WIPIP Session 2: Trademark 1

Trademark 1

 

Paul Heald, Testing Theories of Tarnishment in Trademark and Copyright Law

 

Tarnishment should be treated like false advertising: you should have to prove some (likely) damage to your TM to win, rather than presumptions.  Tarnishment is a psychological/cognitive theory. Appears similarly in © literature, mostly in policy analysis—Landes & Posner—if we had an X-rated Mickey Mouse movie, the Mouse would be destroyed.  (As opposed to the super racist versions.)  Theory: owners “shepherd” their marks/works better.  Theory is that sexual association is particularly bad.  ATM: Cookie Jar—strip club named Cookie Jar opens up across the street; Restatement thinks this is clearest case for tarnishment, such that no evidence is needed for relief.

 

Studies: lots of empirical work in marketing literature on sex; increased memory for ads with sex, but decreased memory for brand. Lots of gender effects.  Strong evidence of congruence: sex in ads works better when product has something to do with sex—perfume, jeans, hotel rooms v. iron skillets.

 

Experiment: show “tarnishing” version of well known work.  Showing people two movies—poster and short description—and ask which movie will be most successful at the box office.  Titanic v. Good Will Hunting.  Subjects do this for 20 filler movie pairs and 10 target pairs. Porn examples, e.g., Bitanic, You’ve Got Shemale.  See if treatment group exposed to these versions ranked the originals any lower.  Theory’s prediction: Bitanic would diminish preference for Titanic.  Instead, there was a positive effect; overall no statistically significant diminishment for any, and 5 of them showed statistically significant enhancement.  No significant differences between women and men; a little, not statistically significant difference b/t conservative and liberals.  Libertines do show a big difference; Mechanical Turk has very few puritans.  So we tried to find a good distribution of really conservative and really liberal people, and test sequels—damage to branding.  For sequels, there was no overall enhancement effect or negative effect; some went down a little and some went up.  And again, no difference between gender. For most conservative viewers: statistically significant negative effect—for them, the presumption that sex causes tarnishment might apply. 

 

Implications: no evidence of tarnishment overall; would we want to protect one corner of the population?  Research calls evidentiary presumptions into question; rationales for copyright term extension; parody/satire distinction in fair use cases; market harm calculation in fair use cases.  We have previously shown tarnishment in other ways: significant positive correlation between quality of audiobook recording and perceived value of underlying book, but no correlation between reader status or legal status and value.

 

Mark McKenna: are things getting mashed together in using movie posters? Could there be something importantly different in creative works v. brands attached to goods. One plausible explanation for the audiobooks is that people think that the proprietor of the book is responsible for the recording.  Why choose to use movie posters rather than more conventional brands?

 

A: we did want to get at both, and the TM and © literature both describes the same claimed harm and the same claimed mechanisms, so we wanted to see if it would work.

 

Lunney: Why do TM owners sue over tarnishment then?  Every business has puritanical consumers, so maybe they’re concerned about those consumers.

 

A: Third grade, intuitive mentality: this is mine and you have no right to do this.  True, we may want to protect a narrow proportion if the harm caused is significant, but we need to balance that with the harm caused by absence of ability to tarnish.  Mickey Mouse porn: might benefit a slice of the population even as it harms another slice.

 

Jessica Kiser, Market Responsiveness to Trademark Litigation

 

1997 article by Bhagat and Umesh in the Journal of Market Focused Management: sample of approx. 60 cases mentioned in WSJ.  Focused on econometrics—stock prices when sued, and when resolved.  Findings: TMs are valuable; litigation is expensive; no broader context.  She decided to redo this to see if there was a reason for TM overenforcement—do investors like your filing TM suits?  If there was a negative effect, which traditionally comes from commercial litigation in other contexts—both parties’ stock prices go down—it shows irrational overenforcement. Began w/Ken Port’s Mitchell Study on TM Litigation—2972 cases; adding stock prices to it; pulling out cases w/o a publicly traded party.  Open questions about how else to thin the herd.  Event study methodology: see what stock prices do in relation to notice of litigation.  Helps you figure out if the brand, not just the TM, is harmed by the litigation.

 

Define the event and notice period; measure stock return during that period; estimate baseline w/out event; compute abnormal return; measure statistical/economic significance. 

 

Previous studies: 1995 study shows significant effect of major endorsement deals; 2011 study showed that announcements about health of Steve Jobs affected Apple stock prices.

 

How do you figure out what’s public?  Previous study used WSJ/NYT coverage, but maybe that’s not the right measure now.  Maybe we should look at Westlaw/LEXIS.  Pre-and post-internet divide?  When is the test window?  Any effect of anticipation from C&D letters? Large company v. small company; established v. newer company.

 

Q: Other related litigation studies: Alan Mathios & Mark Plummer, The Regulation of Advertising by the FTC: Capital Market Effects, 12 RES. L. & ECON. 77 (1989); Sam Peltzman, The Effects of FTC Advertising Regulation, 24 J.L & ECON. 403, 419 (1981).

 

Q: when does the fact that the alleged infringement is occuring become known? That might be another relevant event. 

 

Q: Type of product? Some industries may not care.  Some of the most aggressive litigants, like Louis Vuitton, are nonpublic.

 

Signe Naeve, User Generated Crafts in the Sports Industry

 

All the stuff people make as fans: knitted scarves, etc.  Fan fiction/fair use in copyright is different in trademark where people make and often sell stuff.  Working thesis: Met with counsel for sports teams; came in from fan perspective wanting to argue for some permissive uses.  Now thinks this is different from fan fiction; inherent tensions w/in TM law that lead TM owners to police brands.  User-generated crafts raise unique issues b/c, while TM owners can turn a blind eye to personal use, they may need to take action to protect reputation.  TM owners could sponsor contests, partner w/fans, license them.  Risk of losing the right creates need to police.

Difference b/t kinds of sports—Mariners said “this is our TM, and we’re afraid of tarnishment.”  Sounders: “there’s a fan culture of supporters that’s different—we look for opportunities to partner w/fans.”  Sounders have “posters by the people” contests.  Implied or direct licenses are even possible.  Noncommercial fair use as a potential safety valve; only policing when there’s broad distribution or where it competes with an exclusive license; you could even donate older TM versions to public domain.

 

Q: Materiality?  Matthew Kugler’s Measuring Sponsorship Materiality.  Counsel may be strategically overstating risks of naked licensing: PTO decisions on Bucky Badger mascot, UNC—uncontrolled since 1792, but university was still able to claim TM rights.  If the risk of losing the right is real, then maybe the problem is the risk, not the fans.

 

Heald: Harvard’s TM counsel—not afraid of people’s perception of licensing.  Harvard says whether it licenses or not is proprietary information—it will not admit whether it licenses “Harvard Mercedes.”  Mariners may be overstating their fears.  (That Harvard practice could have really interesting consequences in litigation.)

 

Irene Calboli: There is a risk of naked licensing in the US, but the law is still very confusing. Natural for TM owners to err on side of caution.  If we had a system in which the registration conferred property rights, paradoxically, that could allow TM owners to pick and choose more like patent/© owners.  Struggle is extent to which fan use can cause a real issue of tarnishment/loss of control.  Real world has merchandising; we can make a difference in cabining that and telling owners you don’t need to enforce so aggressively.

