Tuesday, July 22, 2014

FTC goes after misleading certification mark

Here's some discussion of the FTC's complaint from the FTC itself, with a link to the proposed settlement.  Unsurprising takeaway: If you purport to certify products as "Made in the USA," it is a good idea to do some verification of the manufacturers you accept into your program.  Manufacturers who licensed the mark from "Made in USA Brand" might want to inform their insurers.

Presumably the certification mark is also now eligible for cancellation.  What effect does the settlement have on a potential cancellation proceeding?  (One possibility under the settlement is for the company to disclose that licensees self-certify.  If the company chooses this option, isn't it engaged in naked licensing and therefore abandoning the mark?)

Monday, July 21, 2014

Georgetown Law's new Center on Privacy and Technology

Learn more here. All my colleagues who worked on this deserve congratulations--Professors Julie Cohen, David Vladeck, Laura Donohue and Angela Campbell worked tirelessly for this achievement.

trademark beats copyright at surviving motion to dismiss

Gorski v. Gymboree Corp., 2014 WL 3533324,  No. 14-CV-01314 (N.D. Cal. July 16, 2014)
Via Eric Goldman.  Gorski and Gymboree both make shirts that feature the phrase “lettuce turnip the beet.” Gorski sued for copyright and trademark infringement; Gorski owns trademark registrations for LETTUCE TURNIP THE BEET for “[p]aper for wrapping and packing”; “tote bags” and “[w]earable garments and clothing, namely, shirts”; and “[o]n-line retail store services featuring clothing, accessories and art.”  She alleged that her “light grey heather shirt for children is widely considered one of the most popular children's products ever pinned on Pinterest under their ‘Popular’ heading and has over 120,000 product views on Etsy making it one of the most popular products ever on Etsy.”  In addition, she alleged that “the overall arrangement, shapes, typefaces, sizes and placement of the design elements” of Gymboree’s shirt were “substantially similar” to Gorski’s design.
Gorski Design

