multi-million dollar award for trade secret theft & false advertising of "local" origin

Bimbo Bakeries USA, Inc. v. Sycamore, 2018 WL 1578115, No. 13-cv-00749-DN-DBP (D. Utah Mar. 29, 2018)

A relatively large trade secret/false advertising verdict in this case.  Bimbo prevailed at trial on its trade secret claim that Sycamore revealed Bimbo Bakeries’ secret recipe for Grandma Sycamore’s brand “granny” style white bread, which U.S. Bakery obtained and used in the production of its own granny bread. In addition, Bimbo prevailed on its false advertising claim that U.S. Bakery’s use of the word “local” in the tagline “Fresh. Local. Quality.” was misleading in markets, including Utah, where U.S. Bakery’s bread was baked out of state.

The jury found that U.S. Bakery’s trade secret misappropriation was willful and malicious (by clear and convincing evidence), and resulted in $1,578,942 in damages.  Syacamore was responsible $526,314 in damages, and the misappropriation was willful and malicious (by a preponderance of the evidence).  The jury also found that U.S. Bakery’s false advertising of “local” was willful and resulted in $8,027,720 in profits (apparently all the profits from its sales using the tagline, with no deductions).

The court declined to enhance damages on the false advertising claim, because though the jury found actual damages, the verdict form didn’t ask the jury to quantify those damages, at Bimbo’s request. Thus, there was no basis on which the court could “enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount,” as provided for in the statute—there was nothing to multiply. Instead, the finding of actual damages allowed the profit award.  The equitable factors weighed in favor of disgorging profits, including (1) the jury’s finding that the false advertising was willful, (2) evidence of Bimbo’s lost sales, (3) U.S. Bakery’s direct role in marketing its products under the “Fresh. Local. Quality.” tagline; and (4) the inadequacy of Bimbo Bakeries’ unquantified actual damages.

The court declined to award attorneys’ fees for the false advertising claim. This was not an “exceptional” case in terms of litigating in an unreasonable manner, and the issues were close; U.S. Bakery “meaningfully challenged” Bimbo on falsity and consumer confusion.

The trade secret award, however, did include exemplary damages and fees due to the jury’s finding of “willful and malicious” misappropriation. The court awarded a “less exacting” amount. Though the misappropriation was willful and malicious and continued for nearly four years, the issues were closely litigated and U.S. Bakery is the smaller company; nor was a desire to harm Bimbo, apart from competing with it, shown.  The court also took into account the false advertising disgorgement and awarded 50% of the compensatory damages, or $789,471, along with reasonable attorneys’ fees.

The court also awarded a permanent injunction on the trade secret claim, though the injunction did not extend to blocking U.S. Bakery from producing a granny-style bread product as long as it didn’t use the trade secret.

"tougher" and "durable" aren't puffery for shingles

Stern v. Maibec Inc., 2018 WL 1586323, No. 11-cv-3951(PGS)(TJB) (D.N.J. Apr. 2, 2018)

Maibec makes eastern white cedar shingles and offers a 50-year limited warranty against wood decay and a warranty against stain failure. Its website touted eastern white cedar as “very durable and requires very little maintenance.” Its brochures claimed: (1) “Timeless. Traditional. And tougher than ever.”; (2) “At [M]aibec, we have spent the last four decades improving the way white cedar shingles are made. Today, they are engineered to be so durable that you just might consider them high tech.”; (3) “Best of all, [M]aibec shingles are guaranteed to last”; and (4) “The fact that they are low maintenance and look even better as they age is just an additional benefit.”

Plaintiff Stern alleged that she chose Maibec shingles over a competitor’s based on her understanding that they offered the same warranties and were maintenance free. She alleged that her shingles were warping, cupping, and lifting three years after installation, and that a Maibec employee who inspected her house concluded that the warping and other issues were not due to improper installation. Plaintiff McCaffrey had a similar story.

As indirect purchasers, plaintiffs had no breach of contract claims.  However, the court refused to dismiss claims based on express warranties in Maibec’s ads. Maibec contended that it never guaranteed “no maintenance” and the statements on its website were mere puffery. The court identified “tougher than ever”; “they are engineered to be so durable that you might consider them high tech”; and “[they] are guaranteed to last” as statements that weren’t mere generalized claims of superiority, but emphasized the shingle’s durability and low maintenance.  These were objective representations, not subjective. “Although not quantifiable, these statements are not so grandiose or lofty as to be considered subjective; rather, these statements leave a reasonable reader to expect the shingles to withstand the elements of nature and last for an extended period of time.”  Nor were they incapable of influencing consumer expectations due to how exaggerated they were.

Maibec next argued that the plaintiffs couldn’t show reliance, since neither recalled reading or viewing the statements on the website. However, they generally claimed to have relied on statements made on Maibec’s website in deciding to purchase Maibec shingles. A reasonable factfinder could find reliance.

Breach of implied warranty and merchantability claims failed for lack of privity, which is required to recover for economic loss in New York.  

GBL Section 349 claims were governed by a three-year statute of limitations, and for its purposes, the injury occurs on the date that a product is purchased, delivered, and installed. Thus, at least one plaintiff’s claims fell outside the statute of limitations; further factfinding was required for another, whose claims survived for the reasons noted above with respect to the warranty claims.

Puzzle/IP overlap with character figures

This delightful vintage puzzle contains whimsies in the shape of once popular cartoon characters--some I can ID, like Popeye, while others are more elusive.  Suggestions welcome.

Add caption

Upside down but complete

Lost goodwill isn't irreparable harm without more specifics, court says

Alfasigma USA, Inc. v. Nivagen Pharmaceuticals, Inc., No. 17-cv-01974-MCE-GGH, 2018 WL 1567820 (E.D. Cal. Mar. 30, 2018)

The parties make “medical foods,” which are intended to be used under a doctor’s supervision; subscriptions for their use are common though not required. They are not eligible for reimbursement by Medicaid, Medicare, or many private insurers. Alfasigma makes Foltx and Breckenridge makes a generic version called Folbic.

The pharmaceutical industry allegedly maintains a database in which generic foods can be linked to their name brand equivalent through an honor system. If a generic company “represents to industry databases that its generic medical food contains the same active ingredients in the same amounts as a certain branded product, the databases will link the generic to the brand.”  Nivagen makes a generic that it represented was equivalent to Foltx and Folbic, causing it to be linked. “But Nivagen also characterized its product as a prescription drug that requires an ‘Rx’ on the label, thereby entitling users to reimbursement.” Nivagen also allegedly caused its product Niva-Fol to be shown as having a National Drug Code or National Health Related Items Code number, which are for approved drugs and medical devices only, but which would qualify Niva-Fol for federal reimbursement. This conduct allegedly gave Nivagen a competitive advantage.

The court found that plaintiffs hadn't shown irreparable harm . The claimed damages were all financially-based: that Nivagen’s actions had or will cause customers to seek lower prices from plaintiffs and/or buy from Nivagen instead and that its conduct would cause a “loss of goodwill” with certain customers, lost market share, and “other economic losses.” “To the extent courts may consider a loss of goodwill to be intangible under certain circumstances, those circumstances are not present here.”  [When are they present?  Who knows?]  The claimed lost goodwill was the only potentially intangible harm, but was entirely speculative at this point.

Plaintiffs also argued that their harm was irreparable because Nivagen wouldn’t be able to satisfy a judgment against it. The court found it unlikely that “Nivagen is taking customers and stealing market share at a rapid pace, while also making little profit doing so.” But also, the cases supporting finding irreparable harm involved defendants who were insolvent or deliberately dissipating funds to avoid judgment; there was no indication that Nivagen was either.

