AALS Section on Antitrust and Economic Regulation

Google and Antitrust

Moderator:  Michael A. Carrier, Rutgers School of Law - Camden

Mark R. Patterson, Fordham University School of Law

Geoff Manne, Executive Director of the International Center for Law & Economics (ICLE), Lecturer, Lewis & Clark

Frank A. Pasquale, Seton Hall University School of Law

Marina L. Lao, Seton Hall University School of Law

Pamela Samuelson, University of California, Berkeley, School of Law

Samuelson: Google Books—antitrust issues remain interesting, though now on hold because of the rejection of the settlement.

Lao: Disclosed that most recent paper was funded by Google, though earlier work on Google Books wasn’t.  Believed that the rejected settlement was procompetitive.  Had it been approved, Google would have had a nonexclusive license to continue digitizing, and public would have had free previews of many books; Google could have sold blanket licenses, and colleges/public libraries would have gotten at least one free terminal.  Central objection: de facto monopoly over unclaimed works.  But that assumes unclaimed books is the relevant market; if not, then having de facto monopoly wouldn’t give Google monopoly power. 

Even assuming monopoly power, is that anticompetitive?  Foreclosure is the usual theory—DOJ’s theory is that close competitors wouldn’t be able to compete for the unclaimed books.  But monopoly supplier is better than no supplier, and without the settlement, there would by definition be no supplier.  What about effects on search engine?  Improvements to search algorithm would make Google a better competitor in search—ambitious but dubious claim.

Samuelson: disagrees.  Orphan books were to be priced in particular ways, 12 bins: ave. price was $8.  When you think that Amazon is selling commercially available books at $9.99—there could be many out-of-print books that do have commercial value that Google wanted to be able to exploit.  Economics of digital publishing are so different from print that there was value to be extracted.  When she talked to the lawyer for the Authors’ Guild, he said that they added books in the cloud because otherwise it would look like an antitrust violation.  Focusing just on out-of-commerce, unclaimed works makes it seem like they’re low-value.  The database was going to be full of books from major research libraries, dense with knowledge, valuable to have access to.  Also, the license was going to be to scan all books, make nondisplay uses, display up to 20%, classwide releases/safe harbors/negotiations/compulsory arbitration—none of which would be available to anyone else.  Would also resolve ebook rights controversy that right now makes it difficult for everyone else: publishers and authors both claim rights and you essentially need to deal with both.  Google would get enormous leverage to transform the market in troubling ways, especially given that no discounts could be given without Book Rights Registry’s permission, and some agreements not to compete.  Not necessarily a violation, but DOJ did us a favor in raising some of those issues.

Pasquale: Google recognizes that bottlenecks can abuse their power in net neutrality debates; same may apply to search engines.  Google’s competitors complain that Google should be evenhanded and not favor its own services in providing ten blue links—Daniel Crane debunks this reification/naturalization of the way Google was for a certain period.  Debunks hardcore neutrality applied to search engines as in fairsearch.org.  Stealth marketing and stealth deindexation still are important.  A lot of people don’t adequately disclose compensation—we should see more enforcement.  Google’s letter to the FTC explicitly assures they won’t demote entities in google.com just because they opt out of being indexed in Google Shopping.  Enforcement will be an interesting issue there.

SearchKing case: Google’s rankings were protected by the First Amendment.  He doesn’t believe the First Amendment precludes antitrust regulation.  First Amendment ideas of right to access can be extended to Google.

One of Bork’s last papers gave an imprimatur to Google.  Bork’s legacy is very powerful in producing this no-action letter from the FTC.

Lao: would have been wrong for any search engine to deliberately demote a site for refusing to buy ads or because a competitor was buying ads.  Search rankings aren’t objectively neutral, but reflect judgment about relative value of a page.  But she doesn’t think objectively neutral search is possible and thus can’t wrap her head around neutrality as a regulatory principle.  No theory of antitrust liability would work.  “Neutral” presumably means that objective principles must be used in ranking, without intentional demotion for anticompetitive purposes—other than that, who gets to pick the criteria and why are they correct?

Google values links from educational sources more heavily than from others—all else being equal, page with link from .edu will be ranked higher than identical page with link from .com.  As academics, we may agree, but will Fox News?  Except in extreme cases, it’s hard to say that a judgment is wrong.

Tackle specific problems as they arise: if there’s a deliberate change in algorithm to penalize buying ads from someone else/entering into a joint venture with a Google competitor, that would be exclusionary conduct without getting to neutrality in general.

Manne: Market power: it’s easy and commonsensical to talk about search market/search ad market, but doesn’t make a lot of economic sense from POV of advertisers as well as searchers.  Advertisers don’t care what the tech mechanism is—search, social media, billboard on bus—as long as they can reach people.  Defining market around tech has inherent flaw. 

Google’s actually at a disadvantage to potential competitors in serving up most relevant ads—Amazon now offers demand-side advertising, using its data to serve up ads on other sites, as Google does with NYT.  Facebook knows who your friends are; Amazon knows what you’ve bought and what you might well want to buy next; Google knows what you search for.  Whose data would someone who wants you to buy stuff want?  Risk of a separating equilibrium: people searching to buy stuff don’t start on Google; 60% start on Amazon.  Google may be the place people go for information, not products.  Advertisers have very little interest in advertising to people looking for info on the RBI of a baseball player.  FB has done a terrible job of monetizing, but when it develops FB search, it will be an enormously powerful source of info and a place advertisers want to be.  Arguable that Google isn’t a monopolist and lacks market power.  We have to assume FTC recognized the importance of competing technologies and didn’t blindly accept search market as market.

Patterson: dispute over whether Google is a true 2-sided market.  Credit card users want merchants and merchants want credit card users. Some people say that advertisers want searchers, but searchers don’t necessarily want advertisers. 

Suppose someone creates a great new market.  Google might or might not put it on the first page.  Google says it does panel tests with users on different search results.  But Google never has to test whether people like competitors’ sites better. 

Pasquale: Lao made the point that SearchKing says it’s good and Google disagrees; he’s willing to accept that it’s junky.  But he interviewed the founders of a site that had gotten awards in England, had been ranked very highly; they were cut off at the knees when their ad rates went from 5 pence to 5 pounds.  All of a sudden Google Product Search got a huge market share and everybody else got less.  In terms of market definition, sure there are lots of people for the advertising market overall, but search advertising has sufficient differential utility that it can be separated.  It could well be that Google Product Search is demonstrably better than anything else (since he searched for Big & Tall clothes, Google highlights Economy Plus seats).  But that belies Google’s mantra that competition is one click away.  If your competition model is clash of the titans battles to the death, that’s one thing—Microsoft is willing to lose $2 billion/year on Bing.  But if you’re thinking about the zillion little guys, that’s different: as if the electric company decided that it wanted a share of every refrigerator sold or it wouldn’t supply electricity to the manufacturing plant.

Credence goods: black box nature of search means we have to trust Google because we can’t evaluate it.

Manne: you can buy lots of consumer data from other sources.  Big companies have data; smaller companies can buy it. And if they can’t, that’s not a unique barrier to entry.

Pasquale: but the big issue is having the largest set of data.

Manne: if you don’t have the money to have as much data, how do you remedy that?  Antitrust wasn’t meant to correct that financial problem.

Carrier: antitrust isn’t well cut out to solve many of these problems, including privacy.

Lao: Essential facilities?  If Google lacks monopoly power, it can’t have an essential facility. Extremely difficult to define a market, but it can’t be as narrow as general search on user side or search advertising on advertising side.  Switching costs are low, anyway.  Google being better than the alternatives doesn’t make it essential.

Denial of access: usually this is clear-cut, but not so in the case of search. We don’t know what the alleged facility is.  Competitive websites are readily accessible to anyone using Google: if I type in the name of the website, I’ll go there.  It must be the case that the claim is the list is the essential facility, or even placing high on the list.  The implications of that, though, are breathtaking, and courts are unlikely to construe denial of access that broadly.

