consumer claims aren't covered by advertising injury policy

National Union Fire Ins. Co. of Pittsburgh, Pa. v. Mead Johnson & Co., 913 F. Supp. 2d 682 (S.D. Ind. 2012)

National Union successfully sought a declaration that it had no duty to defend Mead Johnson in the follow-on consumer lawsuits stemming from the PBM v. Mead Johnson infant formula §43(a)(1)(B) false advertising litigation, where Mead Johnson was found to have falsely claimed a unique formulation unavailable in less expensive store brands.  The consumer plaintiffs based their claims on the same comparative advertising.  National Union argued that this wasn’t covered “personal and advertising injury.”

Under Indiana law, a duty to defend is triggered when the underlying complaint alleges facts that might fall within the coverage of the policy (or, when the facts are contested, the insurer must undertake a reasonable investigation into the underlying facts).  The relevant question was whether the underlying lawsuit alleged “[o]ral or written publication ... that slanders or libels a person or organization or ... disparages a person's or organization's goods, products, or services.”  Mead Johnson argued that the underlying complaints alleged that consumers suffered injury arising out of Mead Johnson’s disparagement of competitors’ lower-priced formula, e.g., “As part of its deceptive marketing campaign, Mead Johnson has disparaged competing products, particularly store brands....”

The court found this insufficient; to state a claim for libel, slander, or disparagement, the underlying plaintiffs would have to allege that the false statements were made about the plaintiffs.  Consumers wouldn’t have Article III standing to bring claims for disparagement of the competition, and their injuries were purely economic.  Since the statements at issue weren’t “of and concerning” the underlying plaintiffs, there was no coverage, and any economic injury they suffered didn’t fall within the scope of “disparagement.”  (I don’t really get this.  The policy by its terms doesn’t say that the “person” who is disparaged has to be the one who’s suing to trigger coverage; it just says that the injury has to arise out of disparagement, and the underlying plaintiffs here alleged that Mead Johnson’s denigration of competing brands caused them to pay more for Mead Johnson’s version.) 

No duty to defend and no duty to indemnify.

Misleading before and after photos

A personal trainer blogging at the Huffington Post has some striking before and after photos--before and after in less than a day.  His point, consistent with the FTC's guidance on endorsements and testimonials, is that it's easy to mislead about results with before and after photos.  Would reasonable consumers expect that lighting and positioning made all of the difference?

True product integration has arrived

On MTV's Teen Wolf, which really shouldn't surprise anyone.  Last night's episode featured one character very deliberately opening and eating a Reese's Peanut Butter Cup while delivering the plot-significant line, "Perfect combinations are rare in an imperfect world."  This line is, naturally enough, already in dozens of tweets/tumblr posts.  As much as it made me roll my eyes, I must congratulate the writers on doing far better than usual in substantive integration.

Inconsistent yogurt rulings, but no preliminary injunction for UCL case

Kane v. Chobani, Inc., 2013 WL 3703981 (N.D. Cal.)

This decision conflicts with one I blogged last week holding that the FDA didn’t have an enforceable position on evaporated cane juice.

Plaintiffs alleged that they bought multiple flavors of Chobani’s Greek Yogurt, and alleged that the labels were false and misleading in three ways: (1) The labels described their sweetener as evaporated cane juice (ECJ), which is just sugar, aka dried cane syrup; this term falsely concealed the nature of the sweetener and violated FDA regulations requiring ingredients to be identified by their “common and usual names,” as well as the standard of identity for yogurt, which doesn’t list ECJ as an authorized sweetener.

(2)  Chobani’s website said, “The 7g of sugar listed on the nutrition facts panels … comes from a naturally occurring type of sugar found in all dairy products called ‘lactose.’ This lactose often called ‘milk sugar,’ is the only sugar you'll find as we don't add sugar to our yogurt.”  It also said, “Does Chobani Champions contain extra sugar? No way! Just because Champions is made for kids doesn't mean that we need to add extra sugar. You won't find any high fructose corn syrup or artificial ingredients, flavors, or colors in our yogurt. Just low-fat milk … ; [and] real fruit, lightly sweetened with evaporated cane juice ….”

(3) Chobani allegedly falsely claimed that the yogurt contained “[o]nly natural ingredients” and were “all natural,” but actually included artificial ingredients, specifically the use of of “fruit or vegetable juice” “for color.”  

Plaintiffs alleged the usual California claims in the usual ways.  Chobani argued first that they failed to plead reliance.  Reliance can be shown if the defendant’s misrepresentation or nondisclosure was an immediate cause of the plaintiff’s injury-producing conduct.  The court found that plaintiffs showed reliance as to the ECJ claims: they alleged that use of the term concealed the fact that the ingredient was essentially white sugar or dried cane syrup; that, based on the labels, they believed that the yogurt contained “only natural sugars from milk and fruit and did not contain added sugars or syrups”; and that they wouldn’t have bought the products if they’d known the truth.

