7th Circuit affirms rare right of publicity loss based on ad

Martin v. Living Essentials, LLC, No. 16-1370, --- Fed.Appx. ---- (7th Cir. Jun. 30, 2016)

The Seventh Circuit knocked this affirmance out quickly—here’s my discussion of the Jan. 2016 district court decision.

Guinness World Records lists Johannes “Ted” Martin as the open singles champion for consecutive kicks of a football; his record has stood since 1997. A 2013 Living Essentials energy shot ad featured “an actor who boasts that in just five hours—all because of 5-hour ENERGY—he disproved Einstein’s theory of relativity, swam the English Channel twice, found Bigfoot, and ‘mastered origami while beating the record for Hacky Sack.’ The actor, not to be mistaken for the 56-year-old Martin, appears to be folding an origami animal while kicking two footbags, not one.”

Martin contended that the reference to “beating the record” was a reference to him, and thus an unlawful commercial use of his identity, also tarnishing his reputation by suggesting that his record stemmed from performance-enhancing drugs.  The district court found that the ad was puffery, but Martin argued that he was bringing a false association/endorsement claim. Citing the execrable White v. Samsung, the court reasoned that, “With advertising, even a parody of a celebrity can trigger liability; the critical question is whether consumers are likely to be confused and believe that the aggrieved party endorses or approves of a product.”

The court of appeals found that Martin’s theory was “not reasonable.”  “[W]e cannot imagine how this ad would confuse anyone into thinking that Martin himself endorses 5-hour ENERGY or that his use of the caffeinated drink explains a record set before the product came to market.”  (But it’s plausible that consumers would think that Vanna White endorsed Samsung because a letter-turning blonde robot appeared in its ads?)  The mention of Hacky Sack was “sandwiched between obviously absurd achievements.”  Moreover, “the actor cannot be accused of impersonating Martin, since he brags of besting, not holding for years, a footbag record,” and Martin didn’t claim to have achieved his title while creating origami animals.  Furthermore, there was no reason to assume that it was Martin’s record that had been beaten; other records exist, including for kicks of two footbags (as shown in the ad).  Nor did Martin plausibly allege that he had “the degree of public notoriety necessary to support a claim under the Lanham Act for false endorsement.” 

Moreover, the district court properly held that Martin failed to state a claim under the Illinois Right of Publicity Act.  That law broadly defines “identity” to mean “any attribute ... that serves to identify that individual to an ordinary, reasonable viewer or listener.”  But the phrase “the record for Hacky Sack” is too ambiguous to call an “attribute” of Martin. “[N]o reasonable viewer would interpret the commercial for 5-hour ENERGY as referring to Martin, and because he does not plausibly allege that Living Essentials invoked his ‘identity’ through the actor’s statement, Martin fails to state a claim under IRPA.”  Note the implication: if there were only one prior record holder, another person’s claim to have beaten that record—even if truthful—would seem to be an appropriation of the loser’s identity.  That seems … overbroad.

Update: that's not actually the latest in B&B!

My mistake. The latest is that after the ruling I just wrote about, there was a jury trial, which produced findings that (1) Hargis infringed the federally registered mark, (2) there were no damages/profits awardable from the infringement and the infringement was not willful, (3) the registration/incontestability was procured by fraud, and (4) Hargis prevailed on its false advertising/false designation of origin counterclaims.  Because of (3), the judge granted judgment as a matter of law to Hargis on (1), since fraud on the PTO invalidates the entire registration.

B&B Hardware Inc. v. Hargis Indus. Inc., 06-cv-01654 (E.D. Ark. Jun. 26, 2016)

The court explained that, absent the benefits of incontestability, Hargis could’ve shown that the Sealtight mark was descriptive without secondary meaning.  Indeed, it did so in a 2000 trial, but then B&B renewed and filed for incontestability.  Then B&B sued again in 2006, and the court of appeals found that preclusion didn’t apply because of the change in the registration’s circumstances from contestable to incontestable.  (Should that affidavit even have been filed?  How could it possibly be correct to say there were no final determinations adverse to B&B’s ownership of a valid mark?  The 2000 trial sounds an awful lot like a final judgment that the mark wasn’t valid.  Something has gone very wrong with incontestability.)   Hargis thus couldn’t repeat its mere descriptiveness argument, but it did prove fraud on the PTO, which removed the conclusiveness provided by incontestability.  “Without incontestability, B&B does not have a change in circumstances that allows it to escape claim preclusion because the jury in 2000 found that ‘Sealtight’ lacks secondary meaning.” 

Anyway, B&B wasn’t entitled to a remedy.  No injunction, because protecting B&B’s registration in the future was no longer possible; Sealtight wasn’t registered any more.  (This seems to skip over some issues surrounding likely confusion, but I find it hard to blame the court.)  Disgorgement was unavailable because it was subject to the principles of equity, which did not favor B&B.  There was no intentional infringement; there were no diverted sales because the parties don’t compete; and there was no palming off.  True, B&B was without another remedy, but that was its own fault for failing to renew; B&B didn’t delay in asserting rights and filed 43 days after its mark became incontestable; and the public interest was served by enforcing valid trademarks. But it would be “unfair to disgorge Hargis of its profits under unjust enrichment or deterrence rationales when B&B did not lose a single sale as a result of Hargis’s actions and Hargis’s infringement was unintentional.”  Even if the fraud on the PTO claim didn’t survive the (inevitable) appeal, there’d be no justification for disgorgement.

Guess what the latest development in B&B v. Hargis is?

B&B Hardware, Inc. v. Hargis Industries, Inc., No. 06CV01654, 2016 WL 3615833 (E.D. Ark. May 16, 2016)

So, despite all the commotion surrounding this case, B&B forgot to renew its registration, which was duly cancelled.  A cautionary story for clients!  Also, incontestability is a really big deal, which deserves to be much, much better policed.

As you may recall, B&B sells self-sealing fasteners for the aerospace industry under the mark “Sealtight.” Hargis sells fasteners for the construction trade under the mark “Sealtite.” As the Supreme Court said, the full story of the litigation “could fill a long, unhappy book.”  And here we go again, denying Hargis’ motion for judgment on the pleadings.

B&B registered Sealtight in 1993.  It opposed Hargis’s 1996 application; Hargis sought to cancel B&B’s mark, and then B&B sued for infringement.  A jury found in favor of Hargis, holding that B&B’s mark was “merely descriptive” and had not acquired a “secondary meaning.” Hargis’s petition to cancel B&B’s trademark was dismissed in June 2003.  In 2006, B&B filed a declaration of incontestability, “negat[ing] the first jury’s findings on descriptiveness and secondary meaning.”  B&B then sued again.  Before the second case went to the 2010 jury, the TTAB found a likelihood of confusion; the jury again found for Hargis on all claims.  But the Supreme Court held that TTAB decisions have preclusive effect!  Thus, the 2010 judgment was remanded for further proceedings, “including what remedies may be awarded for infringement.” The Eighth Circuit instructed the trial court to “give preclusive effect to the decision of the TTAB on likelihood of confusion.”

But then!  After the remand, “Hargis discovered that B&B failed to renew its registration, resulting in its cancellation some time after the 2010 trial.”  The PTO’s official record of the cancellation says the mark was cancelled on February 29, 2016, but Hargis argued that the cancellation occurred some time prior, which I suspect is true given ordinary PTO practice but have not specifically investigated.  The cancellation record is a ministerial act; the registration lapsed when the Section 8 deadline passed. See Land O' Lakes, Inc. v. Hugunin, 88 U.S.P.Q.2d 1957, 2008 T.T.A.B. Lexis 47, at *4–5 (T.T.A.B.2008) (precedential) (“[T]he date of expiration of application's registration is not dependent on the date the Office undertook the ministerial function of entering the cancellation into the USPTO database.”).

B&B since reapplied for registration, which is pending, but obviously can’t provide B&B with priority over Hargis even if it’s ultimately granted.  (If it is, because confusion with Hargis’s use is unlikely and, though preclusion applies in court to TTAB holdings, the PTO isn’t bound by prior rulings on different marks, then Hargis will have a good argument for its saga replacing Bleak House as the definititive account of ridiculous litigation; I haven’t even mentioned some of the details of what went on before.)

The district court confronted the question: now what?

First, B&B didn’t waive review of the non-infringement claims such as unfair competition, nor was it estopped from relitigating them or barred by the law of the case.  “Considering how intertwined ‘likelihood of confusion’ is with the other claims, it cannot be ruled that B&B waived or is estopped from re-litigating the other claims when it explicitly argued that such an important element was improperly decided.”  Nor did the law of the case govern, because B&B “was certainly a significant development that changed the game for both parties.”  And the trial court’s earlier error about preclusion “also affected the admissibility of evidence. B&B was limited by pretrial rulings on how the decision could be used during trial.”  (Query: why would the TTAB ruling be admissible now?  Of course the arguments for why it’s not relevant now have a different basis.)

