Tank wars

Precision IBC, Inc. v. PCM Capital, LLC, 2011 WL 5444114 (S.D. Ala.) (magistrate’s report and recommendation)

IBC sued defendants, competitors in the market to sell and lease intermediate bulk containers (IBCs or tanks) designed to store and transport hazardous, degradable, and sensitive materials. Some of Precision’s 350-gallon stainless steel tanks, which comprise 25% of its tank rentals, are imported from China. Precision alleged that its products were made of high quality materials and properly labeled with the country of manufacture. Defendants, allegedly knowing that Precision used Chinese-made tanks, made statements that such tanks are "lower quality" and have "serious quality issues," advising customers that they should "stay away from," "beware" of, and "say no to Chinese IBCs." They allegedly further falsely claimed that Chinese tanks are not UN/DOT compliant and may expose the consumer to "costly legal liability." Precision claimed that this constituted a violation of the Lanham Act and also defamation per se.

Defendants challenged constitutional and prudential standing, because why not these days? This created a question of what kind of motion to dismiss this was; the magistrate found that the jurisdictional and merits inquiries overlapped. Defendants’ arguments over lack of injury were inextricably intertwined with the Phoenix of Broward inquiry into the directness or indirectness of the asserted injury and the speculativeness of the damages. The proper course of action was thus to find that jurisdiction existed and deal with the attack on the merits.

Article III standing requires an injury fairly traceable to the defendant that would likely be redressed by a favorable decision. Defendants argued that Precision only made generalized assertions of harm without identifying any customers allegedly affected by the challenged statements or any causal connection between the statements and harm to Precision. This didn’t work. Precision alleged that defendants, “with whom it is in direct competition, made false and misleading statements regarding its Chinese-made tanks, that the statements have the capacity to deceive existing and potential customers, that as a result of Defendants' false advertising, it has suffered loss of reputation, goodwill, and market position, and that the purpose of the false advertising was to drive business away from Precision in favor of Defendant Tote Systems.” This was enough to plead constitutional standing.

Prudential standing: (1) This was the type of injury to a direct competitor’s market position, goodwill, and reputation that Congress targeted with the Lanham Act. (2) Directness of harm: defendants argued that Precision’s name was never mentioned. That didn’t matter, because the parties were direct competitors: Precision alleged a direct causal relationship between the false advertising and the injury. (3) Precision’s proximity to the alleged injurious conduct: “The most appropriate party to bring a false advertising claim under Lanham Act are competitors who suffered a loss in customers and consequently suffered a loss in profits.” That’s Precision. Defendants argued that since they said nasty things about Chinese manufacturers, such manufacturers and distributors would be better plaintiffs. But Precision alleged that defendants attacked Chinese-made tanks in an effort to harm Precision.

(4) Speculativeness of alleged damages: The degree of evidence required depends on the stage of the litigation. Precision was seeking injunctive relief, disgorgement, expenses for corrective advertising, and attorneys’ fees. Defendants argued that damages would be speculative because Precision has no way of knowing how many potential customers saw the allegedly false advertising and made purchasing decisions based on it. Moreover, they argued that potential customers visiting Precision’s website wouldn’t know that Precision sells or leases Chinese-made tanks, and that because Precision also sells US-made tanks, it wasn’t harmed. The magistrate, demonstrating that Phoenix of Broward is a machine for hurting plaintiffs before they get to put in any evidence, found that this factor counseled against standing. “Because the actual economic loss depends on consumers' reaction in a particular way to Defendants' advertisements [ed. note: when will this not be true of any ad?] regarding Chinese-made tanks, the amount of any resulting loss will necessarily be speculative and difficult to quantify.” Something that will always be true is not a factor; it is serving some other function. If we want to put a thumb on the scale against all plaintiffs, we should at least say so, not pretend otherwise. (Note also the illegitimate sub rosa incorporation of materiality; whatever speculativeness means, this version is bad.)

(5) Risk of duplicative damages. Defendants argued that every Chinese manufacturer, seller, lessor, distributor, and owner of Chinese tanks would have prudential standing. This factor is related to factor (3), proximity. Precision is the most proximately injured because it’s at the same place in the distribution chain. Also, the market here is smaller than that in Phoenix of Broward, since it’s restricted to retailers who sell or lease Chinese-made tanks in the US.

Given that Phoenix of Broward was a close call with more factors weighing against standing, the magistrate here found that Precision had prudential standing.

Substance: Precision challenged an article, “A Pioneering Pedigree,” originally published in the Hazardous Cargo Bulletin (gotta love niche publication) and reposted on defendant Tote Systems’ website; the FAQ section of that website; and defendants’ print and electronic ads.

As to falsity, on a motion to dismiss, the court must accept as true the facts as pled and Precision was not required to submit proof of actual falsity. Precision properly alleged that the statements at issue were literally false and misleading because they suggested to the IBC-buying public that Plaintiff's Chinese-made tanks are unsafe and inferior to American-made tanks and that they do not comply with UN/DOT standards.

Defendants argued that the statements weren’t about Precision and didn’t refer to it or its products by name, and thus weren’t actionable. The magistrate rightly rejected this argument, determining that the claim that the statements were directed at Precision was plausible. (Even if there were a bunch of sellers of Chinese-made tanks on the market, Precision should still have a claim; the Lanham Act, after all, does not require disparagement, only falsity—even if the defendant is making false claims about its own products.)

Defendants argued that the trade journal article wasn’t commercial speech. Using the Gordon & Breach test, the magistrate determined that it was, apparently reaching this result both for the original article and for Tote Systems’ republication of the article. In the “Pioneering Pedigree” article, defendant Palmer Finger stated that consumers should know about pitting, which could affect the wall thickness of IBCs and have "the potential to throw you out of UN and DOT compliance," which could subject the consumer to legal liability. The article mentioned “problems” and “serious quality issues” with imported Chinese tanks, then suggested that Tote Systems had eliminated those problems. The purpose of those statements was clearly to get consumers to choose Tote Systems IBCs over competing Chinese-made IBCs. Moreover, posting the article on the publicly accessible Tote Systems website, and in Hazardous Cargo Bulletin, was sufficient dissemination.

Defendants also argued that their statements were opinion or nonactionable puffery. Representations about safety hazards, however, can be interpreted as claims founded in fact. In context, the reference to “problems” suggested a proven and known fact. Likewise, ads urging customers not to "take the CHANCE!!" and suggesting that Chinese tanks are "dangerous ... [and] environmentally taboo" “could undoubtedly bring safety concerns to a customer's mind.” These safety concerns weren’t easily verifiable by customers, and they went beyond mere opinion. Likewise, claims that Chinese-made tanks are "lower quality" and "have serious quality issues"; that customers should "stay away from," "say no to," and not "take the chance" with Chinese IBCs; that the "risks borne of using such units far outweigh apparent savings"; and that these tanks are "dangerous, expensive, and environmentally taboo" include specific and measurable claims capable of being proven false or interpreted as statements of objective fact.

Because the Lanham Act claims survived, so did the related conspiracy claim.

Turning to the libel claims, the magistrate engaged in a necessarily different analysis. Defamation requires 1) a false/defamatory statement concerning the plaintiff; 2) an unprivileged communication of that statement to a third party; 3) fault amounting at least to negligence on the part of defendant; and 4) either an exception to the special harm requirement or the existence of special harm. The magistrate rejected Precision’s claim because Precision didn’t allege defamation personal to it: the statements were about Chinese-made tanks and not Precision. Alabama law precludes recovery for defamatory statements about someone else.

Governance of Social Media, MSU Quello Center Workshop

Missed the first day, but here's the second:
Panel 5: Social Media, Privacy and the User
Moderator: Jonathan Obar (MSU)

Matt Jackson (PSU)
Concern about exploitation/commodification of user by marketers. Issues related to redlining: businesses or other entities may make predictions about us for health insurance, life insurance, etc. Price discrimination. General security breaches from large companies.

First Amendment hurdles to regulation. Also, courts have ruled there’s almost no expectation of privacy online, even when sites claim to protect privacy/use security measures. Clickwraps often purport to take away users’ say in the matter anyway. A party to a communication can divulge that communication to someone else absent a privilege. So if we look at Doubleclick case, disclosing cookies to marketing affiliates; court held that the website was the intended recipient of info and thus had the authority to share or authorize Doubleclick to intercept the data.

10 years later, Facebook: Court says it doesn’t matter who the user is communicating with. If intended recipient is Facebook, Facebook can share it with a third party marketer. If user is communicating with third party marketer, can share it with Facebook. Either way, user has no control. When users gave third parties authority to go to Facebook and mine their data, court ruled that users had no authority to give Power Ventures right to access their data. One of the parties to the communication can’t give authorization because of ToU—again, the user has no say.

Solutions? Opt out or opt in. Technical issues are a barrier. Regulation through essential facilities doctrine, but courts generally skeptical.

Typically unconsented data collection is not considered economic loss. Users’ attention can’t be unjustly taken, even though marketers pay millions for that access. Copyright is no solution; facts are not protected by copyright, and compilations have only thin protection. However, DMCA is being leveraged by Facebook to claim additional control—Power Ventures case that FB may have copyright in its layout of user’s page.

