Another keyword defendant victory, among other tort claims

M-Edge Accessories LLC v. Amazon.com Inc., 2015 WL 403164,  No. MJG–11–3332 (D. Md. Jan. 29, 2015)

 

M-Edge started selling Kindle accessories soon after the Kindle was released. The parties’ relationship began well, but began to sour by 2011. M-Edge sued, alleging patent infringement and tort claims.  The court granted summary judgment on patent claims against one Kindle cover and denied it on claims against another.  I will only discuss the various false advertising/unfair competition torts.

 

Under Maryland unfair competition principles, “all dealings must be done on the basis of common honesty and fairness, without taint of fraud or deception.” But the tort isn’t boundless; it doesn’t protect against mere competition. 

 

M-Edge was a member of the “Kindle Compatible Vendor” program, which allowed it to label its products as “Kindle Compatible” and sell them online through Amazon.com. By the end of 2009, “M–Edge was Amazon’s largest third-party Kindle accessories seller.” Amazon underestimated the market for Kindle accessories, and wanted to increase its margin.  Thus, Amazon initiated the “Made for Kindle” (MfK) program.  Amazon’s partners would get special benefits, including being sold in the Kindle Store area of Amazon.com, permission to use the “Made for Kindle” trademark, pre-launch access to new Kindle products, and inclusion on Amazon’s list of “Made for Kindle” vendors. MfK members paid a royalty on their sales of Kindle-related products.

 

M-Edge rejected the MfK program at least in part due to the high royalty rates.  The court found that the MfK program was not actionable unfair competition. M-Edge made an informed business decision not to participate, and any harm to it was caused by its decision that the costs outweighed the benefits.  Plus, there were valid business reasons for the MfK program—Amazon was justified in seeking to promote quality merchandise for the Kindle, and there was nothing wrong with charging a royalty to manufacturers who benefited from Amazon’s endorsement.  Nor was there anything wrong with boosting a smaller M-Edge competitor as part of the MfK program, encouraging it to adopt features of other successful products, including M-Edge accessories. There was no evidence that any copied features were legally protected.

 

The court rejected M-Edge’s claim that Amazon misused confidential information about M-Edge sales to design its own accessories. Amazon copied M-Edge’s best-selling colors, but this wasn’t confidential: it was from Amazon’s own sales records.  Likewise, while a former Best Buy executive gave Amazon M-Edge’s offline margin (information about what offline retailers paid), there was no evidence that this damaged M-Edge.

 

Amazon also offered discounts and sold related products as bundles, amounting to below-cost pricing. But there was no evidence of a motive to harm a competitor or destroy competition.  The specific promotions at issue were undertaken to get rid of excess inventory, some of which were related to an obsolete product. Maryland law permitted below-cost sales where “the merchandise ... [m]ust be sold promptly in order to prevent loss.”

 

M-Edge also challenged Amazon search strategies, like running an ad for “M Edge TM–Official Site ... Kindle.Amazon.com Buy Kindle or Kindle DX at Amazon....” as a search result for “M-Edge” on the WSJ’s site.  But there was no evidence this damaged or jeopardized M-Edge’s business.  Though Amazon discussed using the keyword M-Edge to promote competitors, M–Edge engaged in the same practice with its competitors’ keywords, and the practice was permissible under 1–800 Contacts, Inc. v. Lens.com, Inc., 722 F.3d 1229 (10th Cir. 2013) and Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011). “Therefore, this conduct cannot serve as a basis for a claim of unfair competition.”

 

Nor did Amazon make actionable “threats” in the course of contract negotiations. While Amazon demanded increased rates, M-Edge successfully resisted its demand for retroactive fees. An Amazon employee allegedly told M–Edge’s Vice President of Sales when M-Edge expressed discomfort with MfK: “That’s a path you really don’t want to go down, because we are going to be putting pressure on retail to use the preferred partners. It will cause damage to you if you’re not part of the program.”  But Amazon had a valid reason to discourage M-Edge from rejecting MfK, since M-Edge was a successful and popular merchant—at least one Amazon executive’s “favorite brand.”

 

M-Edge also didn't prove that Amazon deceived it by not fulfilling a promise to provide M-Edge with pre-launch access to the third generation Kindle. M-Edge didn’t identify any contract obligation on Amazon’s part, and it only renewed its merchant contract with Amazon eight days before the launch—even if it had a contractual right to prelaunch specifications, there was no evidence that a one-week delay harmed it. Also, in a 2011 meeting, Amazon allegedly “pumped” M-Edge for product information after already deciding to shut it out.  “But asking a competitor who has agreed to meet with you about their products is not deceit.”

 

Tortious interference claims also failed. M-Edge alleged that Amazon made misrepresentations about M–Edge’s status as an Amazon-approved vendor and performed “unlawful acts of coercion against retailers.”  Amazon allegedly spread false messages that only MfK vendors had ‘High quality products: Amazon approved and tested,’ and that only MfK vendors were ‘highly capable, honest, and trusted.’”  But Amazon had a right to promote MfK vendors; it didn’t say “only” Amazon vendors were high-quality or disparage M-Edge.  There was no evidence of deliberate disparagement.  For example, one Amazon employee in an email described responding to an accessory buyer’s question about M–Edge as follows: “I stuck to the script and focused on our partners abilities, leaving risk on M–Edge.”

 

False advertising: No luck here either.  M-Edge challenged (1) ads on third-party search engines that resulted in Amazon advertising Amazon.com as the “official site” of M–Edge; (2) statements on Amazon.com that M–Edge’s products are “no longer available”; and (3) Amazon’s use of the approved vendor list in connection with the MfK program.