However, plaintiffs’ allegations suggested that they understood that dried cane syrup was a form of sugar, but “failed to allege what they believed evaporated cane juice to be if not a form of sugar.”  Thus, since ECJ was on the label, it was implausible on these allegations for them to conclude that only milk and fruit provided the sugars in the yogurt.  But the ECJ claims still survived, since plaintiffs sufficiently alleged that the term ECJ was deceptive, concealing that the ingredient is little different than ordinary white sugar and suggesting that it was akin to natural sugar cane.  Plaintiffs did allege that natural sugar cane is “healthy and nutritious, containing vitamins, minerals, enzymes, fibers, and phytonutrients,” unlike ECJ.  “Moreover, to the extent ECJ suggests that the product is derived from a juice, it may have plausibly suggested that the product is healthier than refined sugars and syrups.”

Also, the court found that plaintiffs didn’t sufficiently allege reliance on the “no sugar added” claims. They didn’t allege they ever saw Chobani’s website, on which the claims resided, and thus they couldn’t have relied on them.  In re Tobacco II didn’t change the result, since that case involved a long-term ad campaign; plaintiffs are still required to allege facts showing that the ads at issue were an immediate cause of the purchase decision.  Plaintiffs argued that the website statements violated FDA labeling requirements, rendering the yogurts misbranded and unlawful to sell; further, they alleged, they wouldn’t have bought the products if they’d known they weren’t lawfully on the market. But that wasn’t enough to show reliance; this theory would “eviscerate the enhanced standing requirements imposed by Proposition 64” and Kwikset, which requires actual reliance on the allegedly deceptive or misleading statements. Plus, there was no allegation of a duty to disclose the alleged noncompliance with labeling laws.

Likewise, plaintiffs failed to allege reliance on the “all natural” representations; allegations that they wouldn’t have bought the products if they’d known that some of the yogurts were colored “artificially” using “fruit or vegetable juice concentrate” were insufficient because the label explicitly disclosed that Chobani added “fruit or vegetable juice concentrate [for color].”  Thus, the reliance allegations were implausible.

With only the ECJ claims remaining, the court found that plaintiffs had adequately alleged injury, even though Chobani argued that the product contained exactly what was in the ingredient list.  That ignored the theory of harm accepted by Kwikset: plaintiffs wouldn’t have bought the product but for the alleged misrepresentation.

Plaintiffs didn’t allege they purchased all Chobani flavors, or any Chobani Champions products.  The allegedly deceptive use of ECJ was substantially similar across all the products, but plaintiffs didn’t allege facts sufficient to show that the products they didn’t purchase were substantially similar, and both kinds of similarity were required; claims based on unpurchased products were dismissed without prejudice.

The court then found that it was plausible that a reasonable consumer could be deceived by the misstatements: “it is plausible that Defendant's use of the term ECJ suggests that ECJ is a healthier alternative to refined sugar and may conceal the fact that ECJ is” basically white sugar (why do you think Chobani used the term, especially in the face of FDA guidance suggesting the contrary?).

The court also rejected Chobani’s preemption arguments, including the fruitless argument that the FDCA lacks a private cause of action and thus must intend that states not grant a cause of action for violating the law.  But the FDCA specifically contemplates state law enforcement of “identical” rules.  Pom Wonderful didn’t change that; it was limited to the Lanham Act and didn’t deal with the presumption against federal preemption of state health/safety law.  Cases involving Class III medical devices and fraud on the FDA claims were also inapposite; there was no “comparably rigorous review” or premarket approval for foods here, and the extensive regulation of Class III medical devices gave preemption a different context than the FDA’s “substantial, but more limited oversight of food labeling requirements” that explicitly recognized a state role.  Plaintiffs weren’t suing because the conduct at issue violated the FDCA, but rather because it violated state law identical to the federal requirements.

Chobani argued that express preemption applied.  Plaintiffs alleged that the use of ECJ violated the FDA’s requirement that ingredients be referred to by their “common and usual name.”  Chobani noted that plaintiffs were relying on draft guidance about ECJ specifically stating that it was nonbinding.  But this specific document was consistent with the general regulation about common and usual names, and an agency’s interpretation of its own regulation, even if set forth in an informal document, is “controlling unless plainly erroneous or inconsistent with the regulation.” The FDA also expressed the same view about ECJ in several warning letters, which while informal and advisory, also communicated the agency’s position.  For purposes of a motion to dismiss, this was sufficient to show that plaintiffs’ claims were identical to FDA regulations.

Plaintiffs also alleged that using ECJ in the ingredients violated the standard of identity for yogurt, which sets forth a list of approved “[n]utritive carbohydrate sweeteners” that may be included in a product designated as a yogurt.   The list includes “[s]ugar (sucrose), beet or cane,” but it wasn’t entirely clear that ECJ was permitted.  However, the court declined to resolve the issue, dismissing the claims on primary jurisdiction grounds.

The core ECJ claim wasn’t dismissed on primary jurisdiction grounds, because the informal guidance on ECJ meant that the court wouldn’t have to resolve an issue of first impression without the FDA’s input. But the FDA had proposed a new standard of identity for yogurt allowing any “safe and suitable sweetening ingredients,” and plaintiffs didn’t allege that ECJ wasn’t safe or suitable.  The FDA had also suggested that it wouldn’t enforce violations of the current standard of identity for companies complying with the proposed one, making the primary jurisdiction doctrine appropriate.

Nearing the end of the analysis: plaintiffs argued that Rule 9(b) didn’t apply to their UCL unlawfulness claim, since it wasn’t based on fraud. The court disagreed because the underlying allegations were that the product labels were misleading and deceptive and that’s what made them unlawful.  But plaintiffs did plead with sufficient particularity; they didn’t have to identify the exact days on which they bought the products and they did plead the general timeframe of purchases.  Chobani didn’t show that it used a term other than ECJ during the alleged purchase period, so plaintiffs didn’t need further specificity.