 

Rebecca Tushnet, The First Amendment Walks into a Bar: Trademark Registration and Free Speech

 

I’m going to talk fast so you have maximum time to yell at me.  My paper analyzes the First Amendment arguments against §2(a)’s disparagement bar with reference to the consequences of any invalidation on the rest of the trademark statute.  Ultimately, given the differences—or lack thereof—between disparagement and other bars in the statute, I conclude that §2(a) is generally constitutional as a government determination about what speech it is willing to approve, if not endorse.  If the Supreme Court disagrees, it will face a difficult job distinguishing other aspects of trademark law.  And these difficulties signal a greater problem: the Court has lost touch with the reasons that some content-based distinctions might deserve special scrutiny. 

 

Arguments I’m playing with that haven’t yet made it into the paper: Consider this argument: disparagement + false connection taken together is viewpoint neutral ban on use of the identity of a person or group of which one is not a part: if it disparages, probably doesn’t cause a false connection; if it causes a false connection, probably doesn’t disparage, but together they make up one unified content-based but not viewpoint-based prohibition on taking advantage of another entity’s reputation in a mark [except that doesn’t explain Tam—but perhaps that’s not necessary if the overall scheme is content neutral].

 

Vagueness objection: the standard for disparagement is vague and hard to apply with predictability. This is perfectly true, as the cases discussed by the majority indicate—but it’s also a problem with the rest of the bars!  If vagueness is a constitutional flaw in disparagement, consider if any of the other bars—or even the “use as a mark” precedents requiring trademark use instead of ornamental use for registration—they are no less vague.

 

There are over a hundred thousand applications each year.  It would be actively astonishing if even the consistency available in obscenity cases were achievable in this flood.  In fact, the inherent inconsistency in a merits-based system is one reason why the Court has granted government flexibility in making content-based decisions: many systems of government grants couldn’t survive if held to strict First Amendment consistency in every case, and the costs of not having trademark registration are greater than the costs of not having lots of obscenity prosecutions.  This is what it means to have a regulatory state, and it’s another reason why, if the state is going to maintain a trademark system granting the benefits of registration after substantive examination, it needs some flexibility and tolerance inconsistent with traditional strict scrutiny.

 

Q: why isn’t disparagement viewpoint-based?  Very surprised if even before Tam RACISTS SUCK would get rejected, precisely because we distinguish b/t things disparaging to a discrete and insular minority and things not—lots of marks say bad things about people.  [Law treats only certain groups as if they can’t take care of themselves]; actual practice discriminates b/t use of racist terminology by members of racial minorities: dykes on bikes treats the content differently b/c of who the speaker is and that seems an indication.

 

RT: [relevance of individualized determinations—Dykes on Bikes had a different record about what the targeted group would think when they saw the mark.]  The bar itself doesn’t care what your viewpoint is; it rejects disparaging terms in context of their use.  Also, dispute the paternalism point: one way people take care of themselves is through the political process. Antidiscrimination laws generally are ways to prevent some people from harming others.

 

Sheff: nature of gov’t interest in different bars.  False consumer beliefs as to facts they encounter is different in salience than interest in preventing gov’t support of particular kinds of content  which is different in interest in free competition.  [treaty compliance in provisions on wines and spirits; if we can have multiple interests implemented in §2, preventing gov’t endorsement of disparagement is one of them]

 

Farley: if it were all about false association you wouldn’t need the other bars besides false association.  Very clear that viewpoint of speaker doesn’t matter, but the current test makes the viewpoint of the listener matter.

 

Q: but the other bars are about levels of generality.

 

RT: yes, as predictions that, say, use of a flag will be confusing in some relevant sense—but if we apply 1A scrutiny, those predictions seem highly vulnerable.  RE/MAX case makes that clear: (1) nobody knew the mark was the flag of the Netherlands, so couldn’t be confused; (2) though the registration was for the flag, in practice it always had the balloon in front of the flag, so nobody could be confused even if they would have recognized the flag.  The level of generality is unwarranted if we let strict or even intermediate scrutiny apply.

 

Q: where do consequences of registration fit into theory? If law prohibited these forms of speech outright, this would be unconstitutional.

 

Q: if SCt affirms Tam, does it have to strike down Gay Olympics?

RT: G-d willing.  Yes, when gov’t seeks to suppress speech instead of just not support it, I want gov’t to be held to higher standards of proof as to the harms it seeks to avoid.

 

Calboli: what is the minority group?  Asian-Americans?  Self-identified Asian-Americans?  Difficult to pinpoint potentially offended community.  Also exclusive registration prevents others from using the name: if Tam has a First Amendment right, why don’t other potential users of the SLANTS have First Amendment rights to commercial use?

 

RT: shift would have to be, as Sheff says, in nature of gov’t justification—Tam’s first appropriation of the term.

 

Lucas Osborn, presentation (didn’t catch title): TM outsider perspective: use in commerce required, but that doesn’t mean what it means in the dictionary; confusion is actionable, but not what you think confusion means—can include uncertainty among people looking creepily close at your stuff.

 

Effects of 3D printing: manufactured at home; TM owners will want to police CAD files because they can’t control what goes on at home as easily. Knockoffs will become easier and more diverse; creativity and personalization will increase.  Modifications, mashups (I love the connectors for multiple kids’ construction sets).  Normative shift: source of the goods no longer mean the manufacturer; the important source is the CAD file source.  CAD files can be literally duplicated, so no further quality protection rationale if the CAD file is the same (or if the person knows that it’s an unauthorized CAD file).  Left with property based theory of TM.

 

Pragmatically, TM owners want to police CAD files directly. Tech and procedural hurdles as w/DMCA.  Can protect CAD file with TM—IC 009: downloadable virtual goods, namely computer programs featuring [specify] for use in virtual worlds.

 

Some but not all TM owners will embrace 3D printing, maybe even allow you to personalize.  Will a CAD file directly infringe a physical good?  Related goods?  Dilution?  Indirect infringement/dilution based on web host—eBay v. Tiffany means that knowledge standard will apply; maybe we won’t need DMTA, but eBay requires at least some policing.  [Expect to hear about “notice and staydown” with these as well.]

 

Knockoffs and counterfeits will proliferate, magnifying existing concerns with post-sale confusion. Many more uses will proliferate for free: circulating the CAD file will be less likely to be paid-for.  3D printing can undercut the mobs/criminals funded by counterfeits.

 

Normative shifts with personal manufacturing: if I can take a picture of something and reproduce it, creativity and personalization will increase.

 

Lemley: post-sale confusion theories aren’t persuasive on their merits; used instead to get proxy for design rights.  We will probably decide that posting the CAD file is advertising for sale.

 

McKenna: creates a Dastar problem: do people care about the “source” of the file when what they want is the content?  Is a file a “good”?  (Could you even be confused about the source when you know where you got it?)

New article forthcoming on trademark registration

New article:  Registering Disagreement: Registration in Modern American Trademark Law, 130 Harvard L. Rev. (forthcoming 2016)

Abstract: Trademark scholars widely agree that our current system for evaluating what rights a trademark owner should have over others’ uses of their (or similar) marks is broken. Courts too readily find that too many acts are infringing even when they’re harmless or actually useful to consumers. Trademark practitioners, meanwhile, while often quite approving of broad interpretations of trademark law, widely recognize that our trademark registration system has significant practical problems. What we haven’t done is try to unite concerns over the expansion of trademark rights with concerns over the registration system and explain their relationship to each other. Registration offers some of the most challenging puzzles in trademark.