 

Third-party ads directing users who used M-Edge keywords to the Amazon accessories page is fine, see, e.g. Judge Berzon’s concurrence in Playboy. Amazon’s use of such ads wasn’t literally false and there was no extrinsic evidence of confusion.  As for “no longer available,” that was literally true because M-Edge products weren’t available on Amazon.  “Moreover, in the modern world, with ready availability of eBay and numerous sources for products discontinued by a manufacturer, a consumer would not reasonably conclude that a message of unavailability on Amazon.com would constitute a statement that a product was not available from any other source.” M-Edge didn’t show materiality.

 

Finally, as for the approved vendor list, Amazon allegedly engaged in false advertising by “approach[ing] M–Edge’s existing and prospected offline retail customers with a list of ‘approved’ vendors and messages about the MfK program.”  Amazon’s message that M–Edge was not an “approved” vendor was allegedly “literally false” because “[w]hen Amazon contrived the [MfK] program, M–Edge was already an Amazon-approved vendor of Kindle covers.” That is, M-Edge was part of the Kindle-Compatible Vendor program, allowed to label its products as Kindle Compatible and sell them through Amazon.  Still, Amazon’s statements weren’t literally false, since the MfK approved list and the earlier KCV list were separate programs. 

 

One side note: Amazon proffered the testimony of Dr. Allyn Strickland as a damages expert. M-Edge sought to exclude “character” testimony that “Amazon ... seeks to be Earth’s most customer-centric company,” that Amazon announced that it would be opening a fulfillment center in a previously inactive area in Baltimore that would create over 1000 jobs; that Amazon’s founder/CEO was named Time Magazine’s Person of the Year in 1999 and  “America’s Best Leader” by USNWR; and that the Kindle won consumer awards.  “The Court finds a considerable degree of potential undue prejudice—and an effort to pander to a local jury—in Dr. Strickland’s purported character or ‘background’ evidence. At least two days prior to offering any “background” testimony (and preferably prior to trial), Amazon would need to proffer the testimony for an advance ruling on admissibility.  Also, because the tort claims were gone, Dr. Strickland’s opinions regarding Amazon and M-Edge’s respective responsibility for M-Edge’s losses due to the MfK issues described above were irrelevant and inadmissible.

 

Public comments on proposed DMCA classes

Public comments on the proposed DMCA classes are up. I had the great privilege of working with EFF’s Corynne McSherry on the noncommercial remix exemption.  The comment of EFF and the Organization for Transformative works is here.  I believe we put forward a strong case to continue the protection of political and artistic speech.

 

Special thanks to Jeremy Sheff for contributing a comment in support of the academic use exemption, and to the National Congress of American Indians for supporting the remix exemption.  The EFF also provided petition-like language for individuals to use to support the exemptions, and many did.  Most simply signed on to the suggested language (with a few specifically noting that they did so because it accurately reflected their views), but I noticed some interesting patterns in the comments nonetheless.

 

First of all, except for the vidders, the commenters overwhelmingly use male names.  Perhaps more interesting is what people add to the proposed text: there’s a lot of work to be done here about the lay concept of ownership, often claimed as a trump to both contract and law. Another common theme is the importance of tinkering to learning and innovation. I picked Ryan Crabtree’s additional comments as representative:

 

Suggested text:

Copyright was designed to encourage creativity and fuel innovation. But it's being abused to do exactly the opposite. Every single day, copyright law is twisted to stifle creativity, limit consumer choice, dismantle property rights, and chip away at our digital freedoms. I should have the right to remix, modify, and repair the things that I own. As electronics are integrated into every kind of product, please consider the needs of consumers as well as rights holders.

 

Added by Crabtree:

Think of it in terms of educational evolution. I didn't discover or develop Algebra; I had to learn from the building blocks of those ahead of me. The same is true for anything else. Having just registered for the first classes of my MBA, I can assure you that I have not discovered much of anything! I've held onto the coattails of many amazing minds before me. My point is this: if I am to learn about the operating systems of my phone or video game system (for example), I will be greatly hindered without access to said operating system software. Perhaps I am developing security software as a small startup or research outfit, criminalizing tinkering will only hinder progress and advancement. We need to have access and freedom to not only learn, but also to fix our own items. If I have paid for something and own it completely, I cannot fathom how I should be limited to what I can do with it. This kind of stranglehold on freedom goes against the very idea of American ingenuity and exceptionalism. Let us become more and more exceptional as time moves forward.

 

Finally, I wanted to single out the comments of vidder Laura Shapiro, so they don’t become lost in the crowd:

People watch remix videos the way they watch television now: on a big screen far away, or on a small screen close-up. Either way, low-resolution footage is noticeable and undesirable. I don't want audiences to be seeing pixels, I want them to be seeing what I'm saying. My message can't come through in a clear, engaging manner when viewers are struggling to read it around video artifacts in low-resolution shots. Give me high-quality, high-resolution footage for my remixes to ensure my audiences see and understand what I'm saying.

false claim of gov't affiliation not actionable by non-gov't plaintiff

Two Jinn, Inc. v. Government Payment Serv., Inc., A136984, 2015 WL 456063 (Cal. Ct. App. Feb. 3, 2015)

 

Two Jinn (dba Aladdin Bail Bonds), a licensed bail agent, tried to enjoin GPS, a financial services entity, from allegedly engaging in bail agent activities in violation of state licensing and regulatory requirements. The court of appeals upheld the dismissal of Aladdin’s UCL and Lanham Act claims.

 

Aladdin and GPS allegedly “provide pretrial release services to detainees in exchange for a monetary compensation.” Aladdin posts surety bonds, while GPS allegedly posts cash bail for detainees using contracts with county sheriffs in several counties.  Under those agreements, GPS agreed to process credit/debit card transaction requests for cash bail.  Aladdin alleged that this required a license under the insurance law regulating bail/bail bonds, and violated other provisions of the insurance code.  Aladdin also alleged that ads GPS posts in county jails are false, misleading and confusing to consumers because it employs the terms “Government,” and “GOV” in combination with a state capitol dome logo to create the false impression of government status or affiliation.