Kane v. Chobani, Inc., 2013 WL 3776172 (N.D. Cal.)

Plaintiffs sought a preliminary injunction against the sale of allegedly mislabeled yogurts, and the court denied the motion.

The court first rejected plaintiffs’ argument that, under California law, they weren’t required to show irreparable harm.  The court disagreed about the substance of California law, which generally does require irreparable harm.  Anyway, choice of law principles supported the application of federal law to this question of civil procedure, where the determination wouldn’t alter the final outcome of the litigation, since a permanent injunction would still be available if plaintiffs ultimately prevailed.

Accepting that plaintiffs had shown likely success on the merits, they still hadn’t shown irreparable harm.  The court rejected their arguments that they didn’t need to show irreparable harm because they were acting as private attorneys general (that’s not enough); because they were seeking to enjoin a public nuisance (there was no specific California law declaring mislabeled food to be a public nuisance, nor did plaintiffs plead the existence of a public nuisance or a special injury to the plaintiffs of a character different in kind from that suffered by the general public, as required for public nuisance standing); and that they were seeking to enforce statutory provisions, allowing an inference of irreparable harm.  This last argument in favor of a presumption of irreparable harm, even assuming the precedent behind it transferred from federal statutes to state ones, was probably no longer good law after eBay and Winter.  Those cases at least require strong evidence of a legislative intent to abrogate the irreparable harm element, and there was no such evidence with respect to the consumer protection claims.  (Also, California cases following the pre-eBay rule that no irreparable harm must be shown when an injunction is authorized by statute only apply that rule to government agencies, which plaintiffs weren’t.)

Anyway, California law requires courts to balance the harm to the parties, including by considering irreparable harm to the plaintiffs.  The harm here to Chobani would be great—relabeling in accordance with any injunction wouldn’t be possible before the yogurt expired, so it would lose millions.

And plaintiffs and other consumers were not likely to suffer irreparable harm.  Plaintiffs argued that Chobani’s labels deceived people into over-consuming sugar, which has a negative impact on public health.  The court wasn’t persuaded that consumers were likely to be confused about the sugar connection: “The fact that the name of the ingredient discloses that it is derived from cane seriously undermines any contention that consumers are unlikely to be under the impression that the ingredient is or contains sugar.”  More significantly, the labels explicitly disclose the total amount of sugar; failing to disclose the portion of sugar from ECJ—the added sugar—wasn’t a problem without any evidence that a consumer who knows the total amount of sugar would suffer health effects from not knowing how much is from ECJ.

The other harms plaintiffs identified—buying yogurt they otherwise wouldn’t have bought, and having competitors lose market position as a result of the mislabeling—were monetary and compensable with damages, thus not irreparable; also alleged harms to competition were vague and speculative.  (I thought in trademark cases market position was always irreparable!) 

alleged patent infringement doesn't violate Lanham Act

Seoul Laser Dieboard System Co., Ltd. v. Serviform, S.r.l., 2013 WL 3761535 (S.D. Cal.)

Seoul Laser alleged that defendants infringed its patents and violated the Lanham Act. Some of the patent claims survived the motion to dismiss, but not the Lanham Act claims.  The court found it unclear whether Seoul Laser raised a §43(a)(1)(A) or (a)(1)(B) claim, and, while other courts are more forgiving, noted that “[t]his ambiguity alone raises fair notice concerns.”  Regardless, Seoul Laser failed to state a claim.  As for §43(a)(1)(A), “origin” means the producer of tangible goods, not the author of ideas etc. embodied therein.  The allegations that the sale of infringing machines would confuse and deceive the public into thinking that defendants’ products were Seoul Lasers were insufficient.  Seoul Laser appeared to allege only that it owned the patents embodied by defendants’ machines, so defendants were creating confusion as to inventorship, and that’s Dastar-barred.

The complaint also failed to state a false advertising claim, which was subject to Rule 9(b)’s heightened pleading standard because district courts have said so.  Here, Seoul Laser failed to identify a particular false statement or explain why it was misleading.  Tortious interference claims failed for similar reasons.

intellectual property in the uncanny valley

Noel Cruz repaints dolls to make them look more like their models (that is, more like the actors as they looked when they played the relevant characters, or more like the celebrities).  The results are often uncanny.  Apparently there is an entire “repainting” community.  The first sale issues, both in terms of copyright and in terms of trademark, are quite intriguing—and I don’t recall that any right of publicity case has addressed first sale at all.  (For copyright, I’d argue that to the extent that Cruz makes the dolls resemble the relevant actors more, he is not changing anything a copyright owner could own, as the appearance of a real human being isn’t part of the protectable expression in a TV show or movie—but there is loose language in cases like X One X that could be read otherwise.  But if X One X is right—if MGM owns a copyright in Dorothy-who-looks-like-Judy-Garland—then that has interesting implications for §301 preemption, since courts in right of publicity cases usually hold to the contrary.)

Examples from people/characters involved in litigated right of publicity, copyright, and trademark cases:

Cruz also does black and white portraits, for those interested in Comedy III issues.