Then, the court ruled, “the Lanham Act does not require a registrant to maintain [its] registration through to trial.”  Sections 32 and 43(a) have the same basic elements, except that incontestability is conclusive evidence of validity (subject to various defenses).  Hargis argued that B&B could no longer rely on its registration, because it doesn’t have one.  “B&B argues that its mark was registered during the period of infringement and its subsequent cancellation only changes the theory on which it can rely for the time after cancellation.”

Hargis argued that the words “registrant,” “registered mark,” and “registered on the principal register” in the Lanham Act all require B&B to maintain its registration for the duration of the suit, rather than simply possess it when Hargis allegedly infringed.  The court considered this an issue of first impression.  (I’m dubious of the court’s reasoning here.  Consider the situation where the registration is directly and successfully attacked.  The court properly orders the registration cancelled.  It’s beyond peradventure that the presumptions accorded the registration, although they applied at the outset of the case, can’t still be accorded the former registration.  The registration did exist when the litigation started, but now it doesn’t.  Even if the mark is cancelled for reasons that are not absolute bars, this should be true.  Consider, for example, fraud on the PTO: the mark is in theory registrable, but the registrant deliberately lied to register it with the intent to deceive the PTO, then sues someone else.  The fraud is proven and the registration is cancelled.  The plaintiff claims that it still has common-law rights (say, secondary meaning for a descriptive term).  The defendant shouldn’t still confront the presumption of ownership/validity that existed at the outset of the case.)

The court reasoned that, when an unregistered mark becomes registered during the pendency of the litigation, that doesn’t change the fact that it was unregistered at the outset and thus no burden-shifting from the trademark claimant is appropriate.  But that seems completely different to me, because the initial basis of the claimant’s rights—its unregistered common-law rights—is still present in the case, and those rights simply continue.  It would be completely unfair to, say, a §33(b) remote good faith user to say that the registration relates back to the initiation of the case, when a key point of registration is to fix the date on which rights became nationwide as a matter of law.

But, for the very same reason, the result should be different here: registration provides statutory rights that are explicitly provided over and above the common law, and it was those things—nationwide priority, the very broad description of the goods in the specification, and, for incontestability, distinctiveness as a matter of law—that allowed B&B priority and victory in its likely confusion claim.  Those are now gone from B&B’s arsenal.  B&B should be able to claim whatever common-law priority it has, including rights concurrent with its federal registration, but the cancelled registration ought to be treated as if it had never existed.   

However, relying on the analogy to unregistered marks that become registered, the court held that “registration only impacts the theory of recovery during periods of infringement.”  The court also considered that its rationale was in line with constructive notice: even a nonrenewed registration provided constructive notice during the period of registration.  Action Temp. Serv., Inc. v. Labor Force, Inc., 870 F.2d 1563, 1566 (Fed. Cir. 1989).

But constructive notice and existence of rights are pretty different.  Indeed, the Action Temp court continued that the TTAB’s conclusion that an initially unlawful adoption of a mark stayed unlawful was “flawed.”  Though use during the pendency of another’s now-cancelled registration wasn’t “lawful” in the sense necessary to support a concurrent use registration, that was only one part of the question the TTAB had to resolve on remand, given that mere knowledge of a prior user isn’t itself bad faith precluding registration.  See also Action Temp, 870 F.2d at 1566 n.9 (citing Anderson, Clayton & Co. v. Krier, 478 F.2d 1246, 1248 (C.C.P.A. 1973), for the proposition that “whatever benefits a federal registration confers are lost when that registration is canceled”).

Unfortunately, the B&B court’s research failed to disclose the cases—few of them, to be sure—reaching the opposite conclusion.  Spin Master, Ltd. v. Zobmondo Entertainment, LLC, 2012 WL 8134013 (C.D. Cal. Jun. 18, 2012), for example, has some striking similarities with this case.  The Ninth Circuit held that plaintiffs’ registration, which was granted without a requirement of showing secondary meaning, entitled it to a presumption of inherent distinctiveness and therefore reversed a grant of summary judgment to defendants. While the case was back before the district court, however, the time for filing the section 8 affidavit expired.  Plaintiffs argued that the presumption of validity/inherent distinctiveness still applied to the time the registration was in effect.  The court disagreed, concluding that “[t]he statutory evidentiary presumptions attendant to a registration disappear when the registration lapses, including a lapse caused by the failure to file a timely Section 8 affidavit.” 

Along with a few other cases, the Zobmondo court pointed to TTAB practice of rejecting expired registrations as evidence of anything, including protectability, validity, use, likely confusion, or anything other than that the registration issued.  “When a registration lapses, the ‘applicant is now in much the same position it would have been had the prior registration never issued ....’”  See, e.g., In re Compania Tabacalera Santiaguense, S.A., 1999 WL 546830, at *3 (T.T.A.B. July 21, 1999) (“Once a registration has been cancelled under the provisions of Section 8 of the Trademark Act, however, it cannot serve as evidence of any existing rights in the mark.… By failing to timely file a Section 8 affidavit, applicant has opened up its mark to reexamination under present standards.”); In re Compania Tabacalera Santiaguense, S.A ., 1999 WL 546830, at *3 (T.T.A.B. July 21, 1999) (non-precedential) (“Once a registration has been cancelled under the provisions of Section 8 of the Trademark Act ... it cannot serve as evidence of any existing rights in the mark.”); cf. Kellogg Company v. Western Family Foods, Inc., 209 U.S.P.Q. 440 (T.T.A.B. 1980) (explaining that TTAB makes an exception to its practice and takes judicial notice of cancellations of relevant registrations that occur during the pendency of an opposition proceeding, because of the potential material effect of cancellation on parties’ rights).

In sum, the Zobmondo court held, the expired registration “is treated as never having been issued,” which is “a bright-line rule that does not turn on the factual and procedural nuances of a particular case. Thus, when the ‘830 registration lapsed, the statutory presumption of validity evaporated.”  As a result, the plaintiffs would now have to proceed without any rights conferred by registration, despite their victory at the court of appeals based on their registration when suit began.  See also Advance Magazine Publ’rs, Inc. v. Norris, 627 F.Supp.2d 103, 114 n. 2 (S.D.N.Y. 2008) (finding that the presumption of validity evaporated upon expiration of registration two years after suit was filed and “affording neither presumptions nor evidentiary advantages to any party”). 

The reasoning in ZipSleeve, LLC v. West Marine, Inc., 2015 WL 2380990 (D. Or. May 19, 2015), relies on Lexmark but reaches the same conclusion:

ZipSleeve was indeed the “registrant” of the registered trademark “ZIPSLEEVE” when West Marine allegedly began its infringing activity in 2011. ZipSleeve accordingly argues that its right to sue under § 1114 accrued at that time—and that the cancellation of the mark [for failure to renew during the pendency of the case] did not extinguish that right….

A statutory cause of action “extends only to plaintiffs whose interests fall within the zone of interests protected by the law invoked.” Lexmark, 134 S.Ct. at 1388. The constructive notice to competitors and evidentiary presumptions afforded the registrant are among the most important rights a trademark registrant has under the Lanham Act. By contrast, the right to exclude others from use of the mark comes not from registration, but merely from priority of use of a protectable mark. And that right may be protected, in the absence of a registered trademark, using § 1125(a). The weight of authority thus clearly indicates that Congress sought to protect only the interests of plaintiffs with registered trademarks under § 1114. Plaintiffs with unregistered trademarks are protected by § 1125(a), but do not fall within the zone of interests protected by § 1114. Therefore, the owner of a mark that was valid when issued but which has since lapsed has no cause of action under § 1114—not even for infringement that occurred during the lifetime of the mark.

The B&B district court’s conclusion was, by contrast, that:

“registrant” and “registered mark” do not refer to a claimant’s present condition, but only the situation at the time of infringement. Hargis’s argument inserts words into the statute, as the Lanham Act does not say that a mark must be “presently registered” or “currently registered.” B&B’s registration was not cancelled because it was obtained improperly, but merely expired when it failed to renew. 

I don’t understand that distinction, which does not explain why someone with a mark cancelled for a substantive reason wouldn’t also have been the “registrant” at the time the lawsuit began.  The statute also doesn't say "legitimate/ly" or "valid/ly" before registrant/registered.

Anyway, the court went on to hold that B&B’s requested remedies, an injunction and money damages, were both still available. An injunction was still available to prevent injury given that B&B filed a new registration application seeking expedited review.  “Should Hargis be found liable at trial, the parties may argue whether an injunction is appropriate.”  As for damages, willful infringement wasn’t a prerequisite; the court found that the statute was straightforward because of the more recently added language requiring willfulness for damages caused by dilution.  And anyway, there was a question of material fact:

Viewed in the light most favorable to B&B, Hargis knew of B&B’s concern for the confusing marks since the mid-1990s, and even after Hargis won at trial in 2000, Hargis knew that the PTO deemed B&B’s mark worthy of registration. Hargis had knowledge of B&B’s registration, and thus B&B’s right of exclusive ownership, and Hargis admits that it was aware of the PTO’s later determination of incontestability. Based on this limited record, this is sufficient to create a jury question on whether Hargis willfully infringed on B&B’s mark.