First, the court agreed that Aladdin didn’t have UCL standing. Standing requires a plaintiff to “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.”  The evidence showed that any customer diversion didn’t result from GPS’s lack of a bail bond license or noncompliance with regulations.  GPS doesn’t compete directly with Aladdin or post bond. The legislative history shows that the state authorized counties to accept a credit card, debit card or other EFT in order to “make it easier for people to pay fines, post bail, and to alleviate time spent in jail.” Plus, GPS isn’t the only company that provides EFT services to California counties, so even were GPS enjoined, Aladdin’s customer base could still make a cash bail payment that way.  “[A]ny diversion of potential customers from Aladdin to GPS results from the Legislature’s establishment of the cash bail payment system as an alternative to the traditional bail bond service, and not from the fact that GPS conducts its business without a bail agent license.”

 

Nor did Aladdin’s investigation costs give it standing, because they were in anticipation of litigation. “Aladdin has failed to identify any evidence supporting its remarkable claim that it investigated GPS’s activities for non-litigation reasons.”

 

In addition, GPS’s business practices weren’t unlawful or unfair under the UCL.

The unlawfulness theory required a violation of the Insurance Code, which wasn’t present, and there was also no unfairness.

 

Lanham Act: Aladdin failed to allege a false statement in commercial advertising or promotion. The court described Aladdin’s theory as being that the advertising was “conceptually misleading” by using words like “gov,” “government,” and a capitol dome as its logo. This allegedly misled consumers to believe that GPS is a government agency or affiliate.

 

The court misunderstood the Lanham Act, finding that Aladdin didn’t have standing to bring a false association claim, which is true, but should be irrelevant given the special status of government approval.  But the court reasoned that Aladdin conflated false association and false advertising when it argued that the Lanham Act prohibited misleading ads, including misleading statements about endorsement or approval by another, including the government.  (Does that mean that competitors lack standing to claim that a competitor falsely claims FDA approval, or compliance with ISO standards, or UA certification?  This is a deceptively simple argument that is nonetheless troubling, and does conflict with the FDA cases.)

 

Aladdin correctly pointed to Trafficschool.com, Inc. v. Edriver, Inc., which did find false advertising based on use of dmv.org based on consumer confusion about whether the website was owned by or affiliated with state governments.  Puzzlingly, the court said, “Edriver was not a pleading case; it did not address or even consider what allegations are sufficient to allege a false advertising claim. Furthermore, Aladdin overlooks that EDriver expressly confirms that the first element of false advertising under the Lanham Act is ‘a false statement of fact.’”  Hunh?  The false/misleading statement in Edriver was “dmv.org,” which caused consumers to have the mistaken belief that the website was official. The analogy is exact. 

 

True, the court said, Edriver does support the proposition that false statements can either be literally false or literally true but misleading, but Aladdin didn’t identify “any actual statement in a GPS advertisement that allegedly misled or deceived consumers.”  (Other than the name and the logo?  Names and images can be false and misleading; e.g., the 3d Circuit’s Breathasure case.)  Though Aladdin alleged that the use of the words “gov” and “government” was misleading, it didn’t allege “that these isolated words were used in a statement of fact that was provably false or misleading.”  I’m still befuddled.  The claim makes perfect sense: in the context in which it’s encountered, GPS’s name confuses consumers into thinking it’s an official government entity.  GPS’s name is part of its advertising.  This might or might not be material, but it’s not incapable of being falsified.

 

Nonetheless, Aladdin’s claim failed.

No TM or false advertising claims without use of mark in US commerce

Belmora LLC v. Bayer Consumer Care AG, No.  1:14-cv-00847 (E.D. Va. Feb. 6, 2015)

 

Territoriality lives!  Belmora sells an OTC pain relief product, Flanax, in the US with a similar trade dress to, and capitalizing on the good will of, Bayer’s Flanax, sold in Mexico.  The Lanham Act does not provide Bayer with a remedy in this situation.  (Perhaps Bayer should’ve sued in NY, where state law might do so.)   [NB: Marty Schwimmer & John Welch represent Belmora.]

 

Belmora's Flanax

Belmora registered FLANAX for analgesic tablets in 2005, with use in commerce since March 1, 2004.  Bayer has used FLANAX in Mexico since the 1970s, with sales of hundreds of millions of dollars and promotion in Mexico, including major cities near the Mexico-US border. Bayer attempted registration for Flanax in 2004, but failed due to Belmora’s preexisting application. Bayer has never had FDA approval to market or sell Flanax in the US.

 

Bayer's Flanax

Belmora’s early packaging was virtually identical to Bayer’s, and the court found that Belmora copied Bayer’s logo and trade dress.  The packaging has changed but is still similar to Bayer’s, and Belmora’s marketing “often suggested a historical connection between its FLANAX and Latino customers.”

 

Bayer petitioned for cancellation in 2007.  In 2014, the TTAB cancelled Belmora’s registration under §14(3) of the Lanham Act.  Belmora appealed to the Federal Circuit, but Bayer sued Belmora; though Bayer wanted the case heard in California for obvious reasons, it was transferred to Virginia.

 

The court found that Bayer lacked standing under §43(a)(1)(A) and (B) under Lexmark.  Starting with false designation of origin: Lexmark established that the plaintiff needed to be within the Lanham Act’s zone of interests and plead proximate cause of its injuries to have standing.  The zone of interests test isn’t very demanding, and the plaintiff receives the benefit of the doubt. It “forecloses suit only when a plaintiff s interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress authorized that plaintiff to sue.”  Lexmark.

