WIPIP: copyright procedure

Sat. Session 1: Copyright Procedure

Julie Cromer Young, Thomas Jefferson School of Law

Rethinking Copyright Pleadings

Historically low pleading standards changed by Twiqbal.  Conclusory allegations can be ignored, then remaining judged for plausibility; court can use common sense to see if complaint states a claim.  Resolving things at 12(b)(6) skews toward defendant. Pro se complaints now dismissed at higher rate.

Crossover into IP.  Courts more willing to require broader facts from copyright plaintiff at 12(b)(6) stage.  Also Q of whether 12(b)(6) applies to affirmative defenses—some courts have required the same level of specificity.  Her wish list—UK Patents Court, 3 month fast track to (c) litigation.  Court decides based on bill of particulars, with option of removing to High Court. 

Lydia Pallas Loren, Lewis & Clark Law School

Copyright Litigation Reform Through the Plausibility Standard for Pleadings

Faulkner got her thinking about this—one mechanism by which judge decides case is 12(b)(6).  Copyright sj has been messed up for a long time—P had to be given opportunity to present to jury if there was the slightest doubt.  But the SCt changed sj, and now it changed 12(b)(6).  Result in copyright: lots of cases saying sj is traditionally frowned on in (c) cases, even after the SCt said otherwise; some considered sj more readily, but then were willing to grant sj to the plaintiff—Steinberg.

Peter Gaito Atchitecture v. Simone Dev. Corp., 2d Cir. 2010: 12(b)(6) can be granted when the complaint attaches pictures of the parties’ works.  No discovery needed for substantial similarity, because only visual comparison is necessary—court quotes a court’s verdict after a bench trial.

Post-Twiqbal: 54 district court cases in 3 years granting 12(b)(6) dismissals in copyright cases; 21 in 2d Circuit, and 6 of 6 appealed are affirmed.  9^th Circuit: 9 cases.  Other circuits have fewer.  Wide range of works: architectural, musical, literary, PGS, photos, videos, software. Range of issues: ownership, copyrightability (registration, elements copied not copyrightable); copying in fact; substantial similarity; fair use (Brownmark Films—court of appeals converts it into sj on appeal, but 12(b)(6) in dct); license.  And even awards of attorneys’ fees!

We’ve been waiting for reform from the copyright office, but we’re getting it in the pleading mechanism.  This hoists the originality standard, for example, by telling p not to sue over questionable copyrightability—cases over Z-stools and other pieces of furniture.  Faulkner case: don’t assert infringement based on fragments of a work.  Respect idea/expression boundaries: cases involving T-shirts with paper airplanes on them; dandelion blowing seeds—court says no reasonable observer could find substantial similarity, which is sj language.

Twiqbal was concerned about cost of discovery/willingness to settle.  IP cases have this, but also the public interest: the idea of harassing competitors just by filing suit.

What should we code for?

Q: code for copyright troll cases. 

Loren: very few appear to be brought by trolls.

RT: Doesn’t seem to be happening in TM where there would seem to be more things one must plausibly and concretely allege—wonder why not. Would be great to know.

Q: Conventional wisdom: judges are really scared of music, and like it to go to jury—very powerful if this is happening in music too.

Q: Twombly changing the law, or emboldening judges?  Many of these cases strike me as clear sj D victories, and obviously so from the start.

Young: yes, we need to collect more pre-Twombly data, to get a sense.

Q: patent policy, the Goodlatte bill being the exception, has gone away from the idea of IP exceptionalism—for example, eBay uses the general common law.  But the Goodlatte bill differs by requiring fact pleading to weed out trolls at the earliest  point. That narrative of exceptionalism hasn’t been as strong in ©.

Loren: yes, you can see this as © finally getting in line with other cases.

Welkowitz: filtering aspect: you are supposed to filter out conclusions of law and only measure by the allegations that are left.  How much of that is in the cases?  Also hasn’t seen as much in TM.  Have you seen judges say “you’re just pleading conclusions of law,” rather than judges deciding sj motions as 12(b)(6) motions?

Loren: see both.  Cases where works are attached, see sj type analysis.  Judge Alsop: just dismissed a case where the p pled “D copied our software. D created derivative work.” Those were legal conclusions.  What lines of code?  How was it derivative?

Don’t count dismissals with leave to amend as dismissals in her coding, unless the court still grants the 12(b)(6) after amendment.

Q: Disputes account that © courts resisted granting sj before Twiqbal.  Cases also did say that you have to plead more than “d copied my stuff.”  Basic story is correct, but contrast may not be that stark.

Loren: debated about the sj story; not really key to this paper.  Some commentators claim Twiqbal wasn’t significant given what dcts were already starting to demand from Ps.

Raizel Liebler, John Marshall Law School

Use of Treatises in Intellectual Property Cases

Law reviews aren’t used much in IP cases, but treatises are more common.  Does citing something count as sufficient use to be measured?  Ann Bartow’s work focuses on how the material is actually used, but Liebler is starting by asking whether it’s mentioned at all. For example, does the treatise support the claim for which its cited?  Recursive nature of the enterprise: it seems that Nimmer doesn’t necessarily follow law, but changing treatise so that law will follow/reinforce the treatise.  Are raw numbers more important?  What about comparisons to law reviews or other types of secondary sources?

Q: would be interesting to know whether they’re citing the treatise only, or the treatise plus cases?  Whether they’re citing it for basic background proposition, or on an important contested issue in the case.  (I second this interest.)

Welkowitz: notes that McCarthy has apparently changed his RoP position based on representation.  The states enacted McCarthy’s version of the Model TM Law, not the official version published in the TM Reporter—doesn’t know why it’s a different version, but it has a different key word, and somehow the states enacted the unofficial version.

Farley: treatise authors as advocates is a fascinating topic. When McCarthy cites cases citing the treatise, the circularity is eye-opening. McCarthy gives the impression of separating the is and the ought by having a section labeled “author’s note.” But not everything is separated out in that way (including his statements on standing for false advertising, BTW).  Could look at citations of treatise authors as law review authors v. citations of treatises—the former might be where we’d expect opinions to go. Could also look at them as authors of amicus briefs.

Q: treatise for noncontroversial points v. treatise as authority, shutting down debate.

Q: Does the spectrum of authority in copyright (Patry v. Nimmer, etc.) lead to more citing of treatises, or less? 

A: Nimmer is cited more than Patry, but McCarthy is 10x or more cited than any other treatise.  700x in the last 3 years; others 50x in total.  (Though this must be compared to the N, since there are more TM cases than © cases.)

Chris Ridder, Stanford Law School (non-residential fellow)

Uncertainty In IP Address-Based Identification: Protecting The Innocent Internet Service Subscriber

Many households have more than one user; businesses may have many users; many networks are unsecured.  200,000 sued in copyright troll cases—many of them likely innocent.  In Digital Sin, 2012, the court said that even 30% made it nervous.

