How green was my tractor accessory? John Deere defeats aesthetic functionality defense for color scheme

Deere & Co. v. FIMCO Inc., No. 15-CV-105 (W.D. Ky. Mar. 8, 2017)      

Deere sued FIMCO for infringing on Deere’s green and yellow color scheme on agricultural equipment.  Deere has three green and yellow registrations: (1) the ‘103 Registration is from 1988 and covers green and yellow “agricultural tractors, lawn and garden tractors, trailers, wagons, and carts,” specifically those with green bodies/frames and yellow wheels; (2) the ‘576 Registration is also from 1988 and covers green and yellow “wheeled agricultural, lawn and garden, and material handling machines”; and (3) the ‘095 Registration is from 2010 and covers “tractor-towed agricultural implements,” including, among others, “fertilizer spreaders” and “nutrient applicators” with green bodies and yellow wheels. Deere also alleged common law trademark protection of its green and yellow color combination.

FIMCO makes lawn and garden sprayers, its main source of business, along with a smaller line of agricultural equipment, including towed agricultural sprayers and nutrient applicators, which FIMCO offers in multiple colors, including green and yellow. Deere sought to enjoin FIMCO’s use of green and yellow for sprayers and wheeled agricultural equipment, and its use of yellow tanks or wheels in connection with wheeled agricultural equipment having green vehicle bodies. 

 

screenshot from complaint

Here, the court rejected FIMCO’s functionality argument and several others, but allowed some elements of FIMCO’s defenses to proceed.

First, the court declined to exclude testimony from Deere’s expert, William Shanks, an investigator at Marksmen, “a private investigation firm that focuses on intellectual property investigations.”  Shanks summarized his investigation as follows:

Over several weeks in June 2016, I spoke with a total of 20 salespeople at different dealership locations, and with 18 of those 20 salespeople, I said something very close to the following: “I always thought [or assumed] that yellow/green farm equipment was made by . . . .” or “I always thought [or assumed] that the yellow/green coloring looked like . . . .” I would not finish the sentence, but would pause, to see if the sales personnel would finish the sentence. Each time I raised this unfinished sentence (18 of 18 times) the salesperson responded to my partial sentence and pause by stating promptly either “John Deere” or “Deere.”

He thus opined “that salespeople at dealerships that sell FIMCO’s agricultural equipment perceive the green and yellow colors on agricultural equipment as associated with Deere, or at a minimum, recognize or believe that people generally associate such colors with Deere.” Shanks presented himself in the role of “an employee of a film production company that wanted to rent or purchase agricultural equipment for a movie” so that dealers would “perceive[] [him] as someone not well- versed in that equipment, so the salespeople would be more inclined to educate [him] about the equipment than to assume [he] knew about it already.” He used “candid conversations” instead of “an interrogation or formal survey” in an effort to “ensure that the respondents felt comfortable enough with me to use their own words and give me their truthful, candid opinions.” He “offered an open- ended statement so people would feel free to fill in the gap however they wanted, instead of acting on a prompt or specific question from me.”

The court found that FIMCO’s criticisms went  to weight, not admissibility.  Shanks’ “twenty years of experience as a private investigator for an intellectual property investigation firm, which has often involved developing personas, conducting investigations, eliciting candid responses, and evaluating the results of such investigations, qualifies him to testify as to his opinions in this case.”  Would his testimony be “based on sufficient facts or data” and “the product of reliable principles and methods,” as the FRE require?  FIMCO argued that dealers would give different, less specific answers to a “random layman” than they would to a “true purchaser or shopper” and that it was likely that respondents were making “guesses . . . as to what they thought Shanks’ film producer character, as a completely uninformed, uneducated consumer, would think Shanks meant to finish the statement with. . . . Shanks’ [u]nfinished [s]tatements clearly lobbed for the respondents an answer going to what company most prominently features green and yellow on its agricultural equipment.”  But “errors in survey methodology are more properly directed against the weight a jury should give the survey, rather than overall admissibility,” and these problems were mere “technical inadequacies.”  

Nor would his testimony be inadmissible hearsay: “evidence of the state of mind of persons surveyed is not inadmissible as hearsay.” “Here, Shanks phrased his questions to dealers as inquiring into what they always ‘thought [or assumed]’ about the colors green and yellow on agricultural equipment” (emphasis added because of factual mistake).  The Court was satisfied that “experts in Shanks’ field would reasonably rely on this kind of data in forming opinions.”

Comment: When I think about how hard real surveys struggle to get attention paid to them, this result makes me sad.  Shanks explicitly induced salespeople to read his mind and complete his sentence with what they thought he thought.  The problem isn’t that Shanks is in the courtroom instead of the salespeople—he can testify to their present mental impressions—it’s that he isn’t testifying to the salespeople’s present mental impressions of what they thought, but rather what they thought he, as a novice, would be thinking.  After [gulp] years of teaching, even I can anticipate a number of standard student responses, and fill them in once a student starts down some particular path.  That doesn’t mean that the student is correct or that I think the way the student thinks; it means I’ve seen the argument before and I know what it sounds like.  Nothing in his report is evidence of what dealers or ordinary customers think.

Deere also failed to exclude five FIMCO expert witnesses qualified by their years of experience in the industry.  However, they lacked the expertise to testify about likely confusion as an ultimate issue, rather than about their own experience, because surveys are what proves likely confusion.  [And Shanks apparently did a “survey,” albeit one without controls, which alone would ordinarily have been enough to exclude a real survey in the modern era.] As McCarthy says, “A survey expert has conducted a scientific test and asked questions of potential buyers: other experts have not,” and thus “expert who has not conducted such a survey must articulate and describe some other reliable methodology that forms the basis for the conclusion that confusion is or is not likely in this case.” FIMCO’s witnesses didn’t offer reliable methodologies sufficient to offer the blanket opinions that “[t]here is no actual or likely confusion by U.S. consumers.”

However, FIMCO’s witnesses could testify about their own experiences with their customers throughout their careers, as well as “subsidiary factual questions, such as … the sophistication of buyers and the degree of care buyers typically exercise when making a purchasing decision of these kinds of goods or services.” For example, one witness testified, “reliably in the Court’s view, that he based [his] opinion on ‘[t]he price difference. The farmer is either looking for self-propelled that doesn’t compete because it’s a 300, $400,000 sprayer self-propelled sprayer versus a $50,000 or less sprayer.’”  Even though they did no separate research before forming their opinions, that went only to weight.

On to substance: in terms of fame, Deere claimed fame since 1923, or at the latest 1950.  Deere’s advertising expenditures were $34,000 in 1903 (roughly 1.1% of total company expenditures), $1.59 million in 1948, $5.4 million in 1957 (roughly $46.3 million today), and $75.3 million in 2015. Since the 1920s, it has advertised in color, clearly depicting its yellow and green color scheme, and often referred to this color scheme as the “John Deere Colors.” Its US sales have been extensive throughout its history, beginning in 1905, reaching $299.7 million in 1950 (roughly $3 billion today) and $29 billion today, and many of those sales were of products using the color scheme.  Deere’s archivist cited a 1923 article published in Implement & Tractor Trade Journal, discussing an upcoming convention at which a “Model Store” would be featured for agricultural dealers to see, which said that “[t]he glassed-in front is painted in the Deere colors, green and yellow.”  A novel, originally published in 1950 as Reluctant Farmer, also discusses a new wagon “painted the bright John Deere green and yellow” and a “side-delivery rake” painted “the usual bright John Deere green and yellow.” A Smithsonian.com article from 2011 called “Happy Birthday, John Deere!” begins with the following statement:

Unless, like my husband, you hail from a place like Nebraska, where it is  common knowledge that Farmall tractors are candy apple red, New Hollands’ are royal blue and Allis Chalmers are orange, I suspect that John Deere tractors, with their kelly green bodies and bright yellow hubcaps, are the only ones that are instantly recognizable.