 

Nonetheless, Bayer’s interests didn’t fall within the zone of interests Congress intended to protect, because Bayer didn’t have a protectable interest in Flanax in the US.  Congress intended “to regulate commerce within the control of Congress.”  For trademarks, the purpose was to provide national protections to marks to secure to owners the benefits of their goodwill and to protect consumers. Park ‘N Fly.  “[A] key purpose of the Lanham Act is to protect the interests of those with a protectable interest in a mark,” and ownership of a mark is an element of a §43(a)(1)(A) cause of action.  Unregistered marks must be used in commerce in the US. Bayer failed to plead facts showing that it used Flanax in US commerce.  Bayer was therefore not within the class of plaintiffs Congress authorized to sue under §43(a)(1)(A).

 

Also, even if Bayer satisfied the zone of interests test, it failed to plead facts showing that Belmora’s false designation of origin proximately caused Bayer economic or reputational injury. Bayer suggested that it lost sales in the US by not being able to convert immigrating Flanax consumers to Aleve, its American counterpart to Flanax. But a core purpose of the Lanham Act is to "help assure a trademark's owner that it will reap the financial and reputational rewards associated with having a desirable name or product." To let Bayer make this argument “would require the Court to extend Lanham Act protections to an international mark that was not used in United States commerce.” The economic consequences targeted by the Lanham Act are those caused by infringement in the US.

 

The Fourth Circuit hadn’t adopted any exceptions to this rule. It hadn’t recognized the famous marks doctrine had suggested it was disinclined to do so. In addition, some courts allow extraterritorial conduct to be actionable if it has a significant effect on US commerce, since sales to foreign consumers may harm the income of an American company.  The Fourth Circuit hasn’t recognized this theory, and, even if it did, Belmora is selling to US consumers, not to foreign consumers.  “[T]he Court expressly declines to find that the loss of potential sales to immigrating consumers is the type of economic loss recognized by the Lanham Act as they are speculative.”  [Compare doctrines surrounding the likelihood of irreparable harm.]  Speculative allegations of harm are insufficient for Lanham Act standing.

 

Not only did Bayer fail to plead that Belmora proximately caused cognizable economic injury, it also failed to plead proximately caused damage to its reputation. Speaking of  irreparable harm, here’s a line we might see quoted again: “Mere confusion by itself does not amount to reputational injury—there must also be evidence of harm resulting from the use of the allegedly infringing product” (citing Haute Diggity Dog). 

 

Bayer argued that its reputation was harmed because Belmora’s deceptive marketing caused actual confusion.  Telemarketers hired by Belmora allegedly called potential distributors and suggested to them that Belmora's Flanax products were the same as those offered by Bayer in Mexico. Belmora also allegedly advertised that its Flanax was a brand that Latinos had turned to "for generations," and that "FLANAX acts as a powerful attraction for Latinos by providing them with products they know, trust, and prefer."  However, that didn’t show injury to Bayer’s reputation.  There was no evidence showing that Belmora’s products had harmed anyone, or that people had made misdirected payments.  “Without more, mere confusion by itself does not constitute reputational injury.”

 

Bayer argued that its inability to control the quality of goods sold under the Flanax brand harmed its reputation.  This “demonstrates a fundamental misapprehension of the protections of the Lanham Act.”  But quality control injury depends on ownership, and Bayer can’t bring a trademark infringement claim because it’s not an owner. Bayer pled neither actual reputational injury nor a protectable interest in a mark.

 

The court also dismissed the §43(a)(1)(B) claim on standing grounds, for the same reasons: Bayer didn’t sufficiently plead an injury to commercial interest in sales or business reputation proximately caused by Belmora’s alleged misrepresentations.

 

The court dismissed Bayer’s California state law claims for unfair competition and false advertising, declining to exercise its supplemental discretion.

 

Further, the court affirmed the TTAB’s dismissal of Bayer’s Article 6bis claim.  “[T]he Paris Convention is not self-executing and Sections 44(b) and (h) of the Lanham Act, 15 U.S.C.

§ 1126(b) and (h), do not render Article 6bis of the Paris Convention a ground for contesting trademark registration.”  Section 44 incorporates the Paris Convention only to provide foreign nationals with the necessary substantive rights. The court would not infer, “from uncertain terms in the Lanham Act, a declaration from Congress adopting the famous marks exception captured in Article 6bis, thus creating a cause of action therein.”  Such a new rule would “eviscerate” territoriality, “a principle that has been accepted  by  the  Supreme  Court  for  nearly  one  hundred  years  and  remains  essentially unassailable in each circuit court except for the Ninth Circuit.”  More definite instruction from Congress would be required to do so.

 

Then the court reversed the TTAB’s holding that Bayer had standing to seek cancellation, because Bayer lacked standing to sue under Lexmark. The TTAB had found standing based on injury allegedly caused by strikingly similar packaging and copying that was done to misrepresent a connection with Mexican Flanax. Cancellation can be sought by any person who believes they are or will be damaged by the registration, including “if the registered mark is being used by, or with the permission of, the registrant so as to misrepresent the source of the goods or services on or in connection with which the mark is used . . . .” Lexmark guided the standing inquiry here too, though the TTAB didn’t apply it. Again, Bayer failed the zone of interests test as well as the proximate cause test. [Interesting collapse of protection & registration, something I’m thinking a lot about.] 

 

Section 14(3), the court held, requires use of the mark in US commerce to find a misrepresentation of source. Bayer argued that the plain language of the statute didn’t require that, and that such an interpretation was inconsistent with other provisions of the Lanham Act barring registration of deceptive marks.  The TTAB found standing.  But the court was persuaded otherwise by case law and comparison to other provisions of the Lanham Act.

 

Previous misrepresentation of source cases either involved petitioners who owned a mark or were silent on the question.  Nor could Bayer rely on cases applying special standing rules to Cuban entities, because there’s a special law providing for that treatment.