How does this work?  File a complaint naming a Doe, then make ex parte motion for expedited discovery.  Possible motion to quash; if unmade or unsuccessful, IP address is produced by subpoena to ISP.  He thinks further investigation is required; if P can’t name defendant, should subpoena subscriber.

Many standards for early discovery, varying by jurisdiction/type of case.  Judge asks: can you survive a motion to dismiss? Do you set forth a prima facie case of actionable harm?  Discovery is aimed at identifying specific information.

Good faith basis is required to name a defendant.  If P names the only guy with that name in the phone book, that’s not enough for a good faith basis.  Complaint must state a claim plausible on its face.  Elf-Man v. Cariveau: P didn’t allege that IP address owners were the ones who downloaded.  Allegation that IP address is registered to individual isn’t enough to support a claim that this individual is the infringer.

Good cause: reasonable likelihood that information sought would enable identification of infringer. Trolls are really driving the case law. Odious to courts; they don’t really care about jurisdiction.  Trolls have the toughest fact pattern because all they have is an IP address, at least in a typical bittorrent situation.

Proposal: courts should if possible resolve threshold issues early, such as jurisdiction, mass joinder, intention to litigate, First Amendment, scope/burden of proposed early discovery/likelihood of leading to identity.  AF v. Does, DC Cir., ISPs are appealing allowed discovery even when the ISP didn’t operate in the jurisdiction. 

Investigation: if multiple IP addresses can be obtained they should be, and then correlated. Username of bittorrent user, where possible.  Courts should permit ISP subpoenas seeking phone number and email; courts worry about harassment/threats but this could be very helpful with restrictions imposed on the questions that could be asked.  If informal investigation doesn’t work, should be able to subpoena subscriber, ask about residents, etc.  Cops go to great effort to find this out in child porn cases.

Some discovery should rarely be granted: depositions, forensic examination (in absence of showing of discovery misconduct).  When naming a party, ps should be specific in setting forth basis for identification and courts should hold them to it.

Ingenuity v. John Doe (Feb. 7, 2013): court interpreted P’s investigation strategy is “if subscriber is 75 years old or female, look for pubescent male in the house and identify him as D.”  Not houseguests/visitors.  This was nothing more than a hunch.

Q: (1) bittorrent isn’t the only source; (2) want to know how dynamic IP addresses are—was more of a problem with dialup, less with broadband; IPv6 won’t have shared addresses, but still household issue; (3) how does 6 strikes agreement factor into that—gives ISPs even more incentive to keep addresses stable—may be a diminishing problem.

A: it’s possible, but his analysis assumes static IPs.

Loren: trolls send letters to houses saying you’ll be named D, so people settle.  The use of subpoena in place of a letter might be worse—that’s very scary.

A: doesn’t propose to let people send that kind of letter. Courts saying “you can’t send letters” make it work in the end.  Better way to handle it: some sort of informal contact seeking information.

Q: sensitive to costs of enforcement to copyright owners.  Costs of discovery should be proportionate to recovery. Someone who wants legit enforcement may look an awful lot like a troll. In absence of small claims process, what are we to do?

A: many reasons people sue—there is value to disincentivizing infringement that may justify some expense. Motion for early discovery is not so hard.  Investigation should really already be occurring. His proposal wouldn’t add much cost, he believes.  Need more than IP address.

Q: note that there are many cases on this in Europe.  Generally privacy prevails over © so you need judicial authority to get disclosure.

WIPIP part 2, TM doctrine (and false advertising)

Christine Haight Farley, American University Washington College of Law

Sleeping Treaty: The Pan-American Trademark Convention

TTAB’s 2000 Belmont case: British-American Tobacco v.  Philip Morris—cancelled an incontestable mark on the ground that it violated the Pan-American Convention, which is self-executing. That was a huge deal, and yet few people noticed or reacted to it.  1929 regional convention dealing with TMs and unfair competition, 10 countries ultimately ratified it.  Provision was that owner of a mark protected in one state who knows of use in another state shall have the right to oppose use or registration on proof that the registrant had knowledge of the existence and continuous use of the mark in any contracting states. Huge exception to territoriality!

Since then, a few other cases, in which constructive knowledge satisfied the Board. Held by SCt to be self-executing in a 1940 case.  In a timeline of self-execution, comes after Missouri v. Holland, before backlash to self-execution after WWII; period during which we were comfortable with self-execution. Two circuit court cases assert that claimants have to use section 44 of the Lanham Act as a vehicle to assert rights.  §44 previously specifically named the Pan-American Convention as covered; now the language is more general. Lanham Act drafter: he was concerned about Latin American friends pointing the finger at us as hypocrites—want to see statutory evidence of compliance.  Unfair competition: clear self-executing language for states without legislation.

Chapter on geographic indications: clear and broad—ever indication that doesn’t actually correspond to the place of manufacture (etc.) shall be considered deceptive.

Ladas, 1929: because we had the TMs, protection of foreign marks was really protection of US nationals. Foreigners registered very few marks of their own.  US was looking for market for its goods.

Initially Latin American conventions were meant to be substitutes for Paris Convention, but direction changed after WWI.  1923 Convention, still in force between Brazil and US, has similar provision.

Be careful what you wish for: US never really expected Belmont case.  Recent Free Trade Agreements—we haven’t seen anything like these GI or unfair competition provisions, nor have we seen them in the TPP (or even references to existing rights!). But these rights are still being asserted by US companies in the know.

David Welkowitz: discussion is predicated on the self-executing nature of the treaty.  Is there anything that prevents Congress, after a self-executing treaty is signed, from deciding that it’s not self-executing/saying our statute is all-encompassing?

A: would need a strong reason to think there was a conflict with the Convention.  There’s no evidence of that, and §44 supports a complementarity reading.  More disuse than repudiation. Nothing about GIs in §44, where there’s another set of rights not covered at all by §44.

RT: Now that I’ve read the original Lanham Act legislative history, I’m really interested in this rhetoric that we were or might be creating an independent federal unfair competition cause of action through the Lanham Act by referring to our international obligations.  There was much debate about that, and it now no longer makes any sense to modern TM lawyers because we’ve grown up assuming that of course it wasn’t like that.  Similar to what the original understanding of incontestability and defenses thereto might have been, now forgotten because confusion has eaten everything.  A history of forgetting?  Compare to histories of discovering causes of action?

Compare to discourse in copyright policymaking about how our TRIPS etc. obligations mean we have to accept that we already have a right of making available/can’t change copyright laws in any ways that favor users?

Irine Calboli: The US wants others to follow certain rules.  US thereby locks itself in, preventing differences in our own laws because of US lobbies/USTR captured.  Businesses dictate the laws—claims that we’re bound by int’l law are actually about policy laundering, because we did it to ourselves.

Deborah Gerhardt, UNC School of Law, Kevin McGuire (UNC), & Mark McKenna, Notre Dame

An Empirical Study of False Advertising Claims Under the Lanham Act (presented by Gerhardt)

Not much empirical work has been done.  What’s going on with prudential standing?  What’s going on with different media when challenged?  Other attributes of ad that may affect result—if it’s comparative.  What about the type of falsity? 

