Court finds misleading omissions can deprive ISP of 230 protection

General Steel Domestic Sales, LLC v. Chumley, No. 14-cv-01932, 2015 WL 4911585 (D. Colo. Aug. 18, 2015)

 

General Steel sued Chumley and Atlantic Building, of which he was CEO, for false advertising, libel, and intentional interference with prospective business advantage (plus civil conspiracy).  It alleged that defendants used the internet to harm General Steel and get business by running ads in response to searches for the words “General Steel,” “General Steel Buildings,” “steel buildings,” and “metal buildings.” Many of these ads allegedly contain derogatory information about General Steel and contain links to a portion of the Armstrong Steel Corporation website which does the same.

 

There were twenty statements on the Armstrong Steel website at issue.  One part of the website was called “Industry Related Legal Matters” (IRLM), created by Chumley; it had 37 posts, 20 of which were alleged to be unlawful.  Each post contains a “read more” button that links to third-party website; each post also contains an excerpt from the document which can be seen in full when the “Read More” button is pushed.  For example, one post’s heading was “Class Action Complaint - Heinbaugh et al v. General Steel Domestic Sales, LLC.” Its first paragraph was a quotation from courthousenews.com describing a class action lawsuit filed against General Steel, with the words “U.S. District Court of Colorado” added before the quotation, which read: “General Steel Corp. and its CEO Jeffrey Knight ‘infamous’ telemarketers of steel-buildings, systematically defrauded their customers, in defiance of court orders, by, among other things, taking nonrefundable deposits and then refusing to deliver buildings for the price advertised, a class-action complaint claims in Federal Court.”

 

Other posts included “Attorney General Madrid Warns New Mexico Churches About Colorado Metal Building Company” and “General Steel Domestic Sales, LLC v. Chumley,” the latter of which described the claims and counterclaims in a 2010 case, but didn’t mention the dismissal of certain counterclaims.  Another post, “Rock Limo Service v. General Steel Domestic Sales,” included quotations from a court case describing a contract and ending with this sentence: “Petitioners demanded return of their deposit, but General Steel refused to pay it.” The “Read More” link led to the full text, affirming an arbitrator’s award finding that General Steel properly retained the deposit because Rock Limo breached the relevant contract.  The IRLM Page contains a general disclaimer: “These external hyperlinks represent allegations made by parties (which may or may not ultimately be adopted by a judge/jury) and findings of fact and law by judges/arbitrators. Some of the cases mentioned here may be ongoing, dismissed, settled and/or may not be final.”

 

As for defendants’ search ads, they included:

 

Don’t Send Them A Deposit - ArmstrongSteelBuildings.com Ad www.armstrongsteelbuildings.com/

Until You’ve Seen These Lawsuits. Read This Before It’s Too Late!

 

Before You Send a Deposit - Do Your Research First Ad www.armstrongsteelbuildings.com/ (855) 882-6555 Read This Before It’s Too Late!

View Gallery - Virtual Building - Design It Online - 1.800.345.4610

 

Steel Building *Lawsuits* - ArmstrongSteelBuildings.com www.armstrongsteelbuildings.com/ +1 800-345-4610 4.8 rating for armstrongsteelbuildings.com

Rock Limo Lost $125,383 in Deposits *Beware* Research Before You Buy! Court Rulings · Lawsuits · Buyer Beware · Complaints

 

‘General Told Her ‘We Will Keep You In Court Until We Break You’ ‘

Court Rulings · Lawsuits · Buyer Beware · Complaints

 

General Steel argued that defendants “collected old documents from long-resolved General Steel litigation and wholly created a website conveying facts that are false as to General Steel’s current operations. In addition, the title of the IRLM Page, “Industry Related Legal Matters,” was allegedly misleading because it appeared to be an objective site disclosing industry lawsuits, but actually is a page targeting General Steel. 

 

Defendants argued that the CDA gave them immunity.  General Steel responded that they wholly or partially developed the information at issue, and thus didn’t qualify.  To be responsible, a service provider must “in some way specifically encourage[] development of what is offensive about the content,” which is to say what is unlawful or legally actionable.  (Interpreting the Accusearch case, which some worried represented an expansion of ISP liability—as with Roommates, it may be that the case actually sets a limit that preserves most ISPs’ immunity.)  Merely inviting or encouraging third parties to post content isn’t development of that content.  Even ratifying or adopting third party content, including through the posting of commentary, isn’t development.  Nor is minor editing, as long as the changes don’t contribute to the false, misleading, or otherwise unlawful nature of the underlying information.

 

General Steel pointed out that the posts weren’t submitted by third parties, but rather created by Chumley.  However, “nothing in § 230 or the relevant case law limits § 230 immunity to information submitted directly to a website by a third party.”  Here, everything came from the internet, so cases finding that §230 didn’t cover publication of material submitted to an ISP that was not intended for public distribution were irrelevant.  Thus, the links received § 230 immunity, and so did the summaries, because the addition of “U.S. District Court” was inconsequential.  General Steel claimed that the excerpts highlighted inflammatory and disparaging parts of the documents.  (With respect to the arbitration, a false light-like theory of responsibility for development would make sense to me—it’s kind of like editing out the “not” in an otherwise nondefamatory statement.) 

 

At many points, the defendants created their own summaries of allegations made by others.  Defendants also didn’t post a court order finding them liable for willful false advertising targeting General Steel.  Still, General Steel didn’t claim that the links went to inaccurate versions of the documents, or that the page contained inaccurate quotations.  Ultimately, the court found that defendants developed some of the information:

 

To the extent the defendants chose certain summaries and quotations describing the referenced court proceedings, failed to accurately describe the proceedings as a whole, and posted those quotations and summaries on the IRLM Page, the defendants developed the information they posted on that page. These editorial choices can be seen as a choice to emphasize unflattering allegations made against General Steel without summarizing or quoting information which reflects the nature and outcome of the court proceeding described…. Highlighting the unflattering allegations without providing other relevant information reasonably can be seen as contributing to the allegedly defamatory or otherwise actionable nature of the underlying information. Such actions specifically encourage development of what is allegedly unlawful or legally actionable about the content and, thus, constitutes development of the information for the purpose of § 230 immunity.

 

However, certain summaries and quotations were “reasonably accurate” summaries of the underlying information developed by third parties, and thus covered by §230. “By organizing, quoting, and summarizing this information, the defendants did nothing to specifically encourage the development of what General Steel claims is unlawful or legally actionable about the underlying content.”  By contrast, other posts highlighted content that was allegedly unlawful/actionable.

 

The search ads also weren’t subject to §230 immunity, since the defendants created and developed their content.

 

General Steel argued that Lanham Act claims were exempt from §230 immunity because of §230’s IP exclusion.  The court ruled that General Steel’s claim was brought under §43(a)(1)(A), but then called it a “false advertising claim,” which it is—and thus mistakenly held that General Steel’s Lanham Act claims weren’t subject to §230: “Particularly given this [statutory placement of false advertising language in a trademark law], a false advertising claim under § 1125 implicates trademark law, an ilk of intellectual property law.”  Sigh (though it’s not clear this matters to the outcome, since the court seemed to focus its analysis on the content it found defendants to have created).

 

For similar reasons, the court found the fair report privilege applicable to some of the posts, not others.