 

What about the argument that some provisions, like §2(d), mention owning a mark and others, like §§43 and 14(3), do not, implying a difference between them?  “[A]lthough Section 43(a)(l)(A), by its terms, does not require use of the mark, courts have consistently required a plaintiff to use the mark in United States commerce in order to state a claim under that statute.”  Congress’s intent “to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce” was also relevant, making it appropriate to read a use requirement into §14(3) as well.  Thus, the TTAB ruling was reversed.

WIPIP, part 2, Session 3 Trademark

Session 3, Trademark

 

Leah Chan Grinvald, Constructive Consent

 

Courts adopt as evidence of fame the number of users = strength = fame.  Example: the number of Flipboard users accepted by a court in October.  But that also is read to include shortened forms like the stylized F Flipboard uses.  May be unconscious influence. 

 

Bad because there’s a theoretical disconnect.  In contract, judges acknowledge that they’re creating a hypothetical world where people assent to terms through reasonable notice, for reasons of efficiency; we want online contracts to be valid and we want to put the burden on the user to read the terms.  In TM, at least in theory, the law takes more of a legal realist approach: we really want to get into consumers’ minds. Though we use proxies like advertising, we are trying to reach consumer thought. Internal criticisms of constructive consent in contract are very strong in themselves—coercion, reality that consumers/users don’t read the terms. 

 

Judges who do this lower the burden of proof for some TM owners.  Rack up user downloads = strength, but that’s an unfair shortcut.  So don’t import the theory. Scrutinize agreements carefully.  Are the claims based on prominent marks?  Adopt “interactive” theory of fame.

 

Is this really happening on a large scale?  Aren’t companies like Facebook famous anyway? Yes, but there’s overreach too.  Tumblr = ‘t’ famous?  Efficiency: maybe this is efficient cheap way to prove fame. At least w/r/t current TM doctrine, we want fame to be done on a case by case basis.

 

Gibson: you don’t have to reject the contract theory to reject it in TM.  Contract = there’s a theory of the informed minority who reads and protects the rest of us.  Fame numbers generated by overall customer base don’t take that into account.  Second, reputational argument: consumers usually work these out as customer service matters and not contract matters, but again that is not a TM context. These theories don’t work for TM purposes.

 

A: right, that goes to my argument about fit.

 

Rosenblatt: to what extent is this counting users approach really constructive consent versus a way of figuring out how many people have seen the mark?

 

A: she thinks it’s unconscious; also it’s a way to prove secondary meaning (which is a factor to prove fame, Rosenblatt points out) but it needs to be scrutinized more carefully. We have all downloaded random apps we don’t know much about/we deleted quickly.

 

Ramsey: separate issue of using number of users who downloaded versus agreement in fame.  Constructive consent applies to agreeing that its famous. Has any court really explicitly relied on the idea that users have agreed the mark is famous?

 

A: Run the risk; need to scrutinize evidence carefully.

 

William McGeveran, What Campbell Can (and Can’t) Teach Trademark Law

 

Campbell is important for various things, including ill-advised parody/satire distinction. What does it do for TM? Error and administrative burden in adjudicating parody.

 

Lessons of Campbell: parody is important—significant speech/social value.  Parody is inherently tricky because imitation is inherently necessary to do parody.  No bright-line rules; fact intensive.  Parody should be handled consistent w/the underlying purposes of IP.  Underlying purpose of TM is different from that of ©!  (Though Silbey’s work suggests that laypeople don’t agree.)

 

Present lessons: Judges get it right. Parody almost always wins nowadays. We don’t have a meaningful error cost problem now, though we did in the past.  Too much discussion suggests that might be the case.  Some markholders get it wrong: overclaiming.  We talk too much about problem #1 (judges) and not enough about problem #2 (overclaiming by TM owners), giving sustenance to the narrative out there that helps sustain overbroad C&Ds by suggesting that parody is vulnerable in court when by and large it’s not. 

 

Dogan & Lemley; David Simon; Tushnet & Keller have cataloged the scene. There are 12 key cases, and not a ton more. The age of these cases suggests that, whether cause or symptom of change in attitudes, Campbell was an inflection point, w/trend to much better results if they go through full adjudication.  10 of the 12 are from last century; Buttwiper is 2008 and Charbucks 2009.  Some of these lawsuits are probably justifiable b/c parody was cream-skimming ex post justification, or at least you can understand why the court thought so. The reasons parodies lose are varied; there’s not one magic problem.  Direct competitors who’s doing what Campbell was worried about; unjustifiable general concerns over free riding; messing up what confusion is about; just blowing it: NAACP v. Radiance (Nat’l Ass’n for Abortion of Colored People). Hard to figure out any tweak in law that would fix that last one: neither def’t nor court cited Rogers, ESS, or any other relevant case.  The real cost we face is adjudicative cost. Any effort to tweak parody is likely to make that worse rather than better because Campbell teaches us that’s hard.  Start doing work to make adjudication quicker and cleaner.

 

Future: Think holistically about parody as part of larger set of expressive uses and respond with expressive use reform more generally.  Expressive works, political uses, maybe comparative ads.  Can’t make too big a list b/c then people claim anything not on the list is excluded. Argument will then not be about whether it’s a parody or whether it’s confusing but whether it fits these other parameters.  Presumptions and the Rogers test.  Confusion isn’t everything.

 

Lemley: one thing you don’t include is cases where the Q is whether or not it fits in the parody box. Mostly, once we decide something’s a parody, we give it credence. Campbell draws unjustified divide between satire and parody, and people try to tug one way or another because it changes results.

 

A: I did look at those cases; Ds do really well there too, though it can be costly. Parodic character perceptible = ok. And sometimes when the court disagrees, he thinks the court is right.  Series of fishing nets—scoop up easy cases first.  That might mean some parody cases go to the end of the line, but hopefully that’s where the cases are the hardest.