Need new solutions for users to control own privacy.

Frank Pasquale (Seton Hall)

From health privacy to medical reputation: invasive personal profiling in an age of digitized social networks. Health-based social networks: Patients Like Me; also, people release health status information on general social networks. Data breaches: recent enforcement of HIPAA, which used to be known as a toothless tiger. Medical reputation is different—development of predictive algorithms, used like credit scores. He believes that these analytics will be used more and more in health.

Why do social networks change things? We have many sources of health info. There are new forms of disclosure. “Liking” the syphilis info page, or liking “a glass of wine solves everything” or “I do stupid things when I’m drunk.” Quantified self. What if you’re reading stories on AIDS treatment with a social reader, or what if your relatives/friends mention your health status in their own discussions?

It’s really hard to understand what’s happening to your data. Suppose you “friend” a local hospital. How can you know what they’re doing with the hundreds of other “friends”? Default: no independent verification of who joins, including whether or not they’re data miners.

Rough proposals: social networks need to prohibit scraping or clearly notify users not only of data uses, but also of credible threats. Regulation needs to move beyond social networks to medical profiles. Consent is increasingly rickety. Need audit trails in the health privacy context, as we do with SEC and national security. The power of corporations over individuals is so great that we need to understand what’s going on and institute forbidden grounds for making decisions (or at least disclosure to individuals of the record on which decisions were made).

FTC recently settled with a couple of companies that were gathering pharmacy data not covered by HIPAA and using it to create profiles of individuals, then distributing that to insurance companies to make insurance decisions. Any record of a mental health prescription was a red flag for insurers. These types of profiles are very commercially powerful. Employers now have so much access to health data, including social networking, that it’s too tempting—especially if they self-insure—to profile and wrap that profile into a larger score, so you’re never really fired for being too costly.

Increasing pressures to self-disclose as well. Nothing preventing you from advertising your good health decisions, which creates its own dynamic.

We tend to think of different areas (telecom, health) as silos. But in this realm, with so much data unleashed, any source can be medically charged and will leak across silos.

Kathryn Montgomery (American)
Safeguards for children and teens. General points: Any discussion of privacy implications has to be considered in context of the digital marketplace. Information is used covertly to manipulate; young people are being socialized into the system, with huge implications not just for them but for everyone.

COPPA was the result of a lot of lobbying, debate over online privacy. Recent settlements: skid-e-kids involved a big fine for failure to comply. But that’s just a tiny part of a huge social media landscape. Teens in particular are highly engaged with social media. Parents are lying to get their kids on Facebook—Consumer Reports says 5 million users are 10 or younger. Parents don’t necessarily know what they’re getting into. Could comply with the law if parents were well informed.

Social media resonate with key adolescent developmental needs—explore identity, figure out who you are, express yourself and find your voice, develop relationships with peers, and be autonomous. Marketers know this too. Teens’ brains are still developing; can be impulsive, sensation-seeking, risk-taking, subject to peer influence, subject to severe mood variations. Advertisers have developed very specific ways to find and measure influencers, used to create user-generated ad campaigns distributed to friends with lots of incentives and data collection built in. Mountain Dew: Dewmocracy, kids induced to create their own ads. Activation: another step beyond monitoring—prompts certain behaviors and measures them. Discussion of Doritos Asylum 626 promotion, which includes pulling two of the user’s FB friends into the asylum, having the player choose which one to save, and inviting the user’s entire social network to help “save” him or her. Have to buy Doritos to “unlock” the “darkest” part of the game.

Current initiatives: revising COPPA rules to be extended/clarified for mobile apps. What constitutes personal information? Has called for greater attention to adolescents, giving more transparency and control. Digital bill of rights for marketing to teens. How do we market fairly to adolescents to honor full participation but also providing them safeguards as consumers—not in the COPPA model of permission from parents but socialization into responsibilities as consumers.

Junichi Semitsu (University of San Diego)

Arresting development: FB and the information superhighway. He’s one minor traffic stop away from having all the details of his life scoured because the police can search cellphones on arrest. Companies make extraction devices so that police can clone phones easily. He has a password, but companies promise to break right through those passwords. Architecture of FB and other sites means that gov’t can catalog my personal info if any one of my friends is arrested. Must assume that anything he’s ever written, liked, or shared on FB may be easily searchable by law enforcement.

Is that legal? Traditional 4th amendment; Electronic Communications Privacy Act; First Amendment all offer concerns. His work is going towards First Amendment because the other alternatives won’t get the job done and the present solution risks a serious chill.

53 cell phone search cases found in his search for reported opinions after Arizona v. Gant: Not many compared to number of searches, but in 82% search of cell phone upheld. 17.6% invalidated. The list of crimes for which one might find evidence on a cell phone is huge—any crime where mens rea is important, location, potential conspirators. Only minor vehicular traffic violations in which the police already have all the info they need at the time of arrest wouldn’t potentially turn up relevant evidence. When searches struck down, involved (1) invalid inventory search (purpose should be safeguarding, not looking for evidence—though courts have also accepted inventory searches of the contents of a phone); (2) improper for fact-specific reasons unrelated to cell, such as that the entire search of a car was improper; (3) one case, Ohio S.Ct., held that cell phones shouldn’t be treated like any other container because of how much is in them—but that’s an exception, conflicting with other cases including Cal. S.Ct. Some cases are vague about where the info came from, but most involve texts, email, and call logs.

What if the police did go through one’s FB account? Should the magnitude of the amount of content matter? Should it matter that valuable evidence could disappear from the account? What’s the expectation of privacy? Very difficult claim to make because the information is public, or shared with a large number of people. Many FB users are careful about restricting access, but even if so there’s still FB in the middle.

ECPA: only covers, at most, private FB messages less than 181 days old. More importantly, there’s no suppression remedy.

This leaves us with the First Amendment.

Robert Sprague (Wyoming)

The walls have eyes: surveillance through social media. Privacy is about seclusion/controlling information about yourself. Surveillance is the thing that makes intrusions work. One judge’s view: if you voluntarily post info/pictures on a social networking site you can’t have any reasonable expectation of privacy. “By definition, a social networking site is the interactive sharing of your personal life with others.” Privacy is binary: it’s either secret, or if it gets out it’s gone.

Who is tracking you? Gov’t, individuals, employers (productivity, liability avoidance, asset protection, reputation, litigation), businesses (FB, protecting their own reputation either by addressing complaints or threatening responses).

Recent moves to reform ECPA—unclear what if anything might happen. Maybe should be unlawful to pressure your employees (or applicants) to provide access to their social media passwords. Over 100 charges by employees who were fired for complaining on FB—question is whether that’s protected activity. FTC: deceptive practices, but limited resources for enforcement. Fair Credit Reporting Act—some preemployment investigations may bump up against this, and states are considering their own acts.

FRCP: court reviews the publicly accessible portions; if there’s reasonable likelihood of further relevant information, subject may have to turn over username and password. (As Eric has pointed out, this is a way overbroad solution that has the potential to embarrass and chill the litigant. Why not have them turn over discoverable results, not all the info?)

DMCA/ACTA are also potentially relevant—obligations on ISPs to monitor for copyright infringement.

Panel 6: First Amendment and Free Speech
Respondent/Moderator: David Post (Temple)

Peter Swire (Ohio State)
Privacy as pain in the neck for, e.g., Obama organizers who just want to reach their targets. Progressives wanted us to be empowered, but that means reaching out through social networking (also true of Tea Party). Engines of associational activity. 2009, 97% of charities used social media. Majority of online users have been invited online to join a group. Over 1/3 have used the internet to invite others to form a group.

Do not track: one version is that we won’t show you ads based on targeting; version two is that we actually won’t track, which is what people think the concept means. It’s like do not call, but there’s an exception for do not call for nonprofits/political parties. Are nonprofits/political campaigns entitled to a similar exception for do not track? Not in FTC proposals; they’re working on this.

Data collection limits are a different animal. That’s a pretty severe interruption in data flows, but won’t much affect nonprofits/political entities.

More generally: our ability to reach out and touch people is data empowerment, in contrast with EU privacy/data protection—human rights not to have others process data. The form of that argument is that there is a right to avoid contact. But right to association can also kick in—it’s right v. right, not right v. interest.

Think about an integrated intellectual structure of social media as platforms for association and privacy. We split within ourselves: we like to get our stuff out there to our friends, but we don’t necessarily want it done to us either. Legal doctrine needs more development of freedom of association. Practical politics: hard to tell politicians to limit their FB activities. If you make it hard to find supporters, that will make politicians sad.

Marvin Ammori (New America Foundation)

New e-PARASITE act, following earlier drafts. Goal supposedly to target Pirate Bay type sites. Broad union and corporate support (AFL-CIO); opponents: tech companies and law professors. Allows AG to go after rogue sites, as well as private right of action to any IP right holder harmed by a site. “Market-based private right of action.” Sites are any sites “dedicated to the theft of US property.” Site “enables or facilitates” copyright infringement. That freaks out a lot of sites because that’s pretty broad. YouTube is potentially at risk. Or: any site that has taken actions to avoid confirming a high probability of the use of a site to violate copyright: imposes a duty to monitor to avoid infringement. Also covers sites whose object is to promote infringement. Implicates much social media.