(Is that really sufficient for willfulness as to infringement? Ah well.)  Questions about equitable defenses also would have to be resolved after liability, if it were found.

It depends on what the meaning of “is” is: Section 15 declarations and pending challenges

It turns out that Paleteria La Michoacana, Inc. v. Productos Lacteos Tocumbo S.A. De C.V., 2016 WL 3034150,  No. 11–1623 (D.D.C. May 27, 2016), is even more of a hairball than I realized.  The thorny legal and factual issues as delineated by the district court are plentiful enough, and at this point in the case there are also procedural questions about timeliness of arguments and the like which I can’t even begin to opine on.  

It turns out that there are also what appears to me to be mistaken Section 15 declarations wrongly accepted by the PTO.  Given that (1) the court found that the marks at the core of the controversy were geographically descriptive (whether the image of the Indian Girl was descriptive is a little unclear, so that too is an issue, but the decision is clear that the word marks are and its rationale would seem at least potentially applicable to the Indian Girl as well), and (2) the incontestability of one side’s marks was part of what let it prevail on priority, the PTO’s invited error might have been consequential and this case is even more of an issue-spotter than I thought.

Here’s what apparently happened: Prolacto counterclaimed in 2012 for cancellation of PLM’s older registrations on the grounds of fraud and abandonment.  (I understand that there were strategic reasons not to counterclaim for mere descriptiveness, but now that creates one of the procedural issues.) The court granted summary judgment in favor of PLM on these counterclaims in September 2014, at which point PLM filed for incontestability for its registrations of the Indian Girl alone, Nos. 2,905,172 and 2,968,652.

As with the bead dog case, TSDR clearly shows that this lawsuit is pending right before the Section 15 affidavit, but nonetheless the PTO, which doesn't conduct substantive examination of Section 15 affidavits, accepted the affidavit.  That affidavit stated that there was “no proceeding involving said rights pending and not disposed of in either the U.S. Patent and Trademark Office or the courts” (emphasis added).  That was just not true.  The law and the TMEP refer to proceedings and not to individual claims for cancellation, and rightly so: if the judgment is nonfinal, then, for example, the challenger could appeal and the court of appeals could reverse the district court on the nonfinally resolved issue—except, if the Section 15 affidavit is accepted in between the district court and court of appeals stages, then the court of appeals can’t rule on a challenge to distinctiveness or priority any more! 

There are cases indicating that if the trademark owner is a plaintiff, and no counterclaim challenging registrability was filed before the declaration was submitted, that’s not a problem. See TMEP §1605.04 (“The USPTO does not consider a proceeding involving the mark in which the owner is the plaintiff, where there is no counterclaim involving the owner’s rights in the mark, to be a ‘proceeding involving these rights’ that would preclude the filing or acknowledgment of a §15 affidavit or declaration.”).  And that too makes sense, because the mere fact that the trademark owner is fighting alleged infringers shouldn’t keep it from incontestability; at the point that no counterclaim has been raised, there is no element of the proceeding challenging the trademark owner’s ownership/right to register.  But that’s a completely different situation than a nonfinally rejected challenge to registrability. To maintain otherwise seems to me an implausibly tendentious reading of the word “is” that is inconsistent with the concept of challenges that are “pending” though not finally disposed of.

First, is it fraud on the PTO to file, claiming that there’s no pending challenge, in such a circumstance? Because the standard for fraud is so high I would say: not if there was a misunderstanding of the law (or the facts, though in this case the same firm handled the registration and the litigation), even an unreasonable misunderstanding.  (Though I think the lawyer should know better.)  Thus, the registration itself isn’t invalid. 

But, in my opinion, the Section 15 declaration still has to be revoked because the statutory requirements for incontestabilty weren’t fulfilled, even though the registration itself survives.  Because there’s no examination, this is the only way to keep the register accurate.  See Nahshin v. Product Source International LLC, 107 U.S.P.Q.2d 1257, 1258 n.1, 2013 WL 6040375 (T.T.A.B. 2013) (§ 15 affidavit filed after a petition to cancel was filed has no legal effect); cf. Duffy-Mott Co., Inc. v. Cumberland Packing Co., 424 F.2d 1095, 1100 (C.C.P.A. 1970) (noting that, because incontestability amounts to a “new right” as to the covered mark/goods, policing incontestability is of separate importance versus registration generally). I would think that the PTO, district court, or court of appeals, when informed of the problem, should revoke the acknowledgement of the declaration/order it revoked, as the PTO did with the bead dogs.

Here are the cases cited by PLM defending its position that it could take advantage of the gap between district court and appellate proceedings to file its affidavit: Sunrise Jewelry Mfg. Corp. v. Fred S.A., 175 F.3d 1322, 1327 (Fed. Cir. 1999) (no proceeding involving rights in the mark was pending because at the time section 15 affidavit was filed, no counterclaim challenging registration or validity of mark had yet been filed, though one was filed in between the filing of the affidavit and its acceptance by the PTO); Holley Perf. Prods., Inc. v. Quick Fuel Tech., Inc., 624 F. Supp. 2d 610, 616 (W.D. Ky. 2008) (section 15 affidavit of incontestability properly filed where counterclaim had not yet been filed); Levi Strauss & Co. v. Esprit US Distribution Ltd., 588 F. Supp. 2d 1076, 1083 (N.D. Cal. 2008) (no fraud where affidavit filer failed to investigate whether there was a pending challenge); J. H. Chapman Grp. v. Chapman, No. 95 C 7716, 1996 U.S. Dist. LEXIS 899, at *8-9 (N.D. Ill. Jan. 30, 1996) (same where affidavit filer didn’t disclose that a challenge had been threatened but not filed); 3 McCarthy on Trademarks & Unfair Comp. § 19:140 (4th ed.) (no challenge is pending until counterclaim has been filed); 1-4 Gilson on Trademarks § 4.03(2)(b) (Matthew Bender & Co. 2016) (reference to ability to file affidavit upon “successful termination of the litigation”; PLM's brief added the words “on the counterclaim challenging the registered mark”).

Other thoughts?  (I should disclose that PLM cites my earlier post on the case in arguing to the court that the judgment should be corrected because it doesn't make sense to cancel one of PLM's marks based on the existence of marks that infringe other, similar PLM marks.  I doubt it will want to cite this one.)

Stunning scope of color TM leads court to cabin registrations

Cedar Valley Exteriors, Inc. v. Professional Exteriors, Inc., No. 13-CV-2537 (D. Minn. Jun. 29, 2016)

See DuetsBlog’s 2012 entry on what appears to be a related case, in which the plaintiff roofing/repair company sued a different competitor for using orange on its signs.  (Related DuetsBlog entry on pervasive use of orange in the home improvement industry, making the PTO’s actions here even more troubling and plaintiff’s lawsuits seem even more anticompetitive.)

One might call this case a poster child for the problem of too-broad trademark registrations.  The court begin by deeming Cedar Valley’s service marks

highly unusual in two respects: First, both marks are for a color— specifically, the color orange. And second, both marks are extraordinarily broad. Together, the two marks appear to cover any use of any shade of orange in any article of clothing or any form of advertisement related to any aspect of the construction industry. Thus, for example, the use of orange safety vests on a construction site would appear to be encompassed by the registered marks—something that would no doubt come as a surprise to thousands of contractors.

How Cedar Valley was able to persuade the United States Patent and Trademark Office (“PTO”) to register such marks is a mystery, particularly given that Cedar Valley has used only particular shades of orange; used it only on shirts, lawn signs, and a few other advertising items; and used it only in connection with a narrow slice of the construction industry. But the PTO did register the marks [and they became incontestable], and, as a result, this lawsuit raises a number of difficult legal and factual issues. 

The court ultimately amends Cedar Valley’s registration and finds that there are outstanding questions of fact on likely confusion.

Cedar Valley logo

Flashy Cedar Valley logo

The plaintiff is primarily in the residential repair business, which it gets through “door-knocking campaigns, use of yard signs, [and] referrals and other advertising,” as well as through preferential relationships with insurance companies and their intermediaries.  Professional Exteriors does residential “remodel[ing] [and] restoration,” including similar services.  Sixty to seventy percent of its work consists of “insurance restoration” of storm-damaged homes.

“Cedar Valley uses orange on the signs that it puts on customers’ lawns and the shirts that its employees wear, as well as on flyers, door hangers, and other advertising materials.” Cedar Valley picked orange “[b]ecause it stands out more than other colors,” and because orange was “the most obnoxious, loud” color it could put on signs and shirts, according to its witness.