 

Heymann: consumer oriented language: reasonably be perceived. Relationship to audience: what is the market you’re talking about?  Market for parody or market for rap in Campbell? Who is perceiving this as parody, and in what market?

 

A: agree, but hopefully won’t need that level of analysis. But when you do consider full scope in confusion analysis, that would be important.

 

RT: Makes me think about why transformativeness has expanded in content.  Satire/parody distinction never worked and it was almost immediately apparent that it didn’t.  Timmy Holedigger & Cariou have in common their lack of interest in specifying the transformative/parodic message. [And Chewy Vuiton too, and even Charbucks as it rejects the defense.]

 

A: yes, agree—we’re working on problems that don’t need much work. Courts haven’t taken up Souter’s invitation to make what is essentially a meaningless distinction, even if at first they were willing to try (Cat NOT in the Hat).

 

Ramsey: incentive to explain to potential witnesses that commenting = helpful (a problem in the LV Hyundai basketball ad). Global issue?

 

A: also a problem in Rosa Parks case.  Not going global in a symposium on Campbell, but it is an issue elsewhere. My position = what needs to be reformed is the admin process, which is US-focused.

 

Gibson: is the point to get more cases before judges b/c judges do a good job? Or what?

 

A: I want you to be able to reply to a C&D with “no, b/c X.” Categorical defense = great.  Simple & straightforward Rogers-like test = great. If they do sue, resolution should be cheap and early.  Not complicated confusion based tests but simple tests. I’m not trying to improve outcomes, I’m trying to improve defenses. [This actually sounds like a reason to make registration more substantive—and to defer to 2(d) rejections in subsequent confusion cases.]

 

Xiyin Tang, Against Fair Use: The Case for Genericide Defenses in Artistic Works

 

Rogers v. Koons: cited in the LV/Hyundai case.  Folded parody/1A defenses into each other.

Genericide: formerly protectable mark is found no longer protectable b/c stopped signifying source but rather the product itself.  Increasing intersection between luxury goods/art/commerce.  Original Campbell’s soup can à Warhol’s silkscreens of can à Warhol estate-authorized Campbell’s soup cans colored in honor of 50^th anniversary of silkscreens.  Genericness in a market = lose protection in that market. Murphy bed used to be a protectable TM, and then became the name for a bed that pulls down from the wall. 

 

In expressive context: b/c of the way rap employs tropes, like liquor brands and cars.  Rolls Royce sued a rapper named Royce Rizzy, demanding he stop using the RR mark in connection w/stage shows, albums, and merchandise.  Rizzy seems likely to settle. 

Genericness defense could discourage overzealous TM owners from going after expressive uses.  Many uses will just go away if you threaten; many artists lack time/energy to take to full trial.  Court could invalidate mark across a market—Cristal could be generic in the rap industry but retains secondary meaning in liquor industry.  Betty Boop on T-shirts: decorative/aesthetically functional—not a complete invalidation.

 

Rosenblatt: Genericity is about ordinary descriptive term for the goods; it means that expressive use isn’t applying as we usually understand it unless it’s already a mark for expressive goods.  What you’re talking about isn’t genericity so much as ubiquity or expressive value as a result of ubiquity—wouldn’t that make every famous mark generic for expressive goods?

 

A: some marks do catch on and are used more often as stand-ins than others.  Cristal in rap, compared to McDonald’s which is not used as much in expressive works.

 

Ramsey: need to know what marks would qualify. How would judges or juries decide. Also, how do you define what’s artistic?  Artistic designs are applied to shoes, product packaging, etc.

 

A: category of expressive use. You can create markets where you don’t need to define artistic works as a whole to invalidate a mark in a market.  Should introduce the idea of genericness into the public dialogue.  The way people are actually using it expressively.  “Gucci” to mean “fancy.”  [I was thinking about Idris Elba being, as they say, “one GQ m-------”].

 

McGeveran: courts are reluctant to find genericism because it’s so radical in consequences. Is this genericity or something else about confusion? Will using the term introduce ideas that you don’t want to have?

 

A: Abercrombie spectrum shows that you can fine tune genericity—SAFARI generic for hats, not for other apparel.

 

Heymann: maybe you really want to use the term functionality. 

 

Gibson: or TM use. 

 

Lemley: no, we can’t say that, we have to invent 20 different doctrines that serve the same function as TM use.

 

Q: what would balancing test look like in commercial use cases?

 

A: case by case.  Do you use mark as general stand-in for category of goods?  Was the brand involved in promotions in the industry in the past?  How close are the goods?

 

Q: what’s the relationship between nominative fair use and genericide?  You’re using this as references to ideas, not products: Louis Vuitton as a reference to luxury, not to a particular class of products.

 

A: we’ve seen a collapse between goods and goodwill—the mark is the product.  So the idea could be the thing that’s generic.

WIPIP, Part 2, Session 2, Trademark

Glynn Lunney, Inefficient Trademark Law

 

Older TM lawyer would be surprised at breadth: inherently distinctive marks were the only marks, and double identity was essentially the rule.  Today: looks very different. What will it look like in 100 years—will expansion continue? Even if we could change the Lanham Act today, would it be that Act in 50 years after the courts were done with it.

 

De-evolution: trademark protection has expanded radically in ways undesirable normatively and unjustified by the language of the Act.  Expansion not due to changing markets or marketing/advertising. Flaws inherent in the judicial process: party-driven nature of judicial process (wrong set of cases before the courts) + judicial myopia because courts focus on parties before them not on society. Too easy to give into the restitutionary impulse/instinctive dislike of copyist. 

