University-adjacent is not university-approved in supplement ads

Obesity Research Institute, LLC v. Fiber Research International, LLC, 2018 WL 1001089, No. 15-cv-00595 (S.D. Cal. Feb. 21, 2018)

Despite the high-falutin’ names, the parties compete in the market for glucomannan dietary supplements. Glucomannan is a soluble-viscous fiber derived from the Konjac plant root used in weight loss supplements. The parties agree that numerous studies have shown that at least some types of glucomannan are effective for losing weight, but dispute whether different types, grades, places of origin, processing procedures, and/or characteristics, including viscosity, of the specific glucomannan products alter its effectiveness on weight loss.

ORI’s former products sourced glucomannan from another company, Shimizu. Currently, ORI sells its supplements branded as Lipozene, which is not manufactured with Shimizu’s glucomannan.  ORI (with a supplier) funded a study purporting to find significant weight reductions, of which 78% was fat, using Shimuzu-supplied glucomannan.  ORI references the study in promoting Lipozene, characterizing it as a “major university double blind study.” Lipozene’s packaging stated that there are “[n]o known allergens in this product.”

Shimizu assigned any false advertising claims it might have to FRI, as well as the rights to distribute its glucomannan. The court found that FRI had statutory standing under the Lanham Act to bring claims on behalf of Shimizu.  Though trademark claims require “an interest in the asset allegedly harmed,” under §43(a) standing is broader.  Under Lexmark, Shimizu had standing: it invested millions of dollars into developing its products, and created a relationship with FRI to serve as its newest U.S. distributor, largely because FRI was in a stronger position to “launch direct-to-consumer” products than Shimizu, given its location in Japan. Though it isn’t a direct competitor with Lipozene, Shimizu also distributes glucomannan and supplies glucomannan to FRI, who seeks to compete with Lipozene in the glucomannan supplement market. Thus, Shimizu likely suffered an injury to a commercial interest in reputation or sales and ORI proximately caused Shimizu’s injuries by using a clinical study analyzing Propol to sell an allegedly inferior glucomannan product. “Because a valid assignment allows for an assignee to ‘stand in the shoes’ of the assignor, the Court finds FRI has standing to proceed with Shimizu’s Lanham Act claim.   

FRI also showed standing to sue on its own behalf.  FRI’s declarations included testimony that “[a]s a direct result of ORI’s use of claims derived from the Propol® studies to sell an inferior product, FRI has been unable to make inroads into the direct to consumer glucomannan supplement marketplace.” Though FRI didn’t have a sale when it counterclaimed,

having a sale is not the sole mechanism for standing under the Lanham Act. The law is clear that a party does not need to show a loss of sales. Moreover, a lack of sales is consistent with FRI’s alleged economic injury that it was shut out of the glucomannan supplement market because of ORI’s false advertisements. Based on the evidence presented, a reasonable juror could find that FRI sought to enter the glucomannan supplement market, but found it was blocked from doing so in part by ORI utilizing a clinical study on its exclusive source of glucomannan.

Though the Court didn’t consider FRI’s post-counterclaim activities for standing purposes, its later market activities were consistent with its claims: it registered a website, launched a direct to consumer Propol, and made a sale.

Falsity: FRI challenged a bunch of ORI’s statements allegedly based on clinical studies; instead of studying Lipozene, the key studies (by Kaats & Walsh) evaluated Shimizu’s Propol-branded glucomannan, a distinct product. ORI disagreed, arguing that the product was the same and that it used the specifications from the Kaats Study as a guide and “floor” for the ingredients they ultimately chose. These disputes were best presented to a jury, so the court denied summary judgment.

ORI also advertised that the Kaats Study is a “major university study.” But the study was conducted by Dr. Kaats’s then-private clinical research organization. ORI responded that the study’s design was approved by Texas Women’s University’s IRB and that two of the named reviewers of the study were affiliated with two major universities—Georgetown University and the University of Texas.  Nope.  Kaats stated that he isn’t affiliated with a major university, that no university was involved in the measurements for the study, and that he does not consider the study a university study (and even told ORI to stop calling his study university sponsored).  There was no evidence that IRB involvement “transforms a study’s sponsorship or affiliation into that of the IRB,” or that a reviewer’s affiliation with a university allows the study to adopt that university’s affiliation or sponsorship.  FRI was entitled to summary judgment on the falsity of this claim.

ORI also advertises that, in the Kaats Study, the test subjects were “asked not to change their lifestyle” and “asked not to change their diet or exercise” and lost weight anyway. FRI argued that this statement was literally false because the test subjects were given no instruction—one way or another—as to their lifestyle, including diet and exercise. In fact, the study states that “participants were free to follow any diet/exercise plan of their own choosing.”  The court found literal falsity: ORI sought to communicate that study participants “were affirmatively asked not to change their diet and exercise, implying that any weight lost while taking Lipozene could not be due to a lifestyle change.” But that message is not true, although a jury could find it immaterial.

FRI also challenged ORI’s “pure glucomannan” claims such as “Take pure Glucomannan from the finest Konjac Plants and see results” and “Lipozene is made with 100% pure Glucomannan, which comes from the root of the Konjac plant.” Lipozene is made of a combination of ingredients, with the majority being glucomannan.  No reasonable jury could find literal falsity—the message was that Lipozine was “made with” glucomannan, not “made entirely of” glucomannan, and there was no evidence of actual deception, so that falsity claim was gone.

Finally, ORI claimed that Lipozene contains “no known allergens,” but FRI argued that it contained excessive sulfite levels, which qualify as a “known allergen” under FDA regulations. The court couldn’t grant summary judgment either way; FRI didn’t show that these FDA requirements should apply to ORI’s statement, and ORI didn’t show that the absence of “major food allergens” was the same as having “no known allergens.” A jury could find that this statement only applied to the commonly known major food allergies, such as nuts, milk, and other common allergies, or that it instead meant additional irritants, such as sulfites.

Deception: falsity and deception are linked; “[t]he expenditure by a competitor of substantial funds in an effort to deceive consumers and influence their purchasing decisions justifies the existence of a presumption that consumers are, in fact, being deceived.” FRI was entitled summary judgment as to the deception element of its Lanham Act claim for the “major university” and “no lifestyle change” statements.

Materiality: The court mostly declined to find that, as a matter of law, the challenged statements were material, but neither did ORI show immateriality. For the false-as-a-matter-of-law statements, “major university study” and “no lifestyle change,” FRI argued that false claims were presumed to be material, but the court disagreed, and anyway ORI rebutted such a presumption for the “no lifestyle change” statement by arguing that the difference between the true and false statements wasn’t material to a consumer. Though “extensive” empirical evidence isn’t required, FRI needed something.  Nor was “no lifestyle change” an “inherent quality or characteristic” of the product in the same way as statements relating to Lipozene’s product composition and proven effects on weight loss.  However, the court did find that no reasonable jury could find that “major university” was immaterial. “[A] ‘major university’ affiliation invokes a level of legitimacy and assurance for a consumer that would likely affect a consumer’s decision to purchase Lipozene,” which accounted for ORI’s desire to have a “university affiliated” study.

Although there was a genuine issue of material fact as to whether FRI and Shimizu were likely injured, they failed to show irreparable harm absent injunctive relief. Even assuming the Ninth Circuit would still presume irreparable harm from falsity [no], ORI rebutted the presumption, so the issue was best suited for a jury.

Crowning inglory: no trade dress in short-lived ads

EZ Pedo, Inc. v. Mayclin Dental Studio, Inc., No. 16-cv-00731, 2018 WL 934552 (E.D. Cal. Feb. 15, 2018)

EZ-Pedo sells “prefabricated pediatric zirconia crowns,” which are colorless, durable, all-ceramic crowns that mask disfiguration or stains on children’s teeth. Mayclin sells similar pediatric zirconia crowns under the business name Kinder Krowns.  EZ-Pedo sued over the copying of several ads it made from stock photos, but its trade dress claims failed.

EZ-Pedo used the “Beach Girl” ad at the 2014 annual meetings of the California Society of Pediatric Dentistry and the American Academy of Pediatric Dentistry; both organizations also featured the Beach Girl advertisement in their trade journals; and EZ-Pedo displayed the image on secondary pages of EZ-Pedo’s website. EZ-Pedo alleged that it stopped investing in this “trade dress” within four months after its first use, after discovering Kinder Krowns had used it in AAPD’s July 2014 print journal.