In 2008, Cedar Valley registered two service marks involving the color orange:

Registration No. 3,429,642 (“the ’642 mark”) is for “the color orange as applied to yard signs and other advertising materials used in advertising the services.” The drawing depicts a solid-orange yard sign outlined by dotted lines. Registration No. 3,429,643 (“the ‘643 mark”) is for “the color orange as applied to clothing worn during the performance of the services.” The drawing depicts a solid- orange short-sleeved polo shirt outlined by dotted lines.

Shirt registration

Sign specimen

Shirt specimen

Sign registration

The description of the services includes “building construction and repair; building inspection; construction and renovation of buildings; construction and repair of buildings; general construction contracting; installing siding; roofing contracting; roofing installation; roofing repair; [and] roofing services . . . .”

RT here: Examining TSDR, I found that the shirt mark had initially been nonfinally rejected for failure to function as a mark, with the 2(f) statement of five years of continuous use deemed insufficient because the nature of the claimed matter—the color of a shirt worn by an employee—wasn’t such that consumers would ordinarily perceive it as a mark.  The same was true for orange for signs.

In its response to the examining attorney, Cedar Valley argued that color was in fact registrable.  It also argued that its sales of over $12 million/year and its pervasive use of orange in marketing qualified orange as a trademark for its services, since its 250 sales reps each spoke in person to 5,000 potential customers per year (which works out to roughly 20/day in a 5-day week, yikes) and thus 1.25 million people were exposed to their orange clothing each year, not to mention anyone who saw their orange-clad workers on 1,500 roofing etc. jobs per year.  

Cedar Valley submitted employee declarations that they “often receive telephone calls from prospective and actual customers who often times invariably ask for them to confirm if Applicant is the roofing/siding company with the ‘orange signs’, ‘orange flyers’ and/or ‘orange shirts’.”  (Often times invariably?  The declarations themselves say “sometimes,” which is at least plausible; there are three employee declarations repeating this statement, though only one considers it common—her estimate is 30 calls/week; the other two employees only answered the phone when the receptionist was unavailable.)  Plus, Cedar Valley contended that there was evidence of actual confusion in that “a member of the purchasing public recently mistook services of a competitor wearing orange shirts as the services as provided by the Applicant.”  (In the declaration, the declarant states that the relevant customer signed a contract with a Cedar Valley sales rep, who unbeknownst to Cedar Valley gave her contact information to a competitor.  When the competitor showed up to perform the work, it’s not particularly surprising that she thought it was Cedar Valley; I can’t imagine the absence of orange shirts would have changed anything.) 

"We're the guys with the orange signs!"

The examining attorney accepted these claims; I saw no further correspondence.  The only “look for” advertising in the TSDR record was “we’re the guys with the orange signs!” on the second page of an orange flyer.  It’s hard to expect examiners to know how pervasive a color is in any given industry, but I still think this has facts consistent with rejections upheld by the TTAB, given the high burden of proof that color claimants should face.

Anyhow, back to the present dispute: Professional Exteriors began in 2010, and has used orange on its advertising and promotional materials, including yard signs and shirts.  After a 2011 C&D was ignored, Cedar Valley sent another in 2013 adding a demand for $25,000 in damages, then sued.

Professional Exteriors logo

Another Professional Exteriors logo

Photo with Professional Exteriors shirt

The court expressed concern about the apparent scope of the registrations.  At times, Cedar Valley argued that the marks were narrower than “any shade of orange in any article of clothing or any form of advertisement related to any aspect of the construction industry, … although Cedar Valley had difficulty explaining how they were narrower.”  The court appointed a trademark lawyer as an expert witness.  The expert described Cedar Valley’s marks as “very unusual” and the legal issues raised by those marks as “very hard.”  He concluded that the functionality and “phantom mark” doctrines justified amending the marks, but nonetheless recommended summary judgment for Cedar Valley on likely confusion.  The court agreed with the first part, but, as the responsible entity for legal determinations, not on the latter.

Mark Lemley & Mark McKenna will be glad to hear how the court approached the issue:

Before the Court can assess the merits of Cedar Valley’s infringement claims and Professional Exteriors’ defenses, the Court must first determine the scope of the registered marks. That is, before the Court can answer such questions as “how strong are the marks?” and “how similar are Professional Exteriors’ marks to Cedar Valley’s marks?,” the Court must first determine the precise scope of Cedar Valley’s registered marks. 

Functionality limits the scope of color marks.  In particular, functionality bars registration of orange for earplugs, because “orange is particularly visible and facilitates safety checks.”  So too with payphones, which if orange are easier to find in an emergency. And likewise with safety in the construction industry.  Given the breadth of the written descriptions of the marks, they encompassed functional use of orange in “clothing” and “advertising materials” across the entire construction industry.  Read literally, the registrations would cover construction workers’ safety vests and some of the orange signs at construction sites, which could be deemed advertising materials.  However, the court wasn’t sure if the record showed that orange serves the same safety function in residential repairs as it did on large construction sites.  (In my neighborhood, they use orange cones for small repairs all the time—it’s an easily understood warning sign.)  Still, orange was functional in most of the construction industry.  There was also a question about the eye-catching use of orange, that is, aesthetic functionality, but the record was contested at this point.

Given the record, Cedar Valley’s registrations had to be amended to be limited to “installing siding; roofing contracting; roofing installation; roofing repair; [and] roofing services.”

Separately, the marks as described were also illegitimate phantom marks. “[U]nder the Lanham Act and the rules promulgated thereunder, a trademark application may only seek to register a single mark.”  A mark that might change is not a single mark.  “The prohibition against phantom marks serves the primary purpose of federal trademark registration, which is providing notice to the public of the registrant’s ownership of the mark,” and allows people to search the register to figure out what’s there.

Color marks are subject to the phantom mark rule, and Cedar Valley’s marks conflicted with it on their face.  However, the TMEP allows an exception for color service marks when an applicant “seeks to register a single color as a service mark used on a variety of items not viewed simultaneously by purchasers.”  They can represent the mark as “a solid-colored square with a dotted peripheral outline . . . .” TMEP § 1202.05(d)(ii). The idea is that a color service mark can be applied to a variety of objects (“e.g., stationery, uniforms, pens, signs, shuttle buses, store awning, and walls of the store”), but still create for the consumer a unified “distinct commercial impression.”  (The court pointed out that Home Depot has its own registration for orange for advertising for installation services, “including, notably, the installation of ‘roofing’ and ‘seamless gutters.’”)

The court’s expert expressed doubt about the validity of this exception; the TMEP notes that no court has blessed it, and, as a policy matter, it’s not clear that such a registration provides adequate notice.  The court didn’t need to decide the matter, though, because Cedar Valley hadn’t registered a solid-colored square with a dotted peripheral outline.  The drawings depicted a lawn sign and a polo shirt.  And, “[i]n the case of a discrepancy between the drawing and the written description of a color mark, the drawing controls the text”:

To hold otherwise would be to ignore the public-notice function of trademark law. Cedar Valley’s marks cannot be allowed to encompass any type of advertising materials and any article of clothing, because the drawings in the registrations depict only a yard sign and a polo shirt, and thus indicate to anybody who finds Cedar Valley’s registrations in a trademark search that the marks are limited to those particular objects. The drawings do not give anyone wanting to establish their own service marks adequate notice that Cedar Valley’s marks encompass more than lawn signs and polo shirts.

The drawings also determined the particular covered shade of orange, though the court noted that infringement by different shades of orange would still be possible.  And the drawings determined the particular manner in which orange was claimed: “the entire surface” of short-sleeved polo shirts and yard signs, not orange stripes or orange trim or orange lettering against a non-orange background—though again, that didn’t exclude infringement claims against such uses.  (Though, especially with functionality concerns, I think the registration’s limits should weigh very heavily against a finding of infringement in such cases.)

The court also held that it had power to rectify the register even as to incontestable marks, which the parties didn’t contest.  And since the changes here aren’t based on lack of distinctiveness, that seems correct.

On to likely confusion, where there was conflicting evidence on the strength of the marks and the degree of competition  between the parties; there was no evidence of bad intent or actual confusion; and the consumers were likely to pay a lot of attention.  There were also factual disputes about the functionality of orange in connection with roofing and siding.  Finally, though Cedar Valley emphasized the incontestability of its marks, Professional Exteriors could still argue that the marks were weak because they lacked distinctiveness or secondary meaning.

Trademark question of the day, zoo edition

Spotted by an eagle-eyed correspondent (no pun intended) at the New Orleans zoo:

Straight Outta Audubon Zoo

Just Voodoo It

TM/false advertising interface: "same formulation" statement w/o more infringes

De Simone v. VSL Pharmaceuticals, Inc., No. TDC-15-1356, 2016 WL 3466033 (D. Md. Jun. 20, 2016)

This case sends us deep into the weeds of the distinctions between trademark and false advertising, and approves rather onerous requirements for apparently truthful statements about the relationship between the parties’ products.