Feasibility of sharing the facility: essential facilities doctrine doesn’t require sharing if it’s impractical or would detract from monopolist’s use. How would that work in a search engine?  Intrusion on property right would require compensation; could a court order a search engine to change its business model?

If all Google has done is favor its own content over competitors’, no antitrust theory would prevent that.  Different story if it acted affirmatively to block content—targeted a website for entering into joint venture with a competitor, buying ads from competitor/refusing to buy ads from Google.  Very likely that those things are exclusionary; wouldn’t need essential facilities paradigm.  FTC doesn’t seem to have found evidence of this.

Samuelson: Another dimension of GBS is still salient.  One concern about corpus is that Google, especially if it settled, would entrench search dominance because Google would have 20 million books to improve its search/translation tools.  Yahoo and Bing wouldn’t have the same access, and  no one else can settle with the same class.  If Google’s fair use defense succeeds, then we don’t have that problem, though Google could have exclusive agreements with universities that could still be a problem.  What she saw in Judge Chin’s statement is the idea that if one search engine satisfies tail queries and one doesn’t you’ll always choose the former, and that the corpus helps with the tail queries; Chin may have wanted to nudge parties to settle with a license (compensated) to others to use that information as a tool to improve their own algorithms.  Though the essential facilities claim is problematic here, the DOJ probably would have been more happy with data licensing.  There’s more than one layer at work here.

Manne: to the extent the problem is the biasing of Google’s own content, procompetitive justifications are obvious. If indeed there’s a benefit to the content offered through vertical sources (Maps, Travel Search, even Books), then there’s a value to Google of being able to offer the effective answer.  Ironic that a lot of complaints are that Google does what it does too well—it has better data so it can offer more relevant results, faster, with better integration.  This is all to the benefit of consumers.  Google’s maps are not becoming crummier as MapQuest recedes; it’s trying to integrate its maps better into the rest of the services.  We’re too caught in the model of ten blue links, where you search and you get a link to someone else’s site. Given the tech we have now, that’s a terrible way to respond to informational queries, where you have to go and search that page.  To the extent Google can answer your question, that’s a huge benefit.

Pasquale: First, switching costs are enormous: you’ve been training Google for years and it knows enormous amounts about you. Start searching on Bing = they don’t have a vast database of relevant information that can personalize results.  Also, DuckDuckGo as alternative just made complaint to FTC that Google disadvantaged them on Android: consolidation matters.  You could have gotten the same story from Microsoft about switching.

Patterson: Google isn’t going to provide a crappy map, true, but MapQuest is a causal factor in that: without MapQuest, no good Google Maps.  Now hears that people are being told not to compete in areas in which Google has an interest, because it’s not worth it—that’s a problem.  Google as similar to credit rating agency: transparency as remedy?  Algorithms are infinitely malleable; can always justify one.  Real problem: Consumers think Google is something it no longer is.  Eric Goldman was surprised by a search whose results were all paid links.  Antitrust doesn’t have a way of dealing with the information content problem, truthfulness etc., as opposed to access.

Manne: didn’t think Microsoft was right either, but here there aren’t network effects.  Also no strong argument for exclusionary conduct/preclusion of access to important inputs.  Closest argument is that Google has legacy deals with websites that have some exclusionary aspects, though other search engines can operate on those sites; that’s a tiny fraction of their business—only exclusive deal is with AOL.

Samuelson: some of the same issues Google is dealing with in Authors’ Guild—indexing, providing snippets—which she thinks have a strong fair use argument are also at issue here.  Scraping related claims have never struck her as strong; but Google made a representation that, for objecting sites, it will not scrape in ways it’s done before.  (I think a better description is that it won’t display scraped data in ways it’s done before: in its specialized services; you no longer have to choose all or nothing with respect to no-index.)  Google could have pushed harder on that issue given the copyright status, but decided it could live with that concession.

Carrier: new patent obligations for licensing.  Successors will be bound by Google’s promises.

AALS Section on Defamation and Privacy

Me @ the Zoo: Privacy, Celebrity, and Modern Media

Moderator:  Amy Gajda, Tulane University School of Law

Speakers:  Robin D. Barnes, University of Connecticut School of Law

Chris Crocker, Actor, Blogger, Prolific Entertainment, New York, NY

Tia Maria Torres, Star of “Pit Bulls and Parolees” (Animal Planet), Villalobos Rescue Center, New Orleans, LA

Valerie Veatch, Filmmaker, Me @ the Zoo, Prolific Entertainment

Eugene Volokh, UCLA School of Law

Andrew Weaver, Assistant Professor, Indiana University,

Documentary about Crocker’s experiences.  Crocker spoke about the difference between the in-person hatred he experienced and the anonymous hatred, which posed a separate danger (he spoke of his grandparents).  Positive and negative were both ramped up (people who reached out to him and said they felt unsafe at school too, death threats).

Torres: needed the money; on the brink of closing the doors of her nonprofit.  Keeps things private even on the show.  Public attention is more positive than for Crocker, but she has been grabbed.  Said the crew was secondary to the animal rescue: she’d leave them behind if they didn’t keep up.  Contrast to Kardashians, which she described as a scripted show: no need to create personal drama.

Barnes: it’s wrong to essentially imprison Chris Crocker because he’s threatened.  Gay teens are bullied, threatened—fixating on why they didn’t like him, as one of Crocker’s clips did, is the most important thing.  Celebrity culture can distract from problems like the economic crisis and bank bailouts.

Volokh: has more positive view of free speech.  Westboro Baptist is nasty people, but expressing their views.  Expressing 1000 feet from funeral and on web doesn’t strip it of constitutional protection. Lots of silly stuff is distracting people from important issues.  That’s not enough justification for restricting speech.

Crocker doesn’t buy slippery slope arguments as to protests at children’s funerals.

Torres: when the show went on, her adopted sons’ mother resurfaced and made a number of accusations against Torres, including passing them out to the entire town.  Lawyers said as a public figure she was fair game.

Crocker: people think whether it’s a D-list celebrity or A-list celebrity, whether I deliberately uploaded videos at age 18 (right when viral video was getting started), they’re entitled to attack you. People stop seeing celebrities as human; think they have all these great things and that they’re so accessible that they’re ours.

Torres: when I go out in public, people say “we watch your show, you’re ours.”  You’re on TV = you belong to us.

Crocker: especially with reality TV; you’re in their homes. 

Torres: I come across very angry when I’m confronted in public.

Crocker: they say you deserve it because you put yourself on TV.

Gadja: courts are likely to agree.

Volokh: celebrity or not, there are laws prohibiting death threats—may not be as well enforced as we’d like, but they exist.  There are laws against assault.  Don’t lay that against the First Amendment.  (Sure, and I agree—but doesn’t culture matter?  How do we create boundaries that don’t rely on restricting speech?  There’s a reason that “sticks and stones may break my bones but words will never hurt me” generally seems unpersuasive, and so we rely on teaching potential boundary violators that some kinds of hurt are ok and some aren’t; this is difficult.)

Crocker: the gray area is protests at kids’ funerals.  Imagine the harm inflicted on the parents and grandparents by protests.

Weaver: invasion of privacy will be even more an issue in the future.  Reality TV is what people want; it’s not going away because it provides unique gratifications—social comparison, identification with characters, information-seeking: comes from fiction, but more salient from real people.  All else being equal, people like reality shows more the more they feature fly-on-the-wall cameras, voyeuristic view, night vision cameras; telephone conversations are more enjoyable if the camera seems to be looking in without being observed itself.  People know on some level that they’re on camera.

Gadja: but sometimes people forget.

Torres: distinguishes between Kardashians, who did ask for it, and herself: she did it to survive/to keep her job.  Why does that make her a public figure?