Side note of possible interest to Vampire Diaries fans—he did a great job on Stefan, but clearly understood that his Damon was subpar and has no closeup pictures of the less broody Salvatore.  That might be due to the underlying doll’s failure to replicate the actor’s distinctive facial structure, since I imagine there’s only so much repainting can do.  (If anything, that doll looks more like Joshua Jackson to me.)

The past is never dead, but it is de minimis

Faulkner Literary Rights, LLC v. Sony Pictures Classics Inc., No. 12-cv-00100 (N.D. Miss. July 18, 2013)

As someone said on Facebook, in an ideal world this would’ve been a two-page order with Rule 11 sanctions attached. Instead, we get a muddle saying that using a paraphrased Faulkner quote in a movie is a de minimis fair use, or maybe it’s just de minimis.  Here’s the court’s summary: “At issue in this case is whether a single line from a full-length novel singly paraphrased and attributed to the original author in a full-length Hollywood film can be considered a copyright infringement. In this case, it cannot.”  (Emphasis added.  How about in no imaginable case could it be?)  Also the trust’s Lanham Act claim based on the same facts failed, and here the court didn’t really bother to give a reason other than incredulity, raising the question: is it better that in copyright we have an elaborate schema for rejecting a terrible claim like this, but only after an extended analysis; or that in trademark we have a set of doctrines muddled enough that it’s hard to pick a clear doctrinal reason to reject a terrible claim like this even though it’s obvious that the trust has to lose, so it’s simpler just to say this is dumb and dismiss it?

(Bonus irony: of course, the opinion quotes a lot more of the Faulkner work at issue than the movie did, though a lot less than a standard college essay should’ve.  One hopes the trust isn’t going to sue the government for its judicial taking.  Of course, in all life + 50 jurisdictions, Faulkner’s works just entered the public domain, so plenty of people around the world can read the whole novel at will.  But in America, the past is never dead—it’s not even public domain.) 

In Faulkner’s Requiem for a Nun, a character says, “The past is never dead. It’s not even past.” In Midnight in Paris, a character says, “The past is not dead. Actually, it’s not even past. You know who said that? Faulkner, and he was right. I met him too. I ran into him at a dinner party.”  

Midnight in Paris is a whimsical Woody Allen film (is there any other kind?) involving time travel by a “Hollywood screenwriter with literary aspirations” who meets Cole Porter, Zelda Fitzgerald, and F. Scott Fitzgerald.  According to the court, the film has both a plot and a theme of longing for the past, with a character who coins the term, “Golden Age Thinking, the erroneous notion that a different time period is better than the one one’s living in. Ya know, it’s a flaw in the romantic imagination of those people who find it difficult to cope with the present.”  The first lines of the screenwriter’s novel are, “‘Out of the Past’ was the name of the store, and its products consisted of memories. What was prosaic and even vulgar to one generation had been transmuted by the

mere passing of years to a status at once magical and also camp.” The screenwriter’s friend says, “The past has always had a great charisma for me,” and they debate which era was the best.  The quote at issue comes in context of the screenwriter’s accusation that his girlfriend is having an affair; he got the idea from Hemingway, Fitzgerald, Gertrude Stein and Salvador Dali, “a notion Inez ridicules because they are all dead.”  He responds with the quote in suit.

Requiem for a Nun is part of Faulkner’s Yoknapatawpha cycle; Sony called it “relatively obscure,” but the court explicitly disagreed, because “[n]othing in the canon is obscure.”  Requiem is a cross between a novel and a three-act play.  Searching to help a nanny sentenced to death for the murder of a child, her defense attorney visits the child’s mother, who is “not without fault” in the death.  The mother “resists and distances herself from her past, stating that she is now Mrs. Gowan Stevens, not Temple Drake. Gavin Stevens [the attorney] retorts, ‘The past is never dead. It’s not even past.’” The novel has other references to the past, including Gavin Stevens’s statement to Gowan that “There’s no such thing as past either” and Gavin’s description of the past as a promissory note:

It was as though she realised for the first time that you – everyone – must, or anyway may have to, pay for your past; the past is something like a promissory note with a trick clause in it which, as long as nothing goes wrong, can be manumitted in an orderly manner, but which fate or luck or chance, can foreclose on you without warning.

The court decided the case on a motion to dismiss, but, since Sony didn’t contest any of the minimal facts alleged in the complaint, the decision would be the same on summary judgment.  (You will see below that this means the judge opines on the state of the copyright licensing world via plausibility.  If we have to have Iqbal/Twombly, then certainly copyright defendants shouldn’t be exempt from pro-defense bias.  But I think a better explanation of the outcome here is that Campbell can’t possibly mean what it says about requiring defendants who make commercial uses to present evidence on factor 4 to win, even though that was the basis for the remand in Campbell itself, because sometimes finding fair use on a motion to dismiss is appropriate.  Compare Brownmark v. Comedy Partners, also sketchy on this point and also correctly decided.)