Looked at opinions issued after 1988 revision became effective.  Looked for standing issue or substantive false advertising question, about 1380 opinions (ultimate set will be smaller). Started by coding cases that just deal with 1 ad or 1 analysis on group of statements or ads. Bigger challenge: coding for multiple ad cases.  849 single-statement analyses.

Unsurpisingly, 2d Circuit is biggest, a lot in 9^th, 3d Circuit also prominent.  Number of decisions increased over time.  Natural persons not a big driver.  Spike in 2006 (why? Looking for theories).

Plaintiffs win 15% of the time over all decisions (not all in dataset are final; win means win on some sort of dispositive procedural posture, like D win on motion to dismiss; P win on motion to dismiss doesn’t count as a win).  1990, P win rate was 40%, but dropped sharply and now hover 10-15% for past decade.  40% are decided at motion to dismiss stage.  Need to see how that compares to other IP contexts.  Only place where Ps win more than Ds is permanent injunction stage.

Ps have standing most frequently when both parties’ products are mentioned; mentioning either also increases standing finding, but not as much.  But mention of P’s product doesn’t increase overall wins very much.

Text by itself, image by itself doesn’t seem to have different win rate, but with both text and image there seems to be a higher P win rate, up to 25%.

Many cases, courts don’t even consider falsity. Only about 42% do. When they do, they find falsity 40% of the time.  Longer litigation = increased chance of P win.

P win rate higher when statements found true but misleading versus literally false—though this may change with additional, multiple statement data.

Conclusions (preliminary): increasing, at greater rate since 2005. Prudential standing at issue in 18% of cases.  At trial, Ps win 48-50% of time.

My Qs: is there any interaction between literal falsity and media type? My confusion: Did you code for arguing literal and misleading in the alternative, and which if any the judge accepted or rejected? The judge can really change the course of the case by adopting one theory over the other.

Lemley: one possibility with spike in 2005 is that Westlaw has become more inclusive—could look for some similar cause of action and see if you see a similar spike.

A: we took a look at the Administrative Office data on filings, and the spike wasn’t nearly as high, but of course that’s not directly comparable.

Felix Wu: one story consistent with data is that parties are only willing to litigate to SJ motions.  Either the D wins or SJ is denied, but P might be getting really good settlement—Ps might be doing better than 15% because of unwillingness to go to trial.

A: no matter how you count it, the importance of the motion to dismiss stage is huge.

McKenna: plausible, but P success rate isn’t that high after SJ.  Vast majority of cases fall out before that.  If you have a 50% win rate for going to trial, D isn’t necessarily that scared, except of the expense of continuing the case.

Lunney: Qs of selection bias—low win rate suggests suit is for some other reason than prevailing in litigation.  In terms of literally false v. misleading: that is counterintuitive, but clients who can’t afford the litigation pursue literal falsity claim but can’t afford a consumer survey—so this may indicate difference in Ps. 

[RT: my thoughts here: this is why the falsity by necessary implication finding is very interesting—relatively high win rate.  Falsity by necessary implication is a tool judges can use to move a case from “misleading” to “false” and help Ps avoid a survey. It is very much a matter of judicial choice.]

A: can check that.

Eric Goldman: Could have spun finding as Ds win 50% of time. Sounds less interesting.  Middle ground of undecideds—what are those?  Are these really P wins that will settle?  Measuring P wins in court is useful but incomplete because of other battlegrounds/D changing ad and mooting the case. 

A: Ps win 24% of the time when there’s a dispositive winner.

Q: re internet ads as affecting spike?

Michael Grynberg, DePaul University College of Law

Thick Marks Thin Marks

Mark might be strong but receive weak protection based on nature of claim, such as nominative fair use.  Courts adjust thickness of protection to resolve cases involving nontraditional source meanings of TMs. Urge for some courts to give thick protection stems from difficulty understanding overlap in meanings TM might embody.  Tracks some accounts of property rights as solution to info management problem, but also explains why property can never really get the job done.

Courts calibrating thickness: Example—Maker’s Mark case from 6^th Circuit, sued Cuervo for use of red wax seal on tequila.  There was a ton of distinguishing context making confusion extremely unlikely—different spirits; Cuervo brand was premium; distinguishing labels; no evidence of confusion. Court waved that away, speculating consumers might perceive some connection—less obvious harm becomes easier to prove than traditional harm.  Louboutin: 2d Circuit finds mark protected, but not infringed.  Disposed of case without giving us clean doctrine.

Impulse to give thick protection is driven by fact that courts have difficulty isolating meanings a TM might embody.  Automotive Gold: makers of car accessories using TMs as complementary good.  Court rejects functionality defense because it would be death knell for TM—consumer demand is difficulty to “quarantine” from reputation function of marks.

We might see this move as a propertization of TMs in response to info management problem, as per Henry Smith, who tries to justify strong rights to exclude as part of a modular system.  Tries to apply that to © and patent.  In modular system, intense interactions between modules are hidden and communications between modules are limited.  In a car, the brake system operates independently of car—can deal with brakes without having to deal with entire car.  If you are in a parking lot and you see a car, you don’t need to know much about ownership status other than that right to exclude means you shouldn’t mess with it; owner can attend to more complex Qs of efficient use.

This might explain some of what judges are thinking, since judges can’t sort out TMs meaning—what does association really mean? How seriously do we take the dilution story? Judges mask those interactions behind the property signal.  They’re applying source confusion language, but the moves are unsatisfying.

The other side of modularity is that there are times it doesn’t work—stakes are too high; other interests implicated; interaction between property right and potential users needs to be more nuanced. This is the governance model. TM is necessarily marinated in this because standard of delineation of property right is effect on consumers—3d parties—and their interests are supposed to be paramount, along with competitors’ interests. Info management is simultaneously appealing and impossible, leading to push-pull between thick and thin protection.

Example: keyword cases.  9^th Circuit began with ridiculously thick protections.  Changed because courts got wise. But they’ll always oscillate.

Calboli: why not say thin protection/thick protection, not thin mark/thick mark?  Sees no competitive problem with Automotive Gold.

A: Maker’s Mark and Automotive Gold are both approval cases.  Could say latter is a lot closer to actual sponsorship, but the 9^th Circuit is equally broad in its language.  His point is what the 9^th Circuit does in the opinion, which is to say that it can’t separate the 2 functions (communicative and branding) of the mark.

Farley: would robust rule of aesthetic functionality deal with many of your problems?

Wu: is your notion of thick or thin derived from the cases/describing the cases, or prior to the cases? 

Linford: judges seem uncomfortable with forfeitures (aesthetic functionality)—though that creates a chicken/egg issue with the concept of property.