Volokh: if someone calls you a drug dealer and knows you’re not or recklessly disregards the evidence, then even a celebrity would have a cause of action, except that you couldn’t get damages from someone with no money.  That means there are interesting questions about injunctions and criminal libel prosecutions.  The First Amendment allows criminal prosecutions and probably permanent injunctions.  The difference is that people have more latitude for honest but unreasonable mistakes about public figures.

Gajda: Hulk Hogan sex tape case?

Volokh: he believes invasion of privacy tort is a bad idea; newsworthiness is too vague a standard.  Courts have held publishers liable for revealing public facts about prior convictions (though he thinks that case is unlikely to be followed today) or about sex changes.  As to Hulk Hogan, the tape was newsworthy, though many courts have found sex tapes non-newsworthy.  There’s room for a narrow cause of action for sex tapes, but with a better definition.

Sonja West has an excellent article pointing out that facts about a person are quite often facts about other people too: they are relational. Telling your own story/truth may require telling stories/truths about other people.  Freedom of speech thus requires freedom to talk about other people even in its narrowest self-defining aspects.

Torres: positives (in response to a Q): adoptions and donations have soared.  We’ve been able to help guys leaving prison move on.  The positives have come to the organization, though the negatives are concentrated on her.

Volokh: in response to question about newsworthiness: would eliminate it entirely, not to be replaced by outrageousness—people should decide for themselves the relevance of information.  The basic right is the right to talk about whatever they want, so long as they’re saying truthful things or expressing an opinion. 

(But what gets translated into being recognized as creating a risk of harm that goes beyond talk?  Death threats, yes.  Disclosure of gun ownership?)

Barnes: public figure has expanded beyond politicians to newsworthiness—if you’re a private person who happens to do something that is an example of a larger public controversy (like owning a gun, maybe?) then you lose private-figure status.  But when people are dying from harassment it’s gone too far.

Q: instinct is that in jurisdictions with strong libel laws people are not necessarily nicer to each other.  Can law help?  What do you want?

Torres: I wanted my harasser to go away.  She was able to picket in front of my house because she had a right to be on the public easement.

Showed clip of Crocker’s famous ‘leave Britney alone’ video and a variety of critical, dismissive, harassing, and frankly threatening responses thereto.

Crocker: at 19, he felt that he had the right to say whatever he wanted and not expect criticism or threatening phone calls (both of which he got).  Now, he might do things differently.  (Though part of the point is that we let teenagers online and need to understand what to do with them!)

Volokh: a British man was successfully prosecuted for saying that all British soliders should die and were scum.  That’s one of the prices of lack of free speech: you’re not free to be grossly offensive.  A woman posted a picture of a burning poppy (symbol of WWI) and was successfully prosecuted.  The First Amendment isn’t holy, but he likes how it works.  He doesn’t want the gov’t to decide what pollutes public discourse.  Viewpoint neutrality allows horrible advocacy to be tolerated but has served America well. 

On public figures: if Crocker had just posted to 100 people, copyright law might protect him.  Also most such videos wouldn’t trigger public disclosure of private facts tort.  Disclosure to 100 would also be too much there, though maybe disclosure to 3 would still be protected.

Self-dilution?

School-friendly version of Avenue Q (scroll down), allegedly for ages 9 and up.  The mind boggles.  "Everyone's a Little Bit Mean"?  "The Internet is for Facebook"?  I cannot right now think of a single subplot that I would want to explain to a 9-year-old. H/T Zachary Schrag.

Purchaser has standing to challenge "All-Natural" on multiple product flavors after buying one

Colucci v. ZonePerfect Nutrition Co., 2012 WL 6737800 (N.D. Cal.)

James Colucci and Kimberly Sethavanish sued ZonePerfect on behalf of a putative class, alleging that its “All–Natural Nutrition Bars,” were not in fact all-natural, in violation of the Magnuson-Moss Warranty Act and the usual California statutes, and also claiming common-law fraud and restitution based on quasi-contract.  They alleged that all of ZonePerfect’s nutrition bars contained at least one of ten allegedly non-natural ingredients, including ascorbic acid, cocoa processed with alkali, and xanthan gum.  

Sethavanish is engaged to Colucci, and while he was deployed in the military, she sent him a monthly care package, which at his request included two multi-bar packs per month, including the Chocolate Peanut Butter flavor.  Colucci allegedly believed and relied on the “all-natural” representation on the label when he asked Sethavanish to buy them for him; Sethavanish allegedly wouldn’t have agreed to buy the bars had they known the bars weren’t all-natural.

The court held that Sethavanish had standing as to all twenty bar flavors, but that Colucci lacked standing.  Even if she didn’t purchase each flavor, the key question for purposes of a class action was whether there was sufficient similarity between the products purchased and not purchased.  Though one court denied standing as to products that “differed from the purchased product in only minor, arguably trivial ways,” Dysthe v. Basic Research LLC, CV 09–8013 AG SSX, 2011 WL 5868307 (C.D. Cal. June 13, 2011) (denying standing as to an unbought weight-loss pill marketed as “Relacore” where plaintiff bought only “Relacore Extra,” which had only minor differences in packaging and ingredients; “[J]ust because an Old Fashioned and a Manhattan both have bourbon doesn't mean they're the same drink.”), other courts found standing as to “unbought products that differed only trivially from the purchased product, as well as to unbought products that differed fairly substantially,” such as Koh v. S.C. Johnson & Son, Inc., C–09–00927 RMW, 2010 WL 94265 (N.D. Cal. Jan. 6, 2010) (two cleaning sprays, one a window cleaner and the other carpet stain remover, both with the same allegedly false badge of eco-friendliness).  

The court didn’t resolve the tension between the cases because “the challenged products here are sufficiently similar under any test—more similar than the weight-loss pills in Dysthe and at least as similar as the ice cream brands in Dreyer's Grand. The different flavors of Defendant's nutrition bars are more or less fungible when viewed from the perspective of a consumer considering buying one or the other; any preference for one flavor versus another could rest only on personal idiosyncrasies of taste, diet, or allergy.”  Here, the products were all of the same kind: nutrition bars.  They had a uniform size and shape.  There were some differences in ingredients, but “the similarities are more striking: six of the nine challenged ingredients appear in all twenty nutrition bar flavors. Most importantly, all twenty flavors bear the same challenged label: ‘All–Natural Nutrition Bars.’”  Thus, Sethavanish had standing for both Article III and UCL purposes to sue for alleged mislabeling of all twenty nutrition bar flavors.

Colucci, however, did not.  He didn’t buy the products, nor were they purchased with money in which he had a legal interest.  He may have been the “beneficiary” of the purchases in a colloquial sense, but he wasn’t a third-party beneficiary as a matter of law.  “While it is not required for both parties to intend to benefit the third party, it is required that the promisor understand the promisee—here, Ms. Sethavanish—to have such intent. Even assuming that Defendant was the promisor (as compared to the retailer who actually Ms. Sethavanish the bars), nothing suggests that Defendant knew Ms. Sethavanish intended to benefit Mr. Colucci when she bought the bars or, indeed, knew of Mr. Colucci's existence.”

The Magnuson-Moss Warranty Act claim was also dismissed.  The court initially rejected ZonePerfect’s argument that plaintiffs failed to meet the jurisdictional requirements of the law, which provide that there’s no federal jurisdiction over actions brought on behalf of a class if the number of named plaintiffs is less than one hundred.  But that was irrelevant, since the court had federal jurisdiction as a result of CAFA (and of course this makes sense; ZonePerfect had actually removed the case from state court).  On the merits, though, the claim failed.  There was no alleged warranty of a “defect free” product: plaintiffs allged that “All-Natural” was a written representation that the bars were free of the defect of being synthetic or artificial.  “The identical argument has been rejected in many other cases…. Plaintiffs fail to marshal any persuasive authority that artificial or synthetic ingredients in otherwise unobjectionable food products amount to an actionable defect under the MMWA.”