Gymboree design
Copyright: This can be resolved on a motion to dismiss in appropriate cases.  The court agreed with Gymboree’s argument that Gorski failed to plead substantial similarity by identifying any protected elements that were copied.  Short phrases can’t be copyrighted, even if they’re distinctively arranged or printed.  The claim about similarity in “overall arrangement, shapes, typefaces, sizes  and  placement  of  the  design  elements” merely amounted to arrangements of the short phrase “lettuce turnip the beet.”  That wasn’t protectable.  Because all the alleged similarities related to the arrangement of a short phrase, she didn’t allege copying of anything protected by copyright.  But the court granted leave to amend, because she might be able to allege substantial similarities to other protectable elements. 
Query: what other protectable elements?  I don’t know why the court invited repleading.  As my 7-year-old daughter said on looking at the shirts, the only similarity is the unprotectable words.  Her immediate reaction: “they’re different colors, the letter shapes are different, and the words are different sizes.”  My 8-year-old son concurred.  What possible additional facts could change what the shirts look like?
Gorski’s trademark claim fared much better. On the motion to dismiss, Gymboree only argued fair use.  Descriptive fair use requires a defendant to show that it’s not using the term as a mark, it’s using it fairly and in good faith, and it’s using it only to describe its own goods and services.  Plus, the court continued, the Ninth Circuit has held that “the classic fair use defense is not available if there is a likelihood of customer confusion as to the origin of the product.”  (Citing Transgo, Inc. v. Ajac Transmission Parts Corp., 911 F.2d 363, 365 n. 2 (9th Cir. 1990); Lindy Pen Co. v. Bic Pen Corp., 725 F.2d 1240, 1248 (9th Cir. 1984).)
Note: Whoa, Nelly!  The Supreme Court subsequently informed the 9th Circuit that it was wrong about that, and although the 9th Circuit essentially defied the Court on remand by reinstating confusion as an important consideration and making it impossible to win a descriptive fair use defense on summary judgment, I would at least have expected a citation to KP Permanent instead of to these overruled precedents.
The court then found that descriptive fair use didn’t apply as a matter of law such that the complaint had to be dismissed.  The complaint alleged that Gymboree had appropriated the cachet of Gorski’s products and created confusion, so that’s that.  Gorski alleged that consumers had contacted Gorski, showing actual confusion—though ultimately we need to know the content of the communications; if consumers are contacting Gorski saying “Gymboree is selling shirts with the same phrase,” that doesn’t evidence confusion at all.  And Gorski alleged that consumers associate the phrase only with Gorski.  Note: had the court properly applied KP Permanent, I suspect that the complaint still survives the motion to dismiss because trademark infringement doctrine is just so broad and forgiving.  But this analysis is quite plainly incomplete under the actual governing law, which does require toleration of some confusion in order to protect descriptive uses; pleading confusion by itself shouldn’t be enough, though pleading bad faith might be.
The court proceeded to discuss nominative fair use, which just isn’t an applicable theory here—I don’t see how one could plausibly argue that Gymboree’s use was a reference to Gorski’s mark.  Unfortunately, the court said more than that.  It defined the third element of nominative fair use as requiring Gymboree to show that its use of the phrase “makes no suggestion of sponsorship or endorsement by Gorski,” and of course Gorski’s pleading of confusion trumped that on a motion to dismiss.  (Citing an increasingly appalling list of precedents: Estate of Fuller v. Maxfield & Oberton  Holdings,  LLC, 906 F.Supp.2d 997, 1012 (N.D.Cal. 2012) (holding that an allegation of likely confusion over endorsement was sufficient to deny a motion to dismiss; product name); Yeager v. Cingular Wireless LLC, 627 F.Supp.2d 1170, 1178 (E.D.Cal. 2008) (same; mention of plaintiff in press release); Films of Distinction, Inc. v. Allegro Film Productions, Inc., 12 F.Supp.2d 1068, 1076 (C.D.Cal. 1998) (same, use of “The Crime Channel” in a film as the name of a channel a character watches (!)).
This is why this common restatement of the third element of nominative fair use, eliminating the requirement of some affirmative act indicating endorsement other than the use of the mark itself, is so destructive.  New Kids identifies the third element as “the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement.”  If the use of the mark itself can prevent the third element from kicking in, nominative fair use collapses on itself, as many scholars have noted.  I part ways with them insofar as I think that nominative fair use need not collapse on itself, but I can’t deny that lower courts keep inventing new ways to muck it up. Tabari tells us that you can’t use the multifactor test to figure out whether there’s likely confusion over source or sponsorship.  If the courts also abandon the distinction between explicit sponsorship claims (“authorized biography”) and implicit ones, then guessing is the best they can do, and it’s not likely to go that well.