 

Example: The “Who Dat” controversy.  Saints tried to control the phrase but that was unpopular with local businesses/politicians. Then two brothers who popularized the phrase sued Fleurty Girl and a couple of other T-shirt shops; their claims were weak—limited use, likely naked licensing, not much likelihood of confusion. Attorneys around town agreed to represent the Ds pro bono.  Court rejects sj motion: factual issues on abandonment, ownership, validity, confusion.  Ds all settle.  Not worth it to them to litigate.  They wouldn’t win enough by winning: right to compete w/other merchants to sell the shirts, and it’s distracting from their business.  Ps have a greater incentive: if they prevail, they get lots of licensing revenue.  That’s the story of the 20^th century: TM owners have strong incentive to litigate and develop legal rules that benefit them and similarly situated TM owners in the future; TM defendants usually have no systematic interest in developing TM law on lines more favorable to competition.

 

Trade dress: Congress relegated it to the Supplemental Register; In re Haig & Haig (Comm’r 1958) Daphne Robert said that she didn’t care what Congress said; 8^th Circuit said it was protectable under §43(a) for trade dress of corn hopper.  Two Pesos said secondary meaning wasn’t required by Congress (b/c they didn’t mean to protect trade dress); Qualitex says “symbol” means anything even though the term was added to the Act precisely to refute that contention.

New forms of confusion: post-sale; initial interest confusion; Boston Hockey/promotional goods.  Some are desirable—Aunt Jemima should be allowed to control pancakes, not just pancake syrup to avoid confusion. Case by case v. systematic: the cost of false positives and false negatives; court doesn’t consider the long-run consequences, like Boston Hockey or post-sale confusion.  In some cases, we should let the wrong go despite the false negatives. Consumers could figure out that Aunt Jemima pancakes were from a different source.

 

Good law becomes extended and becomes bad. Arguments aren’t made by attorneys: failed to argue that Congress explicitly excluded trade dress.  Respect for precedent preserves bad decisions, but not good decisions—why is Two Pesos still good law?  Silly excuses offered for expansion, like the 1962 Amendments mean any confusion is actionable and “commerce” means anything even though that’s put in to satisfy the Commerce Clause.

 

Parties set the agenda: decide whether to act, sue, settle.  Present info on which decision is based. Consumers are not allowed to participate.  Not necessarily a problem when resolution affects only the parties.  Sometimes nonparties are affected: asymmetric stakes—win for P increases market power and rents, while win for D leads to competition and no rents.

 

Thus, as problematic as TM is, it’s likely to get worse.  Increasingly broad protection w/increasingly narrow, complex and specialized exceptions.

 

Remedies: adjust stakes: attorneys’ fees/boundies to get right cases before the courts. Eliminate collective action by mandatory joinder of possible Ds; eliminate private enforcement. Also need courts to reach right results. Better information; create defense bar; ideology can create results by focusing attention—property-philia is a problem.

 

Sheff: Is TM exceptional in this regard or like any other regime in which stakes are asymmetric? Also, Q of institutional competence. If this is a structural problem w/ the nature of litigation, then courts aren’t the proper institution to balance in favor of competition and we need other institutions, maybe legislative.

 

A: can do it: antitrust, where ideology and other factors have produced counterbalances.  Or remove law-making authority from courts altogether.

 

Ramsey: nominative fair use—entertainment/news companies have an interest in pushing back. We have to identify companies w/broad interests and bring them in.

 

A: Wal-Mart. Sometimes you wonder: why did the Ds fight?  Why did Dallas Cap & Emblem fight so hard—were their sunk costs so high? Sometimes it’s idiosyncratic, and that can be really bad b/c defendants may make bad precedent.

 

McGeveran: when is there some other external doctrinal barrier for courts?  Speech or some kinds of competition get courts to take notice.  Results can be quite favorable. Part is just increasing salience to courts of those third rails, like the First Amendment.

 

Rosenblatt: there will still be uncertainties in the absence of rigid carveouts.  All the settlements hurt the law, they don’t help it.  Uncertainty drives settlement. [Compare fair use principles, though—we have been able to strengthen the resolve of at least some sectors in the © area.]

 

Gerhardt: I wonder about quality of lawyering. Smack Apparel: P has sophisticated TM counsel and D doesn’t.  Defense bar/more connections with people fighting = huge difference.

 

A: true, you can end up with a TM lawyer who usually is P-side and then you get the ridiculous argument in Two Pesos about secondary meaning in the making, or a non-TM lawyer who just misses the point.

 

Peter J. Karol, An Exclusive Right to Judicial Discretion: Learning from eBay’s Muddled Extension to Trademark Law

 

Most circuits had a rule presuming irreparable harm in TM cases.  Now: a mess.  9^th Circuit: no longer receive presumption of irreparable harm, and generalized statements about losing control of TM/reputational harm won’t be enough. Need specific facts.  Middle: 11^th: prevailing P don’t get categorical entitlement, but dcts may presume irreparable harm where cases bear substantial prallels to previous cases such that a presumption of irrep harm is appropriate exercise of discretion, per Roberts concurrence.  5^th Cir. cites eBay but applies presumption in a laches case.  DCts are also completely over the map.  Many/most give lip service to no presumptions, but then find irreparable harm b/c P will lose control of TM; many cite eBay and then apply a presumption.  Platters cases: 9^th Cir. reverses grant of PI; M.D. Fla. grants PI a year later, saying it can apply presumption if it wants to and offering general statements about reputational harm.

 

Theory: damages to business reputation are inherently irreparable, therefore extending eBay doesn’t make sense.  Evidence showing likely confusion then shows irreparable harm.  Rierson: presumption for traditional TM actions might be justifiable, but post-sale confusion and the like should show harm.

 

What about property/liability rules literature? Most focuses on ©/patent.  Most pre-eBay economic analysis assumed infringement finding meant the D would stop. Exception: Epstein, after eBay, concludes TM are more like property than patent/© based on indefinite duration and thus more suited to property rule treatment.