ZonePerfect also argued that the state-law claims were conflict preempted, but the only authority it relied on had been vacated.  (Degelmann v. Advanced Med. Optics, Inc., 659 F.3d 835 (9th Cir.2011), vacated, 699 F.3d 1103 (9th Cir.2012)). In the absence of clear authority, the court declined to resolve the preemption argument at this time, though ZonePerfect could raise preemption arguments later.  

The court also rejected ZonePerfect’s Iqbal/Rule 9(b) challenge.  As to plausibility, the statutory claims turned on how a reasonable consumer would react to the label.  That issue is generally not resolvable on the pleadings.  As for the allegations subject to Rule 9(b), ZonePerfect argued that plaintiffs didn’t allege with particularity “how the purchased nutrition bars fell short of their advertised qualities, in other words, how the advertising was false. The suggestion is unavailing. Plaintiffs allege that the bars were labeled ‘All–Natural’ but in fact were not.” 

ZonePerfect argued that the central premise of the complaint was false—the “synthetic” ingredients were not in fact “unnatural” in the sense of not being found “in nature.”  Plaintiffs admitted that certain of the challenged ingredients are naturally occurring compounds (for instance, vitamins) or “common and normally expected to be in foods.”  This allegedly made the ingredients, “if not quite ‘natural,’ then not unnatural.”  This was a factual dispute not amenable to resolution at the pleading stage, despite ZonePerfect’s request for judicial notice of screenshots from the websites of purportedly health-conscious grocery stores mentioning ingredients used in ZonePerfect’s bars.  Though these allegedly showed that it was implausible that any reasonable consumer would be deceived by the “All-Natural” claim, that determination wasn’t appropriate on a motion to dismiss.  Plausibility is not probability.

The court also rejected ZonePerfect’s challenge to the CLRA claim.  ZonePerfect argued that the 30-day notice required prior to the commencement of a CLRA action for damages came too late because plaintiffs sent a demand letter on August 30, 2011 but then filed suit in California Superior Court on September 14, 2011.  But the action now before the court was filed on April 26, 2012, after a voluntary dismissal that had no preclusive effect; it was filed long after the 30-day notice period.  And the letter had sufficient detail to “give the manufacturer or vendor sufficient notice of alleged defects to permit appropriate corrections or replacements,” as required.

The court also declined to dismiss the claim for restitution based on quasi-contract, in the alternative to the tort claims.  Courts have been all over the map on whether a restitution claim is available in these circumstances.  Some say that restitution/unjust enrichment is not a cause of action but a remedy. Others say that it’s neither a claim nor a remedy, but a principle.  Still others say that it’s a cause of action, but one that can’t be pled alongside claims for breach of contract or tort.  Others disagree and find that it can be pled in those circumstances, but only as an alternative or fallback.  Others ignore the issue entirely and look at the elements of the claim.  “The outcome of some motions appears to have turned on the words used in the caption to describe the cause of action.”  (Heh.  I love restrained judicial annoyance.  Hmm, that came out wrong.  I don’t like annoyed judges as such!)  After its review of the cases, this court was persuaded that restitution/unjust enrichment claims can be pled as an alternative avenue of relief, but cannot afford relief if other claims do.

Legislators' statements establish existence and strength of government interest

1-800-411-Pain Referral Service, LLC v. Tollefson, 2012 WL 6737776 (D. Minn.)

Eric Goldman is going to hate this law, I predict.

Plaintiffs sought to enjoin pending amendments to Minnesota’s No-Fault Automobile Insurance Act as violating the First Amendment; the court rejected the attempt.  The lead plaintiff was 1–800–411–Pain Referral Service, a legal and medical referral service that maintains a referral network with chiropractors and medical doctors, to whom accident victims are referred after calling 1–800–411–PAIN. It advertised through billboards, radio, television, print, and internet ads, to the alleged benefit of providers in its network who lack such an ability to advertise extensively.  Other plaintiffs were part of 411–Pain's chiropractic network in Minnesota.

The No-Fault Act, among other things, prohibits health care providers from initiating direct contact with injured automobile accident victims.  However, health care providers or persons acting on their behalf can mail people directly, or can advertise generally, if they follow disclosure requirements.  For general advertising, the advertising must:

(1) be undertaken only by or at the direction of a health care provider; (2) prominently display or reference the legal name of the health care provider; (3) display or reference the license type of the health care provider, or in the case of a health care provider that is a business entity, the license type of all of the owners of the health care provider but need not include the names of the owners; (4) not contain any false, deceptive, or misleading information, or misrepresent the services to be provided; (5) not include any reference to the dollar amounts of the potential benefits under this chapter; and (6) not imply endorsement by any law enforcement personnel or agency.

Legal name, for these purposes, means the name under which a person or entity is registered in the state. 

The amended language was “an effort by the insurance industry and health care providers, specifically chiropractors, to enact reforms to Minnesota's No-Fault Act. The legislative record before the Court also reveals an intent to prohibit deceptive, misleading advertising in the context of automobile accidents.”  The record included specific references to 411-Pain’s billboards and those of another similar referral company, 1suggesting that they were driving up insurance costs under the no-fault system.  Bob Johnson of the Insurance Federation of Minnesota testified that the proposed language requiring advertisers to disclose health care providers' legal names or clinic names would “follow up” on current law governing unethical practices.  In answer to a question from one senator about the nature of the problem addressed, the bill’s sponsor said, “perhaps there are some outliers in the industry that use advertisements out of Florida companies that tend to get a lot of care directed their way, and perhaps they have a lot of modalities that they run through the treatment and there's presenting not the tightest language to correct some of that. And no-fault is fairly broad and so we are trying to deal with one of those issues. We would really rather have them be more specific than what I just said.”  (Hunh?)  A lobbyist for the Minnesota Chiropractic Association, stated that advertisements that fail to disclose the names of the health care providers to whom consumers are referred, are deceptive:

From the Chiropractors' Association, the concern that we're trying to address is deceptive advertising. We want people, patients injured, individuals who want to access care because they were injured in an auto accident to know—when they call a number—when they go to somebody who's advertised—that they know that it's either a provider or a referral source or that it's very clear to them what the advertisement is and who those people are that are advertising their wares. And so for us, it's an issue of deceptive advertising making sure that people who are accessing health care know exactly the conduit by which they're accessing it. And in this case, the language would clarify and specify that you need to use—if you're a health care provider advertising—you need to use your legal name. … [W]e do agree that there is a problem out there—or if not a problem—it's a perceived problem with deceptive practices by some providers out there.

Johnson also addressed why a telephone number or internet address might be considered misleading in this advertising context: “To just see a phone number, it doesn't actually tell you what the business is or what you're doing. So if consumers just see a phone number, that's what the advertisement is, then that's confusing and potentially deceptive or misleading.”  He described the new rule as “targeted.” 

A witness for the Association for Justice indicated that the language would eliminate 411-Pain and 1-800-ASK GARY’s ability to do business in the state.  A representative indicated that the provision was similar to another issue “with locksmiths and florists where you would call a number in the phone book or something or look on Google. You would Google ‘Blaine locksmith’ and it would actually patch you to a company in New Jersey who would then send you back to a Blaine locksmith. We fixed that a couple years ago for locksmiths and florists and I believe that this language is fairly similar at least looking.”  Another representative stated, “We're not trying to get rid of annoyance; we're trying to get rid of fraud.”