allegations about fake reviews can support false advertising claim

American Bullion, Inc. v. Regal Assets, LLC, 2014 WL 3516252, No. CV 14–01873 (C.D. Cal. July 15, 2014)
The parties compete to sell gold and other precious metals as retirement investments.  Plaintiff (ABI) advertises online using third-party affiliates, who get paid for referrals.  ABI alleged that defendants created and operated such affiliate websites.  (I believe, based on this description, that ABI may be alleging that defendants were involved in some competing endeavor that paid affiliates via the same affiliate arrangement as ABI uses, but it's not very clear.)  These sites allegedly purport to contain independent consumer reviews, but falsely advertised for Regal and disparaged ABI.  ABI allged that the websites weren’t independent, but that Regal didn’t publicly disclose its connections thereto.  Reviews on the websites praised Regal and gave ABI negative reviews. Some reviews were allegedly false, others allegedly plagiarized.  Some sites claimed that ABI was a defendant in a fraud suit, was found guilty, and was sued by the Commodities Futures Trading Commission.  ABI alleged that this was false, and that a business with a similar name, American Bullion Exchange, was in fact the party found guilty in that action.  In addition, many of the websites allegedly used ABI’s name in a bait and switch: they urged customers to “click here to visit American Bullion,” but customers were linked to Regal’s website upon clicking. (Were those the same sites that disparaged ABI as a fraudster, or different ones?)
Defendants argued that the Lanham Act claim had to fail because ABI didn’t allege trademark ownership, and because the alleged statements were just designed to influence consumers to refrain from buying from ABI, not to induce purchases from Regal.  First, although I must say that the bait and switch allegations would seem to support a traditional trademark claim, the court noted that ABI wasn’t bringing a trademark claim; it didn’t need to own a mark to prevail on a false advertising claim.  Second, as to the disparagement-not-promotion argument, so what?  (Certainly after Lexmark, that’s good enough.)  Also, the complaint clearly alleged that Regal disseminated ostensibly independent reviews promoting its own services.
Regal argued that the litigation privilege protected certain alleged conduct.  This was meritless, since neither side was a party to the fraud claims brought by the CFTC against American Bullion Exchange, and Regal didn’t identify any other relevant proceeding.
Unsurprisingly, trade libel, defamation, and state law unfair competition claims also survived. The court was also forgiving with respect to intentional interference claims—though defendants argued that the complaint failed to identify specific economic relationships with a third party, as is usually required, the complaint did allege that ABI lost several customers to Regal who cited Regal’s “review sites” as their reason for switching.  That was enough.