Consider: If the mark REDSKINS for a football team is disparaging and its trademark registration therefore invalid, can trademark law nonetheless protect the team against unauthorized uses of the term? This question became more than theoretical when a district court recently upheld the invalidation of the REDSKINS registrations, a ruling now on appeal and likely headed to the Supreme Court. Or suppose the PTO determines that, in the abstract, an applied-for trademark is likely to cause confusion with another previously registered mark. If the applicant decides to use the mark anyway, without a registration, should the PTO’s determination bind a federal court asked to determine whether the new mark, as actually used, causes confusion with that previously registered mark? The Supreme Court just decided this issue in a way that generated large-scale uncertainty about the new relationship between registration and infringement liability. These questions, and a number of others, highlight the need for renewed attention to trademark registration as such. Registration provides opportunities to limit trademark’s current structurelessness.

Specifically, registration works best in a system that doesn’t aim to search out and extirpate every possible instance of confusion, instead recognizing multiple reasons that we might avoid fact-intensive confusion inquiries and instead either ban or allow certain market behaviors. Moreover, maintaining the registration system requires substantial government and private resources, which are currently almost irrelevant at the enforcement stage. Applicants and the PTO spend much time and effort crafting the equivalent of an exquisitely detailed origami crane; rather than considering the details, courts then ask the equivalent of “is this paper folded?” and move on. Not only is this a waste of resources, but it leads courts to misunderstand the proper scope of a registration. There are a number of changes, ranging from small tweaks to sweeping statutory reforms and the rejection of the Supreme Court’s ahistorical conclusion that registration is a matter of factual accident rather than an important distinction between types of marks, that could improve the law to the benefit of trademark owners and non-owners alike.

WIPIP, plenary session 1

WIPIP, University of Washington School of Law

Plenary Session 1: Innovation Policy

 

Stephanie Bair, Promoting the Useful Arts: Corporate Edition

 

87% of patents are assigned to organizations, not individuals.  How to motivate individuals/employees?  Assumption is usually that companies will offer optimal incentives, such as financial bonuses.  But companies vary quite widely in incentive structures, both financial and more importantly nonfinancial.  Amazon: works employees past endurance.  Amazon thinks challenging employees is good for innovation.  Google: free massages, food; policy allowing employees to take extended leave w/benefits to work for nonprofit, travel, etc.  Google also thinks its approach is good for innovation.

 

Findings: workplaces that function like economic exchanges—bonus financially for innovation—don’t work very well. Social exchanges tend to motivate creativity more.  Social exchanges are less formal than economic exchanges, like friend/neighbor relationship.  Loose exchange of favors over time. Can be more efficient because of informality; reduces transaction costs. Built on trust, dignity, and respect.  Other factors good for creativity: autonomy, competence, feeling of relatedness among employees, variety of tasks, work/life balance.  Promoting sense of choice; avoiding undue control; giving credit for work; encouraging appropriate breaks/downtime.  Conclusion: Amazon has it wrong.  Controlling behaviors make employees feel less competent.  [Does Amazon get fewer patents relative to its non-warehouse employee cohort size than Google?  What other measures might we use?]

 

How to get companies to do what’s best?  The case for private ordering.  Evidence shows that creativity incentives support the bottom line, are related to employee satisfaction/productivity/loyalty; good press.  Should want to do it of their own accord.  (Unless employer class has taste for control/status inequality that overwhelms this, or is in a market with less need for ongoing large-scale innovation and just wants bodies.  Cf. Edward Baptist’s excellent and terrifying The Half Has Never Been Told—physical torture can also elicit innovation and efficiency from human bodies.)

 

What causes these incentives to fail?  Bounded rationality.  Info processing limitations; status quo bias; conformity bias.  Solution: company can use metrics.  Info asymmetrics: potential employees may not have as much info as they do at Apple.  Amazon announced new benefits after the bad press.  Social norms: managers should face constraints for behaving poorly.  Employment law: promote employee mobility.

 

Glynn Lunney, Copyright’s Excess

 

We know © exists to solve a problem of supply/demand and underproduction in the absence of legal protection; © tries to eliminate free riders to push paying demand = actual demand, making supply & demand intersect at optimal level.  Copyright’s excess is: when we push © up we do it uniformly, not just for marginal works we want to incentivize—transfer wealth from consumers to producers of works we would have gotten anyway, with less ©.  Traditional analysis: just redistribution, no welfare effects; maybe it’s in pockets of Congress, but that doesn’t matter. Plus, given uncertainty, might be incentive effects even for nonmarginal works.

 

But, traditional answer: higher prices mean higher deadweight losses and higher transaction costs to be balanced against marginal benefits. Deadweight loss will be half of what’s transferred to producers (in perfect model).

 

Real world application: demand curves are highly skewed.  One song streamed 60 million times during 2005-before.  4 million songs on Spotify have never been streamed by anyone.  5 million times for Goo Goo Dolls song.  To help one marginal song by $1 we have to give $12 to that song at the top.  Very little goes to the marginal songs overall.

 

Music has seen a radical transfer of wealth from consumers to copyright owners from the 1970s to 2000s—followed by sharp decline in sales.  What relationship between income and output in the music industry?  Music revenue is down from peak in 2000.  File sharing traffic is up—1000 petabytes a month, 1.25 billion albums a month if they were all albums; $75 billion in reduced deadweight loss.  Albums released in US from 1996-2012: 30,000 to 100,000, then recession took us to 80,000, well above the peak revenue year of 1999.  Billboard Hot 100: 5200 slots/year; number of unique songs: in 60s/70s it was about 750.  Falls steadily until 2002 when it’s 300 songs, then up to 500, then recession and 400.  Turnover isn’t exact proxy for high quality output—maybe we’re getting some super-high quality songs sticking around.  Did quality peak in 1999?  Rolling Stone thinks it peaks in 1970s (top albums ever), but Spotify might be less white-guy.  2014 play count: backside of Spotify distribution curve; median user is 28 and mostly younger; normalized, though, the play counts peak in 1983, when revenue was lowest, and 1997 is nadir in terms of what people still listen to today. So we didn’t see peaks in quality in 1999. 

 

Why might we be getting fewer high-quality songs?  New artists—peak revenue period in 1983-1999, there is a slight upward slope in the number of new artists.  25% of songs were by new artists, up to 40% at peak; filesharing kicks in and we go back to 15-20%.  Why not as many new songs?  Existing artists produce fewer hits when record sales are going up. 

 

Hypothesis: backwards bending labor supply curve. Overpaying superstars reduces their creative output.  Backstreet Boys & ‘Nsync were making $200 million/album.  They produced fewer albums.  Top 250 acts of all time, according to RIAA: early ones like Beatles produced average 14 albums in first 10 years of career (Beatles were 12 albums + EP); by the 1990s, that was down to 5.  Lost: Sergeant Pepper’s, the White Album, Abbey Road, Let it Be.  Adele’s delay between albums will predictably be greater too.  Top artist hit production from 1962-present: number of hits v. record sales over first 10 years of career—the artists with lots of hits tend to be grouped on low income portion of scale.

 

More revenue didn’t yield more and better works of authorship.  Higher revenue = more new artists, but fewer hits from existing artists; most of the new artists were one-hit wonders. Second effect (fewer hits) outweighed the first.  Maybe we need to balance incentives for marginal artists v. incentives for most popular, instead of incentives v. access.

