How Many Wrongs Make a Copyright?

This has tangential relevance to the Innocence of Muslims case (of which more soon).  I've written more directly about that case at the district court level, but this forthcoming publication deals with the idea of providing more protection to victims of revenge porn via changes to copyright:

Rebecca Tushnet, How Many Wrongs Make a Copyright?

Minnesota Law Review, Forthcoming

Abstract:     

Derek Bambauer’s provocative paper argues that, because the remedies available to people who suffer unconsented distribution of intimate images of themselves are insufficient, we should amend copyright law to fill the gap. Bambauer’s proposal requires significant changes to every part of copyright—what copyright seeks to encourage, who counts as an author/owner, what counts as an exclusive right, what qualifies as infringement, what suffices as a defense, and what remedies are available. These differences are not mere details. Among other things, incentivizing intimacy is not the same thing as incentivizing creativity. Bambauer’s argument that copyright is normatively empty and already full of inconsistencies and exceptions does not justify such profound changes. Bambauer’s true target is § 230 of the Communications Decency Act, which protects online intermediaries from liability stemming from users’ violations of others’ privacy. Copyright claims aren’t subject to § 230, so his proposal hopes to force intermediaries to do more in revenge porn cases. But the case for requiring more from intermediaries to protect privacy should be made on its own merits, not by distorting copyright law.

Deciding substantial similarity on a motion to dismiss

Klauber Bros., Inc. v. Bon-Ton Stores, Inc., 2014 WL 657953, No. 13–1672 (2d Cir. Feb. 21, 2014)

Klauber appealed from the dismissal of its copyright claim against Bon-Ton.  It argued that the district court erred in finding no substantial similarity as a matter of law between the parties’ lace-waistband underwear.  The court of appeals affirmed the grant of the motion to dismiss; a district court can resolve an infringement case as a matter of law if “no reasonable jury, properly instructed, could find that the two works are substantially similar.” And where, as here, the works in question are attached to the plaintiff’s complaint, the district court may “consider the similarity between those works in connection with a motion to dismiss, because the court has before it all that is necessary in order to make such an evaluation.”

Klauber's design

Bon Ton's design



 

The court of appeals’ independent review revealed that the designs didn’t have a substantially similar aesthetic appeal. Yes, they had similar elements—curling sprigs, leaves, and flowers—placed in a similar spatial arrangement. But each element had differences, too:

For example, the sprigs in Klauber’s designs are long, winding, and delicate, while the sprigs in Bon-Ton’s design are shorter and more compact; the leaves in Klauber’s designs all have a distinctive indentations and vary in shape and size, while the leaves in Bon-Ton’s design have no indentations and are uniform in shape and size; and the flowers in Klauber’s designs are buds growing upward away from the nearest border, while the flowers in Bon-Ton’s design are blossoms growing downward towards the border.

“The accumulation of these differences gives Bon–Ton’s design a substantially different ‘total concept and overall feel’ than Klauber’s designs.”  Klauber’s designs were “delicate and ornate, with the dominant element being the semicircles formed by the curling sprigs,” while Bon-Ton’s design “conveys a more rudimentary and abstract feel, with the dominant element being the straight portions of the sprigs.”  No reasonable juror would regard the works’ aesthetic appeal as the same.  (Under the surface here, there are significant idea/expression issues and concepts of what the protectable “aesthetic appeal” has to be here to avoid protecting ideas.)

Horror retellings of children's classics

Transformative works of the day: horrific retellings of children’s classics.  Are You My Mother? (a chilling story of self-delusion and parental feeling gone wrong);  If You Give a Mouse a Cookie (“He’s going to ask for a glass of milk/and you will give it to him,/because you are incapable of acting in your own best interests.”); The Runaway Bunny (“‘If you become a fisherman,’ said the little bunny,/‘I will become a rock on the mountain, high above you./Better to be a stone and insensible to all things/than to stay here with you. Better to be a stone.’”); Oh, the Places You Went; The Gifts of the Giving Tree; The Hunger of the Caterpillar.  Really brings to light the shared thematic concerns of horror and children’s books.  Now if only someone will do the opposite and do the kid’s book version of Flowers in the Attic. 

No, I have more to say: several friends immediately reacted to The Runaway Bunny retelling with “this book was already creepy; this just makes the subtext text.”  I think that making subtext text is transformative, but doctrinally this reaction might be thought to create a problem because of cases like Salinger. What this retelling is, is interpretive—perhaps a better word than transformative in this context; interpretation has a long history as recognized fair use.  And we don’t find interpretations unfair just because other people have read the work and had a similar reaction.

Credit score service is credit repair service because of its ads

Stout v. FreeScore, LLC, No. 10-56887 (9th Cir. Feb. 21, 2014)

The court of appeals reversed the dismissal of Stout’s putative class action against FreeScore under the Credit Repair Organizations Act (CROA). The district court concluded that FreeScore is not a “credit repair organization” as defined in the CROA. The court of appeals reversed because FreeScore, “through the representations it made on its website and in its television advertising, offered a service, in return for the payment of money, for the implied purpose of providing advice or assistance to consumers with regard to improving the consumer’s credit record, credit history, or credit rating.”

FreeScore is an online “provider of credit scores, reports and consumer credit information.”  Its website says a lot about the importance of staying out of financial trouble, the importance of knowing one’s credit score to staying out of financial trouble, etc.  E.g.:

See your Credit Report & FREE Credit Scores online today and start your climb to financial freedom… Now more than ever, you need to ensure your Credit Report is clean. Lending standards are extremely strict. Poor Credit Scores and a damaged Credit Report could put your dreams of home ownership, a new car or even a new career on hold today – and haunt you for years to come. You can’t afford to bury your head in the dirt when it comes to your credit any longer.

I’m omitting a lot, but it goes on in this vein extensively, and juxtaposes these statements with offers to enroll in its service so that users can “see what lenders see,” “[G]et your complete credit picture,” etc.  FreeScore’s reports allegedly allow users to spot errors “so you can quickly address incorrect information,” “[g]et your Scores to negotiate your best mortgage, auto and loan interest rates,” etc.  TV ads tout FreeScore as some sort of way to address the problem of being hounded by creditors, though the direct statements are in the vein “you can’t fix errors on your credit report if you haven’t seen it… [K]nowing your credit score could be the difference between being down there, and being up here.”  The tagline: “Life costs more without FreeScore.”

FreeScore also talks a bunch about FICO scores, including

[H]ow can you deal with or improve a FICO® score? It’s a long process that starts with knowing more about all the details of your overall financial situation. Many people take years to micromanage their accounts, attempting to repair a damaged credit score, and many find that the best solution is preventative credit maintenance. Learning to manage your credit starts with getting informed about your credit. That means utilizing services like credit monitoring to find out what may be changing in your credit history report; those changes can have an immediate effect in your credit score.