Deere also surveyed members of the general public, 153 out of 156 of which identified a tractor bearing the yellow and green colors as being a Deere brand. Deere also has registrations for its color scheme, but those were not obtained until 1988 and 2010, long after the years in which Deere alleges its mark became famous—and long after FIMCO began using the colors.  The court found that the issue of when Deere’s colors became famous was a genuine issue of material fact.  “[T]he mere fact that Deere’s use of yellow and green were referenced in 1923 and 1950 is insufficient, at this stage, to say that 1923 or 1950 are the years Deere’s mark became so ‘widely recognized’ so as to make it famous for dilution purposes. Indeed, our sister courts have stated that ‘general media assertions and acclamations of fame are not strong evidence’ of fame because fame for trademark dilution purposes ‘is not proven through the words of trade publication articles declaring it so.’”

FIMCO alleges that, through its alleged predecessor in interest, JDD, it used green and yellow on its agricultural equipment from “either [19]32 or [19]38 forward.” The problem was that FIMCO couldn’t prove that JDD was its predecessor in interest, since the only evidence was from the current owner, Kevin Vaughn, who testified to his childhood memories from 1966 when, in his understanding, his father took over JDD’s assets out of bankruptcy.  [One might think that this is one reason we have laches, but the courts have been very hesitant to find laches in trademark cases, though perhaps once the court gets around to likely confusion Deere’s apparent inability to find real confused consumers over the past half century might matter.]  This evidence couldn’t be presented in admissible form, so FIMCO was left to its own start date in 1966, when it started to use the green and yellow colors.

Functionality: basically, FIMCO couldn’t prove that, even assuming that a desire to match equated to competitive necessity, the desire to match couldn’t be satisfied with either yellow or green, perhaps with black or gray; Deere limited its claims to the yellow and green combo.  Deere & Co. v. Farmhand, Inc., 560 F. Supp. 85 (S.D. Iowa 1982), aff’d, 721 F.2d 253 (8th Cir. 1983), found aesthetic functionality in the color green in similar circumstances, but (1) Deere clearly claimed only the combo this time, (2) the case predated Qualitex and Traffix (which I think is a bad argument because Breyer cited the case specifically in his discussion of aesthetic functionality in Qualitex) and didn’t apply the modern test.  “It may present a different question if Deere sought to completely prohibit all use of the color green or all use of the color yellow, as was the case in Farmhand.”   Trademark rights in one color “may differ from trademark rights in a combination of colors.”  [See also Louboutin.] 

Anyway, since Farmhand, courts have rejected claims based on a mere desire to match, because that’s not an aesthetic purpose “wholly independent of any source-identifying function.”  [I think that interpretation equivocates about independence. The desire to match, given a previous purchase of durable equipment, is independent of source-identifying function; it would apply no matter which brand of tractor the buyer had.  The matching color is related in a but-for sense to the choice of Deere, but I don’t think that source-identifying function should be deemed a proximate cause of the choice of matching equipment.]  Testimony that half of customers wanted their equipment to match, and half of those would change a purchase over that requirement, wasn’t convincing to the court—which I find a bit perplexing, since functionality has never required a showing that every single customer thinks there’s no alternative; 25% is a pretty significant chunk of a market.  But the broader point that the color combo wasn’t shown to be necessary to match is still a good one.

FIMCO’s laches defense failed because it couldn’t prove privity with JDD, which had received C&Ds in 1944 and 1963, as did its implied license defense. However, there was a genuine dispute of material fact as to acquiescence and estoppel. FIMCO put in a lot of evidence that its products would have been visible to Deere representatives at farm shows for years before 2011, when Deere allegedly discovered them.

The court also rejected FIMCO’s arguments about the scope of Deere’s registrations as covering yellow tanks/other aspects of FIMCO’s products; the question was not what the registrations covered but whether confusion was likely.  There were also some issues with incontestability—whether Deere made/sold all the items listed in the registrations continuously.  (Among other things, the ‘576 Registration includes “sprayers”; the court wasn’t persuaded by FIMCO’s argument that Deere didn’t sell trailed sprayers because it did sell self-propelled sprayers.)  Mostly there were genuine disputes of fact.

Conference announcement from the ABA

ABA’s 32nd Annual Intellectual Property Law Conference April 4-6, 2017 Crystal Gateway Marriott, Arlington, VA

Learn more here.

GW/Harvard conference: licensing and exhaustion

Licensing and Exhaustion

Moderator:  Prof. Robert Brauneis, George Washington University Law School

Eric M. Reifschneider, The Marconi Group: There are deals that have died just b/c of exhaustion uncertainty.  What triggers exhaustion?  At one time, many practitioners thought that a covenant not to sue wouldn’t trigger exhaustion; in 2009, Fed. Cir. said that’s not the case. There was a point when people thought that if you withheld the right to use from a license grant, that would avoid exhaustion b/c a right couldn’t be conveyed broader than the license itself. That’s not correct either: exhaustion comes from sale, not the right to use. There’s no way to stop companies trying to do business from attempting to structure contracts in a way to achieve business objectives—avoidance, not evasion. These days, covenant to sue last/covenant to exhaust remedies: before I sue you, I will sue your customer.  But if I can’t, I reserve the right to come back and assert patents against you. That doesn’t authorize sale or grant license.  You’d think that would work, but we don’t know b/c there’s no court that’s decided the issue.  Enough language out there makes it sound like avoidance is a bad thing.

Aaron M. Panner, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC: more ready finding of exhaustion than in pre-Quanta law. Substantial embodiment now gets litigated: when does the product sold substantially embody the patent, critical for method patents as well as compounds. Real hostility to slicing and dicing rights in any way you want; transactions should be chunked to avoid worries about separate IP rights.  [That is a very Henry Smith-/numerus clausus-sounding justification.] That’s why the SCt got Kirtsaeng wrong.  The whole idea of “made under this title” was understood by the Second Circuit to be “made in the US,” and that can’t be right.  But “made under this title” as “made under some authorization under the law” makes more sense.  If I authorize printing a book in England for sale worldwide, that’s made under this title b/c a right under US © law has been conferred on the printer, whereas if I authorize English sale only I’ve done nothing that implicates my rights under US law.  Lexmark will raise this same Q under a statute with no such language; we need to figure out when you’re exercising your rights and when not.

Prof. John F. Duffy, University of Virginia School of Law: First authorized sale could mean you lose all your rights worldwide; or you could lose nothing as long as you specify it clearly enough in your license.  That’s about as big a range of possibilities as one can imagine.  Does the statute help? 

           

Sarang V. Damle, U.S. Copyright Office: Kirtsaeng leaves not so much left under §109. What we’ve been thinking about in post-sale restrictions: software-enabled consumer products.  Suppose you want to patch your own toaster’s vulnerability. You may have to reproduce software to examine it; maybe you create a derivative work. Those aren’t exhausted rights.  Do we characterize books and movies as licensed when they’re digital, as we’ve done w/software? Think about basic commercial law principles. There are still exhaustion-related Qs to be examined in ©.