Before the final vote, one representative stated:

We did agree on some advertising. In particular there is one group you might have heard the jingle 411 Pain that promises you $40,000. Pretty good deal. Not exactly the purpose of auto insurance is to give people $40,000. And so that's an example of an abuse. ... There are some people who will run interference and go attract patients and give them rides and pay them money to go become patients whether they are injured very bad. They are called runners, cappers and steerers. That's a problem. The amendment that's before you is agreed upon by all parties and it involves advertising and adds some peace [sic] to the runners, cappers and steerers piece. In short it says advertising must be undertaken by health care providers, they must display the legal name with a health care provider or their clinic name. They must tell what kind of health provider they are. It must not be false, deceptive or misleading. It must not give reference to dollar amounts like the $40,000 and it must not imply endorsement by law enforcement or personnel.

A senator likewise stated:

This will protect individuals injured in a motor vehicle accident from solicitations and advertisements that exert undue influence, are deceptive and mislead. First of all, by imposing new restrictions on advertisement targeted to individuals injured in a motor vehicle accident to insure that advertising is not misleading and clearly identifies the health care provider directing the solicitation.

Another described the bill as a whole as “an appropriate protection for consumers and injured parties so they don't get taken advantage of at some of the most vulnerable moments.”

411-Pain’s founder averred that, through significant ad investment, the company has name recognition in the Minnesota market, and that it’s not required to have a license in order to provide referrals for professional services, including referrals for medical treatment.  Further, he averred that 411-Pain's advertisements contain only truthful, nonmisleading information. Examples of prohibited ads referring to specific dollar amounts of possible benefits include ads stating “... REMEMBER, AFTER 911, CALL 411 ... 1–800–411–PAIN ... YOU MAY BE ENTITLED TO FORTY THOUSAND DOLLARS IN INJURY AND LOST WAGE BENEFITS ...”; “... CALL 1–800–411–PAIN AND LET THEM EXPLAIN THE UP TO $40,000 IN INJURY AND LOST WAGE BENEFITS YOU MAY BE ENTITLED TO ... PLAN NOW ... PROGRAM 1–800–411–PAIN INTO YOUR PHONE NUMBER UNDER ‘ACCIDENT’ ...”; “Call 1–800–411–PAIN 24 hours a day 7 days a week and let them explain the up to $40,000 injury benefits you may be entitled to ... In an accident, and the guy with the tie says ‘let's not get our insurance companies involved.’ No good deed goes unpunished ... always call 911 and always call 411. REMEMBER after 911 call 411, 1–800–411–PAIN”; and so on.  Some of 411-Pain’s TV ads show actors appearing as police officers or EMTs, supposedly with conspicuous disclaimers that they are actors.

The amended act would drastically limit 411-Pain’s business model.  First, 411-Pain doesn’t advertise at the “direction” of any one health care provider.  Second, the requirement to disclose individual provider names wouldn’t be feasible on billboards, due to space limits, nor in radio or TV ads, due to time limitations.  Plus, the prohibition against advertising specific dollar amounts would bar its past ads.  A licensed chiropractor submitted a declaration saying that he’d like to become part of 411-Pain’s referral network, but wouldn’t with the law in place for fear of disciplinary action by the licensing board.  Another chiropractor attested that his clinic was part of the 411-Pain network, and that if not for the law he would himself create ads referencing specific dollar amounts and depicting police officers or EMT personnel with a “paid actor” disclaimer.

Plaintiffs sought to enjoin all elements of the new section except for the ban on falsity, misrepresentation, misleadingness, and deception.  They argued that these were speaker/content-based bans that violated Sorrell v. IMS Health, Inc., 131 S.Ct. 2653 (2011).  The court determined that it would apply Sorrell’s two-part approach, incorporating Central Hudson in the second half of the analysis.

The first Sorrell question, then, was whether the restrictions were content- and speaker-based.  Content neutrality depends on whether the government adopted a regulation because of disagreement with a message.  The court agreed that some parts of the regulation were—the requirement that any referrals for medical treatment of a car accident injury must be undertaken only by or at the direction of a health care provider (which only applies to a narrow class of speakers: advertisers in the context of car accidents, as opposed to slip or fall accidents); the ban on references to specific dollar amounts of potential recovery (as opposed to the possibility of economic benefits in general); and the ban on implied law enforcement endorsement.

As to the required disclosure of the health care provider’s legal name and license type, the Supreme Court held in Zauderer that “advertisers' rights are adequately protected as long as the disclosure requirements in question are reasonably related to the government interest in preventing consumer deception.”  The court pointed out that there are “countless” consumer protection disclosure requirements, including requirements specific to debt collectors, camping operators, lawyers, etc.  Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S.Ct. 1324 (2010), reiterated the holding in Zauderer that the standard of scrutiny to be applied to disclosure provisions for commercial speech was whether the requirements were reasonably related to the government's interest in preventing consumer deception.  Plaintiffs argued that Sorrell required more than the “reasonably related” standard did.  The court found that the outcome would be the same under Central Hudson anyway, and Central Hudson was part of Sorrell, so it didn’t consider the matter further.  (I’m not sure I’ve seen a treatment of Sorrell like this, but since nobody else knows what Sorrell means either, I’m not prepared to say it’s wrong, though I have to wonder what the “first prong” of Sorrell is for under this analysis, since commercial speech regulation is by definition going to be speaker-based.)

Central Hudson first asks whether the speech is misleading; misleading advertising may be banned entirely.  Here, there was a significant difference from Sorrell, where the government didn’t argue that the commercial speech (whatever it was) was misleading.  The record contained statements from legislators and stakeholders that “consumers have little understanding, if any, of what type of services are advertised, who the advertiser is, or whether consumers are entitled to recover a specific dollar amount.”  (Will removing references to specific amounts help with this last part?  Perhaps research on framing would be relevant here.)  The Senate bill’s sponsor specifically identified the purpose of the bill was to avoid misleading ads and clearly identify the health care provider directing solicitations.

The court found that the restricted advertising was “inherently misleading.”  The radio ads plaintiffs submitted as examples failed to identify that 411-Pain was a health care referral source,

“much less that the health care in question is chiropractic care…. [C]onsumers hearing such ads have no idea what 411–Pain is or does. Instead, 411–Pain's advertisements urge consumers to call 411–Pain immediately, at the accident scene, second only to dialing 911.” 

Also, though plaintiffs argued that the references to “up to $40,000 in injury and lost wage benefits” were truthful, the court nonetheless found them misleading.  The dollar-specific amounts implied that consumers would receive a floor of benefits, up to a $40,000 ceiling, when in fact many consumers would receive nothing.  On the other hand, $40,000 wasn’t actually the ceiling given the potential benefits available to car accident victims.  “While an attorney or insurance agent qualified to advise clients about coverage could convey this information, 411–Pain's advertisements of ‘up to’ $40,000 in economic loss benefits misleadingly limit the universe of information. Just as 411–Pain's advertisements may prompt some consumers to unnecessarily seek benefits, the proscribed advertising may also keep some consumers from obtaining more benefits.”

Furthermore, the ads showing a vehicle crash and an actor playing a police officer or EMT suggesting that 411-Pain was a source of help implied law enforcement endorsement, even with the “Paid Actor” disclaimer.  (The court might have been aided here by the extensive body of research, on which the FTC has relied, showing that textual disclaimers don’t work with visual/audio messages.)

Finally, the requirement that ads must be at the direction of a provider was a valid prohibition of speech concerning unlawful activity.  Given the anti-steering provisions of the law, which allow restrictions on situations in which a person benefits financially by referring a patient to another person, this restriction was aimed at “forbidding practices that are both misleading and possibly unlawful.”  (Note the regress here: if Sorrell is as powerful as plaintiffs argue, then restrictions on benefiting financially from steering a patient to a provider—through speech—may themselves independently be invalid, illustrating the corrosive power of subjecting commercial speech regulations to strict or even “heightened” scrutiny.  After all, if politicians aren’t corrupted by donations, why would recommenders be?)