FreeScore requires an initial fee (which must be authorized at the time of an initial 7-day “free” trial), plus $29.95/month.  The fine print at the bottom of the enrollment page that Stout used stated that FreeScore provided tools for monitoring credit information, but that “FreeScore and its benefit providers are not credit repair service providers and do not receive fees for such services, nor are they credit clinics, credit repair or credit services organizations or businesses, as defined by federal and state law.”  The enrollment page also enumerated the “benefits” of membership, and explained that “Knowing All 3 Credit Scores Gives You the Power to Negotiate the Best Rates Possible.”

The district court held that FreeScore wasn’t a “credit repair organization” because it didn’t promise to improve consumers’ credit.  It promised to provide a credit score, but it was up to the consumer to improve it.

The court of appeals first turned to the plain language of the CROA, which was part of a statute that Congress intended courts to construe broadly to fulfill its remedial purpose.  The CROA defines a credit repair organization as:

[A]ny person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform (or represent that such person can or will sell, provide, or perform) any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of –

(i)         improving any consumer’s credit record, credit history, or credit rating; or

(ii)        providing advice or assistance to any consumer with regard to any activity or service described in clause (i). (emphasis added)

Congress also found that consumers had been harmed by certain advertising and business practices of some credit repair companies, particularly consumers “of limited economic means and who are inexperienced in credit matters.”  The purposes of the statute were to ensure that prospective clients were provided with the information necessary to make informed decisions, and to protect the public from “unfair or deceptive advertising and business practices by credit repair organizations.”

FreeScore “falls squarely within the CROA’s definition.”  A covered person need not actually provide credit repair services to do so.  Instead, it need only “represent that it can or will sell, provide, or perform a service for the purpose of providing advice or assistance to a consumer with regard to improving a consumer’s credit record, credit history, or credit rating.”

FreeScore’s ads represented that it provided a service “for the purpose of assisting a consumer in improving the consumer’s credit record, history or rating.”  Citing an FTC case, the court held that the proper inquiry was to examine the “overall net impression” of an ad “to determine what message a viewer may reasonably ascribe to it.” 

Here, FreeScore did more than provide credit reports.  It advertised that its report allows consumers to “[s]pot damaging inaccuracies on [their] Free Credit Report at a glance so [they] can quickly address incorrect information dragging down [their] Credit Scores,” that it will “keep an eye on [consumers’] Credit Reports at all three bureaus 24/7 so [they] don’t have to,” and that “[i]nstant email alerts notify you when critical changes appear on your Credit Report so you can make corrections fast!” The TV ad similarly claimed “FreeScore.com even sends me an alert when there’s any change to my credit report.” “FreeScore clearly states that the express purpose of credit monitoring, through services such as email alerts, is so that steps may be taken to improve credit: ‘Learning to manage your credit starts with getting informed about your credit.’”

Further, FreeScore affirmatively represented that its services could improve, or help improve, consumers’ credit record, history, or rating.  FreeScore’s FICO page asks, “So how can you deal with or improve a FICO® score?”  It continues, “many find that the best solution is preventative credit maintenance.” The page concludes, “Learning to manage your credit starts with getting informed about your credit. That means utilizing services like credit monitoring to find out what may be changing in your credit history report; those changes can have an immediate effect on your credit score.”  Thus, FreeScore claimed both explicitly and implicitly that its services could improve or assist in improving consumers’ credit records.  Of course, FreeScore’s “self-serving disclaimer” was ineffective, given its own representations.

Comment: The FTC’s rule is that lawyerly parsing of the kind that might avoid a perjury conviction isn’t enough for an ad.  Juxtaposing so many words about improving credit scores with FreeScore’s services clearly implies that the service will help raise scores.

The court continued: “FreeScore offers services aimed at improving future creditworthy behavior with prospective promises of improved credit. It advertises on FreeScore.com that consumers must ‘ensure [their] Credit Report is clean,’ ‘[s]pot damaging inaccuracies’ on their credit reports, and ‘start [their] climb to financial freedom’ by utilizing the services it offers.” Its TV ad stated that consumers who used FreeScore would be able to “fix errors on [their] credit report,” and that credit scores can determine whether consumers can “get a loan, a better interest rate, or a new job.”

FreeScore said it only promised to provide information, not to “improve” a consumer’s credit.  But FreeScore’s ads clearly went beyond providing information.  It even recommended a course of action to consumers: use FreeScore.com to “[s]pot damaging inaccuracies,” and use “[i]nstant email alerts … so [they] can make corrections fast!”  FreeScore wasn’t just selling data—it was giving advice about what consumers could or should do with the data.  “The overall net impression communicated by FreeScore.com is that in order to ‘repair a damaged credit score,’ the ‘best solution’ is to ‘utilize[e] services like credit monitoring,’ which ‘can have an immediate effect on your credit score.’”  (Note that the “immediate effect” language might look to a lawyer like it was referring to the errors, but that’s not what a reasonable consumer targeted by such services would likely take away.)

Other cases have found similarly with respect to defendants that promised things like “personal credit analysis.”  As with those defendants, “FreeScore, while not actually providing credit repair services, has represented that it can or will sell, provide, or perform a service for the purpose of providing advice or assistance to a consumer with regard to improving a consumer’s credit record, history, or rating.”  Literal alteration of historical records isn’t required to be a credit repair organization. FreeScore’s ads gave the net overall impression that its services would improve consumers’ credit.

Lay mis/understandings of copyright

What do people think about copyright? Over at Jotwell, Andres Guadamuz reviews Lee Edwards et al, Isn’t it just a way to protect Walt Disney’s rights?: Media user perspectives on copyright, 16 New Media & Soc’y (2013) (paywall). The article looks very interesting.  I was struck by this description from the review; it’s probably familiar/intuitive but this time it gave me an idea:

Another interesting finding is that users tended to describe downloading and file-sharing as something transitory, for example, to be done while there are no legal alternatives, or to be performed while you do not have enough money to purchase content legally. Similarly, the delay between a TV show being distributed in the US and Europe was identified by participants as an important factor driving piracy levels up. Users also seemed to be more comfortable with sharing content with friends and family, than to widespread and indiscriminate file sharing online.

I’ve long been a fan of Viviana Zelizer, and these descriptions of incompletely commodified relationships strike me as structurally similar to other relationships to the market she describes, where market transactions are appropriate for some circumstances and nonmarket for others, and this helps constitute a self distinguishable from the market while also involved in and shaped by it.  Of course, here copyright owners are really really unhappy about that, but I think her approach might offer some useful insights.  What will be private and/or uncommodified in the brave new copyright world?