The court first discussed Sony’s de minimis defense.  Substantial similarity is measured by considering the qualitative and quantitative significance of the copied portion in relation to the plaintiff’s work as a whole, which “mirrors the third factor of the fair use defense.” (It can’t really “mirror” it, or the two inquiries are duplicative.  Uses of an entire work can be fair.  And something that’s noninfringing isn’t necessarily a “fair” use—it may not be a “use” at all.  I could get behind the idea that there is some threshold beyond which only factor 3 matters and no consideration of the other factors is required—but that is to say, there is a de minimis doctrine separate from the multifactor fair use test.)  The parties agreed that the de minimis doctrine was separate from the affirmative defense of fair use, though the Fifth Circuit hadn’t ruled on the issue.  Here, the court considered the two analyses “fundamentally related,” with the former “wholly encompassed” within fair use.  Thus, it used the fair use factors “in making a determination on the de minimis and substantial similarity issues.”  (Emphasis added.)

A claim can be dismissed if a successful affirmative defense appears on the face of the pleadings.  But that didn’t matter anyway because “the court addresses the affirmative defense but disposes of its ruling on separate grounds.” 

Comment: As I read this, the court is saying that it is really ruling on the de minimis issue, which is part of the prima facie case of infringement, via the fair use factors.  The reason for this tapdance is that many courts say, without explaining why, that a de minimis use is one that’s not recognizable.  But the film attributed the quote to Faulkner, making this use recognizable, and it’s ridiculous to have a standard that any attributed use, however minimal, is infringing.  Back when courts didn’t think copyright owners would sue over sentence-long quotes, the recognizability standard didn’t do much damage, but it does now.  Then the question is what might be de minimis despite being recognizable, and the court is pulling in the fair use factors to make that determination.  But if it’s still a de minimis test rather than a variant of fair use—which it should be, and which it must be if we were really serious about the procedural difference between the prima facie case and affirmative defenses—then why the fair use factors other than factor 3 should be used is somewhat unclear.  A better rule would be that simple quotes, of the kind one would find in a review or yearbook collection, are de minimis, full stop.  The court gets there using fair use factors by fiating a result on factor 4, which confirms again that fair use is an awkward fit when all the defendant did was quote a line from a book.

Okay, fair use: the use was transformative because

[t]he speaker, time, place, and purpose of the quote in these two works are diametrically dissimilar. Here, a weighty and somber admonition in a serious piece of literature set in the Deep South has been lifted to present day Paris, where a disgruntled fiancé, Gil, uses the phrase to bolster his cited precedent (that of Hemingway and Fitzgerald) in a comedic domestic argument with Inez. Moreover, the assertion that the past is not dead also bears literal meaning in Gil’s life, in which he transports to the 1920’s during the year 2011. It should go without saying that this use is highly distinguishable from an attorney imploring someone to accept responsibility for her past, a past which, to some extent, inculpates her for the death of her child.

The characters used the quote for “antithetical” purposes of persuasion.  One was “a serious attempt to save someone from the death penalty,” the other was “a fiancé trying to get a leg up in a fleeting domestic dispute.”  This was undoubtedly transformative.  It was also relevant that Requiem was “a serious piece of literature lifted for use in a speaking part in a movie comedy, as opposed to a printed portion of a novel printed in a newspaper, or a song’s melody sampled in another song.”  The transformation of medium favored fair use.  (Newspapers can quote novels—they’re generally called “reviews”—and I’m pretty sure that Campbell involved some melody; I had thought that meaning rather than medium was significant.  Belt-and-suspenders distinctions are too often used to strangle a later litigant.)

Anyway, the changes in context and medium “coupled with the miniscule amount borrowed tip the scales in such heavy favor of transformative use that it diminishes the significance of considerations such as commercial use that would tip to the detriment of fair use.”  It wasn’t plausible that Sony “somehow sought some substantial commercial benefit by infringing on copyrighted material for no more than eight seconds in a ninety minute film,” since the 8 second clip wasn’t “a thematic catharsis or apex in plot” for either work. (And if it had been, it still would’ve been okay!)

Nature of the work: not helpful in transformative use cases.  Campbell’s statement to this effect was about a parody, but it also applied to “analogous” uses like this one; this factor was neutral.

Substantiality of the portion used: Faulkner argued that the quote was qualitatively important, containing “the essence of Requiem: there is no such thing as past, whether for Jefferson or Temple Drake. The events of the past (for better or worse) cannot be discarded and forgotten; the history of mankind just as the personal history of Temple Drake shapes and forms human relations and conduct.”  A critic has deemed the quote “central to the entire novel” – the “mainspring of both theme and narrative,” and the quote’s fame showed its unique expressiveness.  (The court considered the critic’s reaction and President Obama’s use of the quote in a speech to be outside the pleadings, but considering them would make no difference.)  As the court pointed out, however, this was an argument about the qualitative importance of the theme, “not the qualitative importance of the quote itself, however eloquent in conveying this theme the quote may be.”  Copyright doesn’t protect ideas.  The court focused on the qualitative importance of the theme’s expression.  But the quote constituted only a small portion of the expression of the idea in the novel, including the quotes above and also these:

“Because suddenly it could be as if it never been, never happened. You know: somebody – Hemingway, wasn’t it? – wrote a book about how it had never actually happened to a g- woman, if she just refused to accept it, no matter who remembered, bragged…. Then Gowan came to Paris that winter and we were married… and if that couldn’t fumigate an American past, what else this side of heaven could you hope for to remove stink?”  

… “Perhaps she was too busy between the three of them to be careful enough:… the doom, the fate, the past;…”  

The quote at issue was a fragment of the idea’s expression.  “[H]ad Sony copied half of these quotes, Faulkner might have a stronger argument under this element.”