So was this government interest substantial?  Plaintiffs argued that the challenged provisions were supported merely by claims that the conduct at issue was potentially misleading.  Merely labeling commercial speech potentially misleading doesn’t satisfy the state’s burden.  Ibanez v. Fla. Dep't of Bus. and Reg., 512 U.S. 136 (1994).  But the record spoke both of potential and actual confusion/misleadingness.  (This is finessing the question, since the legislators and lobbyists were giving their conclusions but don’t seem to have been relying on the experiences of actual consumers, copy testing, or marketing experts; the court’s approach indicates just how unsettled the evidentiary parts of the Central Hudson inquiry really are.) 

Consistent with earlier cases on lawyer advertising, “the State has a substantial interest in ensuring that accident victims, who may be under duress, have a clear understanding of who they are contacting for aid and treatment.”  And the state had an interest “in requiring that only parties actually capable of providing health care treatment direct the advertising of their health care services,” which would also protect consumers (presumably because the providers know their capabilities better than someone else hired to go off and tout the services).  The interest in ensuring the accuracy of commercial information is substantial, as is the interest in protecting the public by regulating the practice of professions, including by regulating the boundaries of ethical conduct.  “Absent the provisions in the amended No-Fault Act, advertisers and referral sources are permitted to make an end-run around the regulations and prohibitions otherwise enforceable only against licensed chiropractors.” 

Next, the court considered whether the statute directly advanced the asserted interests.  The disclosure requirements directly advanced the state’s interest in “prohibiting misleading advertising and ensuring that accident victims have a clear understanding of who they are contacting for aid and treatment,” including the provider’s name and license type.  Likewise, the requirement that advertisements must be undertaken only by or at the direction of a health care provider advanced the state's interest in giving car accident victims “a full understanding that the person or entity to whom they may be referred for treatment is also directing the advertisement.”  And the ban on specific amounts ensured that ads wouldn’t “entice, induce, or even lull consumers into believing that an automobile accident may lead to a particular sum of compensation.” 

As for the ban on implied endorsement of law enforcement, this was an appropriate restriction on a specific type of misleading advertising.  “To the extent that Plaintiffs contend that this ban on advertisements impermissibly extends to images of law-enforcement personnel, the statute does not ban the use of such images altogether—it merely bans the implication of law enforcement endorsement of a product.”

Finally, the court considered whether the law was “narrowly drawn” and not more extensive than necessary to serve the governmental interest.  It was.  The restrictions weren’t more extensive than necessary to ensure that “only parties actually capable of providing treatment are advertising that treatment” and that consumers are receiving non-misleading, non-deceptive information.  Though the legislature was aware that the law would have a major impact on the business of companies such as 411-Pain and 1-800-ASK GARY, that doesn’t mean they weren’t narrowly tailored.  Indeed, 411-Pain can continue some of its ads.  Defendants took the position that 411-Pain could advertise on behalf of/at the direction of multiple health care providers at once, and 411-Pain could draft contract language to that effect if it was concerned about its risks.  411-Pain could also still advertise the general availability of potential economic benefits under Minnesota's No-Fault Act.

What about the burden of listing providers and identifying what types they were?  411-Pain didn’t provide evidence of the number of chiropractors with whom it did business.  In any event, the law didn’t eliminate 411-Pain’s ability to advertise, and the disclosure requirements were narrowly drawn, consistent with Zauderer and Milavetz.  (Notice the effects of regulation on firm structure: a multisite chiropractic practice that does its own advertising will be less burdened by this law than a bunch of independent providers who are trying to get returns to scale by participating in a third-party referral network.  I don’t mean this as a criticism, necessarily: one point of the regulation is accountability, and a consolidated practice would have more reason to monitor the behavior of individual providers than a referral network would.  Thus, the non-speech-related effects of the regulation are likely to work in tandem with the legislature’s goals because they favor bigger entities, at least if the malpractice liability regime works in any significant respect.)

With no likely success on the merits, the preliminary injunction was denied.  The court specifically noted that disruption to 411-Pain’s business was insufficient as irreparable harm, absent likely success on the merits, and that to the extent that individual chiropractors would like to advertise similarly to 411-Pain, they’re already forbidden from disseminating deceptive, misleading, or incomplete advertising, including advertisements that do not contain the licensee's name, by a separate rule.  “While the nature of some of Plaintiffs' advertising may necessarily change, the change does not constitute irreparable harm.”  Indeed, because of litigation brought by the Florida AG under Florida’s Deceptive and Unfair Trade Practices Act, 411-Pain agreed to “various settlement terms, publicly available, some of which mirror the restrictions found in the new amendments…. 411–Pain agreed not to use any advertising promising a specific amount of monetary reward, nor to imply or misrepresent that a law enforcement official directed or mandated that consumers contact 411-Pain after contacting 911 or other emergency services.”  

 

The balance of harms also favored the state: “411-Pain's advertisements provide no information to the public that a call to 411-Pain will result in a chiropractic or other health care referral. Moreover, callers have no idea to whom they will specifically be referred, as the identify of referral providers is unknown.”  And the monetary claims both artificially raised and lowered consumer expectations.  This outweighed the argument that the ads were “particularly valuable for accident victims who otherwise would not know who to call for assistance.”

Apple's App Store claim is TM, not false advertising

Apple Inc. v. Amazon.com Inc., 4:11-cv-01327-PJH (N.D. Cal. Jan. 2, 1013)

Channeling in action, though not as explicit doctrine: the court rejects an attempt to make a trademark case into a false advertising case. Apple sued Amazon over Amazon’s use of “Appstore” for apps for Android and Kindle Fire devices.  Apple alleged trademark infringement, federal and California dilution, false advertising under the Lanham Act, and unfair competition.  Amazon sought and received summary judgment on the Lanham Act false advertising claim.

Apple’s false advertising argument was that Amazon’s use of “App Store” misrepresented the nature, characteristics and qualities of Amazon’s service since consumers would expect the high quality of Apple’s App Store and get an inferior service.  Amazon argued that Apple hadn’t identified any false statement of fact about the nature, characteristics, or quality of its Appstore, and that its claim was nothing more than garden-variety trademark infringement.

Apple conceded that it hadn’t identified any explicitly false statement, but argued that actionable falsity may be implied.  It relied on three cases and a citation from McCarthy (all quotes are the Apple court’s, not the original source’s):

(1) TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820 (9th Cir. 2011), found false advertising based on implicit claims of government endorsement/official status by DMV.org.  The name of the site mimicked an official site, as did the site design.  But here there was no evidence that Amazon was mimicking Apple’s site or advertising, and the plaintiffs in TrafficSchool.com had evidence of consumer confusion from surveys, emails from confused public officials, etc.

(2) Eastern Air Lines, Inc. v. New York Air Lines, Inc., 559 F.Supp. 1270 (S.D.N.Y. 1983), involved Eastern’s well-established “shuttle” service.  When NY started a new service on the same route, it also called it a “shuttle,” suggesting in its ads that it offered the same features (guaranteed seating, no need for reservations, and frequent service) as Eastern Air Lines’ “shuttle” service.  The court found that “shuttle” was generic, but upheld the false advertising claim, reasoning that “as used by Eastern, the term ‘shuttle’ had come to denote certain characteristics, and a competitor could not use the term to mislead customers into believing that it provided the same type of service that the public had come to expect from Eastern Airlines’ ‘shuttle.’ … New York Air Lines’ ads were misleading, because they purported to compare the two shuttle services and indicated that the features and amenities were comparable.”

(3) Potato Chip Inst. v. General Mills, Inc., 333 F.Supp. 173 (D. Neb. 1971), involved a lawsuit against General Mills for selling a product called “potato chips” that contained rice flour and dehydrated potatoes.  The court concluded that “potato chip” could in theory describe chips made in this way, but that the term was, “in the experience of consumers, so associated with slices of raw potatoes cooked in oil until crisp that using it to describe chips made from dehydrated potatoes would tend to mislead the public and therefore constitute false advertising.”  It relied on consumer surveys and dictionary definitions.