Dividing the spoils: soured Afghan deal brings TM, CFAA claims

Global Fleet Sales, LLC v. Delunas, 2014 WL 634075, No. 12–15471 (E.D. Mich., Feb. 18, 2014)

“This dispute arises out of the pursuit of business opportunities in the Islamic Republic of Afghanistan in the wake of the NATO campaign against the Taliban and the subsequent souring of the business relationships established to execute those opportunities.”  Plaintiffs, collectively RMA, sued defendants Leonard Delunas and Mohammad Wahab for various business torts.

The plaintiffs provide products and services for infrastructure in conflict-plagued countries.  Delunas was allegedly hired to serve as a country manager for RMA in Afghanistan, charged with procuring registration of RMA Afghan entities and holding shares of those companies for the beneficial interst of RMA.  Wahab was a friend and associate of Delunas, and listed as a corporate officer and shareholder of record of the Afghan entities, but allegedly held the shares as a trustee.

In late 2001, which is to say after September 11, 2001, the RMA plaintiffs and Delunas, who worked in construction/engineering services/construction, started to discuss business opportunities that they expected to arise in post-conflict Afghanistan.  RMA hired Delunas, allegedly under an agreement that “Delunas was to manage the operations of the RMA Afghan Entities” and not engage in other business; he was thus to get 25% of the net profits, and would reimburse RMA for up to 25% of net losses.  RMA alleged that Delunas breached in various ways, such as advancing himself funds and pursuing corporate opportunities for his own personal benefit.  Despite RMA’s termination of their agreement, Delunas allegedly continued to hold himself out to current and prospective customers as RMA’s authorized representative.  He ran a website that directed actual or prospective customers or suppliers who wish to contact the RMA Group’s current Country Manager in Afghanistan to Delunas’s email address, not the actual current Country Manager. The website formed the basis of the Lanham Act and CFAA claims on which I will focus.

On the Lanham Act claims, the court began by distinguishing §43(a)(1)(A) false association claims from §43(a)(1)(B) false advertising claims.  The complaint alleged that Delunas’s website implied continued affiliation with RMA by listing his contact info for those seeking to do business with the RMA Afghan Entities and with RMA Group companies in other countries where Delunas was never employed nor affiliated with in any capacity.  (Lurking issue: is this extraterritorial application of the Lanham Act?  If the website solicits business in the US and other countries, how should we think about that?)

Defendants, amazingly, challenged standing, which in the Sixth Circuit is governed by the reasonable interest test.  Defendants argued that the plaintiffs lacked standing because the complaint alleged that the official RMA site was owned by the RMA Group, which isn’t an actual entity.  But the plaintiffs alleged that they were among those comprising the RMA Group, which gave them a reasonable interest.  There was also “a reasonable basis for believing that the interest is likely to be damaged” by the defendant’s alleged false association or false advertising, because of the allegedly attempted diversion.

Defendants argued that there was no false association, because he actually is affiliated with the entities listed on the offending website; the complaint alleged that he was a 25% shareholder in the Afghan entities. But the complaint pled that his ownership interest had terminated.  And the complaint sufficiently pled likely confusion:

The Complaint alleges that Delunas is operating a website that suggests to all who view it that he is the RMA Group’s Country Manager in Afghanistan and that directs inquiries to his email address instead of the email address of the current Country Manager. The website references contracts performed by the RMA Plaintiffs’ companies and displays icons of companies with which the RMA Plaintiffs conduct business. Such allegations do, in fact, permit the Court to infer that confusion is likely.

Anyway, confusion is a fact question, and dismissal on that ground should be rare.

For similar reasons, the false advertising claim survived.  “In this Court’s opinion, advertising the services, contracts, and customer relationships of another as one’s own to deceive customers into believing that ‘RM Asia’ performed work actually performed by the RMA Group Plaintiffs constitutes a false or misleading statement of fact concerning the services and commercial activities advertised on the internet.”

However, the CFAA claim failed.  It was based on Delunas’s continued use and operation of the website post-termination.  The complaint plainly alleged that the plaintiffs had no affiliation with or control of the website.  Although the plaintiffs vaguely implied that they once owned the site, the complaint didn’t allege that they did own or control it.  An entity lacking ownership and control “simply has no basis for granting or withholding authorization to the website.”  The CFAA doesn’t apply when the defendant accesses a computer not owned by the plaintiff.

Some contract-related and tortious interference claims survived.  However, allegations of “repeated abusive telephone calls” to the plaintiffs’ current Afghanistan country manager, allegedly threatening him with arrest and prosecution if he stayed in country, along with allegations of instigation of a meritless and spurious complaint against a non-party country at the Afghanistan Ministry of Justice, were insufficient to allege tortious interference with prospective economic advantage.  Unjust enrichment claims also survived, pled in the alternative to the contract-based claims.

The court then turned to plaintiffs’ motion for a preliminary injunction. They sought an order requiring defendants to discontinue operating the offending website, restore control of it and its server to plaintiffs, turn over emails and other communications that passed through it, and return various documents. 

Plaintiffs argued that they showed likely success on the merits because of actual customer confusion.  They pointed to emails Delunas forwarded to the current Country Manager during a brief thawing in tensions.  The emails sought services from the RMA plaintiffs, but were sent to Delunas (who uses the same email he used when the Country Manager of Afghanistan), not to the actual Country Manager. Though the complaint stated a cause of action, this wasn’t enough to show likely success because of “the number of important factual discrepancies between the parties’ positions regarding the ownership of the RMA Afghan Entities.”

Without that, the RMA plaintiffs didn’t show irreparable harm.  They alleged that they’d lose “good will, client trust, confidence and confidentiality and competitive advantage,” but didn’t show that such harm was actual and imminent.  Their delay until November 2013 in moving for a preliminary injunction, when Delunas allegedly ceased his affiliation with them in March 2011, was damaging.  That was a year after filing the complaint and six months after amending the complaint. Delay alone may preclude a finding of irreparable harm.

The RMA plaintiffs argued that courts can presume irreparable harm from likely success in showing confusion.  But it’s not clear that this rule survived eBay, and even if it did, “it would be inappropriate to apply the presumption in this case given the lingering factual questions surrounding ownership of and right of access to the website as well as the lengthy delay in seeking injunctive relief and the possibility that monetary damages would sufficiently rectify any harm the RMA Group Plaintiffs experience while the Court is able to adjudicate this dispute on the merits.”