Moreover, the 9-word quote’s “subsequent fame as a succinct expression of the theme” didn’t make it qualitatively important to the originating work; that was a matter of qualitative importance to society.  And of course the quantitative importance was miniscule.  This favored fair use, and “no substantial similarity exists between the copyrighted work and the allegedly infringing work.”

Despite having found no substantial similarity and thus no infringement in the first place, the court still considered factor 4.  Now, Campbell says that a proponent of fair use “would have difficulty carrying the burden of demonstrating fair use without favorable evidence about relevant markets” and that “a silent record on an important factor bearing on fair use disentitled the proponent of the defense….”  But here, despite the silence of the [nonexistent] record, “the court uses these factors to guide its determination under the de minimis and substantial similarity analyses” (emphasis added) so it’s ok.  And anyway factor 4 is a “non-issue” in light of the other factors and the court’s opinion about the market:

The court is highly doubtful that any relevant markets have been harmed by the use in Midnight. How Hollywood’s flattering and artful use of literary allusion is a point of litigation, not celebration, is beyond this court’s comprehension. The court, in its appreciation for both William Faulkner as well as the homage paid him in Woody Allen’s film, is more likely to suppose that the film indeed helped the plaintiff and the market value of Requiem if it had any effect at all. In fact, Faulkner has not pled any injury except for a statutory entitlement to an award. Such an entitlement does not hold up on a de minimis infraction, however. Had Faulkner pointed to compelling evidence that the markets for Requiem suffered a substantial harm as a result of the use in Midnight, this harm would be so anomalous that it would hardly undercut Sony’s justification in presuming fair use.

Faulkner argued that it would submit evidence of its licensing agreements, showing harm, but a copyright owner isn’t entitled to license fees for fair uses.

Faulkner also wanted discovery on Sony’s good faith, but that was irrelevant here. Sony attributed the quote, and the complaint didn’t allege facts from which bad faith could reasonably be inferred.  And even if Sony acted in bad faith, “the only relevant fair use factor … would be under the fourth factor regarding relevant markets, which, again, would not undercut the stark balance in favor of Sony.”  And even a bad faith attempt to injure Faulkner couldn’t help because “Sony would have had a good faith basis for believing it need not obtain permission for its use of the quote. That is, a bad faith effort to use a copyright holder’s work under the fair use factors would be a contrived dichotomy that would be harmless when the use is so apparently fair.”

Faulkner argued that Sony licensed other material for the film, such as Cole Porter’s “Let’s Do It (Let’s Fall in Love)” and Pablo Picasso’s artwork.  But that wasn’t relevant to whether the use of Faulkner’s quote was fair [or de minimis?], and the court noted the “obvious” distinction that Porter and Picasso’s works were used in their entirety, not just a fragment. Licensing these other works was therefore irrelevant.  “[N]o substantial similarity exists between the copyrighted work and the allegedly infringing work, and Sony’s use in this matter was de minimis.”

Now for the Lanham Act claim: “The court has no doubt that the interests of Sony in First Amendment protection outweigh Faulkner’s interest in pursuing a Lanham Act claim in this case. However, the court declines to engage in a thorough analysis of this issue because a Lanham Act claim has not been established in the first place.”  The mere allegations that the film would confuse “viewers as to a perceived affiliation, connection or association between William Faulkner and his works, on the one hand, and Sony, on the other hand” and that viewers might be deceived “as to the origin, sponsorship, or approval of Sony’s goods, services, or commercial activity by William Faulkner and/or his written works” were implausible.  The only facts alleged were the two works.  Looking at both, “largely in light of the court’s copyright analysis,” “no such misappropriation can possibly be inferred.”  Literary allusion—Faulkner’s name and a short paraphrase—couldn’t possibly confuse an audience about affiliation.  “Allusion is not synonymous with affiliation, nor with appropriation.”  Anyway, the allegations were wholly conclusory and failed Iqbal/Twombly.  Sony admitted all the facts in the complaint, and still no reasonable juror could find confusion.

The court declined to exercise jurisdiction over Faulkner’s state law claim for commercial misappropriation (essentially, a right of publicity claim).

Initial interest confusion is dead, long live IIC?

1-800 Contacts, Inc. v. Lens.com, Inc., 2013 WL 3665627 (10th Cir. July 16, 2013)

I will try not to repeat Eric Goldman’s trenchant analysis; our aggravation is shared.  A few points I want to highlight:

(1) Implicitly acknowledging the need to reconceptualize the multifactor test in modern infringement cases, the court explicitly endorses the idea that courts are authorized to pick certain factors as dispositive and ignore others, depending on the situation.  I think such a reconceptualization is the big project of our time for trademark theorists, comparable in its way to coming up with a theory that allowed courts to find infringement by noncompetitors.  (We tried trademark use as a way to hive off categories of uses from the multifactor test en masse; that didn’t pan out, though various First Amendment-inflected theories are doing similar work for noncommercial speech.  Courts have begun to understand that the internet isn’t what they first thought it was, and have declared various factors unimportant in various internet contexts, as the 10^th Circuit does here, but what we need is a Pam Samuelson-like taxonomy that tells everyone what to do in the next case of innovation, instead of having a set of rules for domain names, a set for banner ads, and another set for keywords, which is where we are now.)

