... but consumers do need to satisfy 9(b) in California

Eckler v. Wal-Mart Stores, Inc., 2012 WL 5382218 (S.D. Cal.)

Eckler bought Equate Glucosamine MSM Advanced Triple Strength, marketed as good for the health and comfort of joints, and allegedly didn’t receive the promised benefits.  She sued under the California UCL and CLRA and brought a breach of warranty claim.

Wal-Mart argued that her claims were impermissible “lack of substantiation” claims.  Eckler’s claims did indeed draw heavily on the alleged absence of any scientific evidence that glucosamine was good for joints, e.g., “Clinical cause and effect studies have found no causative link between the primary purported active ingredients in Equate and the prevention of joint degeneration or relief from joint discomfort. And, there are no competent or well-designed clinical studies that support Wal–Mart's joint comfort, renewal and rejuvenation representations.”  She also alleged, “the National Institute of Health ... concluded that ‘[g]lucosamine and chondroitin sulfate alone or in combination did not reduce pain effectively in the overall group of patients with osteoarthritis of the knee.’”  Still, the complaint reduced to allegations that the purported benefits of glucosamine were (1) completely unsubstantiated and (2) had been disproved by science.  The court held that (1) and (2) were not the same for these purposes. There’s a difference between an unproved claim and a disproved claim. “A study showing no connection between Equate's active ingredients and joint health, however, is a fact that suggests Equate's claims are false.”  That’s different from a scientific opinion that the evidence is inconclusive.

In a footnote, the court expressed skepticism that Eckler could know that Equate didn’t work for her, but then pointed out that this is why scientific studies are so important for claims of this nature—this type of credence claim is one that an individual consumer must be able to rely on, since she can never evaluate it for herself:

Of course, how would she actually know that [the product didn’t benefit her]? The health and comfort of joints is probably influenced by a number of variables. Did Eckler keep all of them constant, adjust for ones that can't be kept constant (like aging), and then somehow have her cartilage and joints examined? Did she keep precise records of how much Equate she took, why she took it, and just how long she took it for? Can she document what her physical condition was before she and after she took Equate? Probably not. What's more likely is that she took Equate casually and just didn't feel much better, but that makes her own claims just as speculative as she alleges Equate's benefits are. On the other hand, Eckler can't reasonably be expected to come forward with some rigorous medical exam that shows Equate did her no good. That's just the nature of the product at issue; it's really only scientific testing that can show a supplement's claims to truly be false and/or misleading.

The complaint focused on the fifth of five representations on the product package, claiming that it was “[f]ormulated to help [s]upport joint comfort [and][r]ebuild cartilage and lubricate joints.”  The packaging didn’t specifically claim to help all joints for all ages, but “[t]he packaging does suggest, at a minimum, that Equate is good for the shoulder, wrist, elbow, hip, and knee joints; a picture of a human body on the packaging calls attention to these areas specifically.”  But it was less clear that the claim suggested a benefit to all persons at all stages of joint disease, especially given the disclaimer that the product “is not intended to diagnose, treat, cure, or prevent any disease.”

Eckler’s complaint was apparently rather kitchen-sinkish in its approach to the UCL.  The court treated the UCL claim as fundamentally one of “fraudulent” conduct, not “unlawful” or “unfair.” Rule 9(b) applied to UCL claims alleging fraudulent conduct, even if they are based on the unlawful/unfair prongs.  (Even though they don’t require intent to defraud … sigh.)  Anyway, Eckler did identify the specific representations at issue, the specific studies that allegedly falsified them (which I’d think goes beyond Rule 9(b)’s requirements), and when and where she bought the product, along with its price.  That seemed adequate to the court.

Still, the court thought that cases about explicit claims of clinical proof were inapposite.  But, as the court itself previously noted, how else is a health claim to be proven?  A reasonable consumer would expect some type of systematic study to be behind a health claim; implicit in any health claim is a representation that there is scientific evidence to support it.  Nonetheless, the plaintiff did allege that there were good studies disproving the health claims, showing that they didn’t provide any benefit over placebo.

However, none of the studies at issue involved Wal-Mart’s product, which had a number of ingredients, not just the studied glucosamine and chondroitin sulfate, but also vitamins, manganese, sodium, Boswellia serrata, Hyaluronic Acid, etc.  And the overall formulation was the basis of Wal-Mart’s claims.  Second, Eckler’s studies all focused on osteoarthritis, but the product here didn’t claim to reduce pain and cartilage loss associated with osteoarthritis.  (However, she might be able to allege that the studies also disproved the claims to rebuild cartilage, lubricate joints, or support joint comfort.)

Eckler argued that these were merits arguments, inappropriate for a motion to dismiss.  But if Wal-Mart was right, the studies wouldn’t show that Wal-Mart’s product didn’t work (just that two key ingredients didn’t, and who knows, the gelatin and sodium in it might change the effects!), and Eckler wouldn’t have alleged any facts that could be used to infer that Wal-Mart had advertised falsely.  Plus, the disclaimer made it harder for Eckler to argue that the product promised benefits for all stages of joint disease.  Other cases discounting disclaimers on a motion to dismiss involved direct contradiction of other representations.  Thus, in the end, the court didn’t find that Eckler’s studies made her claim facially plausible.  “The studies allegedly show that glucosamine doesn't alleviate the symptoms of osteoarthritis in the hip and knee. That is a very particular showing with respect to a degenerative joint disease, and in the Court's judgment it doesn't address the far more general claim—which is made by the Equate representations—that glucosamine is good for the body's joints.”  Along with the disease disclaimer, the packaging touted the product as a curative for “[o]verexertion, the natural aging process and everyday wear and tear.”  This mismatch between the claims and the allegedly contrary evidence was too great.  And that got rid of the CLRA claim too.  These claims were dismissed without prejudice.

The breach of warranty claim was dismissed with prejudice for failure to give Wal-Mart notice.

The court had some advice for Eckler if she decided to file an amended complaint.  To the extent her claims turned on her own experience, she needed to say more than “I took Equate and didn't feel any better.”  Also, she needed to do more to explain why the studies contradicted the actual representations at issue.  (It seems to me that she could do so by, for example, using the FDA’s studies showing that consumers do not distinguish between structure/function and disease claims, thus pleading that consumers would not be disabused of their illusions by the disease disclaimer.)  The court’s “biggest problem” was that it didn’t see a link between studies showing that glucosamine doesn’t alleviate osteoarthritis and this supplement’s claims, “explicitly not intended to treat a disease, that it is formulated to support joint comfort, rebuilt cartilage, and lubricate joints.”

Section 43 isn't subject to Rule 9(b) standards

Tempur-Pedic Intern. Inc. v. Angel Beds LLC, --- F. Supp. 2d ----, 2012 WL 5395825 (S.D. Tex.)

Angel Beds and Tempur-Pedic compete in the bedding market, which is probably not as sexy as it sounds.  Tempur-Pedic, which makes its products from a proprietary foam, objected to Angel Beds’ comparative advertising.  It prohibits authorized retailers from selling its products online.  Angel Beds allegedly operates multiple websites, including angelbeds.com, tempurpedic-comparison.com, and mattress-find.com. Tempur-Pedic claimed that these sites misused Tempur-Pedic’s marks, causing initial and actual confusion, including by use of product names confusingly similar to Tempur-Pedic’s product names.  The parties previously settled an earlier lawsuit in which Angel Beds agreed to discontinue use of tempurpedic.angelbeds.com URL, stop using “tempur-pedic” and similar variations in keyword and description metatags, and stop using “tempur-pedic” etc. in title tags except for “Compare Angelbeds Mattresses to Tempur–Pedic Mattresses” or substantially similar phrases.  Angel Beds agreed not to use Tempur-Pedic’s marks except in truthful, comparative advertising.

Tempur-Pedic objected to Angel Beds’ 2008 use of tempurpediccomparison.com, which redirected to angelbeds.com, and its use of Tempur-Pedic marks in a “link block” on its website.  Although Angel Beds made some changes to its sites, Tempur-Pedic wasn’t satisfied and sued for trademark infringement, unfair competition, trademark dilution, cybersquatting, and breach of contract.