(4) Finally, the McCarthy treatise says, as part of its discussion of how to avoid genericity by using a generic descriptor to accompany another term that can serve as a trademark, that “a company that introduces a new product that does not establish trademark rights may have a false advertising claim against a junior user who uses a generic term to falsely imply that it is selling the same generic product or service identified by that term as does the established company.”

Apple argued that its cause of action was the same as in the above cases/authority, since Amazon’s service didn’t possess the characteristics and qualities that consumers had come to expect from an APP STORE, based on their familiarity with Apple’s services.

The court disagreed, finding these authorities “not noticeably relevant to the question whether it has provided evidence in this case sufficient to support the first element of the false advertising claim” (falsity).  In particular, “[t]he mere use of “Appstore” by Amazon to designate a site for viewing and downloading/purchasing apps cannot be construed as a representation that the nature, characteristics, or quality of the Amazon Appstore is the same as that of the Apple APP STORE.”  It’s true that implicit falsity is governed by the Lanham Act, but Apple provided no evidence, either through market research or consumer surveys, of exactly what false message was conveyed.  “Apple has presented no evidence that consumers or customers understand ‘app store’ to include specific qualities or characteristics or attributes of the Apple APP STORE, or that any customers were misled by Amazon’s use of the term.”  Apple argued that its store was better, with more apps and better device integration, but there was no evidence that consumers would expect Amazon’s store to be identical to Apple’s, especially since Apple’s store sold apps just for Apple devices, while Amazon’s sold apps solely for Android and Kindle devices.

AALS speed mentoring

I'll be participating in the AALS speed mentoring program for new law professors this coming Sunday, co-sponsored by the sections on Women in Legal Education & New Law Professors.  It's at  Grand Ballroom A, First Floor, Hilton New Orleans Riverside, starting at 8:30 am.  I'm looking forward to meeting new people!

Appearance is functional for pills, study confirms

From the NYT:

New research suggests that changing the color of a person’s pills — by switching to a generic from a brand name drug, for example — sharply reduces the chances that the patient will continue to take it.
....
Compared with patients whose pills remained the same, those whose pills’ color was changed were 53 percent more likely to stop buying them. A change in shape also affected the patients’ use of medication, but that was not statistically significant.
“I think we’ve identified another hurdle to medication adherence and a relatively easy way to fix it,” said the study’s lead author, Dr. Aaron S. Kesselheim of Brigham and Women’s Hospital in Boston. “Require that brand names and generics should look alike. The color of a pill does have clinical relevance.”

The most striking thing to me is the apparent intertwining of reason and emotion: patients apparently don't like having their pills changed.  Color is functional not as a pure informational signal (as if there were any such thing) but as a familiar, accepted feature--like a heart-shaped gift box or matching green farm equipment.  As Mark McKenna has argued, "utilitarian" functionality and "aesthetic" functionality are intertwined, and the aesthetic is often more important than the merely utilitarian.

Another point is that the effect is small but significant--the discontinuance rate was individually low even for changed color, but given that refills are regularly needed and given the serious effects of discontinuing the medication, the harm is still potentially substantial.  So for how many people need a feature be functional in order to count, legally speaking?

Oh Ars Technica no

“She didn’t write it…  She wrote it, but look what she wrote about.  She wrote it, but she wrote only one of it. She wrote it, but she isn’t really an artist, and it isn’t really art….  She wrote it, but she’s an anomaly.” – Joanna Russ, How to Suppress Women’s Writing.

The latest round, from this Ars Technica article about why DRM on music has declined while DRM on e-books is still widespread:

Another possible explanation over the lack of outrage is that within music, not only is the market larger, but there’s more of a tradition of turning the original work (a song) into a derivative work, like a remix.

“When iTunes was introduced no one was thinking: ‘When I buy this, can I cut it up into ringtones?’” Higgins added. “They weren't thinking, ‘Can I set this to a rhythm game and play fake guitar to this?’ Because people love music, there's avenues for that remix. With books, especially with e-books, books as codecs aren't a very remixable form. People don't really know to do anything with them except start at the beginning and read to the end.”

That’s incredibly dumb, except for just two words: “as codecs.”  Books are hugely remixable!  Though the tradition of scrapbooking, which involved physical collages of images and text on a very wide scale (there were patents; Mark Twain was involved in trying to make money off of the phenomenon; etc.), has faded somewhat, we never lost the tradition of remixing stories.  It’s just that you don’t need to break DRM to remix a story!   There are interesting things to be done with DRM-free books, but the basic condition of remix is pretty firmly ensconced in literary traditions.

The article continues, informing me that Alissa Quart says that “even the biggest literary fans generally don’t do much besides read or perhaps quote other works that they like. ‘There's not really a culture of remix amongst book readers,’ she said. ‘There's a literary culture of appropriation and interesting fair use but I don't think a lot of readers have that relationship to it.’”  Oh, really? 

Look, the set of readers who write fan fiction, create fan art, etc. is smaller than the set of heavily invested readers and also of course smaller than the set of casual readers.  But I call shenanigans on the idea that the proportions are wildly smaller than the analogous music remixers:serious music fans:casual music listeners relation, which is the very comparison we’re supposed to be making.  And I especially call shenanigans on the idea that this conclusion is so obvious it needs no factual investigation.  Maybe musicremix.net is out there and maybe it has 650,000 Nine Inch Nails remixes, but until you show me that, Harry Potter fandom remains king.  (Or perhaps that should be Weasley remains king.)  “Aside from zombie crossover fanfic, few outside the ivory tower are interested in remixing the written word,” another quote from the article, is kind of like saying “aside from blue cars, the highways aren’t that crowded.”  It’s just so aggressively wrongheaded!  (Also, it’s disappointing to see a geeky publication denigrate geek genres—but then, Joanna Russ wouldn’t be surprised at the structure of the Geek Hierarchy.)

The question of why DRM survives on books but not music is an interesting one both theoretically and practically.  But the article does no good by positing an answer that erases transformative literary fandoms instead of one that focuses on the affordances of technology and the kinds of transformative practices that aren’t bothered by DRM.  This false explanation further throws the article off track because it focuses on books v. music, ignoring video, which retains its DRM (thus requiring us to get DMCA exemptions for remix) and has its own histories of remix. 

Barbie as famous works of art

H/T Sarah Burstein: Jocelyne Grivaud puts Barbie in a variety of famous pictures.



 

I'd pay some serious money for a Barbie Venus de Milo, though the one that works most easily as social commentary by physicality is Man Ray's Le Violin d'Ingres:

Wells Fargo wins appeal on resequencing withdrawals

District court opinion discussed here.  The court of appeals found that much of the awful conduct at issue was unregulable because state regulation was preempted, though it upheld the unfair competition finding based on Wells Fargo's misleading statements about its awful conduct.  Ugh.

230 doesn't yet bar suit against Apple over intrusive apps

Pirozzi v. Apple Inc., 2012 WL 6652453 (N.D. Cal.)

Pirozzi sued Apple for failing to prevent third-party software applications distributed through its online App Store from uploading user information from their mobile devices without permission.  She alleged the usual California claims.  Apple moved to dismiss, and the court granted the motion, though with leave to amend; the court also rejected Apple’s broad §230 arguments.

Pirozzi alleged that apps are integral to users’ experiences on Apple devices, and that the App Store was the exclusive source of apps.  Apple thus completely controls users’ experience in the development of Apple devices and the development and selection of available apps. 

In addition, Apple’s App Store Review Guidelines provide that “Apps cannot transmit data about a user without obtaining the user's prior permission and providing the user with access to information about how and where the data will be used.”  Third parties are contractually required to obtain user consent before they collect any user or device data through their apps.  Apple states that it reviews all apps submitted to the App Store for compliance with its rules.  It also claims that its OS “is highly secure from the moment you turn on your iPhone. All apps run in a safe environment, so a website or app can't access data from other apps. iOS also supports encrypted network communication to protect your sensitive information. To guard your privacy, apps requesting location information are required to get your permission first.”

