false advertising claims failed as a matter of law. (Did Fair Isaac not ask for an opportunity to prove implied falsity of the first set of claims?)

Revitalizing false patent marking

Elizabeth I. Winston, The Flawed Nature of The False Marking Statute

Abstract:

In 2005, the United States Court of Appeals for the Federal Circuit rendered a decision on an “issue of first impression” interpreting a one hundred and sixty-three year old provision of the United States Code - the “false marking” statute embodied in 35 U.S.C. § 292. It is false marking to mark as patented an unpatented article if done with the intent to deceive the public and as such, is a fineable offense. The false marking statute remains one of only a handful of qui tam actions left intact from a rich history of varied incentives provided by the government for private enforcement. Enacted to protect patentees, and viewed as a blend of public and private resources, the false marking statute has failed to work as intended. These issue lies with the interpretation of the statute given by the courts. The penal nature of the statute has been eviscerated by the current interpretation, leaving us with an interpretation that is both false and flawed – the punishment should fit the crime, and the courts should not be allowed to read a statute into non-existence simply because of their discomfort with the qui tam nature of the action. Unduly emphasizing the fact that the false marking statute requires neither privity nor injury on the part of the party bringing suit, ignores the culpability of the party who has falsely

marked their innovation – harming both the patent system and the public. A party who falsely marks their innovation as patented should be presumed to have done so with the intent to deceive the public, and the burden should rest on the marker to prove that they lacked such intent. Furthermore, the penalty should reflect the culpability of the marking party, taking into account various mitigating factors, including whether the public was actually deceived, the materiality of the marking and the harm to competitors caused by the marking. Only then can the false marking statute ring true as the effective and economically efficient vehicle it was designed to be.

I think her proposal won't work to the extent it includes materiality--false patent marking will rarely be material to consumers; she also advocates looking at the effect on competitors, which I think gets a lot closer to the actual damage. Anyway, it's a good look at a provision of the patent law that doesn't get much attention.

Snow job: new article on false advertising at ski resorts

Jonathan Zinman & Eric Zitzewitz, Snowed: Deceptive Advertising by Ski Resorts

Neat data, interesting results. Abstract:

Casual empiricism suggests that deceptive advertising is prevalent, and several classes of theories explore its causes and consequences. We provide some unusually sharp empirical evidence on the extent, mechanics, and dynamics of deceptive advertising. Ski resorts self-report 23 percent more snowfall on weekends; there is no such weekend effect in government precipitation data. Resorts that plausibly reap greater benefits from exaggerating do it more. We find little evidence that competition restrains or encourages exaggeration. Near the end of our sample period, we observe a shock to the information environment: a new iPhone application feature makes it easier for skiers to comment on resort ski conditions in real time. Exaggeration falls sharply, especially at resorts where iPhones can get reception.

The authors point out that some of the factors people say are key to false advertising aren’t present here: feedback is immediate in that customers see the snow (or lack thereof) on the ground, and there are very few fly-by-night ski resorts. But there are still false empirical/measurable claims.