Finally, plaintiffs’ delay undercut claims of irreparable harm. Breckenridge sent Nivagen a letter in June 2015 indicating it knew of the database linkage and accusing Nivagen of false advertising and unfair business practices. Plaintiffs still waited until September 2017 to file suit, and waited until October to move for a preliminary injunction, only then unsuccessfully seeking expedited discovery to support their request for an injunction, “which provides at least a tacit admission that they do not have sufficient evidence to support the Motion as it stands.”

Nor did the balance of equities tip in plaintiffs’ favor. “Plaintiffs have failed to so much as allege that customers are in fact choosing Nivagen’s product over their products, let alone that they are doing so at a rate that puts Plaintiffs’ businesses at risk of greater damages than would be caused by enjoining Nivagen—a much smaller entity—from advertising, promoting, or selling its product, and requiring it to change its labeling, correct any false statements already made, and recall any product already sold.”

Finally, though the public interest favored protecting consumers from false advertising, it also favored competition.

An actual jury verdict favoring plaintiff in false advertising case based on false patent claims

Hillman Group, Inc. v. Minute Key Inc., No. 13-cv-00707, 2018 WL 1532526 (S.D. Ohio Mar. 29, 2018)

Here's a reminder that meaningless macho banter about the competition can come back to haunt you.  The parties compete in the self-service, automatic key duplication industry. Hillman initially sued Minute Key, seeking a declaratory judgment of non-infringement and invalidity of U.S. Patent No. 8,532,809; Minute Key provided Hillman with a covenant not to sue, but Hillman’s claims under the Lanham Act/Ohio Deceptive Trade Practices Act continued based on allegedly false and misleading representations of patent infringement to Walmart, the parties’ mutual customer for key duplication machines.  A jury trial resulted in a verdict in favor of Hillman. 

Minute Key sought to overturn that verdict, arguing that Hillman needed to demonstrate that its statements were “objectively baseless” as part of the bad-faith requirement applied to false advertising claims based on patent rights assertions. Minute Key argued that Hillman could not establish objective baselessness without first proving that its kiosk didn’t infringe the patent, which would have required pretrial claim construction by the court, which didn’t happen.  The court agreed with Hillman that claim construction was unnecessary when the claim terms— “fully-automatic” and “fully automatic”—were clear on their face.  Indeed, Minute Key had repeatedly claimed in its marketing materials that its product was fully automatic and Hillman’s was not, and also a central MK witness agreed that the marketing materials used the term synonymously with the patent. 

The jury found that Hillman proved by clear and convincing evidence that Minute Key knew that Hillman’s FastKey kiosk did not infringe the ’809 patent but nonetheless represented to Walmart that it did. The court instructed the jury that bad faith could be found in a clear case of knowledge of noninfringement, or by showing that the claim was objectively baseless and subjectively made as an attempt to interfere with Hillman’s business relationship with Walmart. The jury was also instructed that a patent can’t be infringed if even a single claim element is missing in an accused infringing product.  The court instructed the jury to give “fully automatic” its plain meaning, but noted that the jury wasn’t being asked to decide whether the Hillman kiosk infringed.  The instructions also stated that “A patent holder is even allowed to make representations that turn out to be false or misleading as long as the representations are not made in bad faith.”

 

A reasonable jury could have found bad faith by clear and convincing evidence. MK’s internal discussions distinguished its “fully automated” kiosks from those of Hillman, a distinction it considered of “High” importance.  The same day the CEO told a board member that he was “[t]hinking about raising the patent card” with Walmart, MK told Walmart that its kiosk was the “first and only fully automated, self-service key duplication machine,” a statement repeated in direct comparisons with Hillman in marketing behavior. Though MK engaged a patent attorney to conduct an infringement analysis before telling Walmart about potential infringement, it produced a chart that showed “‘blank’ or ‘zero’ entries in the chart next to the preamble to the claims that embody the parties’ claim construction dispute.” Moreover, MK never provided any of the marketing documents to the attorney. “The absent patent attorney in this case, whom Minute Key curiously did not bring to trial, cannot save Minute Key on the question of bad faith.”

The subjective component of bad faith was also supported by the record.  After learning that MK would be required to compete against Hillman in a head-to-head competition for Walmart, a board member/investor asked the CEO “if there is any way we can use the patent application to create some FUD [fear, uncertainty, and doubt] with Walmart re Hillman.” Fagundo testified at trial that “FUD” is an acronym for “fear, uncertainty, and doubt.”  Once MK learned it lost the head-to-head pilot, the CEO emailed that he was “[t]hinking about raising the patent card.”  And here’s the bad stuff that almost always shows up in discovery:

“Fuck Hillman, they don’t know they are messing with a pirate.” (the CEO); “Ha…love it. Always need a competitor and we will whack them in time[;]” and “Need to whack them now!” (the CEO). After this civil action commenced, “I’m pissed. I don’t want to win at the kiosk level – I really want to hurt them – badly.” (to the CEO); and “We are and will continue. If we were not they would not be fucking with us. Go to bed please;).” Further, MK’s remarks surrounding the patent infringement allegation were “glib,” e.g., “Let the fun begin” and “Interesting developments at WalMart. They appear to [be] taking the patent infringement letter very seriously[.]...It’s getting exciting!” (the CEO).

A reasonable jury could also have found literal falsity, given the absence of a need to engage in claim construction, and given that the phrase “it appears” in the letter MK sent to Walmart needed to be interpreted in context.  That message, “examined as a whole, is not equivocal in nature, and the jury reasonably could read it to state the fact that Hillman is a patent infringer.”  In the alternative, a reasonable jury could have found that Walmart was actually deceived and that it influenced Walmart’s purchase decisions.

Walmart’s Senior Manager for Home Services denied that MK’s allegation of patent infringement “brought everything to a halt.” Rather, “it was considered that Hillman was going to file a countersuit, which then complicated things.”  However, this testimony failed to account for that manager’s contemporaneous directive, sent soon after he received MK’s message: “Due to the upcoming issuance of the MinuteKey Patent that will occur on Tuesday and the cease order that will be issued to the Hillman Group (FastKey) we will be using the MinuteKey Program for all stores asking for the self-assisted key cutting kiosk.” All that was necessary was proof that “the statement is material in that it will likely influence the deceived consumer’s purchasing decisions,” and this email sufficiently demonstrated this likelihood. Likewise, delaying Hillman’s exercise of a contractual right to install kiosks in the relevant time period, and denying Hillman (as well as its customer, Walmart) the revenue expected during that time period, qualified as a “change” to the original purchasing decision.  A reasonable jury could have believed the manager’s contemporaneous statements over his after-the-fact testimony.

In addition, a reasonable jury could have found “commercial advertising or promotion.” This requires dissemination either widely enough “to the relevant purchasing public” or “to a substantial portion of the plaintiff’s or defendant’s existing customer or client base.” Here, the proper customer “base” was the market for self-service key duplication kiosks and not key duplication equipment generally. “Statements to a single customer can trigger the protections of the Lanham Act ‘if the market at issue is very small and discrete,’ but it was for the jury to decide whether the market at issue in this civil action was properly limited to Walmart.” The evidence allowed this conclusion, even though Home Depot, Lowe’s, Orchard Supply, Meijer, and Menards were also allegedly in the market. There was testimony “that virtually every FastKey ever built was and has always been in Walmart stores,” that, out of “a thousand and twenty” FastKeys ever built, “a thousand” were in Walmart stores, and that Walmart was “100 percent of [Hillman’s] focus” for self-service key duplication.