 

Truth: defendants argued that “Rock Limo Lost $125,383 in Deposits” was true.  But this created a material issue of fact about whether the statement clearly implied that the loss resulted from wrongful behavior by General Steel.  The court found that disputed issues of material fact about the ads precluded summary judgment on the grounds of truth for the Lanham Act/tortious interference claims.

 

Defendants argued that General Steel failed to present evidence of customer confusion.  Given General Steel’s theory of intentional deception, no extrinsic evidence of confusion would be required.  Likewise, General Steel’s experts provided sufficient evidence of the loss of one or more contracts to take the tortious interference claim to trial.

Copyright infringement is channeled into (c), not state or Lanham Act claims

Quadratec, Inc. v. Turn 5, Inc., 2015 WL 4876314, No. 13–6384 (E.D. Pa. Aug. 13, 2015)

 

The parties compete to sell removable soft tops and other aftermarket parts and accessories for Jeep vehicles. Quadratec alleged that it invests substantial resources in the advertising of its products by “creating tens of thousands of unique photographs” and writing descriptions of the photographs, which “differentiate it from all of its competitors in the automotive market.” Except for Turn 5, which allegedly engaged in extensive copying of its images and descriptions (including a Quadratec photo with a superimposed Turn 5 logo on it), despite Quadratec’s demands that it stop.  (Why no 1202 CMI claim?  Although it seems unlikely to have concealed copyright infringement, so quite probably futile, though that doesn't distinguish it from various other claims asserted.)  Further, Quadratec alleged that Turn 5 falsely advertised its Baricade Soft Top products by falsely claiming that they exceeded original equipment manufacturer standards and are made from Black diamond sailcloth material (though this allegation isn’t addressed in this ruling).  Quadratec registered its images and sued.

 

Copyright infringement: though the complaint alleged that images other than those specifically identified might have been infringed, it also provided sufficient notice about particular registered images, and Quadratec wouldn’t be allowed to base claims on unidentified images. However, statutory damages/attorneys’ fees claims were dismissed because in all cases the infringements began before the registrations; allegations that Take 5 began infringing new parts of the registered work post-registration were insufficient because statutory damages go on a work by work basis.

 

§43(a)(1)(A): Dastar barred this claim. There was no misrepresentation of the origin of the goods for sale.  Quadratec argued that it was claiming false designation of the origin of the services at issue, here providing catalog services. That is, Take 5’s use of the product presentations was likely to confuse Quadratec’s customers into believing that “identical product presentations in both Plaintiff’s and Defendant’s catalogs” means that the “catalog sources are the same or otherwise affiliated.”

 

But Dastar precludes this argument.  Neither party is in the business of selling catalog services, only aftermarket Jeep products.  There could be no confusion as to the origin of those goods.  The Lanham Act doesn’t create a cause of action for plagiarism of marketing.

 

§43(a)(1)(B): Again, this failed because there was no alleged misrepresentation about the products for sale, rather than about the source of the marketing materials used to sell them.

 

Misappropriation: preempted by the Copyright Act.  The alleged deceit involved was not an extra element because it occurred only by way of reverse passing off, which meant that there was nothing fundamentally different from a copyright infringement claim.

 

Unjust enrichment: Ditto.  Quadratec alleged that Take 5 received benefits beyond the mere intrinsic value of the Quadratec materials, because it diverted profits and goodwill from Quadratec and saved money on advertising that it could use to lower its prices in competition with Quadratec.  The alleged financial benefit in the form of reduced overhead didn’t make the unjust enrichment claim qualitatively different than the copyright infringement claim.

Connecticut taxi companies' claims against Uber fail

Greenwich Taxi, Inc. v. Uber Technologies, Inc., 2015 WL 4774989, No. 14cv733 (D. Conn. Aug. 13, 2015

 

Plaintiffs sued Uber for violating the Lanham Act, the Connecticut Unfair Trade Practices Act (CUTPA), and RICO, as well as for intentional interference with contractual relationships. The court dismissed the amended complaint with leave to amend.

 

Plaintiffs alleged that Uber began taxicab and/or livery operations in Connecticut without complying with state laws and regulations.  Uber allegedly partners with plaintiffs’ drivers, each of “who[m] make[s] an illegal side deal with Uber to take its customers while simultaneously working a normal shift with his or her authorized company.”  Uber allegedly “misrepresents to customers its compliance with Connecticut laws and regulations, misrepresents its insurance coverage, misrepresents the safety of its drivers, misrepresents its affiliation with lawfully operating taxicab and livery companies, and misrepresents its fares.”

 

False advertising: the court noted that the pleading standard applicable is Rule 8, not Rule 9(b).  See John P. Villano Inc. v. CBS, Inc., 176 F.R.D. 130, 131 (S.D.N.Y.1997) (“No matter how parsed, a claim of false advertising under the Lanham Act ... is not identical to a claim of fraud. Fraud requires, not just the making of a statement known to be false, but also, inter alia, a specific intent to harm the victim and defraud him of his money or property.... By contrast, no fraudulent intent ... is required under 15 U.S.C. § 1125.”).

 

Under Dial A Car, Inc. v. Transp., Inc., 82 F.3d 484 (D.C.Cir.1996), violations of Connecticut transportation laws and regulations aren’t actionable as false advertising; given that it wasn’t clear whether state transportation laws applied to Uber, Uber’s representations that it complied with the law couldn’t be false or misleading.

 

As for other representations, they weren’t adequately pled to be false or misleading.  For example, the complaint didn’t sufficiently allege that Uber claimed to be a “ridesharing” service. Plaintiffs alleged that Uber falsely claimed to have “partner” drivers, but they didn’t plead what it meant to be a “partner” and what would make that claim false or misleading.  They further alleged that Uber does not regularly recheck insurance, but they didn’t allege that Uber represented to customers that it does so. Likewise, they pleaded that it is nearly impossible to collect on Uber’s liability insurance and that the Connecticut Insurance Department issued a consumer alert stating that Uber’s drivers may not be covered by their personal automobile insurance. But they didn’t plead that Uber represented to customers that Uber’s drivers are covered by their commercial or personal insurance.  Further, allegations that Uber’s user agreement allows it to use “surge” pricing when demand becomes “high” or “intense” and that “[t]he mechanism for determining [‘surge’ pricing] appears arbitrary and unpredictable, made solely at the discretion of [Uber]” didn’t support an inference that Uber made a representation to customers that its pricing was simple.

 

False association under §43(a): Plaintiffs failed to allege that they had recognizable trademarks on the cars driven by Uber “partners.”

 

RICO claims: dismissed.

 

CUTPA: Plaintiffs’ unfairness claims required some sort of violation of public policy, but it hadn’t yet been established that Uber’s services violated Connecticut law, and plaintiffs didn’t sufficiently allege anticompetitive, immoral, or otherwise unfair conduct.

 

Tortious interference with contractual relationships: This requires wrongful conduct such as

fraud, misrepresentation, intimidation or molestation.  Plaintiffs didn’t plead that Uber’s interference with the contractual relationships between the plaintiffs and their taxicab and livery drivers and between the plaintiffs and credit card processing companies was tortious. Wooing the drivers wasn’t inherently wrongful.