Angel Beds moved to dismiss for failure to state a claim of federal unfair competition and breach of contract, and for failure to sufficiently specify the marks at issue.  The first question was whether the unfair competition claim was subject to Rule 9(b)’s heightened pleading requirements because it alleged that consumers were misled.  But, since this was a trademark claim and not a false advertising claim, the court couldn’t find any 5^th Circuit case law indicating that the complaint sounded in fraud, and it declined to apply any such requirement; notably, it considered §43 in its entirety, rather than explicitly segregating trademark from false advertising.  On its face, the statute bars false or misleading representations, without mentioning intent to deceive or defraud.  This is not fraud, and Rule 9(b) “is often reserved for claims predicated on statutes or common law that requires some showing of scienter.”  A number of district court cases in the circuit have applied Rule 8 even to false advertising claims under §43, though courts elsewhere are split.  The weight of the law supported Rule 8 treatment.  And even if a plaintiff avers fraud in a claim in which fraud is not an element, the proper procedure is to disregard averments of fraud that don’t satisfy Rule 9(b) and see if a claim has still been stated.

With that out of the way, the court examined whether Tempur-Pedic stated a claim for false advertising (the only part of the Lanham Act claim that Angel Beds was challenging on this ground).  The court noted that the complaint alleged that specific marks were used in the “link block” and that tempurpediccomparison.com was a confusingly similar domain name used to present misleading and confusing ads that redirected to angelbeds.com.  Tempur-Pedic plausibly alleged misleadingness, likely deceptiveness, materiality, and injury.  It also plausibly alleged a breach of contract.

Angel Beds also argued that Tempur-Pedic didn’t sufficiently identify which marks it claimed had been diluted (federally and under Texas law).  The test for whether a complaint requires a more definite statement is whether the complaint is so vague or ambiguous that the defendant cannot reasonably prepare a response. Discovery is ordinarily the place to clarify claims.  The complaint here identified 15 registered marks and 7 unregistered marks that were allegedly diluted. (Can there seriously be an Iqbal/Twombly-passing allegation of federal fame for all of these? What about an Iqbal/Twombly-passing allegation that this wasn’t in the course of comparative advertising?  The answer to the latter might well be “yes,” but that would be parasitic on the trademark infringement claim; there is no way that I can see for Tempur-Pedic to lose its infringement claim and win its dilution claim.)  Identifying the marks and alleging how Angel Beds used them, allegedly dilutively, was enough for the complaint stage.

recommended reading: images and false advertising

Linda J. Demaine, Seeing Is Deceiving: The Tacit Deregulation of Deceptive Advertising, 54 Arizona Law Review 719 (2012)

Abstract:

This Article reveals  the central paradox in modern advertising law—that despite advertisers’ nearly universal shift from linguistic claims to comparatively powerful visual imagery, the FTC and courts continue to scrutinize the  more  trivial linguistic elements of ads while leaving visual imagery mainly unregulated. As a result  of this misplaced effort, the more  pervasive and  persuasive  the form in which an advertiser makes its deceptive claims, the less subject to regulation the claims will be.  The  Article analyzes the causes of this paradox and offers preliminary suggestions for how the FTC and courts could effectively adapt the general framework they apply in deceptive advertising cases to the unique characteristics of visual imagery. It concludes by explaining that a more rigorous assessment of visual imagery would fulfill Congress’s intent to protect consumers and business firms from  deceptive advertising and comport with Supreme Court commercial speech jurisprudence, while  avoiding  the market inefficiencies and loss of social capital associated with widespread deception.

A bit from the article itself, on the inutility of disclaimers to correct for deceptive visuals: “the FTC and courts  here, too, generally treat the reasonable consumer as having the remarkable ability  to  resist believing or being influenced by what his or her eyes plainly see.”

Privacy and substantiation

The UK's ASA just upheld a complaint against an ad for a consumer review site, holding that, because the site discarded consumer details such as email after determining that a review seemed legit, it couldn't substantiate its claims to have legit reviews.  One reading is that it wasn't clear that the advertiser had used the same careful scrutiny in the past that it now did, so that there were legacy reviews on the site that might have been bogus, but the language was also broad enough to suggest that having a good procedure isn't enough if you can't later track down the consumer who provided the review.

NB: while I don't think you'd get this result in the US, section 230 would most likely not protect the kinds of claims at issue--"our reviews are from real consumers" and the like, since the advertiser itself created that content.

Appropriation, artist

The very interesting The New Inquiry has a forthcoming article (presently subscribers-only), Being Damien Hirst, an interview by Jesse Darling of Slovenian Damien Hirst, who tweets and has other social media presences.  The whole thing is worth reading, especially for people interested in trademarks, authenticity, and attribution.  Some highlights:

I did consider Jeff Koons, but because I wanted to appropriate the very spirit of contemporary art, it really had to be Hirst.

… The point of Paris Hilton is that she’s famous for being famous. This is the same logic that defines contemporary art, in that the art of Damien Hirst is expensive for being expensive. The point of my project is to shake the balance of this logic. What happens if people start believing that the cheap and meaningless art I make is created by the greatest artist of our time just because I appropriated his name?

… The highest sum I ever got for a single piece was €100. Of course I realized right away that something was wrong, so I contacted the buyer and asked him if he actually knew what he paid for. Obviously he didn’t; he thought he bought an “original” Damien Hirst, even if that “original” Damien Hirst was just a scribble on a piece of notepaper. He was too embarrassed to ask for a refund once I’d explained things to him, but he got the money back anyway because I am not a scam or a fraud or anything like that, and I don’t care about money.

… The disclaimers are because too many people seem to believe I am the British Damien Hirst, despite the fact that the art I do looks like crap, and is crap. I got sick of explaining this to everyone, plus it made me feel guilty, even though it isn’t my fault if people get fooled.

But it doesn’t seem to help all that much, since people still want to believe I am the British Damien Hirst. I don’t know if it’s because people don’t read what’s written, or because people don’t believe what’s written; it annoys me how people can’t seem to see the difference when it’s so obvious, but if you can’t see the difference between the crap Slovenian Damien Hirst makes and the “great art” British Damien Hirst makes, just because they share a name, then this only goes to prove my point.

… I contacted [Hirst’s gallery] some years back and asked them directly if they would approve what I was doing. They said no. At that point I considered giving up on everything. But then I thought they were such hypocrites—warning me that what I was doing was a trademark infringement, while also knowing that one of Damien Hirst’s major works was a much more severe case of trademark infringement, and defending it for being an artwork. They had a different opinion of what I’m doing, because it’s against their interests. But then I realized they’re just running a profitable business, so why should I care what they think about my art since they don’t give a damn about art in the first place?

… I sincerely consider Damien Hirst to be the best artist of our time. I don’t have anything against Damien Hirst and even if I did, I don’t think I could do anything to damage his brand. Quite the opposite: by doing what I’m doing I am helping his brand gain relevance. For me Damien Hirst is just the paint I use to create my paintings.

latest political parody of a song

Call Your Zeyde. Though they haven't fared well in court, people keep making these.  Could it be because ordinary communication on the issues of the day is often most naturally and memorably expressed using popular culture, regardless of the supposed satire/parody divide that neither comports with our literary traditions nor respects Justice Souter's footnote in Acuff-Rose refusing to kick "satire" out of fair use protections?  Ahem.

domain name may be noncommercial speech; TM rules don't apply

The Supreme Court has endorsed copyright exceptionalism—ordinary First Amendment doctrines just don’t apply, because copyright has to be constitutional (regardless how far it’s strayed from what the Framers understood to be “copyright”).  Courts are inclined to do this with trademark too, even though, as the recent Stolen Valor Act case made clear, the “deception” rationale for trademark protection fits neatly into broader First Amendment narratives.  This case represents a particularly blatant example of trademark exceptionalism.  I’m not saying it’s wrongly decided; I just really don’t like special pleading in the First Amendment context. 

Gibson v. Texas Dept. of Ins.-Div. of Workers' Compensation, --- F.3d ----, 2012 WL 5330890 (5^th Cir.)

The TDI sent a C&D to Gibson, a plaintiff’s attorney who does workers’ comp claims and uses the domain name texasworkerscomplaw.com, stating that his domain name’s use of the words “Texas” and “Workers’ Comp” violated the Texas Labor Code.  He sued alleging that the relevant statutory provision violated the First, Fifth, and Fourteenth Amendments, and the district court dismissed for failure to state a claim.  The court of appeals affirmed in part and reversed in part.

The relevant provision states that

a) Except as authorized by law, a person, in connection with any impersonation, advertisement, solicitation, business name, business activity, document, product, or service made or offered by the person regarding workers' compensation coverage or benefits, may not knowingly use or cause to be used:

(1) the words “Texas Department of Insurance,” “Department of Insurance,” “Texas Workers' Compensation,” or “division of workers' compensation”;

(2) any term using both “Texas” and “Workers' Compensation” or any term using both “Texas” and “Workers' Comp”;

(3) the initials “T.D.I.”; or

(4) any combination or variation of the words or initials, or any term deceptively similar to the words or initials, described by Subdivisions (1)-(3).