Sites at risk: Facebook, Technorati, Flicker, Delicious, Stumbleupon, Twitter, Blogger, etc. Turntable.fm—you upload some songs for friends, like a DJ. Hugely popular, likely dedicated to infringement under the new standard. Soundcloud: also allows people to upload music and comment on it at particular points in the song—also at risk. MonsterCable: a supporter of the act; lists eBay, Craigslist, Costco, and Sears as targeted entities. GroupM, another supporter: lists Internet Archive, BitTorrent Inc., Soundcloud, Vimeo, Vibe Magazine, many hip-hop blogs. Anticompetitive motive!

The law says that it shouldn’t be construed to impose a prior restraint on free speech or the press. First Amendment question is harder than that, though. Floyd Abrams wrote a letter on behalf of the content industry saying it’s ok; 90 law professors disagreed, arguing that it was a prior restraint.

One angle: private right of action generally. Private rights of action are indeed subject to First Amendment scrutiny. Covers foreign or domestic sites. Foreign speakers don’t have First Amendment rights, but American recipients do.

Argument 1: this is a copyright-based restriction, a new class of speech of sites “dedicated to infringement.” Entire sites subject to punishment from payment services/change in the DNS. If so, it’s not narrowly tailored because it shuts down the whole site and doesn’t just target the infringing material. Also not tailored to the compelling interest if the interest is foreign sites.

Argument 2: suppose it’s not content-based. Eldred says change to copyright’s ok if it doesn’t change the basic contours of copyright, but this changes the basic contours by going after the whole service/technology instead of the infringing material. Not clear what standard applies in such a case, but he argues it fails both strict and intermediate scrutiny.

Long history of copyright owners fighting against new tech. Now: Hollywood finally gets a chance to break the internet. Sony Pictures CEO says: “I’m a guy who doesn’t see anything good having come from the internet.” Bad precedent abroad for other people who want to break the internet.

Adam Candeub (MSU)

Anonymity/pseudonymity. First Amendment protects anonymous speech. (Me: Why doesn’t the privacy reasoning courts have used to make privacy binary also apply to anonymity? It clearly doesn’t—courts have protected anonymity as against the world even when the speaker has provided identifying information to an intermediary—but why not?) But there’s no First Amendment right against a private actor running a social network, so you don’t have a right to speak anonymously. FB has a policy against anonymous speech; Google+ banned pseudonyms (actually they still do but have promised to stop). ToU violations can be a crime under the CFAA, and fraud and other laws limit the right to act pseudonymously.

If you’re a fan of the Federalist Papers, how do we protect pseudonymity? How does anonymity fit into self-help privacy?

Privacy is contextual. Medical record privacy is important. You want doctors to have your gory details, not someone on the subway. Privacy is therefore not binary, as the doctrine is inclined to say. Privacy should be “good enough.”

Tools to get good enough privacy: technical, “do not track” market structure etc. In social media: have a pseudonymous FB account. Everyone who knows me can find me, but a potential employer won’t come up with the account. A little research into the name would probably reveal the identity backwards, though.

Other tech tools: proxies like Tor. Behavioral tracking/server records would remain available.

What do you do when the service fights back? CFAA prosecution—criminalizes the violation of an employer’s computer use policy. We don’t know what will happen next. Plain vanilla fraud also remains available. Many states have anti-impersonation rules; some statutes aren’t written to cover only fraudulent intent—Nevada bars any pseudonym. If we want to protect pseudonymity, we need a First Amendment safe harbor for nonfraudulent uses. A precedent for this in the materiality requirement in federal misrepresentation statutes.

Rob Frieden (PSU)

The dichotomous world of social media as neutral conduit and active content packager. Social networks have competing motives, creating ambivalence. Not quite common carriers; not really foremost identified as a First Amendment speaker, though we have exemptions for liability where the network disavows responsibility for speech. Best of both worlds for it is to be able to toggle between speaker and nonspeaker. Weaving in network neutrality: new motivations for service providers to actively manage their networks, engage in quality discrimination and price discrimination.

Lee Tien (EFF)

Does not use any social media for fear of exposure. We don’t know where our private medical data are going: private entities are sharing it for their own purposes. This is very different from other types of speech. Speech is intended; it has an audience; you can refrain from speaking when you don’t want to. First Amendment embraces a right not to speak, or at least allows policies sensitive to audience selectivity. In any robust conception of the First Amendment, there has to be a sense of audience selection. (Me: This is why Julie Cohen is right to point out the conflict between defenders of copyright restriction/transformative fair use and privacy advocates; types of control are not created equally.)

Disclosure/transparency are inadequate unless we can make the gov’t tell us what it’s doing with our data. Government bans you from disclosing you’ve received a national security letter—gag orders.

Statutory framework: consent can vitiate any statutory protections. If the gov’t doesn’t need to use a warrant, we’ll never detect the things the gov’t is doing. So one thing necessary is to restore the consumer’s ability to set terms.

Sorrel: probably correctly decided because statute was poorly drafted, but sui generis. Court was clear that it was shocked by the content/speaker discrimination. Court was careful, because the US raised a bunch of cautions, to distinguish HIPAA. People are over-reading Sorrel. The real issue is whether we’re talking about speech in a particular instance of data. What you say on FB is speech, but the clickstream data moving around because of what you’re doing on FB is a different animal: did you intend to communicate that?

230 exceptionalism aside, for the most part, social media isn’t presenting different cases (laws about teachers maintaining social media profiles, for example, shouldn’t be thought of differently than other regulations of teacher communication).

Post: how do you get courts to take First Amendment claims seriously in these contexts?

Candeub: pseudonymity is a limiting case of association rights—I don’t want to be associated with myself.

Tien: Association cases are stronger, but do seem to require a signficant factual showing of some kind of fear of reprisal.

Q: hyperbolic to say that e-parasite act will kill the internet. Music is one of the most important industries in the country. YouTube has as much as acknowledged that it’s an infringer and has taken steps to correct it, using tech to identify videos using commercially released music and work with content owners. They wanted eyeballs (founders said so). They could’ve negotiated with rights holders and specifically chose not to do so when others were doing so. There’s a problem with licensing, yes, but that’s not enough. Turntable.fm is now negotiating licenses. Some sites just need to go to BMI/ASCAP and just chooses not to. Limewire is a good example. Law professors are being unreasonable. (Hey!)

Ammori: disagree with it all. The act is even more extreme than when it started. Turntable and YouTube suggest the current system is working. Imposing extra obligations seems unnecessary. There has been litigation (which Viacom lost at the lower level). When you say it’s a joke for tech companies to be concerned, that’s hard to buy given that they’re concerned about their own business models.

Q: your one-sided presentation is a joke. Silicon Valley is engaged in DC.

Ammori: new involvement as a result of this law!

Q: idea that they’re forced to negotiate up front is added on to the DMCA. We’ve been operating with a launch first, ask forgiveness model. That’s anticompetitive to those companies that ask first and negotiate the licenses. The licensing structure is broken, sure, but that’s what needs fixing. Current law is unfair to content companies.

Post: the law doesn’t break the net by getting rid of infringers. It breaks it through the architecture: novel enforcement procedure going through the domain name system, authorizing courts for the first time to order registrars, registries, and ISPs to remove sites from the databases. That’s in deep conflict with the architectural principles of the net, which is that it should be the same thing whereever you are. There’s a serious argument from the technologists that an entire suite of applications is built on that unified notion of addressing. Second, the obligation of monitor is new and bad. You can get shut down if you have taken steps to avoid confirming that there is infringement, whether or not there is infringement. Creates a new duty to monitor which is troubling.

Semitsu: If the social network actually refused to cough up the identity when the gov’t ask, wouldn’t the anonymity argument still maintain its First Amendment punch? Isn’t the problem that the networks roll over?

A: a truly privacy-protecting social network hasn’t emerged yet—that’s an economic/industrial org question about why we don’t have these competitors.

Post: the question is, when faced with a subpoena for a group’s membership, why is it so difficult for an ISP to say no, it’s unconstitutional under NAACP v. Alabama?

A: q is how the third party doctrine fits in. The moment 5 people organize through FB, the Fourth Amendment says it can be turned over. Can you nonetheless assert a First Amendment claim because you meant to keep it private?

Tien: certainly in the Doe cases—ISPs may notify a user and allow them to litigate.

Panel 7: Traditional communication policy goals - Implications for Social Media
Moderator: Patricia Longstaff (Syracuse)

Information theory: sender, encoding, channel/medium/interference, decoding, receiver—provides a framework for thinking about regulation.

Johannes Bauer (MSU)

Governance: includes co-regulation, self-regulation, and emergent coordination. Social media are governed by nested systems of laws, norms, code, and so on. First question: what is working and is there a need for change? Traditional media raise similar problems, but how we deal with competition and other things may change—as it turns out, barriers to entry to new media are also high. Information security is a new issue, unaddressed in social media.

Governance happens within existing institutional frameworks, producing inertia. Mechanisms evolve at different speeds. This is why we can expect layers—likewise international aspects push towards co-regulation and self-regulation.

Nonlinear (tipping point, network effects, etc.) qualities of social networks make them difficult to regulate. Institutional entrepreneurs are needed to help evolve existing and new governance mechanisms.