The test for commercial advertising or promotion can focus on an “existing” customer base, and doesn’t have to include a “potential, possible, or even once-contemplated customer base.” No retailers besides Walmart invited a 100-store to 100-store, head-to-head competition between Hillman and MK; the jury could reasonably find in Hillman’s favor.

Similarly, a reasonable jury could have found causation and harm based on the rollout freeze on installing kiosks. The jury awarded $164,072 in damages, which was half of the amount computed by Hillman’s witness regarding the freeze in installation in different Walmart stores brought about by the patent threat. The court thought this was likely related to the testimony that Walmart had put a holiday installation blackout in place for half the time covered; the jury also declined to award damages because of lost placement of kiosks beyond the initial 1000 awarded by Walmart. The award wasn’t speculative so the court left it alone.

Can the argument that third party users of a term are engaged in nominative fair use defeat a genericism claim?

Illinois Tamale Co. v. El-Greg, Inc., 2018 WL 1534971, No. 16 C 5387 (N.D. Ill. Mar. 29, 2018)

This case raises the interesting question of whether it’s possible to distinguish nominative fair uses from generic uses when looking at online comments/reporting; the jury may not get much guidance on how to do that!

Illinois Tamale owns a registered trademark for PIZZA PUFFS for “a frozen, hand-held stuffed sandwich or dough pocket filled with meat, cheese, and sauce,” among other PUFFS trademarks. El-Greg used theproduct names “Pizza Pies (Puffs),” “Chili Cheese Puff,” and “Veggie Pizza Puff,” and allegedly similar slogans and packaging. The court denied El-Greg’s motion for summary judgment on genericism and Illinois Tamale’s motion for summary judgment on fair use.

Illinois Tamale’s slogan is “MAKERS OF THE ‘ORIGINAL’ PIZZA PUFFS.” Although the word “pizza” is disclaimed, Illinois Tamale owns an incontestable registration for PIZZA PUFFS. On its website, Illinois Tamale describes its Pizza Puff as “Pork Sausage and Mozzarella Cheese with our Home-Style Pizza Sauce Wrapped [in] a Soft Flour Tortilla.”

El-Greg sells the “Pizza Pie,” a copy of Illinois Tamale’s Pizza Puffs product, described in El-Greg’s advertising as “Cooked Pork, Real Mozzarella Cheese, Homemade Pizza Sauce with our blend of fresh spices wrapped in a flaky tortilla pocket.” The parties have sold their products to Restaurant Depot, a restaurant supply firm, for many years; the products are sold side-by-side. In 2010, El-Greg changed its Pizza Pie label, but only for products sold at Restaurant Depot, now referring to the product as “PIZZA PIES (PUFFS).” El-Greg’s modified label has a layout similar to Illinois Tamale’s Pizza Puffs label, and it includes the slogan “MAKERS OF THE ‘ORIGINAL PUFFS.’”

The parties’ Restaurant Depot labels:

 

Defendant's Pizza Pies (Puffs)

Plaintiff's Pizza Puffs

The parties sell other products, including variations on the same stuffed sandwich / dough pocket theme. Additional stuffed sandwich items from Illinois Tamale include Sloppy Joe Puffs; Taco Puffs; Gyro Puff; Ham & Cheese Puff; Pepperoni Pizza Puff; Beef Pizza Puff; 4-Cheese Pizza Puff; Ham, Cheese & Jalapeno Puff; BBQ Pulled Pork Puff; Reuben Puff; and Breakfast Puff, with registrations for a number of these products, including Taco Puffs and the Gyro Puff. El-Greg sells a similar “Chili Cheese Puff” item and phyllo dough “Spinach Puff” hors d’oeuvres.

Whether or not a term is generic is a question of fact, but it may be resolved on summary judgment “if the evidence is so one-sided that there can be no doubt about how the question should be answered.” Though the Seventh Circuit hasn’t decided who has the burden of persuasion for a registered mark, it has noted that “an incontestable registration is more like a bursting-bubble presumption of non-generic-ness” than an “indomitable presumption” overcome only by strong evidence of actual generic usage of the term. The court put the burden of persuasion on genericness on the defendant for incontestable trademarks.

El-Greg’s evidence of genericness was (1) the PTO’s apparent approval of use of the term to denote a type of good (in six registrations not currently in force); (2) manufacturers’ and restaurants’ use of the term to denote a type of good (two other manufacturers and nearly 400 restaurants); (3) use of the term to denote a type of good in about 100 recipes published online; (4) dictionary definitions (Urban Dictionary and Wiktionary); (5) use of the term to denote a type of good in newspapers and other publications (over 200 times); and (6) use of the term to denote a type of good in connection with other products and services (just under 90 examples in TV shows/ads for other goods or services).

Illinois Tamale disputed the relevance of much of this evidence, arguing that it does not compete with restaurants because it sells Pizza Puffs only to wholesalers and retailers. The court disagreed—noncompetitors’ uses can be considered “where that use contributes to consumers’ common understanding of the meaning of the term.”  However, Illinois Tamale’s argument that the “pizza puff” item on menus and in news articles could be designating Illinois Tamale’s product, rather than a category of food, was better aimed.  Where the menus didn’t designate the source of the “pizza puff” product or indicate that it is homemade, they could be referring specifically to Illinois Tamale’s Pizza Puffs brand, as could many of the articles that reference pizza puffs. [Capitalization appears not to matter to the court here.]  “That said, the vast majority of the articles and menus cited make no reference to Illinois Tamale, nor do they otherwise suggest that they are referring to ‘pizza puffs’ as a brand rather than a type of food product.”

Here’s what caught my eye: in responsing to the “pizza puffs” recipes, Illinois Tamale argued that there are also thousands of recipes for a homemade version of Hot Pockets; this might just show that Hot Pockets are a “well-known brand[ ] [that] home cooks want to replicate.” There was also variation in the recipes—some produced pizza-themed foods that bore little resemblance to the Pizza Puffs product at issue, allegedly indicating that consumers don’t use the term “pizza puff” to denote any particular type of food product. Such use didn’t preclude genericness, but it wasn’t helpful to El-Greg either.

Illinois Tamale also showed that a number of similar stuffed sandwich / filled dough pocket products on the market are not named or described as “pizza puffs,” and El-Greg sold its competing product as “Pizza Pies” for over 20 years before changing its Restaurant Depot label. The term “pizza puff” does appear in any dictionaries other than the crowd-sourced ones above, and definitions of the word “puff” don’t encompass Illinois Tamale’s product. Several recent news articles expressly identify Illinois Tamale as the source of the Pizza Puff brand.

Ultimately, the court denied summary judgment to both sides; there was “significant evidence” of generic use, but no showing that there was no other name for the product. Thus, a reasonable juror could find either way.  Similarly, the court denied summary judgment on the issue of whether Illinois Tamale owned a “Puffs” family of marks.

So too with descriptive fair use. On factor 1 of the statutory test, Illinois Tamale argued that El-Greg couldn’t prove it uses “Pizza Pies (Puffs)” in a non-trademark way because it was featured prominently on the product label, but that wasn’t dispositive. But a jury could accept El-Greg’s argument that putting “(Puffs)” after Pizza Pies on the label was not trademark use, because of its placement and the parentheses, and that El-Greg’s logo on the box served as the trademark.  On factor 2, Illinois Tamale argued that “puffs” wasn’t merely descriptive of its product, because it wasn’t a light, fluffy pastry, and El-Greg only used the word “puffs” on its label for Restaurant Depot, where the parties compete side by side. But a jury could agree with El-Greg, and examining attorneys at the PTO, that “puffs” is descriptive for the product. 