Informal administrative inquiry doesn't preclude lawsuit over "organic"

Brown v. Hain Celestial Group, Inc., 2014 WL 556732, No. C 11–03082 (N.D. Cal. Feb. 10, 2014) (magistrate judge)

Plaintiffs sued Hain alleging that it marketed its “Avalon Organics” and “Jason” cosmetic products as organic when they were not made predominately from organic ingredients, in violation of the California Organic Products Act of 2003 (and therefore violating the usual California laws as well).

Hain moved for summary judgment on the ground that the California Department of Health (CDPH), the agency responsible for enforcing COPA, determined in a February 2013 enforcement decision that the Jason and Avalon Organics labels complied with COPA. The magistrate judge disagreed: CDPH’s inquiry was informal, based only on ex parte submissions from Hain, and merely decided not to pursue the matter further.

Plaintiff Brown sued in 2011 as part of several lawsuits filed against manufacturers of personal care products for violations of COPA, at which point a deputy director at the CDPH contacted plaintiffs’ counsel and asked for copies of the lawsuits.  Plaintiffs didn’t intend to submit an administrative complaint.  Then, the chief of the Food Safety Inspection Unit contacted Hain about its COPA compliance, saying that the CDPH “recently received a complaint alleging that cosmetics sold by your company do not comply with the COPA.”  The letter asked for a written response asking for a list of all products sold as “organic” (etc.), labels, formulations, and evidence of organic certification for every ingredient listed as organic.

Hain’s counsel replied with the requested information (basically, though among other things Hain disagreed that its products would be within the scope of COPA or that COPA was unpreempted) about its reformulated products.  Hain discontinued certain “organic” products, and contended that the only ones left were made with at least 70% organic materials as of late 2011.  Haim then moved to dismiss plaintiffs’ claim as preempted by federal law, but the court rejected that argument.

Nothing happened with CDPH between September 2011 and January 2013, at which point Hain’s counsel asked what was going on.  Hain’s counsel sent additional information and made further arguments to the CDPH (including that the Avalon products just used “organic” in its brand name, and that Jason products used “pure, natural, organic” as a tagline, and not to identify the products or to highlight particular ingredients on the principal display panel—um, I’m sure that affected consumer perception a lot). 

The CDPH then sent Hain a short “notice of resolution,” saying that the CDPH reviewed the documentation sent in response to its letter.  It said “The Avalon Organics® and Earth’s Best and Jason brands were not found to represent the products as ‘organic’, or to use the word ‘organic’ to identify ingredients or modify content on the Principal Display Panel (PDP).”  Then it noted Hain’s voluntary actions to change the labels/certifications. “We appreciate the efforts you have taken to address this inquiry and consider the matter resolved.”

Plaintiffs first learned of the inquiry in 2013, when Hain’s counsel provided plaintiffs’ counsel with the CDPH’s February 2013 notice of resolution.  At that point, plaintiff’s counsel contacted the CDPH, and included two court orders interpreting COPA as prohibiting any use of the term “organic” (etc.) on the principal display panel of cosmetic products that contain less than 70% organic ingredients.  The relevant person at CDPH responded that he was not dealing directly with organic issues and typically did not discuss letters issued to another firm with counsel not representing the firm that received the letter.  Plaintiff’s counsel said that if the CDPH was treating the lawsuits as administrative complaints, then it should discuss them with him, since he was the complainant’s attorney.  CDPH responded that “CEH opted to file these lawsuits instead of referring the alleged violators to CDPH for investigation.”  Later, CDPH said that the “complaint” language in its letters was just standard; that plaintiffs publicized their lawsuits in the media before letting CDPH know and that CDPH had to ask for the complaint; and that “[t]hese facts make it very difficult to argue that you are a complainant.”

COPA gives the CDPH authority to enforce the organic regulations and provides for a complaint procedure.  The AG or other state attorneys may also bring suits, and there is also a private right to sue for injunctive relief.

The magistrate judge determined that the February 2013 notice of resolution wasn’t a determination that Hain’s labels didn’t violate COPA.  Instead, it was only an informal notice of a decision not to pursue further action, and didn’t preclude plaintiffs’ COPA claim. The inquiry was informal on its face, and the process that followed was also informal.  Hain’s initial submission was ex parte, and then nothing happened for 18 months until Hain asked and was able to speak to someone at CDPH and supplement its response.  The fact that the agency considered only Hain’s ex parte submissions further indicated its informality.  And the CDPH clearly considered only the labels Hain submitted—the reformulated ones, not all the ones at issue in this case, which included products that didn’t contain 70% organic ingredients.  Finally, the informality was bolstered by the agency’s post-notice communications to plaintiffs’ attorney that he was not a complainant and was not entitled to know the details of a response made to Hain.

Hain argued that plaintiffs’ inability to present evidence or argument was irrelevant, since members of the public didn’t have a right to participate in things like a DA’s decision not to prosecute or the state bar’s decision not to revoke a lawyer’s license but are still bound by that.  (Um, no, they’re not in a subsequent civil suit for violation of the relevant legal duties?)  Hain argued that both CDPH and plaintiffs sought to advance the same “primary right” to compliance with COPA, and thus claim preclusion applied.  But this wasn’t a formal adjudication, as required for claim preclusion.

Hain argued that the CDPH adjudication didn’t require a trial-like process, since no due process right of plaintiffs was involved, and CDPH is the state agency charged with enforcing COPA, doing the same thing as plaintiffs acting as private AGs.  Plaintiffs conceded that certain administrative enforcement proceedings conceivably could preclude private persons acting as private AGs from pursuing a claim in a separate civil action.  But here, “the agency process and resulting notice did not have the procedural safeguards and formality of an agency decision.”  It didn’t consider any information other than what Hain submitted, and it didn’t involve any independent evaluation of the products or ingredients.  Indeed, the notice of resolution made a factual error: its statement that the labels “were not found to use the word ‘organic’ to identify ingredients or modify content on the Principal Display Panel (PDP)” is wrong in that “even Hain’s limited production of labels to CDPH included both labels that explicitly identified organic ingredients and ones that identified some organic content on the PDP. For example, as Hain concedes, a number of labels submitted to CDPH included claims that the products are made with ‘Organic Oils.’”  In context, the mistakes bolstered the judge’s conclusion that this wasn’t a true enforcement action but just an informal inquiry.  Plaintiffs identified numerous pre-2011 products referring to specific organic ingredients, and also disputed present compliance with COPA’s 70% requirement (and a few other issues). 