EZ-Pedo’s “Gears” design is in an ad that shows a photo of metal gears plaintiff downloaded from a third-party website; the photograph is placed beside the slogan, “engineered for a precision fit,” and Kinder Krowns allegedly copied it to advertise its “Less Prep” crown line on its company website, causing EZ-Pedo to abandon it after about a year.   The “Blue CAD” design depicts a computer-aided drawing of a deep-blue-colored tooth with visible contours. The image was created with 3Shape 3D Viewer, and deep blue is one of three default color choices.  The image was featured in print ads, trade-show banners, brochures, flyers and on its website. Kinder Krowns allegedly copied the Blue CAD trade dress to advertise its own line of “Less Prep” crowns.    

Beach Girl ads

Blue CAD images

Gears

Promotional flyers/ads could in theory be covered by trade dress protection; courts have said as much about a website’s “overall look and feel.” Nonetheless, the burden of establishing protectability is a serious one.  EZ-Pedo argued that its ads were inherently distinctive trade dress because each contains “beautiful, glamorous, fanciful, recognizable” imagery.  But it couldn’t meet the “demanding” standard; Wal-Mart cautioned against vague tests for inherent distinctiveness.  At least inherently distinctive trade dress requires “manifestly unique arrangements,” and a plaintiff can’t just point at an “overall look”; it must “articulat[e] the specific elements which comprise its distinct dress.”    EZ-Pedo’s claims couldn’t meet this standard.  For Beach Girl, adjectives like “unique” and “distinctive” weren’t sufficiently specific.  “As currently defined, the court and competitors remain in the dark as to what EZ-Pedo purports to own. Are competitors never to advertise using the same third-party stock photograph? Can they use the same photograph, but pair it with different text, logo and company information?” Vague descriptions may also cause “jurors viewing the same line of products [to] conceive the trade dress in terms of different elements and features” and so the verdict may drive from “inconsistent findings.”  

Nor was there a triable issue on secondary meaning. “Not one of its promotional advertisements was on the market for more than a year before the alleged infringements happened.” That was too short, especially given the lack of any consistent theme in the ads and indeed the drastic differences among them.  Nor were any of the ads ever placed on EZ-Pedo’s product or product packaging, “further weakening any association.”  And there was no direct evidence of any consumer meaning, let alone meaning to a substantial portion of consumers.  A vague, self-serving declaration from EZ-Pedo’s founder that “[t]he pediatric dentistry community has come to associate the Blue Crown CAD imagery with EZ-Pedo’s products. I know this...from specific conversations I have had with purchasing pediatric dentists who have stated they recognize the Blue Crown CAD as symbolizing our products,” was insufficient. So too with claims of “thousands” of ads distributed and “substantial time and energy” promoting the imagery. “[P]rominent display” in a trade journal “is not the kind of media coverage that shows the ‘enthusiasm and loyalty’ of plaintiff’s customers.”  

Sanderson can't chicken out of false advertising claims

Organic Consumers Assoc. v. Sanderson Farms, Inc., 2018 WL 922247, No. 17-cv-03592 (N.D. Cal. Feb. 9, 2018)

OCA sued Sanderson, a poultry processor, over ads that allegedly mislead consumers about the nature of Sanderson’s chicken products and farming practices. OCA and co-plaintiffs FoE, and CFS are non-profit organizations that “work to safeguard the rights and promote the views and interests of socially responsible consumers and farmers.”  OCA challenged claims that Sanderson’s chicken is “100% Natural,” has no “hidden ingredients,” and that “at Sanderson Farms, being 100% natural means there’s only chicken in our chicken.” In TV ads, two men wearing Sanderson Farms baseball caps make comments such as, “no antibiotics to worry about here” and “good, honest chicken.” But USDA testing found 49 instances in which Sanderson’s products tested positive for antibiotics, pharmaceuticals, and other unnatural substance residues, causing the plaintiffs to undertake efforts to warn customers and educate the public about the true nature of Sanderson’s products and chicken raising practices.

The court found organizational standing under the UCL and FAL, which is available where there is  “(1) frustration of [the plaintiff’s] organizational mission; and (2) diversion of its resources” to combat the challenged actions by defendant. OCA’s research into Sanderson’s farming practices and advertising, preparation of internal memoranda, strategy meetings, and coordination of a multi-organization consumer outreach plan diverted resources and staff time away from OCA’s policy and consumer education work on other issues.  So too with the other organizational plaintiffs.

The court also rejected Sanderson’s argument that state law claims challenging its advertising were impliedly preempted by the Poultry Products Inspection Act (PPIA) and Federal Meat Inspection Act (FMIA), given the congressional intent to provide uniform national standards for monitoring food producers and ensuring they do not mislead consumers as to the contents of meat products. Also, the USDA approved the “100% Natural” language.

But consumer protection laws “are within the historic police powers resting with the states and are therefore subject to the presumption against preemption.” There was no manifest purpose to displace them, and avoiding misleading advertising was consistent with the federal statutes’ aims to ensure quality and proper labeling. And USDA approval wasn’t enough to avoid misleadingness: “Label language is reviewed for technical and scientific accuracy. Yet common sense suggests even ‘language that is technically and scientifically accurate on a label can be manipulated in an advertisement to create a message that is false and misleading to the consumer.’”  Also, Sanderson’s ads included “images, representations, and language that go beyond what is included on the USDA approved label.”

Plausibility: Sanderson argued that a reasonable consumer wouldn’t interpret “natural” as stringently as the plaintiffs propose or be surprised to learn that Sanderson’s products have trace amounts of synthetic materials like antibiotics.  The court disagreed: Plaintiffs alleged the existence of surveys indicating a majority of consumers believe: a) a “natural” poultry product is produced without the use of antibiotics or other drugs at any point; and b) it is important to reduce antibiotic use in food production and improve the living conditions of animals. The allegations were plausible.

claiming to provide services then referring out can be false advertising, but P must still show harm

Larry Pitt & Associates v. Lundy Law LLP, No.. 13-2398, --- F.Supp.3d ----, 2018 WL 925011 (E.D. Pa. Feb. 15, 2018)

The parties are Philadelphia-area law firms that advertise for personal injury, social security, and workers’ compensation cases. Pitt sued Lundy Law and its managing partner, L. Leonard Lundy (“Lundy), asserting wrongful use of civil proceedings, false advertising, and trade secret misappropriation. Lundy sought and received summary judgment.

“In Pennsylvania, unlike in many other jurisdictions, an attorney or a law firm is permitted to refer a case to another attorney or law firm and earn a portion of the clients’ fees without performing any work on the case, so long as the arrangement is disclosed to the client and the fee is not excessive. However, a law firm may not actively advertise in its own name for certain categories of cases for the purpose of referring those cases to other law firms.”  Lundy Law, a personal injury law firm, has used the slogan “Remember this Name” and its mnemonic hotline number 1-800-LUNDYLAW for years.

Lundy had agreements with other firms that they’d share in the cost of Lundy Law’s advertising for social security disability cases in the Philadelphia area, and Lundy Law would refer all of its potential social security disability cases directly to the other firm in return for referral fees; the most recent version of the agreement involved Lundy hiring a part-time Social Security lawyer to handle up to five cases a month.  For workers’ comp, Lundy Law had a referral agreement with the Law Offices of Lenard A. Cohen, P.C., under which Lundy Law refers all its potential workers’ compensation cases in Pennsylvania to LOLAC in exchange for a referral fee. Cohen himself has been covered under Lundy Law’s liability insurance policy as “of counsel” to the firm since 2009 and keeps Lundy Law business cards and a Lundy Law email address, as well as other connections to Lundy Law.

Some Lundy Law ads featured 1-800-LUNDYLAW in large font with the words “Injury and Disability Lawyers” or “Injury, Disability & Workers’ Compensation lawyers,” in smaller font above or below the telephone number. Some ads feature dtestimonials from purported social security disability or workers compensation clients that they were glad they “remembered the name.”  Some TV ads specifically promoted workers’ compensation and social security disability services, e.g., “Lundy Law gets you the social security benefits you deserve.”  Pitt asserts that all of these ads were false and misleading because Lundy intended to refer, rather than handle, any potential workers’ compensation and social security cases.