 

No winner in Cablevision v. Verizon

Cablevision Systems Corp. v. Verizon New York Inc., --- F.Supp.3d ----, 2015 WL 4758072, No. 15–CV–456 (E.D.N.Y. Aug. 7, 2015) (magistrate judge)

 

Cablevision and Verizon sought to enjoin each other’s comparative ads; the court denied both cross-motions for preliminary injunction. 

 

Verizon’s top three tiers, 150/150 upload/download Mbps, 300/300 Mbps, and 500/500 Mbps, all provide faster download speeds than Cablevision’s fastest plan, and all five FiOS plans offer faster upload speeds than any of Cablevision’s offerings, though a very small proportion of Verizon customers subscribe to the top three speed plans.  The customer’s router constrains wireless internet speed, like the nozzle on the end of a garden hose.  Verizon offers, at additional cost, the FiOS Quantum Gateway router, which can support “throughput” speeds up to the fastest FiOS tier (500/500Mbps). Thus, it advertises that FiOS provides the “fastest WiFi available from any provider.”

 

Initially, it predicated its claim on a 2014 router study that tested the FiOS router against another of other competing devices, but “notably” not Cablevision’s router.  In a second study, Verizon’s router outperformed Cablevision, “though in certain instances by a narrow margin.”  However, comparative router speed, standing alone, had little meaning.  After the second study, Verizon continued to advertise “Fastest WiFi,” but based the claim on “Verizon’s combination of the FiOS 500/500 Mbps Internet service tier with the FiOS Quantum Gateway router.”

 

FiOS did offer a faster connection once the router was connected, especially with its more expensive plans.  Cablevision contended that WiFi speed, technically speaking, “is the speed of that communication from a router to a device such as a laptop or tablet.” But internet connection “is a common, if not preeminent, WiFi application,” and may be used as a shortcut not only refer to the WiFi itself but also to a wired connection to the internet accessed via WiFi.  Verizon rejoined that consumers understand the term primarily in the context of a wireless connection to the internet, with evidence that included Cablevision’s own FAQ.

 

The judge found that, regardless of the technical definition, consumers commonly understand WiFi to mean a wireless connection to the internet. “[C]onsumers paying for WiFi are likely to be more concerned with the speed provided by their Internet Service Provider, which permits them to download music, movies, games and the like, rather than the theoretical capability of the supplied router under laboratory conditions.”  Thus, there was no likely success on the merits at this stage. 

 

Cablevision argued that Verizon’s earlier use of a router study to support its claims meant that Verizon had picked its definition of router speed and couldn’t change that definition in subsequent ads.  But the court saw these ads as distinct from the older ads, and Verizon had discontiuned the ads with an “erroneous” definition of speed, making relief as to them moot.

 

Meanwhile, Cablevision promoted that it offers subscribers access to a network of “1.1 million hotspots.” What this meant was 65,000 outdoor public routers, about 100,000 routers located in small and medium businesses, and roughly 1 million routers located in the homes of its residential customers. Each “smart” router installed by Cablevision includes a second channel—a “dual SSID”—which provides a public access point for all Cablevision customers, unless it’s disabled. These routers provide WiFi service at distances of 135’ or more.

Verizon argued that these hotspots weren’t truly public, because they came from private homes, and numerous ads suggested that they were in public places.  Cablevision’s website contained a claim that it maintained hotspots at “1 million public locations like train stations, restaurants, cafes and parks,” which would clearly be misleading.  Cablevision agreed to discontinue making this claim, absent a change of circumstances, “which change would presumably involve the construction of 900,000 or so hotspots in public locations.”

 

Cablevision also claimed to offer a “better data network” than Verizon, and stated that Verizon “two-times” it customers by charging for cellular data usage from customers that have already paid for WiFi access at home. It was undisputed that, when connected to WiFi, mobile devices can access data faster than when connected via cellular towers. But it was also beyond dispute that Verizon’s cellular towers provided far broader geographic coverage than Cablevision’s WiFi network. And Verizon did impose separate data charges on its customers, under certain circumstances, for data obtained via cellular towers.

 

In addition, Cablevision recently launched the Freewheel, an all-WiFi communication device. Freewheel is a Motorola Moto–G model smartphone configured to function only using WiFi connections rather than traditional cellular telephone towers. This is a relatively low-cost mobile device that can, where WiFi is available, make and receive phone calls, text and surf the Internet.  Verizon argued that references to the device as a “phone” and comparisons to cellphones and smartphones were misleading. Internal Cablevision marketing research—focus group studies of preliminary Freewheel ads—suggested that certain viewers could be confused about the nature of the device and the extent of the “coverage” of the Cablevision WiFi network.

 

The court turned to images to show the “gestalt” of the ads, which characterized Freewheel “as something new and different from a cellular phone.”

 

Cablevision argued that Verizon delayed too long to get a preliminary injunction.  The judge agreed that Verizon’s “inordinate” delay of more than six months as to all the non-Freewheel ads weighed “heavily” against a finding of irreparable harm.

 

1.1 million hotspots: Verizon argued literal falsity based on Cablevision’s failure to disclose that 87% of the hotspots emanate from residential locations.  But the ability to use the WiFi at distances of 135′ or more meant that “signals from residential routers can be accessed from the street or sidewalk,” which are public places.  Thus the judge found neither express nor implicit falsity.

 

“Better data network”: “better” did not necessarily mean geographic coverage.  A WiFi-connected consumer would get faster downloads than she’d get from a cell tower.  The multiplicity of meanings made “better” puffery.

 

Freewheel: Verizon argued that, to the extent that Cablevision called the Freewheel a “phone” or “smartphone,” those statements were literally false.  However, the Freewheel actually was a “Motorola Moto–G model smartphone.” The fact that it was configured only to work on WiFi didn’t change its “essence” as a telephone, just as “phone” can mean cell phones, “historical” (ouch!) landline telephones or cordless handsets. So there was no literal falsity.

 

The main argument was that consumers would think they were getting cellular phone service from the Freewheel.  This was an implied falsehood claim, though, and Verizon didn’t have evidence of deception.  (Claims that Freewheel was “better than cellular” were mere puffery.)  The Cablevision focus groups weren’t enough, even though the company conducting the work for Cablevision warned that “[c]omparisons to cellular in messaging exposed during the groups helped create the perception that Freewheel service (including talk/text) will be ubiquitous given respondents’ near universal coverage experience with cell service for talk/text/data[.]”  While focus group information isn’t always reliable, especially when it favors the party who conducted it, the judge didn’t need to decide here because the ads shown to the focus groups were preliminary drafts, to which substantial changes were made. 

 

Those changes included specific qualifications of the text to make clear that “it’s a WiFi phone” rather than a “cell phone,” and a checklist indicating people for whom the phone might be appropriate.  Thus, the focus groups didn’t show that the ads actually run were deceptive.

Reading list: Kate Crawford and Tarleton Gillespie

Rebecca Tushnet, What is a Theorist For? The Recruitment of Users into Online Governance, JOTWELL (August 14, 2015) (reviewing Kate Crawford & Tarleton Gillespie, What is a flag for? Social media reporting tools and the vocabulary of complaint, New Media & Society (2014), available at SSRN)

Pure mourning: Pom fails to get preliminary injunction again

Pom Wonderful LLC v.  Pur Beverages LLC, No. 13-cv-06917 (C.D. Cal. Aug. 6, 2015) 

 

Pom fares no better its second time around. Although the court of appeals previously found likely confusion between its marks and defendant’s “pūr pŏm” energy drink (which allegedly contains no pomegranate juice at all) and remanded for a re-analysis of the remaining preliminary injunction factors, Pom was unable to show irreparable harm distinct from its showing on likely confusion. 