 

Laura Pedraza-Fariña, Scaffolding Innovation: The Role of Patents, Grants, and Informal Norms in Assembling Teams that Span Technological Domains

 

Lumpy structure of architecture of knowledge distribution.  We’ve made vast improvements in the way we can cure cancer/prolong survival, particularly for childhood cancers, but the side effects include infertility; fewer advances in that area.  Why this disconnect?  Two communities involved in infertility/cancer research: oncologists, who are interested in understanding cell division; endocrinologists, who in part work on addressing infertility. Though when you ask cancer patients their main concerns, infertility is second only to fear of death, that research hasn’t happened.  These two communities are not talking to each other though they have key complementary knowledge to address secondary infertility from cancer treatment.

 

Accounts of innovation incentives often assume free flow of information; don’t look at barriers to assembly of teams even once free-riding and market-demand problems are eliminated.  Architecture of knowledge distribution/social barriers to flow of knowledge are often important.  NIH sought proposals for interdisciplinary research—problems that can only be solved by cooperation among disciplines; oncofertility is one example.

 

Interviewed key informants: barriers and benefits to such research; what is the effect of current patent and grants policy/what should we do to encourage it?  Requires someone in a position to unite two groups—an endocrinologist who fortuitiously ended up in charge of a cancer center.  Benefits of collaboration: problem finding.  Huge areas of unknowns—when the mouse ovary and monkey ovary people got together (hadn’t previously been talking), they realized that these ovaries behaved very differently and they needed to account for that instead of using mouse ovaries as human models.  New field of research: oncofertility. New products: gel matrix to grow follicles into eggs in vitro.  New social connections: ongoing collaborations between engineers, endocrinologists, oncologists, etc.  People w/40 years of experience described it as the best program they’d been involved with in their lives.  Intrinsically motivating to work in non-traditional teams.

 

Policy conclusion: create scaffolds.  Temporary bridges may be enough to bring together communities previously separated by structural holes, b/c intrinsic motivation may take care of the rest.  Patents are not the right tool for the job; the type of research creating nontraditional teams tends to be exploratory, low appropriability/high spillovers, long time to market—patents tend to distort incentives against these.  Grants aren’t currently structured to do this b/c NIH institutes weren’t coordinating, but could be.  Regulatory levers: FDA.  Collaborative R&D.

 

W. Nicholson Price II, Timo Minssen, & Arti Rai, Patent Failures on Life Science Frontiers

 

Poster child for patents seems to be developing new drugs.  Some literature says that’s not true across pharma/bioscience—antibiotics, orphan drugs, biosimilars, manufacturing, second uses for existing drugs, diagnostics—all these things are different.

Themes emerging from the literature: coordination—many of these policies cut across areas—FDA, PTO, Fed. Cir., Congress think of different things and don’t talk to each other.  Policy academics in these areas also often don’t talk to each other. Maybe industry trade groups are better at figuring out how to play off regulations/regulators.  Life sciences are different?  Maybe health is special: human flourishing, market failure, FDA as giant regulator sitting on top of everything, gatekeeping market entry.

Uber and out: court grants limited but still tricky injunction against Uber

Uber Promotions, Inc. v. Uber Technologies, Inc., No. 15-cv-206 (N.D. Fla. Feb. 16, 2016)

 

This is a hardcore test of how you feel about consumer protection as the sole legitimate aim of trademark law.  Uber Technologies (Tech) rolled into Gainesville, over the unheeded objections of local senior user Uber Promotions (Promotions), which among other things provides party buses or limos to take people to events.  Someone who Googles “Gainesville party bus” would find, on page two of the results, a listing for “Uber Promotions.” Generally, its services include  “promotional and event planning services, . . . graphic, web design and print media photography services, . . . modelling and talent agency services, . . . private venue rental services,” and “passenger transportation services, including through limousine and charter services.”  It used “UBER,” “ÜBER,” “UBER PROMOTIONS,” and “ÜBER PROMOTIONS” since at least 2006.  Tech registered UBERCAB in 2010, then registered UBER in 2011.  It expanded permanently into Florida in November 2013, starting with Jacksonville and reaching Gainesville in August 2014.  But Tech is an elephant, and Promotions a squirrel.  Shall the strong do as they will and the weak do as they must?

 

Promotions sent Tech a letter in April 2014 demand ing that Tech “discontinue the use of the terms ‘Uber Promotions’ in connection with [Tech’s] marketing and advertising campaigns . . . and undertake in writing that [Tech] will not at any time in the future use any of [the] Uber Promotions name in any future mark[et]ing or advertising campaigns, Twitter Accounts, or apply for registration of any trademarks/service mark that may be confus ingly similar to Uber Promotions.” Tech responded by (1) removing the term “Uber” from the title of a page on its website that had previously been titled “Uber Promotions” and (2) responding (through counsel) that it didn’t agree that there was a problem, but that to avoid trouble it removed the “Uber Promotions” reference.

 

Soon after the lawsuit was filed, Tech launched a new service called UberEVENTS, which allows customers to purchase rides for others that can be used at a particular time in the future, “a popular option for corporate events.”

 

Promotions sought to keep Tech out of Florida.  It didn’t get everything it wanted, but what it did get might pose some interesting technical challenges.

 

First, the court addressed the lurking eBay issue: the court was inclined to agree that no presumption of irreparable harm was appropriate now.  But history also indicated that the practice of presuming irreparable harm from likely success “was grounded upon the sound principle that the harm associated with trademark infringement is typically irreparable in nature. So while a court must, in each trademark in fringement case, make a finding of irreparable harm before an injunction may issue, that finding will often be made due to the na ture of the harm.”  Still, the court has considerable equitable discretion to tailor its relief.

 

Likely success: First, the court agreed with Tech that its use of UBER related back to the registration of UBERCAB in 2010—though this is a question of fact under Hana Bank, “this Court is confident that Tech would be able to convince a jury that UBER and UBERCAB would be ‘considered the same mark’ by a reasonable consumer,” so UBER was effectively registered in 2010.

 

The court then asked whether Promotions was entitled to a reasonable zone of future expansion; §33(b)’s freezing provision suggests otherwise, but the case law seems to recognize such a zone even when the junior user is a federal registrant.  The court also asked what Tech’s nationwide rights were for—its registrations cover “computer software for coordinating transportation services,” not the provision of actual transportation services themselves.  (It’s a platform!)  It wasn’t necessary to resolve these issues, because there was no evidence of a zone of expansion outside Gainesville.  Promotions’ infrequent trips out of town to various places weren’t enough to show use or likely expansion, except perhaps for Promotions’ bus service to Ocala Poker and Jai Alai in Reddick, Florida, which it might have been servicing regularly for many years.  Thus, Promotions was the senior user in Gainesville.

 

This is a reverse confusion case, meaning that “the largest class of people who might be confused are people familiar with Tech’s marks who then encounter Promotions’ marks.”  Promotions primarily serves and advertises to college-age people.

 

The court first looked at the UBER marks except for UberEVENTS, which it analyzed separately.

 

Strength: Tech argued that the term UBER was laudatory and descriptive.  There wasn’t much competitive need for the term UBER, though UBER PROMOTIONS was a closer call on being laudatory and thus descriptive.  Though “uber” isn’t extremely uncommon, it’s also “less frequently encountered—and thus less likely to be perceived by the relevant public as merely self-laudatory—than a term like ‘super’ or even ‘ultimate.’” Thus, Promotions’ mark was suggestive.  The mark wasn’t especially strong conceptually, so this factor slightly favored Tech.

