Parody of the day: It's Finally Ironic

There, Rachael Hurwitz fixed it: Alanis Morrisette's Ironic, with some different lyrics.

Can't Buy Me Love (but maybe coauthorship?)

... but a copyright infringement lawsuit can do plenty of other things. The NYT reports on a lawsuit by the creators of one Beatles tribute performance against another Beatles tribute performance:

The suit contends that the new musical — which steers clear of those contentious “Let It Be” recording sessions, focusing instead on peppier Beatles moments like the “Ed Sullivan Show” appearance — owes a significant debt to “Rain,” from the musical arrangements to the between-song patter to the mop-toppy wigs. All but 3 of the 31 songs in “Rain” are also in “Let It Be,” according to the lawsuit, and “the artwork used as background during the performance of many of those songs are similar or identical.”

Derivative works/stagecraft claims run amuck? The complaint doesn't deal with the issue of musical arrangements not being copyrightable as a derivative work without the copyright owners' consent.  Mention of the arrangements may be a matter of the reporter misunderstanding the complaint; the complaint itself mainly talks about actual samples (though it also says that the defendants' show uses the "same acoustic versions" of the songs, which seems to refer to arrangement).  Though really, the claims seem more contractual than copyright-based: the allegations are designed to show an agreement to be co-authors, highlighting the ways in which joint authorship doctrine is about power more than it is about creativity.

Goodreads sued for user-posted photo

Here's the PaidContent story. Was this really a good use of time and effort, especially given Goodreads' DMCA policy?  Should fees be available when, as is apparently sometimes the business model, a copyright owner jumps straight to suing without using a DMCA policy?  The picture is apparently the one in the center bottom of this screenshot of a small reading group--not exactly a high-profile commercial/substitutive use:

China, DVDs, and antitrust

This post by Joe Karaganis on China, media piracy, and business models made me think of the Apple ebooks case:

Chinese and Indian studios could drop DVD prices because, unlike the Hollywood studios, they never reset production budgets and revenue projections around the DVD bubble—around the very recent assumption that studios could double profits through DVD sales. Chinese and Indian companies could treat home video (and the DVD in particular) as a market to build rather than protect.  For the global studios, the rational strategy was to protect the profit centers—the high-income, high-priced markets—rather than engage in complex forms of price discrimination that could undermine the perceived value of the DVD in the US and Europe.  For domestic Chinese and Indian studios, the case for building domestic markets through lower prices was much clearer.  Such strategies didn’t eliminate piracy, of course, but did creating a basis for rapid growth and gradual legalization of the market. 

There are similarities between Chinese and Indian studios' behavior and Amazon's as a disruptive innovator with no existing business to protect versus the big American studios and publishers--also plenty of differences, of course, but protecting "the perceived value" of the physical book was an important consideration for the big publishers trying to figure out what to do with ebooks.

Double don't do this

From the Apple e-book opinion:

Hachette’s Young told Nourry in late Fall 2009, “[c]ompletely confidentially, Carolyn [Reidy] has told me that they [Simon & Schuster] are delaying the new Stephen King, with his full support, but will not be announcing this until after Labor Day.” Understanding the impropriety of this exchange of confidential information with a competitor, Young advised Nourry that “it would be prudent for you to double delete this from your email files when you return to your office.”

Antitrust law is far from healthy, but some conduct still counts.

Different kinds of reproductive work

Two quotes:

[I]t is almost unanimously accepted that a scholar can make a handwritten copy of an entire copyrighted article for his own use, and in the era before photoduplication it was not uncommon (and not seriously questioned) that he could have his secretary make a typed copy for his personal use and files. These customary facts of copyright-life are among our givens.

Williamson & Wilkins v. United States, 487 F2d 1345, 1350 (Ct. C. 1973)

 
Personality always contains something unique. It expresses its singularity even in handwriting, and a very modest grade of art has in it something irreducible, which is one man’s alone. . . .

Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 249 (1903) (Holmes, J.)

Whose copying work counts as creative?

Fire watch: court certifies NY but not CA class in hair product case

Guido v. L'Oreal, USA, Inc., 2013 WL 3353857 (C.D. Cal.)

Plaintiffs sued L’Oreal for falsely advertising Garnier Fructis Sleek & Shine Anti-Frizz Serum by failing to disclose its flammability after 2007, when L’Oreal removed a flammability warning; they contended that the Serum was flammable even with denatured alcohol removed, as it had been in late 2006. The court granted a motion for class certification, but then found that the existing class representatives weren’t typical.  Plaintiffs were then added for putative NY and California classes.  The court certified the former but not the latter.

Numerosity was easily satisfied, with 9.9 million units sold nationwide, implying about 1.1 million units in California and 800,000 in NY.

Common questions centered around the factual and legal questions relating to the omission of the flammability warning, consumers’ reasonable expectations, etc.  “Because Serum was packaged and sold uniformly across the nation, these questions can be resolved ‘in one stroke.’ Moreover, answers to these questions are ‘central to the validity’ of each class member's claims because … each class member's claim hinges on (1) whether a reasonable consumer would have been deceived by Serum's packaging, (2) what information L'Oreal knew or had access to regarding Serum's flammability, and (3) what the true market value of Serum was given its alleged flammability.”  Thus commonality was also satisfied; putative class members’ individual reasons for purchasing a product don’t bear on commonality under the UCL under Tobacco II, which allows presumptions of reliance.

Typicality requires plaintiffs’ claims to be reasonably coextensive with those of absent class members, not substantially identical.  Each putative class representative bought Serum during the class period in a relevant state, and said that she wouldn’t have bought it at its market price if she’d known it was flammable.  L’Oreal argued that each was subject to unique defenses, but the court only agreed with respect to one.  One NY plaintiff, Germann, bought at least one pre-2007 bottle containing a flammability warning and didn’t notice the warning at that time; thus, L’Oreal could argue that she would’ve bought the product after 2007 anyway.  Thus, she’d been exposed to a warning label, while many class members who only bought after 2007 wouldn’t have been, and an individual defense of nonreliance might well succeed under NY law, rendering her atypical.

L’Oreal argued that another plaintiff, Baisley, was uniquely subject to a laches defense because she didn’t know that the Serum was flammable before she spoke to plaintiffs’ counsel and generally knew little about the facts.  But that didn’t mean that laches applied, or that L’Oreal suffered any prejudice; Baisley’s claims hadn’t been shown to be atypical of the class.  L’Oreal argued that another plaintiff was atypical because she said she might’ve bought Serum even with the warning, but that was a misreading of her deposition testimony, which was that flammability was a relevant consideration to her.  She might have been somewhat tentative in deposition, but she never said she would’ve bought a flammable product.  And though she wasn’t primarily motivated by seeking a refund of the purchase price—what she said she sought was a warning to others—that was understandable in light of the low price.  That wasn’t atypical, just the practical reality that only a zealot would sue just for $30.

Adequacy of representation was also satisfied.  Though counsel found the substitute plaintiffs, “[a] representative plaintiff's lack of detailed, comprehensive knowledge about the legal technicalities of the claims asserted in class litigation … provides no basis on which to deny a motion for class certification.”  Rudimentary knowledge of the claims asserted was enough, provided typicality was present. Here, there was no indication that the proposed class representatives were ignorant of the basic facts or of their duties as class representatives.  “While they may have first learned about Serum's alleged flammability from plaintiffs' counsel, this is not disqualifying, especially in light of counsel's explanation that the key facts underlying this case were only uncovered after costly testing.”