The statute also bars use of these terms along with the state seal, images of the state, or official logos.

Restrictions on commercial speech have to pass Central Hudson scrutiny.  Gibson argued that this was a content-based regulation deserving higher scrutiny, but the court disagreed: the law was viewpoint-neutral, and it didn’t restrict all speech relating to workers’ compensation.  He argued that his domain name was inextricably intertwined with his website’s content, which includes his views on the need for legal reform.  (Is a domain name ever inextricably intertwined with the content of the site?  No law of humanity or nature seems to require that.)  But that was speech outside the reach of the regulation, and it didn’t make this regulation one that discriminated against content.  Gibson also argued that the law was a prior restraint, but the Supreme Court has held that laws aimed at prohibiting deceptive commercial speech are unlikely to implicate the prohibition on prior restraints. Friedman v. Rogers, 440 U.S. 1 (1979) (not incidentally, a case about a Texas regulation of the use of certain terms by businesses).  Anyway, this wasn’t a prior restraint; it provided a penalty for past speech.

So did the statute regulate commercial speech?  The court of appeals agreed that the domain name and associated blog might do more than propose a commercial transaction.  But the domain name could still be commercial speech if it’s an ad, referring to a specific product, with an economic motivation.  “A domain name, which in itself could qualify as ordinary communicative speech, might qualify as commercial speech if the website itself is used almost exclusively for commercial purposes.”  The court of appeals designed to resolve the issue, because even if the domain name was commercial speech, Gibson stated a claim; on remand, Gibson could submit evidence that his domain name was noncommercial speech. 

Now, the key Central Hudson moment: commercial speech that is false, deceptive, or misleading may simply be banned.  But is that determination to be made wholesale or retail?  Well, inherently misleading speech can be banned outright, while speech that is only potentially misleading is different.  To be completely unprotected, the commercial speech must either be inherently misleading or the record must show that a particular “form or method” of advertising has in fact been deceptive.  Pub. Citizen, Inc. v. La. Attorney Disciplinary Bd., 632 F.3d 212, 218 (5th Cir. 2011) (citing In re R.M.J., 455 U.S. 191 (1982)) (Again leaving the wholesale/retail line unclear.)

Texas argued that the domain name was inherently misleading, citing trademark cases refusing to apply First Amendment protection for domain names that used marks “to misidentify the source of a product.”  But these cases were “unique to the field of trademark infringement, and [did] not necessarily extend to a case such as this one, where Texas is prohibiting Gibson from using words that are otherwise in the public domain.”  The court continued:

Cases involving trademark infringement involve inherently deceptive speech because they contain a significant risk that an infringing party will freeload on the goodwill that has been created by the original trademark. No such risk is present here. Texas has made no showing that its own talents and energy contributed to the creation of any goodwill in the name “texasworkerscomplaw.com.” Instead the regulation at issue is forward-thinking; intended to prohibit confusion for individuals seeking information from the government agency. It is not retrospective in the same way as most trademark litigation, which is generally intended to preserve the reputation that has been built upon a trade name.

Okay, set aside the equation of free riding with harm.  The only reason there’s “inherently” a risk of free riding from infringement is because of the risk of deception about source, which is the exact same risk at issue here.  The question is not whether Texas has “goodwill” in the conventional sense in the particular domain name chosen by Gibson, but rather whether Gibson’s domain name creates a significant risk that people will believe it is official.  Even if I assume, contrary to what most Texans are likely to tell me, that Texas lacks a preexisting brand identity/reputation, the aim of preventing confusion is trademark’s aim.  We even protect inherently distinctive marks without secondary meaning (reputation); the trademark question is, in exactly these words, whether people will be confused into thinking that the domain name indicates official/authorized source, whatever that source is.  Here, that source is (allegedly) the state of Texas. 

(NB: Let me emphasize that I think trademark has lost its anchor in harm, and that materiality and harm should also be required; under Central Hudson, perhaps they should be required as a matter of constitutional law.  Thus, I’m not saying that Gibson should lose.  But pretending that trademark has some completely different theory is intellectually dishonest and helps insulate trademark from proper scrutiny.  And this case further cements my conviction that “goodwill” is a magic word that prevents thought about what is actually going on.)

The court also said that most of the trademark cases cited (e.g., Planned Parenthood v. Bucci), domain names were (ed. note: wrongly) held not to be protected speech because they weren’t expressive, not because they were misleading.  But Gibson’s domain name was expressive because it did more than simply mimic the state agency’s website or identify a source of workers’ comp law.  Instead, it was intended to direct visitors to a forum for discussing such laws and potential reforms, and to convey “the message of Gibson's website as a whole.”

Anyway, in non-trademark cases, “inherently deceptive speech has been found in essentially one other area: attorney solicitation of prospective clients.”  (Though Gibson’s blog might be a solicitation, the rule here wasn’t directly related to his legal practice.  The alleged harm was confusion with a government agency, not harm to a solicited client.)  The risk of harm found in attorney solicitation cases was not present here.  There was no history from which a court could conclude that the speech covered by the statute, and domain names like this one, were inherently deceptive.  And there were no factual findings to support a claim of actual deceptiveness.  Thus, some First Amendment protection attached.

Even speech that isn’t inherently misleading can be regulated if the regulation directly advances a substantial state interest, and is no more extensive than necessary to serve that interest.  The state’s interest was to prevent misuse of state names and symbols, but Texas conceded that it didn’t yet have the record to satisfy its burden under this branch of Central Hudson.  Though history, consensus, and common sense can be enough, the district court here still erred by relying on the legislative record without further briefing.  The case would be remanded on the as-applied challenge. Gibson also alleged facial unconstitutionality, which could be addressed on remand as well.

However, Gibson’s Fifth and Fourteenth Amendment challenges were unmeritorious.  As for the equal protection claim, there was no claim of discrimination against members of any protected class or of uneven application as to similarly situated individuals.  Instead, he argued merely that the law subjected him to controls not placed on similarly situated individuals or businesses.  “The mere fact that a law impacts different individuals in different ways does not subject it to constitutional challenge unless Gibson can show that Texas's law is so extreme as to lack a rational basis.”  And “[g]iven the complex nature of workers' compensation law and the risks that may result from the dissemination of misleading information in this area, Texas's law bears a rational relationship to a legitimate state interest.”

Gibson’s due process claim was that he didn’t get a hearing or a possible appeal, but the regulation allowed him to provide a written response to the C&D, which he didn’t do.  Procedural due process is flexible; he was entitled to notice and an opportunity for a hearing before being assessed any penalties, and this was enough to guarantee him due process.

Gibson’s takings challenge was unripe.

Judge Reavley concurred only in the judgment to reverse.  He didn’t read the statute as prohibiting deceptive commercial speech (though I’m not clear what his alternative reading was), nor did he see the domain name here as misleading.

Part numbers don't function as trademarks in robust aftermarket

Wilden Pump and Engineering LLC v. JDA Global LLC, 2012 WL 5363319 (C.D. Cal.)

Wilden sued several employees and their startup JDA, alleging trademark infringement of its numeric codes for pump replacement parts.  JDA argued that the part numbers were functional in that they were formulated to communicate specific part information.  “Wilden assigns part codes according to the following scheme: XX–YYYY–ZZ where XX identifies the size of the pump, YYYY identifies the part itself, and ZZ identifies the material from which the part is made.”  According to JDA, the aftermarket industry used Wilden’s part codes for years without objection from Wilden (which would suggest at least lack of secondary meaning, if not genericity), using a prefix to identify the aftermarket manufacturer.  Wilden argued that the use of a prefix was the market recognizing that the part numbers themselves identified Wilden products, but the court saw that as a fatal concession: if a prefix distinguishes the aftermarket product from a Wilden product, “then it can hardly be said that Defendants are guilty of trademark infringement.”

But more significantly, while the part numbers might represent Wilden products, they didn’t serve as source identifiers.  Instead, it was the prefix that designated the source, while the numbers represented the product with which the part was compatible.  “As relevant here, then, the part numbers are not source identifiers, but rather, compatibility indicators.”  Wilden simply didn’t deal with the industry practice of using prefixes, which it did in its own aftermarket parts business when it used competitors’ part codes, stating: “For ease of ordering all you need to do is find the OEM part number and add an ‘S’ in front. To distinguish between an OEM part and a Spectrom part simply look for the logo ... on the part.”  The part numbers weren’t source identifiers; rather, the prefixes were.