These were just not the kind of facts justifying claim preclusion.  Even cases not involving the removal of benefits (which Hain argued justified more process) still offered opportunities for public participation. Hain analogized to USDA premarket approval of labels—which is preemptive of claims for misleading advertising.  “But those cases involve an elaborate statutory and regulatory scheme and regularly-followed administrative procedures.  There are no cases construing an administrative inquiry like this—triggered by a ‘complaint’ and involving only an informal ex parte submission of information by the alleged wrongdoer and no apparent investigation—as a binding agency decision.”

Hain also argued that the CDPH’s decision not to refer the case for investigation or prosecution had preclusive effect. But the statute permitted a private right of action for injunctive relief “[n]otwithstanding the provisions of [the provision that allows the California Attorney General or a district attorney to bring an injunctive-relief action].”  There were lots of reasons CDPH might not have continued—“Lack of resources, lack of information, and the ongoing lawsuits in state and federal court are a few possible reasons.”

Further, plaintiffs were not judicially estopped from contesting the notice on the ground that they triggered the inquiry. The record didn’t support that argument; CDPH asked for the complaint and didn’t include plaintiffs in its inquiry.

rigorous falsity standard in sophisticated market defeats false advertising claim

Kwan Software Engineering, Inc. v. Foray Technologies, LLC, No. C 12-03762, 2014 WL 572290 (N.D. Cal. Feb. 11, 2014)

Plaintiff (here VeriPic) and defendant both sell digital asset management software to law enforcement.  VeriPic and Foray both sell software that allows users to determine real distances/heights etc. from a photo.  Also, Foray’s software can validate whether a piece of digital evidence has been manipulated or altered between the time it is entered into the system and a later time when a user wishes to make use of that piece of digital evidence. VeriPic’s software allows the user to validate not only whether digital evidence has been altered since it was entered, but also whether the digital evidence has been altered from the moment the picture was originally taken.

VeriPic sued Foray for false advertising and copyright infringement (and related claims).  The court here rejects them.

The state and federal false advertising claims were judged by the same standard, meaning that the analysis of the FAL and UCL claims used the explicit/implicit falsity divide (as consumer FAL/UCL claims do not).  First, the court rejected VeriPic’s survey, since it looked at digital photo users in law enforcement.  However, most of the respondents were unfamiliar with the relevant software programs, though they used some form of photo evidence in their work.  More importantly, they weren’t the relevant audience for the targeted ad claims, which were made in response to requests for proposals, in direct emails, and displays at trade shows. VeriPic didn’t show that photo users would see those materials.  So the survey wasn’t shown to be reliable or relevant.

Thus, VeriPic had to make a claim for explicit falsity, a “rigorous” standard requiring a statement to be “unambiguously false,” analyzed in its full context.  The fact that statements were made to sophisticated consumers with background knowledge/expertise is relevant here, as are industry standards.

VeriPic first challenged Foray’s claims that it could “authenticate” digital evidence, arguing that authentication required assessing whether there’d been any alterations since the photo was taken, not just since the photo was entered into the software system.  The latter, VeriPic argued, was known as “integrity.”  VeriPic relied on industry guidelines (known as SWGIT guidelines).  But those guidelines showed that “authenticate” had different meanings dependent on context.  In some contexts, authentication requires a human observation, and neither party can provide that.  In other contexts, “authentication” means being able to “discern if a questioned image is an accurate representation of the original data by some defined criteria.”  But this was closely related to the concept of “integrity.”  The SWGIT guidelines therefore defined “Forensic Image Authentication” as a type or subset of “integrity” process.  Plus, Foray showed that the digital asset management software industry uses the term “authentication” when referring to the ability to ensure the “integrity” of images.  This included three other competitors, as well as VeriPic’s own website FAQ.  Though VeriPic claimed that its “true authentication” was better than “acquisition authentication” (which was all Foray could provide at the relevant time), it was still using the term “authentication,” not “integrity.”

VeriPic’s only evidence of purchasers using the term in its chosen manner was one RFP, which stated that “[b]y ‘Authentication’ we specifically mean the examination of the photos at the time it is imported into the system to look for signs that the photos were edited by photo editing software PRIOR to import into the system and PRIOR to acquisition of the photo into the system.”  But, the court pointed out, this RFP found it necessary “to provide an express definition of how it was using the term and to bold and capitalize the word ‘prior’ to make clear” its meaning, suggesting that it wasn’t using a common definition of “authentication,” or at the very least that there’s some other definition of the term that needed to be distinguished.  Nor did VeriPic’s expert testimony support its proposed definition as the only industry definition.  Thus, summary judgment was appropriate.

VeriPic challenged another statement: “While some vendors may claim they are ASCLD or SWGIT compliant, no other digital evidence management system vendor complies with the SWGIT workflow shown above. ONLY the Foray ADAMS solution meets this requirement!”  VeriPic argued that this workflow was one of four example workflows and thus wasn’t a requirement, and that “only” was literally false because VeriPic complied too.

As to “requirement,” the statement wasn’t literally false in context.  The example workflow at issue was the only one that involved a digital asset management system; the guidelines said that the examples weren’t exhaustive, though.  Foray’s use of “requirement” was consistent with the meaning that its software was one known way of complying with the standards.  The OED defines “requirement” as “something wanted or needed,” and Foray’s use of the word “merely conveys that its software uses a series of steps known to be wanted or needed by the example workflow—i.e, consistent with it, as it is written.” 

As for the “only,” it was undisputed that the example workflow contemplated making copies of the images whenever an image was viewed or processed. VeriPic contends that making copies isn’t as good at protecting the integrity of the evidence; instead VeriPic provides enhancement tools that don’t make copies. While this might be a good idea, “VeriPic’s product cannot be literally consistent with the workflow—rendering Foray’ statement unambiguously false—where its product allows user to deviate from the steps listed in that workflow.”  Summary judgment for Foray.

The court also rejected VeriPic’s copyright and copyright-related claims.  VeriPic alleged that Foray obtained VeriPic’s software in 2008 and copied it.  Foray’s employees testified that they observed the use of VeriPic’s software, but never obtained a copy of the software or the source code.  VeriPic’s evidence was a 2005 email from Lynn Slaughter, a Foray sales representative, to other Foray employees. The email stated: “I will be getting a VeriPic DVD at the CBD conference that I will send in to the office. (Our client will bring me one ...).”  This was insufficient to create a genuine dispute of fact on access.  VeriPic failed to provide any evidence that Slaughter did get a copy; the only record evidence was Slaughter’s testimony to the contrary.

Plus, Foray provided evidence of independent creation in 2005, with a source code expert who reviewed the 2005 software and the current version and found no changes to the parts of the code VeriPic claimed had been copied.