The court turned to Rule 23(b)(3)’s requirements of predominance and superiority and also found them satisfied for liability and damages for the NY class, but not for damages for the California class. Whether the omission of a warning violated the UCL, CLRA, FAL, Song–Beverly Act, and NY GBL presented common factual and legal issues, since the consumer protection laws protected “reasonable consumers,” defined objectively, and didn’t require each and every class member to be deceived in actuality as long as the omission here was material.  

The court rejected L’Oreal’s arguments based on Mazza, whose facts were distinguishable.  In Mazza, it was likely that many class members were never exposed to the allegedly misleading ads, but here the challenged advertising wasn’t a limited campaign that only affected some class members.  Rather, the claims here were based on the packaging, which hadn’t changed materially over the course of the class period, and thus class members were necessarily exposed to the advertising at issue. 

But without expert testimony on plaintiffs’ theory of classwide relief, certification was improper for the California class.  Under NY law, each injured consumer may recover $50 upon proof of injury; thus common issues predominated regarding proof of damages.  But under California law, L’Oreal argued that inquiry was required into whether each individual class member would’ve purchased the product if properly labeled, and how much they would’ve been willing to pay.  Plaintiffs argued that they’d use expert testimony to determine actual market value for a flammable product not labeled as such.  Each class member could then be awarded the difference between historical market price and true market price.  This was a legally justifiable theory of restitutionary relief that didn’t depend on individualized inquiries and that could be used under California consumer protection law as well as to compute relief for breach of the implied warranty of merchantability. 

But the Supreme Court’s recent Comcast decision held that it was improper to accept a method of computing damages that didn’t differentiate between harm caused by different forms of antitrust injury when the court had accepted only one theory of antitrust injury.  At the class certification stage, a model supporting damages must be consistent with the plaintiff’s liability case.  Certification therefore requires “evidence demonstrating the existence of a classwide method of awarding relief that is consistent with the plaintiffs' theory of liability.”  Without actual expert testimony, plaintiffs didn’t meet their burden of showing that common questions predominated over individual issues regarding classwide relief.  If the false advertising had a measurable impact on the Serum’s market price, then there’s a classwide method of awarding relief. But without a quantifiable impact on the market price, certification would be inappropriate, because plaintiffs didn’t show any other method of awarding relief based on common proof. Plaintiffs could renew their motion when the expert report was in hand.

NY, with its statutory damages, posed no such barrier.  Under NY’s procedural rules, a class action for statutory damages under §349 can’t be maintained.  But controlling precedent makes clear that this rule doesn’t apply to class actions in federal court, even though that produces forum-shopping.

With that out of the way, superiority was also easily shown.

L’Oreal argued that the class wasn’t ascertainable.  Some courts have found that classes aren’t ascertainable when some members might have known the truth about the falsely advertised product. L’Oreal argued that the class here could contain people who didn’t care about flammability.  But that’s not really about ascertainability, which is satisfied when the class can be defined through objective criteria, here whether they bought the product within a certain period.  L’Oreal’s argument was about similarity, already analyzed.  Anyway, there was no suggestion that class members knew that the Serum was flammable, and no evidence that consumers don’t care about flammability. Under California law, “[n]ondisclosures about safety considerations of consumer products are material,” suggesting that a broad class definition was appropriate in cases involving omissions about consumer safety. 

Statements about FTC regulations not covered by Lanham Act

CMH Mfg., Inc. v. U.S. GreenFiber, LLC, 2013 WL 3324292 (E.D. Tenn.)

CMH makes manufactured homes. GreenFiber sells home insulation, whose insulating power is represented by an R-value: the higher the R-value, the greater the insulating power.  Federal regulations require loose-fill insulation sellers to put a chart on product labels showing how thick the insulation has to be installed to achieve specified R-values.  Homesellers are required by federal regulations to install insulation according to the insulation manufacturer’s instructions. CMH alleged that GreenFiber’s product label and instruction manual misrepresented the necessary thickness to comply with federal regulations, incorrectly stating that the insulation did not have to be installed over the entire installation area to the minimum thickness required for the stated R-value, but rather that the regulations only required that the average thickness of the area meet the minimum thickness.  The manual stated that “an interpretation [of the FTC rule] might be that the depth can never be lower than 8.1 inches in an attic [to reach R-30]. That is not what is being asked of an applicator. Both the insulation industry and FTC recognize that loose fill materials will never be installed to a perfectly even depth. Requiring that no area is less than 8.1 inches actually results in an R-value higher than R-30 and a higher installed cost for the applicator.” 

However, in 2000, the FTC clearly stated that no area covered with insulation could be less than the minimum.  In 2008, a group of CMH's home buyers began a class-action arbitration against CMH, arguing that their insulation didn’t meet the R-value claimed by CMH because the thickness of the insulation in some areas was less than the minimum thickness necessary.  CMH settled the arbitration action with a payment and sought to recover those amounts from GreenFiber.  The court rejected CMH’s breach of contract, warranty, and indemnity claims; I will discuss only the Lanham Act false advertising and state law fraud claims.

While much precedent suggests that customers lack standing under the Lanham Act, the court focused on two other problems: first, the alleged misrepresentation was about the federal installation regulations, not about “the nature, characteristics, qualities, or geographic origin of [a person's] or another person's goods, services, or commercial activities.”  (I’m dubious—how much of a product you need to use to achieve a certain result seems like a characteristic or quality of the product, regardless of the reason why you need to use that amount—but there is also plenty of precedent that a claim about the meaning of a law, at least if the law is unsettled, is not a factual representation at all. The problem here seems to be that the FTC was unambiguous about what it meant.)

Also, the claim was barred by laches, measured by borrowing the analogous state statute of limitations and presuming laches after that time has run.  Tennessee’s Consumer Protection Act has a 1-year statute of limitations.  Under federal law, the period begins to run when a plaintiff knows or has reason to know of the injury.  The latest date there was when the class plaintiffs filed their action, in 2008.  CMH didn’t sue until 2012.  CMH argued that the limitations period should be tolled because GreenFiber kept insisting that its instruction manual was accurate.  Fraudulent concealment of facts tolls the statute of limitations if the plaintiff couldn’t have discovered the cause of action despite exercising reasonable diligence, but CMH could have discovered its cause of action given the explicit statements in the class action complaint, which referenced the 2000 FTC public letter stating that averaging insulation depths violated the regulations.  “With reasonable care and diligence, CMH should have been able to determine what the applicable federal regulations required regardless of what GreenFiber executives were saying.”  Thus, there was a strong presumption of laches, which was not overcome.

The state-law fraud claim, with its three year statute of limitations, was also time-barred.

Limited service pregnancy centers may be engaging in misleading commercial speech

Greater Baltimore Center for Pregnancy Concerns, Inc. v. Mayor and City Council of Baltimore, No. 11-1111 (4^th Cir. July 3, 2013) (en banc)

Panel opinion discussed here.  Once again, though this walks like a First Amendment case, the fact that it is an abortion case makes it of likely limited practical significance for any other type of speech, but because hope reigns eternal I cover it here.  Also, plenty of grist here for those who believe that procedure is substance.