Duffy: commercial law/Title 9 deals with encumbering property after it’s sold/transferred. You can say “you can’t use a research laser for a commercial purpose” and put a security interest on it and the interest follow the good. There are some limits; there are notice rules. What exhaustion is trying to do is not make patentable goods an encumbrance-free zone; conditional sales are possible, but you need to use this other area of law, and there’s a reason behind that—this is what courts were saying when they created this doctrine. The debate in IP is about conditional sales—that was a term in the 19^th C. in commercial law, a forerunner of the security interest. But the UCC now just expressly incorporates that into the concept of security interests; UCC abolished conditional sales.

Why is exhaustion so inflexible when even tying is now flexible? It’s just a domain limitation. Just like the line b/t Virginia and North Carolina is very formalistic.  That makes sense because of what the line is there to do.  For a security interest, there’s a stronger notice requirement: the consumer has to affirm it actively, not just click yes on a contract of adhesion.

GW/Harvard conference: Infringement and Defenses

Infringement and Defenses

Moderator: Prof. Michael B. Abramowicz, George Washington University Law School

William F. Lee, WilmerHale LLP: Literal infringement/each and every element of the claim—useful for laypeople to think about the claim. In many jurisdictions (Germany, Netherlands, Japan) around the world, focus is less specific terms of the claim and more the essence of the invention. Having seen both regimes, essence approach is more flexible but less predictable—depends on what adjudicator thinks the essence of the invention is. One thing juries do understand, whether they understand the claim in its entirety, they understand that each and every thing described in the claim needs to be there. Useful framework for trial, appellate, and beyond.

As we think about things like “should we have all elements or essence system,” any changes have to be viewed from global, not US property right, perspective.  eBay: from his perspective, the biggest effect of eBay has been to move IP litigation outside the US; Germany, Netherlands, Japan, Korea have become more important b/c injunctions follow as night does day there, and they are not stayed pending appeal.  59 Apple/Samsung cases outside the US w/injunction regimes that were much more patentee-friendly.

Prof. Dmitry Karshtedt, George Washington University Law School: Interesting tensions in this area. At claim construction stage, judges may look at essence, even if not always. Biggest concern is symmetry b/t infringement and defenses. Claims drafted by patentee, but odd to say that SCt is concerned about claim limitations but in Mayo the Ct was dismissive of the draftsman’s art.  Exhaustion: look at LG, court says it doesn’t have to be every element if it’s substantially embodied, it may exhaust. But that moves away from the primacy of the claim. Tensions worth noting; some can be explained by construing against the drafter, but the essence can affect claim construction, and that hasn’t been flagged sufficiently.

Abramowicz: Formalism v. purposivism is an issue across bodies of law.  Attention to economic/policy issues. Should this be the same in IP versus outside?  Same in © as in patent?

RT: Fromer has written about peripheral v. core claiming in © v. patent: derivative works right differs, and the court may be the first time you get an interpretation of the meaning v. more substantive examination for patent.

Malcolm L. Stewart, Deputy Solicitor General of the United States: Techniques of statutory construction.  Tax code has industry-specific provisions, parsing fine details/drawing inferences from use of term in different provisions. You can’t do that w/infringement provisions b/c they’re not written at that level of detail, intended to cover all the industries that might be covered by patent and ©. But the concepts of infringement have been around for 100s of years, differing from modern regulatory statutes; there’s a wealth of material about patent & © infringement as traditionally understood. What drives courts is unavailability of one method of statutory construction, plus historical rich background, e.g. on inducement.

Abramowicz: Karshtedt has argued for more flexible liability for person A for person B’s acts.

Karshtedt: tort & criminal law concepts of aiding and abetting. One intuition is: if you commit a crime/tort w/physical instrument, we treat it as direct liability not inducement or secondary liability. Sometimes another human being can be such an instrument—a completely passive human user who doesn’t know about the tech and who is just executing steps in a method claim. That’s direct and not indirect liability; the real responsibility lies w/the manufacturer. Inducement was really encouraging/giving someone a weapon where the other person was central in committing the crime.  The differences in the facts inform these questions.  The courts have been very formal in direct/indirect boxes; the line is not so sharp.  See this in Aereo too, where the issue is direct/indirect. See that in patent too; don’t have to be physically carrying out the act, and use in patent doesn’t have to be physical use—just take advantage of.

Lee: We’ve had a number of cases w/attempts to apply traditional causation concepts to 300-year-old patent concepts; people struggle w/proximate, but-for causation.  If we changed, what would the standard be? How would that change the evidence that fact finders hear?  If it was cause in fact v. inducement—the evidence might not change a bunch; would it have much effect? Not clear.  Another point: 300-year-old principles, the history has been that they exist and modified, amended, over time but there in some form. The process has always been that development a new tech, or convergence of tech, are seen in light of old principles. As you think about changes, it’s a system that’s there to accommodate unimagined tech, and thus must be flexible.

Prof. Rebecca Tushnet, Georgetown University Law Center: Formalism as transaction and error-cost lowering: Type I and Type II errors, but lower systemic costs.  Lack of formalism doesn’t work very well in TM—Google as potentially directly liable for KW advertising carried out by advertisers.  But Google won all those cases at the end, as it should; the direct liability mirage just was very very costly for the system.

Infringement in context, not just global but remedies: statutory damages. That affects direct/indirect liability too b/c of lack of any knowledge/intent if we call an ISP directly liable it’s quickly in billions.

Designated skeptic about private law as a distinctive set of tools.  [Whether you engaged in a public performance is not so much a matter of good faith in the ordinary sense.  Consider regulatory analogies instead of private law analogies: Tax evasion/tax avoidance distinction that arguably mapped better onto Aereo than other analogies. Evasion is a wrong; avoidance is not.  Likewise, creating a nonprofit archive or museum in order to take advantage of the various limitations copyright law provides for such archives: that’s not wrongful if you really create a nonprofit. Nor is structuring a business around fair use. Interesting to talk about corporate law analogy: the whole point of the corporate structure is to cut off individual liability, which is why people were really dubious about that enterprise at its historical beginning, but if you do it correctly we make it almost impossible to pierce the corporate veil.]

Stewart: Aereo: We know from precedent that a cable system was supposed to be covered by public performance, but not a seller of rooftop antennas.  Wanted to know which this was more like.  People had different answers; we had our brief about our reasons, but it came down to gut instinct.  We filed the brief we did b/c gov’t decisionmakers felt it was more like cable, and the Court majority agreed. There was no complex statutory language you could turn to in order to make the choice b/t competing paradigms.  Not fascinating as a legal puzzle, but as factual one.

The dissenters in Aereo: this might be prohibited by some other aspect of the © law, and if not probably should be, but if they found a loophole so be it, that’s for Congress to fix.  Court majority’s reaction: it sure looked like a public performance in every respect.  This wasn’t a loophole but in fact the very thing Congress sought to cover.

Abramowicz: we didn’t see patent analogies. To what extent should areas of IP look at one another?  To what extent should IP look to contract law, tort law?  Is there a special relationship b/t © and patent?  Or is the first step to think about contract and tort b/c all new problems are old.

Stewart: depends on the type of problem you’re dealing with.  Inducement liability: if Congress had codified it differently, that’d be good evidence of a difference, but without that borrowing seems plausible.

Lee: Where the statutes differ on their face, that’s easy; where they share language, that’s easy; the harder ones are specific provisions that might, if stretched, have some analogous meaning—harder to do and more dangerous.

Abramowicz: Akamai: no inducement w/o primary infringement. 