On factor 3, Illinois Tamale argued that El-Greg lacked good faith because El-Greg had been involved in other disputes with Illinois Tamale relating to its use of the word “puffs,” and also because the rest of El-Greg’s product label clearly demonstrated an intent to copy Illinois Tamale’s label, which El-Greg admits to having seen prior to creating its own label. [They both look to me exactly like the generic informative labels you’d expect to find in a food warehouse that isn’t consumer-facing.] El-Greg argued that it added the “puffs” descriptor because Restaurant Depot complained that people were opening the boxes to identify the contents, and that it designed its label in accordance with Restaurant Depot’s requirements. Though Restaurant Depot didn’t require adding the word “puffs” to the label, that didn’t mean that El-Greg didn’t make the change to address the problem of customers opening boxes to identify the product.  A defendant’s good faith can be judged “only by inquiry into its subjective purpose.” El-Greg’s awareness of Illinois Tamale’s “Pizza Puffs” trademark and label was insufficient to prove bad faith, even though “the similarities between the parties’ labels and slogans is striking and could quite possibly be interpreted as evidence of bad faith.” 

Timeshare company can sue anti-timeshare law firm under Florida unfair competition law

Orange Lake Country Club, Inc. v. Castle Law Group, P.C., No: 17-cv-1044-Orl-31DCI, 2018 WL 1535719 (M.D. Fla. Mar. 29, 2018)

Plaintiffs are entities involved in selling timeshares; defendants promise to help timeshare owners get out of their contracts. Defendants allegedly use misleading advertising to solicit Orange Lake owners, claiming a high likelihood of success, when in reality they are rarely successful. Further, Castle Law allegedly advises its clients to breach their contracts with Orange Lake as a way of increasing the chance that Orange Lake will agree to let them out of their contracts.

Plaintiffs alleged false or misleading communications from Castle Law in which it “guaranteed timeshare owners it would relieve them of their timeshare obligations within one year to eighteen months.” Castle Law didn’t dispute having made this statement or others, but referred to its standard contract, which states that “Client understands and agrees that there is no guaranteed result of the Firm’s services or that Client will recover money or other property as a result of the Firm’s engagement. Client understands and agrees that there is no way to determine the time frame in which the Client’s case will be resolved and that there is no guarantee regarding the time required to resolve your Claims.”  But “a truthful disclosure is not necessarily sufficient to overcome the net impression caused by a misleading communication. Even if every Castle Law customer signed an engagement letter with the quoted language – something that cannot be determined at this stage of the proceedings – it would not necessarily require dismissal.”

On Florida Deceptive & Unfair Trade Practices Act claims, the plaintiffs alleged that defendants violated FDUTPA by soliciting the Orange Lake owners misrepresenting to the Orange Lake owners that Castle Law could legally represent them in Florida courts and falsely informing clients who were Orange Lake owners that their timeshare matters had been resolved. These allegations failed to state a claim because these alleged violations would have [directly] harmed the Orange Lake owners, not the plaintiffs. In addition, though, plaintiffs alleged that defendants’ advertising falsely induced timeshare owners to stop making payments even though they were contractually required to do so. Further, the advertising allegedly falsely portrayed timeshare developers and associations, generally, and plaintiffs specifically, as systematically engaging in fraudulent and deceptive conduct, tarnishing their business reputations.  FDUTPA isn’t limited to consumers, and competitors need not be the only parties aside from consumers that can bring FDUTPA claims.  Though the Lanham Act claims failed here (see below), the FDUTPA claims survived because of the allegation about lost contractual payments.

Lanham Act false advertising: The allegedly false advertising consisted of a website guarantee that Castle law would relieve timeshare owners of their timeshare obligations within 12-18 months from the date they sign up with Castle Law; a claim to have saved “6000+” customers “millions of dollars” defending against timeshare developers with express mention of one plaintiff; “[n]o matter your reason for wanting to get rid of your timeshare, Castle Law Group can help”; Resort Relief guarantees relief, promising “a 100 percent money back guarantee certificate for an added sense of security”; a claim of 93% success at cancellation, and again with an express mention of one plaintiff as a developer against whom it has achieved success. But the alleged injury to plaintiffs’ reputation caused by false claims that they were engaged in unlawful or illegal conduct couldn’t have happened as a result of these allegedly false statements.  “Misleading potential clients about Castle Law’s success rate in getting timeshare owners out of their contracts does not harm the reputation of timeshare developers or lenders.”  The implication is that lost contractual payments would solve the Lanham Act hurdle as well if otherwise properly alleged.

Section 817.41, Florida Statutes also makes misleading ads unlawful. But plaintiffs weren’t consumers and couldn’t allege that they relied on any of the advertising. Some courts have held that “when the party alleging misleading advertising is a competitor of the defendant in selling the goods and services to which the misleading advertisement relates, an allegation of competition is permitted to ‘stand-in’ for the element of direct reliance that a consumer is obligated to plead.”  But here, the parties didn’t compete; the plaintiffs “are in the business of getting people into timeshares, while the Defendants are in the business of getting them out. Though their target audiences necessarily overlap, the Plaintiffs and Defendants are selling entirely different services. They are adversaries, not competitors.”

Post-sale statements that prevent return of items can constitute advertising & promotion

Boltex Manufacturing Co. v. Galperti, Inc., 2018 WL 1535199, No. H-17-1439 (S.D. Tex. Mar. 29, 2018)

The parties compete in the market for carbon steel flanges.  Normalization is a heat treatment process that changes the physical composition of carbon steel to increase its machinability and toughness; it’s more expensive to make normalized flanges than non-normalized (or forged) ones. Boltex sells normalized flanges, made with processes compliant with ASTM standards, which require heat treatment for certain types of flanges. Several processes are available, but many customers will only purchase certain flanges if they are normalized.  Boltex stamps its normalized flanges to indicate their compliance with ASTM standards and provide a Mill Test Report (“MTR”)—an industry-standard report “used to promote and certify a material’s compliance with the appropriate ASTM standards, applicable dimensions, and physical and chemical specifications.” Boltex charges more for normalized flanges than for forged ones.

Defendants allegedly advertise some flanges as normalized and as meeting the the ASTM standards in the same way as Boltex touts normalization, but their flanges are allegedly not normalized and not ASTM-compliant.

Defendants argued that stamping flanges and providing MTRs wasn’t “advertising or promotion,”  because MTRs and stamped flanges are “post-sale communications to consumers who have already purchased a product[.]” Further, because the statements are “only seen by the specific customer who has already purchased the product” the statements weren’t disseminated sufficiently to the relevant purchasing public within the carbon steel flange industry.

However, previous cases about package inserts weren’t binding and were distinguishable. Here, the stamping and inclusion of MTRs, rather than containing new false statements, allegedly confirmed the assumption that consumers made when purchasing the flanges.  Stamping and MTRs allegedly allowed defendants to “convince their distributors to ship and their end use customers to accept non-compliant shipments” rather than returning them.  This was enough to state a plausible claim.

YouTube's claims about allowing free speech are merely puffery, court holds

Prager University v. Google LLC, No. 17-CV-06064, 2018 WL 1471939 (N.D. Cal. Mar. 26, 2018)

Prager’s “mission” is to “provide conservative viewpoints and perspectives on public issues that it believes are often overlooked or ignored” by creating educational videos, though, despite its name, Prager “is not an academic institution and does not offer certifications or diplomas.”