The district court permanently enjoined Baltimore’s ordinance requiring limited-service pregnancy centers to post disclaimers that they don’t provide or make referrals for abortion or birth control services.  The majority reversed because the district court improperly denied the city discovery and otherwise disregarded basic rules of civil procedure.

Before an answer had been filed, plaintiffs sought summary judgment, arguing that the ordinance discriminated based on viewpoint and failed strict scrutiny.  They argued that the disclaimer ensured that “every conversation at a limited-service pregnancy center begins with the subject of abortion, and convey[ed] the morally offensive message that abortion is available elsewhere and might be considered a good option.”  The city, by contrast, characterized the ordinance as a consumer protection regulation, referring to legislative history finding that limited-service pregnancy centers often engage in deceptive advertising to attract women seeking abortion and comprehensive birth control centers and then use delay tactics to keep women from getting those services, thus threatening their health because the risks and costs of abortion increase as a woman advances through her pregnancy, and because delays in access to birth control can leave the woman vulnerable to unintended pregnancy and sexually transmitted diseases.  The city submitted four pieces of evidence from the legislative record relating to false advertising by pro-life pregnancy centers—a US congressional report on misleading practices including attempts to advertise as providing “abortion” services; a NARAL report on misleading practices in Maryland specifically; written testimony from a woman who, 16 years previous, as a 16-year-old was misled by a center advertising under “Abortion Counseling”; and written testimony from a doctor at U Md. who testified that, “[a]s an educator of college-aged women,” she had “heard countless stories from students who go [to limited-service pregnancy centers], assuming they will get a full range of services and counseling and wind up feeling harassed, coerced, and misinformed.”  The city also argued that summary judgment was premature and that discovery into the Center’s advertising practices was justified, as well as discovery into whether the Center’s services were a form of commerce and thus the ordinance regulated commercial speech.  The city also said that it would provide further evidence of the harms from delays in access to birth control/abortion services, and the vulnerability of women seeking family planning/pregnancy care to deception.

The district court found that, by submitting the legislative record, the city had converted its motion to dismiss into a motion for summary judgment.  It rejected the city’s request for discover as an improper “attempt to generate justifications for the Ordinance following its enactment.”  It defined its task as to determine whether the ordinance on its face was subject to and satisfied the applicable level of scrutiny, confining itself only to the evidence relied on by the city counsel when the ordinance was passed.  The district court then found that strict scrutiny applied, because the services it offered were free despite having commercial value, like sacramental wine, communion wafers, and prayer beads; that any commercial and noncommercial elements were inextricably intertwined; and that the ordinance failed strict scrutiny because the dialogue between the centers and women begins when women enter the waiting room, and the mandated sign would alter the course of the center’s communications with them.  Plus, the district court found that the ordinance was enacted out of disagreement with plaintiffs’ viewpoints, because, being targeted at those who don’t offer abortion or birth control, it therefore was discriminatorily aimed at those with objections to such services.  Even assuming a compelling interest, the ordinance wasn’t narrowly tailored to target only centers engaging in deceptive practices; the city could use existing regulations on false advertising or a new content-neutral ordinance applicable to noncommercial entities.

The majority didn’t evaluate the ultimate merits, though.  The chief error was awarding summary judgment without discovery, which was an abuse of discretion based on an error of law, since there wasn’t proper notice by the court that it was going to treat the motion to dismiss as a motion for summary judgment.  Submitting the legislative record doesn’t, as a matter of clear circuit precedent, constitute submission of material beyond the pleadings justifying such a conversion.  Moreover, conversion is only justified if the parties are afforded a reasonable opportunity for discovery.

The district court denied discovery on the theory that a facial challenge made discovery unwarranted.  But the district court didn’t “fairly examine” whether the ordinance was invalid in all or even a substantial number of applications, as required for a facial challenge. Instead, the district court accepted the center’s description of itself and then assumed that all limited-service pregnancy centers shared the same characteristics. This was as-applied rather than facial review, but a proper as-applied challenge would’ve required discovery.

A further abuse of discretion came when the district court restricted its analysis to the legislative record.  A justification for a law can’t be invented post hoc in response to litigation, but the record can be augmented with evidence to support the existing justification, which was all the city sought to do.

The district court additionally failed to draw all justifiable inferences in the nonmovant’s favor.  The divide between noncommercial and commercial speech is very important here, since disclosure requirements aimed at misleading commercial speech need only survive rational basis scrutiny by being reasonably related to the prevention of deception. The city’s commercial speech theory shouldn’t have been rejected so early by the district court, though it might not ultimately succeed.  The city argued that limited-service pregnancy centers proposed commercial transactions every time they offered to provide commercially valuable goods and services, such as pregnancy testing, sonograms, or options counseling, to a consumer.  Whether speech is actually commercial is fact-driven.  Speech beyond “I will sell you X good at Y price” can be commercial, depending on the circumstances.  The district court reasoned that the plaintiff’s purpose in advertising wasn’t to propose a commercial transaction, nor was its speech related to the center’s economic interest.  But it wasn’t undisputed that the plaintiff’s motives were entirely religious or political; discovery was needed to determine whether, for example, centers were referring women to pro-life doctors in exchange for charitable contributions. 

Anyway, commercial speech doesn’t depend entirely on the center’s economic motive.  Context matters, including the listener’s viewpoint, since commercial speech’s level of constitutional protection is predicated not just on the speaker’s interest but on the way in which such speech assists consumers and disseminates information.  See Fargo Women’s Health Organization, Inc. v. Larson, 381 N.W.2d 176 (N.D. 1986) (enjoining deceptive advertising misleading women to believe that a clinic provided abortions in order to lure them in for anti-abortion counseling; though services were free to women, speech was still commercial if the ads were in a commercial context and directed at providing services and soliciting patronage rather than exchanging ideas).  This context differentiated the services here from sacramental wine, etc.; no one alleged that churches were advertising their provision of the latter in a commercial context to solicit patronage.  Without all the pertinent evidence, it was impossible to analyze the regulated speech.

The existing record did have some relevant evidence, including ads for Option Line, with which the plaintiff had a relationship.  Option Line advertised that its “consultants will connect you to nearby pregnancy centers that offer the following services”: “Free pregnancy tests and pregnancy information”; “Abortion and Morning After Pill information, including procedures and risks”; “Medical services, including STD tests, early ultrasounds and pregnancy confirmation”; and “Confidential pregnancy options.”  The city argued that the ad was deceptive.

Nor was any commercial speech inextricably intertwined with fully protected speech as a matter of law.  The district court merely speculated that “[t]he dialogue between a limited-service pregnancy center and an expectant mother begins when the client or prospective client enters the waiting room of the center.” And it “prematurely and perhaps inaccurately characterized [the required] disclaimer as ‘a stark and immediate statement about abortion and birth-control,’ i.e., a declaration that abortion and birth control are morally acceptable options.” Discovery could refute these factual assumptions and show that any commercial aspects of a limited-service center’s speech weren’t inextricably intertwined with fully protected noncommercial speech by showing that nothing in the ordinance prevented the center from conveying noncommercial messages.