Barbara Cherry (Indiana)

Social media and the constitutional rights of individuals v. corporations. Her focus: evolving legal landscape for social media—legal limits on gov’t power are evolving. Growth in judicial recognition of corporate rights coupled with regulatory retrenchment is undermining the rule of law and allowing corporate power to be leveraged over individuals.

Phase transition, driven by litigation by corporations asserting First Amendment rights. Erodes government’s ability to distinguish between corporations and individual human beings. Coupled with erosion of consumer protection—unilateral imposition of arbitration barring class actions, etc. Economic power can be leveraged into political realm. New tech environments are no different. Increased globalization—serves to undermine rule of law itself when gov’ts can’t respond in time. Exacerbation of systemic risks and “normal” accidents.

How do we respond? Constitutional amendment limiting const’l rights of corporations. Encourage judiciary to balance constitutional rights of corporations v. individuals. Extend constitutional rights to new forms of human collective activity, such as those facilitated by new media, as counterweight to corporate rights.

Governance of social activities affects the continuing coevolution of economic/political systems. We have the opportunity for self-direction.

Philip Napoli (Fordham)

Implicit/explicit concern of most traditional communications policy has been that citizens receive necessary information. How does journalism factor into social media policy discussions? Growing importance of social media in the news ecosystem. Social media can produce news, distribute news, and provide feedback for news producers—these are very distinct roles and each must be understood. News sites are making most use of social media for sharing—news referral service. FB is thus 2d/3d most important driver of traffic to many sites. Social media as tool for feedback: reporting more relevant news or further descent into market-driven news.

Access issues: government blockage or shutdown of social media platforms—hundreds of instances 1995-2011, for example BART blockage recently.

Diversity: who participates? 10% of Twitter accounts produce 90% of tweets. Diversity of FB users seems to reflect diversity of US internet-using population. Diversity affects the role of feeback: news will be responsive to those who provide the feedback.

Amit Schejter (PSU)

All media are social, so he doesn’t like the term. Are we in this to help out marketers? To craft policy to improve access? Innovation? Participation/opportunity for those who don’t have it? There is a connection between economic development and democracy, but that requires equitable distribution of growth. Compare government adoption of static v. interactive web apps. One study: state gov’ts’ use of social media tools. There’s a direct connection between usage and access to the internet—getting people connected changes their relation with government/increases participation in public life. But, Nov. 2011 report still shows socioeconomic barriers. There are populations that aren’t able to connect, mainly “nothing for me there” (beats even “I can’t afford it”). Why isn’t there anything for those populations?

We should look for a policy promoting civic participation, not hands-off or hands-on. There’s no contradiction between market growth and increased connection of people who aren’t yet connected. Replace our metaphor of utilitarianism with a corrective justice policy.

Q: How do we understand the DMCA safe harbors and CDA 230 from a rule of law perspective? Maybe they allow for decentralized solutions, but now we see efforts to close off those safe harbors. These are very destabilizing laws.

Cherry: Isn’t a copyright expert. Outgrowth of litigation that proceeded without a definitive statutory framework; attempt to provide uniformity previously lacking. But any legislation is always the result of lobbying. If you can’t win, you at least leave wiggle room to litigate—ambiguities intentionally left in. In terms of rule of law, would think about it this way: consider how we’ve enabled certain kinds of activities through the legal structure of the corporation, allowing it to block government regulation, in ways initially reserved for humans. Certain collectivities can trump humans in the political realm by leveraging economic power derived in another sphere. That’s her focus.

Santa Monica sues Goldline for false advertising

The lawsuit provides a good reminder that some sub-state entities have consumer protection units of their own.

Patents and the 1%

Naked Capitalism/Dean Baker on the intersection of the critique of upwards redistribution with the critique of patent law.

Governance of Social Media Conference at Georgetown

From the organizers:

Use social media? Wondering how the government should (or should not) be involved in social media's future? This Friday and Saturday, watch the live webcast of the Governance of Social Media Workshop.

Event Info:

This Friday and Saturday, Georgetown University will be hosting the Quello Center's Governance of Social Media Workshop. A large group of academics, policymakers, representatives from the advocacy community and industry (including Facebook and Google) will be debating the various policy issues raised by social media. Issues to be addressed include:

- Privacy concerns
- Social media analytics
- Web tracking
- Competition policy
- Free speech
- Policies in virtual worlds
- Access
- Surveillance
- Protection of children
- Copyright
- Data mining
- ... and much, much more!

The event will run from 8:30am - 6pm on Friday, November 11 and from 8:30am - 4pm on Saturday November 12. Workshop schedule.

Among the speakers will be Dr. Ed Felten, Chief Technologist at the FTC, who will be giving the luncheon keynote address this Friday at 12:30pm.

Event hashtag is #GSMworkshop

For more information, email: obar@msu.edu.

Claim against Safeway's online grocery goes forward

Rodman v. Safeway, Inc., 2011 WL 5241113 (N.D. Cal.)

Rodman brought a putative class action against Safeway for breach of contract and violations of the California consumer protection laws in connection with overcharges for groceries sold by Safeway through its website for home delivery. He alleged that, while Safeway clearly disclosed its home delivery fee, the contract and the information at Safeway.com says that consumers will be charged the same prices for products bought online as those charged in the local store on the date of delivery. However, he alleged, Safeway secretly adds about 10% to the in-store price for most groceries bought on the web.

Safeway moved to dismiss the breach of contract claim on the ground that it made no such promise of price parity. The contract said:

The prices quoted on our web site at the time of your order are estimated prices only. You will be charged the prices quoted for Products you have selected for purchase at the time your order is processed at checkout. The actual order value cannot be determined until the day of delivery because the prices quoted on the Web site are likely to vary either above or below the prices in the store on the date your order is filled and delivered.

Rodman argued that this language meant that the online shopper would get the same price as that charged in the store at the time of delivery. Safeway responded that there was no affirmative price parity statement. While the court was more inclined to Rodman’s interpretation, at this stage the contract was reasonably susceptible to both parties’ interpretations. Looking at the extrinsic evidence provided by the FAQ revealed this statement: “Depending on the delivery date you select, prices could vary from the time you place the order and the time your order is delivered, …. You will be charged the prices charged in the store on the day your order is picked and delivered.” This was a clear statement of price parity. To the extent Safeway argued that “store” was ambiguous in this context, a motion to dismiss was not the place to argue about it.

Rodman adequately alleged the existence of a contract and its breach.

Safeway also lost on its motion to dismiss the consumer protection claims. To the extent that the contract and the FAQ were reasonably susceptible to constructions other than Safeway gave them, they could mislead a reasonable consumer into believing that there was price parity between the store and the online service for products. “Price differentials are material.” The complaint’s allegations that Safeway misled or failed to disclose material information were clearly sufficient.

Safeway argued that Rodman didn’t properly allege reliance. But, with materiality adequately alleged, an inference of common reliance arose. Moreover, the complaint specifically alleged that Rodman read the price terms. And, the court pointed out, Safeway required consumers to agree that they’d “read, understood and agree to these Terms and Conditions.” This was enough to allege reliance.

Finally, Safeway suggested that Rodman and the class weren’t injured. The court was similarly unpersuaded. The injury is the alleged 10% mark-up; Rodman didn’t need to allege that he could’ve bought the same groceries elsewhere for less.

Nominative fair use defense blocks Levi's summary judgment motion

Levi Strauss & Co. v. Papikian Enterprises, Inc., 2011 WL 5192237 (N.D. Cal.)

Levi owns a bunch of trademarks for clothing, including 501. It sells only through company-owned stores and authorized retailers, with special policies for authorized online retailers. In 2000, Papikian registered 501usa.com, which sells discontinued or out-of-stock styles of Levi Strauss jeans. The website includes visual depictions of a number of Levi Strauss marks, including its Red Tab mark, its house mark, and the Arcuate mark.

Levi learned of the website (and other Papikian domain names incorporating its marks) around May 2003. For a year, the parties “engaged in discussions” about this. Levi claimed that, shortly before it filed suit, it reviewed the 501USA.com website and concluded that it had changed radically. Levi sued in November 2010.

Levi moved for summary judgment on liability and on Papikian’s laches defense, as part of which Levi stated that it decided to forego damages claims. (A wise, because belated, choice.)

Levi argued that Papikian infringed by (1) using the 501 mark in the domain names for 501USA.com and 501USA.net; (2) using it in his business name 501USA.com: A Division of Papikian Enterprises and 501USA: Jeans and Accessories; (3) using the Levi Strauss "Tab Device" trademark on and throughout the websites; (4) using the Levi’s mark throughout the websites; (5) using Levi Strauss trademarks in keyword metatags associated with the websites; and (6) using Levi Strauss trademarks for the purpose of generating search term priority and diverting customer attention to the websites. “It is evident from Levi Strauss' motion, however, that its primary complaint is that Papikian's use of the marks on his website, and its overall look and feel, falsely suggest that he is an authorized online retailer of Levi Strauss products.”