Zahr Said, University of Washington School of Law

Interpretive Complexity in Copyright and Trademark: Comparing Substantial Similarity and Likelihood of Confusion

Judges in copyright cases routinely make decisions about where to locate their interpretive authority—a judge has to decide whether interpretive authority rests primarily in the text, in the author, in the audience/reception/critic/expert, or in judicial intuition. These are interpretive pressure points, and they’re a feature of copyright rather than a bug.  But the choices aren’t transparent, though they’re necessary.  Copyright realism: judges avoid choice, or behave as if they’re compelled to decide one way.  Usually outcome-driven analysis.  Conclusion: judges might have too much discretion over whether and how to make interpretive decisions, creating confusion in copyright law.

Substantial similarity analysis: interpretive pressure points consistently unacknowledged, but matter a great deal to outcomes.  Broken in several places. 

Compare to TM.  Most TM scholars love to hate likely confusion analysis. As with ©, TM requires substantive comparison of two things—P’s prior existing thing and D’s allegedly infringing thing. Must compare in order to allocate rights in those things.  Comparison must find interpretive authority—how do we know that consumers might be meaningfully confused?  Actual confusion (audience); risk of confusion high because owner says it (author); surveys/experts.  TM asks how we know what we know about these marks.

From ©’s perspective, even this broken test seems like an improvement.  Different elements of the Polaroid test appeal to audience (strength of mark, actual confusion); text (similarity of marks); authorial intention (D’s intent); experts (actual confusion, buyer sophistication); judicial intuition (quality).  Though they aren’t consistently applied, judges at least have to say how they know what they know. 

Empirical scholarship suggests that these factors often don’t control. But the existence of the factors allow us to diagnose what courts are doing—departures from methodology are more visible because of the steps the court is taking that it isn’t. We have a clearer version of the “ought.”

Lemley: everyone thinks the discipline they’re not in has got to be more organized, and he wonders if this is going on here. Transparency seems a good thing, but would you also get a substantive alteration in the way we make decisions and would that be good?  Likely confusion makes a particular choice about audience (individual consumer). You could make that choice in copyright, but a test that focused on some of the things likely confusion does would get different, and probably broader, results. Maybe what you want is some properly designed multifactor test, but the real work is in designing the test.  Does the analogy to confusion end up biasing the test towards results that we won’t like (market substitution rather than technical substitution—competition as harm).

McKenna: others criticize courts for rigidly marching through factors. The factors are not the “ought.” The factors aren’t just used to judge similarity, but some result. In ©, similarity is itself infringement. That’s why people criticize the factors—in certain kinds of cases the factors don’t have much to do with the result.  What’s the ultimate Q we want to answer?  (See: why nominative fair use was developed.)

A: does feel it would be better for judges to have less discretion.

McKenna: then TM is not your example.

A: rigidity is also transparency, though.  Transparency without inflexibility?

Lydia Pallas Loren: substantial similarity is about “at what point have you copied too much?”  If you’re asking if this is illicit, we have very different biases about what’s illicit, incredibly context-dependent. Likes idea of transparency.

David Welkowitz, Whittier Law School

Fault Lines in Default Judgments

Defendant’s profits are available as measure of damages for willful infringement (requirement differs by circuit); TM counterfeiting, if willful—statutory damages multiply by a factor of 10.  Indications that under §35(a), while it’s not supposed to be penalty, willful infringement increases the likelihood of enhanced damages. Willfulness therefore plays an important role; people who don’t have resources to contest suit may not fully realize what they’re doing when they default. Because damages aren’t a sum certain, default judgment means damages must be proved up. But the evidence accepted is often lacking (e.g., willful because P sent a C&D and D didn’t stop). Sometimes courts find that default means that we accept the well-pleaded allegations as true, and the allegations are that D was willful.  Some play in that, but plausibility doesn’t seem to be a big barrier.

Alternative: accept allegations as true to the extent of showing liability, not damages. TM claims don’t necessarily require willfulness (cybersquatting aside), and intent is of course relevant to courts’ assessments. But realistically, willfulness isn’t required. In most cases, should be part of damages, not readily accepted on complaint’s allegations.  Found one court that realized this, but found independent evidence of willfulness.

Many courts say that the fact of default makes you a willful infringer (also said in copyright cases).  Why?  Courts just think: good people don’t default.  Questionable. Also: bankruptcy says that willful & malicious debts are not dischargeable in bankruptcy.  Usually a default judgment isn’t issue preclusive, but some states don’t follow that rule.

McKenna: encourage you to think more broadly about willfulness—not many litigated cases find bad faith in our false advertising set, so it might not be a huge number. Does it show differences?

Loren: is there wiggle room after default and even if willfulness is pled? 

A: what happens in TM cases is that if the complaint pleads willfulness, the tendency of courts is to accept that after default.  He thinks this is a bad result.

Linford: you have an intuition that we’re catching lots of people we shouldn’t be catching—aren’t these folks likely to be bad actors?

A: maybe.

Calboli: no need to prove willfulness in copyright/patent for big damages—many Ps are international corporations and expect that treatment. Property concept.

A: TM cases dealing with statutory damages tend to cite copyright cases.

Said: Pam Samuelson & Tara Wheaton on statutory damages in copyright—mere knowledge of infringement constitutes malice.

RT: many of these defaults are from immigrants.  Sociological literature on counterfeit sellers in the US: many come from places where legal system is corrupt; may perceive police crackdowns on counterfeits as ordinary shakedowns; moral force of default is different, at least in the absence of some educational attempt.

Farley: define what we mean by willfulness: a big deal. Does default plus willfulness findings come up in other areas?

A: willfulness comes up a lot in TM, not sure about bigger picture.

Works in Progress in IP, part 1

WIPIP

Session 1: Copyright Theory, Parlor C

Chris Buccafusco & David Fagundes, The Moral Foundations of Copyright (Fagundes presenting)

Copyright is deeply moral; best explained by moral foundations theory; these are descriptive claims. Normative claims: how we talk about copyright/how we make laws

Nature of copyright’s moral domain—contested propositions from moral psychology.  (1) intuitive primacy.  Reason and emotion aren’t separate processes, and intuition is primary. (2) Moral foundations theory: moral foundations that make up decisionmaking, Jonathan Heidt: harm/care; justice/fairness; purity/degradation; loyalty/betrayal; authority/subversion; liberty/oppression. Our instinctive reactions depend on our taste settings/dials here.  It’s more than just harm and fairness.  This is especially true past elite Western societies—different cultures/social strata.

Similarly, we have a cramped language for why we have copyright—a subset of harm (traditional utilitarian cost/benefit analysis), just flavor of moral rights in US.  But what about sources that aren’t the traditional legal sources—testimony/people expressing their moral intuitions about copying/copyright legislation.  Found something similar: utilitarian framework does terrible job of explaining moral intuitions.

Harm/care: captures the straight story—harm to authors, harm to the public, harm to the “little guy.”  Part of the harm/care narrative is obvious; also, artists/authors rarely talk about money, but talk about intrinsic dignitary harm they experience when they cede control through unauthorized use, or reputational harm due to misattribution.  Care narratives: orphan works, stewardship of archives. 