 

Similarity: There are many ways to be familiar with Tech without using Tech’s services, given its wide recognition.  The court agreed that the differences between Tech’s app and Promotions’ logo, together with the fact that Promotions usually included “Promotions” in its name, made consumer confusion relatively unlikely on a full encounter.  But “the visual differences are much less significant for those consumers less familiar with Tech.”  Tech’s ads and promotional materials suggested that the most important feature of Tech’s mark was the word UBER, not any particular design element.  Indeed, Tech switched logos after the hearing in this case.  If anything, “[t]he fact of the change—and the fact that it was so well-publicized—might tend to increase reverse confusion by creating doubt among those familiar with Tech about what its ‘look’ really is.”  Regardless, visual similarity weighed slightly in favor of Promotions.  More importantly, “many consumers may have just heard of Tech or read a news story referencing it, in which case the visual differences are quite unimportant,” nor would the relatively common word “Promotions” help consumers distinguish the two.  Plus, Tech often uses “Uber Promotions” in connection with various promotional campaigns, which could easily create confusion.   

 

Similarity of services: Though both offered passenger transportation, the services differed in many important ways—Tech had “driver partners” using their own cars, while Promotions used more traditional vehicles such as charter buses, party buses, and limos. Tech focused on moving individuals or small groups, whereas Promotions focused more on group transportation. “These differences are not so great that they weigh heavily against confusion, particularly in light of Tech’s expanding roster of transportation options,” such as the UberXL service that provides SUVs and minivans, as well as UberPOOL, which allows customers traveling in similar directions to share a car and save money, though the latter wasn’t yet available in Gainesville.  People highly familiar with Tech would notice the absence of driver partners, but “those who only know that Tech has something to do with transportation or that it provides something like a taxi service could very well think that Promotions and Tech are affiliated based on Promotions’ services.”  (Also, Amazon just opened a physical bookstore—just because you start out without employees doesn’t mean you end that way.) This factor tilted slightly in favor of Tech.

 

Similarity of sales methods weighed heavily in favor of Tech, because Tech uses an app, whereas one must call, email, text, or send a Facebook mes sage to Promotions in order to set up a ride. Even people only vaguely familiar with Tech might well know that its services were app-based.

 

Similarity of advertising methods: both use social media extensively. Some of Tech’s affiliates even put ads for Tech’s services on Promotions’ Facebook page. Though the look of Promotions’ ads was quite different from the look of Tech’s ads, extensive use of social media and especially Promotions’ Facebook page raised the likelihood of confusion.  Also, Tech’s use of AdWords made it more likely that certain searches would lead to an ad for Tech being displayed above the results.  Weighed slightly in favor of Promotions.

 

Intent: In a reverse confusion case, the concern is that the infringer will “push[] its [smaller] rival out of the market,” thus “usurp[ing] [the rival’s] business identity.” Only intent to “usurp identity” through confusion is relevant.  (Here’s where the equity kicks in.  What about reckless indifference to the senior user’s trademark rights?  Tech clearly didn’t intend to misappropriate Promotions’ goodwill, but it might well have anticipated that its entry into Gainesville would extinguish that goodwill, which is a kind of “usurping” the identity of UBER in Gainesville.  How should we think about that?)  The court was skeptical:

 

It is difficult to believe that Tech acted with the intent to push Promotions out of the Gainesville market by using a confus ingly similar mark. Elephants don’t look out for gerbils when they plow through the bush. Tech adopted its mark before it ever knew of Promotions and expanded nationally thereafter. Surely it knew that it would collide with Promotions once it entered Gainesville, but that doesn’t mean it intended to confuse consumers and thereby hurt Promotions. This factor is not particularly relevant to the analysis in this case.

 

Actual confusion: There was a fair amount, which is interesting in light of the court’s conclusion that most of the standard circumstantial factors either favored Tech or only weakly favored Promotions.  Promotions received “numerous” phone calls from customers looking for tech.  The court found that some of the people who called Promotions looking for Tech “were indeed “confused” within the meaning of the Lanham Act—that is, they understood they were calling Promotions and thought Promotions was affiliated with Tech.” 

 

But Tech’s number is hard to find, so many of the callers were just misdirected, such as the ones who asked about becoming driver partners.  Especially since a Google search for “Uber Gainesville phone number” or “Uber Gainesville phone” brings up Promotions’ phone number, “it’s likely that a large fraction of the callers didn’t even grasp that they were calling something called Uber Promotions, but instead thought they were calling Uber Technologies. This is akin to being given a wrong number by a telephone operator.”  The confusion about who they’d reached isn’t relevant trademark confusion, at least not in a reverse confusion case—it would be highly relevant to initial interest confusion. “A person who does not even grasp that he is talking to Promotions on the phone, or that Promotions even exists separate and apart from Tech, is obviously not going to form a bad opinion of Promotions based on his ‘confusion,’ nor is Promotions going to lose any business.” The same was true with emails received by Promotions from people looking for Tech. “The Los Angeles customer appears to be someone so easily confused that even trademark law cannot protect her.”

 

Two instances of confusion by former customers of Promotions were more helpful: they clearly understood what Promotions is, understood what Tech is, and thought they were affiliated. Also, there was evidence that “a few Tech customers—and even some driver partners and others affiliated with Tech”—thought the parties were related.  The calls/emails were less important, especially since their confusion could be easily corrected.  “That said, it strains credulity to think that at least some of the many dozens of callers were not actually confused, and certainly two of the emailers were.”  Even a few instances of actual confuison were worthy of note because of how difficult actual confusion is to find.  This factor weighed in Promotions’ favor, “but it by no means weighs so heavily that a finding of a likelihood of confusion is inevitable.”

 

All together: The court was especially impressed by the difference in sales channels: “anyone who has used Tech’s services necessarily understands that those services are accessed via a smartphone app, and is unlikely to think that Tech has all of a sudden started to make its services accessible via other means.”  So, the people who might be likely to be confused are people who have “heard of, but not used, Tech’s services.”  But the people in that group most likely to encounter Promotions’ mark is young people, a group that’s relatively tech-savvy and therefore likely sensitive to the difference in sales channels.  (NB: I don’t think tech-savvy means that; an ability to spit out emojis super fast is not sophistication in business organizations.)  Plus, a person who’s heard of Tech might be aware that Tech is available in many locations, not just Gainesville, “and the local focus of Promotions’ advertising will not tend to create confusion.”  (Though doesn’t Tech roll out new services place by place?)

 

If there were no evidence of actual confusion, the court wouldn’t find likely success on the merits.  But there was, so it did. “[G]iving great weight to evidence of actual confusion helps ensure that a judge doesn’t rely (perhaps subconsciously) too heavily on his own subjective view of the likelihood of confusion” and “helps counteract the empathetic deficiencies that necessarily distort the analysis of the remaining factors.”  There were about five clear instances of people who truly thought that Promotions and Tech were related “despite having a more-than-casual relationship with the two entities.”  Even a few can be enough, though.  It was a close call, but the court found likely success on the merits.