Wednesday, July 16, 2014

Uber/under: false advertising and association claims against Uber continue

Yellow Group LLC v. Uber Technologies Inc., No. 12 C 7967, 2014 WL 3396055 (N.D. Ill. July 10, 2014)
Taxi medallion owners, taxi affiliations (taxi dispatch services), and livery service providers sued Uber, alleging that it competed unfairly by misrepresenting certain features of its service, misleading customers as to an association between Uber and plaintiffs, and encouraging taxi drivers to breach their agreements with plaintiffs.  People who use Uber’s app may end up getting a driver associated with one of plaintiffs Flash Cab, Yellow Cab, or Your Private Limousine, and take their rides in vehicles bearing one of those plaintiffs’ marks.  The court partially granted Uber’s motion to dismiss.
Treating the Lanham Act and state law as identical in relevant part, the court first addressed claims regarding alleged misrepresentations of rates, licensure, and insurance.  Plaintiffs alleged that Uber deceptively advertised that Uber taxis charged “standard taxi rates,” when in fact riders were charged the meter fare plus a 20% ”gratuity” that was split between the driver and Uber.  They also challenged an Uber blog post stating that all uberX vehicles were “licensed by the city of Chicago, and driven by a licensed chauffeur.”  And they alleged that Uber misrepresented the scope of insurance coverage for uberX drivers and passengers as $2 million and then $1 million, whereas Uber doesn’t provide any insurance coverage.
Uber argued that plaintiffs lacked standing because they weren’t direct competitors at the same level of business.  But then Lexmark happened, so plaintiffs needed only to an allege “an injury to a commercial interest in reputation or sales, and that the injury must flow directly from the deception wrought by the defendant’s advertising, such that the false advertising directly caused consumers to divert their business from the plaintiff.”
Uber argued that bexause the taxi affiliation plaintiffs and Your Private Limousine didn’t receive a percentage of drivers’ fares or a dispatching fee, they couldn’t allege harm from the false advertising.  But at this stage, they plausibly alleged that Uber’s deceptive advertising has caused customers to refrain from using their dispatch services, harming the economic value of their business and their reputation.  Plus, the taxi affiliation plaintiffs are direct competitors on these pleadings, since Uber exercises control over vehicles for hire that compete with plaintiffs. 
But—and here the proximate causation reasoning of Lexmark starts to have bite—the medallion owner plaintiffs didn’t have standing, because they didn’t allege direct injury.  They argued that Uber’s presence decreased the value of medallions by allowing drivers of non-commercially licensed cars to pick up fares.  But that wasn’t injury directly flowing from Uber’s misrepresentations.
As to stating a claim, Uber again argued that plaintiffs’ income came from lease payments from drivers, not a percentage of fares or a dispatch fee, so they couldn’t lose income from diverted fares. However, the taxi affiliation plaintiffs alleged damage because the value of their business depended on the number of passengers; more passengers meant more goodwill.  If customers use Uber instead, their reputation would be damaged and, more importantly, they wouldn’t be able to charge drivers as much for the right to participate in plaintiffs’ services, including dispatching taxis and livery vehicles. They thus plausibly alleged that misrepresentations regarding Uber’s rates and uberX drivers’ licensure and insurance caused them harm.
What about the $2 million/$1 million claim?  Uber didn’t say it would provide the insurance policy.  Rather it said that there would be an insurance policy covering drivers and riders of at least $1-2 million, and plaintiffs didn’t allege this was false.  That claim was dismissed.
§43(a)(1)(A): Plaintiffs alleged that Uber misrepresented an association with them by occasionally referring to its “fleet partners,” and using a yellow colored SUV in one of its advertisements that evoked Yellow Cab. The SUV in the ad didn’t have Yellow Cab’s logo or name, but did include a taxi number 1317, which was assigned to a Yellow Cab of the same make and model. They also alleged that confusion was exacerbated by the fact that “when a customer orders a taxi or livery vehicle via Uber, a vehicle bearing the Flash or Yellow trademarks will often arrive to pick up the fare.”
Mark McKenna and Mark Lemley will be sad (compare a previous Uber case): this plausibly alleged a §43(a)(1)(A) violation.  Plaintiffs plausibly alleged that “Uber’s representations and the very nature of its service is likely to confuse Uber customers regarding an association between Uber and Flash or Yellow Cab, and that this confusion harms Flash and Yellow Cab’s taxi dispatch business.”  Likewise with the taxi affiliation plaintiffs. 
However, the medallion owner plaintiffs didn’t state a claim because they didn’t allege harm from the misrepresentations. Harm from Uber’s existence in the market depressing the value of medallions was insufficient.
Livery services were also different: Your Private Limousine alleged that confusion was even worse in the livery context “[g]iven that trademarks and trade dress are not as prevalent on the livery side of transportation services.”  But that didn’t work, because Your Private Limousine didn’t allege that its cars bore its mark or any other indicia of ownership/operation by Your Private Limousine. Its claims were therefore limited to its allegations that Uber improperly referred to its “fleet partners.”  And that wasn’t enough to plausibly allege likely confusion.  On its own, that’s not a misrepresentation, “as it could accurately refer to the owners and drivers of independent livery vehicles that have contracted directly with Uber.” Without identifying markings, “it is highly unlikely that a customer would even know that he or she was riding in a Your Private Limousine vehicle and would therefore infer that Your Private Limousine is one of Uber’s ‘fleet partners.’”  Plus, “fleet partners” wasn’t a specific, concrete, or measurable statement.  (This is applying §43(a)(1)(B) puffery analysis to a §43(a)(1)(A), but given that this should be a §43(a)(1)(B) claim, I’m not too saddened.)  So there was no plausible allegation of misrepresentation or confusion from “fleet partners” alone.
The plaintiffs who could proceed with these claims could also maintain a common law unfair competition claim.
Tortious interference with contract: This claim included allegations that Uber encouraged drivers to violate the trademark clause in the drivers’ taxi affiliation contracts by providing drivers with Uber branded “hangtags” to suspend from the cabs’ interior rearview mirrors.  Uber also allegedly encouraged drivers to use their cell phones while driving and required drivers to process credit card transactions via the Uber app, actions that violate local laws which are incorporated by reference into the contracts. Plus, these plaintiffs alleged that by subscribing to Uber in the first place, drivers violate their agreements that they will not use competing dispatch services. Uber argued that the plaintiffs didn’t allege harm, but the court inferred damages to their business through losing customers from their dispatch services and refused to dismiss the claim. 
Again, though, the medallion owner plaintiffs lost out. Their argument was based on their licensees’ agreement to abide by Chicago’s rules and regulations, and Uber’s alleged inducement to disobey the same (rules banning use of cell phones while driving and a regulation requiring that taxis “must process electronic forms of payment through their affiliations or licensed medallion managers”).  But the medallion owners didn’t plausibly allege reputational or economic harm from the violation of these contractual provisions.  (Could the medallion be seized if a driver were arrested for using a cell while driving? Would that be enough?)
Finally, Uber argued that the court should dismiss the entire complaint based on Dial A Car, Inc. v. Transportation, Inc., 82 F.3d 484 (D.C.Cir. 1996), which held that a limousine service could not bring a Lanham Act claim against a competing taxicab company when the plaintiff sought only to enforce violations of local taxicab ordinances and regulations. The DC Circuit declined to interpret or enforce municipal regulations; instead, the plaintiff should take its argument to the Taxicab Commission.
However, the point of this complaint was not that Uber’s service was illegal.  Rather, plaintiffs alleged misrepresentation separate from the legality of the service.  To the extent that the complaint alleged that Uber violated the Lanham Act or its Illinois counterpart simply by operating illegally or misrepresenting the legality of its service, those allegations would fail.  (Note that this would not be the result in California, which does allow its consumer protection law to borrow violations of other laws.)