Karshtedt: There are other ways to infringe besides physically doing things. Mental state isn’t even mentioned in inducement, though it’s correctly read in due to background common law.  Just b/c patent act doesn’t mention respondeat superior doesn’t mean that respondeat superior doesn’t apply, etc. Inducement can mean many different things—e.g., aiding and abetting.  We should impose higher mental states for making food for an infringer/providing a platform that can be used for an infringer v. making a device that can only be used to perform steps of a method claim.  Akamai was unanimous, unusually, in Fed. Cir. even though vicarious liability may not be the best fit. Take common sense intuitions about holding Akamai liable b/c it’s providing a service that can only be used to infringe. 

RT: you get some weird results that are path-dependent: TM and © vicarious liability differ, but why?

Stewart: Grokster considered two historical analogies: seller of equipment useful for almost nothing but infringement, and that = liability; or product suitable for both uses, but manufacturer specifically encouraged use for infringement, and that = liability. The Court really paid no attention to the fact that concepts of secondary liability have been codified in Patent Act as provision covering components specifically made for use in patented invention and as provision covering active inducement—striking that there was no attempt to get lessons from that.

Another thing—Court has a very strong recognition of the fact that a lot of tech can be used in infringing or noninfringing ways; in many instances vendor can confidently predict infringing and lawful use. Court leery of infringement liability in those circumstances.

RT: responses of litigants: Scale/ inability to control design through traditional law (e.g., creator of Bittorrent, which nobody thinks is liable for inducement, but nonetheless enables a lot of infringement); related move to admin/new forms of lawmaking/non-law making w/ICANN, copyright strike system, etc.; other attempts to police design or behavior on platforms; moves in Europe where they don’t care about the common law.  Consider hydraulic effects of making rules in common law reasoning manner.

Lee: inducement claims in patent have proliferated v. 15 years ago.  Why?  Claims litigated today were drafted 15 years ago; struggling to address new inventions.  But also particularly in the US, litigating an inducement claim, even w/additional burden of showing some level of culpability, is simpler and potentially more lucrative, b/c you’re going after one defendant but the acts of direct infringement are those of other parties w/a larger revenue base than the actor you focus on.

Jonathan Band: Scalia’s Aereo dissent spent a lot of time criticizing the majority for not identifying a volitional actor—the individual or Aereo.  Majority was very cagey; assumed that Aereo was a volitional actor but didn’t use the word. That’s led some litigants to say that Aereo got rid of the volition requirement.  Perfect 10 said volition still exists.  Why was the SCt so averse to using the word, and is it significant?

Stewart: Can’t remember ever hearing volitional as a magic word that would help you to determine whether a particular entity was subject to infringement liability. We didn’t frame the issue that way, but not from conscious shying away; that just wasn’t the most natural way of describing what was going on.  In the context of a cable operator, there are two volitional actors: the cable operator itself making certain choices about how machinery will work and what channels will be available, and then to get a program transmitted the person in the house has to adjust the channel; both are volitional. The initial determination about lack of liability for cable/Congressional override—not naturally explained as a disagreement about volition, but rather as what kind of volition counts. Same is true in Aereo: both are making volitional choices.  Dispute b/t majority and dissent was whether Aereo did enough to make it the public performer.

RT: my realist answer is Dropbox.  If you don’t say volition, you don’t have to explain why Dropbox isn’t exactly the same as Aereo.

Karshtedt: Sleepwalking as question of volition, or being dropped off drunk in a public square and then getting arrested for public intoxication; to say that Aereo didn’t engage in volitional conduct is weird. The question is whether your conduct is sufficient for direct or indirect liability and that’s a judgment call. It’s volitional to make a product, but is that enough? 

Lee: if you’re a patent owner today, filing in Germany will get you a decision in 9 months; filing in Germany, Netherlands, and ITC is the strategically optimal choice. It’s a commercial question b/c these tend to be big markets; you have to enforce your rights in each market.

Many companies move all their products through the Netherlands for tax reasons; that is what makes the Netherlands a key jurisdiction.  German courts think they’ve done a good thing by attracting IP litigation.  In China, now seeing a switch in enforcement as well.

Q: is state of mind evidence for inducement available? [May differ as between © and patent, given DMCA for © and lack of registration requirement.]

Lee: clearly a heightened standard, useful at JMOL and on appeal; courts looking at jury verdict are thus more willing to look at the evidence.

Q: does claiming actually provide more certainty or just supposed certainty?  The original idea of peripheral claiming would be requiring all elements + that the accused device/etc. do what the invention does; Fed. Cir. has abandoned the second part as the disfavored reverse doctrine of equivalents. Would that be better?

Lee: compared to other jurisdictions, our juries and judges, even at the Fed. Cir., are just bright people hearing about the claims. They get inventions in two ways: claims in literalistic fashion where judge tells them what the claims mean, but they also always get the narrative of how the invention was made, the problem to be solved, how the inventor did it, as well as the narrative of how the infringing product was developed. Element by element infringement analysis is more predictable/precise than other systems, but it’s important to remember that juries/judges get all that in a narrative context communicating much of the essence of the invention as well.

Karshtedt: so is Germany central claiming?

Lee: (1) yes; (2) litigating to a court appointed expert selected by the judge; (3) most important thing about Germany is that it’s a little bit East Texas/Delaware—on the margin, it’s better to be the patentee than not.

Q: Avoidance/evasion for patent inducement: can there be inducement when you believe you’re engaging in legal conduct b/c the patent is invalid?  Opportunism goes to intent. But intent to do what?

Stewart: another area in which language of the statute didn’t solve the problem. Court could have drawn the line in various places.  Could mean “actively/deliberately brings about conduct that turns out to be infringing” v. “intended to infringe/knew about the patent.”  Court rejected the former.  We unsuccessfully advocated to draw the line b/t knowledge of the patent v. knowledge of infringement; Court requires knowledge that the conduct itself was infringing.  Dissent’s argument: if you go this far, you should require knowledge that what you’re inducing is illegal, and if you think the patent is invalid you don’t know it’s illegal. Court thought that tilted too far b/c illicit intent is too difficult to prove; court also referenced general principal that ignorance of the law is no defense.

Karshtedt: Some problems in PSM debate may have come from Fed. Cir.’s narrowing of experimental use defense.  Still, damages would be pretty low in such cases; nonetheless it increases pressure to invalidate research based patents.  Maybe revisit that.

Harvard & GW Law Conference, Intellectual Property, Private Law, and the Supreme Court: panel 1

Opening Remarks

Hon. F. Scott Kieff, U.S. International Trade Commission

Grokster required a heavy lift for those heavily oriented to positive law, b/c SCt took inducement—a doctrine in the patent statute, but absent from the otherwise very detailed © statute, and root and branch bring it over, but what drove that was the straightforward business appeal to Grokster’s investors acknowledging the appeal of infringement to its customers.  Private law is designed to be responsive to business results. Limelight is the same doctrine in patent; the key question was divided/joint infringement and SCt again acted unanimously.  One private law theme for Limelight: defective formation corporate law Q: group of folks get together to form a corporation but somehow overlook the corporate formalities. The result is, they’ve probably created a headache under state law—joint and several liability for torts and contracts of the partnership.  Straightforward business approach.  [I think I missed his point b/c I don’t speak patent.]  ITC Clear Correct case about 3D designs.  A business approach would have gone a very long way.  Try to make a private law oriented argument: a straightforward anticircumvention argument. The only reason this business model was bifurcated to run over the internet is that it started w/infringement that got enjoined; then the business split itself to import the models and have 3D printers.