Google allegedly “hold[s] YouTube out to the public as a forum intended to defend and protect free speech where members of the general public may speak, express, and exchange their ideas.” However, Google allegedly discriminated against Prager’s viewpoint by censoring certain videos that it uploaded on YouTube by putting age restrictions on some of Plaintiff’s videos and/or excluding them from YouTube’s “Restricted Mode” setting, which helps schools and other content-screeners by keeping out content that violates YouTube’s guidelines.  Although YouTube has insisted in the past that Restricted Mode and age restriction filtering aren’t supposed to filter out content based on political viewpoints, Google allegedly restricted access to some of Prager’s videos “based on [Defendants’] animus towards [Plaintiff’s] political identity and viewpoint.” Additionally, Google allegedly “demonetized” some of Plaintiff’s videos—by preventing advertisements from running on those videos—in a viewpoint-discriminatory manner.  For example, Prager’s “Are 1 in 5 women in college raped?” has been restricted by YouTube, but “Author Jon Krakauer on new book ‘Missoula’ and college rape epidemic” uploaded by “CBS This Morning” has no such restriction. Prager further alleged that content from some of its restricted videos “was not restricted after it was copied and posted by other content providers or vloggers.”

Prager asserted violations of the First Amendment, the California Constitution, the California Unruh Civil Rights Act, the UCL, and the Lanham Act, as well as breach of the implied covenant of good faith and fair dealing.  The court kicked out the federal claims and declined to exercise supplemental jurisdiction over the state claims.

First Amendment: Google isn’t a state actor. Marsh v. Alabama “plainly did not go so far as to hold that any private property owner ‘who operates its property as a public forum for speech’ automatically becomes a state actor who must comply with the First Amendment.”

Lanham Act: The alleged implication that Prager’s videos were “inappropriate” was, first, pure implication; Prager didn’t identify any Google statements about YT’s classification of those videos. The mere implications arising from decisions to restrict access couldn’t constitute “commercial advertising or promotion” within the meaning of the Lanham Act. Prager alleged no facts that remotely suggested that Google restricted access to Prager’s videos for any “promotional purpose” or “as part of an organized campaign to penetrate the relevant market,” or that the implications of Google’s restriction decisions regarding Prager’s videos was “disseminated sufficiently to the relevant purchasing public to constitute ‘advertising’ or ‘promotion.’ ”

YT’s policies and guidelines setting forth what videos will be restricted also didn’t constitute commercial advertising or promotion. They were more akin to instruction manuals for physical products, which “are not advertisements or promotions.”

Nor did Prager sufficiently allege harm resulting from the allegedly false policies and guidelines. Although Prager alleged decreased viewership, ad revenue, and advertiser relationships, nothing suggested that this harm flowed from Google’s publication of its guidelines, as opposed to the decision to restrict Prager’s videos.

Google’s allegedly false statements about its viewpoint neutrality (“voices matter” and YouTube is “committed to fostering a community where everyone’s voice can be heard,” YouTube’s “mission” is to “give people a voice” in a “place to express yourself” and in a “community where everyone’s voice can be heard,” and YouTube is “one of the largest and most diverse collections of self-expression in history” that gives “people opportunities to share their voice and talent no matter where they are from or what their age or point of view”) were all puffery.  They weren’t quantifiable or specific enough to be measurable.  Thus these statements were neither “[ ]likely to induce consumer reliance,” nor “capable of being proved false.”

In addition, Prager didn’t sufficiently allege harm from these statements, for the reasons given above.

Prager also alleged that it relied on false representations contained in the parties’ agreements: YT’s representations that Google endeavors to “help you grow,” “discover what works best for you,” and “giv[e] you tools, insights and best practices for using your voice and videos.” First, these claims were no more than puffery. Second, Prager lacked standing under the Lanham Act as a consumer.

Open legal question doesn't preclude fees award where manner of litigating is exceptional

Tobinick v. Novella, 884 F.3d 1110 (11^th Cir. 2018)

The court of appeals held that the Octane Fitness standard for “exceptional cases” applied to Lanham Act cases, and that the District Court here didn’t abuse its discretion in awarding attorney’s fees to Novella.  As you may recall, Tobinick claimed that a treatment he created works for spinal pain, neurological dysfunction, and Alzheimer’s disease.  Novella, a neurologist at Yale New Haven Hospital, wrote a blog post criticizing Tobinick’s treatment as unsupported by medical evidence, so Tobinick sued for (1) false advertising under the Lanham Act, and (2) unfair competition, trade libel, libel per se, and tortious interference with business relationships, all under state law.  After pretrial motions, the district court granted summary judgment to Novella, holding that the blog posts weren’t commercial speech as required by the Lanham Act.

Previously, the court of appeals had said that an exceptional case under the Lanham Act was one “where the infringing party acts in a malicious, fraudulent, deliberate or willful manner.” The District Court initially denied a motion for fees by one defendant (a nonprofit associated with Novella), determining that Tobinick had not pursued his Lanham Act claim maliciously or fraudulently. Novella also successfully brought a special motion to strike the state law claims under California’s anti-SLAPP statute, which was granted, entitling him to fees and costs as to those claims.  The district court held that this was now an exceptional case, since a showing of subjective bad faith or fraud was no longer required under Octane Fitness. The court noted that it had twice before ruled against the plaintiffs on the issue of commercial speech, and even after this, plaintiffs repeatedly sought to multiply the proceedings by adding new parties and claims, moving for sanctions, and accusing Novella of perjury. The court awarded fees as to those expenses incurred after the order granting summary judgment for the nonprofit, over $220,000 (added to a smaller amount for the anti-SLAPP claims for a total of almost $260,000).

Unsurprisingly, the court of appeals joined its fellows in holding that Octane Fitness’s interpretation of the identical patent statutory language applied equally to the Lanham Act. An “exceptional case” under the Lanham Act thus requires only that a case “stands out from others,” either based on the strength of the litigating positions or the manner in which the case was litigated.

The court of appeals held that the district court didn’t abuse its discretion.  That court had ruled against Tobinick in three separate orders, and “[p]laintiffs repeatedly failed to produce new arguments or evidence to distinguish the Court’s prior rulings.” After two adverse rulings on commercial speech, and more than eleven months, plaintiffs “repeatedly sought to multiply the proceedings by adding new parties and claims,” creating 131 new docket entries in 6 ½ months after that summary judgment, and bringing what the trial court viewed as baseless motions for sanctions and accusations of perjury.  The court of appeals, however, didn’t place much weight on the fact that Tobinick continued litigating his case even in the face of a number of adverse rulings on whether the blog posts qualified as “commercial speech,” because that was an open question in this circuit, resolved by a published decision on the merits in this case. Even so, Tobinick’s manner of litigating his suit was enough to make it an exceptional case.

Walmart's allegedly secret customer return blacklist could be misleading, unfair

Maestas v. Wal-Mart Stores, Inc., No. 16-cv-02597-KJM-KJN, 2018 WL 1518762 (E.D. Cal. Mar. 28, 2018)

Maestas allegedly bought a car battery from Wal-Mart that purportedly came with a replacement and refund warranty. When the battery malfunctioned and he tried to return it, Wal-Mart allegedly refused to give plaintiff a replacement or refund because his name appeared on an internal fraud database (based on allegations that he tried to use a bad check at a Colorado Wal-Mart in 2000, thirteen years before his purchase).  Because he wasn’t warned of his ineligibility for the warranty, he sued under the usual California statutory claims on behalf of two putative classes of California consumers whose names also appear in Wal-Mart’s fraud database. The court denied a motion to dismiss. 

Maestas adequately alleged an unfair business practice under Rule 8(a). He explained how the alleged unlawful business act or conduct was “immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.” The applicable test asks whether “the consumer injury is substantial, is not outweighed by any countervailing benefits to consumers or to competition, and is not an injury the consumers themselves could reasonably have avoided.”  Maestas clearly identified the practice at issue: Consumers on the fraud database buy products in reliance on express replacement and refund warranties without any warning that the policies do not apply to them, then Wal-Mart refuses to honor the agreements when the consumers try to use those policies. He alleged that this practice of profiting from false promises didn’t benefit consumers, and that consumers cannot reasonably discover and avoid the injury because only Wal-Mart knows the information that will lead it to reject warranty claims.