Justice/fairness: “Thou shalt not steal.”  Reaching for a clear rule to object to conduct, because clear rule following is part of the justice framework. Likewise “don’t reap where you haven’t sown.” Something unfair about investment in something when someone else gets it for free.

Purity/degradation: see a lot of courts, owners offended by prurient uses of works. (Sculptor who sued over orgy scene in Devil’s Advocate.)  Concern over degradation of archived works. Rhetorical devices: “infectious” anti-DRM tech; slothful infringers; “sacredness” of custom tattoos.

Loyalty/betrayal—patriotism—Jack Valenti’s infamous Boston Strangler testimony was all about the Japanese threat.  Danger of “rogue foreign sites.”

Authority/subversion: analogy of works as author’s children; orphan works.  Threats to order are bad—content industries invoke this all the time.  Piracy is appealing to people with other orientations.

Liberty/oppression: information wants to be free; admissions of futility of control; slavery metaphors.  Slavery metaphors show up on both sides.

So what?  Not trying to object to normative aims of copyright.  Two themes: how we talk about copyright. If we understand moral architecture better, we can craft more convincing copyright narratives. Appealing to heterogenous group: what Jack Valenti was good at.  Could also target a message.  Also relevant to how we legislate—to the extent that law doesn’t reflect actual moral experience, creates enforcement/legitimacy problems. Also, copyright is about incentives, but if we don’t understand how people react to certain conduct, difficult to craft a system responsive to that.  Chekov: “Man will become better when you show him what he is like.”

Q: does this mean that Congress and courts should be doing this type of reasoning?

A: descriptive claim about how people think about unauthorized copying and proposed legislation.  Law shouldn’t reflexively track moral intuitions, but can help us understand how best to achieve normative goals.

Mark McKenna: how do you ID what strikes people as stealing and what doesn’t?  What kinds of things people react to as stealing v. legit borrowing matters.

A: Moral facts: a prior Q.  Want to leave it aside and ask what happens when a particular heuristic is triggered. Certain subcultures widely perceive something as universally bad (e.g., talking back to father).  Still broad categories are possible.

Q: can you disentangle instrumental arguments from true moral arguments?  Jack Valenti was an instrumentalist.

A: agenda will differ depending on audience, but it still matters how the arguments are made.  Valenti’s choices are interesting because he thinks that if he triggers certain issues, audience will find the claims more persuasive.  This approach allows better communication.

Q: fair use uses language of fairness, but elements are utilitarian.

A: we should look at the statute’s language!

Jeanne Fromer, NYU, An Information Theory of Copyright Law

Dominant American theory is utilitarian.  Less settled are the sorts of works copyright law seeks to encourage.  Information theory: branch of applied math that suggests optimal ways to transmit info.  Proposes: what makes expressive works valuable is that they make a contribution in at least 1 of 2 ways: communicate knowledge of some sort; or convey information enjoyable in and of itself. For (1), there ends up being a lot of noise in the expression, and copyright is encouraging redundancy—encouraging it to appear in multiple forms to transcend the noise.  (2) is valuable in and of itself; we can pick it over for meaning/value; different audiences locate different meanings in this type of expression. These diverse and evolving meanings are just as valuable for society as the original. So © ought to be encouraging interpretation and repurposing—encouraging a noisy conversation.  Allows underlying expression itself to be used redundantly in different meanings and contexts.

Information theory imagines simple framework: speaker with message, and communications channel to recipient, who must decode message.  Need to figure out efficient encoding and accurate decoding.  Information theory assumes a lot of noise on the channel.

Semantic info theory: noise comes b/c people have different codebooks for decoding messages. Have to figure out how to get them on the same page.  Use redundancy to detect/correct errors.

Overarching purpose of ©: promoting progress of science—seems to be about systematic knowledge, can include cultural knowledge.  We don’t see many laundry lists of knowledge. See things that are much less efficiently coded.  We like having a marketplace of ideas, and don’t allow someone to monopolize them.  We have some hedonic interest in seeing expressive works.

Jabberwocky: seems nonsense, but people have been picking it apart since it was written. Copyright law is trying to encourage a conversation about expression.

Idea/expression, merger, scenes a faire: certain building blocks are off limits to ownership so they can be communicated redundantly. Also, when expression is valuable in itself, we might also want to allow it to be used redundantly.  Originality/independent creation—if you come to something on your own, you can use it, because that independent creation shows it’s valuable. Introduces valuable redundancy, as opposed to allowing wholesale copying (which would be the most redundancy possible). “Modicum of creativity” standard—standard alphabetical order is most efficient way of communicating the phone book, so that can’t be protected.

Q: suggests we shouldn’t have an idea/expression split.  Haven’t heard anything that says we should treat them differently for redundancy.

A: two tracks for knowledge v. expression.  May need recategorization of some expression we protect and some we don’t.

Irene Calboli: define knowledge.  Indep. creation usually involves something added on, which may be valuable.

A: different people absorb knowledge in different ways, so variation is good.

Zahr Said: Jabberwocky seems like fair use—commentary and criticism. What would trouble the theory more: spinoff play?  Translations of Jabberwocky into German & French. Q re: role of error: seems like you’re doubling down on a particular view of what works do when they communicate—that the author has a message and can transmit it in a way that doesn’t have errors if properly transmitted. But that’s a particular view of reception. 

A: Factual knowledge has a very clear answer there, but that answer may not be as interesting as with more expressive works.

RT: Redundancy can be contributed either by different versions or by lots of copies keeping stuff safe.  Information theory doesn’t seem to provide any of your answers here.  This is the part of the paper where I really got lost:

[The scope of the derivative works right] can be addressed through the lens of information theory, by asking who will do the best job of transmitting and disseminating the existing work’s message—be it the underlying knowledge or valuable expression in and of itself—in these follow-on works. Vesting these exclusive rights solely in the existing work’s author can be helpful on the ground that the creator arguably knows better than anyone else (non-noisily) the message that he or she communicated—probably noisily—in the original work.

This isn’t an information theory answer. Fromer even says earlier in the paper that highly expressive works like the paintings of Van Gogh don’t have a reducible “message” other than the artwork itself. I say: the creator doesn’t know better than anyone else how to transmit the valuable information in her work! We have an empirical dispute. Can this question be answered within information theory? I don’t see that it can. Likewise, the incentives argument isn’t an argument from information theory, and it’s incentives that Fromer uses to draw the line between control and no control (which Fromer says would otherwise encourage dissemination, per information theory).

A: it is a variation on thinking about incentives, but it’s helpful to asked whether we think there are contexts where the author is well placed to make good choices about who is communicating, because then that person has something within them that they can communicate to the people they authorize to make derivative works.  If that’s not true, then the case for the derivative works right is weaker.  Maybe we would have more nuance.

Betsy Rosenblatt: irony: would seem to call with situations with least ambiguity to be given most control rights—facts, where there’s no room for interpretation.  Then we’d give less exclusivity to people for whom interpretation would be important.  That seems problematic.