Separately, Lundy Law purchased ad space on SEPTA buses, trains, and transportation stops for years, and throughout that time, Leonard Lundy’s daughter, Sara Lundy, was an account executive at an ad firm. She provided Lundy Law with photos of ads used by other law firms and information on their locations as well as transit ridership information. Pitt alleged that these disclosures constituted misappropriation of confidential information about the advertising strategies of Lundy Law’s competitors, including Pitt.

False advertising, workers’ comp: Pitt didn’t raise a genuine issue on material falsity/misleadingness.  Pitt didn’t show that the nature of Cohen’s relationship with Lundy “differed materially from a consumer’s reasonable understanding of the relationship between a law firm and its attorneys,” since a potential client “would meet with an attorney physically present in the office and would have recourse to Lundy Law’s malpractice insurance for the attorney’s conduct, if necessary.”

Social Security: There was no evidence of consumer deception, so Pitt had to rely on literal falsity. Most of Lundy’s statements were too general/ambiguous to qualify, but there were a few more specific statements in TV ads such as “Lundy Law gets you the social security benefits you deserve. • We’ll help you through the process. That’s what we do.”  Although Lundy argued that the ads didn’t indicate that Lundy employees would “themselves handle the viewers’ social security disability claims from beginning to end,” “when a law firm releases a commercial directed specifically at social security disability cases, and tells viewers that it will help them through the process of obtaining social security benefits because ‘that’s what [they] do,’ such a message necessarily implies that lawyers within the law firm handle their clients’ social security claims.” And if Lundy didn’t handle any aspect, that was literally false. So too with Lundy’s listing “social security” among its “practice areas”: “it unambiguously implies that attorneys at the firm handle cases within that practice area.”  Between late  2008 and late 2013, Lundy Law referred all of its potential Social Security cases directly to other law firms, creating a genuine issue on literal falsity.  But after that, a part-time attorney came on to handle Social Security cases; even if she handled only a few, the post-2013 ads didn’t “unambiguously represent that the firm would take on more than five cases per month.”

But Pitt couldn’t show damages: it had to show a causal link between its alleged injury and Lundy’s specific misrepresentations by showing that Lundy’s statements actually deceived and influenced consumers. Evidence that potential clients responded to Lundy Law’s advertisements wasn’t enough to show that the clients relied on any of the specific false representations. And there was no evidence linking an increased Social Security intake to the use of any specific ads; it might have resulted from Lundy’s non-false advertising, such as the firm’s more general “injury & disability lawyers” ads or its personal injury ads. This defeated Pitt’s damages claim, and also its request for disgorgement of profits and corrective advertising.  

There was no reason to proceed to trial for injunctive relief; though Lundy could once again farm out all its Social Security cases while misrepresenting that its attorneys handled those cases, there was no evidence that Lundy intended to do so.

The same analysis applied to the state UCL deceptive marketing claim.

The trade secret claim failed because, while the nepotism might concern Titan (the ad agency) and SEPTA, there was no evidence that any of the information Sara Lundy shared with Leonard was confidential.  “[T]he content and location of a law firm’s advertisements is generally intended to be public.”

The court concluded with a cautionary note: “In many instances, a complaint to the state attorney disciplinary boards may be the most effective means for quickly ending and sanctioning plainly unethical conduct. Thus the Court’s decision should not be read to condone or excuse Defendants’ alleged actions, but should instead serve as a reminder of the burden that plaintiffs bear when they choose to seek relief against their competitors in court.”

When an author's name isn't CMI

Fischer v. Forrest, Nos. 14 Civ. 1304, 1307, 2018 WL 948758 (S.D.N.Y. Feb. 16, 2018)

This very outdoorsily named and themed litigation arose out of the termination of a longstanding business relationship between plaintiff Fischer and defendants, including Brushy Mountain Bee Farm, alleging that they used his likeness and proprietary text and images to promote their own competing knock-off version of his product, Bee-Quick, a honey harvesting aid.  He sued for copyright infringement, 1202 CMI violations, and false advertising/NY unfair competition. (Previous discussion of report & recommendation here.)  The court adopted and elaborated on the “thorough and persuasive Report and Recommendation.”

Fischer began using certain phrases in advertising on his website in 2000. From 2002 onwards, Brushy used similar words to promote Bee-Quick in advertisements. The parties disputed who wrote the ad copy. Around 2010, Brushy decided to sell its own version of the product, Natural Honey Harvester, obtained from a third-party vendor. For purposes of this lawsuit, the court then accepted that Brushy at that point no longer had any “right,” “license,” or “permission” to use Fischer’s intellectual property, but Fischer didn’t say that until April 2011, when he sent a C&D complaining about copyright infringement.  Brushy responded that “there [did] not seem to be grounds for [Fischer’s] request,” and that Brushy would “review” Fischer’s concerns if he was more “specific.”

Photos of Bee-Quick remained on Brushy’s website until at least January 2011, and images of Bee-Quick may have remained available on Brushy’s website much longer (though it’s not clear whether any full pages used those images).

In 2011, Brushy introduced its Natural Honey Harvester product, using much the same language as before but with a different name, with the intro “For years we have promoted the use of a natural product to harvest honey but an unreliable supply of such a product has forced us to come out with our own.” Fischer alleged that defendants removed CMI and that defendants’ alteration of their online and print advertisements altered CMI by replacing, inter alia, the term “Fischer’s Bee-Quick” with “Natural Honey Harvester” in a sentence describing the product.

Copyright: Fischer’s statutory damages claim failed as a matter of law because his registration postdated the uncontested date of first use of the allegedly infringing work.  Fischer tried to get around this by arguing that Brushy didn’t lose its rights to use his works when it announced to him its cessation of sales of Bee-Quick, but only until he sent the C&D (which was after his registration).  But this argument wasn’t available at this late date, when Fischer’s complaint pled directly contrary to that theory, and it was too wasteful to allow a fully briefed and decided issue to be completely changed now; “[a] proceeding before a magistrate judge is not a meaningless dress rehearsal.”  The changed theory would be even more wasteful because to decide it, the court would have to figure out whether Brushy exceeded the scope of its license by using Fischer’s material to promote Natural Honey Harvester, and thus infringed, before 2012.  And, the court noted, Fischer had consistently contended that these acts by Brushy were unauthorized; the court had already found it highly improbable “that Fischer[’s license] [would] allow[ ] a competitor to repurpose original works he had created, copyrighted, and continued to use to promote and sell his own product.”

Likewise, Fischer couldn’t claim statutory damages based on secondary infringement based on the acts of third-party vendors. These infringements were “part of a series of related infringements by defendants and the [third parties] of the same copyrighted work” that predated Fischer’s registration of his copyright. The fact that Fischer filed two separate lawsuits, rather than consolidating his claims against Brushy into a single lawsuit, didn’t change anything.

DMCA 1202: Fischer argued that Brushy removed CMI in violation of § 1202 when, in revising its ads from promoting Bee-Quick to promoting Natural Honey Harvester, it substituted, in a sentence, the term “Natural Honey Harvester” for the term “Fischer’s Bee-Quick.”  CMI includes the name of the author or copyright owner and can be “contained in the body of a work,” so “Fischer’s” was capable of constituting CMI.  “But, to qualify, the word or words said to constitute CMI must also be ‘conveyed in connection with copies ... of a work ... or displays of a work ....’” and “[a]n action for removal of copyright management information requires the information to be removed from a plaintiff’s product or original work.” 