You can respond w/parade of horribles about cosmetics, pharmaceuticals, orthotics, taillights for automobiles—entire market would change. On the flip side, you won’t trap innocent infringers b/c none will be infringers. You’re just updating for new tech, but these techs existed 100 years ago.  INS v. AP: electronic transmission in US is unfair competition.  Ben Hur: taking a physical book and turning it into a new medium, movies.  Remind us: each case allows us to think about private law approaches’ interaction w/IP.

The Nature of IP

Moderator: Prof. Ruth Okediji, University of Minnesota Law School

Prof. Henry E. Smith, Harvard Law School: Why private law/IP?  Concrete cases, historical and current through private law lens, they’re better as IP cases then conventionally thought to be.  People think private law = property all the time, and that’s not the case.

INS v. AP, eBay v. Mercexchange, and patent v. copyright.  INS v. AP: Held up as a Frankenstein’s monster of potential property rights generated in a free-floating way.  But if you read it all the way through, there’s material for thinking that but also a lot else going on. It’s a classic equity case.  Court says over and over it’s quasi-property, doesn’t bind the world. Let’s take that seriously.  Antecedently we have to take equity as a concept seriously.  Does that make it even worse?  No: equity cases in that period featured presumptions, constraints, rules of thumb, intersection w/commercial morality that didn’t make it free-floating exercise in Lockean fairness or unconstrained policy analysis.  As an equity case, it makes more sense, though you can still disagree; it’s really an unfair competition case.

eBay: Another equity case; cobbled together a test that was different from traditional test that emphasized more presumptions, good faith, and undue hardship.  The traditional approach based on the idea that there were situations of repeated violations/irreparable harm that got us most of the way to injunction but then we’d pull back if there was good faith + disproportionate hardship. Tailored to the idea of opportunism. If the motivation was trolls, makes sense to focus on opportunism/unfair surprise.  Fewer injunctions may be good, but a test that doesn’t turn on good faith/undue hardship will have a lot of mischief—the truly traditional test would do better if the problem is really trolls.  [I want to hear him talk about the tax evasion/tax avoidance distinction that arguably mapped better onto Aereo than other analogies. Or Kozinski on how IP rights emit no penumbras.]

IP regimes are not all equally property like.  Patent law is more property like; Patrick Goold has been writing about how copyright is more tort-like. Patent—abstracted from use, more like trespass. Idea of differing property-ness is important. These issues are still relevant: hot news and misappropriation claims now more than ever. eBay is wreaking havoc in the federal courts.  Private law lens can add a lot to the mix.

Aaron Cooper, Business Software Alliance (former Counsel to the Senate Judiciary Committee): Incentives and fundamental fairness—instinctively we feel that if we create something, others shouldn’t be able to take it.  AIA: shift in review of patents post-grant.  New system is more adversarial for post-grant review after issuance; after 9 months, you can only challenge on limited set of grounds.  Certainty for patent owners, business owners, users.  Certainty works well for everyone (but bad actors)—patent w/50% chance of invalidity is not good for anyone.

Patents and © are the only rights mentioned in the original Constitution.  [OK, if you say so, though I kind of thought the restraints on states’ abrogation of contracts, ex post facto laws, etc. were mandatory and ©/patent were optional.]  That has real ramifications in what congress does, v. trade secret/TM b/c those rely on Commerce Clause.  Many members of Congress view Commerce Clause scope as having gone too far. New trade secret law has interstate nexus requirement that is narrower than SCt would allow.

Donald B. Verrilli, Jr., Munger Tolles & Olsen LLP (former Solicitor General of the United States):

Once it had been determined that an invention qualified as IP, SCt will refer to private law notions and talk about the issues before the Court in property terms, as in Festo or Nautilus—use language of property right, drawing on private law concepts/analogy to the deed. We want to get the incentives right by creating enough of a property interest but not so much that we stifle innovation.

In whether patentability exists: No Lockean notion of entitlement to fruits of labor.  May take a lot of work to identify/isolate plant, but that doesn’t entitle you to a property right in Myriad.  Gov’t isn’t asserting its own interest over a thing, but rather leaving it open and uncontrolled.  Private law concepts of defining property don’t seem to be much use b/c courts are worried about tilting in Lockean direction rather than striking the right policy balance.  Seems like an interesting contrast to him.

Prof. Robert P. Merges, University of California, Berkeley School of Law: IP is property, but property-ism isn’t property absolutism.  Institution of property is much more flexible and nuanced than a lot of the critics of IP would say. Does eBay make patents “less than property”?  No. Analogies: encroachment/forced sale/conversion where lots of value has been added.  We have now over-solved the problem of trolls, as if we treated a headache with ibuprofen and aspirin and scotch. That’s led to the §101 cases that are fundamentally off track. The reason you can’t locate good property reasoning in those cases is that they’re sui generis. The remedy driven view of property is too limited.  The real action in eBay is old equitable concepts of hardship, good faith, etc.

Usual role of the state: passive enforcement of private bargains; role of state is always to grant the rights but w/patents that’s more visible b/c the right is more complicated.  Basic aim: identify rights, then let owners loose on the marketplace.  Occasional rule: insure legitimacy of market transactions; prevent undue leverage/undue hardship in the market.  

eBay within patent law: 75% of cases still get injunctions; where you don’t, tend to have the eBay concurrence factors indicating that there’s undue leverage.

[I took a phone call]

Verilli: Aereo has a tentative quality: we aren’t saying anything else is public performance etc.  Lacks same confidence w/IP as w/other areas it has handled.

Cooper: Figuring out the contours of the property right v. figuring out level of enforcement. Aereo, more than patent cases, looks like I know it when I see it, and so does INS v. AP.  There are words around it to try to provide some structure for lower courts, but it’s still Stewart’s obscenity.

Okediji: Private law as a basket of tools. Courts are more confident when they think they’re targeting bad actors.  Has the IPR system actually provided certainty for property owners? The investment in innovation took place long before the IPR stage.  AIA changes may give us better stronger patents, but would that really help the property interests of those investing in innovation in the first place.

Cooper: ideally, we’d make sure that the terms were as clear as possible when granted.   

Okediji: we’ve gotten rid of formalities in ©; Rebecca Tushnet argues that the TM registration system isn’t very useful; do we need more formalities or fewer?

Merges: it was a bad time to do away with formalities, given the rise of the internet and the need to track rights.  When we have a way to track individual property rights that’s relatively costless, it’s good.  TM, patents: I disagree that IP is regulation, but the differences b/t IP and real property is more complex system of registering, maintaining, and contesting rights, b/c mapping contours of idea is inherently more complex and overlapping than w/real property. Ideal division of labor b/t initial examination and post-grant review for all 3 (not trade secret? RoP).  PTAB/high volume of IPRs shows that AIA was right that people wanted a cheaper way to quiet title. We may need corrections in IPR review, but it’s cheaper than district courts, which gets rid of more nuisance suits/weeds out patents.

Prof. Lemley’s idea of no examination: that’s one of the bigger failures b/c people want more clarity, fewer cases in district court. But ½ of Fed. Cir. caseload is reviewing PTAB decisions, a big change in 5-8 years.  Optimal division b/t registration, post-grant review, and rare district court determination of validity. We should think about that as system design. Once you have that right out there, it becomes a private law system.

Smith: registries are insufficiently appreciated across the board in ©.  Registries are particularly important in areas where there are a lot of subsequent transactions—how central registration is in certain areas of property—land and company registries are important.  Including how registries should be organized, public and private.  Recommends book by Benito Arruñada, which I have just ordered.