 

The harm at issue must not merely be irreparable; it must also be imminent. “Speculative injury does not constitute irreparable injury sufficient to warrant granting a preliminary injunction.” Thus, unsupported and conclusory statements about harm are insufficient. Herb Reed.  A finding of reputational harm “may not be based on ‘pronouncements [that] are grounded in platitudes rather than evidence.’”

 

Pom argued three varieties of irreparable harm: (1) the POM mark would lose distinctiveness and potentially become generic; (2) it would lose its return on its investment in its mark; and (3) its reputation and goodwill would be harmed.

 

As for loss of distinctiveness, Pom offered the declaration of Fernando Torres, the Chief Economist at IPmetrics LLC, an intellectual property consulting firm.  Torres stated that the problem with free riders like Pur is that infringement “will eventually destroy the value of the reputational investment embodied in the trademark.” He opined that, because Pom Wonderful has cultivated a distinctive brand using the POM mark, “allowing a third party to make a confusing use of ‘pom’ under the guise of a generic abbreviation for the ingredient pomegranate would help push the valuable POM trademarks toward generic use.” Such a “loss of distinctiveness” couldn’t be quantified in terms of lost sales or lost profits.  The court was unimpressed.  “Although Torres cites economic theory to supports his opinions, the opinions are not tied to actual evidence, and constitute little more than assertions grounded in ‘platitudes rather than evidence’” (quoting Herb Reed).  His conclusions “would apply in any trademark infringement case where the plaintiff owns a distinctive trademark.” A risk isn’t a likelihood of irreparable harm.

 

There was no evidence that the “distinctiveness” or perceived value of Pom’s mark would likely be affected negatively by Hubbard’s use of “pūr pŏm,” including no evidence that consumers’ association of the POM mark with Pom Wonderful had weakened since pūr pŏm entered the market or that other companies had attempted to market pomegranate beverages under “pom” in the more than two years since Pur began doing done so. “Such evidence might make irreparable harm likely, as opposed to just merely possible.” But Torres merely assumed that others would, in the future, begin using the POM mark on their products after observing Hubbard do so. That was mere speculation on this record.  Plus, Torres said it takes time for genericide to occur, and didn’t opine that this period could run during the pendency of the trial.  Ultimately, the court found, his opinions were “little more than speculative statements regarding the type of harm that can arise in any trademark infringement case.”  His evidence was non-specific to Pom Wonderful “and equally applicable to any trademark infringement case. Consequently, it is not sufficient to show a likelihood of irreparable harm.”

 

Pom quoted defendant Hubbard’s statement to the press in response to the question, “Would you consider changing your drink’s name, and why or why not?”

 

I will prove that pom means pomegranate.  When I do, it will make their standard word trademark of ‘POM,’ that is currently incontestable, invalid. They will lose their registration of the mark under the theory of genericness. Although it may be true that when they initially got the standard word mark of ‘POM’ it had no meaning at the time. They, and numerous other makers of pomegranate flavored products, have widely used the term pom to describe pomegranate flavoring. Just like I do with my product.  The term has now become generic, and thus, not deserving of Federal Trademark Registration. . . . Mark my words: I will be the company that makes Pom Wonderful lose their trademark ‘POM.’ I will then allow the consumer packaged goods industry to use the properly used, and widely known term ‘pom’ to describe its pomegranate flavored products, without the threat of a bully company suing every person or company that utters those three letters in sequence.

 

Pom argued that this was an admission that “part of his reason for using ‘pŏm,’ as part of his energy drink’s name, is to pave the way for others to use POM as a flavor descriptor, turning this incontestable mark into a non-protectable generic word.”  But the court found that these statements weren’t about this case, but rather about ongoing cancellation proceedings before the TTAB, wherein Pur argued that Pom abandoned its word mark by using “P♥M” rather than “POM.” Risks connected to the cancellation petition weren’t connected to the purported infringement, and didn’t adequately demonstrate likely irreparable harm from that infringement.

 

Plus, even attributing this statement to the current infringement, that didn’t show irreparable harm, just because it might become generic “over time” if third parties begin to use it in a descriptive and/or generic sense.  Pom actively polices its trademark and this hypothesized use has yet to begin.  Again, this was merely speculative.

 

Loss of return on investment by preventing Pom from fully exploiting its reputation: Pom argued that Pur’s use “limit[s] Pom’s ability to control the reputation of its recognized brand and the perception of Pom’s premium quality products.” This was again speculative and not supported by evidence. Torres claimed that post-infringement, the value the trademark lost due to the infringing activity is never recouped, but the testimony offered wasn’t specific to Pom.  Since it would be true in every infringement case, this claim couldn’t be “squared with the rule that a plaintiff must adduce evidence of likely irreparable harm to obtain an injunction.”

 

Harm to reputation and goodwill: Pom argued that (1) the infringement damaged its ability to communicate a consistent brand message; (2) Pom’s reputation as a seller of healthy beverages conflicted directly with consumers’ perception of energy drinks; and (3) Pom lacked control over the quality of Pur’s products.

 

As for the brand message claim, Pom argued that it focused on communicating that it uses only 100% pure pomegranate juice in its products. Pom has expended substantial resources marketing products that contain only 100% pomegranate juice and litigating against companies that market their products as “pomegranate juice” when the products are predominantly cheaper “filler juices.” Because Pur’s product contained no pomegranate juice, any association between Pom and Pur would harm Pom’s brand. Likewise, while Pom “prides itself [on] advertising that is sophisticated, smart and witty,” Pur’s ads are often “low-brow and tasteless.”  But there was no evidence of harm to Pom’s goodwill.  Though Pur had been selling its products for more than two years, there was no evidence Pom’s customers were aware of Pur’s product or that they had a negative reaction to it or to Pur’s advertising.  It was certainly “possible” that Pom’s reputation and/or goodwill could be damaged by having less control over its brand messaging, but it didn’t show that such harm was likely.

 

There is a distinction between a likelihood of irreparable harm and a showing of actual harm.  But one way to show likely irreparable harm is to show actual confusion or harm right now.  Post-Herb Reed cases have therefore, when granting injunctive relief, often relied on “some evidence of actual confusion or actual harm,” including confusion surveys.  (NB: Confusion is not harm; harm is harm.  Also, a survey doesn’t necessarily show actual confusion of plaintiff’s customers, unless the parties compete directly, so it doesn’t inherently show the damage that the court said it was looking for.)  Among other cases, the court cited OTR Wheel Engineering, Inc. v. West Worldwide Services, Inc., 602 Fed. Appx. 669 (9th Cir. Mar. 18, 2015), which affirmed a preliminary injunction and found that there was some evidence of irreparable harm where the infringing product was sold to the plaintiff’s major customer, which led to a dispute between the plaintiff and its customer—“a nonquantifiable injury to the goodwill it had created with its customer.”  In Life Alert Emergency Response, Inc. v. LifeWatch, Inc., 601 Fed. Appx. 469 (9th Cir. Feb. 4, 2015), there was a declaration “reporting numerous and persistent complaints from would-be customers who received robo-calls for what they believed were Life Alert products,” as well as emails and social media posts substantiating the threat to Life Alert’s reputation and goodwill.