Papikian argued nominative fair use. His burden, per Judge Kozinski, was to show that he was using the mark to refer to the trademarked good. He was. Summary judgment is generally disfavored in trademark cases. In nominative fair use cases, the three New Kids factors are used to evaluate likely confusion: confusion is more likely when defendants use an unnecessary trademark or “more” of the mark than necessary. The court concluded that the facts were sufficiently in dispute.

A reasonably prudent consumer accustomed to shopping online could go either way. The domain names here “are the type of domain names that the Ninth Circuit has stated could suggest sponsorship or endorsement by the trademark holder.” And although the 501usa.com logo has evolved over time, a reasonable juror could find it reminiscent of the Levi house mark. Moreover, Papikian used a number of Levi’s marks throughout the website, as well as Levi’s “proprietary” photos (query: why no copyright infringement claim?). A jury could find this more use than necessary, because Papikian could adequately communicate his message without the visual trappings of the Levi brand.

However, Papikian has also used disclaimers in the past, though he didn’t at the time the issue was submitted to the court (the disclaimer appears to be back now). The disclaimers are in small font, though. Also, the headline “501USA Jeans and Accessories, a division of Papikian Enterprises” could be construed as an implicit disclaimer. Thus, a reasonable consumer could find confusion unlikely, and the court noted that Levi didn’t present any evidence of actual confusion.

Levi did manage a vital objective—kicking out the laches defense. Laches requires prejudice. Papikian testified that he expended effort in obtaining a high search ranking and, if he was forced to abandon the domain name 501USA.com, he would have to expend significant amounts of time and money to regain that ranking. The court agreed that this was improper lay opinion, since Papikian testified that he didn’t know what about his website kept it high in search engine responses. The source of search engine rankings is “subject matter that would be based on technical or other specialized knowledge and, thus, is the subject of expert testimony.”
Papikian also purchased various goods and services in connection with his business, but didn’t offer any evidence that these were investment in 501usa.com as the identity of his business. Thus, he couldn’t show any genuine disputed issues of material fact on prejudice.

Southern California IP Professors’ workshop 4

Barton Beebe, NYU, Aesthetic Progress and Intellectual Property Law

What is the aesthetic? Something other than the utilitarian/useful. Distinction between aesthetic and ethical, aesthetic and moral/political. Aesthetics is the study of this distinction and the study of the study of this distinction. Fred Yen has a great article, as does Christine Haight Farley. Copyright is more comfortable with the utilitarian than the aesthetic. First draft: copyright eventually adopted an incredibly purist definition of art, largely because of Bleistein. Substantial similarity: test for similar aesthetic appeal, a meaningless question.

Common root: we have no idea what it would mean for there to be aesthetic progress, but progress is part of the constitutional concept of copyright. Framers weren’t sure there was such a thing as aesthetic progress, but there was an active debate over whether we’d made progress over the ancients at that time. Hume, for example, was willing to say that the 18th century was superior to the ancients because the heroes had better morals.

Do we need a theory of aesthetic progress? Tech progress is built into our IP theory, why complicate things? Courts seem to take idea of aesthetic progress for granted. They talk happily about artistic progress. The aesthetic is always cabined, secondary.

Progress of science and useful arts is a strange phrase to have used at the time of the Founding. Everyone talked about arts and sciences, or maybe science and the arts. But science and useful arts is absolutely unique in the 18th century—some deliberate effort to carve out the fine arts, with no explanation from the Constitutional Convention. Painting wasn’t protected in England into 1862; Americans incorporated fine arts in 1870, so maybe they were following the English example. But English were protecting music, considered fine art, earlier. English law of the time offered protection for sculpture to “encourage” sculpture, synonymous with progress.

Though the Framers might have been comfortable with ideas that fine arts promoted civic virtue, they still had a real problem with popular sentimental novels, women’s literature—very strong anti-novel movement in late 18th and mid-19th century; except that the 1790 Copyright Act protected “books,” without exceptions for novels. Further weird because that makes us ask whether the Act was unconstitutional because it protected neither science nor useful arts—but we’ve given up on that, and may mean that “progress” is a meaningless term, a mere preamble.

Beebe says 19th century cases were flawed but were trying to talk about copyright as cultural policy: what our society should have as its goals. But then came Bleistein. Holmes is the perfect nemesis not just for the idea of progress but for the idea of aesthetic progress. Holmes was a dark person; hard to believe he’s idolized as a great Justice given the things he was capable of in some opinions. Massive turning point in American copyright. Beebe argues that Bleistein ignored the governing Act and therefore the judgment of the people who enacted that law. At that time, the law protected works of “fine art,” tough as it is for us to accept that today; Holmes placed aesthetic judgment beyond the reach of the crowd, crushing cultural policy in the copyright context. It’s wrong of Holmes to do that; it’s not wrong for a democracy to have an aesthetic theory and there’s nothing stopping us from basing copyright/property rights on aesthetic theory. Yet congressional debates quote Bleistein as if it imposed a limit on the kind of copyright law Congress could enact.

We should adopt a typical liberal mode of resolving questions of value: avoid merit, substance etc. and ask questions about process. This would expand transformativeness. We should avoid discussion of aesthetic excellence; a pluralist liberal society wants to retreat from elite judgments of that kind. Excellence in its emphasis on comparative quality distracts from the cooperative quality of aesthetic experience. Cumulative progress over time is our standard technologically; we’ve carried that into the aesthetic realm so that Michelangelo is bested by Rembrandt. But the aesthetic is a completely different world. Pragmatically: there’s no real distinction between fine and useful arts; aesthetic includes most experience, and participation is important in all aspects of life.

Commentator: David Plunkett, UCLA

Analytic philosopher’s question/answer. What’s the history of our use of the concept of aesthetic progress? Broader historical question: what’s the basis for the copyright in works of fine art? If the answer to the historical question is much more interesting and nuanced than we think, a normative question then naturally arises. How should the notion of progress related to the fine arts play a role in copyright law?

Maybe scientific progress is crucial to justify copyright, but not artistic progress. We can start by carving human activity into different domains: engaging in scientific theorizing, producing technology/useful arts, engaging in ethical/moral theorizing, living a life, producing art. For each type of activity, there will be a number of different products. Science: notes, emails, grant applications, trash from dinner in the lab. Core product is the theories themselves. Might think of any given theory as a list of proposition describing the world and how it works. That’s the aim of scientific theory as such. So, with that in mind, what’s the core product of each sphere? Might be abstract or concrete: a painting, a sculpture, a rock. For artistic activity, the relevant products are the pieces of art.

Are there normative/evaluative standards that determine which things are successful/better products? Yes for both science and art. Our theory of how planets move is better now than it was for the ancient Greeks, and the White Album is better than my childhood guitar stylings. So we’re committed to the idea that there’s some way to learn about or gain access to these standards. How are these norms related to the idea of progress?

Part of what it is for a scientific theory to be good is for it to be in some way better than what came before—better how is contentious, but we look for explanatory/predictive power etc. If a theory doesn’t do better in understanding location of planets than our current theory, then it’s not progress. But no similar notion is constitutive of our judgments about good art; could be shoehorned in, but not clear why you’d do that. A sculpture from now and 1910: we can think both are good examples of sculpture without thinking the new one is better.

There may be relevant notions of artistic progress: better representation of reality can be improved, but that’s not a constitutive aim of art as an activity the way that understanding the world is a constitutive aim of science. (How do we distinguish art from living?)

Mostly we want more of products, because that gets us more successful instances. Having more scientific theories around helps us get the ones that are better. Partly true of artistic products—we want ones that exhibit excellence. Natural to think that progress would be important for scientific theories but not for aesthetics/fine arts; could just ask about good instances. Looks like we apply aesthetics to cultures and individual lives—Nietzsche and Foucault were interested in the aesthetics of everyday living. Norms internal to the science, epistemic norms; cultures and human lives are sensitive to a large range of norms, including aesthetic and moral. Evaluating life purely in aesthetic terms is wrong. Maybe our concepts of aesthetics applied to lives are different than aesthetics applied to fine arts.

A differnent question: Who if anyone is expert in figuring out the standards that should apply?

A consequence oriented approach can fit smoothly into explaining why scientific progress is crucial, but not for artistic progress. And we can say that without embracing any aesthetic neutrality.

Beebe: To participate in the world of the aesthetic now is to participate in property. This is a difference from scientific/useful arts progress. Participation in culture doesn’t mean better expression; aesthetic progress means progress of a culture in allowing people to participate. Shift away from objects to processes. Away from fixed achievements to more immediate aesthetic experience. Copyright should be more attentive to that form of progress.

He’s trying to get at the Deweyan art of living: not better works of art, but facilitating the art of living.

Q: if you aren’t interested in aesthetic works, then progress of what?

Beebe: would define aesthetic progress not as a better movie, but as allowing a person who sees that movie to post a clip and comment on it or make a parody: can participate in the creation of the aesthetic and not merely have it imposed on them. If we accept that “better” works are hopeless, let’s think of some other way to apply progress. Ability of users/experiencers of aesthetic works to participate in the creation of new aesthetic works—kind of like literacy (Nimmer’s contribution).

Q: wouldn’t that argue for no copyright at all?

Beebe: would agree with some incentive argument, just add more transformativeness.

Q: How compatible is this theory of progress with other cultures?