Unrelated cy pres recipient and disfavored coupon offer doom settlement approval

Hofmann v. Dutch LLC, No. 14-cv-02418, 2017 WL 840646 (S.D. Cal. Mar. 2, 2017)

The court rejected plaintiff’s unopposed third motion for preliminary approval of the proposed class settlement in this case involving allegedly false “Made in the USA” claims for jeans.  The initial proposed settlement provided for: (1) $20 worth of e-gift certificates for each of the class members; (2) $250,000 in cy pres awards; and (3) up to $175,000 in plaintiff’s attorney’s fees with a “clear sailing” provision attached.  The court didn’t like (1) that the e-gift certificates effectively constituted coupons because they required class members to pay out of their own pocket before they could redeem them; (2) that the cy pres award failed to meet the objectives of the underlying consumer protection statutes; and (3) that, when considered in conjunction with the other provisions of the proposed settlement, the “clear sailing” provision “created at least a danger of collusion during the settlement negotiations which is not refuted by the record.”

For the second attempt to propose a settlement, Hofmann proposed to add one denim tote bag ($128 retail value) to the initial settlement, but the court found that the problems remained.  This third attempt added “multiples of $20.00 corresponding to the number of units of Class Products purchased during the Class Period” to individual e-gift certificates and injunctive relief.

The court was not impressed.  Under California statutes, a product may not be represented as “Made in U.S.A.” if the product itself “or any article, unit, or part thereof, has been entirely or substantially made outside the United States,” or if the product or its components were “entirely or substantially made, manufactured, or produced outside the United States.” That a product is designed, engineered, finished, or otherwise processed in the United States does not make “the foreign work performed on the part unsubstantial.”  Hofmann alleged that the “made in USA”-labeled jeans she bought contained foreign-made buttons, rivets, zipper assembly, thread, and/or fabric; the defendant voluntarily revised its label.

“Given these relevant legal standards and the record available to the Court, the Court observes that Plaintiff’s case is relatively strong,” though there had been no rulings on dispositive motions or factual disputes, and the risk, expense, complexity, and duration of any litigation, in addition to the risk of maintaining class certification throughout the suit, weighed heavily in favor of settlement. In particular, it’s difficult for plaintiffs in false advertising cases to calculate and prove damages for the entire class. Questions about how to quantify the consumer impact of a “Made in the U.S.A.” would pose “a formidable challenge” to Hofmann’s case.  Other factors also pointed in favor of settlement, given counsel’s experience in consumer class actions.

Nonetheless, the problems remained, chief among them the cy pres award.  “An award that does not target the plaintiff class or that fails to provide reasonable certainty that any member will be benefitted by the award, will not satisfy the fairness inquiry.”  The current proposal was that defendant would donate $200,000, over four years, to a scholarship endowment at the consumer science department of a not-for-profit institution of higher education and an additional $50,000 to Step Up Women’s Network.   But these targets didn’t have a sufficient nexus to objects of the underlying statutes allegedly violated in this case.  “The chosen charities do not promote consumer protection. Rather the chosen charities’ missions are: offering mentorship programs to at risk teenage girls [Step Up]....” “Continuing to repeat the fact that Defendant’s clientele is mostly women does not somehow make Defendant’s charitable donation to Step Up legally sufficient. The Ninth Circuit’s jurisprudence on cy pres awards is not optional or vague, but binding and unequivocal.”  An “unnamed, unidentified scholarship endowment at a consumer science department like the one at California State University, Northridge” was also deficient, because “making a scholarship to one or two individuals who intend to study consumer science, does not target the plaintiff class and fails to provide reasonable certainty that any class member will be benefitted by the award” and they didn’t identify a specific cy pres beneficiary whose qualifications might be evaluated.

The gift codes were also a problem, as coupons that would require class members to pay their own money before they can take advantage of the coupon. “Both the courts and Congress generally disfavor coupon settlements.” Even in multiples, the gift cards were worth significantly less than their face value, as compared to the non-frivolous claims they were settling.  Even with the tote bag added, “Plaintiff’s repeated failure to fashion a settlement that comports with its concerns, only gives the Court more reason to be suspicious of whether Plaintiff’s counsel are acting in the interest of the class members.”

The tote bag does have transferable value (retail value $128), and plaintiff’s counsel  argued that the tote bag was is worth the eight to ten cents that arguably represented the difference between the American-made parts and the foreign-made parts in the jeans.  But, of course, that amount wasn’t the essence of the lawsuit; it was the allegedly false labeling. The court was skeptical that the tote bag providesd value to the class members, who bought jeans, not a tote bag. “And there is no evidence in the record explaining the real economic value of the tote bag, the likely resale value of the tote bag, or whether the class members are likely to find value in the tote bag.”  There was just too little information before the court, though plaintiff would be given another chance to prove that the settlement was in absent class members’ interests.

The permanent injunction didn’t add anything because of defendant’s voluntary discontinuance.  Also, the “clear sailing” provision stating, in relevant part, that plaintiff’s attorneys would seek no more than $175,000 in fees and the defense would not oppose the fee petition was not a bar to settlement, but it was a sign of some collusion/a red flag. The settlement as a whole had to stand or fall together; for now, it fell.

"imported" Sapporo isn't confusing as a matter of law given clear disclosure of Canadian origin

Bowring v. Sapporo U.S.A., Inc., 2017 WL 902151, --- F.Supp.3d ----, No. 16-CV-1858 (E.D.N.Y. Feb. 10, 2017)

Bowring sued Sapporo under the GBL and similar state law claims, alleging that it created a misleading impression that Sapporo beer is a Japanese import, when in fact, it is produced in the United States and Canada. While Sapporo beer was originally brewed in Japan in 1877, all Sapporo now sold in the United States is brewed in La Cross, Wisconsin, or Guelph, Ontario, Canada.  Bowring pointed to Sapporo’s TV ad with imagery of a “Japanese landscape being traveled into American landscape,” ending with the slogan “The Original Japanese Beer;” its slogans “Sapporo – the Original Japanese Beer” and “Japan’s Oldest Brand;” and an image of the North Star, a “symbol of pioneers in the area of Sapporo” on labels. Canada-produced beers also include the word “Imported” on the front label.

Each imported can or bottle also adds: “Imported by Sapporo U.S.A. Inc., New York, NY” followed by “Brewed and canned [or bottled] by Sapporo Brewing Company, Guelph, Ontario, Canada” in darker contrasting font on the front label for bottles and on the side or back of cans. The labels for beers brewed in Wisconsin don’t use the word “Imported,” and include the following statement on the front, back, or side of the container: “Brewed and Bottled [or Canned] by Sapporo Brewing Company, La Cross, WI for Sapporo U.S.A., New York NY” in visible, contrasting print.  Bowring alleged that independent stores and restaurants display Sapporo in the “imported beer section” and on “imported beer lists.” The complaint showed several menus listing the beer as, for example, “Sapporo Japanese Rice Lager 5%,” and “Sapporo (Japan).”  Surdyk’s Liquor and Cheese Shop in Minneapolis, Minnesota used the text: “Sapporo Draft 6pk bottles from Japan.”

Usually, whether a reasonable consumer would be confused is a factual question unsuitable for the motion to dismiss stage. Here, however, the court found the claims not misleading as a matter of law.  “In evaluating the efficacy of .. a disclaimer, courts consider factors such as the font size, placement, and emphasis. Courts routinely conclude that the presence of a disclaimer, considered in context, precludes the finding that a reasonable consumer would be deceived by the defendant’s conduct.”  As applied to this case, “Sapporo accurately and clearly discloses the product origin in either Wisconsin, USA or Ontario, Canada on its labels; those products labeled ‘Imported’ are in fact imported from Canada; use of alleged Japanese imagery and the trademarked North Star symbol are not misrepresentations, but a tribute to the history and heritage of the company; and Sapporo labels do not include the word ‘Japan.’”