 

Negative association with energy drinks: Pom noted that energy drinks have been associated with 224 adverse event reports to the FDA between Jan. 2012-Nov. 2014.  But that didn’t go far enough to show that Pur was a disreputable product, or that Pom’s customers associated Pur’s product with Pom or saw energy drinks as disreputable. Again, absent evidence about Pom’s consumers, this was merely conclusory and speculative.

 

The court distinguished and disagreed with E&J Gallo Winery v. Grenade Beverage, LLC, No. 1:13-cv-00770- AWI-SAB, 2014 WL 4073241, *1 (E.D. Cal. Aug. 15, 2014), report and recommendation adopted, 2014 WL 5489076, *1 (E.D. Cal. Sept. 8, 2014), which had accepted a similar theory of harm involving Gallo wine v. EL GALLO for energy drinks.  Gallo said it didn’t want to be associated with energy drinks because it believed that mixing alcohol and energy drinks promoted irresponsible behavior.  The court reasoned: “While Plaintiff may not have introduced admissible evidence to support the proposition that energy drinks are associated with irresponsible drinking or that an association with energy drinks would be harmful to Plaintiff’s reputation, it is enough that Plaintiff has introduced evidence of loss of control over their own business reputation.”

 

Not only is this case on appeal, it’s directly at odds with Titaness Light Shop, in which the 9^th Circuit rejected a plaintiff’s speculative theory that its customers wouldn’t want to be associated with defendant’s product, which was sold on “a website that supposedly catered to marijuana growers.” “[A]ssertions by a representative of the plaintiff that its goodwill and reputation would be harmed if consumers associated its product with an item that did not fit the plaintiff’s brand image” were not sufficient. The Ninth Circuit in Titaness observed that the plaintiff did not show that its “customers [were] aware of the website, [that they] would associate the products on the site with    marijuana, or [that they] would stop purchasing Sunlight products if they mistakenly believed that Sunlight was marketing to marijuana growers.”  

 

Basically, the Ninth Circuit ruled that “it was not sufficient for a movant to assert that it had developed a particular brand image and that any association with a product inconsistent with that image would harm its reputation.”  But that’s what Gallo accepted and what Pom asked the court to accept here.  More fundamentally, Gallo essentially presumed irreparable harm without evidence other than its likely success on the merits.  “If a conclusory assertion that a third party has used the plaintiff’s mark in a way that is ‘directly contrary to [plaintiff’s] philosophy,’ or that plaintiff does ‘not want to associate itself or its [ ] trademark’ with the third party or its business were sufficient to satisfy a plaintiff’s burden, it is likely that irreparable harm would be found in any case where plaintiff was able to demonstrate a likelihood of success on the merits.”

 

Evidence that customers have a negative perception of energy drinks in general or of pūr pŏm in particular would probably have sufficed to show irreparable harm, but that wasn’t present.  “It would be reasonable to infer likely harm to a plaintiff’s reputation or goodwill if it could demonstrate that the consuming public has a negative perception of defendant’s product, a product that is sold under a confusingly similar mark.”  (Note the structural similarity here with showing materiality in false advertising—courts generally don’t require successful plaintiffs to show that the false claim is material to the exact same people who receive the false message, according to the plaintiff’s survey; showing that it is the kind of claim that is material in the relevant context suffices.  At long last, and at the remedy stage, irreparable harm is being used to reintroduce a materiality standard to trademark.)

 

Lack of control over the quality of Pur’s products: Pom argued that it was at risk if even “a single incident of poor quality control or a single consumer getting ill from drinking pūr pŏm” was reported. Again, this would be true in every trademark infringement case. There was no evidence that pūr pŏm had caused illness, or facts allowing a reasonable inference that this would occur in the future.

 

Pom argued that the danger to it was great because Pur’s principal was Hubbard, “a litigious and shifty business owner with a checkered past.” Pom proffered evidence that Hubbard has been charged with theft, criminal trespass, assault, and attempting to elude the police, and that he had routinely been “vengeful” in previous litigation to which he has been a party.  As Pom noted, Hubbard had filed a cancellation petition.  But Hubbard explained that he did so based on research indicating that Pom Wonderful has never used POM as a trademark without the “o” in the shape of a heart. Thus, he asserts, Pom was improperly granted a trademark and/or that it abandoned the word mark by not using “POM” in commerce. The court would not impute bad faith to Hubbard based on the fact that he exercised his legal right to file such a petition; plus, that’s unrelated to irreparable harm from continued infringement.

 

Pur said that all its remaining inventory was pūr pŏm as opposed to other products; Pom argued that this made clear that Pur was relying on confusion to stay in business.  That might be true, or maybe he hadn’t been successful in selling pūr pŏm, which would cut against finding irreparable harm.

11th Circuit recognizes contributory false advertising theory

Duty Free Americas, Inc. v. Estee Lauder Companies, Inc., --- F.3d ---- (2015), 2015 WL 4709573, No. 14–11853 (11th Cir. Aug. 7, 2015)

 

Plaintiff DFA operates duty free stores in many international airports nationwide.  It sued Estée Lauder, arguing that Estée Lauder’s refusal to do business with DFA, and its communication of that fact to airport authorities evaluating whether to offer rental space to DFA, violated federal and state law, alleging attempted monopolization in violation of § 2 of the Sherman Act; contributory false advertising, in violation of § 43(a) of the Lanham Act; and tortious interference with a prospective business relationship, in violation of Florida law. The court of appeals affirmed the dismissal of these claims.

 

DFA is one of about ten major operators of duty free stores in the US, with leases in 13 international airports in eleven cities. “It competes with other duty free operators for the limited rental space available in U.S. airports servicing international flights.” Leases generally last from 5-10 years.  Interested duty free operators bid for space, explaining what they’d carry and how much they’d pay.  There’s a minimum annual guarantee plus a percentage of sales revenue. Beauty products are a substantial component of duty free stores’ products, and Estée Lauder is the “largest manufacturer of beauty products sold in duty-free stores in U.S. airports.” In 2010, Estée Lauder’s market share of cosmetics sold in duty free stores was approximately 45.71%, while its market share for skin care products was over 50%.  Newcomers to the duty free beauty products market are apparently rare.

 

DFA bought Estée Lauder beauty products to sell in its duty free stores until June 2008, during which time Estée Lauder set two different prices for each product—a suggested domestic retail price and a lower suggested travel retail price.  Duty free operators could buy at wholesale travel prices that were lower than wholesale domestic prices, set by discounting the suggested travel retail prices—for most of the time, the suggested travel retail price for beauty products offered customers a 10% discount off of the suggested domestic retail price.  Estée Lauder required operators to carry the full line of products within a particular brand and carry the company’s less-popular fragrances if they wanted to sell cosmetics. “Estée Lauder also mandated that operators reserve display space of a certain size and quality for its products and that they keep excess inventory in stock, and routinely threatened to cut off all product supply when duty free operators resisted these conditions.”

 

Then Estée Lauder announced plans to eliminate the differences between its suggested domestic retail prices and suggested travel retail prices, which would increase the prices DFA paid for Estée Lauder products and eliminate the discount that DFA’s customers gained by shopping at duty free stores. As a result, DFA ended its business dealings with Estée Lauder; DFA sought to revive the relationship, but Estée Lauder refused.  This caused DFA trouble in subsequent bidding for retail space at four international airports.