And the district court precipitately concluded that the ordinance discriminated based on viewpoint, surmising that it must have been aimed at centers with moral or religious qualms about abortion or birth control.  But the fact that a regulation covers people with a particular viewpoint doesn’t itself render the regulation content or viewpoint based.  Viewing the legislative record in the light most favorable to the city, there was evidence that the ordinance was enacted to fight deceptive advertising and promote health.  Also, there might be limited-service pregnancy centers without moral or religious qualms that refrain from providing or referring for abortion or birth control for other reasons.

And finally, the district court erred by determining that the ordinance wasn’t narrowly tailored. If strict scrutiny applied, the city had to be given the opportunity to develop evidence relevant to the compelling government interest and narrow tailoring issues, including evidence on the purportedly less restrictive alternatives. 

The majority noted that, on the same day, the 4^th Circuit approved a partial preliminary injunction against a similar law in Montgomery County (enjoining a required disclosure that “the Montgomery County Health Officer encourages women who are or may be pregnant to consult with a licensed health care provider” but not a required disclosure that “the Center does not have a licensed medical professional on staff”).  This procedure avoided constitutional injuries to the plaintiff, assuming strict scrutiny applied, but paid attention to the fact that the record was undeveloped.  That preliminary decision was not an abuse of discretion. 

The majority took the position that the two cases were therefore perfectly consistent, while the dissenters here “would wholly exempt the Center from fundamental procedures to which all civil litigants are both subject and entitled.”  The dissenters “candidly acknowledge[d] that ‘the district court engaged hypothetically from time to time in discussion about the potential relevance of facts,’” but didn’t deal with that problem.  The Federal Rules exist to further due process and deserve respect, especially given the ready availability of preliminary injunctive relief.  Among other things, the dissenters mischaracterized the city’s aim as avoiding misrepresentations about abortions; though there was record evidence that limited-service centers did provide misinformation about abortion, such as that it caused breast cancer, the city always took the position that the ordinance was aimed at deceptive advertising aimed at women seeking abortion and birth control services and then using delay tactics to keep women from those services.

Judge Wilkinson dissented, saying a lot about “the dangers of state-compelled speech.”  The Center really, really doesn’t want to post the disclosure, because it believes that abortion and birth control are profoundly wrong and that even to mention them suggests that they’re readily available elsewhere, thus suggesting that they are viable options.  It may not be technically viewpoint discriminatory, but it compels groups that oppose abortion to “utter a government-authored message without requiring any comparable disclosure -- or indeed any disclosure at all -- from abortion providers.”  (Planned Parenthood feels your pain.)

What about the procedure stuff?  This was an “indiscriminate,” “amorous affair with litigation that is anything but benign.”  The question was whether drawing out the case would “vindicate the assertion of a constitutional right or suffocate it.”  Requiring the Center to suffer through discovery imposed a high price on it for attempting to vindicate its free speech rights, and here the majority authorized a fishing expedition into its motives and operations looking for some vaguely “commercial” activity.  Potential profit motives were “far-fetched hypotheticals.” The resulting delays and costs were especially onerous given the plain violation of the plaintiff’s constitutional rights.

Plus, the city rushed to regulate speech rather than considering other alternatives; mandated speech should be a last resort, but the legislative history didn’t indicate any attempt to consider alternatives. “Posting warning signs in its own voice outside the Center, undertaking a public information effort of its own, or applying the anti-fraud provisions in state law are all alternatives that the City now seems eager to reject but nowhere indicates it ever considered or tried.”  Based on the city’s “bald assertion” that these wouldn’t work, the majority authorized discovery.  Authorizing discovery without a showing that less restrictive alternatives had been considered encourages legislatures to adopt “the most constitutionally offensive option rather than the least.”

The majority also erroneously treated the plaintiffs’ challenge as as-applied rather than facial, forcing other centers with similar beliefs to sue in a war of attrition.

Sometimes the government can get discovery.  “But one does not need discovery to discover the obvious.”  (But are the ads misleading?  Why wouldn’t discovery help illuminate that question?)

Judge Wilkinson noted that compelled speech can further a pro-life agenda as well as a pro-choice one, and argued that the majority’s rule would “bite the very hands that feed it.”  “It is easy to imagine legislatures with different ideological leanings from those of the Baltimore City Council enacting measures that require organizations like Planned Parenthood to post a statement in their waiting rooms indicating what services they do not provide. Indeed, after today’s decision, I would expect a flurry of such measures.”  (Myself, I think legislatures are too busy mandating four-foot-wide doorways and hospital admission privileges to truck with trivialities like signs on the wall, but who knows?)

(Aside from the assumption that the majority was acting only to further an abortion rights agenda, though, the dissent has an important point, except that the horse is well out of the barn. It’s notable that Judge Wilkinson didn’t have any precedent to cite showing that abortion providers receive meaningful First Amendment protection right now, because they don’t.  His posited “services we don’t provide” disclosures are highly beside the point, given the mandated disclosures about risks etc. that have already been approved despite their much greater factual contestability.  If courts presently applied the same compelled speech analysis to abortion providers that they did to anyone else, the dissent would have a good point.  Also, we might still want to discuss advertising for the services separately, as opposed to statements made in the course of delivering the services.)

Finally, Judge Wilkinson noted, the state did have broad police powers to regulate for health and safety, “which includes the authority to require the disclosure of limited amounts of accurate information.”  (Perhaps he has remembered the existing disclosure requirements on abortion providers after all?)  But “the state generally may not force individuals to utter statements that conflict with beliefs so profound that they define who we are.”  (Note that statements like “abortion ends a human life” have at least a structural similarity to “we don’t provide abortions”—the problem for both sides is what they imply, not the brute fact.  Uncharitably, I suspect that lurking underneath Judge Wilkinson’s formulation is the idea that the belief that women should be able to choose whether to bring pregnancies to term, and the belief that such choices are vitally important to their well-being, are not beliefs “so profound” as to define who a person is.)

Judge Niemeyer separately dissented.  There was no need for discovery, because everything here was a question of law.  Compelled speech and content-based regulations always impose huge burdens and are subject to strict scrutiny, even when the regulated speech includes potentially commercial speech. Because the ordinance regulates both commercial and noncommercial speech by addressing all providers of limited pregnancy services regardless of their motives, and because it didn’t prohibit misrepresentations but rather mandated speech regardless of what the pregnancy center represented, the facial challenge should’ve succeeded. 

(One of the majority’s theories of why the speech might be commercial, and the more plausible one it seems to me, is not primarily a factual question—the idea is that by looking to consumers like a commercial service provider, which is part of the deceptiveness, the center is engaging in commercial speech, since an economic motive is not absolutely required to be commercial speech under Bolger and since the center appears to be offering services rather than offering an invitation to engage in discourse.  While discovery might not be needed on this point (though evidence of consumer reception might well be relevant), if it is still the case that an economic motive isn’t absolutely required—that is, if Bolger is still good law—then the dissent isn’t really engaging with the issue, which is the proper definition of commercial speech.)