 

As for UberEVENTS, confusion was much more likely if it were allowed to grow in Gainesville pending trial:

 

First, the more “Uber _” services there are, the more likely it is that a consumer might think that Promotions is just another branch on the Uber Technologies tree. Second, UberEVENTS is accessed through a webpage, thus eliminating one of the key differences between Tech and Promotions. [Ed.: But no reasonable consumer would expect that, right?] Third, the service allows users to coordinate transportation at a set time in the future for a large number of people, just like Promotions.

 

Though most driver partners’ vehicles were probably less lively than a party bus, the services were far closer than with any of Tech’s other offerings. This one wasn’t a close case.

 

Tech’s laches and estoppel affirmative defenses weren’t pursued in opposition to the preliminary injunction, and anyway wouldn’t work as to UberEVENTS because that launched after the lawsuit began.

 

Irreparable harm: Without an injunction, more people would be confused about the relationship between Tech and Promotion.  “But so what? Where’s the harm? The harm usually cited as flowing from confusion in a reverse confusion case is the loss to the senior user of the ‘value of the trademark—its product identity, corporate identity, [and] control over its goodwill and reputation.’” These harms, if they occur, aren’t easy to quantify and redress with money damages, which makes them irreparable. But nonetheless, the harm must be likely, not just possible.

 

The court identified three reasons for concern: (1) Tech’s high rate of growth in the Gainesville market, allowing it to do Promotions more harm before trial.  (2) UberEVENTS, which might even cause Promotions to lose business to forward or initial interest confusion. (3) Tech’s “massive” public relations problems. The court pointed to the top Google News search results (as of 5:00 p.m. on February 11, 2016) for “uber florida”:

 

Bad press for "uber florida"

“With all due respect to Tech, Promotions has every reason not to want potential customers and other members of the public to associate it with a company that has inspired protests in cities around the world.”

 

Balance of hardships: enjoining Tech from using UBER in Florida would go way too far.  Promotions argued that Tech could “make a new app with a new name and operate as a sort of parallel universe version of itself in the Gainesville area.”  But this would be technically infeasible, if not impossible, and economically unwise.  Plus, Tech would have to give up the value of its trademark in Gainesville, “and would have to mount a massive campaign to introduce itself to the Gainesville public. Promotions’ proposal seems to ignore the value of name recognition and brand identity, which are the very things that trademark law seeks to protect.”  (Look, I’m not a big believer in protecting brand identity.  But if Promotions is the senior user in Gainesville, Tech doesn’t have any right to name recognition or brand identity in Gainesville, any more than Delta Dental has a right to expand into airlines under its existing brand.  The court’s reasoning seems to ignore §33(b), which freezes the senior user in, but also freezes the junior user out.)

 

The practical effect of enjoining Tech’s use of its marks in the Gainesville area would be its cessation of operations.  This would set back Tech’s efforts to build a customer base before trial.  (Note the assumption that ultimately it will be able to operate in Gainesville; if true, the court’s got a point.)  Of course, self-inflicted injury can be discounted, but here the infringement wasn’t willful.  Plus, Promotions could have sued earlier; it waited over a year after Tech moved into the Gainesville market to file suit. This might not be enough for laches, but it factored into the balance of hardships.  Thus, the injury to Tech from a flat ban in Gainesville was more significant than the injury to Promotions.

The court was also concerned to avoid “arming squirrels with bazookas.”  (AKA trademark trolling.)  An injunction against the name in a large market could cost Tech far more money than Promotions could ever hope to make, creating a windfall for Promotions given that it could sell the injunction to Tech for “a sum far exceeding its anticipated profits but still far below the cost to Tech of obeying the injunction.”  A permanent injunction after a finding of infringement might be appropriate in such a case, given the adjudicated violation of trademark law. But a preliminary injunction required more caution.  The risk of holdup was a concern in any preliminary injunction proceeding, but was particularly acute in a reverse confusion case, where a small, regional plaintiff takes on a national behemoth. “[A] preliminary injunction should not serve as a bazooka in the hands of a squirrel, used to extract from a more fearsome animal a bounty which the squirrel would never be able to gather by his own labors—at least not when the larger animal is mostly without sin.”  (A skeptic might suggest that courts, like guns, were created by societies precisely so that the big could not simply do to the small what their size permitted them to do—and that courts are better equalizers than guns for a variety of reasons.)

 

Thus, the court would grant Promotions only narrow relief. The injunction would aim at (1) preventing people looking for Tech’s phone number from coming across Promotions’ phone number and (2) preventing UberEVENTS from causing further confusion.  Much confusion stemmed from the fact that Promotions comes up when one searches “Uber Gainesville phone” or “Uber Gainesville phone number” on Google. Thus, Tech would be required to set up a local (352 area code) number to handle calls from Tech customers and driver partners in the area.  (Won’t this further entrench Tech’s dominance/crushing of the goodwill of Promotions in Gainesville?)  Tech would also be preliminarily enjoined from using its marks in connection with UberEVENTS in the area.

 

Public interest: a full injunction against Tech using UBER in Gainesville wouldn’t serve the public interest, because that would harm Tech’s driver partners and customers, including its “Freedom in Motion” program, in which it “facilitates on demand, subsidized transportation services for residents of senior citizen communities,” and in the “Safe Rides” program, “which gives university students discounted rates on their rides when returning home late at night.”  Yanking away Tech’s lower-cost on-demand transportation, especially when Promotions doesn’t directly compete with Tech and couldn’t replace its services, would harm citizens.  But more limited relief would help reduce confusion without harming consumers.  “While enjoining any further growth of UberEVENTS might impact Tech’s driver partners, the effect is likely to be very minor given the fact that UberEVENTS is relatively new and has not yet taken off in Gainesville.”

 

Bond: Tech asked for a security bond of $64 million, based upon a broad injunction covering all of Florida. The court had little to go on for the more limited injunction, so settled on $10,000.

 

Now take a gander at the injunction’s components, and consider how Tech can accomplish them: (1) No advertising of UberEVENTS in Alachua County, including a posting promoting UberEVENTS placed on the Facebook wall or page of people/entities in the county.  (2) UberEVENTS can’t book events in the county.  (3) Uber has to set up a local phone number and list it in all available directories.  (4)  The kicker:

 

Defendant must ensure that a search conducted with the Google, Yahoo, or Bing search engine using the keywords “Uber Gainesville phone” or “Uber Gainesville phone number” returns a result containing Defendant’s 352 areacode number along with words clearly indicating that the result is associated with Defendant. Such words may in clude “driver partner,” “app,” or “ride.” Defendant must ensure that this result, while prominently displayed on the search results page, does not replace the result for Plaintiff’s phone number that is currently returned when a search is conducted using these keywords. Compliance may entail using the search engines’ paid advertisement features such as Google AdWords.

 

In addition, Tech was required to “ensure” that a search conducted with the Google, Yahoo, or Bing search engines using the keywords “Uber promotions Gainesville phone” or “Uber promotions Gainesville phone number” didn’t return Tech’s phone number.

 

Court's suggested configuration of Google search page

Thoughts on the technical feasibility of these measures?