A: but facts wouldn’t get protection in the first place. (But why not, per information theory?)  Maybe we will have people with great knowledge bases, historians, and we do want them writing about it again and again. But she’d still not protect facts.

Eldar Haber, Faculty of Law, Tel-Aviv University (Ph.D. candidate)

Copyrighted Crimes: The Copyrightability of Illegal Works

Imagine people commit murder while another films it.  One murderer’s book describes the murder; another’s describes flowers; the filmographer sells the film. They all make money from the crime, and copyright aids the filmographer.  Argues that copyright should not protect the filmographer. 

Older cases—illegal works aren’t copyrightable; newer precedent is that moral objections are no barrier.  But the law isn’t currently clear, and it should be clarified.  Illegality + harm should preclude legal remedies for the (putative) copyright owner.

Glynn Lunney: consider the WTO proceeding against China for not granting copyright to works that didn’t pass its censorship—how does this differ?

Also hard to figure out how much notoriety adds to the value of the work.

On the First Amendment argument: can we think of this as refusal to give benefit rather than a speech restriction?

Q: what about the money the news media makes from covering events exploitatively?

Q: is there an interest in getting literature about crime?

A: there are incentives to produce works even in the absence of copyright.

Lemley: copyright infringement is a crime.  What crimes are sufficiently severe for this sanction?

A: we have to draw a line, probably felonies and not misdemeanors.

Fagundes: crimes vary and so do works. What about a book that’s only partly about the crime?

Q: would have a standard of “substantially and directly connected to the crime.”

Jerry Liu, University of New Hampshire School of Law

Copyright Complements and Piracy-Induced Deadweight Loss

Recorded music as complementary to performance—theory suggests that P2P sharing will increase demands for concerts and other related goods.  Negative cross-price elasticity of demand.  Three degrees of complementarity: (1) first degree, products used together.  iPod, iTunes, online music and internet services. (2) second degree, consumers usually purchase together but don’t consume together—recorded music, live performance, merchandising. (3) overlapping consumers—wide distribution of music is useful for other purposes, such as ad-supported music, sponsorship/endorsement.

Videogame/console—hardware is relatively cheap, games are expensive; the model is opposite for iPod, where the hardware is relatively expensive and the music is relatively cheap (sold at cost).  Why the difference?  High piracy—underprice music to compete with privacy, overpricing hardware to recoup investment—increased deadweight loss.

What about second-degree complements? In the pre-digital era, concerts were routinely underpriced.  Face value was low, and scalpers cleaned up. Why didn’t artists capture the profit? Wanted hardcore fans to come to concerts so that word of mouth increased demand for records.  Digital age: ticket price increased 131%, 3x faster than general inflation.  A few old acts accounted for a big chunk of that.  As piracy lowers income from record sales, musicians become increasingly dependent on live performance.  Madonna’s agent: people used to tour to promote albums, now people put out albums to promote tours.  David Bowie said in 2002 that only touring would be left in 10 years; copyright would be irrelevant (gives whole new meaning to Bowie Bonds).  Also explains rise of 360 deals with performers. Does the increase in performance make up for loss in recorded music market?  No. Top tours are older acts (ave. 24 years experience), while top albums are from younger artists (ave. 7 years experience).  Systematically favors established artists.

Digital copyright levy?  Spotify as private alternative?

Q: logic works only if there’s no competition that enables supercompetive pricing – works for Xbox and PlayStation, but there’s more competition for iPods.

A: true. My model assumes little competition in hardware market.

Kristellia Garcia: do you include streaming revenues?

A: yes, use IFPI figures.

Lunney: use constant dollars for purposes of comparison.  How does Spotify solve this?  Levy is not market based but provides means to compensate for filesharing.

A: not arguing that Spotify does solve the problem! It’s just a different tool.

Q: can still be shrinking the deadweight loss as you move it from one type to another.

A: true!  If majority of consumers have high valuation but low frequency in music consumption, or are very risk averse, or discount future value at high rate, then the deadweight loss in these other markets is potentially bigger in other markets than in music. It depends.

Q: what about artists outside the major labels?  Thriving small music industry doesn’t have much relationship with this industry, except that Spotify screws them.

A: interested in those.

oral copyright license equals uncertainty in business dispute

Yong Ki Hong v. KBS America, Inc., 951 F. Supp. 2d 402 (E.D.N.Y. 2013)

Plaintiffs, who operated a video rental store catering to customers seeking Korean videotapes, sued KBSA, one of the three main sources for Korean programs, for antitrust violations and other claims.  KBSA counterclaimed for copyright infringement, defamation, and other claims.  The court dismissed plaintiffs’ claims on summary judgment, except for tortious interference against a few non-KBSA defendants, and kicked out the defamation counterclaims.

Plaintiffs sought to form (and for some time did form) a business relationship with KBSA, but when things went sour, they alleged that KBSA conspired to raise prices in the Korean videotape market.  There’s an interesting business model here: KBSA’s programming is primarily delivered through weekly “master tapes” which KBSA licenses and distributes, at a weekly fee, to individual video store owners for copying and retail distribution to their walk-in customers.  KBSA alleged that its (oral) licenses were site-specific and for walk-ins only, though plaintiffs disputed this.

Of course, plaintiffs couldn’t show antitrust injury, because who can?  As a result, their unjust enrichment claims also failed.

The NY Deceptive Practices Act, G.B.L. § 349(h), prohibits “[d]eceptive acts or practices in the conduct of any business, trade or commerce.”  Plaintiffs alleged that defendants’ price-fixing violated the DPA, but the law doesn’t extend to all unfair competition.  Defendants’ conduct wasn’t deceptive to consumers, as required; indeed, plaintiffs’ evidence suggested that defendants publicly announced their price control policy.  “Simply put, the defendants’ alleged scheme may have been … ‘reprehensible,’ but it was not ‘secretive.’”

The tortious interference claims largely failed because plaintiffs didn’t show actual breach of contracts or defendants’ actual knowledge of their contracts/business relationships.  Intentional infliction of emotional distress also wouldn’t fly, because this business situation was too far from the IIED wheelhouse.

On the copyright counterclaims, the court had some things to say about licensing.  KBSA sought summary judgment, but there was a factual dispute about whether its license was exclusive (allowing it to bring an infringement claim).  There was testimony that it was, but the written terms explicitly said that the Korean company KBS “retains the right to distribute its own programming content in North America.”  An exclusive license must exclude the licensor as well.  And though the contract purported to delegate to KBSA the right to sue, “a copyright owner cannot, by contract or otherwise, grant a non-exclusive licensee the right to sue for copyright infringement.”