 

For example, when Newark’s Liberty International Airport issued a request for proposals, Estée Lauder’s President of Travel Retailing Worldwide sent a letter to the leasing agent responsible for administering Newark’s bidding. The letter included a list of duty free operators that sold Estée Lauder products—the three other bidders, but not DFA.  It said: “We are confident that each of these authorized retailers brings the expected quality of in-store execution and required operational excellence necessary to represent our brands and service your valued passengers.” DFA lost the bid; it ranked second to last, with the explanation being “Duty Free Americas does not have the rights to sell Est[é]e Lauder brands.”  Other bidders, in other bids, emphasized their ability to sell Estée Lauder.

 

The Sherman Act claims failed, of course.

 

On the false advertising claim, DFA alleged that Estée Lauder was subject to contributory liability for DFA’s competitors’ false advertising.  Estée Lauder argued that the Lanham Act doesn’t recognize contributory liability for false advertising, but the court of appeals disagreed.

 

In trademark, contributory liability is well-recognized, and for the same reasons, contributory false advertising should be as well.  §43(a), after all, contains both trademark and false advertising provisions, sharing the same introductory clause.  That suggests that “the two causes of action should be interpreted to have the same scope,” especially since they have the unitary purpose of protecting commercial actors against unfair competition.  “It would be odd indeed for us to narrow the scope of the false advertising provision—a cause of action plainly intended to encompass a broader spectrum of protection—and hold that it could be enforced only against a smaller class of defendants.”

In order to state a claim for contributory false advertising claim, “[f]irst, the plaintiff must show that a third party in fact directly engaged in false advertising that injured the plaintiff. Second, the plaintiff must allege that the defendant contributed to that conduct either by knowingly inducing or causing the conduct, or by materially participating in it.”  This participation requires that “the defendant actively and materially furthered the unlawful conduct—either by inducing it, causing it, or in some other way working to bring it about.”  Participation could include direct control or monitoring of a third party’s false advertising.  “It is also conceivable that there could be circumstances under which the provision of a necessary product or service, without which the false advertising would not be possible, could support a theory of contributory liability.”

 

In order to adequately plead contributory false advertising, the court asked whether the complaint suggests a plausible inference of knowing or intentional participation, examining “the nature and extent of the communication” between the third party and the defendant regarding the false advertising; “whether or not the [defendant] explicitly or implicitly encouraged” the false advertising; whether the false advertising “is serious and widespread,” making it more likely that the defendant “kn[ew] about and condone[d] the acts”; and whether the defendant engaged in “bad faith refusal to exercise a clear contractual power to halt” the false advertising.

 

The complaint identified five allegedly false claims.  One duty free bidder said: “Given that Estée Lauder brands account for 20% of cosmetic and fragrance sales, at least in Orlando, and cosmetic and fragrance sales constitute one of the largest sources of revenue for duty free stores, a lack of access to Estée Lauder brands would cast doubt on the validity of DFA’s projected revenue streams.” Two other statements were to the same effect, and a fourth was that “DFA sales project[ions] are deemed to be unreasonable and not sustainable in light of the history.” Finally, one bidder said that “DFA may have made misrepresentations about its ability to carry Estée Lauder brands.”

 

However, the complaint didn’t adequately allege that Estée Lauder contributed to any of the statements.  Alleging that Estée Lauder had knowledge of the false claims but continued to supply the duty free operators was not enough: mere sale of Estée Lauder products was no basis for holding Estée Lauder liable “for any disparaging statements its customers make in the course of their own separate business relations.” Estée Lauder sales were “too unrelated to the making of the allegedly false or misleading statements to form a basis for liability—under either an inducement or participation theory.”  And no facts in the complaint suggested the existence of coordinated action or encouragement, or inducement, between Estée Lauder and the operators on the decision to make the disputed claims to airport authorities. There was no allegation that Estée Lauder monitored, controlled, or participated in duty free operators’ bids, either here or in general.

 

Finally, DFA tortious interference claim failed, for similar reasons.  DFA didn’t allege that Estée Lauder ever expressed its opinions about DFA to airport officials.  The letter vouching for the quality of other duty free operators could not be read to implicitly disparage the quality of all other unmentioned entities in the same industry. Adequately alleged inducement of misrepresentations might qualify as tortious interference under Florida law, but see above.

Noncommercial speaker can't get fees for successfully defending Lanham Act claim

Tobinick v. Novella, 2015 WL 4698549,  NO. 9:14–CV–80781  (S.D. Fla. Aug. 6, 2015)

 

The defendant Society for Science–Based Medicine, Inc., which won dismissal of Lanham Act claims against it, moved for attorneys’ fees, and the court denied the motion.  The court had previously ruled that the allegedly false/defamatory statements attributed to the Society weren’t commercial speech.  The court applied the standard allowing fee awards in “exceptional” cases to require “malicious, fraudulent, deliberate, or willful” behavior. 

 

The Society argued that Tobinick pursued the Lanham Act claims knowing them to be frivolous, given the requirement of commercial speech.  The articles at issue, challenging the were published on the Science-Based Medicine blog, whose relationship with the Society was not entirely clear.  But the court found that this case had been serious enough to require six months between filing and dismissal, and had required oral argument.  Indeed, the court converted the motion to dismiss into a motion for summary judgment and considered dozens of exhibits.  The issue of whether the speech was commercial required a “lengthy and detailed” ruling, and the court’s ruling was the first substantive ruling on the Lanham Act claim; before that, plaintiffs didn’t have reason to know they’d lose.

Be very afraid: another court refuses to find irreparable harm despite confusion

Williams v. Green Valley RV, Inc., 2015 WL 4694075, No. 8:15–CV–01010 (C.D. Cal. Aug. 6, 2015)

 

Basically, in the Ninth Circuit, you might not be able to get a preliminary injunction in a trademark case unless the defendant's quality is bad enough to generate complaints to you.

 

Williams does business as RVMAX, selling used recreational vehicles (RVs) in Loomis, California. In 2008, Williams registered RVMAX as a service mark for his business.  Defendants do business as RV MAX in Colton, California, selling RVs.  (465.5 miles apart, according to Google—one is relatively close to San Francisco and the other to Los Angeles.)  Williams sued for service mark infringement and false advertising under state and federal law, along with cybersquatting.

 

Irreparable harm is required for a preliminary injunction; evidence of such harm could come from  “[e]vidence of loss of control over business reputation and damage to goodwill.” Herb Reed Enters., LLC v. Fla. Entm’t Mgmt., Inc., 735 F.3d 1239, 1250 (9th Cir. 2013). But evidence that “simply underscores customer confusion” is not enough; to accept that would simply collapse likely success with irreparable harm. A moving party cannot merely produce evidence of “unsupported and conclusory statements regarding harm [plaintiff] might suffer.”

 

Williams, unsurprisingly, presented evidence of consumer confusion such as “calls from customers, vendors, and debtors seeking to reach Defendants’ dealerships.”  He argued that this confusion inherently risked harm to his goodwill.  No (fuzzy) dice.  “Plaintiff’s evidence of irreparable harm is nothing more than a regurgitation of consumer confusion evidence, which is the exact type of evidence explicitly rejected by the Ninth Circuit in Herb Reed.”  The claim that his goodwill could be harmed by a bad experience with defendants was “pure speculation.”  His confusion evidence was “highly relevant” to likely success on the merits, but “wholly insufficient” for irreparable harm.