Notwithstanding these claims, Pirozzi alleged, “Apple-approved apps have downloaded and/or copied users' private address book information (including names and contact information of users' contacts), location data, private photographs and videos without the users' knowledge or consent when a user agrees to allow an app to access the user's then current locations.”  Such apps allegedly include Angry Birds, Cut theRope, Twitter, Facebook, LinkedIn, Instagram, Foursquare, and Yelp! 

Pirozzi alleged that she relied on Apple’s statements when deciding to buy an Apple device and buy apps.  However, she didn’t specify which Apple device she owned, which apps she downloaded, or whether any third-party app actually uploaded personal information from her mobile device.

Apple challenged Pirozzi’s standing on the ground that she failed to allege that she lost money or that any third-party app uploaded her personal information.  But that misconstrued the nature of her allegations: that Apple’s misrepresentations and omitted material facts induced her purchases.  This type of allegation satisfies the injury in fact and causation requirements for Article III standing.  However, Pirozzi failed to allege specifically which statements were material to her purchase decisions, which meant she hadn’t properly alleged injury in fact caused by the complained-of conduct.  (Apple submitted various documents that it argued precluded these claims because of the disclosures therein; this might create an issue of fact as to reasonable reliance, but the disclosures didn’t contradict the representations alleged in the complaint.)

As for the second type of harm identified, misappropriation of her personal information, Pirozzi didn’t allege that a third-party app developer actually misappropriated her personal information, only that it was now at greater risk of misappropriation.  This hypothetical threat was insufficient to confer Article III standing as to her negligence and unjust enrichment claims, absent allegations of specific apps that tracked her personal information and harmed her in some way.

Apple then argued that CDA §230 precluded the claims against it because, since misappropriation of users’ information was the heart of the case, Pirozzi was seeking to hold Apple liable for its exercise of editorial discretion in approving and distributing apps.  Not so: the claims were not based solely on the distribution of apps, but on representations made by Apple itself.  “To the extent that Plaintiff's claims allege that Apple's misrepresentations induced Plaintiff to purchase an Apple Device, those claims do not seek to hold Apple liable for making Apps available on its website.”  Instead, Apple was itself an information content provider as to those claims.  Still, on the record before the court, it would be premature to reject §230 immunity entirely.

Next, the consumer protection claims were grounded in fraud, but they didn’t satisfy Rule 9(b).  Pirozzi failed to allege the particulars of her own experience reviewing or relying upon any of the statements detailed in the complaint, or which devices or apps she bought in reliance thereon, or which apps, if any, downloaded her personal information.  The court declined to decide at this point whether any of Apple’s alleged representations was a specific verifiable claim.

Apple then argued that the CLRA claim failed because App Store users weren’t consumers and the apps weren’t goods or services.  The use of the App Store was free and the apps listed in the complaint were free.  (Angry Birds?  I don’t know about you, but they keep asking me to buy stuff.)  Thus, Pirozzi wouldn’t have paid for Apple’s services or software.  Pirozzi argued that her CLRA claim was premised on her purchase of goods, here Apple devices; the complaint didn’t say that, but she was given leave to amend.

As to negligence, Pirozzi alleged that “Apple owed a duty to Plaintiff to protect her personal information and data, and to take reasonable steps to protect her from the wrongful taking of her personal information and the wrongful invasion of her privacy.”  Apple argued that it owed no such duty to protect her from the conduct of third parties.  Pirozzi rejoined that Apple’s control over the user experience from development of the devices to selection of the available apps created a special relationship between the parties, and that Apple undertook this duty by commiting to review all apps for adherence to its policies.  The court found that these allegations were insufficient to allege an independent legal duty on Apple’s part.  Likewise, her allegations that Apple was unjustly enriched failed to sufficiently allege that Apple received a benefit from the unauthorized access to private user information.

No standing when defendant wore noncompeting hat elsewhere in sales chain

Dominick v. Collectors Universe, Inc., 2012 WL 6618616 (C.D. Cal.)

Dominick is a professional numismatist and rare-coin dealer who owns Westwood Rare Coin Gallery, Inc., which sells rare coins and other numismatic material.  The court dismissed Dominick’s mostly antitrust-based complaint without leave to amend.

Defendant Hall is also a numismatist and rare-coin dealer who owns defendant David Hall Rare Coins.  He also acts as the president, director, and CEO of defendant Collectors Universe, Inc.; he serves as the director of defendant Certified Coin Exchange, owned by Collectors Universe, which operates the main website for real-time trading of numismatic materials; and he is a founding member and the chief executive officer of Professional Coin Grading Service, the service that grades most of the rare coins traded on the CCE website (PCGS is now merged with Collectors Universe and no longer an independent entity).   Dominick also sued CCE’s president and sales director.

Along with antitrust claims based on alleged acts to control the market in real-time numismatic materials trading, Dominick alleged that Hall falsely advertised that PCGS-graded rare coins are “valued accurately and impartially” and that rare-coin dealers can become CCE members as long as they fulfill CCE's requirements.

Defendants argued that plaintiffs lacked standing because the statements were about PCGS and the membership requirements for CCE, neither of which were named defendants.  Article III injury in a false advertising case occurs “if some consumers who bought the defendant's product under a mistaken belief fostered by the defendant would have otherwise bought the plaintiff's product.” TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820 (9th Cir. 2011).  In addition, Lanham Act standing requires a plaintiff to show that the false statement caused a “competitive” commercial injury: harm to the plaintiff's ability to compete with the defendant.

The complaint showed a lack of standing.  Plaintiffs alleged a Lanham Act claim only against Hall, their direct competitor, but while parts of the complaint ascribed the false statements to Hall, other parts suggested that the statements were more properly attributable to PCGS and CCE, not Hall.  (The court seems to be suggesting that false statements made by an entity wearing the wrong “hat” aren’t within the scope of the Lanham Act; this seems wrong to me.  Compare Harold H. Huggins Realty, Inc. v. FNC, Inc., --- F.3d ----, 2011 WL 651892 (5th Cir.), which involves an allegedly false statement made in part of the competitive chain that the plaintiffs didn’t compete in, but that nonetheless allegedly harmed them as competitors with the defendant; the court of appeals found standing even under a restrictive standing test.  It’s not quite the same because of the different corporate entities here, but I’m not sure why that should be dispositive, since it invites gaming.  Possibly there is a distinction to be made in that plaintiffs weren't harmed as competitors, but I'm not sure there are enough facts here to be very confident of that.) 

 

The fact that Hall owned PCGS and CCE was insufficient to allege that he made the false statements, since they’re separate entities even if Hall owns and operates them “to some degree.”  Thus, the false representations were more properly attributable to PCGS and CCE, and plaintiffs needed to allege a hindrance to their ability to compete with those entities.  But they didn’t allege a claim against those entities, nor did they allege that they provide coin grading services or an online trading platform that competes with the services provided by those entities.  Given that this was the second amended complaint, the court determined that dismissal with prejudice was appropriate.

Studies show people like studies

Man: "My doctor told me to take Centrum Silver a few years ago.  Now, I hear that there's been a study on the effects of vitamins.  The vitamin they used?  Centrum Silver.  Guess my doctor is pretty smart!"  Tagline: "Most studied."  The ad campaign is, I think, a work of diabolical genius: of course having been studied doesn’t mean the results of the studies were good!  But as other studies have shown, advertising an irrelevant attribute can increase consumers’ favorability towards a product even when it’s explicit that the attribute is irrelevant.  And I don’t think this actually allows an escape from regulation: the clear implication—the necessary implication, if you will—of this claim in an ad is that the studies produced favorable results for Centrum Silver.  H/T ST.