For alleged fraudulent practices, Maestas also satisfied Rule 9(b). The question was whether the public was likely to be deceived. Maestas identified what specific misrepresentations and omissions allegedly deceived him: his ineligibility for the warranties was omitted from all receipts and contracts, and he bought in reliance on the warranties.  When he tried to return the battery, a Wal-Mart employee allegedly told him his ineligibility covered “any products” for as long as he remained in the fraud database.

Wal-Mart also argued that, because the proposed class entitled to refunds included consumers who bought products other than the battery Maestas purchased, he hadn’t suffered an injury similar enough to his proposed class members to confer class standing. The court disagreed: the injury wasn’t based on the battery, it was based on the list and allegedly covered all product lines. Nor would the court strike class allegations; the certification stage was the more appropriate time to do that if appropriate.

reasonable consumers might not know just how big Apple iOS 8 is

Orshan v. Apple Inc. 2018 WL 1510202, No. 14-cv-05659-EJD (N.D. Cal. Mar. 27, 2018)

The plaintiffs bought iPhones and iPads with 16 GB capacity running earlier versions of iOS, which they later upgraded to iOS 8, which used anywhere from 18.1%-23.1% (2.9-3.7 GB) of the capacity and made it unavailable for personal storage. They alleged that, had they known this, they “would not have upgraded to iOS 8,” “would not have purchased the 16 GB of storage capacity or would not have been willing to pay the same price for it.” Further, Apple allegedly exploits this discrepancy between represented and available capacity by selling iCloud storage subscriptions and not allowing users to use cloud storage from other vendors. They brought the usual statutory California claims.

The court found plaintiffs failed to state a claim, though one theory might be repleadable.  First, it wasn’t reasonable to think that all advertised storage capacity would be available for personal use.  In all its materials, Apple clarified that the “actual formatted capacity” of these devices would be “less” than the full 16 GB. Also,

iPhones and iPads are not hard drives; they are fully functional devices that come pre-installed with an operating system and applications. Consumers know and expect this. No reasonable consumer would buy an iPhone or iPad and not expect that it would not already include this software. Although an average consumer is not an engineer, software and computers are pervasive enough in the modern world that a reasonable consumer would at least expect that software would require some storage space.

Second, a reasonable consumer might not have thought that iOS 8 would be so bulky.  Apple didn’t make specific statements about its size either absolutely or in comparison to iOS 7.  “In addition, a reasonable consumer is not a software engineer and would not be expected to know, as a matter of common knowledge, how much space iOS consumes or the relative size differences between iOS 7 and iOS 8.” However, plaintiffs didn’t sufficiently plead their claims with particularity. Their general statements about deceptiveness didn’t let Apple pinpoint which of its statements, or its materials containing omissions, gave rise to plaintiffs’ alleged expectations.

reading list: parody takedowns on Google

Erickson, K. & Kretschmer, M. (2018) ‘This Video is Unavailable’: Analyzing Copyright Takedown of User-Generated Content on YouTube. Journal of Intellectual Property, Information Technology and ECommerce Law (JIPITEC), 9(1).

From the abstract:

This research investigates factors that motivate takedown of user-generated content by

copyright owners. We study takedowns within an original dataset of 1,839 YouTube music video parodies observed between January 2012 and December 2016. We find an overall rate of takedowns within the sample of 32.9% across the 4-year period. … The variables analysed include commercial substitution, artistic/moral concerns, cultural differences between firms and YouTube uploader practices. The main finding is that policy concerns frequently raised by rightholders are not associated with statistically significant patterns of action. For example, the potential for reputational harm from parodic use does not appear to predict takedown behavior. Neither does commercial popularity of the original music track trigger a systematic response from rightholders. Instead, music genre and production values emerge as significant factors.

In particular, lower production values increase the risk of takedowns, contrary to the hypothesis that substitution would be a more-feared risk for higher-production-value parodies.  A clear intent either to target the song itself or to use the parody to target some other entity both decrease the risk of takedowns, showing again that the satire/parody distinction is not a legally helpful one.  From the conclusion: “The central finding is that rightholders appear to make complex choices that are assisted by automatic detection mechanisms, with little concern for the artistic integrity of the creative works they represent. The significant difference between musical genres suggests that rightholders, even in the same medium, behave quite differently from their peers.

Supplement review guide not disguised advertising despite cozy relationship with one manufacturer

Ariix, LLC v. Nutrisearch Corp., No. 17CV320, 2018 WL 1456928 (S.D. Cal. Mar. 23, 2018)

Ariix competes with Usana Health Sciences in the nutritional supplement market.  NutriSearch publishes the NutriSearch Comparative Guide to Nutritional Supplements, “a guide to nutritional products that is relied on by consumers and professionals.” The Guide’s Gold Medal of Achievement has gone to four different companies:

Ariix made a vigorous effort to qualify for the Gold Medal, but was denied. According to the complaint, NutriSearch admitted Ariix had met the standard, but refused to award the company the Gold Medal because it was reworking its criteria for the distinction. The existing Gold Medal holders, including Usana, were “grandfathered” in during this period.

The allegedly false representations were (1) that Ariix or its products are not as good as Usana or its products and (2) that NutriSearch claims to be objective and neutral but is actually a shill for Usana.

However, “the legislative history of the Lanham Act suggests Congress’ intent to avoid trying to regulate consumer reports or consumer protection groups that review products,” and the benefit of the doubt must go to “protecting rather than stifling speech” about “matters of public concern.” “The Court therefore holds that the Lanham Act doesn’t apply to reviews of consumer products, even if they are alleged to be biased, inaccurate, or tainted by favoritism.”

But not every soi-disant “review” is actually a review.  “Caselaw is replete with examples of people and entities positioning themselves as reviewers who were actually engaged in some form of commercial product promotion.” Nor did the court’s holding apply to other statutes, such as the FTC Act, which have their own requirements. [Though given the First Amendment reasoning, it’s not clear why.]  But an actual consumer product review “falls outside the scope of the Lanham Act’s false advertising provision.”

The court referred to, but didn’t exactly rely on, the Lanham Act’s “commercial advertising or promotion” requirement.  The Ninth Circuit has adopted the Gordon & Breach test: 1) commercial speech; 2) by a defendant who is in commercial competition with plaintiff; 3) for the purpose of influencing consumers to buy defendant’s goods or services, 4)  disseminated sufficiently to the relevant purchasing public to constitute ‘advertising’ or ‘promotion’ within that industry.  As the court noted, Lexmark requires tweaks to 3), such as construing this element to require that the statements be made for the purpose of influencing consumers to buy particular goods or services—whether those are the defendant’s goods and services or someone else’s. But 1) and 4) remain good law.

But the first and fourth elements were not implicated by Lexmark’s holding.

Books and articles can sometimes be commercial speech, but if their main purpose was not the proposal of a commercial transaction, that’s not going to be commercial speech, even if parts promote sale of a product by the author. “Where the general purpose of a book is not the promotion of a commercial transaction, the book may nevertheless contain commercial speech”; the question then is whether the  commercial and non-commercial components are inextricably intertwined. Companies are not allowed to “mask” the commercial nature of a publication “merely by adding informational content.”