Separately, there was a dispute of material fact about whether the relevant counterdefendants actually violated their license.  KBSA said its oral licenses were site-specific and only permitted rental to walk-in customers, and offered affidavits from various Korean video store owners in the New York area “affirming that their licenses with KBSA included those limitations and that they had always understood them.”  KBSA alleged that defendants, by moving from Brooklyn to Queens without authorization (when Queens licensees paid much higher license fees) and by renting to non-walk-in customers, violated their license terms.  But counterdefendants vigorously disputed the terms of the oral agreement and claimed that a relevant person approved their plan to move and assured them their license would transfer.  (Though this person might not have had actual or apparent authority to negotiate on KBSA’s behalf, his statements were of evidentiary value as to the nature of the KBSA agreement.)  KBSA argued that the counterdefendants had no valid license at all because their agreement wasn’t written, and therefore void under NY’s Statute of Frauds.  But that doesn’t matter under the federal copyright act, which permits nonexclusive oral licenses.

Now, on to defamation: libel and slander both.  First, KBSA claimed that certain counterdefendants made false oral statements to several reporters that “KBSA had wrongfully terminated supply” of KBSA videos. Second, KBSA claimed that they sent a letter to KBSA’s president and CEO making false accusations of wrongdoing by an important KBSA figure, C.J. Lee.  Third, KBSA argued that a counterdefendant filed two Blue House complaints (the Blue House is Korea’s equivalent of the White House) falsely accusing KBSA of “oppressing small businesses ... and in some cases destroying their livelihood,” and claiming that C.J. Lee threatened the counterdefendant and solicited and/or accepted bribes from video store owners.

KBSA had no evidence of actual pecuniary or economic harm, so it needed to show that the statements were defamatory per se.  As to the oral statements to reporters from the Korean-American media accusing KBSA of wrongful conduct, the testimony about this was mostly hearsay.  There was admissible evidence of statements of (1) the undisputed fact that KBSA suddenly cut off supplies of videotapes to one store, plus (2) the claim that this action was unfair and “not a proper disposition.” That’s opinion, and didn’t imply the existence of undisclosed underlying defamatory facts.  At most, it was an implication of breach of contract, but that’s not defamatory per se.

Second, allegedly defamatory accusations about Lee: these statements were made in a letter concerning the dispute between the store owners and KSBA’s regional office, “a conflict that threatened to disrupt or destroy an otherwise mutually beneficial business relationship between the two parties.”  It was thus protected by the common interest privilege in the absence of malice.  It didn’t matter here that the parties to the communication were part of separate businesses, nor that their interests weren’t perfectly aligned—the requirement for the common interest privilege is that “they must both have some vested interest in the subject matter of the communications, but their respective interests need not be aligned.”  The privilege is designed to assist people in settling disputes, which was at least what was attempted here; the parties had a common interest in avoiding further escalation.  KBSA argued that it could show actual malice because the senders misrepresented the timing and circumstances of their store’s move to Queens.  This failed to show malice: even if they did misrepresent those things, that statement refers to their own actions, not Lee’s, and thus couldn’t be defamatory or show malice.  (Also, the statements weren’t defamatory.  The letter alleged that Lee cut off the store’s video supply in response to their threats to take the dispute to the press/wreak general havoc if KBSA didn’t do what they wanted.  That made the store owners look bad, not Lee.  Though he came off as “no wilting flower,” saying that he became “enraged” in response to such threats wasn’t defamatory, since rage would be a “natural human response” to such threats.) 

Finally, KBSA alleged “false and defamatory statements concerning KBSA and Mr. C.J. Lee” in the two complaints submitted to the Blue House.  This was, according to the evidence, a quasi-judicial administrative proceeding, in which the complainant hoped to vindicate “what he believed were his legal rights without the need to file a formal lawsuit—a resort to a form of alternative dispute resolution.”  The court further characterized the result of the complaint as “a formal administrative process involving fact-finding, an opportunity for both sides to be heard, consideration before a neutral arbiter, and standardized forms and procedures.”  The statements were therefore communications by a party in a quasi-judicial proceeding, material and pertinent to the issues to be resolved therein.  Thus, they were absolutely privileged.  “The fact that the place where the formal dispute resolution occurs is not called a courtroom provides no safe harbor for defamation claims.” Nor was the privilege limited to statements before US agencies or adjudicators.  (In the alternative, they were protected by qualified privilege, since the administrative body existed precisely to investigate such claims.)

Summary judgment, sua sponte, for defendants on these claims.

French court finds that Facebook fan page doesn't infringe TM

Report here from Inlex IP Expertise:  "The court considered that using the 'PLUS BELLE LA VIE' trademark on a public Facebook page dedicated to this French TV series did not constitute an infringement, in that the trademark was not used in a normal course of business, as web users did not use it for professional or business purposes."  A welcome result, with perhaps less fuss than would be required under the supposedly more robust defenses in the US.

Berkeley Tech. L.J. spring writing competition

For JD candidates.  Details here.

Dastar misunderstanding watch

Fergon Architects LLC v. Oakley Home Builders, Inc., 2014 WL 340035, No. 13 C 6019 (N.D. Ill. Jan. 30, 2014) (magistrate judge)

Fergon sued Oakley for copyright infringement for exceeding its license to use Fergon’s architectural works.  The contract allegedly allowed Oakley to build one home from each design and required Oakley to credit Fergon as the designer in any promotional materials. Oakley allegedly took credit for the designs, not just construction, and built additional homes based on the designs.

The magistrate judge declined to dismiss the copyright claims at this stage.  The allegations that Oakley infringed by “making unauthorized copies and reproductions of” Fergon’s home designs, “selling copies of those designs to third parties,” “preparing derivative works based on those designs,” and “constructing houses based on those designs” were sufficiently specific, even without things like named individuals or dates. 

The next count was styled “false advertising,” but unfortunately the magistrate judge didn’t evaluate it that way (where there’s at least some possibility of focusing on the right issues—commercial advertising or promotion, and materiality).  Instead, the magistrate said that this case involved “reverse passing off,” which occurs when a “producer misrepresents someone else’s goods or services as his own.” Dastar. Comment: No! No, this case does not involve that! Origin of designs (as in, copyrightable material) is not origin of goods or services, or Dastar would have come out the other way!  The magistrate found that Fergon had properly pled that it was the “origin” of the home designs depicted in Oakley’s promotional materials, “because although it did not construct the homes, it conceived of the architectural designs and it owns the copyrights in the designs.”  (Aaaargh.  This is the exact same claim Fox had, that it was the “source” of the expression, even though Dastar made the copies at issue.)  Fergon also alleged that Oakley took credit for the designs by “touting its architectural and design prowess” and stating that it has “mastered the process of taking a custom home from idea to reality,” all while featuring homes designed by Fergon. And it alleged that consumers were likely to be confused, and that it was harmed.

The state-law claims for deceptive trade practices/unfair competition were preempted, though.  The element of “consumer confusion” wasn’t a sufficient additional element to make the claim qualitatively different from an infringement claim.  “Consumer confusion and deception have been held to be inherently present in any copyright action and are therefore not considered extra elements that qualitatively alter the nature of a claim where they are asserted.” The state-law claims here were, in essence, that Oakley represented someone else’s work as its own—“that conduct lies at the heart of the Copyright Act.” (Which is why Dastar bars the reverse passing off claim!)  Since the gravamen of each of the state-law claims was that Oakley passed off Fergon’s designs as its own by “failing to properly disclose Fergon as the actual designer,” “misleadingly holding itself out as a design/build firm and the designer of the Fergon Home Designs,” and engaging in “unauthorized use of the Fergon Home Designs in its commercial advertising,” the claims were preempted.