Ackerman v. Coca-Cola Co., No. 09 CV 395 DLI RML, 2013 WL 7044866, at *4 (E.D.N.Y. July 18, 2013), involved a challenge to “vitaminwater” product, alleging that it misled consumers to believe the beverage was comprised of vitamins and water, obscuring its significant sugar content. The court refused to dismiss, considering slogans such as “vitamins + water = what’s in your hand,” as well as the name of the product itself. The sugar content disclosure on the nutrition label “[did] not eliminate the possibility that reasonable consumers may be misled” regarding the contents. But here, Sapporo disclosed its product origin in a standalone statement, unlike the line listing the sugar content on the vitaminwater nutrition label. “Imported” was a truthful statement, unlike “vitamins + water = what’s in your hand,” and it was qualified by the “visible disclosure statement specifying the beer’s origin.”   The court also distinguished Marty v. Anheuser-Busch Companies, LLC, 43 F. Supp. 3d 1333 (S.D. Fla. 2014), where Beck’s beer, once from Germany but produced in Missouri, used slogans including “Brewed under the Germany Purity Law of 1516” coupled with a vague disclaimer in white font on a silver background making it physically “difficult to read.”  “Unlike the cases cited by Plaintiff, the disclosure statement on Sapporo appears in contrasting, visible font, and states in clear language where the product is produced.” This defeated all plaintiff’s common-law and statutory claims. 

Court trebles damage award based on willful false advertising, over advisory jury verdict

Concordia Pharmaceuticals, Inc. v. Method Pharmaceuticals, LLC, No. 3:14CV00016, 2017 WL 837688 (W.D. Va. Mar. 2, 2017)

A jury found that Method engaged in false advertising; that Concordia was entitled to $733,200.00 in actual or compensatory damages; and that the false advertising wasn’t willful. Concordia subsequently filed a motion for JMOL or a new trial on willfulness, a motion for enhanced damages and prejudgment interest, and a motion for attorneys’ fees and costs.

Concordia acquired the Donnatal line of products from PBM Pharmaceuticals, Inc.  Donnatal is a line of prescription combination phenobarbital and belladonna alkaloid (“PBA”) products used in the treatment of irritable bowel syndrome and acute enterocolitis. (Side note: wow, that is quite a combination.  Who knew it (allegedly) had therapeutic properties?)  Donnatal was first introduced in the 1930s, before safety and efficacy showings were required; its safety has now been FDA-approved but not its effectiveness.  In 2011, generic manufacturers began to leave the market, leaving Donnatal as the only line of PBA products available.  Method wanted to change that.

Method is a wholesale drug distribution company owned by defendant Tucker, and Christopher Boone served as the company’s VP of operations during the relevant period.  Instead of a sales force, Method uses pharmaceutical databases to promote its products. Its business strategy is to ensure that its products are “linked” to existing drugs in the databases, which are used to determine whether generic substitutes are available for brand name products.

In 2013, Method began making plans to market a new PBA product that would be pharmaceutically equivalent to Donnatal, named Me-PB-Hyos. However, the company Method approached to make it never performed the stability testing necessary to develop Me-PB-Hyos, and no finished product was made.   Still, in March of 2014, Method moved forward by using the product labels and package inserts for Donnatal tablets and elixir to create labels and inserts for Me-PB-Hyos tablets and elixir.

“Method then proceeded to list the nonexistent Me-PB-Hyos products with two of the major pharmaceutical databases, Medi-Span and First Databank,” taking pains to have them liked to Donnatal at lower listed prices, which prices were supposedly effective as of April 2014.  (Later, the Medi-Span listing showed a marketing start date of June 2014, which Method knew.)  Medi-Span duly linked the products, though First Databank refused without validation from DailyMed, a website operated by the National Library of Medicine. Method therefore sent DailyMed the product labels for the nonexistent Me-PB-Hyos products.  After successfully listing Me-PB-Hyos with DailyMed, Method resubmitted the product labels to First Databank, indicating that its planned launch date was June 1, 2014, a day that had already passed, although it knew that it didn’t have any products ready and that its information would be relied on by members of the pharmaceutical industry. The products were listed in First Databank’s pharmaceutical database in early June 2014.

After this lawsuit was filed, Method contacted the manufacturer to whom it had initially reached out and indicated that it knew that the manufacturer had not started anything on the project, and that Method had decided that it “might be best to bail on [the] project.” But that same day, in response to an inquiry from Medi-Span, Method advised Medi-Span that “Me-PB-Hyos is an active product and will be available to ship by November 15, 2014.” Method also confirmed that “[t]he pricing and label ... are current and correct.”   The products never launched, and a bit later, Medi-Span removed the listings for the Me-PB-Hyos products, while First Databank moved its listings from active listings to archived listings.

After the listings, Donnatal prescriptions and unit sales decreased. The parties disputed the cause; Method presented evidence indicating that a number of other factors contributed to the reduction in Donnatal unit sales, including significant increases in the prices of Donnatal products. Concordia spent $885,015.00 on a coupon buy-down program to combat the negative effects of the listings for Me-PB-Hyos; it also revamped its marketing strategy and engaged in increased promotional efforts targeting pharmacies and prescribers.  The court excluded Concordia’s expert witness Hofmann’s lost profits calculations, which attributed all of the measured lost profits to the database listings for Me-PB-Hyos.

The court first concluded that the jury’s verdict on willfulness was advisory, not binding, making Concordia’s motion for JMOL or a new trial moot.  Instead, the court found that Concordia should recover enhanced damages, which are allowed, “according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount.”  Such damages must be compensatory, not punitive, even though willfulness is a consideration in whether to award them.  [Weird, statute. Very weird.]  The Fourth Circuit considers: “(1) whether the defendant had the intent to confuse or deceive, (2) whether sales have been diverted, (3) the adequacy of other remedies, (4) any unreasonable delay by the plaintiff in asserting his rights, (5) the public interest in making the misconduct unprofitable, and (6) whether it is a case of palming off.”

The court found that defendants acted willfully, or at a minimum with indifference to the truth or falsity of their statements, but said that even if it found otherwise it would enhance damages.  In particular, sales diversion was shown by the decline in Donnatal sales and Concordia’s expenses mitigating the impact of the Me-PB-Hyos listings. Thus, the court was convinced that the jury award didn’t provide adequate compensation.  Nor would an injunction adequately remedy Concordia’s lost sales.  Concordia didn’t unreasonably delay, and there was a public interest in making the misconduct unprofitable, despite the defendant’s statutory right not to be assessed a penalty. Thus, the court trebled the actual damages to nearly $2.2 million.  The court declined to award prejudgment interest, given the trebling of damages. 

However, the court—applying the Octane Fitness standard—found that this case wasn’t “exceptional” for the purpose of granting fees.  The defendants’ position on liability wasn’t frivolous or objectively unreasonable; before trial, the court denied Concordia’s dispositive motions on the issue of liability, both at the summary judgment stage and at the close of the defendants’ evidence. Nor was the case litigated unreasonably. Willfulness, standing alone, “is no longer sufficient to show that a case is ‘exceptional.’ ”  Nor did deterrence or compensation concerns merit a fee award, given the trebling of damages.