Political Joe Isuzu

Will Ferrell Will Do Anything to Get You to Vote.  Puffery in action.

The National Archives blogs about trademark law

Thanks to an alert reader, who put me on to this gem about a lawsuit by LifeSavers against a candy competitor.  I'm charmed by the idea of the National Archives having a blog, and they have pictures of the allegedly infringing trade dress, which the court decided was functionally required to advertise little rolls of differently flavored candies!

IP & Gender at AU

I missed Chris Sprigman's talk yesterday because I was on a plane, but AU makes webcasts available!  Another one of note looks to be Copy Culture, Media Piracy, and Shadow Libraries, described as:

Joe Karaganis, a researcher at Columbia University’s American Assembly, and Bodó Balázs, a professor at Budapest University of Technology and Economics and Fellow at Harvard University’s Berkman Center for Internet and Society, will discuss their ongoing research on culture and media piracy in the U.S. and Europe.
Karaganis will discuss a recent comparative study, "Copy Culture in the US and Germany," which maps digital media practices and attitudes toward copyright enforcement in the two countries.
Balázs will discuss his ongoing research on the complex system of rules and governance mechanisms in piratical P2P file-sharing “darknets,” including communal enforcement of intellectual property –like regimes within such communities.

Today we had a roundtable discussion of IP-less spaces and gender.

Peter Jaszi: mapping connections between areas of gender studies and IP scholarship, leading in some years to a larger, more formal gathering.  Today is a mapping day.

Lorraine Aragon: just as the law is starting to look at negative spaces of IP, we find law moving in to colonize them.  Her background is in things like Indonesian art—post-TRIPS cultural property thinking is increasing.  Gender frame: communities of practice in places like Indonesia are gendered.  So you can look at how promotion of circulation is done v. sequestration of knowledge: the cultural ecology.

Chris Sprigman: writes on negative spaces of IP.  Looking at more communities within that negative space; connections between gender/social class/history and the rules of how creativity works in particular communities. 

Me: I talked about Viviana Zelizer and fandom as interprenetrated commercial/noncommercial space: certain kinds of market relations meld with a gift economy.

Libby Smigel: Dance Heritage Coalition—dance history and dance criticism.  Our connection to law came through fair use best practices for dance libraries/archives.  The dance field wasn’t terribly clear on what kind of IP/copyright really applied to it or didn’t.

Vicki Jackson: longtime participant; has written on quilting as one of these communities.

Sean Pager: norms within filesharing communities: there will actually be takedowns in those communities if you put up the wrong kind of material.  (I am desperate to know more, which is why I like the paper by Balázs above.)

Michael Carroll: anthropologists like to measure the gap between what people say and what they do; gender plays an important role in that gap.  (Though see this report on P2P practices in the US and Germany, which are generally similar across men and women.) 

Daniela Kraiem: women’s paid and unpaid care work.  Spaces that are part of the informal economy but make up what’s most important to people—art, family, care obligations.  Spaces generally based on intergenerational reciprocity rather than on bargain or exchange—long-term relationships, family and communities of practice similarly.

Christine Haight Farley: interested in trademark and gender.  Taking an online design course and the biggest conversation among 5000 course members is about IP. 

Sprigman: we’re at the beginning of investigating the negative space.  Communities that have been looked at: fashion, food, open source software, roller derby, comedy, magicians, tattoos, but even there none of the articles represent a complete view of any industry: fashion is enormous and ever-changing.  Some areas remain untouched: furniture, an important US industry, existing on the borderline of IP, with some design patent/TM action but mostly no IP protection.  Emeco just sued Restoration Hardware for knocking off the Navy chair; he doesn’t think it’s a good suit.  North Carolina, where the industry is centered, is open to researchers.  Food—much more work to be done.  Cookbooks serve a lot of functions, only some of which have to do with cooking: signalling social class/taste/gender.

Within communities of pirates, more work to be done.  Furthernet: watching their IP norms.  Within jamband community, there are robust norms (Mark Schultz has a paper).  Are there conversations among musical communities about whether that model can be exported?

Also different perspectives.  His centers in law & economics.  That’s a reasonably useful lens, but to be a real area of scholarship, this needs to attract scholars who think differently and use a variety of tools.  How IP without IP interfaces with IP generally: Why has fashion gone so little noticed for so long?  Something about law: IP lawyers are interested in places where IP is, not where it isn’t.  But IP isn’t really for people who love termination of transfers; people who practice it tend to admire the creative spirit and the people who use it for a living.  They think IP is the handmaiden of creativity: sometimes it is and sometimes it isn’t.  If we break the supposed iron link between IP and creativity and recognize the true elasticity of that link, we need that kind of anthropological scholarship.

Jaszi: what’s the range of methodologies available?  Formal survey research; less clearly bounded information collection.

Sprigman: most formal—used Bureau of Labor Statistics to study fashion prices over time.  Price at the top turns out not to be meaningfully disciplined by the presence of low-end knockoffs.  Whatever is going on with knockoffs, there’s little elasticity.  That’s very formal data collection/analysis.  So too the Von Hippel etc. survey of French chefs—qualitative data backed up with quantitative survey of consequences of norm violation.  Narrow but defensible conclusion about copying and attribution in that defined community.  Then there is qualitative empirical work. Comedian study is relatively formal: we had a script for the interviews, though we could stray.  Experimental studies also offer another option—his work on valuation of IP. Would love to start testing norms about copying/appropriation/credit.  Many norms that we have documented in scholarship could be tested in the lab.  Historical studies, sociological studies of institutions—all needs to be done. 

Carroll: participant-observer/longitudinal studies—gaps often get revealed over time.

Sprigman: Ashley Mears’ book on Pricing Beauty is a great example of this.  Embedded herself as a fashion model.  Great work on how agencies and models think.

Me: recognize that as scholars we are also norm entrepreneurs intervening in these very fields—my DMCA advocacy, Sprigman testifying before Congress, AU promoting fair use principles.  Scholars should do that when their work has practical applications, but it’s a tension we need to recognize—we don’t leave the fields we study untouched.

Smigel: in the dance field, people worry about influence (that is, one choreographer on another), but they haven’t come together to talk about underlying questions.

Aragon: anthropologists already accept that law itself is partly constructing what it purports to regulate.  At the same time, with globalization and confusions about how the world has changed, we have gotten so busy looking at global connections that we aren’t doing sustained microanalytic examination of norms.  Innovation as a concept: creativity works as a more open concept than innovation.  Indonesia—an ethnomusicologist has looked at when music is at the same level of change, Americans emphasize its newness but Indonesians emphasize its continuities with the past, because that’s their source of authority.  IP thrives on newness, but the undercurrent is that nothing is really novel.  Magic studies: exposure more of a threat than copying. Also shows up in cross-cultural studies. 

 

Smigel: Recurrent theme from choreographers: I want my process saved more than I want the outcome/a videotape. Often a very organic process that changes from work to work; doesn’t seem copyrightable, but they feel it’s the signature part of what makes them an important artist.

Carroll: what would preservation look like?

Smigel: conundrum.  We have 3000 hours of a rehearsal tape for one artist, including water breaks; not simple.  We embedded an archivist to watch the creation of a work; we believe it’s the first embedded archivist. There were moments where pieces of the work emerged because of smells in the studio that day.  They didn’t come in with a fully formed work but rather incorporated all sorts of things, including contributions from participants.  Differs by artist, location, collaboration. A lot of contemporary dance is now collaborative, falling out of simple single-author copyright scheme.

Jaszi: possible to derive some findings about unarticulated norms that relate to, e.g., contributions of dancers v. contributions of choreographer?  Almost all of these investigations don’t focus on geographic specificity, but maybe we should be more attentive to that even with constructed nongeographic communities (e.g. online) which may be different from place-based communities.  Culture of hip-hop in a particular city, for example: thick accounts of creativity in a particular place and time.

Jamal Thompson: it depends. Seattle’s filmmakers have a shared history/psychology (we’re not LA and Vancouver overtook us and the weather’s horrible), but that’s very different from the hip-hop community’s or the performing arts community’s.

My thoughts: design v. serendipity; both affect online and offline spaces.  Some cities invest in having an “arts” industry, successfully and unsuccessfully.  Norms of attribution on Tumblr, for example; not necessarily intentional even though we assume that online design is always deliberate.  User communities react to affordances but not necessarily in predictable ways.