The works Fischer identified didn’t qualify.  Even assuming that the works Fischer submitted in conjunction with his copyright registration were covered, no CMI was removed from those or exact copies/displays of of them; instead, four discrete phrases were allegedly copied.   “In those cases where claims of removal of CMI have been held viable, the underlying work has been substantially or entirely reproduced.” An ad “based upon an earlier advertisement which in turn drew upon various materials Fischer sent Brushy” is a kind of “composite” work not covered by 1202.  The four phrases themselves also couldn’t form the basis of a DMCA claim.  “CMI exists to inform the public that a work is copyrighted and by whom.” But the four phrases weren’t CMI; only one even mentioned Fischer, and no reader would find that “Fischer’s” as used in the phrase “Fischer’s Bee-Quick is a safe, gentle, and pleasant way to harvest your honey” “speaks to copyright ownership” of that phrase or the others:

Imagine that the back cover of the Ian Fleming novel Dr. No. contained the following encomium: “In Ian Fleming’s Dr. No, Fleming shows his mastery of Cold War spycraft.” Imagine then that a person lifted language from that review to promote a different thriller, writing: “In John Le Carré’s Tinker, Tailor, Soldier, Spy, Le Carré shows his mastery of Cold War spycraft.” Whatever the other legal implications of such conduct might be, it is inconceivable that a DMCA claim would lie from the elimination of Fleming’s name. The expression at issue does not connote Fleming’s copyright ownership of anything, much less the language common to the two book-promoting blurbs. Fischer’s name—whose deletion Fischer’s DMCA claim challenges—similarly has no CMI relevance as used in Defendants’ advertisement. It neither informs the reader that Fischer wrote either the phrase to which “Fischer’s” is attached or the surrounding text.

False endorsement: Fischer argued that defendants violated the Lanham Act by including his name in the post-domain path of URLs that linked to Defendants’ Natural Honey Harvester, e.g., http://brushymountainbeefarm.com/images/799fischers.jpg.  As a matter of law, Fischer couldn’t show confusion. There was no evidence of actual confusion.  Fischer pointed to a review from Brushy’s website stating that an later shipment of a product was not as good as an earlier shipment, but there was no evidence that these were the parties’ respectively.  Fischer also failed to show that the post-domain path names were the cause of Google search results, and his evidence showed that Google provided mostly results for his product, which would indicate that consumers wouldn’t be led astray.  His claims of initial interest confusion were “factually threadbare” and failed to show intentional deception, which is important online because consumers can so easily click back.

Bad faith: There was no evidence that the use of his name in the post-domain URL was knowing; the use of existing URLs was inadvertent, according to Brushy.  Although two archived links on the website contain Fischer’s name, they don’t appear on any webpage advertising Brushy’s products, and were retained to avoid spoliation concerns.

Consumer sophistication: As the report indicated, “Whether defined as the typical consumer of beekeeping products, or Internet users writ large, no ordinary consumer is likely to see Fischer’s name in the post-domain path of the URL and wonder if that signified his endorsement of a completely different product in the accompanying web page.”  Plus, precedent indicates that post-domain paths usually don’t signify source. 

Fischer argued that the continued use of a mark after the termination of a licensing agreement should be a factor in his favor. Courts in this district have indeed held that “[w]hen an ex-licensee continues to use a mark after its license expires, likelihood of confusion is established as a matter of law.” But here, Brushy hadn’t been using Fischer’s name as a mark.  The per se rule of the former licensee cases was inapplicable.

False advertising: Fischer argued that the “Come out with our own” claim was false because Brushy bought its product from a third party.   This statement wasn’t literally false; it didn’t “unavoidably signify that the product offered by Brushy was created in the first instance by Brushy.” Nor was there evidence of deliberate deception or consumer confusion.

Conference: administrative law/private law interface in IP

The Administrative-Private Law Interface in IP,  March 29, 2018

A conference co-organized by the Project on the Foundations of Private Law at Harvard

Law School and the University of Texas School of Law, sponsored by Qualcomm Inc.

More info here.

False endorsement: some bad questions to ask in a survey

Gibson v. BTS North, Inc., 2018 WL 888872, No. 16-24548 (S.D. Fla. Feb. 14, 2018)

Plaintiffs are professional models, actresses, and/or businesswoman who earn their livings by promoting her image, likeness, and/or identity to select clients, commercial brands, media, and entertainment outlets and carefully controlling their images. Defendants operate three “full friction and full nudity” gentlemen’s clubs. Each plaintiff had one or more of her images used on at least one of the Club’s Facebook pages without her consent.  Defendants’ corporate representative testified that they never asked the plaintiffs for their consent, and that he assumed J Dog Media, a separate company thad does the ads for the Clubs, created the graphic designs, backed up by a declaration from the owner of J Dog.

He stated that “in procuring the images at issue, these images were not altered in any way, and were located on other Facebook sites and pages, none of which were Facebook pages associated with, or describing by name, any Plaintiff, and all of which invited ‘sharing’ on the internet.” He said he chose the images “solely because the images depicted attractive females, and not on the basis of any person’s identity, celebrity, popularity, or any personal basis or characteristic associated with any particular Plaintiff.”

Plaintiffs alleged that the uses caused affiliation confusion, and submitted a survey with three representative images from defendants’ ads, two of which featured a named plaintiff. The survey included only “adult (21 and over) male Florida residents who had patronized a Bikini Bar/Gentleman’s Club/Strip Club in the past two years.” The expert testified that 94% of respondents thought the models in the advertisements had agreed to be in the advertisements; 91% of respondents thought the models agreed to promote the Club in the advertising; 9 out of 10 “thought the models represent the lifestyle to which the Club is oriented” [query: how could this be verified or falsified, ever?]; almost 4 out of 5 “thought the models enjoyed a lifestyle like that reflected in the advertising and might participate in some of the events described in the advertising” [mostly the same query]; 75% thought it was “extremely likely” the models were used “to make them think they represented the kind of women they would expect to see at the club,” and another 20% thought it was “somewhat likely” [ditto].

Lanham Act false advertising: Plaintiffs argued literal falsity in that the ads “necessarily conveyed or implied each Plaintiff’s association with[,] endorsement of, and support for the Clubs.” They didn’t show that the images were altered, and since they were actual images of the plaintiffs, they weren’t literally false. “[A]n unauthorized use of a photograph is not a literally false statement, even if the image was altered,” without more. The ads could still be misleading, as shown by evidence of deception.

Defendanted contest the validity of the survey based on the fact that the survey had a small sample size, included images of other women used by other clubs, and used only two of the 57 advertisements at issue in this case representing only two (or possibly three) of the thirteen plaintiffs. These “[c]hallenges to survey methodology go to the weight given the survey, not its admissibility” and a reasonable juror could find the survey unpersuasive, thus preventing summary judgment for plaintiffs.  Further, they didn’t explain how the alleged deception had a material effect on purchasing decisions.  “While the survey found ‘[j]ust over 90%’ of the participants were more likely to be interested in patronizing Defendants by seeing the ads with Plaintiffs than they were from seeing the same advertisements without Plaintiffs, viewed in the light most favorable to Defendants, this does not mean consumers would actually be more likely to frequent Defendants’ establishments based on seeing Plaintiffs in the advertisements.”  [Yeah, not necessarily the right control for materiality.]  Finally, plaintiffs didn’t show how they’d been or were likely to be injured—an alleged right to compensation for the fair market value of the use of their image had “nothing to do” with whether the use was misleading and wasn’t necessarily proximately caused by the misleadingness.

False endorsement: this is the same as TM infringement/false association. Again, the court denied summary judgment to plaintiffs.  Plaintiffs argued that their images were “by definition” inherently distinctive [this seems wrong under Wal-Mart; surely the plaintiffs’ images were either product design or close enough to get the benefit of the rule that in close cases courts should require secondary meaning], or had acquired distinctiveness.

Defendants argued that plaintiffs weren’t celebrities, which the court construed as an argument that their marks weren’t strong.  Interestingly, the court said that the standard secondary meaning factors “do not lend themselves as easily to Plaintiffs whose mark is their identity rather than their name,” which may be to say that identity isn’t really the proper subject matter of a “mark” [paging Mark McKenna], or in other words you can’t necessarily tell what in a plaintiff’s metaphorical “image” is performing the source identification function and what is just a non-trademark kind of distinctiveness (like my distinctive writing quirks).  The court didn’t require much definition from plaintiffs: “While Plaintiffs never explicitly state what exactly their brands represent, Plaintiffs’ declarations satisfy the first three factors [of length & nature of use, nature & extent of advertising and promotion, and & efforts to promote a conscious association between the mark and the business].”  But how can this be a coherent sentence?  What have they used for so long?  What is the mark with which they promote an association and what is the business, if not the “brand” itself?  Can a plaintiff be a mark for herself?

Regardless, plaintiffs provided no evidence of secondary meaning/public recognition, meaning that this factor was neutral in the light most favorable to defendants.