De Simone was one of the inventors of a probiotic that he then brought to the US market through a partnership with VSL, marketed under the trademark VSL#3.  In 2015, De Simone parted ways with VSL and began a partnership with ExeGi Pharma to bring his formulation to market under the name Visbiome.  VSL alleged that De Simone and ExeGi infringed the VSL#3 mark and falsely advertised that VSL#3 was no longer on the market or that Visbiome was the rebranded version of that product.  The court previously granted a preliminary injunction in favor of VSL barring certain conduct by the De Simone parties as infringing, including depictions of Visibiome that referred to it as “Original Formula VSL#3 Probiotic Blend” and “Visbiome/VSL#3 blend”; the phrase “Same as Original Formula VSL#3 Probiotic Blend”; references to clinical studies as “Reported as VSL#3”; and the general statement that Visbiome is “the same” as VSL#3.

The court also provided safe harbor language that was likely fair use: (1) “Compare to Ingredients in VSL#3,” as long as it was accompanied in close proximity by the disclaimers that VSL#3 was a registered trademark of, and manufactured exclusively for, VSL, and that Visbiome wasn’t affiliated with, endorsed by, or distributed by VSL; (2) the statement that “Visbiome contains the same strains, in the same concentrations and proportions, as the VSL#3 probiotic blend as produced before [Date],” one time in the Visbiome materials, accompanied by the same disclaimer; (3) accurate information about De Simone’s role in developing VSL#3 that made clear that there was no current affiliation between Visbiome/ExeGi and VSL#3/VSL.  E.g.,

In the mid-1990s, Professor Claudio De Simone, M.D. invented a proprietary blend of probiotic strains and collaborated with VSL Pharmaceuticals, Inc. to produce and market it as ‘VSL #3,’ a trademark owned by VSL Pharmaceuticals, Inc. In 2014, Professor De Simone decided to leave VSL Pharmaceuticals and is now collaborating with ExeGi Pharma, LLC to produce Visbiome, a probiotic using the same proprietary blend of probiotic strains that De Simone originally invented.

ExeGi launched Visbiome on February 1, 2016, the day after the agreement between VSL and Danisco, the original manufacturer of VSL#3 and current manufacturer of Visbiome, expired on January 31, 2016.   ExeGi issued a press release and a LinkedIn posting using the safe harbor language with a disclaimer in a footnote.  The press release also redefined the strains and concentrations in VSL#3 as the “De Simone Formulation,” to indicate a continuity with VSL#3 without the actual use of that trademark, and asserted that the De Simone Formulation had undergone numerous scientific trials and was the subject of “over 60 peer-reviewed studies.”

The press release also said: “The license agreement between Professor De Simone and VSL Pharmaceuticals, Inc., which provided VSL Pharmaceuticals, Inc. the rights to market the De Simone Formulation using the ‘VSL#3’ trademark, expired on January 31, 2016.”  Likewise, on LinkedIn, ExeGi sent a message to its 85 LinkedIn followers stating: “Have you prescribed the medical food VSL#3 in the past to your patients with IBS, Pouchitis or Ulcerative Colitis? The De Simone formulation you’ve been prescribing to your patients will now be available as Visbiome.”  The posting did not contain the disclaimer.

After further infighting, the court issued an additional order requiring ExeGi to remove the language about license expiration from future communications and generally refrain from stating or suggesting that the license agreement had expired or that VSL#3 wouldno longer be on the market, and include the disclaimer in close proximity. 

VSL objected to statements on the Visbiome website (multiple uses of the safe harbor statements, references to clinical trials that included VSL#3 in their titles, and claims to exclusivity of the formulation), ads that appeared in response to Google searches, and statements made by ExeGi sales representatives and the sales training materials they received and used.  [I note, with respect to the clinical trials, if they really did use VSL#3 in their titles, and if ExeGi really is using the formulation tested, there would appear to be a severe First Amendment problem with banning any references to those trials.  The court focused on the fact that the webpage listing studies didn’t contain a disclaimer or explain why VSL#3 was being referenced.]

ExeGi used both static and dynamic AdWords ads. Static ads display pre-drafted text, while dynamic ads incorporate searched-for keywords into the text of an otherwise pre-drafted ad. “A line of code for a dynamic ad might read ‘Best treatment for {keyword},’ with the user’s search term to be inserted in place of ‘{keyword}’ when the ad appears.”  For its static ads, ExeGi used ads such as one beginning “Have You Ever Used VSL#3?/If So, Check Out Visbiome….”  For dynamic ads, it used ads such as one beginning “{ Keyword: Have You Ever Used VSL#3}/If So, Check Out Visbiome….”  The ads didn’t have a disclaimer, and some of the ads actually appeared as “VSL#3/www.visbiome.com/If So, Check Out Visbiome High-Potency Probiotic….”  VSL’s expert witness on AdWords and SEO testified that this truncation to the keyword alone occurs “when the proposed dynamic headline, including the keyword, would exceed 25 characters.”  ExeGi maintained that it never intended for VSL#3 to appear by itself without the question, and it paused the ads when Google was unable to explain the truncation.

VSL’s expert witness also said that Visbiome’s website showed “keyword stuffing”: repeatedly using VSL#3 to increase the likelihood that Google’s search algorithm will associate the website with that term and thereby increase the prominence of that site in search results relating to that term. “VSL” was the second most frequently used term on the Visbiome website, used even more frequently than “ExeGi.” “VSL#3” frequently appeared “below the fold,” “a placement that may indicate that the term is used more to influence the search algorithm than as text intended for website users.”  ExeGi responded that it put the Disclaimer on every page of the website to be responsive to VSL’s concerns, at the bottom of the page in a “black box” to signal its importance to medical professionals.

VSL also complained that ExeGi sales reps told people in at least three doctors’ offices that VSL#3 was no longer being sold.

VSL moved to hold the De Simone parties in civil contempt, which requires violation of the terms of a valid decree that caused harm to the movant. There is no requirement that the violation be willful.  But, because intent is irrelevant, the order allegedly violated must be one that sets forth in “specific detail an unequivocal command.”  

VSL argued that the use of the safe harbor statements on the Visbiome website was excessive and the disclaimer wasn’t close enough to the use of the mark.  The court found that it was unreasonable for the De Simone parties to interpret the term “only once in the Visbiome materials” as permitting multiple uses on the Visbiome website, up to once on each individual page of the website.  Thus, they violated the spirit of the order, though not its letter, because the order never expressly barred any particular number of uses of VSL#3 or other approved language.  The multiple uses went outside the safe harbor, which was for a single use, but didn’t violate the order.  The order also required the disclaimer to be in “close proximity” to use of VSL#3, and the court found no violation there—sometimes the disclaimer was in text shortly after the reference to VSL#3, and when it was in a footnote, it had the same font, same size, and same color as the main text. “The use of a footnote and placement of the Disclaimer ‘below the fold’ may reduce the likelihood that a user will read it, but with Visbiome’s own content at times requiring the reader to scroll down, the Court cannot say that there is clear and convincing evidence that ExeGi has placed its required disclaimers at a distance too far from the VSL#3 mark to satisfy the requirement of ‘close proximity.’”

However, the court was “troubled” by the lack of footnote reference markers next to the term VSL#3 when it was used in study names.  This appears to me to be excessively formalistic.  Anyone looking at the references would likely have plenty of opportunity to see the disclaimer already, and as the court itself noted, readers would need to understand the relationship between VSL#3 and Visbiome to understand why these were listed as references. But the court reasoned otherwise: “The failure to direct the reader to the Disclaimer substantially decreased the likelihood that it would be noticed, so this omission could be viewed as indicating an intent to obfuscate the fact that the clinical trials were performed on a product offered by a different company.”  Still, the disclaimer was at the bottom of the clinical references page, and so there was no violation of the order.

The court did find the De Simone parties in contempt for the AdWords ads.  “While the Court agrees that the headline ‘VSL#3,’ accompanied by no other text, would appear to be an aggressive attempt to co-opt the VSL#3 mark, the Court has issued no orders barring advertising through Google AdWords, employing dynamic ads, or using VSL#3 as a keyword for such ads, so the fact that a dynamic ad resulted in such a headline, intentionally or unintentionally, does not specifically implicate any of the Court’s prior orders.”  But the disclaimer was required, and several of the AdWords ads didn’t have it.  Even if AdWords text didn’t have enough space for the disclaimer, the court’s order provided no exceptions for space limitations in particular advertising media.  Nor was “close proximity” satisfied by having the disclaimer available once someone clicked on the ad.  “The De Simone Parties’ interpretation of proximity as ‘one click away’ defines that term as a physical act, not a measure of distance, and thus cannot be deemed a reasonable interpretation of the language of the February 2016 Order.”  (I think it’s a bit odd for the court to say that proximity requires physical distance in this context, but ok.)  This shifted the burden of compliance to Google’s users, who needed to click to see the disclaimer. 