The DMCA claim failed because there was, likewise, no evidence of circumvention.  So did the contributory infringement/inducement claims.

As for VeriPic’s claim for inducement of breach of contract, VeriPic argued that Foray intentionally encouraged and assisted VeriPic’s customers to breach their end user licensing agreements by allowing Foray employees access to and use of VeriPic’s copyrighted works.  Two Foray employees said that VeriPic customers allowed them to view VeriPic’s software while the customers were using the program, but testified that they never directly used the software. “VeriPic fails to explain how merely allowing a third party to view VeriPic’s software while the customer is using it is a breach of the end user license agreements.”  None of the cited provisions of the EULA barred allowing a third party to view the software while it is in use.

VeriPic also cited the Slaughter email, but there was no evidence she got the disc, and in any event there was no evidence that the client mentioned in the email was a party to the EULA.

A consumer protection case for Fox Mulder?

Hey, I get to make an X-Files reference!

Lilly v. ConAgra Foods, Inc., --- F.3d ----, 2014 WL 644706 (9th Cir. Feb. 20, 2014)

Lilly alleged that the tasty coating on sunflower seed shells is designed to be eaten, and is eaten, before the inedible shell is spat out and the kernel eaten.  The package instructions expressly tell consumers to put the shells in their mouths.  Therefore, she argued, the sodium content in a serving of sunflower seeds must include the sodium in the edible coating, but ConAgra didn’t disclose that additional sodium, or didn’t disclose it with equal prominence to the sodium in the kernels.  She brought the usual California claims.

The district court dismissed her claims as preempted; over a dissent, the court of appeals reversed.

The NLEA requires that a food’s label include the amount of sodium “in each serving size or other unit of measure.”  The FDA has regulations about how this is to be calculated.  First, “[n]utrition information relating to food shall be provided for all products intended for human consumption.” Second, the “declaration of nutrient and food component content shall be on the basis of the food as packaged or purchased.” Third, the amount of sodium in the food is “based on only the edible portion of food, and not bone, seed, shell, or other inedible components.”

But Lilly wasn’t trying to force ConAgra to include the sodium content of the shells.  She wanted ConAgra to disclose the sodium content of the coatings on top of the shells, which “most certainly are not inedible. To the contrary, the coatings impart flavor and are indisputably intended to be ingested as part of the sunflower seed eating experience. Indeed, these coatings come in flavors such as ‘Ranch’ and ‘Nacho Cheese’ precisely because they are to be consumed before the shell is discarded.”  Because federal law requires that sodium listings include the “edible portion” of the food, the portion of the edible coating on the shell “must be accounted for in the calculation of the sodium content.”  Lilly sought to enforce state requirements identical with federal law, and thus her claims were not preempted.

ConAgra argued that the Nutrition Facts Panel on the sunflower seeds references only the kernels, any reasonable consumer would understand that the sodium listing did not include the amount on the shells. (Comment: yeah, right.)  But that was a factual question, not for the panel.

Judge Vinson, sitting by designation, dissented. He would have found that the regulation naturally and plainly excluded the shell.  “Although we might prefer a regulation that includes the shell’s absorbed salt and to draw a distinction between an edible ‘coating’ and an inedible shell, we are nonetheless bound to apply this unambiguous regulation objectively as it has been written.”  Any revision should be left to the FDA.

British villains, by which we mean Marvel's Loki etc.

So what are the trademark implications of the Jaguar ads starring three British actors who tout their credentials as film villains?  Any copyright implications, since they’re evoking some of their characters?  The disclaimers don’t say a word about the franchises that some viewers might be thinking of.

FTC wins big in case against light bulb sellers

The FTC's Business Center Blog has the details, which include a $21 million refund order representing the gross revenues from the advertised products, with no offsets for the benefit consumers actually received.  A very strong opinion for the FTC, requiring a high level of substantiation for specific claims and reiterating that substantiation is required for reasonable interpretations of ads, not just for explicit claims in ads.

Image advertising is commercial speech

Jordan v. Jewel Food Stores, Inc. --- F.3d ----, 2014 WL 627603 (7th Cir. Feb. 19)

When a commemorative magazine issue celebrating Michael Jordan’s career carries ads referencing that career, how should right of publicity and Lanham Act claims, and related state law unfair competition/deceptive practices claims, against those ads be evaluated?  The district court found that a “congratulations”-style ad that identified the sponsor but didn’t tout its products was noncommercial speech, and thus outside the scope of both laws. The court of appeals reversed.

“On the occasion of Jordan’s induction into the Naismith Memorial Basketball Hall of Fame in September 2009, Time, Inc., the publisher of Sports Illustrated, produced a special commemorative issue of Sports Illustrated Presents devoted exclusively to Jordan’s remarkable career.”  Jewel was offered free ad space in exchange for stocking the magazine in its stores. 

 

The text:

A Shoe In!

After six NBA championships, scores of rewritten record books and numerous buzzer beaters, Michael Jordan’s elevation in the Basketball Hall of Fame was never in doubt! Jewel-Osco salutes # 23 on his many accomplishments as we honor a fellow Chicagoan who was “just around the corner” for so many years.

Jewel’s ad was commercial speech because it prominently featured Jewel’s logo and marketing slogan, “which are creatively and conspicuously linked to Jordan in the text of the ad’s congratulatory message. Based on its content and context, the ad is properly classified as a form of image advertising aimed at promoting the Jewel-Osco brand.”  Remand for consideration of the substance of the claims.

The court began by noting that Jordan conceded that, if the ad was noncommercial speech, his claims would fail.  But the law, it continued, was considerably more complex than the premise that the right of publicity and trademark can’t apply to speech that is noncommercial in the constitutional sense.  (Which is why the law is screwed up, sigh.)  Among other things, though each of the claims had a “commercial” element, it wasn’t clear that First Amendment commercial speech doctrine should be used to define that term for each cause of action.

Supreme Court jurisprudence generally comes from “public law” cases, where “the commercial/noncommercial classification determines the proper standard of scrutiny to apply to the law or regulation under review in the case.”  But this is a clash of private rights.  (Ooh, state action.  NYT v. Sullivan, anyone?)  So that means that even if the ad is noncommercial speech, the trademark and right of publicity claims might survive; according to McCarthy, there’s no consensus on how to resolve IP v. free speech claims, “and decisions from the lower courts are a conflicting mix of balancing tests and frameworks borrowed from other areas of free-speech doctrine.”

But Jordan’s concession allowed the court to skip further discussion.