Similarity was “about as strong as can be.”  Similarity of goods/services, sales outlets, and customer base: plaintiffs’ lawsuit was premised on the idea that they’d never have endorsed these uses, leading service dissimilarity to weigh in defendants’ favor.  But plaintiffs argued that they vie for the same dollars as Defendants because “Defendants’ customers also fall within a subset of the demographic that is interested in beautiful women.” Plus the parties both use websites and social media such as Twitter and Facebook to reach their target audience. [That is, they exist in 2018.]  So that weighed in plaintiffs’ favor.

Intent: it was difficult to determine whether defendants intended to capitalize on plaintiffs’ goodwill.  If they didn’t even create the ads, they couldn’t have had bad intent, and J Dog’s owner said he chose the images because they were pretty, not on the basis of identity/popularity; this favored defendants.

Actual confusion: see above about the survey, which didn’t ask if respondents recognized the plaintiffs.

Statutory and common law misappropriation of likeness: Although “[r]epublication of facts already publicized elsewhere cannot provide a basis for an invasion of privacy claim,” the harm of misappropriation is different; plaintiffs secured summary judgment on these claims. 

Civil theft and conversion: Plaintiffs didn’t show the requisite intent to deprive them of the use of the images; at most there was a fact issue about who created the images. A reasonable finder of fact could determine that neither defendants nor J Dog intended to deprive plaintiffs of their images or any rights to them. [Also, depriving plaintiffs of the right to control all uses of their images is not the same thing as depriving them of their own possession of copies of the images, which is what conversion requires, especially to avoid copyright preemption. This should have been summary judgment for defendants, though it’s not clear they moved for that.]

Unjust enrichment: plaintiffs didn’t argue that the use of their images increased defendants’ customers or otherwise led to a gain, but that use of their images constituted a voluntary acceptance and retention of the benefit of using their photos without paying any fee.  The court wasn’t convinced that it would be inequitable to let them retain this benefit, especially that the misappropriation of likeness claims would provide compensation for the exact same harm.

  

Damages for misappropriation of likeness: Plaintiffs claimed they were entitled to the fair market value for the use of their images and reasonable royalties, though the court found their expert’s report problematic.  E.g., the expert valued one plaintiff’s “working day rate” at $5,000 without explaining what it meant. The court [wrongly I think] presumed that this was the fair market value for the use of each image; the same image was used three times [which would be one photo shoot, not three] but then the expert calculated actual damages as $30,000. Another plaintiff was credited with a “working day rate” of $100,000; for three different images and eight total uses, the expert calculated actual damages at $900,000. The expert didn’t sufficiently explain his calculations to avoid speculativeness.

Zazzle injunction reversed: irreparable harm is hard to show

Greg Young Pub’g, Inc. v. Zazzle, Inc., No. 16-cv-04587 (C.D. Cal. Feb. 8, 2018)

After a jury trial finding Zazzle liable for copyright infringement for producing goods with user-uploaded images, the court granted a preliminary injunction. Here, it vacates that injunction for failure to consider material facts and to provide a sufficient record on the multifactor test.

Irreparable harm: Plaintiff alleged harm to its “competitive position” because Zazzle sold “unauthorized products,” and alleging “actual loss of market share,” as well as “harm by loss of reputation.” But there was no such evidence.  A conclusory declaration from plaintiff’s owner was insufficient.  Although they alleged direct competition, no evidence showed plaintiff’s products or those of licensees.  The fact of infringing sales and allegedly poor quality of images weren’t sufficient alone to show loss of reputation attributable to Zazzle without evidence about the quality of both parties’ images or a causal connection between the quality and a loss of reputation.

Irreparable harm from “lost control” of copyrights was equally insufficient. “After eBay, Plaintiffs cannot rely on the pure fact of infringement in order to establish irreparable harm.”  Grokster, involving similar arguments, had evidence of infringement on a huge scale, more than Grokster could ever possibly redress with damages, as well as evidence that plaintiffs’ copyrights were particularly vulnerable to repeat infringement. No such evidence existed here.

Plaintiff argued irreparable harm from the threat of future infringement and additional lawsuits, but the “mere likelihood of future infringement by a defendant does not by itself allow for an inference of irreparable harm.” There was no indication here that Zazzle would be unable to pay statutory damages, or that any infringements would require dozens or hundreds of future lawsuits. “The facts were uncontested that Zazzle promptly removed any infringements brought to its attention.”

Nor did plaintiff show lack of adequate remedies at law. The jury’s statutory damage award was more than adequate compensation: $351,100, compared to licensing revenues for the artworks at issue of approximately $21,489 and Zazzle’s sales of $5,622.  Nor was Zazzle likely to repeat its infringement in bad faith, given the court’s previous ruling that Zazzle wasn’t a wilful infringer and the de minimis infringing sales since the lawsuit was filed.  Only about $100 of infringing sales since the litigation began were to third parties; more than 75% of the sales were to plaintiff/its straw buyers.  “Considering that Zazzle reviews millions of images in a given year, Plaintiff has not been able to demonstrate that Zazzle is likely to allow infringement to continue in bad faith. And even if some infringement does continue, Plaintiff has not been able to show why the statutory damages award would not adequately compensate for that injury.”

The proposed injunction was also too broad. The court never decided whether Zazzle had a viable DMCA defense as to images only displayed on Zazzle’s website and never physically manufactured, because the plaintiffs withdrew its claims before trial. Thus, it was unclear whether the injunction covered mere display, or required Zazzle to take “reasonable” steps to address the display of images on its website as well as its manufacture of products.

Bye-bye injunction.

The other Redbox case: the color may fade, but not the mark

Redbox Automated Retail, LLC v. Xpress Retail LLC, 2018 WL 950098, No. 17 C 5596 (N.D. Ill. Feb. 20, 2018)

Redbox sued defendant DVDXpress alleging trademark infringement and false advertising; DVDXpress moved to dismiss and asserted counterclaims/affirmative defenses, some of which the court here rejects. The parties compete in the market for DVD rental services through automated vending machines called kiosks. Redbox has registered trademarks for its word mark and for the kiosks’ red color scheme.

Redbox alleged that DVDXpress recently began using kiosks that are entirely red in color, making them confusingly similar to Redbox’s kiosks. Redbox also alleged infringement from DVDXPress’s use the term “redbox” in the metadata for its website in order to capture searches for Redbox.  [Practice note: this use of metadata is probably useless and though it’s unlikely to be confusing in practice, the case law here is terrible. It is thus risky to use another’s trademark in metadata, though the court here does better than most (while conflating descriptive and nominative fair use).]  Finally, Redbox alleged that DVDXpress falsely advertises that customers can rent movies through DVDXpress twenty-eight days before the same movies become available through Redbox.

  

DVDXpress counterclaimed for tortious interference with its contractual relationship with Weis Markets, which signed a DVD Rental Kiosk Agreement with DVDXpress in July 2017 and accordingly asked Redbox to remove its kiosks, but four days after Redbox filed this suit, Redbox indicated that it wouldn’t remove its kiosks “on Weis’s requested schedule.” Redbox removed the last of its kiosks from Weis’s stores in late October 2017, after DVDXpress filed its counterclaim.

The counterclaim plausibly alleged that the continued presence of Redbox’s kiosks at Weis’s stores through late October caused Weis to breach the contract for exclusive kiosk provision or made it impossible for DVDXpress to perform by taking up the places for kiosks in the stores.  Delay, rather than total noncompliance, can be just as malicious as outright refusal to act.  Given that Redbox informed Weis that Redbox was seeking an injunction against DVDXpress and “would be concerned if more red DVDXpress kiosks began to appear in the marketplace,” it was plausible that the delay stemmed not from some independent logistical difficulty, but rather from Redbox’s illegitimate “desire to stop (or at least slow) the expansion of DVDXpress’s business.”

Acquiescence as an affirmative defense: According to DVDXpress, Redbox has been aware since 2002 of DVDXpress’s use of the color red on its kiosks, and in 2007, DVDXpress and Redbox were temporarily merged under then-parent company Coinstar, Inc. “One can reasonably infer that, while the two companies were merged, Redbox affirmatively approved DVDXpress’s use of the red color scheme on its kiosks. That plausible scenario is sufficient for the acquiescence defense to survive at the pleading stage.”