Grand Theft Auto online delay not actionable

McMahon v. Take–Two Interactive Software, Inc., No. EDCV 13–02032, 2014 WL 324008 (C.D. Cal. Jan. 29, 2014)

Plaintiffs brought the usual California claims based on plaintiff’s advertisements for Grand Theft Auto Vvideogame as including an online multiplayer component, even though they began selling GTAV on September 17, 2013, without making GTA Online available until October 1, 2013.

The court rejected T2’s standing argument—plaintiffs adequately alleged that they lost money or property because they wouldn’t have bought the game when they did if they’d known the truth—but dismissed the complaint anyway. This wasn’t a loss of use claim, but rather an economic injury: they got less than they paid for (and lost the time value of the money). Likewise, though injunctive relief was unavailable, their restitution claims weren’t fatally flawed.  While loss of use can’t support restitution because it doesn’t represent a benefit to the defendant, plaintiffs’ request for refund for the money they paid for the online feature would count as restitution.

The complaint failed, however, to allege fraudulent, unlawful, or unfair conduct.  T2 argued that before release, it made widely reported public announcements of the true launch date and that the packaging explicitly stated that “access to special features ... may not be available to all users.”  The court rejected the first argument—media reporting can’t fix misleading statements on packaging—but accepted the second. The package doesn’t indicate that online play would be immediately available.  Though it prominently stated “Featuring Grand Theft Auto Online,” it also stated that “[a]ccess to special features [defined to include online play] may require internet connection, may not be available to all users, and may, upon 30 days notice, be terminated, modified, or offered under different terms.” “These disclaimers clearly indicate that the online component of GTAV is a ‘special feature,’ which ‘may not be available to all users.’”  This broad language provided clear notice that online play, “despite its prominent highlighting on the packaging, may not be immediately available, regardless of the reason for the unavailability, even from the time of the initial release of the game.”  Thus, the packaging wasn’t plausibly deceptive.

As a result, plaintiffs couldn’t plead actual reliance.  The “immediate cause” of the loss wasn’t a misrepresentation, but their own incorrect conclusions. Given that they claimed to be dedicated video game players, “their reliance upon Defendants’ alleged misrepresentation on the packaging and their conduct in purchasing GTAV were ‘in the light of [their] own intelligence and information ... manifestly unreasonable.’”

There was also no unlawfulness.  There could be no CLRA violation because software and online services aren’t “goods” or “services” covered by that law.  Nor was there unfairness. Though the caselaw is unsettled about the meaning of “unfairness” in consumer cases, plaintiffs couldn’t satisfy any of the tests.  Though T2 could have done more to notify purchasers of the October 2013 launch of online play, the disclaimers were adequate, not “oppressive,” and T2 didn’t cause substantial injury to consumers.  Because online play was a special feature that could always be unavailable, its initial unavailability “could not have represented a substantial injury to customers, as subjectively significant the feature may have been for Plaintiffs.”

Amendment would be futile, so complaint dismissed with prejudice.

Insurer's Lanham Act claim against broker proceeds through necessary implication theory

New Jersey Physicians United Reciprocal Exchange v. Boynton & Boynton, Inc., No. 12–05610, 2014 WL 317179 (D.N.J. Jan. 28, 2014)

Plaintiff NJ PURE sued defendants for false advertising under the Lanham Act, libel, slander, and violations of the NJ Insurance Trade Practices Act; the court dismissed only the last.  Plaintiff is a nonprofit that sells malpractice insurance to physicians and other potential policyholders. Defendant is an insurance broker in the business of soliciting, advertising, and obtaining clients for plaintiff’s for-profit competitors.

Defendants allegedly libeled and slandered NJ PURE in oral and email exchanges with its prospective clients, and falsely advertised by issuing “Marketplace Updates” to prospective clients which offer misleading or false comparisons of NJ PURE’s financials with those of for-profit competitors served by defendants. Essentially, the Marketplace Updates allegedly highlighted as significant certain of NJ PURE’s financial indicators and statistics which are not relevant to the financial health of a nonprofit reciprocal exchange, but are relevant to its for-profit competitors (defendants’ clients).  This allegedly gave a false or misleading impression of NJ PURE’s relative inferiority and undesirability as a malpractice insurer to potential clients.

The Lanham Act claims: Defendants, somewhat surprisingly, didn’t argue standing.  Instead they challenged whether their emails/statements constituted “commercial advertising or promotion,” because they were individual instances of communication instead of disseminated to a widespread market segment.  But NJ PURE alleged a much larger scheme carried out by email and other media; “information and belief” was appropriate at this stage, before discovery.  (Also surprising: that defendants didn’t focus on the part of the Gordon & Breach test that requires competition between the parties—though there is obviously a solid case for competition here, in that defendants seem to make more money when plaintiff makes less and vice versa.)

Next, defendants argued that NJ PURE didn’t allege literal falsity, and also didn’t allege that consumers were actually misled, and thus the complaint failed.  NJ PURE pled both falsity and misleadingness; whether the statements in the Marketplace Updates were literally true was a factual question.  Also, NJ PURE’s main theory was falsity by necessary implication: by comparing data side by side when that data was only relevant for for-profit firms, “coupled with explanatory paragraphs which explained the significance of the financial indicators in such a way that was true for Plaintiff’s for-profit competitors, but not true for a non-profit entity such as Plaintiff,” the statements as a whole were literally false.  This sufficiently pled literal falsity by necessary implication: the Updates allegedly conveyed the message that NJ PURE wasn’t financially sound “as clearly as if it had been stated directly.”  There was no need to evaluate misleadingness.

The libel and slander claims were also sufficiently pled.  NJ PURE alleged pecuniary harm in the form of loss of former policyholders, delays in obtaining new policyholders and the loss of prospective contracts with potential policyholders.  New Jersey’s Supreme Court has made clear that presumed damages are available in private defamation cases, so NJ PURE didn’t have to plead special damages; nominal harm sufficed.

The Insurance Trade Practices Act claim was dismissed because there’s no private cause of action under that law.  There’s precedent that a violation of ITPA can found an unfair competition claim, but that’s not what NJ PURE’s complaint pled.

Matthew Rimmer on fair use

Matthew Rimmer takes a closer look at fair use, with reference to Naomi Novik’s testimony at the recent congressional hearing.  One reaction I've seen to the hearing, which is something I noticed at the time, is that there weren't any tech industry representatives--Google etc. got plenty of criticism, and a bit of defense from Peter Jaszi, but tech isn't Peter's central focus.  So in that respect, the hearing did not hear from everyone with a vital interest in fair use.  Individual artists need fair use, and they need intermediaries to have fair use too; their interests aren't opposed, but they aren't exactly the same either.