The basic definition of commercial speech, “speech that proposes a commercial transaction,” is just a starting point—the core, but not the full extent of commercial speech.  Bolger, for example, involved speech with noncommercial and commercial elements; there, pamphlets providing general information about contraception, and specific information about the manufacturer’s products, were commercial speech because they had the form of an ad, referred to specific products, and were distributed by the manufacturer for economic purposes.  None of the three elements (form, specific product, economic motivation) is sufficient in itself, and not all are necessary.

Jewel argued that its ad didn’t propose a commercial transaction.  True, the literal words congratulated Jordan.  But context was also important, especially in identifying commercial speech, since “[m]odern commercial advertising is enormously varied in form and style.”

Image advertising is advertising:

We know from common experience that commercial advertising occupies diverse media, draws on a limitless array of imaginative techniques, and is often supported by sophisticated marketing research. It is highly creative, sometimes abstract, and frequently relies on subtle cues. The notion that an advertisement counts as “commercial” only if it makes an appeal to purchase a particular product makes no sense today, and we doubt that it ever did. An advertisement is no less “commercial” because it promotes brand awareness or loyalty rather than explicitly proposing a transaction in a specific product or service. Applying the “core” definition of commercial speech too rigidly ignores this reality. Very often the commercial message is general and implicit rather than specific and explicit.

Thus, Jewel’s ad did more than congratulate Jordan. It promoted Jewel’s supermarkets.  It wasn’t just civic boosterism, as congratulating a local community group might be.  “Jewel’s ad has an unmistakable commercial function: enhancing the Jewel-Osco brand in the minds of consumers. This commercial message is implicit but easily inferred, and is the dominant one…. [A]n ad congratulating a famous athlete can only be understood as a promotional device for the advertiser. Unlike a community group, the athlete needs no gratuitous promotion and his identity has commercial value. Jewel’s ad cannot be construed as a benevolent act of good corporate citizenship.”

The court noted that Jewel-Osco’s graphic logo and slogan appeared just below the textual salute to Jordan. The bold red logo was prominently featured in the center of the ad and in a font size larger than any other on the page.  They were set off from the congratulatory text, drawing attention to Jewel’s sponsorship.  And the congratulatory text incorporated Jewel’s slogan (“just around the corner”).  “The ad is plainly aimed at fostering goodwill for the Jewel brand among the targeted consumer group—‘fellow Chicagoans’ and fans of Michael Jordan—for the purpose of increasing patronage.”

The district court thought that there was no particular invitation to buy a product.  True, the ad didn’t showcase specific products, which was a relevant consideration, but far from dispositive, especially where image ads are concerned.  The ad invited readers to buy whatever they would buy at a grocery store.  “That it doesn’t mention a specific product means only that this is a different genre of advertising. It promotes brand loyalty rather than a specific product, but that doesn’t mean it’s ‘noncommercial.’”

The district court thought that the slogan and graphic logo just identified the speaker.  But that overlooked their value as advertising tools.  The repetition of the slogan in the congratulatory message “only makes sense if the aim is to promote shopping at Jewel-Osco stores.” The court pointed out that Jewel’s copywriter thought the repetition of the slogan was “too selly” and “hitting too over the head.”

The ad was commercial speech by necessary implication:

In short, the ad’s commercial nature is readily apparent. It may be generic and implicit, but it is nonetheless clear. The ad is a form of image advertising aimed at promoting goodwill for the Jewel-Osco brand by exploiting public affection for Jordan at an auspicious moment in his career.

Returning to Bolger, the ad had the form of an ad; it was easily distinguishable from the editorial content even though it followed the special issue’s theme; it promoted Jewel-Osco supermarkets.  It promoted patronage at Jewel-Osco stores, similar to promoting purchase of a product.  And it served an economic purpose: “to burnish the Jewel-Osco brand name and enhance consumer goodwill.”  The court noted that Jewel’s marketing representatives said it was a “great offer” and it “would be good for us to have our logo in Sports Illustrated ” because “having your logo in any location where people see it is going to help your company.” Further, Jewel gave Time valuable consideration—placement in its stores—in exchange for the ad, which suggested that “it expected valuable brand-enhancement benefit from it.”  Though Jewel’s tribute “was in a certain sense public-spirited, … Jewel had something to gain by conspicuously joining the chorus of congratulations on the much-anticipated occasion of Jordan’s induction into the Basketball Hall of Fame.”

A contrary holding would be troublesome for “athletes, actors, celebrities, and other trademark holders seeking to protect the use of their identities or marks.”  After all, image ads are common.  The court pointed to ads by Olympic sponsors, many of which consist of images of athletes coupled with the advertiser’s mark and expressions of support for the team, with nothing in particular offered for sale. “To say that the ad is noncommercial because it lacks an outright sales pitch is to artificially distinguish between product advertising and image advertising. Classifying this kind of advertising as constitutionally immune noncommercial speech would permit advertisers to misappropriate the identity of athletes and other celebrities with impunity.”

However, the court claimed that a company could use its logo or slogan “in an otherwise noncommercial way without thereby transforming the communication into commercial speech.”  The holding here was “tied to the particular content and context of Jewel’s ad as it appeared in the commemorative issue of Sport Illustrated Presents.”  Yes, but—after this, how should product placement be analyzed?  Maybe there’s not too much worry about trademark, but what if New Girl makes a joke about William Shatner in the same episode that features paid Subway sandwich placement—would Shatner have a right of publicity claim?

Finally, the court rejected the district court’s conclusion that the commercial and noncommercial elements of the ad were inextricably intertwined.  “[T]he inextricably intertwined doctrine applies only when it is legally or practically impossible for the speaker to separate out the commercial and noncommercial elements of his speech.… But simply combining commercial and noncommercial elements in a single presentation does not transform the whole into noncommercial speech.” 

The court of appeals disagreed with Hoffman v. Capital Cities/ABC, Inc., 255 F.3d 1180 (9th Cir. 2001), which held that a fashion article featuring altered movie stills was noncommercial speech because the editorial elements were inextricably intertwined with the commercial elements. When Dustin Hoffman sued over a photoshopped image of himself in his role in Tootsie, the 9^th Circuit held that “the article as a whole is a combination of fashion photography, humor, and visual and verbal editorial comment on classic films and famous actors. Any commercial aspects are ‘inextricably entwined’ with expressive elements, and so they cannot be separated out ‘from the fully protected whole.’” This was wrong, since there was no legal or practical barrier to “publishing a fashion article without superimposing the latest fashion designs onto film stills of famous actors.” (This disagreement suggests that the holding isn’t exactly as limited as the court claims, though the court also says that it is not opining on whether the ultimate result in Hoffman was nonetheless correct.  Also, note the court’s use of generic “photoshopped,” which I have repeated.)  Here too, “[n]o law of man or nature compelled Jewel to combine commercial and noncommercial messages as it did here.”