The court found that, based on the allegations of the complaint, the Guide was noncommercial speech, with any arguably commercial elements inextricably intertwined with the Guide’s “overriding noncommercial purpose.” “NutriSearch itself does not sell any of the nutritional products reviewed in the Guide, and does not have an ownership interest in the companies that produce them…. [T]here is no allegation that NutriSearch solicits or accepts paid advertising or that it was paid in any direct fashion for promoting Usana’s or any other company’s products or disparaging Ariix’s.”  However, in case Ariix could allege additional facts showing that at least some of the allegedly false or misleading commercial statements were separable from the noncommercial ones, the Court continued.

Statements about NutriSearch’s neutrality applied to the entire Guide as a whole:

This guide was not commissioned by any public sector or private sector interest, or by any company whose products may be represented herein. The research, development, and findings are the sole creative effort of the author and NutriSearch Corporation, neither of whom is associated with any manufacturer or product represented in this guide.

These statements were arguably commercial speech only insofar as they encouraged people to buy the Guide. There was no allegation that the statements appeared anywhere other than inside the Guide itself, and thus they weren’t sufficiently disseminated to the relevant purchasing public to constitute advertising or promotion within the publishing or bookselling industry. Moreover, the court didn’t think they were commercial speech. Furthermore, the Guide’s statements touting its neutrality and reliability could only plausibly be connected with any harm to Ariix in connection with statements about Usana and Ariix, so Ariix’s claim could only succeed if the other statements were actionable.

The complaint didn’t plead facts plausibly suggesting that the statements about Usana and Ariix were commercial speech, or even that they were false or misleading. The sheer numbers of companies reviewed suggested that the Guide was mainly in the business of reviewing a large number of different products, rather than promoting the purchase of a particular product or even one company’s products. The complaint plausibly suggested that the Guide was biased, but not that it was commercial advertising or promotion.

The alleged ties between the Guide and Usana were that the author and NutriSearch’s current CEO were former Usana employees, and that the author originally conceived the Guide as a way to promote Usana’s products. “Given that the Guide is now on its fifth edition, facts surrounding its genesis years ago are not particularly suggestive of any current financial arrangement with Usana.”  Favorability to Usana didn’t mean they were being paid to advertise Usana.

The complaint alleged that Usana compensated NutriSearch indirectly, because it heavily promotes the Guide and “encourage[es] its representatives and consumers” to buy it. “In some circumstances, this might plausibly point to some kind of quid pro quo, but here it does not. It is entirely normal for a company whose products have been favorably reviewed in a particular publication to seek to publicize that fact as widely as possible.”  In addition, the complaint alleged that the author accepted paid speaking engagements for Usana, but has at least once declined to speak at an Ariix convention.  This could suggest some economic motive, but there were no factual allegations suggesting that the speaking fees were under-the-table payments for advertising, and so this suggested at most an indirect economic motive.  In fact, the author’s decision to decline an opportunity to speak with Ariix indicated that he gave up money, which was inconsistent with using speaking fees as payment for advertising; Ariix implied that some kind of exclusivity arrangement existed, but didn’t adequately allege such an agreement.

The court cautioned that unpaid advertising could be commercial speech or constitute commercial advertising or promotion. But without plausible allegations of payment or of some other kind of quid pro quo, these were noncommercial product reviews.  “[A]ny alleged economic motive is too indirect to transform what would otherwise be noncommercial product reviews into commercial speech or disguised commercial advertising. Even if the Guide is biased or its evaluations unfair, or Defendants’ objectivity is tainted by the alleged economic relationships with Usana, there are no plausible allegations that Defendants are engaged in commercial speech.”

Finally, some of the challenged claims were opinion, not fact.  The complaint alleged that the Guide’s ratings system was objective, but said almost nothing specific about NutriSearch’s ratings process or criteria for the Gold Medal award.  “[T]he Guide’s role appears to be that of an evaluator that awards ratings up to five ‘stars.’” Although the plaintiff might not need to allege the exact way ratings were arrived at, without at least some allegations, it wasn’t plausible that the decisions about how rating criteria were selected and weighed were objective, making the ratings just opinion.

Feud lawsuit foiled, but questions about transformativeness remain

De Havilland v. FX Networks, LLC, No. B285629 (Cal. Ct. App. Mar. 26, 2018)

Reversing the trial court’s refusal to dismiss Olivia de Havilland’s right of publicity and false light claims against FX’s show Feud, the California court of appeals reasons, “[t]he First Amendment does not require authors, filmmakers, playwrights, and television producers to provide their creations to the public at no charge.”  [Now ask about sketch artists and video game designers!]  Real people portrayed in expressive works—at least “[b]ooks, films, plays, and television shows”--don’t “have the legal right to control, dictate, approve, disapprove, or veto the creator’s portrayal of actual people.”

Feud is a docudrama about film stars Bette Davis and Joan Crawford, in which Academy Award-winning actress Catherine Zeta-Jones plays de Havilland, a close friend of Davis.  The trial court found that the portrayal was realistic and therefore not transformative.  Noting that “this reasoning would render actionable all books, films, plays, and television programs that accurately portray real people,” the court of appeals reversed.

The de Havilland role takes up less than 17 minutes of the 392-minute, eight-episode miniseries. It’s mostly: (1) a fictitious interview in which Zeta- Jones talks to an interviewer about Hollywood, its treatment of women, and the Crawford/Davis rivalry; and (2) scenes in which Zeta-Jones interacts with Susan Sarandon playing Bette Davis, her close friend.  De Havilland’s expert calculated the fair market value of FX’s “use” in Feud of de Havilland’s “rights” to be between $1.38 and 2.1 million, or $84,000 and $127,000 per minute of screen time.  De Havilland also submitted declarations from two men with “many years of experience in the entertainment business” claiming that “standard practice” in the film and television industry is to obtain consent from any “well-known living person” before her or his “name, identity, character[,] or image” can be used in a film or television program.  FX contested these declarations, including with a declaration from Casey LaLonde, Joan Crawford’s grandson, who is portrayed in Feud although he neither granted consent nor received any compensation for this portrayal.

The trial court said de Havilland had met her burden under California’s anti-SLAPP law to show a likelihood of prevailing on her right of publicity claims “because no compensation was given despite using her name and likeness.” There was “nothing transformative about [Feud]” because FX admitted it “wanted to make the appearance of [de Havilland] as real as possible.”  On de Havilland’s false light claim, the court noted de Havilland asserted (1) she had not given an interview at the 1978 Academy Awards; (2) she had not referred to her sister Joan Fontaine as “my bitch sister”; (3) she never told a director she didn’t “play bitches” and he should call her sister; and (4) when asked where the alcohol in Frank Sinatra’s dressing room had gone, she never said “Frank must have drunk it all.” A viewer “may think [de Havilland] to be a gossip who uses vulgar terms about other individuals, including her sister.” The court stated, “For a celebrity, this could have a significant economic impact.”

Generally, only minimal merit is required to survive an anti-SLAPP motion. But when the plaintiff is a public figure, as de Havilland conceded she was, her prima facie case requires clear and convincing evidence that the defendant acted with “actual malice.”  [It wasn’t clear to me that the court meant to apply this to the right of publicity claims too, but it does come as part of the introductory discussion.]

Right of publicity: First, the court of appeals expressed uncertainty whether a docudrama constituted a “product or merchandise” within the meaning of the statutory right of publicity. “Many of the cases in this area involve products and merchandise such as T-shirts and lithographs, greeting cards, and video games, or advertisements for products and merchandise.”  [Images on T-shirts, lithographs, greeting cards, and video games, of course, are not protected by the First Amendment any more than beer and cars … oh wait, they are, my bad.]  In the recent Hurt Locker case, the Ninth Circuit noted that the movie was “not speech proposing a commercial transaction.”  [You know, not like T-shirts, lithographs, greeting cards, and video games.] 