The court also found that the initial use of the statement that the De Simone formulation was “exclusively available” from ExeGi, coupled with the website’s assertion that the De Simone Formulation is the same as that used in VSL#3, led to “the unmistakable conclusion that VSL#3 is no longer available for sale,” thus violating the court’s order.  The De Simone parties might have intended only to go up to the acceptable line, but they crossed it.  By contrast, statements that De Simone was “collaborating exclusively” with ExeGi “merely states that De Simone has changed companies and does not suggest that VSL#3 is no longer on the market.”  (Interesting how thinly the court is slicing this, given that the targeted consumers probably don’t make these distinctions—or care.)

The court then turned to VSL’s false advertising claims, which turned on ExeGi’s claims to exclusivity/claims that VSL#3 had been discontinued.  Given that VSL had stockpiled the older formulation of VSL#3 and could still sell it, plus the fact that VSL was going to reformulate the product, these claims were false or misleading.  De Simone’s statement “my formulation is now exclusively available from ExeGi Pharma” as Visbiome was likely literally false while VSL’s plentiful stockpiles were available.  This was likely to harm VSL; the court noted that when an ExeGi sales rep made similar statements to one gastroenterologist’s office, that office accepted Visbiome samples and declined to accept any more VSL#3 samples.  

However, the court found that the sales reps’ statements weren’t likely to constitute advertising or promotion.  The Fourth Circuit hasn’t interpreted that language in the Lanham Act.  The court cited the Seventh Circuit’s since-renounced holding that for purposes of a false advertising claim, “[a]dvertising is a form of promotion to anonymous recipients, as distinguished from face-to-face communication.” First Health Group Corp. v. BCE Emergis Corp., 269 F.3d 800, 803 (7th Cir. 2001).  [See Neuros Co., Ltd. v. KTurbo, Inc., 698 F.3d 514 (7th Cir. 2012)]. But the court here agreed with the Second Circuit that such a reading “collapsed the disjunctive statutory language ‘commercial advertising or promotion’ into only commercial advertising.”  Using the relevant parts of Gordon & Breach, the court followed the Second Circuit’s lead, looking for (1) commercial speech; (2) for the purpose of influencing consumers to buy defendant’s goods or services; (3) disseminated sufficiently to the relevant purchasing public to constitute “advertising” or “promotion” within that industry.  Element (3) was not satisfied on the present record.  Since Visbiome’s launch, ExeGi sales reps had made sales calls at about a thousand doctors’ offices; three alleged instances of false statements weren’t sufficient in that context.

VSL argued that the court should consider the sales reps’ statements as part of an organized campaign along with the website statements and find them collectively to qualify as “widespread dissemination.”  The court here declined to hold that “face-to-face statements could be combined with distinct forms of commercial advertising, such as websites or press releases, to satisfy this requirement.”

The court presumed irreparable harm because the literally false statements were functionally comparative advertising. The public interest is against misleading advertising, and so a more expansive preliminary injunction was warranted.

“The evidence presented has amply established that the De Simone Parties’ activities in all three areas continue to be likely to cause confusion over whether Visbiome and VSL#3 are the same product.”  I note that stated this way, this is purely false advertising, not confusion over source or sponsorship—and if they have the same formulation, reasonable consumers might well consider them to be the “same product.” Nonetheless, the court proceeded as if this were a trademark case, holding that the repeated use of VSL#3 on the Visbiome website went too far.  The court cited 15 U.S.C. §1115(b)(4) and descriptive fair use cases, not nominative fair use cases, even though the use is very clearly not descriptive in the ordinary trademark sense.  Also, this result highlights the silliness that the “too much” inquiry can lead to—the ultimate question should be “is this use confusing?” and the fact that a website has a single footer that it uses on every page doesn’t plausibly increase the likelihood of confusion. 

The court also didn’t like that the disclaimer frequently appeared only in a footnote at the bottom of the page, “barely within ‘close proximity’ to the VSL#3 mark.”  So too with the references to clinical trials, which the court previously allowed “so long as the VSL# 3 trademark was not used in such references,” and the De Simone parties’ use of the added parenthetical “Reported as VSL#3” in connection with clinical studies was expressly barred by the prior court order.  In the court’s view,

the combination of the repeated claim throughout the website that the De Simone Formulation has been the subject of over 60 clinical trials and this listing of numerous clinical studies with VSL #3 in the title without a cross-reference to the Disclaimer creates significant confusion whether VSL#3 and Visbiome are the same product. Even if ExeGi has a reason to refer to those studies because Visbiome is, as a scientific matter, the same formulation that was subjected to those trials, that scientific equivalence cannot be used as an opportunity or excuse to erode VSL’s trademark.

And here we have the guts of the problem: “eroding” a trademark isn’t actually a claim under the Lanham Act.  If the use causes confusion as to source or sponsorship, that’s trademark infringement, but the court seems to think that confusion over what’s in Visbiome (which might be understanding, not confusion!) is also trademark infringement.  The classic Smith v. Chanel case, like many others, makes clear that the remedy for this latter claim, if it’s false, is in false advertising. 

In fairness, the fact that trademark now is so expansive and covers immaterial confusion makes it easy for the court to conflate the two.  The court appealed to testimony from one staff member in a doctor’s office who apparently came to believe that VSL#3 had changed its name to Visbiome, which “implicates not just false advertising concerns, but also trademark infringement concerns, because the staff member appears to have believed that Visbiome was the same product, made by the same company, as VSL#3.”  I do note that this testimony appears to have been submitted by an affidavit solicited by VSL, without too much inquiry into how much the staff member distinguished between the two propositions (what's in the product/who sold the product in the US) or cared.  

One useful feature of nominative fair use, for all its flaws, is that it insists on the basic right of people in the market to make truthful claims.  If, as I expect is the case, some set of consumers will always understand “Visbiome has the formulation that used to be available in VSL#3” to indicate some continuity between the responsible companies (which is at least true-ish in this case!), that shouldn’t prevent the seller from stating the truth of that fact.  We can pile on further disclaimer requirements, but most disclaimers don’t work, so this is often just courts making themselves feel better about inevitable confusion.  In this situation, perhaps, doctors will have an incentive to listen and learn that “VSL#3 is still on the market, but with a new formulation, and we’ll be the only supplier of the formulation you know and love once stockpiles of existing VSL#3 run out.” But that’s probably rare.

The court also found that prior statements on the website, “asserting that the formulation used in VSL#3 was now ‘exclusively available’ as Visbiome, created additional confusion whether VSL#3 had simply been renamed as Visbiome.”  Again, the court is mushing together two questions—who produces Visbiome (a particularly tricky inquiry given that, in fact, VSL#3 used to get its formulation from the same manufacturer now providing it only to ExeGi in the US) and what’s in Visbiome.  A reasonable consumer could easily understand these claims to be about what’s in Visbiome, and as far as I can tell from what’s written in the opinion, that interpretation renders the claim true, with the exception of the stockpiled VSL#3. The court doesn’t even indicate that the inactive ingredients differ.

The court found that ExeGi’s use of this language was “a telling indicator of ExeGi’s market posture,” which was to use VSL#3 “to define what Visbiome itself is. The Court therefore can draw no other conclusion than that ExeGi has and continues to use the VSL#3 mark on the Visbiome website in a way that creates confusion and thereby enables Visbiome to impermissibly ‘profit from another’s reputation.’”  Why this isn’t the same mechanism used in Smith v. Chanel is an open question.

For AdWords, VSL didn’t argue that mere use of VSL#3 as a keyword would be infringing, and there wasn’t enough evidence to find that the De Simone parties were “keyword stuffing”; search results showed Visbiome appearing as part of one of ExeGi’s Google AdWords ads, but not as a result of organic search results, and the court noted that, in recent years, courts have understood that such conduct probably doesn’t improve search ranking anyway.  However, the Google ads using just VSL#3 in the top line “exacerbated the confusion in the marketplace between Visbiome and VSL#3.”

The court declined to treat the De Simone parties as adjudicated infringers required to keep a “safe distance” from VSL’s mark, in the absence of a final ruling on the merits.  The court declined to prohibit use of VSL#3 entirely, but expanded the injunction given the De Simone parties’ demonstrated willingness to “go as close as possible to any line drawn by this Court.”

As a result, the De Simone parties were allowed to use the “same strains” language and “De Simone history” language only once on the entire Visbiome website, with the disclaimer in immediately adjacent text, not a footnote.  [I wonder if you could change the website so that it was just frames for other parts, so that these always stayed on top ….] “Any other phrases using VSL#3 must be approved by the Court and may appear only once on the website, again with the Disclaimer in the immediately adjacent text.”  They had to remove the footer from any page that didn’t use VSL#3 in text.