No compelling interest in right of publicity for private figure, 9th Circuit rules

Sarver v. Chartier, No. 11-56986 (9th Cir. Feb. 17, 2016)

 

Shorter opinion about why the film The Hurt Locker didn’t violate Army Sergeant Jeffrey Sarver’s right of publicity: “video games are different.”  Sarver led a team in Iraq to dispose of IEDs. A journalist embedded with his division followed him “for a significant amount of time and took photographs and video of him while he was on and off duty,” and conducted additional interviews with him back in the US.  The Playboy article he wrote was later condensed in Reader’s Digest; it used two photos of Sarver and other personal information, allegedly without his consent, and he objected to the article.  The journalist later wrote the screenplay for The Hurt Locker, and Sarver argued that Will James, the movie’s main character, was based on his life and experiences.

 

Sarver sued in New Jersey for misappropriation of his likeness and right of publicity, false light invasion of privacy, defamation, breach of contract, intentional infliction of emotional distress, fraud, and negligent misrepresentation. The case was transferred to California, where the defendants filed a motion to strike under California’s anti-SLAPP statute.  The court of appeals first went through a choice of law analysis and applied California law, given the predominance of California contacts, the difficulty of determining Sarver’s domicile, and California’s strong interest in enforcing its anti-SLAPP law to “encourage continued participation in matters of public significance” and to protect against “a disturbing increase in lawsuits brought primarily to chill the valid exercise” of constitutionally protected speech.  While New Jersey has no similar law, “its courts have allowed defendants to bring a claim for malicious use of process to protect against suspected SLAPP actions.” Thus, the balance of interests tilted towards California: “Whereas California would appear to object strongly to the absence of a robust anti-SLAPP regime, New Jersey’s interests would be less harmed by the use of California law.”

 

It wasn’t hard to show that defendants’ acts were an exercise of their free speech rights on a matter of public interest, something which is to be broadly construed.  One California court said:

“a matter of public interest should be something of concern to a substantial number of people.” Further, “there should be some degree of closeness between the challenged statements and the asserted public interest,” and the “focus of the speaker’s conduct should be the public interest.” The Iraq war, and the use of IEDs by insurgents during the war, was “a matter of significant and sustained public attention.”  Sarver argued that the true issue was “whether the defendants’ alleged misappropriation of his private persona is of public interest.”  However, unlike the situation of a random callow youth, “Sarver’s work while deployed in Iraq was an issue of public concern significant attention devoted to the war and to the role of IEDs in it.”  Significantly, while the film allegedly incorporated his personal characteristics, the portrayal specifically centered around his work, and his characteristics were displayed only in the context of his job in Iraq. Thus, “the private aspects that Sarver alleges the film misappropriated are inherently entwined with the film’s alleged portrayal of his participation in the Iraq War.”  This was sufficient to show that the narrative focused on an issue of public concern.

 

At that point, the burden shifted to Sarver to “state and substantiate a legally sufficient claim.”  Under last Term’s Reed decision, content-based restrictions on speech, such as the right of publicity, are presumptively unconstitutional and must be shown to be narrowly tailored to serve compelling state interests.  [Query, in the case of a common-law right, who is to make this showing and on what record.]  Zacchini said the right of publicity was constitutional as applied to the appropriation of a performer’s entire performance.  [Zacchini, of course, did not apply strict scrutiny; rather, it applied an analogy to a form of speech restriction that the Court has said ordinary First Amendment principles don’t apply to, see Eldred/Golan, a logic that looks even worse after Reed.] 

 

Zacchini reasoned the state’s right of publicity law was aimed at protecting “the proprietary interest of the individual in his act” and “prevent[ing] unjust enrichment by the theft of good will,” in order to provide “an economic incentive for [the individual] to make the investment required to produce a performance of interest to the public.” This was similar to the interests which “underlie[] the patent and copyright laws long enforced by this Court,” as opposed to reputational and privacy-based interests which underlie torts like defamation. The Court balanced this interest against the TV station’s First Amendment interests in broadcasting the performance and found the station’s interest less weighty because “[n]o social purpose [was] served by having the defendant get free some aspect of the plaintiff that would have market value and for which he would normally pay.” [Note how the “balancing” has nothing to do with Reed strict scrutiny.  Just sayin’.] 

 

The Ninth Circuit has extended Zacchini to lots of things, from greeting cards to video games, even outside of advertising.  “[O]ur precedents have held that speech which either appropriates the economic value of a performance or persona or seeks to capitalize off a celebrity’s image in commercial advertisements is unprotected by the First Amendment against a California right-of-publicity claim.” 

 

But those cases don’t apply here, because Sarver isn’t a celebrity: he didn’t “make the investment required to produce a performance of interest to the public,” or invest time and money to build up economic value in a marketable performance or identity.  He’s a private person, even though his story is of public interest.  “Neither the journalist who initially told Sarver’s story nor the movie that brought the story to life stole Sarver’s ‘entire act’ or otherwise exploited the economic value of any performance or persona he had worked to develop. The state has no interest in giving Sarver an economic incentive to live his life as he otherwise would.”

 

Comment: so, the state has no interest in giving incentives for things that would be produced anyway, where the incentive is given by way of restrictions on speech?  Good to know.

 

Continuing: “The Hurt Locker is speech that is fully protected by the First Amendment, which safeguards the storytellers and artists who take the raw materials of life—including the stories of real individuals, ordinary or extraordinary—and transform them into art, be it articles, books, movies, or plays.”  Um, aren’t celebrities part of the raw materials of life?  (Calling Andrew Gilden: perhaps celebrities are already cooked, but they can still be chocolate chips in my expressive cookies, no?)

 

Anyway, it’s not even clear that California’s right of publicity would extend this far, given that the California Supreme Court barred a right of publicity action based upon the unauthorized exhibition of a “fictionalized version” of Rudolf Valentino’s life on television, because there was no postmortem right.  Guglielmi v. Spelling-Goldberg Prods., 603 P.2d 454, 455 (Cal. 1979). But a broader concurring opinion explained that, unlike in Zacchini, there was no claim that the defendants secretly filmed Valentino’s “performance” or otherwise stole his “entire act,” so as to “undercut[] his ability to earn a living,” thus meaning that the fictionalized portrayal of Valentino’s life was entitled to greater First Amendment protection than the conduct in Zacchini.  Gee, I wonder what implications that logic would have had for Keller v. EA?

 

After the right of publicity claims were kicked out, the remaining defamation, false light, and intentional infliction of emotional distress claims promptly followed. “[A] reasonable viewer of the film would be left with the conclusion that the character Will James was a heroic figure, albeit one struggling with certain internal conflicts.”  Even unflattering aspects wouldn’t be enough to make this defamatory or highly offensive to a reasonable person, even if they were provably false (such as the character’s alleged fascination with war and death).

High-quality health care claims are puffery

Intermountain Stroke Center, Inc. v. Intermountain Health Care, Inc., --- Fed.Appx. ----, 2016 WL 523613, No. 14–4045 (10^th Cir. 2016)

 

Intermountain Health Care is a large hospital/clinic/doctor network.  Before it ceased business in 2013, the Stroke Center provided “same-day and next-day treatment” to patients presenting with strokes and transient ischemic attacks (TIAs). According to its staffer Dr. Nancy Futrell, the Stroke Center was “the only outpatient, non-emergency facility in Utah to provide non-emergency, same-day and next-day stroke and TIA treatment by .... a stroke specialist” and the “only” facility in the state that offered these services at rates significantly lower than prevailing hospital rates.  Originally, Futrell and the Stroke Center sued Intermounntain in state court for violations of Utah’s Truth in Advertising Act and related claims; they added a Lanham Act claim and Intermountain removed.