"same quality as Made in USA" is not puffery, says magistrate

University Loft Co. v. Blue Furniture Solutions, LLC, 2017 WL 876312, NO. A–15–CV–826 (W.D. Tex. Mar. 3, 2017) (report and recommendation of magistrate judge)

University sued Blue alleging false advertising and trademark infringement under the Lanham Act, unfair competition under Texas and Florida common law and the Florida Deceptive and Unfair Trade Practices Act, and tortious interference with prospective business relationships. Blue allegedly falsely claimed that that: (1) it offers Chinese “high quality products made exactly as ‘Made in USA’ products”; and (2) it “is able to achieve low prices and fast delivery on such high quality products, because of the intimate relationship between the manufacturer and Blue’s president Jeff Zeng, and Blue’s understanding of how the local government in China operates.”  University alleged that the quality was not equivalent to “Made in the USA” products, and that the lower prices were due to evasion of customs duties, because Blue mislabeled its products as “steel” to avoid additional anti-dumping duties that are required for “Wooden Bedroom Furniture” imported from China. Finally, University alleged that Blue’s use of the mark “LOFT” for one of its furniture lines infringes on University’s registered and common law word and design trademarks.

The magistrate rejected Blue’s puffery argument.  As to the first statement, Blue argued that the statement was non-actionable in the context of other claims in the challenged article that Blue provided either “high quality, high price,” or “low quality, low price” products. But this explanation appeared pages before the allegedly misleading statement.  The relevant paragraph read:

The ability of my company to not ever have to worry about these issues and properly provide exactly what we had indicated we will, when we will, is amazing. Our process is very smooth and we continue to make our clients happy with the quality of our product. The price is always lower than the amount the client has to spend and they receive exactly what they ask for. When working with my owner, understanding that China has many amazing, high quality products made exactly as “Made in the USA” products is important. The only difference is that China offers these products for a much lower price.

The judge found that this statement “goes beyond mere puffery.”

Likewise, the statement that Blue’s low prices were based on a special relationship with the Chinese government was factual, and thus falsifiable.  Nor did the claim rely on an illegitimate attempt to bring a private claim based on evasion of the Tariff Act; University wouldn’t have to prove anything about dumping to prove  its claim, only that Blue’s manufacturer didn’t have a special relationship with the Chinese government; the assertion that the prices were lower because of tariff evasion could bolster the claim, but the claim itself wasn’t based on tariff evasion.  This reasoning also allowed the state law unfair competition claim to survive, and the magistrate recommended not deciding the choice of law issues as to whether Florida or Texas deceptive trade practice statutes applied.

Trademark infringement: Blue argued that University’s registration explicitly excluded the furniture that Blue Furniture sells under the allegedly infringing mark. University’s registration for LOFT explicitly excluded loft beds and furniture used with loft beds. (Imagine that.) Blue argued that all its furniture could be classified as furniture “used with” loft beds, because “loft furniture could include any furniture found or used in an upper room or floor.” The magistrate understandably termed this argument “nonsensical,” given that any type of furniture could potentially be placed in a “loft.” Plus, the scope of the registration didn’t go to protectability but rather to infringement.

Reading list: IP in the criminal justice system

Rebecca Wexler, Life, Liberty, and Trade Secrets: Intellectual Property in the Criminal Justice System

Abstract

From policing to evidence to parole, data-driven algorithmic systems and other automated software programs are being adopted throughout the criminal justice system. The developers of these technologies often claim that the details about how the programs work are trade secrets and, as a result, cannot be disclosed in criminal cases. This Article turns to evidence law to examine the conflict between transparency and trade secrecy in the criminal justice system. It is the first comprehensive account of trade secret evidence in criminal cases. I argue that recognizing a trade secrets evidentiary privilege in criminal proceedings is harmful, ahistorical, and unnecessary. Withholding information from the accused because it is a trade secret mischaracterizes due process as a business competition.

Reading List: Brian Frye, Invention of a Slave

Reading list: Brian L. Frye, Invention of a Slave

Abstract:

On June 10, 1858, the Attorney General of the United States issued an opinion concluding that a machine invented by a slave could not be patented, because neither the slave nor the slave owner could make an oath or affirmation that they were the inventor of the machine, as required by the Patent Act of 1836. The Attorney General’s opinion caused the Patent Office to deny at least two patent applications, one of which was filed by Senator Jefferson Davis of Mississippi, who later became the President of the Confederate States of America. Notably, the Confederate States Patent Act of 1861 provided, inter alia, that slave owners could patent inventions and discoveries made by their slaves.
 The Attorney General’s opinion seems to have relied on the fact that a slave was not a legal person and therefore could not make an oath or affirmation. But it may also have reflected an ideological dispute over whether slave owners should be entitled to benefit from the intellectual labor of their slaves. Ironically, the Attorney General and the Commissioner of Patents used the ideology of slavery to prevent slave owners from patenting the inventions of their slaves, and the Confederate States of America ignored the ideology of slavery in order to enable slave owners to patent the inventions of their slaves. In this way, a largely forgotten patent claim may offer a unique perspective on the politics and ideology of slavery in the antebellum United States.

Terms and Conditions

Reading list: new comic book, Terms and Conditions: transformative work of the day, using iTunes’ terms and conditions combined with illustrations in the style of various comic artists.

Steve Jobs as Joe Cool

Tumblr here.

Clearblue's corrective advertising not so clear

Via Alex Roberts:

As she said, only a lawyer could love it--also that URL; who'd type that in?

Another fake discount allegation survives challenge to plaintiff's theory of harm

Munning v. The Gap, Inc., 2017 WL 733104, No.16-cv-03804 (N.D. Cal. Feb. 24, 2017)

Munning bought a pair of swim trunks from the Gap Factory retail website, and one dress and one sweater from the Banana Republic Factory website, each advertised as being on sale, e.g. “$24.99 32% off/Now $16.99.”   Munning alleged that the prices she paid were unchanged for the entire week following her purchase; one month later, the price of the swim trunks increased by a dollar, while the price of the dress remained unchanged. Thus, she alleged, the three items she purchased “were never sold or offered for sale at the non-discounted, base prices listed on Defendants’ websites” as part of a uniform scheme. She brought claims under California and New Jersey law.

The court found that Munning stated a valid NJCFA claim. “By alleging that products on Defendants’ websites listed crossed-out prices followed by a percentage discount and a new price, Plaintiff has provided enough facts such that it is plausible a reasonable consumer could view the prices as being deceptive.”  She also needed to show an ascertainable loss, though that loss need not be monetary nor pled beyond a reasonable degree of certainty.  There are generally two ways to show ascertainable loss: (1) the benefit-of-the-bargain rule, or (2) the out-of-pocket rule.  Munning sufficiently alleged an out-of-pocket loss by alleging that she wouldn’t have bought anything if she hadn’t believed in the discount.  This was acceptable, even if what she got wasn’t worthless.

Because of that predicate violation, Munning also successfully alleged a violation of the New Jersey TCCWNA, which requires a plaintiff to show that: (1) the plaintiff is a consumer; (2) the defendant is a seller; (3) the defendant gives or displays any written consumer notice or sign; and (4) the notice or sign includes a provision that violates any clearly established legal right of a consumer or responsibility of a seller.

However, Munning’s California UCL and FAL claims were dismissed because those laws provide only for equitable relief (injunctive relief or restitution), and Munning wasn’t entitled to equitable relief because she had an adequate legal remedy, having sufficiently pleaded claims for breach of contract and breach of express warranty, which would allow her to recover damages.

Reading list, good titles edition

Kacy Popyer. Note. CACHE-22: the fine line between information and defamation in Google's autocomplete function. 34 Cardozo Arts &; Ent. L.J. 835-861 (2016)

But why no publicly available copy, Cardozo Arts & Ent. L.J.?