Further, the website couldn’t claim that any clinical study using “VSL#3” in the study title constituted a study relating to the “De Simone Formulation” and couldn’t not list such studies on the website or the package inserts.  [Hold on!  I take it that all the studies, whether or not they used VSL#3 in their titles, used VSL#3 on their subjects.  Thus, the parties seem to agree that it’s truthful to refer to studies that used VSL#3 to show the likely effect of Visbiome on patients.  Given these predicates, how is this injunction compatible with the First Amendment?  Either it’s truthful to attribute VSL#3 results to the formulation, or it’s not; that can’t turn on the study’s name.]

AdWords text couldn’t include VSL#3 unless the court approved text including the substance of the disclaimer.  And the DeSimone Parties had deliver to each medical office on its sales list a letter, with language pre-approved by the court, stating that VSL#3 has not been discontinued or scheduled to be discontinued, that VSL#3 did not change its name to Visbiome, and that Visbiome is a competing probiotic produced by a different company. The letter couldn’t address the status of licensing agreements or rights to produce a probiotic using the same formulation as VSL#3 prior to January 31, 2016.  [But could the letter say that VSL#3’s formulation will change?  Because that seems like really, really important information for people to know, if they have patients who are doing well on the formulation.]

While the case was pending, “all Visbiome promotional and marketing materials, including the website, package inserts, sales scripts, and any other materials to be provided to or used in discussions with potential customers or medical offices” had to be submitted to VSL’s counsel and, if there were disputes, preapproved by the court.

As for false advertising, the De Simone parties were enjoined from misleading customers and medical professionals into believing that (1) VSL#3 is or will in the future no longer be on the market; (2) that the De Simone Parties were the exclusive provider of the De Simone Formulation or the probiotic formulation in VSL#3; (3) that VSL#3’s license to sell this formulation has expired or would expire; (4) that VSL#3 had a new name or that Visbiome was a rebranded version of VSL#3. 

Copyright/TM question of the day, politics edition

Analyze the linked Buzzfeed public service announcement about registration (warning: link will likely autoplay).

Judge McKeown on copyright, and responses (including mine)

Hon. M. Margaret McKeown,  Censorship in the Guise of Authorship: Harmonizing Copyright and the First Amendment, 15 Chi.-Kent J. Intell. Prop. 1 (2016)

Margaret Chon, Copyright’s Other Functions, 15 Chi.-Kent J. Intell. Prop. 364

Edward Lee, Suspect Assertions of Copyright, 15 Chi.-Kent J. Intell. Prop. 379

Rebecca Tushnet, Fair Use's Unfinished Business, 15 Chi.-Kent J. Intell. Prop. 399

Alfred C. Yen, The Challenges of Following Good Advice About Copyright and the First Amendment, 15 Chi.-Kent J. Intell. Prop. 412

Allegations of undisclosed sponsorship defeat anti-SLAPP motion at pleading stage

Woodard v. Labrada, 2016 WL 3436434, No. 16-00189 (C.D. Cal. May 12, 2016)

Woodard brought a putative class action alleging that various defendants (Media Defendants) misrepresented the weight loss benefits of weight loss supplement products made by the Manufacturing Defendants. Woodard alleged that Dr. Oz fraudulently promoted and marketed the weight loss benefits of the products on his daytime television show “The Doctor Oz Show.” Dr. Oz was allegedly “paid by Defendants Labrada, Interhealth, and/or Naturex in exchange for promoting Green Coffee Bean Extract, Garcinia Cambogia, and Raspberry Ketones on The Dr. Oz Show.”  Media defendants Zoco, Harpo, and Sony produce The Doctor Oz Show and that Sony distributes the show. Woodard alleged that Dr. Oz, Zoco, Harpo, and Sony were jointly liable for Dr. Oz’s misrepresentations.

The court found that Woodard didn’t allege sufficient facts showing Zoco, Harpo, and Sony engaged in a joint venture or civil conspiracy with Dr. Oz to fraudulently promote the products, or that they were liable through an agency relationship or aiding and abetting. However, the court declined to dismiss various consumer protection claims against Dr. Oz.

The court briefly dealt with the argument that Dr. Oz’s statements weren’t commercial speech, because Dr. Oz didn’t propose a commercial transaction in any of his challenged statements and repeatedly told viewers of his television show that he did not promote or sell any of the Products. However, the complaint alleged that Dr. Oz informed viewers of his show that specific brands of commercial weight loss products were effective. Moreover, the Complaint alleged that Dr. Oz was paid by the manufacturing defendants in exchange for promoting the products. That was enough under Kasky v. Nike.

Although defendants argued that California’s anti-SLAPP law applied, FRCP 56(d) overrode it for discovery purposes.  Woodard was entitled to discovery about the relationships between Dr. Oz, the other media defendants, and the manufacturers, to determine whether the speech at issue was in fact commercial speech.  The court thus declined, at this point, to shift fees under the anti-SLAPP law.

EFF/OTW/library/etc. comments on Copyright Office proposal on DMCA registration renewals

Read them here.  The Copyright Office has indicated, unwisely, an intent to make DMCA registrants re-register every three years, which will set up another hurdle for ISPs and encourage copyright trolls.

class action complaint survives GNC in 4th Cir. by pleading misleadingness

Midwestern Midget Football Club Inc. v. Riddell, Inc., 2016 WL 3406129, No. 2:15-00244 (S.D. W. Va. Jun. 17, 2016)

Midwestern is a nonprofit youth football organization, and Riddell makes helmets for football players.  Midwestern bought 12-24 Riddell Revolution Helmets per year; the market price allegedly reflects Riddell’s claim to provide greater concussion reduction compared to other helmets. Midwestern sued for false advertising under the West Virginia Consumer Credit and Protection Act.  Initially, the court dismissed the claim because “marketing statements that accurately describe the findings of duly qualified and reasonable scientific experts are not literally false ....” In re GNC Corp., 789 F.3d 505, 509 (4th Cir. 2015).  (Ugh.)

Midwestern refiled, claiming misleadingness and unjust enrichment.  [Discussion of GNC’s wrongheaded description of state consumer protection statutes omitted.]  Given GNC, Midwestern’s amended complaint alleged misleadingness, claiming that ads that cited the study on which Riddell relied were misleading because the youth helmets at issue were not examined in the study.

Riddell argued that Midwestern’s theory of misleadingness contradicted its earlier claims of literal falsity (since Midwestern had to concede that the claims were “literally true” but misleading). The court disagreed, because that’s not how allegations in superseded complaints work.  Also, Midwestern didn’t need to identify any particular statement as “literally true”; it was enough under GNC to identify a statement that was misleading.  “This central allegation, that Riddell used the Pittsburgh study to suggest a safety benefit for youth Revolution Helmets even though it was a different class of helmets that was subject to testing, provides enough basis to plausibly support a claim for false advertising.”  Midwestern didn’t need to plead with more specificity what the differences between the helmets were.

For causation, reliance, and injury, it was enough to plead that,

[b]ecause Riddell’s claims were included in advertisements, marketing, and sales presentations, a reasonable consumer would likely be misled into believing that the Revolution Helmet will reduce concussions, and may do so by 31%. This allowed Riddell to capitalize on consumer confusion and charge a premium price of approximately $50 for the Revolution Helmet, which reflected the illusory safety benefit of its “Concussion Reduction Technology.”

The complaint also satisfied Rule 9(b) by alleging that Midwestern purchased Revolution Helmets on an annual basis since 2002 and that Riddell made concussive reduction technology claims through a number of advertising channels at that time and up to the present day.

Likewise Midwestern plausibly stated a claim for unjust enrichment under West Virginia law by alleging that a benefit was conferred on the defendant when it knowingly collected a market premium for its youth helmets thanks to its misleading marketing claims. 

Reading List: The Copyright Wars

Peter Baldwin, The Copyright Wars: Three Centuries of Trans-Atlantic Battle (2014)

Baldwin’s basic proposition is that there has been a long history of struggles between creators, distributors and the public, and a related struggle between the idea of Continental authors’ rights (fundamentally moral) and UK/US copyrights (fundamentally economic).  The book is full of tidbits about copyright and authors’ rights.  For example, I did not know that the French word for ghostwriters is “nègres,” which is amazing.  More detail, from JakeLamar at The Root: 

The French started calling ghost writers nègres back in the 1700s, just as colonialism and the slave trade were gaining momentum. The idea was that writing under someone else’s name, erasing your own identity, was thankless servitude on a par with the labor of colonialism’s black subjects and victims.  

Speaking of slavery, the US was a pirate nation for a long time, refusing to grant rights to foreign authors, and during the Civil War the South found time to enact a more protective copyright law, “[t]o distinguish itself from the North, cultivate an aristocratic and nonmercantile national identity, and appeal to the British.”  It didn’t work.

I liked Baldwin’s argument that, if, as some authors claim, the ability to own Blackacre in perpetuity justifies the ability to own Black Beauty in perpetuity, then authors should also have to pay property tax every year. He’s trying to understand what might seem to be a perplexing phenomenon: While authors gained more rights over the past few centuries, our commitment to absolutism in real property rights has declined with the acceptance of the social aspects of private property, operationalized in zoning, rent control, health and safety regulation, etc.