Kraiem: feminist legal method: asking the other question: where are the others in this story?  A lot to be done in this space simply by doing that.  Then there’s consciousness raising.  Belongs to a heavily female online forum with very strong pro-copyright beliefs, but then they freely share and comment on unpublished excerpts with the expectation that it’s copyright that lets them do that.  Then there’s explicit norm violation in order to push/change the norm: Pussy Riot etc. Self-conscious decision to violate norms.

Sprigman: was fashion/food outside IP because of neglect of the creative output of women?  Doesn’t have a great answer for that yet.  But even if we answered yes, there’d still be a normative question: is the right answer “now give me mine” or something else?

Kraiem: a 2-tiered world. 

Sprigman: politically, the idea that it was discriminatory (intentional or unconscious) would increase the likelihood that copyright would extend to fashion.

 

Jaszi: returns to the point that our findings are politically useful to some groups—a real possibility that work may have direct consequences in ongoing doctrinal contests.

Thompson: men aren’t opposed to pioneering/tweaking—open source looks like that, but literature v. code has a gender mapping.  (Of course historically literature was seen as the province of men!)

Kraiem: increased formality draws more male commentary.  A full chapter/work would draw more male attention.  The informal, constant back and forth draws almost no male attention.

Sprigman: in open source, often you get little bits of code meant to do something very specific; the whole task is componentized.  It’s not the level of formality, but the clarity of the expectations—an idea about how to make this routine run better/use fewer processor resources.

Jaszi: how different communities are constituted, who participates, and to what extent the characterization of communities as gendered is operative.

Smigel: Martha Graham warned people that if she watched their dances she’d appropriate what she found useful and make it better in her own work.  Has seen how a dancer can learn and remember a routine.  That was pre-copyright of dance—1930s/40s, when only narrative was copyrightable.  Postmodern/experimental: Merce Cunningham, Judson Church group.  Now, a choreographer bristles at being labeled Judson Church: we were all doing different things! They seem to feel much more investment in individuality/breaking away from Graham.  Now: Julia Rhodes/Lucky Plush, much more indicative of current mashup generation in seeing that almost everything in her toolbox comes from some predecessor, and she footnotes these in her programs, including jazz hands of Bob Fosse, contractions from Martha Graham/William Shatner in Star Trek, Beyonce’s Single Ladies.  Some people go to another culture and bring back ideas and never credit; Rhodes’ great lament is that the dancers she works with don’t know dance history.  Her website: stealthisdance.com: self-deprecating look at what she thinks we all do. 

Post-Graham, it was a period of male dominance.  Male choreographers appealed to IP, TM too to establish distinctiveness/control.  Suspicion among dance community that materials will be stolen occasioned more than once accusations that a female choreographer who had access to public records at NYPL had access to moves that very few people had seen performed live and used them without attribution for commercial benefit.

RT: different subgroups: there are some fan groups that are mainly self-identified women, and some that are mainly self-identified men.  Star Wars fan films v. fan video/fan fiction.

Carroll: what are people willing to reveal to the community?  Fear of copying may matter—if you rely on the community to enforce; if the community doesn’t have a history and can’t recognize a ripoff, that makes norm based enforcement harder.

 

Elizabeth Jackson: dance may also have been late to copyrightability because it was female (non-narrative: of course non-narrativity has also been associated with femaleness).  What do we make of dance norms now that dance has been assimilated into IP law?

Vicki Jackson: Gee’s Bend in Alabama, remote and inaccessible; quilting generally genders female; domestic/gift economy.  Passed-down patterns and the norms seemed to work. Then there were interventions that were very male: the first intervention, civil rights workers/Freedom quilting bee who came & saw these quilts and put them to work making patterns that were more classical quilting to be sold at dep’t stores, no longer messy/utilitarian.  But the underground, abstract art continued.  Recently, another male monetizer: promised that money would return to the community; this intervention has shaken up the community.  The old quilts were now hanging in galleries and art museums, valued in the $100,000s.  Young granddaughters are doing derivative works, selling them under the auspices of this monetizer.  Creates conflict/crossroads.  In the past, they’d been told to quilt Amish-like quilts and it’s not clear that money will come back, but notions of what their craft was have been disrupted.  It’s the IP that’s valuable now—the sanitized prints/designs, mass produced, not the imperfect/slightly smelly version actually covering a bed in the quilter’s house.

Sprigman: crystallizes the style so that it becomes abstracted from the quilt.  The style becomes a thing apart from the quilt; are quiltmakers now creating examples of the style rather than quilts—does it change the way they understand what they’re doing? 

Jackson: maybe—the first intervention led them to have a “day job” creating the Amish-style quilts, but now that Gee’s Bend has become a mass merchandised style, there are ripoffs.

(Reminds me of conflicts in fandom over things like Fifty Shades of Grey and pulling-to-publish.)

Aragon: Indonesia: shift occurs in commodification in which the men become the designers and the women apply the hot wax, when women formerly did design too.  Women control knowledge on dyes—age-related/post-menopausal; passed down within families.

Sprigman: this empirical work requires investment in studying, but the payoff is great.  Traditional knowledge scholarship is implicated/exciting—there’s a lot of IP without IP around the world.  Too simple to say “we should protect this as a domain of no IP” but there are consequences to bringing culture work into the formal legal system, and some are pretty serious.  Communicative function of creativity and monetization may conflict—commoditization may interfere with people’s ability to make meanings, even in intimate relations.

Smigel: has inspired her to think beyond dance: consider yoga, commercialized Pilates, other movement systems: traditional values but also commodified.

Jaszi: give us a research wish list.

RT: kids.  What are kids learning about IP, credit, etc.  What do they believe and what do they do?

Jaszi: intergenerational transmission—sometimes it’s kids teaching younger kids (playground games and verses, with norms of their own about the values of fidelity and innovation), and sometimes it’s adults.

Product v. process: if we just ask about IP/products we may not see how things are made, which is key information.

Sprigman: big variation in US v. European treatment of design protection.  That deserves study in terms of its effects on business practices.

Discussion of hairstyles: no protection, generally, but Jacob says that some places do try to protect their process.  Farley: compare hair braiding, and the labor involved in braiding. 

Aragon: context dependence of innovation: something looks innovative to you because it’s from a different culture, but others in that culture recognize it as a variant or a standard move.  Compare things like Zumba where traditional moves are packaged and licensed—some of these programs can be offensive, as when they bring out the “talking stick” disconnected from its Native American roots.

Farley: Zumba’s story is that it was created by accident: Latin dance moves used for exercise; monetized with an IP lawyer early on in the story. 

Carroll: need ethnographic studies about what kinds of copying are ok.  Why is it ok for two people at a cocktail party to show up in the same car but not for two women to wear the same dress (even by coincidence)?  Sprigman: “Who Wore It Better?” features when stars wear the same outfits—it’s not just about who’s better looking.  Avoiding copying is a way of deferring direct competition.  Farley: not necessarily gendered; except that men don’t worry about wearing the same shirt. 

Thompson: presentation matters—look at the Apple example. 

Jaszi: that’s a limitation of the work on food so far; it’s focused on recipes and not on presentation.  (I wonder if that’s a lawyerly discomfort with the non-replicable which can’t really be copied and thus can’t really be protected by IP, though we are often willing to pretend it can be.  And there’s a gender connection back to the specificity/materiality of the body.)

Farley: increasing number of cases about restaurant décor (TM) and style.

Carroll: empirical research shows that how something tastes is influenced by its presentation.  Wine: wine you think is more expensive tastes better; GIs told to people affect taste; glasses affect taste.

Jaszi: that moves us towards the process side of the process/product scale.

Farley: Hooters case: sued a Fla. restaurant; judge held no infringement because the Hooters outfit was functional.

Jaszi: Fields that are ghettoized/involuntarily gendered female.  Writing instruction as an example.  Responsible for transmission of norms about plagiarism, academic honesty, good and bad writing practice.  Interesting opportunities for study.

 

Seventh Circuit fixes outlier "advertising or promotion" rule

Neuros Co., Ltd. v. KTurbo, Inc., --- F.3d ----, 2012 WL 4856489 (7^th Cir.)