(2) Eric describes the court’s holding as being that clickthroughs are a proxy for a confusion survey, and I’d say it a bit differently: the court says that the theory of IIC is that consumers seeking 1-800 (which we know, the court says, because they searched for the term) clicked on a Lens.com ad while believing it was a 1-800 site and, though no longer confused when they arrived at a Lens.com site, were nonetheless diverted.  The court acknowledges that we have no idea how many were confused when they clicked and how many were not confused but rather seeking a possible alternative to 1-800, but says that we do know the upper bound of the former number: the total number of clickthroughs, which was a tiny fraction of the impressions. Too tiny, indeed, to count as likely confusion even if all clickthroughs were the result of IIC.  (As Eric points out, clickthrough rates are always very low; how a similarly low clickthrough rate could then support a possible finding of contributory infringement when an affiliate used 1-800’s mark in its ad text is left as an exercise for the reader.)

I teach trademark law, and therefore I’m required to despise IIC (except for true bait and switch in the physical world), and indeed I do. But note one way in which clickthrough evidence differs from survey evidence: clickthroughs come from people who didn’t just see the ad, but were interested enough to at least evaluate the advertiser out of all their alternatives.  This is a higher level of engagement than usually required of survey participants, who must be likely/potential consumers and are usually just asked to examine stimuli (and maybe a distractor ad, sometimes) as if they were considering a purchase.  Now, maybe this just shows that surveys are inherently artificial and distorting—and we should probably require more confusion than we do when the evidence is survey-based—but it’s interesting to me that the court is implicitly narrowing the universe of relevant consumers past what surveys do while simultaneously applying survey standards to the evidence in hand, and I don’t think it notices it’s done that.  Big Data in action, changing what we can measure and therefore what we think is relevant?

(3) This case will also be cited for discussing the percentage of confusion in a survey that can support a finding of confusion, diving into detail on the case law (including the early outlier of Grotrian-Steinweg) and concluding that really good surveys showing net confusion of more than 7% can, in combination with other factors favoring the plaintiff, support a finding of likely confusion—but generally, 7% is too low without other evidence of confusion. Along the way the court notes that the import of older cases accepting surveys without controls is unclear—those prior findings based on X percent confusion were really X minus Y, where Y is unknown to us and now unknowable.  1-800 argued that those old cases favored it, because they showed that what must have been in fact even lower percentages of confusion could favor plaintiffs, but the court wasn’t going to accept that.  Now that we require controls, the factual predicates of the old cases accepting what would now be Daubert-excluded surveys don’t make sense any more.  Arguably we shouldn’t look at them for percentages, either, since they were mistaken about whether the surveys were reliable in the first place.

When is yogurt not yogurt? That's for the FDA

Hood v. Wholesoy & Co., 2013 WL 3553979 (N.D. Cal.)

Hood alleged the usual California claims based on failure to label certain foods in compliance with the FDCA as adopted by California law.  Wholesoy allegedly failed to list “sugar” or “dried cane syrup” as an ingredient, but instead listed “organic evaporated cane juice,” in violation of FDA labeling rules; and its products failed to comply with the FDA standard of identity for “yogurt” because they didn’t contain any form of milk.

On “evaporated cane juice,” Hood alleged that the FDA issued guidance in October 2009 and has sent warning letters to companies advising them that the term was unlawful. But the guidance states that it’s a draft, “Contains Nonbinding Recommendations,” and is “Not for Implementation.”  It’s not legally enforceable, but describes the FDA’s current thinking and recommendations, not legal requirements.  The draft guidance here advised that “evaporated cane juice” isn’t the common or usual name of any sweetener; cane syrup has a defined standard of identity under the regulations and is known as “dried cane syrup.”  Juice is liquid from fruits and vegetables; sugar cane isn’t one of those in the FDA’s view; and thus sweeteners from sugar cane syrup shouldn’t be called juice. The guidance says: “FDA considers such representations to be false and misleading … because they fail to reveal the basic nature of the food and its characterizing properties (i.e., that the ingredients are sugars or syrups) as required by [federal regulations].”  The FDA has issued warning letters to companies using “evaporated cane juice” as an ingredient, telling them that they’re violating the law and that the draft guidance states the proper way to name this ingredient.

Similarly, Hood alleged that Wholesoy’s products were misbranded because they didn’t contain the ingredients required by the FDA’s standard of identity (any form of dairy milk). The packages do feature prominent labels stating “DAIRY FREE,” “made from single source U.S. grown organic soybeans,” and “VEGAN.”  But Hood alleged that the regs require dairy, and that the FDA has sent warning letters to companies using “milk” to describe soy-based products, such as “Soymilk” (“[W]e do not consider ‘soy milk’ to be an appropriate common or usual name because it does not contain ‘milk.’   We do consider ‘soy drink’ or ‘soy beverage,’ however, as acceptable common or usual names for such products.”); “French Yogurt Cheese”; “Muscle Milk”; and “Vegetable Yogurt Cheese.”

The court granted Wholesoy’s motion to dismiss under the primary jurisdiction doctrine, per Pom Wonderful. The four relevant factors are: “(1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity subjects an industry or activity to a comprehensive regulatory authority that (4) requires expertise or uniformity in administration.”  So, “where determination of a plaintiff's claim would require a court to decide an issue committed to the FDA's expertise without a clear indication of how FDA would view the issue, courts of this district have repeatedly found that dismissal or stay under the primary jurisdiction doctrine is appropriate.”