Fair use as an affirmative defense: “It is plausible that, when DVDXpress included the term ‘redbox’ in the metadata for its website, it did so ‘fairly and in good faith … to describe’ its own kiosks.”

Unclean hands: DVDXpress that Redbox deceptively advertised “no late fees” and Blu-Ray quality discs, and falsely advertised that certain DVDs would be available at Redbox kiosks on their release dates.  Unclean hands has to relate to the matter in which the claimant seeks relief: if the claimant’s right wasn’t the result of the alleged wrongdoing, then it’s unrelated to the litigation’s subject matter. Also, unclean hands “is disfavored where a plaintiff seeks to enforce laws, such as a false advertising prohibition, that protect the public,” especially where the defendant could challenge the plaintiff’s conduct through a counterclaim or separate suit. Here, the alleged misstatements had nothing to do with Redbox’s allegations; even Redbox’s own allegedly false ads about availability didn’t “help Redbox acquire the right (to enjoin DVDXpress’s assertions that its kiosks have certain movies twenty-eight days before Redbox) that it seeks to enforce here.”  A few courts have allowed the defense in similar circumstances, but the court here found that the “obvious hypocrisy in one company suing a competitor for doing the very same thing it did in the past (and got away with) … does not warrant denying an otherwise merited injunction or other relief, especially when the relief would end a deceptive practice that is harmful to the public.”

DVDXpress also asserted an abandonment defense, alleging only that “Redbox has discontinued its use of the color red on its kiosks in the ordinary course of business, at least, with regard to certain locations, namely at Walmart retail stores,” and that “Redbox has allowed a number of their kiosks to fade to a color that could better be described as pink.” That’s not enough to suggest discontinuance of red, and the court struck the defense.

Reading list: global fair use

Lionel Bently and Tanya Aplin, Whatever Became of Global, Mandatory, Fair Use? A Case Study in Dysfunctional Pluralism

The international copyright system requires all participants to recognise a freedom for fair quotation that covers much of the ground encompassed by the notion of ‘fair use.’ The obligation derives from Article 10(1) of the Berne Convention and thus applies to some 174 countries (and, because Article 10(1) must be complied with under TRIPS, is carried over into the WTO Agreement). In contrast to other limitations in Berne, Article 10(1) is not optional, it is mandatory. It creates an obligation, and thereby imposes a ceiling on the freedom of action of Members of the Union. The breadth of the obligatory exception is wide: as enacted in national law, it should not be limited by work, nor by type of act, nor by purpose. The exception should not be subjected to additional conditions beyond those recognised in Article 10: to do so is to breach the obligation. Subject to those conditions, the freedom the Article secures to users encompasses any and every act of quotation, the meaning of which reflects how the term is ordinarily used across all cultural forms. That includes free-standing uses, transformative uses and parodic uses. Its breadth reflects, but is not limited by, the desire to give effect to the fundamental freedom, freedom of expression. We have dubbed this ‘global, mandatory, fair use’, or GMFU, for short.
 Yet, despite this obligation, there has been a marginalisation of Article 10(1) and this paper explores how, and why, this distortion of international obligations has occurred. It suggests the dangers of pluralism in copyright when it comes to international obligations.

WIPIP concurrent 3 (most of it)

Annemarie Bridy, Fearless Girl Meets Charging Bull: Copyright and the Regulation of Intertextuality

DiModica (who made Charging Bull) complained that Fearless Girl’s placement created an unauthorized derivative work and violated VARA by being a material alteration that prejudiced his honor—Charging Bull was no longer optimistic but transformed into a threat. Turning a semiotic dispute into a legal one.

Can © be leveraged to prevent confrontational dialogue w/preexisting works? What role does copyright play in regulating text to text and author to author interactions? And what can literary theory tell us?

Existing scholarship on role of romantic author: presupposes/valorizes creative genius and possessive individualism. But US © has important differences from European law. Bahktin/Gerard Genette: intertextuality views works relationally rather than as closed systems—dialogism within & between texts. Monologic discourse is poetic; dialogic discourse is associated w/the novel. Monologism privileges unitary voice of author as autonomous; dialogue has mix of voices that are layered in the work. Work is more open and porous. Genette’s hypertextuality: secondary author targets preexisting text & rewrites & completes it in a way original author might not have liked—hypertext as unfaithful continuation of its hypotext.

Dimoda embraces aesthetic monologism, which is encoded in author centric European © law. Strong moral rights, limited exceptions/limitations. US © is hospitable to intertextuality by design, even assumes it. Less author-centric and more focused on public interest in production of creative works. © protects second degree works such as compilations and derivative work, and also excepts a range of second degree uses, including fair use which is flexible/unfaithful/murderous (Genette’s term) and also compulsory license for musical work covers (less flexible but appreciates artistic impulse to remake/reengage the work). Very narrow moral rights that delayed US accession to Berne.

He can’t prevail: derivative work claim requires physical incorporation of elements of the protected work [but consider the case from yesterday finding that embedding was infringement]. Not every modification of a work creates a derivative work, Mass MOCA, and altering the viewer’s experience of a work doesn’t create a derivative work, Lewis Galoob v. Nintendo. Even if the placement did result in a derivative work, the semiotically confrontational nature of its relationship to Charging Bull would mean that it’s a fair use.

Rosenblatt: maybe if juxtaposition is fair use, the fact it’s juxtaposition forces us to go straight to fair use & concedes it’s w/in the scope of the right.

A: but physical incorporation is still necessary.

Ann Bartow, The Economics of Race and Gender in Art Law

Ownership disputes w/racial subtext. Control of Barnes Foundation stolen from Lincoln University, a HBU in Pa.; art now controlled by wealthy mostly white people in Philadelphia—thought the art should be in the hands of nice white guys. Georgia O’Keefe donated art to Fisk Univ., an HBU in Nashville; art now 50% owned and controlled by museum in Bentonville, Ark. founded by Walmart heiress. Leveraged highly contestable claims of financial mismanagement/lack of sophistication.

Georgia O’Keefe lost art theft based on statute of limitation grounds; in the vast majority of art theft cases, by contrast, courts found all kinds of ways around SoLs: possession as continuing crime; demand and refusal rules before SoL restarts; sales reboot the SoL; etc. Nude posing as a career strategy for O’Keefe—it was one of the only ways she could be accepted in the arts community. She didn’t feel it was voluntary. Hazards: sexual harassment, sexual assault, nonconsensual pornography, low pay and labor abuses, gawkers & creeps.

Another example: Barbara Kruger: appropriation art; Hoepker was the foreigner who didn’t comply with 104(a) so wasn’t able to enforce his restored (c). She might not have prevailed on fair use; museum used the art as an ad for the Kruger show, and put it on mugs and the like—she was exploited as she was being accused of exploitation.

Prince and Cariou’s Yes Rasta: both whites dealing in pictures of bodies of black men (and white women from soft-core porn for Prince).

More women than men attend & graduate from art schools/get art degrees. There’s no movement to get more men in art as women in STEM; but men are at the top. Every artist in the top 100 sales in 2013 were men. In 2014, no women in top 2104. Less than 4% of artists in Modern Art at the Met are women, but 76% of the nudes are female. Don’t do as well at art fairs; held only 24% of museum director positions and were underpaid compared to men. Art galleries control value of art by manipulating two signals: price and who buys. Too low and the perception is low quality and too high and the artists seem overhyped. Manipulate the secondary market. Also try to sell to tastemakers. Control value of art worldwide, b/c value is subjective and subject to signalling; white men decide what’s good and valuable. Museums can make or break artists with shows, deaccessioning, etc. Often in collusion with galleries, auction houses and wealthy collectors. China has wealthy collectors in old, European art which has also had an impact.

Antidiscrimination as a moral right. Attribution can facilitate discrimination, esp. for gender. Artworks can be racialized or gendered in ways that are perceptible and signaling, as w/software that can discern gender of text authors. Integrity: has multiple meanings, including the quality of being sound moral principle, uprightness, honesty and sincerity. Galleries, auction houses and museums as sites of resistance and reform.