The parties compete in the market for high-speed turbo blowers used in waste water treatment plants.  Neuros was the first company to offer these in the North American market, while KTurbo began selling two years later, with little success.  In 2008, Neuros won a bidding contest in Utah, while KTurbo came in third (last).  KTurbo’s CEO Lee prepared PowerPoint slides and tables accusing Neuros of fraud in its claim to the Utah buyer that its blowers would achieve a “total efficiency” “that Lee claimed, probably correctly, was unattainable.”  His slides, aimed at the consulting engineers who select and install blowers, alleged that Neuros engaged in “total efficiency cheating,” and that its numbers were “impossible,” “unrealistic,” and a “crime.”

Turbo blowers use a lot of expensive electricity.  “Total efficiency” “is the ratio of input power (electrical current) to output power (a specified volume of air blown by the blower at a specified speed).”  The figure that the slide accused Neuros of claiming, 82.5%, appears to be unattainable.  But Neuros didn’t make total efficiency representations.  Instead, it represented “wire power,” the ratio of an electrical current to work.  Total efficiency requires considering other factors, like temperature and humidity, along with wire power.  KTurbo’s slides challenged some of Neuros’s wire power claims, but the challenges were based on computational errors and incorrect assumptions; Lee eventually admitted that the wire power claims implied at most 76% total efficiency, which apparently was attainable.  Though KTurbo’s expert argued that Neuros overclaimed its efficiency by 2-7%, that didn’t make its accusations substantially truthful, since KTurbo claimed overstatements from 15-26%.

This presentation, which was made to engineering firms, published on a KTurbo website, and sent to sales reps, nonetheless failed to move any business from Neuros, despite KTurbo’s vow to “break” and “terminate” Neuros. Neuros sued for violations of the Lanham Act, the Illinois UDTPA, and defamation.  After a bench trial, Neuros won the defamation claim, with an award of $10,000 in general damages and $50,000 in punitive damages.

KTurbo argued that it had a qualified privilege to make the false statements, but the privilege doesn’t apply if a statement is made with knowledge of its falsity or with reckless disregard for the truth.  “KTurbo was warned repeatedly, not only by Neuros but also by disinterested sources, that its accusations were false; it ignored the warnings and refused to investigate the truth of the accusations. Its conduct was not only disreputable but reprehensible.”

As for the punitive damages, there was no evidence of actual injury, but defamation per se is an exception to the general rule “no injury no tort.”  And accusations of criminal fraud constitute defamation per se.  “It's hard to imagine a more damaging accusation to make against a business.”  Defamation per se entitles a plaintiff to general compensatory damages and, in cases of gross negligence or worse, punitive damages.  Yet what is there to compensate here?  Judge Posner explains:

[T]here can never be assurance that an accusation, however groundless, is not believed by someone, and doubtless employees or sales reps of Neuros had to answer questions put to them by consulting engineers, and perhaps even by shareholders of the parent companies, concerning Lee's inflammatory accusations. So a modest award of damages, though not based on evidence (what kind of “evidence” would enable an accurate estimate of the type of cost that we've suggested Neuros incurred from the defamation?), can reasonably be thought compensatory. The judge may have pulled the $10,000 figure out of his hat, but the figure is appropriately modest, considering that a single high-speed turbo blower costs more than $100,000 and that [Neuros] sold some 500 of them in the first few years of its existence.

He continued that $50,000 was too little in punitive damages.  KTurbo’s conduct was outrageous, and it was a “substantial” company.  The district judge may have been concerned that more than a slap on the wrist would have run afoul of the Supreme Court’s due process/punitive damages cases.  But those cases merely find a presumption against big multiples, which can be rebutted when the compensatory damages award is very small.  The gravity of the injury is only one consideration in determining punitive damages; deterrence also matters, and this award might not be a big deterrent, “considering the potential gains to KTurbo had it succeeded in expelling its foremost competitor from the North American market. It should consider itself fortunate that Neuros hasn't challenged the adequacy of the punitive-damages award.”

Judge Posner turned to the appeal of the dismissal of the Lanham Act claims.  Without provable injury, general damages were unavailable under the Lanham Act, as was trebling of actual damages.  But the Act permits injunctions along with fee awards in “exceptional cases,” including especially egregious violations of the law.

“Without meaning to prejudge the determination on remand, we point out that KTurbo persisted in its false representations to the engineering community concerning Neuros's blowers even after the suit was filed and compelling evidence was presented that the representations were false.”  Though KTurbo’s argument that it wasn’t engaged in advertising or promotion was a “respectable” argument, the part of its defense that went to non-falsity was “objectively unreasonable.” 

In First Health Group Corp. v. BCE Emergis Corp., 269 F.3d 800 (7th Cir. 2001), the court stated (note Judge Posner’s careful avoidance of the word “held”) that “commercial advertising or promotion” is limited to “promotional material disseminated to anonymous recipients.”  This over-stringent language has been followed by a number of district courts, but Judge Posner said that the appellate cases “do not hold that ‘advertising or promotion’ is always limited to published or broadcast materials—an interpretation that would put us at odds with all seven other federal courts of appeals to have considered the issue.”  First Health evinced no intention to create an intercircuit conflict (comment: other than the words it used, I guess?).  The Seventh Circuit cases at the appellate level finding no advertising or promotion involved (1) three person-to-person communications at trade shows and (2) letters to the plaintiff’s customers threatening suit for patent infringement.

So, we now learn that a “classic advertising campaign” isn’t the only form of marketing covered by the Lanham Act.  Rather, we need only “some medium or means” through which the defendant disseminated information “to a particular class of consumers.”  The required amount of dissemination varies by industry.  “If ‘advertising or promotion’ just meant ‘advertising,’ then ‘promotion’ would do no work in the statute.”  But we’re used to redundant language in statutes, so more important is that “there are industries in which promotion—a systematic communicative endeavor to persuade possible customers to buy the seller's product—takes a form other than publishing or broadcasting.”  So here, where KTurbo made presentations to most of the “de facto customers,” the engineers who act as the purchasers’ agents, in the market.  Its negative ads reached fewer people than a conventional campaign would have, but that was because the market was smaller.  Anyway, the type of “road show” KTurbo put on is “a common method of promotion.”  And some of the false statements were also posted on a KTurbo website: “methods of advertising and promotion are changing with innovations in communications media; they are no longer, if they ever were, confined to newspaper and magazine ads, radio and television commercials, and billboards.”

The district court ruled against Neuros in part because “there is no evidence that the statements at issue were presented to any members of the general public.”  But no one would expect that of ads for high-speed turbo blowers, or indeed of ads for almost anything, since rarely is the true market for a product “314 million individuals and millions of firms.”  “There is no basis for limiting the Lanham Act to advertising or promotion directed to the general public, and the case law does not do that.”  (Look, I could snark or ask whether this should have gone en banc, but the “anonymous” standard was poorly reasoned to begin with, and district courts largely felt bound by it; I’m just glad it’s gone.)

Thus, the Lanham Act and parallel UDTPA claims shouldn’t have been dismissed.

Today's trademark question

Harpsichord Hero, on a website apparently devoted to George Washington for kids.  Discuss.  (Via Zachary Schrag.)

Supplier lacks standing to sue retailer for false advertising

Runberg, Inc. v. Victoria's Secret Stores, Inc., 2012 WL 5252309 (S.D. Ohio)

Discussion of complaint here.  Runberg, d/b/a Zephyrs, sued VS when it got dumped as a supplier, arguing that VS violated the Lanham Act, and coordinate state law, by putting different and allegedly lower-quality hosiery in packages that still had pictures of the Zephyrs product.  VS moved to dismiss everything but the breach of contract claims (which I too will ignore) on standing grounds.  (The court declined to reach VS’s argument that choice of law prevented Zephyrs from bringing false advertising claims based on the law of states other than Ohio, which I guess means that those claims are technically still alive, but the writing’s on the wall.)

Because Ohio courts look to the Lanham Act for guidance on Ohio’s DTPA, the court treated the standing analysis similarly for both the Ohio and federal claims.  Zephyrs needed to show injury to itself; false advertising that caused injury to consumers was not enough to establish Article III standing.  Zephyrs argued that direct competition wasn’t required as long as there was a nexus between itself and the alleged falsehood, which existed here because the packages had images of Zephyrs-supplied products on them and because the continued use of those images interfered with Zephyrs’ ability to market its goods to other sellers and undermined Zephyrs’ reputation for high quality.