Here, the “evaporated cane juice” guidance wasn’t legally enforceable, but only a suggestion; the court found it “unclear” why the FDA would then issue warning letters (which are reserved for violations of law) on the topic. At a minimum, the FDA’s position was unsettled and there was no uniform enforcement standard, so the court wouldn’t decide the issue.

With “yogurt,” the FDA didn’t appear to have ruled at all as to whether “soy yogurt” would be subject to the same standards as dairy yogurt, or whether this was a situation like “butter” (which has a standard of identity) and “peanut butter” (which has a completely different standard of identity).  “Many products contain soy and the need for the FDA to administer a comprehensive approach is compelling.”  The warning letters weren’t sufficient to provide clear guidance, and the court wouldn’t act in the first instance.

Hood argued that abstention wasn’t required because the issues presented didn’t require any scientific or nutritional expertise to resolve: all that the court needed to decide was that “soy yogurt” has no milk, and “evaporated cane juice” is really just sugar. But the FDA hadn’t come to any clear conclusion on either issue.   (Hood’s position was also inconsistent, in the court’s view, with Hood’s allegations that the use of “yogurt” was misleading because of nutritional differences.) If the case continued, the court would either lack a clear standard to apply or have to announce one, overstepping its proper role.

Parody of the day: It's Finally Ironic

There, Rachael Hurwitz fixed it: Alanis Morrisette's Ironic, with some different lyrics.

Can't Buy Me Love (but maybe coauthorship?)

... but a copyright infringement lawsuit can do plenty of other things. The NYT reports on a lawsuit by the creators of one Beatles tribute performance against another Beatles tribute performance:

The suit contends that the new musical — which steers clear of those contentious “Let It Be” recording sessions, focusing instead on peppier Beatles moments like the “Ed Sullivan Show” appearance — owes a significant debt to “Rain,” from the musical arrangements to the between-song patter to the mop-toppy wigs. All but 3 of the 31 songs in “Rain” are also in “Let It Be,” according to the lawsuit, and “the artwork used as background during the performance of many of those songs are similar or identical.”

Derivative works/stagecraft claims run amuck? The complaint doesn't deal with the issue of musical arrangements not being copyrightable as a derivative work without the copyright owners' consent.  Mention of the arrangements may be a matter of the reporter misunderstanding the complaint; the complaint itself mainly talks about actual samples (though it also says that the defendants' show uses the "same acoustic versions" of the songs, which seems to refer to arrangement).  Though really, the claims seem more contractual than copyright-based: the allegations are designed to show an agreement to be co-authors, highlighting the ways in which joint authorship doctrine is about power more than it is about creativity.

Goodreads sued for user-posted photo

Here's the PaidContent story. Was this really a good use of time and effort, especially given Goodreads' DMCA policy?  Should fees be available when, as is apparently sometimes the business model, a copyright owner jumps straight to suing without using a DMCA policy?  The picture is apparently the one in the center bottom of this screenshot of a small reading group--not exactly a high-profile commercial/substitutive use:

China, DVDs, and antitrust

This post by Joe Karaganis on China, media piracy, and business models made me think of the Apple ebooks case:

Chinese and Indian studios could drop DVD prices because, unlike the Hollywood studios, they never reset production budgets and revenue projections around the DVD bubble—around the very recent assumption that studios could double profits through DVD sales. Chinese and Indian companies could treat home video (and the DVD in particular) as a market to build rather than protect.  For the global studios, the rational strategy was to protect the profit centers—the high-income, high-priced markets—rather than engage in complex forms of price discrimination that could undermine the perceived value of the DVD in the US and Europe.  For domestic Chinese and Indian studios, the case for building domestic markets through lower prices was much clearer.  Such strategies didn’t eliminate piracy, of course, but did creating a basis for rapid growth and gradual legalization of the market. 

There are similarities between Chinese and Indian studios' behavior and Amazon's as a disruptive innovator with no existing business to protect versus the big American studios and publishers--also plenty of differences, of course, but protecting "the perceived value" of the physical book was an important consideration for the big publishers trying to figure out what to do with ebooks.

Double don't do this

From the Apple e-book opinion:

Hachette’s Young told Nourry in late Fall 2009, “[c]ompletely confidentially, Carolyn [Reidy] has told me that they [Simon & Schuster] are delaying the new Stephen King, with his full support, but will not be announcing this until after Labor Day.” Understanding the impropriety of this exchange of confidential information with a competitor, Young advised Nourry that “it would be prudent for you to double delete this from your email files when you return to your office.”

Antitrust law is far from healthy, but some conduct still counts.

Different kinds of reproductive work

Two quotes:

[I]t is almost unanimously accepted that a scholar can make a handwritten copy of an entire copyrighted article for his own use, and in the era before photoduplication it was not uncommon (and not seriously questioned) that he could have his secretary make a typed copy for his personal use and files. These customary facts of copyright-life are among our givens.

Williamson & Wilkins v. United States, 487 F2d 1345, 1350 (Ct. C. 1973)

 
Personality always contains something unique. It expresses its singularity even in handwriting, and a very modest grade of art has in it something irreducible, which is one man’s alone. . . .

Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 249 (1903) (Holmes, J.)

Whose copying work counts as creative?