The city had the burden of justifying the restriction, and it failed.  Less restrictive alternatives included public education campaigns on the “alleged” dangers of pregnancy centers or promotion of consultation with doctors for pregnant women, along with prosecuting violations of false advertising laws.  (I wonder how the dissenters would feel about a lawsuit charging a limited-service center with advertising a service it didn’t intend to provide: classic bait and switch.  If, as the dissenters are sure, the centers are not engaging in commercial speech, are they subject to such laws?)  Discovery wouldn’t be needed to tell whether the ordinance was overinclusive.  Narrow tailoring is a question of law, determining whether the challenged law “targets and eliminates no more than the exact source of the ‘evil’ it seeks to remedy.” (Still seems like one might occasionally want facts about that, especially if the alternatives don’t work.)

Bad Situation: Jersey Shore cast member loses TM and publicity claim over parody

MPS Enter., LLC v.  Abercrombie & Fitch Stores, Inc. No. 11-24110 (S.D. Fla. June 28, 2013)

Michael Sorrentino, aka The Situation, sued A&F for selling a T-shirt with “The Fitchuation” written on it and for publicizing a press release about A&F’s request that he not wear A&F-branded products on MTV’s popular Jersey Shore series, which began in December 2009.  The court granted summary judgment on all his claims. 

In late January 2010, A&F ordered the shirt as a parody on Sorrentino’s nickname, and began selling the shirt through its stores and website.  “A&F does not engage in any conventional advertising” (certainly none featuring shirts) and didn’t advertise the Fitchuation shirt.  All but four shirt sales were made by December 2010.  In October 2010, plaintiffs applied to register “The Situation” for entertainment services, and now sell t-shirts online at officialsituation.com.

In an August 2011 episode, Sorrentino wore at least one pair of A&F-branded sweatpants.  A&F sent a letter to MTV that included the following:

A&F obviously has not sought product placement on the show, and we believe that, since the character portrayed by Mr. Sorrentino is not brand appropriate, his display of A&F clothing could be misconstrued as an endorsement by him of our clothing or – worse – an endorsement by A&F of his wearing our clothing. We have no interest at this point in pursuing any sort of legal action against MTV or the producers of “Jersey Shore.” In fact, we would be willing to pay MTV or Mr. Sorrentino or other characters up to $10,000 NOT to wear any clothing bearing the “ABERCROMBIE & FITCH,” “A&F,” “FITCH,” “MOOSE” or related trademarks. For additional episodes aired this season, we would appreciate it if you would ensure that our brands are pixilated or otherwise appropriately masked.

The same day MTV received the letter, A&F issued a press release:

ABERCROMBIE & FITCH PROPOSES A WIN-WIN SITUATION New Albany, Ohio, August 12, 2011: Abercrombie & Fitch Co. (NYSE: ANF) today reported that it has offered compensation to Michael ‘The Situation’ Sorrentino, a character in MTV’s TV show The Jersey Shore to cease wearing A&F products. A spokesperson for Abercrombie & Fitch commented: “We are deeply concerned that Mr. Sorrentino’s association with our brand could cause significant damage to our image. We understand that the show is for entertainment purposes, but believe this association is contrary to the aspirational nature of our brand, and may be distressing to many of our fans. We have therefore offered a substantial payment to Michael ‘The Situation’ Sorrentino and the producers of MTV’s The Jersey Shore to have the character wear an alternate brand. We have also extended this offer to other members of the cast, and are urgently waiting a response.” Abercrombie & Fitch Brand Senses Department (614) 283-6500

At the end of the second quarter, the Company operated a total of 1,073 stores. The Company operated 316 Abercrombie & Fitch stores, 179 abercrombie kids stores, 501 Hollister Co. stores and 18 Gilly Hicks stores in the United States. The Company operated 10 Abercrombie & Fitch stores, four abercrombie kids stores, 44 Hollister Co. stores and one Gilly Hicks store internationally. The Company operates e-commerce websites at www.abercrombie.com, www.abercrombiekids.com, www.hollisterco.com and www.gillyhicks.com.

That last paragraph is “standard boilerplate that goes at the end of every press release” issued by A&F. The court noted that the press release “did not contain any video, photographs, or images of Sorrentino.”  (Would there have been a different result if it had done so?)

Plaintiffs sued for trademark infringement, violation of the right of publicity, and related torts. 

The court first found no likelihood of confusion.  Citing odd precedent that the type of mark and actual confusion are the most important factors, the court noted that each case must be evaluated on its facts.  Rejecting defendants’ argument that “The Situation” was a merely descriptive personal name, the court found it arbitrary or fanciful (really, arbitrary, since it’s not a made up term), weighing in plaintiffs’ favor.  “[T]he Court can discern no relationship between the word ‘situation’ and the apparel or entertainment services that the plaintiffs provide.”

The similarity of the marks (setting aside whether this was “use as a mark”) was affected by the fact that a parody needs to conjure up enough of the original to be recognizable.  The court found “The Fitchuation” “visually and phonetically different” from “The Situation,” and there was no evidence of palming off; A&F prominently used its own famous Fitch mark, reducing the likelihood of confusion.  This weighed in A&F’s favor.

As to the similarity of goods/services, even identical goods can be neutral when there’s a parody.  Here, A&F’s apparel was dissimilar to plaintiffs’ entertainment services; plaintiffs didn’t offer apparel under the Situation mark until after the Fitchuation shirt was released.  This weighed in A&F’s favor.

Likewise, the similarity of the parties’ retail outlets and customers favored A&F.  A&F sold the shirt exclusively through its stores and website, while plaintiffs offered “The Situation” entertainment services to bars, nightclubs, and similar venues.  A&F’s customers are mostly aged 15-22, while Sorrentino's predominant customers’ patrons are mostly 18-34.   Nor did the parties engage in similar advertising methods.  Plaintiffs use social media; A&F used its own stores and website.  Both used the internet, but “[t]his similarity would dispel rather than cause confusion, however, because the websites are separate and distinct, suggesting two completely unrelated business entities.”

The court rejected plaintiffs’ argument that intent had to be submitted to a factfinder.  The opinions of their entertainment lawyer and their expert about intent didn’t help.  Parodies don’t justify an inference of intent to confuse, but rather to amuse.  The court agreed that this was a parody as a play on words, and such parodies aren’t likely to confuse.  Thus, intent favored A&F.

There was no evidence of actual confusion.  The court excluded plaintiffs’ survey under Daubert because it “begs its answer by suggesting a link between plaintiff and defendant”; the expert conceded that she wasn’t an expert in Lanham Act or confusion surveys, and the survey “violates fundamental principles of reliability by planting the notion of infringement through closed-ended questioning without any directive not to speculate, failing to include any control whatsoever, and otherwise failing to comply with the Reference Guide on Survey Research or to case law evaluating Lanham Act surveys under Daubert.”  The court didn’t quote the questions, but with a bit of digging in ECF I found that the survey showed respondents the shirt, asked them if they’d seen it before, then asked where they thought the shirt could be bought (over 83% answered A&F), then asked whether they thought the shirt was endorsed by anyone (68% of 201 who answered the question said yes), then asked, if they did think the shirt was endorsed, by whom (81% of 142 who answered said Sorrentino, MTV, or Jersey Shore).  That answer dropoff is probably also of interest in terms of validity.

Overall, there was no triable issue of fact on confusion.

Furthermore, plaintiffs failed to show they had valid rights to “The Situation” as a mark for apparel when A&F introduced its shirt.  Although the court noted that use in commerce may exist even in the absence of sales, it found that plaintiffs didn’t use the mark on apparel until June 2010 at the earliest, several months after A&F’s use.  Nor was there evidence that plaintiffs had rights to the term as a mark for entertainment services until after A&F’s use.  This also entitled A&F to judgment as a matter of law.