 

Although the issue on likely success was “quite simple” here, the court could not reach the merits because Williams failed to show irreparable harm.

 

Reading list: measuring sponsorship materiality

Reading list: Matthew B. Kugler, Measuring Sponsorship Materiality.  Abstract:

 

The problem of sponsorship confusion is one of the most vexing in trademark law. Mark owners often claim that the use of their marks in movies or on merchandise will lead consumers to believe that their companies have approved these other products. They claim that they therefore must be able to control these uses, lest consumers be misled. Many scholars believe that mark owners have been too ambitious in these claims, chilling valuable speech and unnecessarily preventing competition. In an effort to rein in overzealous trademark owners, several scholars have proposed adding a materiality requirement to the sponsorship confusion analysis. They want to require mark owners to show not only that consumers assume a particular product is sponsored by the mark holder, but also that this assumption materially affects consumer behavior. This paper presents an empirical survey that uses a variety of sponsorship materiality measures to determine how such a materiality requirement would affect the shape of trademark law in the merchandising context. The data show that requiring materiality would alter the treatment of several classes of products, but would not have nearly as broad an effect as many would have expected. The implications of these findings for other proposed limiting doctrines are discussed.

overclaiming study results to apply to unstudied product can be false/misleading

In re Riddell Concussion Reduction Litig., No. 13–7585, 2015 WL 4640425 (D.N.J. Aug. 3, 2015)

 

The plaintiffs sued Riddell for marketing football helmets based on allegedly false or misleading claims that the helmets were equipped with unique concussion reduction technology, and that the helmets could reduce concussions by as much as 31%. Plaintiffs alleged that they paid a $50 price premium for Riddell’s helmets even though those helmets offer no greater protection against concussions than other helmets.

 

The court previously granted a motion to dismiss; here it sustained in part the amended complaint, based on statements that Riddell made about helments that weren’t included in the study on which it based its claims.  Starting in 2002, the University of Pittsburgh Medical Center (UPMC) compared concussion rates among high school athletes who wore the Riddell Revolution helmet with those who wore “traditional helmets.” The study, published in a peer-reviewed neurology journal, found that the Revolution helmet reduced concussions by 31% as compared to traditional helmets.  Plaintiffs offered numerous reasons why the UPMC was fundamentally flawed and unreliable, including conflicts of interest: Riddell provided a grant to pay the salaries of the two primary authors of the study, while a third author was a Riddell employee. Moreover, plaintiffs alleged that the traditional helmets were not new, but refurbished; that the participants were not randomly assigned helmets; that the authors disregarded 15% of the collected data without sufficient explanation and manipulated other data to reach a pre-determined conclusion; and that initial data failed to show a statistically significant difference between the helmets. Plaintiffs found corroboration in the criticisms of several peer reviewers. UPMC allegedly instructed Riddell “that this data should not be use[d] as a marketing ploy or marketing tactic from a scientific paper that was not for those purposes” and that Riddell shouldn’t use the study to say that the Revolution helmet provides better protection, but Riddell ignored this admonition. UPMC allegedly said that Riddell should refer to a 2.3% reduction in absolute risk, as opposed to a 31% reduction in relative risk.  Further, plaintiffs alleged that other studies showed, and the majority of independent experts agreed, that Riddell’s claims were false or misleading.

 

Plaintiffs also discussed an FTC investigation, which concluded that Riddell lacked substantiation for its claims, because the UPMC study didn’t prove a 31% reduction in concussion risk, and didn’t test youth helmets.  The FTC emphasized that the helmets weren’t randomly distributed, and that the average age of the kids who got concussions was different in the test and control groups.  The FTC ultimately declined to recommend enforcement action because Riddell had abandoned its 31% reduction claim and a Virginia Tech study appeared to show that “Revolution varsity helmets perform much better than Riddell’s ‘traditional’ VSR–4 helmet in reducing concussion risks attributable to linear acceleration, one of the primary forces to which helmets are subject.”

 

Some of Riddell’s adds explicitly referred to a 31% reduction in concussions, such as “Research shows a 31% reductions in concussions in players wearing Riddell Revolution Helmets.” Riddell allegedly made the same 31% reduction claims when advertising other helmets in the Revolution “family.”

 

The court noted that another opinion refusing to dismiss similar claims against Riddell is now vacated because of the terrible, terrible opinion in In re GNC.  Midwestern Midget Football Club Inc. v. Riddell, Inc., Civ. 15–00244, 2015 WL 3797107 (S.D.W. Va. June 18, 2015) (West Virginia Consumer Credit and Protection Act).  But, the court noted, In re GNC purports to be about the Lanham Act (even though it was evaluating state consumer protection law), and thus the court didn’t consider it binding in this state consumer protection case.

 

Although there was some variation in the marketing statements plaintiffs identified, they fell into three categories: (1) 31% reduction in concussions; (2) claims about “concussion reduction technology;” and 3) statements about youth helmets.  Plaintiffs sufficiently identified the statements at issue, and adequately pled causation, reliance, and injury.  Alleging the exact or approximate price they paid, plus the existence of a $50 price premium, sufficed; plaintiffs didn’t need to plead the exact price of every helmet they could have purchased but did not.

 

But were the claims plausibly false or misleading?  No, for the 31% reduction claims.  Plaintiffs didn’t allege that Riddell mischaracterized the UPMC study’s findings, but rather challenged the quality of the study itself.  “[I]dentifying flaws in a scientific study does not necessarily make marketing statements based on such a study false or misleading…. [P]ublication of the study’s results in a respected, peer-reviewed journal provides some evidence that the study is in fact reliable.”  Plaintiffs didn’t identify any scientific study that showed the 31% reduction claim to be false or misleading with respect to Riddell helmets specifically. The same was true of some of the “concussion reduction technology” claims: plaintiffs didn’t plead that different Riddell helmets contained different design features than those in the helmet tested in the UPMC study.

 

However, more general references to “concussion reduction technology” that protected young players better than other helmets were plausibly false and misleading, because of plainiffs’ allegations that there were no material differences between Riddell helmets and other football helmets available to consumers.  A University of Wisconsin study, which concluded that no brand of football helmet was comparatively better at reducing the incidence of concussions, lent plausibility to these allegations. “[T]he phrase ‘concussion reduction technology’ necessarily implies the ability to reduce concussions.”

 

Moreover, claims made for youth helmets that weren’t the UPMC-tested Revolution helmet were also plausibly misleading or deceptive, since the UPMC study didn’t include any youth helmets.

 

Finally, the court dismissed any omission-based claims.  Plaintiffs alleged that Riddell knew its helmets couldn’t reduce concussions.  But they didn’t identify a discrete omission that Riddell failed to disclose, and most of the ads included a reference to the article discussing the UPMC study, so “it is questionable whether the supposed flaws in the UPMC study were actually concealed.”

 

In the end, various New Jersey, Florida, Arizona, Illinois, and California claims survived.