Other things I didn’t know: German composers were free to set poems to music until 1965, when the poets’ lobby achieved a law preventing this, perhaps connected to the decline of Lieder, “the once archetypical German musical art form.”  The US’s refusal to protect foreign authors made American edition print runs as big or bigger than British print runs even when the US had only half Britain’s population.  In 1775, almost as many copies of Blackstone’s Commentaries had been sold in America as in England, and Dickens was later serialized on the back of railroad times tables.  Baldwin suggests that higher prices in the UK were somewhat offset by its lending libraries, whereas the greater distances separating people in the US meant that books had to be bought rather than borrowed.  I loved the statement of Senator John Daniel of Virginia, opposing international copyright in 1891: “It is a bastile [sic] of letters which is here constructed, and not a republic.”  Separately, but not unrelatedly, Wordsworth insisted that his friends not lend copies of his books to anyone who could afford to buy them.

Moral rights, Baldwin shows, emerged in fascist Europe, part of the self-contradictory conception fascists had of authors as cultural icons of the state, both worth protecting (when they produced the right stuff) and ultimately subordinate to the needs of the community.  Authors’ honor deserved protection, but honor was defined by the community rather than by the individual.  Baldwin doesn’t consider this a knockout strike against moral rights; after all, he notes, Germany outlawed the death penalty at the prompting of a far-right party hoping to spare Nazis.  Moral rights were in part a response to technological change, holding out hope for the author to fix meaning.  They were also, especially in France, a response to specific legal issues, like divorce and inheritance—surely a child, an ex-wife, or a creditor shouldn’t just get to change an artist’s work to make it more marketable!  This relatively autonomous legal character may be connected to the fact that the authors’ rights/copyright conflict doesn’t map well onto any traditional left/right divide: copyright loves the ideology of the market, but also the public domain; authors’ rights sneer at the market but support cultural conservatism.

But perpetual moral rights lead to bizarre situations.  “In 1988 the sole lineal descendant of the painter Achille Deveria (died 1857) secured a court decision against the French magazine L’Express for printing a portrait of Franz Liszt from 1832, removing its bottom part and adding some color.”  Also, the Danish director Jens Jørgen Thorsen made a film on the life of Christ, enhanced “in the tediously predictable way of would-be provocateurs—with brothels and orgies, Mao and Uncle Sam.”  Result? “The Danish parliament and public asked whether the project was blasphemous and if it violated the moral rights of the authors of the gospels of Matthew, Mark, Luke, and John (whoever they were).”

This leads Baldwin to a more significant theoretical point: moral rights begin as highly individualistic, reinforcing “the author’s claim to enforce the singularity of his vision even after death.”  But time marches on, despite the claims of descendants and heirs.  Ultimately, some representative of the broader society steps in “to preserve what by now—if he remained of interest—had become the author’s position in a canon.… [C]ultural bureaucrats safeguarded not his individual vision, but a socialized understanding of where he fit in the pantheon.”  Authors’ rights hardened in Europe in the 1950s and 60s, when “France and Germany sought to distinguish their nascent postwar democracies both from their totalitarian predecessors and from what they and their facist forbears alike saw as the Anglophone world’s crass commercialization of culture.”  They abandoned the fascists’ populism and embraced a moral rights of elitism, preventing any debate on balancing the interests of the author and the audience for a long time after WWII. 

By contrast, Britain and America had an audience focus; “[r]ights of aesthetic control were shunned as fanciful and needless concessions to foppish artistes.”  Only when the US became such a major content producer that economic realities drove us to accede to Berne did we pretend to recognize moral rights.  Hollywood enthusiastically embraced the strong rights and long terms of Europe, without moral rights.  But, though expansive copyright is often considered an American export, it can also be seen as a Europeanization of rights, just as the U.S. ultimately adopted the European first-to-file patent regime (and, though he doesn’t mention it, a more registration-based trademark system).  As Baldwin points out, American positions actually lost out in GATT on performers’ rights (included) and favoritism for local cultural productions (preserved, as a bastion against American media intrusion).  Meanwhile, the magpie/collaborative nature of film forced Europe to adjust its former model of the individual author and the printer, bringing Continental and Anglo approaches closer together.  And then digitization unsettled balances all over—including on the Continent, where skeptics such as the Pirate Party have finally asked whether authors’ rights have gone too far.

Baldwin takes the long view, arguing that technological disruptions have occurred before, as has the democratization of media, often to the same laments/predictions of utopia just around the corner.  Washington Irving’s “The Mutability of Literature” announced the age of “excessive multiplication,” where freedom from parchment and quill made “every one a writer, and enabled every mind to pour itself into print, and diffuse itself over the whole intellectual world”—in 1819.  In 1933, a French observer lamented that recorded music was omnipresent, yet authors hadn’t been “rewarded in proportion to this enormous expansion of consumption.” Truly, there is nothing new under the sun.

Baldwin sees the aim of Google Books as Dionysian—to dissolve all books into a greater carnival of knowledge, and he’s a bit suspicious, though not condemnatory.  In fact, he’s suspicious of all sides, who generally look out for their own interests as readers, authors, publishers, intermediaries, etc. and not for the overall good.  And watch out, Twilight and Fifty Shades critics: “At no moment do we more date our selves than when we draw the line between culture and barbarism. Your artistic abuses are your children’s classics.”

One nit to pick when he gets to American academics, whose generally restrictionist views he attributes to not needing to sell books to make a living—Carol Rose is not, as he strongly implies, a “retooled humanities PhD[], refugee[] from the academic downturn of the 1980s and ‘90s,” nor would I consider her “heavily influenced by literary theories from English and comparative literature departments.”  She’s one of our most eminent property scholars and as hard-nosed a realist as one might hope to find.  

In Baldwin’s view, the lack of elite/academic support for less expansive authors’ rights regimes in Europe meant that resistance, when it did come, was even more populist, in the form of Pirate Parties.  Of course, the U.S. also got Google arguing in more corporatist terms in favor of “balanced” copyright.  To Baldwin, the Anglo perspective is not just that of crass commerce, but also populist/democratic; both of those  features lead to pressure to limit authors’ rights and see copyright as an economic bargain.  I’m reminded of the time I heard proud expansionist Hugh Hansen decry the expansion of the franchise from white male property owners because the rest of us were more likely to want to limit IP rights. 

Somewhat inexplicably to my mind, Baldwin claims that in the U.S., “it was the salaried intelligentsia which dominated the airwaves” in discourse about copyright, since “[n]o well-organized class of literati had sprung forth in nineteenth-century America.”  But that’s only true if you only focus on writers of texts, as opposed to performers, directors, etc., who do very well for themselves in arguing for more rights.  And, as he later points out, most authors can’t survive on royalties in any Western country, no matter how strongly it protects authors’ rights; patronage and self-patronage is the usual name of the game, so that can’t really explain the Anglo/Continental divide in academic perspectives.  His conclusion that only the salaried can advocate for freedom misses voices like Cory Doctorow and Becky Boop, and appears tied to his apparent belief that self-interest underlies everyone’s positions.  (Because claims about the economic impact of copyright are so common, I did like his point that “American colleges and universities employ ten times as many people as the motion picture and recording industries.”)

I also liked Baldwin’s point that, in fighting English hegemony online, the French turned to claims for “diversity” rather than claims for the preeminence of French language and culture. Ironically, American films fund French ones because the French government taxes media, then subsidizes French media; that intertwines the two cultures in a very practical way.  In another irony, French objections to Google Books meant that the project became even more English-heavy, rather than more evenhanded—German books make up more than 12% of Harvard’s collection, and if fully digitized would match the entire University of Heidelberg library.  But French and German books were removed because of publishers’ objections.  Google’s project violates French law because its short quotation exception didn’t apply to random snippets, and presenting excerpts violated the moral right of integrity; in a bit of hypocrisy, the French court determined that publishers, not authors, held the rights to digital dissemination and thus could sue even though such blanket transfers are generally not approved in European law.  

Baldwin reserves his greatest condemnation for the greediness of the big publishers, mostly European, who monopolize scientific publishing, with profit margins of 35-40%, as well as for the German publishers who charge large amounts to publish Ph.D dissertations, since publication is required to make the dissertation official.  He doesn’t have very nice words for the French version of orphan works legislation, either; the stringent requirements make the provision essentially useless, since it’s limited to certain institutions, who must first conduct a diligent search, and must still pay writers and publishers (somebody else’s money, by definition).  Authors could refuse permission to digitize, and a senator explained that an author who’d written something regrettable during the occupation by the Nazis should be able to prevent it from reappearing.  “Rarely had the unappetizing aspects of moral rights been so baldly stated.” Ultimately, he concludes rather mildly that there’s room for more pro-public reform, but the real value here is in the journey.