 

Plaintiffs challenged (1) general representations that Intermountain follows “best medical practices,” provides the “best possible care,” and has a mission of “[p]roviding excellent care of the highest quality at an affordable cost,” and (2) three more specific representations about the number of Intermountain physicians specializing in stroke and TIA treatment, the efforts made by Intermountain to avoid prohibited sources of revenue, and the proper scope of post-stroke or post-TIA care.  The court of appeals affirmed the dismissal of the Lanham Act claim because the challenged statements were puffery as a matter of law.

 

On its website, Intermountain held itself out as “an internationally recognized, nonprofit system of 22 hospitals, a Medical Group with more than 185 physician clinics, and an affiliated health insurance company,” “offering a full range of services,” and “[p]roviding excellent care of the highest quality at an affordable cost is at the heart of [its] mission.” Also: “Our network of experienced doctors, surgeons and caregivers strive[s] to provide clinically excellent healthcare through a wide range of services in a setting where patient needs come first.” On a page called “For Intermountain Healthcare Trustees,” Intermountain described its business model as “[a]n [i]ntegrated [h]ealthcare [s]ystem” offering “[c]linical quality,” “[s]ervice quality,” “[l]ower costs,” “[p]revention,” and “a relatively seamless continuum of care.” Being a vertically-integrated network supposedly enabled it to “contribute in essential ways to the sharing of best medical practices, and raising the standards of clinical excellence.” Thus “Intermountain not only provides quality healthcare; it often achieves lasting improvement in cost structures.” 

 

All this was puffery, in context, which included the fact that it was mass advertising expressed in vague terms, not something said to a particular person with knowledge of that person’s specific needs. “Healthcare is fraught with unpredictability, and a healthcare-delivery system hardly strikes us as the species of business from which a particular objectively-superior result (e.g., with respect to certain stroke and TIA treatments) could reasonably be expected by a consumer without at least some modicum of specificity being provided by the business in its representations ….”

 

Puffery was not an affirmative defense, as plaintiffs claimed; whether statements were factual or puffery were questions of whether actionable conduct had occurred.  Nor did puffery have to be “forward-looking”; that’s just an example of a type of puffery.  “[V]ague statements of corporate optimism” also qualify.  Lexmark changed none of this.

 

As for the three specific statements, they were also non-actionable.  First, plaintiffs argued that Intermountain claimed to have more physicians for stroke and TIA care than it actually did, using misleading statements that its heart and vascular surgeons specialized in such care, and that neurologists at its clinic were stroke and TIA “subspecialists.”  Plaintiffs alleged that Intermountain’s listing of stroke on its website “under ‘Heart and Vascular Services’”  would “confuse stroke and TIA patients into believing that cardiologists and other heart specialists specialize in the treatment of stroke and TIA, which is not accurate.”  Also, “the ‘Find a Doctor’ link from the [Intermountain] website ... lists heart and vascular surgeons ... as stroke treatment providers,” which would mislead consumers. 

 

The court of appeals found that implausible.  “Plaintiffs’ own evidence supports our conclusion that any association of stroke and TIA with ‘heart and vascular’ services is proper” because stroke is a cerebrovascular or cardiovascular disorder.  “[I]t follows that stroke patients could not have been misled by a suggestion that a vascular physician might be of assistance.”  Likewise, the “Find a Doctor” tool would provide a list of doctors, including information about each doctor’s educational background, certifications, and clinical interests. None of the “primary specialty” notations explicitly included a claim of expertise in stroke and TIA treatment; the only claim was that some of them possessed “the core competencies to treat cerebrovascular diseases,” which appeared to be true.  Plaintiffs failed to explain how consumers would infer that the doctors were specialists in stroke and TIA.  Though plaintiffs might want Intermountain to include a disclaimer, the law didn’t require that.

 

Also, Intermountain’s Annual Stroke Report said: “The Stroke Program also offers resources for patients with ongoing medical needs after hospitalization. The Outpatient Neuroscience Clinic[ ] ... is home to subspecialists including epileptologists, general neurologists, physical medicine and rehabilitation physicians, and neuropsychologists.”  Plaintiffs failed to explain why it was false or misleading to label them “subspecialists,” even though they held themselves out as focusing on specified brain disorders. There was no explicit or implicit representation that Intermountain’s Outpatient Neuroscience Clinic was devoted to stroke and TIA.  [I have changed the court of appeals’ language a bit; the court wrote as if making merits determinations, where under Twiqbal it really should have been talking about plausibility.]

 

Plaintiffs alleged that Intermountain falsely claimed in its Ethics Code to “carefully review financial relationships with physicians and other Health Care Practitioners for compliance with the anti-kickback and Stark laws.” In fact, Intermountain reached a settlement with regulators over compensation arrangements that appeared to violate federal healthcare-fraud statutes. But the court found the Ethics Code claims true and not misleading.  Then, contradictorily, it said that an announcement of intent to behave ethically was outside the scope of the Lanham Act entirely (that is, puffery).  A code of ethics is aspirational; “it simply cannot be that every time a violation of that code occurs, a company is liable under federal law for having chosen to adopt the code at all, particularly when the adoption of such a code is effectively mandatory.”

 

Moreover, the Ethics Code promised consequences for misconduct, tacitly acknowledging that standards are sometimes violated.  In fact, the court found that was what happened when Intermountain found out about the compensation schemes and settled with federal regulators.  Comment: Even on its own terms, that’s wrong, which is not to say the ultimate holding is wrong.  But in fact, that Intermountain settled does not itself show that anyone involved in the schemes suffered “consequences” therefore; we would need a lot more information.  The court of appeals, however, concluded that “the very existence of the resulting settlement agreement evinces the truthful spirit underlying Intermountain’s Ethics Code,” which promised to report observed and suspected violations of laws or policies.  Aspirational statements about federal anti-fraud laws didn’t implicate “the nature, characteristics, qualities, or geographic origin of [its] ... services.”

 

Finally, plaintiffs challenged Intermountain’s Stroke Pamphlet, targeted at stroke and TIA patients who have been admitted to an Intermountain facility, as well as their family members and friends. The pamphlet contained background material on strokes and TIAs, a “Stroke Recovery Checklist,” an index of stroke resources, and other general information concerning “[a]ftercare.”  The aftercare page said that “an appointment with” a patient’s primary care provider “is usually recommended 1 to 7 days after [leaving] to go home” and, similarly, that visiting a neurologist “is usually recommended” “4 to 6 weeks after [leaving] to go home.” Plaintiffs alleged that “a TIA patient who reads this pamphlet is likely to be under the mistaken impression that he or she can safely wait 4 to 6 weeks before following up with a neurologist.”

 

The court of appeals found this nonactionable because it made no statement about “the nature, characteristics, [or] qualities[ ] ... of [Intermountain’s] ... services.”  In the entire pamphlet, Intermountain named itself only on the title page; in one very small “Call 911!” icon; and at the end, as one of “many organizations that support people who’ve had a stroke.”  Plus, the aftercare chart in particular couldn’t plausibly mislead anyone about the scope of Intermountain’s services.  This “rudimentary worksheet suggesting how patients might approach post-stroke or post-TIA life” was “far too vague to support a Lanham Act claim.” Plus, if a reader reached the chart on page 10, it stood to reason that she also read the disclaimer on page 3 stating that “this booklet doesn’t replace the specific instructions you will receive from your healthcare providers.”