That wasn’t enough.  Nothing on the packaging indicated that the products came from Zephyrs, and the allegations about the effects on Zephyrs’ reputation were merely conclusory.  Even if VS’s failure to update the packaging caused injury in fact, there was no reasonable inference of a causal connection between the injury and the claim of harm to Zephyrs’ reputation because there’s no obvious association between the parties.  Not only was there no connection on the package, the parties’ agreement barred Zephyrs from publicly disclosing that it made the hoisery for VS.  The required nexus for a false advertising claim would be between Zephyrs’ alleged injury and the advertising, and it didn’t allege facts showing such a nexus.

Even if there were Article III standing, Zephyrs would lack prudential standing.  The 6^th Circuit requires (1) a reasonable interest to be protected against the alleged false advertising and (2) a reasonable basis for believing that the interest is likely to be damaged by the alleged false advertising.  Direct competition is the focus, even if it’s not absolutely required.  In the absence of direct competition, a more substantial showing of injury and causation is required.  “It is not plausible, as the term is used in Iqbal and Twombly, to believe that Victoria's Secret's failure to remove the pictures of the Zephyrs-made product from the hosiery packages for similar products now made by another supplier impedes Zephyrs' ability to sell these same designs to other retailers or injures its reputation.”

Zephyr argued that it was the exclusive licensee of the “Butterfly Lace Design,” owned by a German company, which status was undermined because VS continued to use the design on its package without a license.  But without any allegation of trademark or copyright infringement, this purported license couldn’t have any actionable effect.  Dastar allowed an exclusive licensee to sue for infringement.  Zephyrs failed to allege that its relationship with the German company was harmed or that it lost US business based on VS’s continued use of the photo.

OK for defendant to copy stuff plaintiff doesn't own; also keyword ads ok

CollegeSource, Inc. v. AcademyOne, Inc., 2012 WL 5269213 (E.D. Pa.)

Earlier district court opinion discussed here.  The parties compete to provide online college transfer services, serving schools and individual students seeking to transfer credits from one school to another.  CollegeSource accused AcademyOne of republishing course catalogs and course information digitized and maintained by CollegeSource.  The court granted AcademyOne’s motion for summary judgment on CollegeSource’s claims, which the court divided as follows:

(1) Course collection efforts: CollegeSource offered subscription access to its archive to PDF digital course catalogs; student users could download a free trial with access to up to 3 catalogs.  A separate subscription product, TES, was an online database of courses and other course equivalency-related data culled from CollegeSource's library of course catalogs, primarily marketed to institutions seeking to facilitate the transfer of credits from one school to another.  And CataLink aided schools in distributing course catalogs efficiently: “CollegeSource provides subscribing schools with a URL hyperlink to CollegeSource's archive of that school's digital course catalogs, which can then be inserted and displayed on the school's home page.”  CataLink was not a subscriber service, and users would go to CollegeSource’s website without being told they were leaving a school’s site.

CollegeSource repopulated its catalogs yearly, by contacting individual colleges and requesting copies.  If the catalogs were in electronic form, CollegeSource converted them to PDFs. If not, CollegeSource scanned them, used optical character recognition software, and converted them to PDFs.  Course data was also entered into the TES course database, and some of the catalogs went into CataLink.  CollegeSource inserted a uniform cover page/splash page including the CollegeSource logo on each catalog it converted to PDF.  On the inside cover of each catalog, CollegeSource inserted “Copyright & Disclaimer Information”:

While CollegeSource, Inc. and Career Guidance Foundation provides information as a service to the public, copyright is retained on all digital catalogs. This means you may NOT:

• distribute the digital catalog files to others,

• “mirror” or include this material on an internet (or intranet) server, or

• modify or re-use the files

without the express written consent of CollegeSource, Inc. and Career Guidance Foundation and the appropriate school.

So, basically, copyfraud.  (Nice use of the passive voice there, too!)  CollegeSource’s website had a “Copyright and Disclaimer” link that said the same thing.

CollegeSource Online and TES also required users to agree that anything they get from the services is CollegeSource’s and that they can’t reuse it without permission.  Subscription users encountered sign-in boxes and pop-up forms with links to these terms, but users of CataLink would not encounter this agreement, though the Copyright and Disclaimer page was still present in the catalog.

AcademyOne sought to populate its own database; when CollegeSource denied it a license, it turned to Chinese company to pull PDF or HTML college catalogs directly from those colleges’ sites.  About half of the 4000 schools targeted used PDFs, which had to be converted and processed to get into AcademyOne’s database.  The Chinese  company downloaded over 18,000 PDF files.  Between 2005 and 2007, several AcademyOne employees registered for free trial subscriptions to CollegeSource online.  When AcademyOne launched its sites, which provided free access to its course description database, about 2000 of the PDFs were included. CollegeSource discovered that about 680 had been copied from CollegeSource servers; the Chinese company later identified 783 out of the 18,000 as CollegeSource PDFs.  They had all been obtained through CataLink (there was no evidence of any “breach” of CollegeSource’s servers); presently, over 1700 CollegeSource PDFs are publicly available through college websites using CataLink.  CollegeSource was aware of this practice and permitted it.

CollegeSource sent a C&D letter asserting copyright and trademark infringement.  AcademyOne disabled links on its site allowing access to all PDF catalogs (which meant that someone who’d saved the URL of a catalog could still access it) and initiated an internal investigation.  AcademyOne ultimately removed all PDF catalogs from its servers, but didn’t delete the course descriptions it had copied from CollegeSource PDFs.  Eventually, it began repopulating its database in a new manner, removing all course descriptions derived from PDF catalogs—whether from CollegeSource or not—from its database.

CollegeSource spent a lot of employee hours dealing with this horrible, competitive behavior; it hired a computer expert and increased security measures on its catalogs, such as “seeding,” “salting,” and “watermarking.”  (So, doubling down on the copyfraud?)

(2) Starting in 2007, AcademyOne bought “college,” “college source,” “career guidance,” and “career guidance foundation” from Google’s AdWords and similar search engine services.  The resulting ads used phrases such as “College Transfer Help” or “Find Transfer Information” and used the URL “collegetransfer.net,” not AcademyOne.  Different search engines displayed the ads differently: AOL displayed ads above organic results, shaded in a different color, and marked them “Sponsored Links.”  Google used “Sponsored Links” to the right of organic results.  Ask.com “nestled” ads within organic results under a small “Sponsored Results” banner.

(3) AcademyOne also applied to register collegetransfer.net as a service mark; it was registered on the Supplemental Register in 2010.  AcademyOne represented a first use date of December 1, 2005, but record evidence suggested that first use was sometime after March 2007.  AcademyOne also didn’t disclose to the PTO that an Eastern District of Pennsylvania decision had held that CollegeSource’s collegetransfer.com did not infringe on the collegetransfer.net trademark.  CollegeSource argued that this undisclosed evidence justified cancellation of the claimed mark.

(4) As for the false advertising claims, they came from two sets of public statements: AcademyOne’s correspondence with public colleges and its representations on its website about the accuracy of its course database.  In 2010, AcademyOne’s CEO sent letters to a number of public colleges requesting information under state freedom of information laws.  He told them that CollegeSource had filed “copyright claims” in federal court, requested copies of correspondence between the institution and CollegeSource relating to any “ownership and control [by CollegeSource] of your Institution's digital catalog and the course descriptions therein,” stated that “CollegeSource claims control of the digital catlogs that they collect, even if it resides on your website,” and claimed that CollegeSource's assertions of ownership “attempt to preclude AcademyOne and other software providers from providing automated student transfer systems ....” 

The CEO, a nonlawyer, testified that he used “copyright claim” “generally and not as a reference to a specific cause of action.”  (When news outlets report that Tim Tebow has “copyrighted,” “patented,” and “trademarked” Tebowing, choosing their terms randomly as far as I can tell, I find it hard to blame him; harder given CollegeSource’s own claims.)  He also testified that he’d been told that a specific person related to CollegeSource had told members of the industry that CollegeSource intended to sue any other developers who copied course descriptions or engaged in similar conduct.  

As a result of these letters, some schools contacted CollegeSource and expressed concern. (As well they should have!)  One client pulled its catalogs from CollegeSource's databases.

On AcademyOne’s courseatlas.com, AcademyOne stated that its database was “published annually” with “current course offerings,” was the “most comprehensive database of current course offerings possible,” was not “outdated,” and was “reliable, accurate, and up-to-date.” CollegeSource argued that these statements were false and misleading, pointing to an entry for Bergen Community College which appeared to be derived from a 2006–2007 catalog, not from the current catalog.