Q: Internal splits in Fisk and Barnes led to majorities to surrender [Bartow notes that they required board takeovers] and there were reasons to see them not as central to the missions of the school. When the institution did try to monetize the collection, the AG limited Fisk’s ability to do so—it was accomplished in a number of different ways, including by using institutional power to threaten [Bartow notes threat to funding]. The capacity to divest the collection once the decision was made was also limited & cabined. [Sounds to me like the expropriation of black wealth or wealth foundation described in Richard Rosenstein’s and Ta-Nehisi Coates’ recent books.]

Rosenblatt: Compare appropriation art. Some are seen as legit and others aren’t. But when I dig in to these problems, they feel more like antitrust problems than IP problems. Why is IP the lever here?

A: there could be other things. And antitrust has a role to play around auctions. But moral rights is more empowering to individual artists. [CRT’s rights claims.]

Q: what if art is a male display behavior of taking attention-grabbing risks making a biological basis for male dominance in the field?

Chien: Uber pays men more than women per hour, but it seems to be b/c men drive faster and more dangerous routes. Correlated w/things that are correlated w/value. Are there ways to quantify what would be the legitimate basis for one thing to be displayed more? What are the right criteria?

Raymond Ku, The First Amendment Implications of Copyright’s Double Standards: It’s More than Just Entertainment

Touting the value of P2P for distributing creativity/access w/o deadweight loss. Reaction of former Register: what’s the big deal? It’s just entertainment.  Debate b/t Justices Stevens & Blackmun about ability to time shift popular entertainment: who cares about Honey Boo Boo?  Stevens struggled to find a political or educational use.  Sony makes more sense when you connect it to Bleistein: why are we judging the value of the programming that’s being watched? 

But we judge that all the time. We’ve been discussing how much creativity is sufficient for © protection and fair use.  When we do this, entertainment essentially always loses.  SAT/Seinfeld Aptitude Test case is the key example.  Interesting doctrine: Protection of creative facts—less need to copy them.  In Hoehling, by contrast, the movie studio didn’t need to justify its copying of Hoehling’s theory.  Case law suggests that for fair use, when we’re dealing with entertainment, for fair use no amount of added creativity is sufficient—Blurred Lines, 60 Years Later, The Harry Potter Lexicon. Even in Cariou v. Prince, court goes out of its way to say that its broad definition of transformativeness doesn’t cover entertainment.

We’re mixing up the idea of results and repetition. With factual works we do want people to reach the same results hopefully.  With fanciful works, the options are infinite and reaching the same result is not inevitable; repetition of results means repetition of expression. Independent contributions are not repetition. [  For factual and fanciful works, repetition is part of the process for learning for both; researching and performing respectively are similar in their contributions to understanding. Retyping Holmes’ common law is meaningless, but a musician that is able to replay or emulate Yo-Yo Ma or paint in Van Gogh’s style is doing something dramatically different, yet we say that copying in the latter circumstance is less justified. For both fanciful and factual, incremental contributions may not be recognized or appreciated as such; also, someone may say it better.

Factual: financial stakes are small in litigation, while for fanciful works the stakes can be significant.  For fanciful works in litigations, the work speaks for itself and everyone’s an expert; there are no standards/informal voluntary standards. Factual works litigation: there’s a practice of framing for the jury, governed by agreed on standards and guidelines (my article tells you the contribution it’s making; general, disciplinary, and institutional standards) whereas Fearless Girl and Charging Bull stand by themselves; courts may defer to professional/expert opinions.

RT: about results, what do you mean? I would have gone the other way, w/TS Eliot’s objective correlative—similar results can be achieved by multiple different expressions (compare romance novels or really any standardized genre, even the middle aged white male adultery novel).

A: When you’re trying to answer a Q, 2+2 has one answer but literary Qs have multiple answers. [Like Barton Beebe on progress & Jeanne Fromer on problem finding.]

Rosenblatt: is this a problem of fictional works versus a problem of ignoring SCt precedent in the form of Campbell’s dictate to consider different meaning or message, not just purpose? Are courts ignoring this b/c they disagree & think that entertainment is frivolous?

A: Easterbrook says he likes Cariou but it doesn’t explain difference b/t me creating a derivative work and me making a fair use, especially in entertainment where we often think it’s something the original author should control. 

WIPIP Concurrent 2

Nancy Kim, The License v. Sale Puzzle after Impressions v. Lexmark

Sales exhaust the patentee’s rights to any item regardless of what the contract says. But restrictions on licensees are different because a license doesn’t implicate the same concerns about restraints on alienation as a sale.  Even if the contract is enforceable, that doesn’t mean that the parties can’t contract about everything. They can’t recharacterize the world—you can call a contract w/a worker an independent contract, but if the facts establish an employment relationship you have an employee.  Same with license/sale.  “Authorized” sale is also important.

Contract can give rise for breach and infringement claims, but not for the same provision; not every breach exceeds the scope of the license and constitutes infringement. Principles: if the first transaction by the patentee is a sale, all subsequent transactions are sales. License agreement may or many not be followed by sale. If license allows licensee to sell patent items w/o restrictions, then the subsequent transactions to customers are sale.  If license imposes restrictive conditions on licensees’ ability to sell, they’re sales only if the licensee required with those conditions—e.g., limited to sales in North America, and then sales in France are unauthorized.  If licensee has obligation to impose restrictions on customers, then subsequent transactions are sales.  If mfgr didn’t have customer sign contract restricting use, mfgr might be in breach of contract, but it’s still a sale. 

With a standard form contract/adhesion contract if the patentee/© owner retains rights to reposess or control item, it should be considered a license, but otherwise a sale.  If negotiated or individual contract, distinction should depend on whether contract limits one of the patentee/© owner’s exclusive rights (that is, does it affect the scope of the license?).

Whether the purchaser/licensee infringed depends on whether the contractual provision was a covenant or condition, which means did it limit the scope of the license/implicate one of the exclusive rights of patentee/© owner, but the ©/patent cases differ.  Sale of © item may be treated as still having a license.  Example: a nonexclusive, nontransferable license to make 2 copies. This is not conditional language; transferability is not one of licensor’s exclusive rights as a © owner.  Also: Licensee agrees not to transfer, assign or sell—that’s still drafted as a covenant not a condition.  “provided that licensee may not transfer, assign, or sell … license is expressly conditioned upon compliance w/this provision”: if result would be forfeiture, courts in contract law generally are disinclined to find a condition.  How about: if licensee attempts to transfer, assign or sell this software, the license immediately terminates and is void: clearly a condition, and that’s what it should take.

Lemley: How confident are we that 9^th Circuit’s condition/covenant distinction survives Lexmark?  Lexmark suggests © and patent are kin. 

A: she’s concerned about that.  Ct doesn’t directly address license v. sale b/c they say it’s a sale. Also different exclusive rights: with ©, you can sell the product and still not exhaust all the rights (e.g. public performance).

David Olson, Why Increasing IP Exhaustion Leads to Decreasing Ownership of Goods

Information costs for servitudes on chattel property are high; recording burden is high; may restrict resale/reuse of goods forcing inefficient manufacture of new goods instead.  With information goods/internet age cost of checking restrictions can be very low relative to value of item.  IOT goods that phone home/alert you as to any restrictions.  Cost of knowing them is just lower [depending on what you mean by “knowledge” given human practices & functional capacities].  Digital copy of book can also be created more cheaply; not much waste in idling/deleting my copy.  Allows for price discrimination, as does monitoring via IOT/collection of $ for downstream uses.

Still, most goods are sold free/unconstrained.  It’s often more profitable to simply make a first sale w/o monitoring or transaction costs.  E.g., cars.  Other times it can help buyers who can’t afford the total cost to give them only a partial right & have owner retain residual value—rental cars, tuxedos, etc. 

For the IOT, your refrigerator can be shut down if you violate a term.  HP is also licensing/renting printers on this basis—rent charged based on amount of use, and they send you the toner as you need it.  The relationship no longer looks like a sale; it is ongoing and involves patches, etc.  If your credit card expires, the printer stops working.  Pretty effective lockup through contract, and enforcement w/o any privity of contract necessary.  [Pretty good opportunities for fraud?]

Is this good/bad and how if at all should the law respond?  B/c price discrimination can be quite valuable to society, especially for cheap goods, the next move to preserve ownership would have to be inroads into contract law to stop these characterizations/prevent these restrictions being enforced via self-help.