 

All the circuits are right. How could that be? The Lanham Act is a conflicted statute lacking a single coherent purpose. Sec. 33 tells us registration is prima facie evidence of exclusive right to use mark in connection w/goods. Sec. 34: courts can grant injunctions on the principles of equity. Ex ante and ex post.  Almost identical to Patent Act language, BTW. 

 

More problematic than patent: Likely confusion is element of TM claim; patent infringement doesn’t have a harm element—might be true that likely confusion doesn’t = harm, but there’s at least a potential as there is not in patent.  It’s very hard to get $ in a TM case; usually you want the injunction. Damages require actual confusion; accounting of profits requires deception/bad faith.

 

Can legislative history solve the problem? Overarching tension b/t those who want registration to be truly substantive, federal right to exclusive national use, and those who want the state-based substantive common law model; federal registration is merely procedural. Drafts show pendulum swing. Early drafts show pendulum from substance/entitlement to injunction; later drafts paper over the conflict as a result of concerns from people who thought the federal law was going too far federally.

 

Complete lack of clarity on expected remedy for prevailing Ps, except in counterfeiting and holdover licensee cases. Jarring feedback loop: we made it hard to get money because of the ease of obtaining an injunction; but the eBay test explicitly looks to availability of monetary relief in whether injunctive relief is available.  Maybe no true difference w/out presumption in most courts.  Maybe a creep in of materiality requirement by the back door of remedy.

 

Thoughtful reevaluation is required of what it means to own a registered TM. If you really have an exclusive right, maybe a presumptive remedy. If not, don’t call it an exclusive right and explain better what it is.

 

Next up: more empirical work.

 

Sheff: Functional approach to distinction: bundle of rights approach. TM, unlike patent or ©, P must use IP to be entitled to the right. eBay is arguably about concerns over NPEs depriving public of access to the work/invention, and in TM you don’t have that concern. That would suggest that eBay’s motivation lacks bearing on TM law.  Treating eBay as inappropriate for TM, either formally or through the back door, is just recognizing that.

 

A: maybe the courts aren’t thinking about the differences.

 

Rosenblatt: There is a TM troll problem; it just looks different from patent and © trolling—expressive, ornamental, etc. uses that aren’t confusing. That may justify a similar rationale.

 

A: at least likely confusion filters that out a bit.

 

McGeveran: Civ pro perspective: preliminary injunction standard in general is messy, and there’s lots of complaining about lack of adequate remedy at law w/Q of irreparable harm. To what extent is what you’re observing just one manifestation of overall disorder in the state of injunctive relief decisionmaking? Relatedly, we have a general tradition of presuming reputational harm is irreparable, whether in defamation or in TM.  So, unless we put that to one side, it will be pretty easy for courts to plug in that long tradition.

 

A: Civ pro: part of what we’re seeing is eBay juggernaut disrupting injunctive relief across the board. Might be part of tidal wave. Courts want specific facts, not general statements about harm to reputation being irreparable.

 

[RT: arguments matter, though.  They told us it was statutory construction, and many courts are taking that seriously. Also, I think the arguments about how reputation is inherently irreparable are no longer as persuasive as they were.  (1) We have lots of ways to measure the economic value of reputation now. (2) I think the concept of reputation as dignity, priceless, has become less persuasive as commodification has become more pervasive. A judge 100 years ago would not think of a person’s “name” in the same way.]

 

Q: lack of consumer protection issue: how do you protect consumers from confusion w/out an injunction? Consumers can’t bring the injunction.  The remedy goes beyond the TM owner itself. [Though if we got damages right then many Ds would not infringe … ]

 

A: True, in every case the public interest seems like it would be served by stopping confusion. [Unless they don’t care?  That’s why materiality matters.]

 

Gibson: this is maybe why we keep going back to the substantive problems with TM’s breadth. If it’s a mess, rationalizing the remedies may not be possible.

 

David Welkowitz, Willfulness

 

Willfulness isn’t well defined in criminal or civil law.  Wants to examine meanings ascribed to it in TM and ask whether we should change/refine our understanding.  Comes in largely but not exclusively in the remedies area; counterfeiting. ACPA: presumption of willfulness from false contact info, seems to apply only to cybersquatting, though section applies by its terms to the whole remedies section, §35. Judges have also required willfulness in most circumstances to recover profits.  In inducement, line of cases deals with willful blindness.  Atty’s fees: willfulness is also a factor.  Bad faith: willful acts of copying will also influence the outcome of the liability test. 

 

Willful defiance of a child—not necessarily willful in TM.  Different views in SCt: FCRA case says generally willful means recklessness, but patent inducement cases say that willful blindness requires more than recklessness—some deliberate act on part of inducer that indicates knowledge of infringement.  Higher than recklessness.  Recklessness itself is difficult to define, and hard to distinguish from mere negligence. Another problem: how do we instruct juries?  Apple v. Samsung: TM and patent claims; did a careful definition of willfulness for patent, but didn’t define willfulness in TM, just gave the jury the statute.

 

How can we enhance remedies based on a word that is so inconsistent in meaning?  How do you prove it? In default judgments, courts use the fact of default as evidence of willfulness.

 

Tentative conclusion: if we use willfulness, we need to be very careful about remedy creep. When recklessness is distinguishable from willfulness, we are giving enhanced remedies in non-extraordinary cases and acting as if they are extraordinary.

 

McGeveran: should this even be a jury question?

 

A: that’s a legal q in many cases, especially if you just give them the statute, but after Hana Financial he expects SCt to say yes.

 

Ramsey: very troublesome when courts think knowledge is enough. What should be done?

 

A: not confident of Congress’s ability to do this because of legislative capture. Congress would draw the line too low, accepting recklessness w/out defining it.  Really nice if courts/SCt would say that the conflict needed to be resolved.  Not confident they’d do the same as in patent, but it might help.  If I ran the world, it would be like the patent standard: you have to intend to infringe.  Similarity alone wouldn’t be enough.