7th Amendment provides jury right for TM profits as proxy for damages

Black & Decker Corp. v. Positec USA Inc., --- F.Supp.3d ----, 2015 WL 4656749, No. 11–cv–5426 (N.D. Ill. Aug. 5, 2015

 

The parties compete to sell power tools.  B&D alleged that Positec infringed their patents and trademarks in the yellow-and-black color combination appearing on B&D products and packaging. The court denied Positec’s motion to strike B&D’s jury demand as to its trademark-related claims for Positec’s profits.

 

There’s a right to jury trial where the Seventh Amendment or a statute requires.  The court found that the language of §1117, which provides that a court “shall assess such profits and damages or cause the same to be assessed under its direction,” “at least suggests the possibility of a jury determination in the first instance, even if a court may adjust the jury award as it ‘shall find to be just.’”

 

But other cases indicate that there’s no jury right.  Dairy Queen, Inc. v. Wood, 369 U.S. 469 (1962), held that the trademark plaintiffs had a Seventh Amendment jury right as to their demand for an accounting of the defendant’s profits, reasoning that the complaint’s request for an accounting was “wholly legal in its nature.” Because of the doctrine of constitutional avoidance, the use of constitutional grounds suggested that the Court believed that the statute didn’t create a jury trial right, and lower courts have followed that suggestion.

 

History wasn’t much guide either, because “[t]he history of trademark actions and remedies lies in the murky overlap of law and equity.” The court turned to precedent and functional considerations.  An accounting is a “typical” kind of equitable relief; in the trademark context, it may be awarded to serve the goals of preventing unjust enrichment, furthering deterrence, and providing compensation.  As for compensation, profit awards may function as a proxy for damages because of the difficulty of proving those damages.

 

Courts have split over whether there’s a Seventh Amendment jury right in these circumstances.  One line of cases interprets Dairy Queen to find a right to jury trial regardless of the theory behind the plaintiff’s claim for profits.  A second evaluates the theory of profits and finds a jury trial right where profits are a proxy for damages, but not where profits are designed to prevent unjust enrichment. A third line of cases characterizes disgorgement as equitable, distinguishing Dairy Queen on the ground that it also involved contract damages.

 

The weight of authority supported the first or second view over the third. To the extent that the law was ambiguous, courts resolve doubts in favor of finding a jury right.

 

Here, B&D had at least some evidence that would support an award of profits as a proxy for damages: evidence that the parties sold their products in the same retail stores to the same customers, and its survey, which showed respondents a photograph of the products side-by-side in a store. The survey asked respondents if they believed that the products were produced by the same company, and 47% of respondents said yes.  (If this is an accurate description of the survey, it sounds leading in the extreme.)  If believed, surveys can support a finding of actual confusion, which then supports a theory of profits as a proxy for damages.

IPSC: closing comments

Closing Plenary Session

 

Joshua Sarnoff, DePaul University College of Law: Size affects nature of presentation, time, allotted, depth of development, audience participation.  Makes a personal promise to read papers in sessions he plans to go to—thinks that this will improve the quality of the interactions.  [I do this every year, but not all the papers are available.  I think that people should commit to reading at least some number of the papers at panels they go to, because that improves the discussion a lot.]  More encouragement of collaboration.

 

Money: funding scholarship, especially empirical scholarship is an issue, as is detaching main universities from viewing law school as a cash cow. 

 

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

How to enrich your scholarship through IPSC.  Consider teaching with a nonlawyer expert if there’s a topic that you might want to write on with them.  Working with people with different expertise from you is a good idea; we are too often discouraged from co-authorship and that becomes a habit even post-tenure. You can learn new methods, enrich your own intellectual life. IPSC can serve as a network for finding the right people.

 

Consider your larger audience: figure out who reads what and write for the right audience.  She routinely writes for the Communications of the ACM, with 100,000 members around the world.  Important because it helps computing professionals community to become much more active in IP debates—they write letters, speeches, testify to Congress—activating a group is important too. If you want to create a group that doesn’t yet exist, create it—she created a nonprofit last year, Authors Alliance.  But you can’t find out whether you can make a difference in solving problems unless you give it a try. 

 

Lisa Larrimore Ouellette, Stanford Law School

 

Collegiality/welcoming is a big benefit of coming here.

 

Brett Frischmann, Benjamin N. Cardozo School of Law

 

Collective research agenda: what are the substantive areas of IP scholarship that are most promising/untapped.  Are we going for too much low-hanging fruit/branches that are picked clean? Would have to be pluralist agenda.  Methodological approach depends on our objective.  Though we should be pluralist in our audiences, we should have priorities in who we want to communicate w/: public, policymakers, lawyers.  There are consistent market and other pressures that can drive us in an undesirable direction if we’re not conscious about it. 

 

Have we emphasized quantity over quality? Driven towards more publications/year, but sometimes less is more.  Slow thinking.  Counterargument: Twitter etc. are forms of commentary that are more useful than traditional law reviews.  But let’s think about the appropriate answers as a community!

 

We too often reinvent the wheel without credit to prior authors. Not just a failure of citation, but failure to engage with the earlier work.  Reading lists, canons, boot camps?  Limitations of every approach.  But at least reflect the value of core training in the literature—we could do this better consciously and collectively. 

 

Could add a day at IPSC dedicated to mentorship for VAPs and junior profs by senior profs. We have prepublication peer review at conferences like this, and postpublication peer review at blogs, Jotwell, etc. This is a service to the community, but we could do it in a more coherent way. We could use other peer review systems.  Engagement w/other disciplines = valuable feedback.

 

Burk: didn’t want paper published on open internet.  Could we do a restricted site?  Would get more papers.  [Dropbox is a good option for this.]

 

Carroll: push harder on presenters to have clear thesis statement—richer conversation about thesis, audience, question tried to answer w/thesis.

 

Barrett: what about peer review/picking papers for IPSC?

 

Samuelson: Tried it; was incredibly unpopular. Important norm: people who are very junior feel like they’ll lose out. If they can’t present, they can’t justify coming to the conference.  Too winner take all. 

 

Barrett: unblinded does that, but blinding helps fellows/junior people.

 

Lemley: Disagrees, b/c there’s no such thing as blind peer review in a community of 200 people.  Peer reviewed journals are very political; they are not timely—3 ½ year waits.  Not sure they’re necessary in a community that has peer review at places like IPSC.  But veto power over paper is less important.

 

Samuelson: I learned that there were some papers I wanted to write that I wasn’t yet ready to write. If I’d tried to do an abstract/presentation for them, I might have learned I wasn’t ready yet.  Good idea for junior/midlevel scholars: keep a list of things you’d like to write and do things that build but go sideways from that, so you can come back.  Issues I’m interested in circle around, and my thinking matures over time. 

 

Q: have someone present the paper for you.

 

Frischmann: Tried it.  60% liked, 40% hated it.  [Why not have it be opt-in?  Guarantee someone reacts to your paper.]

 

Buccafusco: likes experimentation.

 

Q: suggest people you’d like to present with?  Opt-in discussion-only version—zero summary of the paper and the expectation is that the presenter will have a draft and the commenters will have read it.  [I like it.]

 

Kathy Strandberg: Emphasizing the idea that you should read the papers for the track you pick.  More time for people who submit a paper. [Yes!]

 

Ramsey: Not a lot of papers, good to see what people are working on.  But also good to have indepth commentary—have both kinds of conferences. But many people need to speak to get funding. Maybe commenting would be enough for people who need funding.

 

Q: Streaming and other ways to have commentary would accommodate people who can’t attend for one reason or another.