Reasons to be cautious about making that move: now that exhaustion is so strong, we’ll see the same attempts through contract law; we’d be better off to allow experimentation and see how the market reacts. We’ve never seen mfgr limit all use/control all aspects; it’s not profitable and there’s bad PR from people not liking price discrim. Instead we’ll see monitoring and price discrim w/customization for users’ needs.  Consumer will not be able to see she’s being charged differently b/c the good will not be exactly the same for each one.  Like cars with different packages [this is a really disturbing example—we know that the poor/women/minorities pay more].  Can charge people willing to pay more, more, and charge low prices to those who can’t afford more b/c arbitrage will be impossible.  [When has this ever happened, compared to poor paying more?]

Better to use antitrust law than sale/license law to deal w/abuses such as market foreclosure.

RT: questions above.  Tell me why you’re hopeful.

A: discrimination law would still apply, but he was talking about standard packages; discrimination comes in at the overall price of the car.  People could still create data [unless contractually prohibited]; they might find that women are willing to pay more, which could be a problem.  Women sometimes are never offered a low enough price and they walk away; the transaction fails.  AI, which has the potential to lessen discrimination [do we know that?], means that if your goal is profit maximization you will try to figure out what people will pay and get past proxies like age and race.  [That does not seem to me to describe how the current algorithms work—they absolutely use your categories to be predictive about your characteristics, including WTP. Plus your other non-race and gender characteristics are tightly correlated w/them, so “non proxies” (e.g., where you live, whether you’ve gone to jail, how much money you make) are also proxies.  And then your reaction to the offers you get—which people in other groups won’t get—determines what happens next, so the discrimination just gets baked further in.]

Rosenblatt: rich could be allowed to make remix, poor not.  If what people want to do is on-label, then your logic makes sense. But if they want to do off-label stuff like remix, reverse engineering, follow-on innovation, doesn’t this bar that?

A: if we restrict producers to one price, the Q is do poorer consumers get to buy anything, or nothing?

Michael Burstein, Indiscrete Property

Information is often incompatible with the notion of thingness in ways that go beyond the mere costs of defining the thing: it is indiscrete and continuous, as opposed to discrete and separable as most tangible goods are. While a stock tip is relatively discrete, more often info conveys different value to different actors; info is more of a platform on which transactions occur.  Thus value depends less on definition than the structure of the underlying institution.  Should focus on rules that allow people to structure info flows for best use.

Case for info as discrete property, from two parallel movements suggesting strong IP to economize on use of info.  First, incentive/reward theory is unsatisfying; market failure resulting in underproduction doesn’t dictate IP as solution and other solutions could produce incentive w/less cost.  As empirical matter, it’s well understood that in many situations the IP incentive, or any incentive, may not be necessary for production of intellectual goods.  Next move: commercialization theory, where IP is about the subsequent use of creation/invention by giving incentive to solve market failure structurally similar to the earlier market failure theory, or by serving as beacon/signal/contracting device for people to come together and exchange info. New private law is aimed at reclaiming centrality of tort/contract/property in US law. Scholars offer info cost theory about economizing the cost of info specifying use rights.  Thingness of property matters b/c by defining a thing and marking it w/rough exclusion signals we create relatively clear signals about what you can and can’t do with it. Use rights in a car; you need no info about underlying owner of car to know not to steal it.  You just need to know it’s not your car.

Nonrivalrous info: inputs to info use are rivalrous, so we want to manage them. New public law theorists like Henry Smith argue here’s a benefit from reducing complexity of coordination, if the thing can be defined easily and the uses cannot.  In such cases, exclusion strategy is more economically justified than governance. Smith argues that patent is more thing-y than ©. This is not uncontroversial or unproblematic. Clarisa Long has made the exact opposite argument.

Problem: relies on thin concept of info such that all you need to worry about in defining a good is the cost of delineating the good. But other characteristics make it almost incoherent to talk about definition. Info is additive, communicative, and layered.  Additive: info bits build on one another so value is different depending on type or info.  “Data information knowledge wisdom” framework: data is info asset that’s product of observation, relatively discrete and objective; info is relevant or usable or significant—info uses data to answer a Q; knowledge is usually knowhow, turning info into instructions/decisionmaking aids, synthesizes across types of info.  Literature usually ignores wisdom and so will I.  As you move up, increasing correlation w/social meaning and value.  Info has value, but it exists in different forms w/different sources of meaning and value.

Communicative: JP Barlow: information is a verb, not a noun.  To have an effect in the world it must be transmitted & create meaning for recipient.  Does this not through ethereal transmission, but is contained in artifacts—physical manifestations that are vessels for the info. Some artifacts are more self-revealing of the info than others.  Sometimes info can be sticky/tacit (Eric von Hippel) and needs more than writing down. Info can be modulated self-consciously, as w/software modularity so you can hide certain elements of code & reveal others.

Layered: Heterogeneity—small molecule pharma—most direct way to communicate info is to show its structure, but you could also talk about the molecule/generate info about that.  You could talk about chemical characteristics, biological effects, efficacy & toxicity, all w/o revealing its structure.

Info exists in continuous indiscrete state in many cases.

In land, things are rough signals of value. But if info is continuous then thingness may send wrong signals.  Lose out on ability to communicate across users.  May be over and underinclusive.  Answer to Smith’s question about how you specify rights & duties up front may be “you don’t have to.”  Spectrum of discreteness may also help rationalize our intuitions, e.g. about patentable subject matter. If abstract idea is relatively indiscrete, and open platform approach is most efficient, that may help explain why IP doesn’t protect them. Likewise for doctrines about timing of patentability such as utility/reduction to practice—when the info becomes more discrete.

Rebecca Kai-Fang Lin, Artist’s Resale Right: Past, Present and Future

What makes art so special?  Work of art can be one of a kind; reproduction doesn’t create the same thing.  Low price when first sold.  Resale right was exception to exhaustion introduced in France.  Visual artists usually earn less than average income; this allows recognition and fair treatment and also helps them stay connected to the works.  Also can support cost of storage, conservation and restoration.  No evidence that resale right harms the art market.

Berne Convention introduced resale right in 1971 as reciprocal right based on country of artists.  Rightholder is author/authorized person.  Covers original works of art/original manuscripts of writers and composers.  Nature: inalienable right; applies in any resale.  Collecting societies should be able to collect the royalty and should have a right to gain information.  US, China, France and UK are the main fine art markets now, representing about ½ of global sales.

EU has harmonized: rightholder/authorized person though member states can limit who those can be; liable person is generally the seller but member states can diverge; the covered works are original works of graphic or plastic art; must be physical but copies can be included.  Nonassignable and inalienable right; applies in resales unless b/t private people or acting for nonprofit museum.  Sliding rate by sales price. Its share of the art market grew over the past years. 

France: liable person is acquirer & law officials jointly; applicable sales are those via a public auction or dealer.  Uniform 3% rate, and artists must publish in Official Journal if they want the right.  UK: seller and relevant person jointly & severally liable; copy of work is generally excluded; collecting society and right to information exists; sliding rate based on sale price. 55% of dealers not affected; average processing time of 10 min. 81% of artists use the income to pay for living expensives.

In US, only California—royalties of 5% of sale price, held to violate dormant commerce clause.  Japan lacks resale right.  Potential artist benefit would be big on market of EUR 2.19 billion; 280,000 visual artists could be covered; manga should also be included.  China has no resale right—proposal to cover limited to auction sales and limited to increase in value.  Int’l treaty may be a good idea.

RT: Collecting societies have a bad reputation for not distributing money fairly especially where the uses are varying and the market is thin (i.e. especially outside music).  If you require registration, what’s the point of a collecting society?

A: Tracking use is a big problem with other collecting societies but discrete sales of physical objects are more identifiable, and collecting societies can handle the administrative costs more easily than individual artists.

Q: Why would we want to benefit successful artists and not unsuccessful ones, when resale rights are only valuable to a very few?

A: mitigating inequality.

Chiang: What is the problem you’re trying to solve? It’s not free riding.

A: musicians can make lots of money from sales of copies, but visual artists can’t, especially for works sold early in their lifetimes.  Sellers benefit from the subsequent creations of the artists so artists should also benefit.  Unfair.