Beebe: limited answer: he’s talking about a pluralist legal society in the Western tradition, interested in perfecting Enlightenment society. If a different civilization wants to conceive of progress religiously, more power to them. Not exportable without sharing norms.

Netanel: Your idea is faithful to the original progress clause: improvement of civilization, education, literacy were concerns of the Framers. Left it to Congress to figure out which works would serve that progress. Elite used to think that works that didn’t live up to the notion of fine art didn’t serve those overall purposes; we can decide as a public which configurations of rights do. Maybe defamatory/fraudulent/obscene expression should be reconsidered: do they serve progress?

Beebe: still worried about censorship from throwing out works that supposedly limit progress. He doesn’t think that he can say “deny copyright to bad works to disincentivize them” because he doesn’t think that copyright gets you good works.

Rothman: tensions in the paper. Begin with the origins of the Clause, which suggest there was no notion of aesthetic progress. Can you really argue that aesthetic progress is then in the Clause? Whether we call it a preamble or not, we can read it narrowly or broadly (scrutinizing an individual work for whether it fits is probably a bad idea). If we read it broadly, we could say the copyright regime promotes progress, which tends toward a focus on owners and not users, which then makes her uncomfortable about his conclusions. Relatedly, role of content in aesthetic progress: does content matter if participation is key? Transformativeness is very much about content. Deontological/consequentialist—the participatory piece is deontological, but then what if we have fewer works to go around?

Beebe: paper tries address this issue: there was a theory of aesthetic progress among the Framers, even if they didn’t talk about it. Deliberately left the fine arts out of the progress clause in anticipation of some of these problems. They could have worried about questions of what counted as progress. But we have since read fine arts in, which is ok, just as we have the right, notwithstanding Bleistein, to decide what progress is. Agrees we should think of the overall system in promoting progress—standards of originality, not the particular work.

Rosenblatt: Seems like in some places you’re saying quality judgments are ok and others not, depending on the purpose for which you’re making judgments. At some point you need to define progress even if not aesthetics. Progress could mean newness, quantity, quality, or participation. But if you go to participation, you end up invalidating all copyright and having to start over. Is it possible you mean newness or accumulation? Degree to which you care about content is relevant to this question.

Beebe: Because of Bleistein, I feel compelled to say that it’s ok to say we won’t give copyright to certain works because, as a society, we’ve concluded through democratic deliberation they don’t promote progress. There’s no reason we as a society can’t make aesthetic judgments. He thinks it would be nonetheless bad for us to engage in content analysis, so the better alternative is process. Best way to think about the aesthetic is in human terms: the aesthetic experience. Thus copyright should facilitate better aesthetic experience, including using works. Move from things to people. (But: No ideas but in things, a quote I was introduced to by Mark Tushnet's writings on art.)

This gets to my question about Beebe’s First Amendment point. Surely (she says) some conceivable aesthetic theories would have First Amendment problems; he just thinks the current liberal pluralist focus on process would work, which almost seems like he’s defining the problem away.

Barnett: think about piracy. US was a pirate nation as to other countries’ works (because it was poor). Reversed when population got wealthier and American domestic authors protested the unfairness because it forced them to sell at lower rates. Bleistein lowers the cost of copyrighting, diminishes defenses—might correlate with economic development of the US.

Beebe: with him on the piracy story. But he’s not sure he can connect this to progress/Bleistein. Formalities were still in effect. Diane Zimmerman would say that Holmes could rely on formalities to protect the public domain; Holmes didn’t have to worry much about the low standard of originality because so much wouldn’t make it into protection anyway.

Ramsey: from a free speech perspective. Maybe we don’t want the government evaluating what counts as progress in the fine arts. Could mean quantity rather than quality. If you’re okay with transformative uses, you can fit that into a free speech account: transformativeness fits into added quantity.

Me: as to quantity: courts routinely say “you’re just giving the same message,” not adding to the real quantity of ideas available, e.g. Salinger v. Colting and the Seinfeld Aptitude Test—quantity is perhaps too flexible to bear the appropriate weight. Also note that we’ve largely ignored, though it’s implied by Beebe’s references to access, the most obvious way in which quantity is increased: by multiplying copies. If you want quantity, bittorrent is your best friend ever. Trying to reduce participation to quantity will inevitably run into this dilemma—will always be possible to say “this review says nothing new.”

Beebe: sympathetic to the incentive argument for restricting unlimited reproduction. Need an incentive/access balance in the aesthetic world, which will be different from the appropriate balance in the tech/scientific world.

Southern California IP Professors’ workshop 3

Wendy Gordon, Boston University, Fair Use Markets: On Weighing Potential License Fees

Fair use comes from a time when an abridgement didn’t invade the right. Now: courts say no pirate can escape condemnation by showing how much he didn’t copy. Creativity still hangs around as part of the fair use, which works sort of as a mirror of substantial similarity. Quantity of copying plays a smaller role in fair use than in substantial similarity, and defendant’s creativity plays a larger role. Fair use is as complex as copyright rights are. Unified by looking at why copyright works: bringing buyers and sellers together in the market. Where that doesn’t work, we have reason to look for fair use. Markets fail when transaction costs are high, when the wrong person has the initial rights, when there are benefits the defendant can’t internalize.

Transformativeness isn’t as helpful as it might be. May involve change in purpose or in content. It’s not transformative if the purpose is the same even with added words/etc. Empirical work confirms this. Dorling Kindersley invents the concept of fair use markets: use can be fair even if a license could have been purchased; the license fees the defendant could’ve paid aren’t counted in the fair use calculus.

Useful if (1) we separate the two effects of declaring a fair use market. It’s very different to say that fair use can coexist with a market than to say license fees are irrelevant. (2) Transformativity of purpose isn’t the best criterion. Licensing shouldn’t foreclose fair use by itself; there’s almost always some other reason why it might be worth considering defendant’s use fair. Consider Sony. People look at that and say it’s all about transaction costs; licensing right to make copies wouldn’t have worked. May be so, and is a perfectly good justification, but other factors like privacy of the home; kind of estoppel that the shows had been broadcast free; tapes were erased after a short time—all mattered to fair use. (3) When a nonmarket mode works better, presence of a licensing option shouldn’t foreclose fair use.

As for not counting license fees at all against the defendant, she tries to ID cases in which licensing would destroy creative communities or degrade quality, or when licensing would not give an effective message about the value of what the copyright owner set out to produce.

Lockean justification: what you’re permitted to keep depends on the purpose you attempted to serve. Rights of copyright owner, rooted in labor towards particular purpose expressing her will, and her rights should expire when those purposes don’t apply. Thus, for transformative use not interfering with those purposes, laborer should have no ground for complaint. Informative index to creative work, or concert photo to illustrate a biography of the band, or thumbnail used in search index, this kind of borrowing isn’t stepping on the personal stake that gave rise to the laborer’s right. Lost benefit is not a cognizable harm. New use could cause cognizable harm if it could erode the market for other merchandise the copyright owner did have in mind—e.g., the Seinfeld Aptitude Test. If it didn’t cause cognizable harm, you’d evaluate the other factors—commerciality, quantity and substantiality of what’s taken. But if we’ve already asserted the plaintiff had no rights outside original purpose and found that purposes wasn’t implicated, no reason to consider the other factors. History doesn’t match a sweeping approach to purpose.

Unforeseeable uses: Balganesh, Bohannon have argued that those are outside the copyright owner’s rights—she thinks unforeseeability should be one ground for finding fair use, but she doesn’t think it’s enough to block consideration of foregone license fees, because today’s rules affect tomorrow’s creators. Transformativeness is too broad and too narrow. There can be commercial transformations that should be licensed (too broad). Too narrow: privacy, estoppel, reliance, rights of self-defense. Locke’s proviso provides immense support for members of a public who relied on a work in forming their own world-view. Transformativity favors fair use for only one kind of unforeseeability, shift in purpose. But that’s not consistent with history or the Progress Clause.

In rejecting transformativity and suggesting use of broader factors for when licenses can coexist with fair use, doesn’t mean to turn her back on the First Amendment. Both copyright owners and the public should have rights on a moral basis. But the area of rights for both sets of parties are fairly narrow.

Commentator: Tony Reese, UC Irvine

Is the fair use analysis of markets descriptive or normative? Gordon takes the 2d Circuit as making a normative statement: even if a market develops, we won’t count it.

Gordon is convincing that merely considering lost license fees needn’t necessarily be circular in the sense of assuming the conclusion that the market will be harmed, if the defendant’s use will create a bunch of social benefit and the plaintiff’s loss is small. That raises the concern that, in actual application, it’s probably generally hard to measure in numbers the defendant’s contribution to progress, while it’s relatively easy to measure the cost of foregone licensing income. So even if courts aren’t formally circular, they may well be weighing lost licensing fees more heavily than they should because they’re easy to measure and because what we can count counts more.

So let’s think through the implications of the Second Circuit’s concept of fair use markets. The category means that the mere possibility of a license shouldn’t foreclose a finding of fair use. Gordon’s principal aim here is to counter those who argue that fair use should only be available where markets fail and voluntary deals aren’t possible. Reese suggests the claim could be pushed further. Given the Campbell court’s disavowal of bright line rules, we could argue that the fact that the defendant could have license should never foreclose fair use.