The plaintiffs also alleged trademark infringement arising out of the press release, arguing that A&F profited off the use of a false affiliation with Sorrentino because the whole offering-to-pay-him-not-to-wear-the-brand thing generated a ton of free publicity.  A&F argued nominative fair use, which the court bolstered with a reference to the exclusions from §43(c)(3)’s ban on dilution.  (Not sure, but this may be the first judicial reference to dilution to support the proposition that nominative fair use is part of trademark infringement doctrine.)  The court, citing New Life, said, “[t]he use of a plaintiff’s alleged trademark for purposes of expression, criticism, commentary or satire is generally protected as a matter of law unless it explicitly misleads as to source or sponsorship.”  Courts have repeatedly dismissed infringement claims based on criticism/making fun of the plaintiff.  The press release, which criticized Sorrentino, could not possibly have created likely confusion that it was issued or approved by him.  A&F was responding to an actual thing that happened, to wit Sorrentino’s wearing A&F clothes on TV. Also, the press release didn’t propose a commercial transaction, the boilerplate promotional statement on the bottom notwithstanding.  (It’s not clear why this matters here, but it will below; the court rejected the opinions of plaintiffs’ entertainment lawyer and marketing expert that the press release was an ad.)  Anyway, this was nominative fair use.  A&F used only so much of his name as reasonably necessary and didn’t do anything to suggest his sponsorship or endorsement. 

Sorrentino’s Florida right of publicity claim also failed.  Florida doesn’t extend the right to publications “which do not directly promote a product or service.”  As the Eleventh Circuit has held, “barr[ing] the use of people’s names” in such a “sweeping fashion” would raise “grave questions” of constitutionality, as “the right of publicity has not been held to outweigh the value of free expression.”  So, the statute’s purpose is “to prevent the use of a person’s name or likeness to directly promote a product or service because of the way that the use associates the person’s name or personality with something else.”  Plaintiffs lose when a communication doesn’t directly promote a product or service, even where the defendant included the plaintiff’s name on the very product it advertised and sold. See Faulkner Press, LLC v. Class Notes, LLC, 756 F. Supp. 2d 1352, 1360 (N.D. Fla. 2010) (professor’s name used on the class note product itself).  (It’s the “even” that creates the conceptual problem here, I think.) 

Here, the press release didn’t directly promote a product or service but responded to Sorrentino’s sartorial choices; the boilerplate identifying A&F’s stores and websites “cannot be construed to directly promote a good or service.”  Apparently leaving room for other press releases to come within the scope of the right, the court held that this press release was more like a C&D than an ad.  It didn’t associate Sorrentino’s name “with something else,” but rather explicitly attempted a dissociation.  It contained opinions and the truthful statement that A&F offered money to stop the use of its clothes.  It didn’t identify any particular product (except the clothes Sorrentino wore).  Statements by others that the press release was a publicity stunt were inadmissible hearsay.

Comment: While of course I agree that Sorrentino must lose, this is a very formalistic and obtuse understanding of A&F’s marketing ploy: A&F sought and received publicity based on the “controversy” it generated by objecting, explicitly nonlegally, highlighting a random event on the show that might otherwise have gone completely unnoticed and raising its brand profile as a result—which sounds a lot like free riding.  (I also don’t think the reaction evidence was hearsay, because it wasn’t offered for its truth, but rather for the reaction of the people to whom it was directed, who clearly thought that A&F was promoting its brand.)  Perhaps, one might say, Sorrentino asked for this by wearing A&F—but that’s a hard argument to make outright given that the right of publicity does not generally recognize truth as a defense; plenty of celebrities have sued when different brands have attempted to publicize celebrities’ actual uses thereof.  More generally, a press release is commercial speech, and has “commercial or advertising purpose,” which is what the Florida statute is (unconstitutionally) written to cover.  The direct promotion language on which the court here relies was in the context of rejecting a right of publicity claim based on a for-profit movie that didn’t itself advertise anything else; a press release promoting A&F’s economic interests is a different animal.

Unsurprisingly, the false advertising claim failed. The court didn’t reach anything but falsity: there were no false or misleading representations of fact in the press release.  The claims were based on A&F’s unfalsifiable statements of opinion: its concern for “damage” to its image and its belief that “this association is contrary to the aspirational nature of our brand, and may be distressing to many of our fans.”  (Hey, since those are unprovable and unfalsifiable statements, what about all those times infringement/dilution plaintiffs swear that the defendant’s use will damage their brands?)  It’s undisputedly true that A&F offered money to stay away from the brand.  And there was no evidence of deception.

The court also dismissed plaintiffs’ state-law dilution claim, which required fame as well as proof that a use decreased the plaintiff’s commercial value.  The failure of the federal infringement claims meant that “related” state law claims likewise fail.  (This seems to conflate infringement and dilution, but I can’t pretend I’m sad.)  Anyway, even if the court deemed “The Situation” famous, A&F’s use preceded plaintiffs’ registration for apparel by several months (the court doesn’t explain this, but presumably it’s concluded that A&F’s use began before plaintiffs’ mark became famous).  And further, plaintiffs failed to show likely dilution or harm to commercial value.

Dastar doesn't bar claim based on allegedly stolen technology

Nippon Steel & Sumitomo Metal Corp. v. POSCO, 2013 WL 3285206 (D.N.J.)

Nippon and POSCO are engaging in a global IP battle.  This is one aspect.  Nippon alleged that POSCO has “engaged in a multi-year program of corporate espionage, including theft and bribery,” directed toward Nippon's specialized steel technology, and that POSCO incorporated Nippon's technology into its own manufacturing process.  The court here dealt with a motion to dismiss the Lanham Act false advertising claims. 

Nippon alleged that POSCO’s statements about its technology were false or misleading because POSCO claimed that its own innovation gave its products uniquely superior characteristics and qualities, such as “excellent performance and high energy efficiency,” “superior electric and magnetic property,” and “consistent quality improvement,” such that “customers prefer products made by POSCO.”  Since the technology was Nippon’s, Nippon alleged, these statements can’t be true.  (I’m surprised that POSCO didn’t move to kick most or all of these out as puffery as a matter of law.)

The court found that Nippon stated a claim.  “[U]se of such statements in advertising must necessarily be a comparison of POSCO's … product to those of competitors, including Nippon.”  This was a false advertising claim, not a passing off claim.  Dastar and Baden Sports, Inc. v. Molten USA, Inc., 556 F.3d 1300 (Fed. Cir. 2009), didn’t bar the claims.  First, Dastar involved a full record, not a motion to dismiss, and Baden involved post-trial motions.  (Hunh?  What record development would make a difference here?)  Second, Dastar was a § 43(a)(1)(A), case, not a § 43(a)(1)(B) case. Nippon alleged more than copying; it alleged that POSCO falsely promoted its products as the customer choice based on false statements of uniquely superior characteristics and qualities.  This went beyond Baden, where Baden just challenged Molten’s claims to be an innovator and didn’t target Molten’s representations about physical or functional attributes of its products.  Here, Nippon did allege statements relating to the “physical or functional attributes” of its products.