Comment: Jewel endorsing Jordan isn’t the same thing as Jordan endorsing Jewel, though I doubt courts will recognize that; anyway, with the metastasizing right of publicity, confusion doesn’t really matter.  I agree that this is an ad.  But I’m distressed by the substantive claims.  And I do wonder about product placement.

Lanham Act 43(a) and Rule 9(b)

SKEDKO, Inc. v. ARC Products, LLC, 2014 WL 585379, No. 3:13–cv–00696 (D. Ore. Feb. 13, 2014)

Short opinion finding that Rule 9(b) applies to Lanham Act false advertising claims (here, counterclaims), because they sound in fraud.  Fraud might not be an essential element of the statutory violation, but if the claimant chooses to allege fraudulent conduct, then the claim sounds in fraud.  “By asserting that plaintiff unfairly obtained business by intentionally misleading customers about the characteristics of its product, defendant made allegations that reach beyond a mere unintentional misrepresentation. Instead, defendant asserted that plaintiff’s misrepresentations were made knowingly, satisfying the scienter element of fraud.” Thus, Rule 9(b) applied, and the counterclaims were dismissed because they failed to state when the alleged misrepresentations were made; where the misrepresentations were made; or who relied on them.  (Note: that last, actual reliance, is not required for literal falsity under §43(a), or for infringement for that matter.)

Comment: trademark plaintiffs almost universally allege intentional infringement.  How often do we see Rule 9(b) dismissals for this reason?  Trademark is literally special pleading!

retail purchases mean class isn't ascertainable

Sethavanish v. ZonePerfect Nutrition Co., 2014 WL 580696, No. 12-2907 (N.D. Cal. Feb. 13, 2014)

Another case finding that, because the product is cheap and people don’t keep purchase records, and because somebody might lie to get a piece of any ultimate settlement or award, no class action may be maintained.  Here the products are ZonePerfect nutrition bars, whose “all-natural” claim is allegedly false and misleading.  Plaintiff brought the usual California claims.

Plaintiff properly alleged standing by alleging her reliance on the misrepresentation for a purchase, even if the product in question is not “defective, overpriced, or of inferior quality,” and even if she didn’t pay a premium for the product. “She bargained for a nutrition bar that was all natural, and she allegedly received one that was not.”  Plus, though she testified that she sometimes buys all-natural products, that didn’t prevent her from also valuing all-natural products.

However, the class was not ascertainable.  ZonePerfect doesn’t have records of purchases, since it mostly sells to retailers.  Affidavits would be insufficient, because the defendant couldn’t challenge class membership that way, and fraudulent or inaccurate claims could dilute the recovery of absent class members, undermining the finality of any judgment with respect to them.  Plaintiff didn’t have any standard for determining class membership or weeding out inaccurate or fraudulent claims.

Though district courts in the 9^th Circuit are split, the court found the rejectionist cases more persuasive.  In response to the more flexible courts’ point that this ascertainability standard precludes class actions involving low-value consumer products, the court noted that, while its standard “may restrict the types of consumer classes that can be certified, they do not bar certification in consumer class actions altogether.”  In some cases, retailer or bank records may allow determination of a class membership.  (Because consumers lie, but banks don’t.)  Anyway, the FDA could define “all natural” or the California AG could sue over these kinds of claims.  Just not the people actually harmed.

Connecticut lawyer can't bring unfair competition claim against California lawyer

Shehu, LLC v. Adams, 2014 WL 567832, CV136017710S (Conn. Super. Ct. Jan. 17, 2014)

Plaintiffs (a Connecticut lawyer and his firm) sued Adams and his firm, both located in California.  In 2012, Adams emailed Shehu, LLC and two employees of the Connecticut Bar Association, stating that the plaintiffs “commented on an article with a mass produced, mechanically generated, irrelevant comment,” “spammed [his] site with the message,” and “used a dishonest ruse.” The email claimed that the plaintiffs engaged in unethical conduct and violated the ABA rules of professional responsibility.  Shehu responded and Adams reiterated his allegations, with the subject line, “Your Spam is a professional ethics violation.” A third email to the bar employees pointed to comments in his previous emails and stated that he had “no evidence” that Mr. Shehu or anyone at the Shehu law firm “had personal knowledge of the comments.”

Plaintiffs alleged that the emails were libelous per se and constituted unfair trade practices; this opinion only dealt with the claims under the Connecticut Unfair Trade Practices Act.  Defendants challenged, essentially, standing. A CUTPA claim is available to [a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment of a [prohibited] method, act or practice.”  As a remedial statute, the law is construed broadly.  The state supreme  court has held that “CUTPA is not limited to conduct involving consumer injury and ... a competitor or other business person can maintain a CUTPA cause of action without showing consumer injury.”

Nonetheless, a plaintiff “must have at least some business relationship with the defendant in order to state a cause of action under CUTPA.” CUTPA was designed to protect two sets of people: consumers (from unfair or deceptive acts or practices) and other business people (from unfair competition), but “at the very least, other business people, who are not direct competitors, must have some type of commercial relationship with the alleged wrongdoer—commercial relationship not being so much a business relationship but some kind of relationship in the marketplace so that the particular acts of wrongdoing alleged will interfere with fair and open competition in that particular marketplace.”

Here, plaintiffs alleged that they were both attorneys, both engaged in internet marking efforts, and both use blogs to share information.  The cases require a “nexus” between the parties’ relationship and “an ascertainable loss caused by the defendant’s unfair or deceptive practices.” Here, the parties’ relationship wasn’t competitive in any ordinary sense, nor was it direct or “in a commercial marketplace.” Before the incident that sparked this conflict, the parties most likely didn’t know of the other’s existence.  It wasn’t enough that both practice law and use the internet to market/blog.  Adams was licensed exclusively in California and Shehu exclusively in Connecticut. 

Even if Shehu’s conduct, as alleged, “diminish[es] the number of websites competing for keywords desirable to the [d]efendants” such that it would result in less competition for the defendants’ websites “to appear at the top of search engine results for those desirable keywords,” that was still insufficient.  (I don’t even understand this allegation.)  The court noted that potential clients wouldn’t necessarily pick the first firm listed, and any decision they’d make between the parties would be more likely based on the location in which they desired to have the services performed.  This alleged commercial relationship was too tenuous to conclude that the “particular acts of wrongdoing alleged will interfere with fair and open competition in that particular marketplace.” Thus, the case was distinguishable from one in which an attorney who once worked for the defendants alleged that they made false statements that harmed her reputation; there, the parties were licensed to practice in the same state.