Her suggestions include where requiring payment would degrade quality of the product—for example, reviews. Or where the defendant’s use implicates/vindicates a nonmonetizable right or interest. Others of her examples seem harder to imagine courts getting a handle on for deciding a case—creativity in gift communities/creative environments in which markets might not be the most useful way to deal with creativity. Reese is concerned that courts may find understanding such markets difficult in determining fair use. (I’d note that the Copyright Office did a decent job with the DMCA exception for noncommercial remix.) Even with orthogonal uses (where the creator doesn’t get appropriate incentive messages from the use, as where a decorator uses sheet music as wallpaper for its visual impact), we may have to think about static v. dynamic orthoganality. If the use becomes popular, maybe composers will work on notating sheet music to increase its visual appeal.

Gordon: We may never have all the information we need; that’s the human condition. What’s driving her work on fair use isn’t fair use, but the problem of universal commodification. Assume we have a magic computer capable of tracing all the benefits and harms we do each other and can shift money around to track that. What would be so bad about that? A lot of her work has been about where markets should end. This paper is trying to feel its way to situations where we’re better off without markets. Fair use is almost a placeholder for that larger concern.

Barnett: Pure economic perspective: Suppose a licensing market exists or could exist, meaning transaction costs are low. Introduce fair use, which is a $0 royalty, and you have reallocated a profit stream to the benefit of the second movers. From an efficiency perspective, we’re indifferent at a static level. But we add litigation costs, which is inefficient, because the defendant may be willing to fight not to pay and it’s harder for copyright holders to walk into court and get an injunction. Also, from a perspective of maximizing output, we’re disincentivizing the first mover, injuring output with no distributive gain unless someone in the second mover class has a greater claim.

Gordon: in the real world, we do have transaction costs, and reallocation of rents is immensely important. Doesn’t understand why the purpose of copyright is to maximize return to the first mover.

Barnett: there’s nothing for the second mover to build on with the first mover; it’s a stylized example.

Gordon: but the second mover could start with something else. The causal chain works both ways. Brett Frischmann: when the second mover does additional work, if the first guy can enjoin the whole thing that’s also an inappropriate allocation.

Barnett: unless we have a distributional reason to favor the second mover, that transaction won’t be blocked—if Disney can make a profit by licensing out, it will do so. The absence of fair use doesn’t mean a transaction is blocked.

Gordon: that’s the temptation about universal commodification. Her response: sometimes we want people not to have to pay for speech. The initial question of where the entitlements are matters a lot.

Shiffrin: Gift community: how far do you want to take this? Sometimes it seems like you’re saying we shouldn’t grant the right if it would change the nature of the plaintiff’s community, and sometimes you seem to say we shouldn’t grant the right if it would change the nature of the defendant’s community. Or we could look at the overall effect on creativity. Is inability to pay sufficient? You say blanket licensing is one way to avoid content discrimination, but some critics may not be able to pay even a blanket license. Almost every community has some people who couldn’t pay. If they couldn’t pay, it wouldn’t affect the plaintiff anyway.

Gordon: problem of arbitrage—how do you sort people who can’t afford to pay (sick people impoverished nations) from those who can? What if it gets resold? If not for that, of course she’d say give it to them for free. Subsidies can help—public schools give out textbooks. In some cases, more drastic remedies are necessary. Hardest question for her: plaintiff community v. defendant community. She has privileged the defendant community. Bob Dylan sitting around writing a song, and into it creeps a bunch of lines from a translation of a novel. To hold Bob Dylan liable, if it will affect his behavior in the future, is a problem. He’d start taking notes, have his lawyers look over his shoulder—can’t imagine any outcome of making him liable that would be salutary for society or for him. Easier when plaintiffs and defendants are part of the same community, as with societies of poets who quote each other. Could look to relative harms.

Merges: Where plaintiff and defendant are part of the same community, why can’t you just rely on voluntary waiver?

Gordon: Bridgeport. The jury found against fair use in one of these sampling cases. Sampling involves everyone borrowing from everyone else. Fair use might be away to secure that community’s existence through norms. You might ask, why not CC licenses or the like? But people who don’t make that kind of music aren’t likely to enter into those formal kinds of deals.

Nimmer: Your question might be whether we could make a formal condition of share and share alike a condition of entry into the community.

Merges: but maybe the market is segregated—top 40 artists whose labels now do engage in sampling transactions on a regular basis, and then an open source community using CC licenses to encourage sampling. Maybe fair use isn’t necessary. (This makes it impossible to transition into the pro ranks using one’s amateur style, which seems odd coming from a person who wants to encourage entry into the pro creator ranks.)

Gordon: this requires organizing a community, but until that happens fair use is a good response. Also there’s a problem of opportunism—violating reciprocity. People change their minds and demand control.

Merges: estoppel and reliance would be good tools.

Q: would the existence of an open community really eliminate the need for fair use?

Gordon: no, but it might eliminate the need in that group.

My question 1: Is Dorling Kindersley wrongly decided by Gordon’s standard? Does it mean that no coffee-table publishers have to pay for concert posters or the like? (Note that they will probably continue to pay in most cases to avoid the hassle.)

Gordon: DK did surprise her; it’s really a copyright misuse case and not a traditional fair use case. But she does want to defend the principle that factual uses should be fair. SCt gave us a ridiculous ontological account of why facts aren’t copyrightable (they’re discovered, not created)—but even in Feist the facts were created; someone came up with the names of the towns and the people, and the numbers were created by the phone company. The number of windows in this room is a fact created by people. Facts are not just found. We don’t protect them for other, communicative reasons. DK is about enhancing people’s factual knowledge of the environment in which the Grateful Dead performed, and that’s why fair use is plausible in this case.

My question 2: What’s the relevance of tolerated use, such as YouTube where the copyright owner decides to run ads against the content instead of taking down the content, or when the MPAA promises to give media studies professors access to any clips for a zero license fee—that’s not even a foregone licensing fee.

Q: if all that was necessary was a last-minute phone call that really worked no matter what movie you wanted to use, she might be inclined to say no fair use; dignity of the user community might not be enough, but she doesn’t think this would be a real option (and in fact that isn’t).

Q: but of course they don’t really want a zero licensing fee and a phone call; they want the right to stop you when they change their minds.

Gordon: privacy also comes in—you may not want to share your syllabus with the world.

Netanel: this is about uses outside the market. Toleration is waiver. Conceptual question: is toleration enough to justify commodification?

Gordon: commodification involves alienation, reselling.

(I don’t think this proposal to offer media studies profs a free license is true commodification; this is the insistence on licensing something that is outside the actual monetary market. It’s troubling in the way that saying consensual sex is commodified because sex is also available for sale on the market; there’s a sense in which that’s partially true but a larger sense in which it isn’t.)

Gordon: there’s reason to be distrustful of a promise to respect your rights without any actual right. Systematic and completely predictable nonenforcement of copyright is hard to believe in.

Rothman: you seem to offer economic and noneconomic justifications for fair use markets. Gift economy = a kind of economic relation, but not a market relation. Rights-based uses seem to be of a different ilk.

Gordon: In the debate about whether licensing always counts against fair use, transformativity gives a human basis for saying “you’ve gone too far in claiming rights.” It’s a way to fight back against “if value, then right.” A market based on copyright owners’ decisions can fail to serve the public interest, sometimes because of transaction costs and sometimes for other reasons, including free speech—in that case, the entitlement just belongs in the other party, especially when interests are nonmonetizable.

Southern California IP Professors’ workshop 2

Rebecca Tushnet, Georgetown, Looking at the Lanham Act: Images in Trademark and Advertising Law

--GUEST BLOGGER
This is Wendy Gordon, blogging a report of Rebecca’s talk.
[RT: Thanks somuch to Wendy! I have exercised my host’s privilege to try to make myself a little clearer.]

Rebecca Tushnet:
Her first topic is the role of critical work. Often we ask of scholarship, ‘what’s the payoff,’ but sometimes there are debates to which there is no one solution. Even if I can’t tell the reader what the solution should be, it’s worthwhile to deepen the exploration of such a problem.

Her second topic is the way ‘trademark’ is often grouped under intellectual property, rather than as a species of unfair trade practice. The sstudent papers made her realze she should make clearer that the property analogy isn’t really dominant. Advertisers care about brands, not trademarks. The Lanham Act (1125 of Lanham Act she puts on the screen) embraces both trademarks and false advertising, with the first half of A and B being virtually identical. It’s important to see the two together. If the courts do something different in one than other, we should notice and ask why.

Treatment of images vary. At one extreme courts will see an image as transparent, easily resolved. Or treatment of images as no one can understand, so throw up their hands. Courts don’t acknowledge the variation or how to identify which bailiwick we are in.

She puts on the screen a test from Tom Lee et al.’s work on consumer perception. Fanciful mark did worse re CONSUMER RECONGITION as a mark than the descriptive/suggestive marks. This illustrates the difficulty with whether the Abercrombie test really tracks how consmers recognize whether a given symbol [word] is a mark.

Our vocabulary for talking about images is limited. She puts on the screen a sketch of a male dancer with bowtie and cuffs from the Chippendales case—but the man’s body is in dotted lines, which means in trademark office lingo it’s not part of the mark. But inevitably the naked body IS part of the mark—the thing they apply for is different from what they claim as the mark. They wouldn’t claim a bowtie and cuffs in conjunction with a man wearing a busiess suit. How do we describe this practice?