Because the federal claim survived, coordinate state law claims under the New Jersey Fair Trade Act and common law unfair competition did so as well.

Lawsuit receives reviving jolt: energy shot claims dismissed too soon

Innovation Ventures, LLC v. Bhelliom Enterprises Corp., --- Fed. Appx. ----, 2013 WL 3306330 (6^th Cir.)

Innovation/LE claimed that Bhelliom infringed LE’s 5-hour ENERGY mark by selling 8-HR ENERGY products and falsely advertised their capabilities. The court of appeals reversed a grant of summary judgment in Bhelliom’s favor on the trademark claims based on the similar result in Innovation Ventures, LLC v. N.V.E.,  Inc., 694 F.3d 723 (6th Cir. 2012), and also partially reversed on the false advertising aspect.

LE sued NVE for selling 6 Hour POWER:

Bhelliom also entered the market with an energy pill, Mr. Energy® 8–HR Maximum Strength ENERGY, and later expanded the 8–HR ENERGY product line to include energy shots:

The same judge presided over LE’s suits against NVE and Bhelliom, granting summary judgment to both.  Finding that LE’s mark was suggestive and that several infringement factors favored each side, the court of appeals determined that summary judgment was inappropriate because the products and sales channels were the same (though the analysis would differ for the energy pills) and consumers wouldn’t be making sophisticated decisions.  With “evenly balanced factors”—the strength of LE’s mark, the similarity of the marks, the lack of evidence of actual confusion, and the defendant’s intent didn’t favor a finding of confusion—summary judgment should’ve been denied; the court said that the absence of actual confusion and bad intent generally neither favors nor weighs against a confusion finding.  (In other words, on those factors: Heads I win, tails you lose.)

Comment: So, each piece of this is certainly prefigured in existing case law.  But to me it suggests the deep rot that has taken hold of the multifactor confusion test.  Read literally, the court is saying that, even with a weak mark and dissimilarity of marks, a competitor in a mass market should get to go to a jury because, after all, competition means that the similarity of goods and marketing channels favor a finding of infringement, and those two factors have to be balanced against the mark strength and similarity of marks factors.  This is the worst kind of mindless counting, and worsened here because the court finds that, because trial was required against a different competitor making a different product, it follows that summary judgment was also inappropriate against Bhelliom.  It is worth nothing that, except for putting a picture of the defendant’s product in the opinion (which is definitely a good thing!), the court of appeals offered no analysis at all of the similarity of these marks: “Considering the similarity of the products, the record evidence, and the district court's rationale, one would expect that our judgment in NVE should control here.” 

LE overreached in seeking a grant of summary judgment on appeal, though.  It failed to distinguish the energy shots from the pills, and its arguments on mark strength and similarity of marks didn’t take the case out of the realm of close calls that could go either way.  “Though we typically resolve trademark claims as a matter of law, we recognize that certain cases present factual disputes or such evenly balanced factors that the matter is properly resolved by the finder of fact.”

LE’s false advertising claim was based on Bhelliom’s claims (1) that the products use a time-released formula, consistent with a Harvard University study that revealed higher sustained energy levels from the consumption of low doses of energy-boosting substances throughout the day; and (2) that the products provide eight hours of energy.

The district court granted summary judgment to Bhelliom because LE failed to show harm.  LE argued that willful misrepresentations warranted a presumption of damages, and that injunctive relief doesn’t require damages.  The court agreed with the second point and remanded.

It’s true that Lanham Act damages are presumed in cases of willfully deceptive comparative advertising where the plaintiff’s product is specifically targeted.  On willfulness, LE offered the testimony of an employee at the company that manufactured Bhelliom’s products that Bhelliom knew that the products lacked a time-released formula, which was “colorable evidence” of knowing misstatements.  It didn’t offer evidence of willfulness on another ad depicting the comparative effectiveness of Bhelliom's products vis-à-vis other energy shots, so the court only analyzed the time-release ads.

Willfulness alone doesn’t warrant a presumption of damages, absent targeting of the plaintiff. The Lanham Act requires damages as compensation and not as a penalty.  As McCarthy writes, it may be appropriate to grant an injunction “even where the likelihood of provable impact on the plaintiff may be subtle and slight,” because that protects both competitors and the public, but not to grant damages that would be a windfall to the plaintiff. 

Here, there wasn’t targeting: at best, one of the time-released formula statements acknowledged LE’s 5-hour ENERGY as a competitor, but it didn’t misrepresent their formulas or effectiveness.  “Rather, the press-release states that the competitors proclaim energy boosts that match their products' respective five- and six-hour names and calls the competitors ‘successful.’ Indeed, the press release offers only one direct point of comparison between ‘8–HR ENERGY’ and the competition: whereas ‘the taste of the drink and the inconvenience of the packaging make [energy shots] a less than ideal choice for many individuals,’ Bhelliom's ‘easy-to-swallow capsule avoids the harsh taste of energy drinks.’”  Those generic statements were mere puffery.  “Thus, at bottom, LE objects to the fact that Bhelliom oversold its own product, not that Bhelliom misrepresented or caused confusion regarding LE's product.” Presumed damages were therefore inappropriate.

Claims for injunctive relief, however, need not meet such a high standard.  “[D]istinct evidence of harm” isn’t a prerequisite.  If statements have a tendency to deceive consumers, injunctive relief is appropriate.  LE argued that the time-release claims were literally false, creating a tendency to deceive as a matter of law; Bhelliom conceded the falsity of the claims, but they only concerned the pills.  Though Bhelliom argued that the ads had been discontinued, the court of appeals remanded for appropriate injunctive relief.  However, the court couldn’t presume deception with regard to the 8-hour-energy claims, whose falsity was in genuine dispute and for which LE didn’t present evidence of actual consumer deception.  This was also remanded.

Fair use of the day

Welcome to Night Vale is a podcast in the vein of Lovecraftian homage/Cabin in the Woods-style absurdist horror.  It's enjoyable for plenty of other reasons, but a number of episodes also have ads from "sponsors" who actually exist ... but who only advertise this way in Night Vale.

E.g.:

Step into your nearest Subway restaurant today, and try their new 6-inch mashed potato sub! Top it with a delicious assortment of fresh vegetables, like french fries and Nutella! They'll even toast or poach it for you! There are several Subway locations in Night Vale, all easily accessible through witchcraft and chanting. And between now and November 30, buy nine reverse colonics and get a free 40-ounce soda or freshly baked tobacco cookie! Subway: Devour Your Own Empty Heart!

And:

And now, a message from our sponsors:

"I took a walk on the cool sand dunes, brittle grass overgrown, and above me in the night sky, above me, I saw. Bitter taste of unripe peaches, and a smell I could not place, nor could I escape. I remembered other times that I could not escape. I remembered other smells. The moon slunk like a wounded animal. The world spun like it had lost control. Concentrate only on breathing, and let go of ideas you had about nutrition and alarm clocks. I took a walk on the cool sand dunes, brittle grass overgrown, and above me, in the night sky above me, I saw."

This message was brought to you by Coca-Cola.

Come for the ads, stay for the hooded figures and the hovering cat. But don't go in the dog park. Don't even think about the dog park.

Failure to quote exact ad text dooms complaint

Bilodeau v. McAfee, Inc., 2013 WL 3200658 (N.D. Cal.)