But the court here didn’t need to decide the issue, because Feud was constitutionally protected in any event, both for the statutory cause of action and the misappropriation tort.  “Our courts have often observed that entertainment is entitled to the same constitutional protection as the exposition of ideas.” FX didn’t have to buy the rights to use de Havilland’s name or likeness.  Producers can buy such rights “for a variety of reasons, including access to the person’s recollections or ‘story’ the producers would not otherwise have, or a desire to avoid litigation for a reasonable fee. But the First Amendment simply does not require such acquisition agreements.”

 De Havilland relied on Eastwood v. Superior Court, a 1983 California appellate case “which arose from an unusual set of facts,” in which a tabloid  published an article about the supposed involvement of famous actor Clint Eastwood in a “love triangle.” Eastwood alleged the article was entirely false, and the court of appeals allowed him to proceed with his right of publicity claims. “Here, by contrast, the expressive work at issue is an eight-hour docudrama of which the de Havilland character is but a small part. Moreover, as discussed below, the scenes and lines of which de Havilland complains are permissible literary license and, in any event, not highly offensive to a reasonable person. Unlike Eastwood, Feud’s creators did not make out of whole cloth an entirely false ‘article’ for economic gain.”  This is a beautiful example of a set of statements that identify factual differences between the cases, but do not explain why the differences matter to whether the right of publicity (a distinct tort from defamation/false light) can be violated.  After all, Eastwood was also brought by a man, not a woman, and against a tabloid, not a TV show—but so what?  This discussion further strengthens my discomfort with the court’s later treatment of transformativeness, which suggests that a character who is the focus of a narrative may have a right of publicity claim even if de Havilland doesn’t.

De Havilland also argued that the fictitious interview “is structured as an endorsement of [Feud].” The court of appeals disagreed, based on the content of the miniseries itself. The court found no authority to support the reasoning that “whenever a filmmaker includes a character based on a real person, that inclusion implies an ‘endorsement’ of the film or program by that real person.” Nor did the use of de Havilland’s name and photographs of Zeta-Jones in advertising for the miniseries support a right of publicity claim, since the constitutional protection of a publication extends to advertising for the publication.

Anyway, the portrayal of de Havilland was transformativeness.  Now here comes some real nonsense: “Comedy III’s ‘transformative’ test makes sense when applied to products and merchandise – ‘tangible personal property,’ in the Supreme Court’s words. Lower courts have struggled mightily, however, to figure out how to apply it to expressive works such as films, plays, and television programs.”  [Which, as we know, are never instantiated in tangible personal property, and cannot be reduced to mere merchandise such as books and DVDs, thus making them unlike the nonexpressive images found on T-shirts and lithographs.  OK, just imagine me making Charlie Brown aaaargh noises, because if the court can’t write a meaningful sentence than neither can I.]  In a footnote, the court notes our amicus brief expressing doubts about the transformativeness test.

Still, the court of appeals finds that here, the struggle is not real. The trial court focused on the show’s attempt to create realism as nontransformative, but the court of appeals found the “imagined” interview in which Zeta-Jones talks about Hollywood’s treatment of women and the Crawford/Davis rivalry to be “a far cry from T-shirts depicting a representational, pedestrian, uncreative drawing of The Three Stooges.”  [On behalf of visual artists and by extension photographers, not to mention copyright law, let me express my dismay at this characterization.] 

The court of appeals focused on the fact that the de Havilland role constituted only about 4.2% of Feud and noted the many other stories the show told, making the likeness of de Havilland  “one of the ‘raw materials from which [the] original work [Feud] is synthesized.” The show’s “marketability and economic value” does not “derive primarily from [de Havilland’s] fame” but rather “comes principally from . . . the creativity, skill, and reputation” of Feud’s creators and actors.  The court concludes that, “While viewers may have ‘tuned in’ to see these actors and watch this Hollywood tale, there is no evidence that de Havilland as a character was a significant draw.” By implication, it seems, the analysis of Davis and Crawford’s publicity claims would have to have proceeded differently, and a biopic focusing on a single person ought to worry, which just goes to show that transformativeness is not a good test.

The false light claim also failed; false light requires that the falsity be highly offensive to a reasonable person.  “In light of the actual docudrama itself -- which we have viewed in its entirety -- de Havilland cannot meet her burden.” First, the court questioned whether a reasonable viewer would interpret a docudrama as entirely factual, rather than as a form in which “scenes, conversations, and even characters are fictionalized and imagined.” But even assuming the scenes would be seen as literal statements of actual fact, Feud’s depiction wasn’t defamatory nor would it “highly offend” a reasonable person.

“Granting an interview at the Academy Awards is not conduct that would subject a person to hatred, contempt, ridicule, or obloquy.”  Generally, “Zeta-Jones acts as a guide for the viewer through the tale, a Beatrice to the viewer’s Dante. Zeta-Jones plays de Havilland as a wise, witty, sometimes playful woman,” characteristics de Havilland displayed in actual interviews. “Taken in its entirety and in context, Zeta-Jones’s portrayal of de Havilland is overwhelmingly positive….The work itself belies de Havilland’s contention that Zeta-Jones portrays de Havilland as a ‘vulgar gossip’ and ‘hypocrite.’” An offhand remark to de Havilland’s good friend Bette Davis while they are alone in Sinatra’s dressing room that he must have drunk the liquor wouldn’t be defamatory or highly offensive to a reasonable person, given that Sinatra’s fondness for alcohol was well known.

As for the “bitch” remarks, given that de Havilland actually described her sister as a “dragon lady,” they wouldn’t be highly offensive to a reasonable person and they were also substantially truthful characterizations of her actual words.  A statement is not considered false unless it “would have a different effect on the mind of the reader from that which the . . . truth would have produced.” The writers submitted declarations that they used “bitch” instead of “dragon lady” because the terms had the same meaning but “bitch” would be more recognizable to the target audience.  The court found that the effect on the mind of the audience was the same. “We must not permit juries to dissect the creative process in order to determine what was necessary to achieve the final product and what was not, and to impose liability . . . for that portion deemed unnecessary. Creativity is, by its nature, creative.”

Nor could de Havilland prove by clear and convincing evidence that Feud’s creators acted with actual malice, as required given her public figure status. De Havilland argued that, because she did not grant an interview at the 1978 Academy Awards or make the “bitch sister” or “Sinatra drank the alcohol” remarks to Bette Davis, Feud’s creators acted with actual malice. “But fiction is by definition untrue. … Publishing a fictitious work about a real person cannot mean the author, by virtue of writing fiction, has acted with actual malice.”  Thus, courts require plaintiffs in cases like this to show that the defendant intended to convey the defamatory impression, which de Havilland could not do, especially since liability cannot be imposed for an implication that merely should have been foreseen. In his sworn declaration, the main creator stated that he intended Zeta-Jones’s portrayal of de Havilland to be that of “a wise, respectful friend and counselor to Bette Davis, and a Hollywood icon with a unique perspective on the past.”

In conclusion, the court of appeals summarized the Catch-22 created by the trial court’s ruling: “If [creators] portray a real person in an expressive work accurately and realistically without paying that person, they face a right of publicity lawsuit. [This part of the dilemma is apparently ok for people who work in static representational art, per Saderup.] If they portray a real person in an expressive work in a fanciful, imaginative -- even fictitious and therefore ‘false’ -- way, they face a false light lawsuit if the person portrayed does not like the portrayal.”  The trial court was ordered to grant the anti-SLAPP motion and award defendants their attorney fees and costs.