The net screen shot raises the barrier between words and images. Shot of various drawings of back pockets of jeans. Applicant argues that Levi and others have TAUGHT the world that the back pocket of jeans is a place to communicate source. TTAB rejected the claim that placement should be understood as a part of consumers’ language—I think this result is fairly arbitrary, excluding symbols that serve the same function as words.

Turning to advertising, she shows a cartoon. Cartoons we know aren’t real. But this one threatens that using the competitor’s CAD software is “a real risk you shouldn’t take.” People are on roller coaster except roller caster is built wrong, “I told you we should have rechecked our dimensions.” Is the advertiser really saying, you could kill people if you use other guy’s software? The fact that it’s a cartoon is not dispositive.

Compare to the Glad case discussed in the paper, featuring an animated talking goldfish in peril—the court says this is plainly false. But it’s neither true nor false: there is no goldfish.

I agree, she says, that images can make claims, but we can’t predict from one case to next how courts will respond. One time an image is so obviously wrong as to be unbelievable puffery and thus not false, while in a somewhat similar case it’ll be seen as false.

What the judges see is different from what the rest of us may believe.

Final example: Sometimes images speak loouder than words even when both are present. On screen is fat guy and thin guy, lost 51 pounds. Words “results not typical. Weight lost on prior Nutrisystem program.” People didn’t really understand the disclaimer, according to the FTC’s research.

Courts have been taking the position that if the words are true, the ads can’t be misleading. That’s just wrong, says RT. The words may be unable to correct what the images say.

Trademark law like advertising law should be probabilistic--about the likely reaction of ordinary consumers.

Commentator: Lisa Ramsey, University of San Diego: takeaways from the paper: (1) The meaning of images: difficult to discern, but can have meanings, and those meanings can influence us even if we’re not aware. (2) Courts should consider competition concerns in their decisions explicitly more often.

Images often have hidden meanings: color can indicate environmental friendliness. Can be distinctive of source. Problem: we often don’t know what the meaning of a particular color is. Do you buy a product because it’s green, or because of additional advertising message? Judges often decide they can’t find something actionable. We want to be consistent. If in TM it is clear that a color or image indicates source and can be compared to defendant’s product, we should be willing to have same certainties in false advertising. Ramsey would take away the opposite lesson: courts and legislatures should exercise caution in granting TM to colors and other visual aspects of a product because we don’t know what the meaning is. One way courts have approached this issue is requiring proof of secondary meaning. Maybe we want to limit TM protection on scope: need virtual identity in similarity and/or in products and services if you’re copying a protected color. John Deere shouldn’t be able to control green on other products. Stronger nominative fair use defense should also apply. Another way to deal with this: remedies. Use of a house mark or disclaimer—maybe an image-based disclaimer.

Another question: why do we protect TM? Are we interested in unfair competition, consumer protection, or free riding? Consumer search costs, etc. don’t provide us with guidance on properly balancing public interest in not being confused with the public interest in having competition or free flow of commercial information.

Social science research: images do have meaning, which can influence us often without our knowledge. Useful to look at what’s been done empirically. Attorneys, judges etc. may not have ability to evaluate surveys.

Cigarette ads: plain packaging movement in Australia and other places. In the US, companies argue that they have a free speech right to use colors or images. Can be turned around in TM context. If commercial speech doctrine permits you to fight this regulation, then it should permit challenges to own rights in TMs in colors—shouldn’t everyone have a right to use these marks to sell? Advertisers are trying to get rights to particular advertising messages, and TM shouldn’t protect that. Gov’t should have the burden to prove the regulation addresses a substantial government interest; we haven’t seen that evidence in the case of dilution, for example, which both Ramsey and I think is unconstitutional. Need TM owners to prove harm. With image, proving harm is often hard.

Me: Julie Cohen emphasizes copyright restrictionists’/privacy advocates’ tensions involving control of information; policies that protect against overexpansive copyright may also allow privacy invasions, and policies that enhance control of personal information may also serve to expand copyright rights. Similarly, there’s a tension between people who believe in regulating ads for truth and people who think TM has expanded too far, both of whom are groups to which I belong. I worry about making it harder to sue for false advertising; it’s already pretty hard. I think we can fix TM without gutting advertising law, through materiality.

Empirical evidence: should rely less on litigation surveys and more on general social science.

Q: Technical solutions possible? E.g., algorithms that figure out meaning of images.

Me: it’s about how people react, so that would be pretty hard.

Q: Results not typical example: people didn’t respond to that disclaimer. What should be done? House brands (great example from Lisa of visual disclaimers)?

Netanel: paper seems to say that images are special case, courts muddle through with text—but remarks today suggest that the issue of images is just an illustration about how TM/advertising law don’t get it right with words either

Betsy Rosenblatt: Counterexample? Images may be more powerful than words, but disclaimers and prominent marking are treated differently—often discounted as ineffective because they are ineffective, and prominent marking is heeded, as with house brands.

RT: Courts always have argument 1 (in this case: images are easy to understand, disclaimer irrelevant) and argument 2 (images are hard to understand, go with the disclaimer) available and pick between them at will. Worst example: two 2d Circuit cases decided on the same day, saying completely opposite things about the relevance of a disclaimer. I agree we need more consistency.

Jennifer Rothman: you want to switch to more general evidence about market functioning, but your last comment suggests that things are so situationally dependent (size of text in comparison to image, weight loss market) that maybe we have to go case by case.

RT: Good point—there will always be litigation-specific testimony about how general rules operate in particular situations. I would like to see courts accept more marketing testimony, allowing experts to testify about likely effects of ads rather than only allowing survey evidence. Right now parties rarely even try to get marketer testimony in many instances because courts don’t think it counts.

Q: Tools we have for interpreting what a reasonable consumer would decide are flawed. We end up with decisions that don’t match the standards. Judge substitutes own judgment. Why attack the tools? It’s the standard itself that’s the problem. Quantifying reasonable consumer’s reaction is flawed in itself.

RT: I agree this is a problem (what I’ve elsewhere called a lack of epistemic humility by judges). I think we can improve the tools.

Nimmer: Merges said we could propertize entry into a new market in a TM-like way. Agree?

Merges: might want to grant a non-TM right. Questions of federalism—forms of state protection, like California local producers’ bonus consistent with federal TM scheme that are currently underexplored. Affirmative protection for local initiatives.

Me: we had that, it was called privileges. Conflict with patent/copyright, not with federal TM law.

Ramsey: property right in descriptive terms like Fair and Balanced, colors, product design—these are troubling things to propertize especially when we grant a penumbra of protection for similarity and even dilution. Free speech and competition need to be taken into account. One problem with more expert testimony is that only companies that can fund fullscale litigation can afford to go through trial. Can always get a C&D from someone claiming rights in color.

RT: this helps identify the source of our divergence: I worry about the upstart competitor who now, in the face of false claims by the market leader, has to go through a fullscale survey—turns out you can’t fight false claims in the market without expensive litigation. That said, we absolutely need tools to make it cheaper to get out of certain kinds of cases, especially in TM.

Seana Shiffrin: worries about deception rather than meaning in general. Why focus only on deception about the product; images can also deceive us about related matter, like that rapid weight loss is healthy. Not directly related to the product, but there are health concerns.

Me: I think that is related to the product. (More generally, she’s concerned with the question of whether there can be a falsifiable claim in an ad that isn’t tied to the product, so, for example, showing anorexic models running a marathon might convey a false message about health. After further discussion, I think we are in agreement that such an ad might be regulable by the FTC, though no private actor would be likely to have standing. Ads may convey far more than the advertiser intends to convey; that’s also why I think we need to consider the alternative ads the advertiser might run to convey the same truthful/nonfalsifiable information. If the advertiser can convey its truthful and nonfalsifiable claims without the misleading information, that’s a good argument for eliminating the misleading information.)

Beebe: what if we were to say TM is not unfair competition, it’s misappropriation of goodwill, dignity, autonomy. That sounds like property. It’s material to me that someone’s using my name even if no one else cares.

A: I think this is inconsistent with the definition of the right, which looks to consumer perception to define the boundaries of the right (though it may provide a justification for a right of publicity). No system actually does this—even the Europeans with their more property focused conception of TM look ultimately to consumer reaction to figure out whether the right has been implicated.

Netanel: images and words: if we know anything about images it’s that they can crowd out rational apprehension/information—the weight loss example is a good one; the image overwhelms “results not typical.” Do some of the justifications for protecting free speech apply less to images then?

A: no, I think we often overstate how hard it is to figure out what an image is saying. (Also, again, focus on what needs changing: many images of weight loss may convey the message “this product will help weight loss” or “weight loss is good,” but those may be true or nonfalsifiable. The question is whether you can convey the true message/s without also conveying the false one/s. A picture of a guy who lost 10 pounds, if that’s the typical result, may continue to convey the truth, and the nonfalsifiable claims, and not the falsehood. We want to minimize both Type I and Type II errors.)

Nimmer: what if the 51 pound loss is true, but they gain it back in a year?

A: potentially actionable.