McAfee markets and endorses software, including software from RPC/Capital Intellect.  Bilodeau alleged that, after she searched for software to repair her computer, she clicked on an ad by McAfee for RPC; McAfee’s website then represented that RPC, Registry Power Cleaner, would “accurately identify, report and repair a variety of computer errors and other problems, enhance the performance, speed, and security of her computer, and perform other beneficial tasks ...”  Relying on these representations, she installed RPC, which told her that her computer needed critical repairs; as a result, she allegedly continued using the software beyond the 30-day trial period and was charged for it.  She alleged that she was misled.

First, Bilodeau alleged that McAfee’s representation that RPC would accurately report errors was inaccurate, because the software is allegedly designed to invariably report errors.  A computer forensics expert tested it on “a brand new virtual computer system” and found that RPC “still reported that numerous errors existed on the system.” Thus, she alleged, the errors allegedly detected on her own computer didn’t exist or pose any actual risk.  Second, she alleged that RPC’s error reports were misrepresentations that induced her to keep the software and pay.

The court first found that Bilodeau alleged particularized injury sufficient for Article III standing.  McAfee argued that she didn’t allege that RPC failed to fix her computer or that the errors RPC found didn’t exist.  Though other courts have reached different results on nearly identical complaints, the court found that Bilodeau alleged economic injury stemming from the misrepresentations: she paid because of the error reports, and she alleged that RPC couldn’t actually do what it promised, so she didn’t get the benefit of her bargain.

However, the complaint failed to satisfy Rule 9(b).  Initially, it needed to distinguish between representations made by McAfee and those made by Capital Intellect, the other defendant.  Bilodeau alleged that she downloaded the software relying on defendants’ representations, without explicitly saying who said what, which was essential to their respective liabilities.

More importantly, the court found paraphrasing the allegedly false representations without citation was insufficient to provide the necessary specificity to put defendants on notice.  There were direct quotes from McAfee’s RPC website: RPC will “[r]epair[ ] PC registry errors”; “[improve [PC] speed”; “[s]can[ ] for hidden threats”; “[p]revent [ ] frequent crashes,” and “[s]afely repair harmful registry errors that make your PC unstable.”  But Bilodeau also alleged that defendants represented that RPC would “accurately identify, report and repair a variety of computer errors,” without attributing these representations to any specific defendant at any specific time.

Rule 9(b) didn’t allow the court to evaluate these representations “regardless of the form they took,” because McAfee argues that it only represented that the software would repair, improve speed, scan for hidden threats, and prevent frequent crashes, and did not represent that RPC would accurately report errors.  

Comment: I really don’t understand what an ordinary consumer should understand distinguishes “scanning for hidden threats” from “accurately reporting errors.” What’s the point of repair software that inaccurately reports errors?  I guess we’re all supposed to assume that repair software is like a shady auto shop; we believe its dire predictions at our peril?  Indeed, the court noted that the parties disputed the distinction between scanning and reporting functions, but it concluded that neither defendants nor the court could evaluate Bilodeau’s claims without clarity “as to what exactly was represented by whom.”

The court was particularly troubled because the generalized nature of the allegations paralleled complaints filed in a number of suits by plaintiffs’ counsel against various computer scan software makers.  Each complaint alleged that a forensic expert had evaluated the program and found that it falsely reported problems.  This similarity magnified the plausibility and specificity issues with the complaint—cutting and pasting is disfavored and undermines claims for relief.

True, Rule 9(b) can be satisfied without direct quotations, if they’re sufficiently specific.  But here, allegations that defendants represented that RPC would “accurately report harmful errors,” or “accurately identify, report and repair a variety of computer errors and other problems,” were not “concrete” and “technical.”  Since the lawsuit turned on how the representations compared to the actual functionality, lack of specificity was fatal to Bilodeau’s claims.

The same was true for RPC’s alleged misrepresentations through falsely reporting nonexistent errors.  The allegation was that RPC inevitably and uniformly reported high-risk errors no matter what was going on in the underlying system.  But the complaint failed to allege when the unidentified forensics expert examined RPC, what errors the software allegedly reported, or whether the expert found that RPC reported errors existing even after it performed its repair function.  Even if the allegation of overreporting error on new computers was sufficiently particular, Bilodeau failed to link it to her personal experience with RPC.  She simply alleged that the errors detected on her computer didn’t exist or didn’t pose any actual risk.  (I don’t really see why that wasn’t enough.  It might be that she can’t ultimately prove that.  But why doesn’t it identify with sufficient specificity what’s at issue for the defendant to prepare its defense?)  She didn’t allege which errors were reported or whether they were nonexistent or merely harmless.  It was an unwarranted logical leap to concluded that, just because RPC allegedly reported false positives on a new computer, the errors on her computer weren’t a problem.  But by her own admission, her computer was malfunctioning before she saw the ad, meaning her computer wasn’t error-free.  She didn’t allege that any expert ever examined her computer to determine whether the reported errors were real, or whether RPC fixed them or continued to provide false reports after performing its purported cleaning and repair functions.  This “cumulative” lack of specificity failed to give defendants sufficient notice.

In addition, this lack of specificity raised plausibility concerns; how could a plaintiff suffer from software deficiencies if her computer was already functioning poorly?  Plus, the court doubted that RPC’s false reports of errors could have induced Bilodeau to buy the software.  She had 30 days to test the software!  (I’m sure it was easy to tell what the software was doing.)  She needed to allege facts explaining why software that continuously reported critical errors would induce her to keep the program beyond the 30-day trial period.

Finally, the court addressed objections to specific causes of action.  McAfee argued that California law couldn’t apply because Bilodeau isn’t a California resident and misrepresentations within RPC itself occurred out of state, as RPC was developed in Massachusetts.  But McAfee’s website could be the source of California liability, if Bilodeau properly pled misrepresentations thereon that were developed by a California sales and marketing department.  There were other deficiencies in Bilodeau’s warranty and breach of contract claims that might be correctable by better pleading; the court dismissed the complaint with leave to amend.

Advocacy group has standing under California consumer protection law

Animal Legal Defense Fund v. HVFG LLC, 2013 WL 3242244 (N.D. Cal.)

Previous decision finding no Lanham Act standing for advocacy plaintiff ALDF to challenge foie gras advertising itself as “the humane choice,” but finding standing for competitor who makes vegan alternative to foie gras, discussed here.  Here, the court dealt with a motion to dismiss the California false advertising claims as brought by ALDF, given Proposition 64’s narrowing of statutory standing. 

The only decision on point, California Housing Rights Center v. Los Feliz Towers Homeowners Association, 426 F. Supp. 2d 1061 (C.D. Cal. 2005), held that, even after the passage of Proposition 64, an advocacy organization has standing under Section 17200 when it diverts resources in response to challenged unlawful activity. On the one hand, if advocacy organizations had standing, then individuals who divert charitable giving from one cause to another to fight a business practice should also have standing, which could effectively resurrect the “any person” standing problem that Proposition 64 sought to cure. “On the other hand, if a competitor has standing by reason of money or property spent to combat a proscribed business practice, as a competitor surely does, then why should a public interest organization not have standing for the same reason?”  In the absence of controlling precedent, the court followed California Housing Rights Center and recognized ALDF as a permissible plaintiff for the California statutory claims.