Turning to the law: the court rejected AcademyOne’s argument that CollegeSource’s breach of contract claim was equivalent to copyright rights and thus preempted.  The existence of a contract or agreement provided an extra element.  Some courts have held that a promise to refrain from exercising copyright rights was not enough to avoid preemption, but the promise here was to make only personal use of the documents, which was “sufficiently distinct” from copyright to avoid preemption.

There were two separate contract claims: one based on the “Copyright and Disclaimer” notice, and one based on the subscription agreement.  AcademyOne won both.  Contract formation requires mutual understanding: both parties must be aware of the contractual nature of a document.  The notice on the second page of the PDF “does not contain any of the essential elements of contract formation. It does not state what exactly is being offered; that users should agree to its terms in a particular manner; or that users will obtain any sort of consideration in exchange for their assent.”  Further, it wasn’t obvious that the notices related to contract as opposed to copyright.  The title suggested that they were telling the user about copyright rights, and the language reinfored that inference.  “A reasonable party reading the documents would not be aware of the contractual nature of the documents.”  There was no contract formed, and thus no contract breached.

As for the subscription agreement, CollegeSource didn’t provide any evidence that AcademyOne breached it by improperly obtaining CollegeSource data through its subscriptions.  That is, there was no evidence that AcademyOne’s actions as a subscriber—while logged in under a trial subscription—violated the terms.   CollegeSource argued that the agreement covered AcademyOne’s subsequent access to CollegeSource documents through CataLink because the agreement told subscribers that restrictions apply to all of CollegeSource's “other electronic services,” and that CataLink was an electronic service because it was comprised of CollegeSource's information from CollegeSource's server.

Again, looking at the parties’ intent, this didn’t work.  Other uses of the term “Service” in the agreement clearly didn’t apply to CataLink (e.g., username requirements and CollegeSource’s ability to cut off an individual user’s access to “Services,” when CollegeSource apparently couldn’t block a user from CataLink).  A subscriber was unlikely even to know that a CataLink document came from CollegeSource, since it would be accessed from a third party’s website via a redirect. 

With the contract claim gone, the unjust enrichment claim failed—it was preempted by §301 of the Copyright Act, lacking an extra element beyond copying/display.  “[M]isrepresentation, or taking in an underhanded way,” didn’t count as an extra element.

The CFAA claim also failed, though there was sufficient evidence of loss, because there was no evidence of unauthorized access, or access exceeding authorization, to CollegeSource computers.  As noted above, the evidence only supported a claim that AcademyOne got to CollegeSource files via CataLink, and that didn’t violate the CFAA.  The documents were available to the general public, and AcademyOne was under no obligation to abide by any terms of use, so its access was neither without authorization nor in excess of its authorization.  CollegeSource argued that it didn’t want to allow competitive uses, but that went to use, not access.  “AcademyOne, as a member of the public, would have had authorization if it had used the data for non-commercial related purposes; by CollegeSource's account, it is only because AcademyOne's use was inappropriate that it became unauthorized. The argument is insufficient to support a CFAA claim.”

Now, the Lanham Act/keyword ad claims: the likely confusion factors applied, but the Third Circuit has noted that “economic reality and common sense require that some of the Lapp factors be analyzed differently” depending on the type of claim at issue. Thus, the court here looked to Network Automation’s treatment of AdWords (a term which here means all keyword ads; insert your own commentary).  The most relevant factors are (1) the strength of the mark, (2) evidence of actual confusion, (3) types of goods and degree of care likely to be exercised by the typical purchaser, and (4) the labeling and appearance of the advertisements.

CollegeSource’s marks were both suggestive and commercially strong, with hundreds of thousands of dollars in advertising over 18 years.  (Really?  That’s commercial strength?)  This favored CollegeSource, since a consumer searching for a generic term is more likely to be searching for a product category.  (Which the 9^th Circuit knew about consumers because … never mind.)

There was little evidence of actual confusion.  The record contained evidence of 65 relevant clicks (I expect Eric Goldman will comment on this part!): “instances in which Internet users searched for CollegeSource, were presented with AcademyOne's advertisements, and clicked to AcademyOne's website.”  All these clicks occurred in June 2009, but the challenged practice had been going on for years.  “Even assuming that all clicks resulted from consumer confusion and not legitimate advertising diversion or in anticipation of litigation, CollegeSource's evidence of actual confusion is sparse.”  This weighed in favor of AcademyOne.

For AdWords, the real key factor is what consumers see on the screen, including labeling and overall appearance.  Even if the ads don’t clearly identify a source, clear labels for sponsored links decrease the likelihood of confusion, and those were present here.  Also, AcademyOne didn’t use CollegeSource’s marks in the ads themselves, only as triggers.  This also weighed in favor of AcademyOne.

Consumer care/attention also favored AcademyOne.  Internet users generally are becoming more accustomed to trial and error and to the practices of search engines.  Specifically, consumers looking for college transfer information “are likely to practice diligence in their research.… Given the importance of their inquiries, they have an incentive to be discerning about the search results they choose to trust.”  CollegeSource argued that, since both parties provide free services, consumers’ level of care would be low, but it wasn’t clear that consumers would be looking exclusively for free services; CollegeSource provides paid services as well.

As for the other factors, the degree of similarity between the owner’s mark and the allegedly infringing mark didn’t favor either party in the context of AdWords, since it was relevant “when a consumer confronts two different trademarks and, due to their similarity, has trouble distinguishing between the two,” but, with AdWords, “the consumer enters one trademark as a search term and sees a sponsored link that displays neither.”  On intent, the court distinguished between using a trademark to mislead consumers and using it to truthfully inform them of their choices.  There was no evidence of an intent to confuse, even though AcademyOne knew about CollegeSource; it might just as well have been trying to give consumers a choice.

Similar marketing channels are less important when those channels are “less obscure,” as in the internet.  Anyway, CollegeSource had never used AdWords, instead using print materials, trade shows, and conferences.  Similarity in targeted consumers and in products/services favored CollegeSource, but the court gave these minimal weight in the overall context.  Summary judgment for AcademyOne.

Further, CollegeSource lacked standing to seek declaratory judgment of trademark invalidity.  CollegeSource’s supposition that the supplemental registration might eventually move to the Principal Register, and its past fight with AcademyOne (resolved in CollegeSource’s favor), were insufficient to give it a real present interest.

For its false advertising claim, the only fact offered to falsify AcademyOne’s claim that its database was “published annually” with “current course offerings,” the “most comprehensive database of current course offerings possible,” not “outdated,” and “reliable, accurate, and up-to-date,” was a single course description that CollegeSource claimed was from a 2006–07 catalog. That wasn’t enough to establish that the description was out of date or not current; there was no evidence about whether Bergen Community College was still offering the course, with or without the same description.  It was possible that the information was still current.  Nor was failure to provide dates when descriptions were last modified misleading.

As for the freedom of information act letters, the court had earlier denied a preliminary injunction because the statements weren’t literally false and hadn’t sufficiently been shown to be misleading to the intended audience.  The description of the lawsuit as a “copyright” suit wasn’t literally false, given that the reference was meant to refer to CollegeSource's Copyright Notice and Disclaimer, not to a legal cause of action. The CEO’s “understanding of the situation, and his subsequent statement to that effect, were reasonable and cannot be considered literally false.”  (Ordinarily intent doesn’t matter to Lanham Act claims, but statements about legal meaning are often treated differently.)  CollegeSource introduced evidence that an attorney might have had a role in drafting the letter, but that didn’t change the court’s conclusion.

CollegeSource argued that since it was only suing AcademyOne, the claim that CollegeSource was attempting to exclude other developers was literally false.  But, given the CEO’s testimony, this claim was “not unambiguously false given the fact that CollegeSource's founder may have threatened other developers with suit.”  (Hey, isn’t that hearsay?  It may well be admissible for the CEO’s state of mind, which of course isn’t relevant, but how is it admissible evidence that there actually were threats of suit?  I think this false advertising claim is bogus for plenty of other reasons, not least because CollegeSource’s claims to own the content of college course catalogs made it perfectly obvious that it would threaten other software developers as well, but I think this rationale skips some necessary steps.)

And no reasonable jury could find the statement that “CollegeSource claims control of the digital catalogs they collect, even if they reside on your website,” unambiguously false.  Given CollegeSource’s claims in this very lawsuit, the statement was “at least ambiguous, if not true.”  (I’d have gone with “unambiguously true,” myself.)

Nor could CollegeSource show misleadingness.  The fact that schools expressed concerns, and that one pulled its catalogs from CollegeSource databases, was insufficient to show a tendency to deceive a substantial portion of the intended audience.  (Because the basic claim was true.)