Using up most of settlement fund shows settlement is reasonable

Larsen v. Trader Joe’s Co., No. 11-cv-05188, 2014 WL 3404531 (N.D. Cal. July 11, 2014)
This is a final settlement approval of claims based on products labeled “All Natural” or “100% Natural,” when they allegedly contained synthetic ingredients.  The settlement provided for the discontinuance of the use of those terms on the products, and created a settlement fund of $3.375 million.  Proof of purchase entitled a class member to full reimbursement, while absence thereof allowed reimbursement for up to 10 products.  Leftover amounts were to be distributed in the form of products to cass members.  Notable here are the claim rates: As of June 2014, class members made 59,830 claims representing a value of $1,906,884,75.  Twenty-three members opted out and 18 objected.  The court here rejected the objections and granted the attorney fees requested of $950,000, or 28% of the settlement fund as consistent with the lodestar and the success achieved.  The remaining amount in the fund to be distributed as product was about $55-85,000.
Some observations: as to the strength of the case, the court noted that “recent decisions have made class certification in food labeling cases an uncertainty.”  Given the uncertainties and risks, the settlement was reasonable for both sides.  Plus, the settlement fund was represented to be 50% of what would be available had the case gone successfully to trial.  (Although wouldn’t the lawyers get paid separately in that circumstance?)  It was also large enough to compensate all the claimants.  This, plus the change in labels, discernibly benefited class members.
In addition, the size of the claimant pool weighed in favor of finding the settlement favorable. And the fact that there were a few opt-outs and objectors indicates that class members read the notice and understood it enough to make an informed decision about whether to participate. 
The court rejected objections that the suit was frivolous; it had already decided that the claims were meritorious enough to proceed with discovery, which was what then produced the settlement: 
Objections directed to the merits of the claim are objections on behalf of Trader Joe’s and not the class. The objectors referenced above disagree with this lawsuit as a matter of principle. While I understand this perspective, in determining whether the settlement is fair, adequate and reasonable, I am not acting as a fiduciary to the defendant, which is represented by able counsel and capable of making decisions to protect its own interests.
The court also rejected objections based on the idea that the bulk of the settlement would be distributed in the form of products, which was disproved by the claim numbers.  (Interestingly, the court doesn’t say whether the claim rate represented a high percentage of actual purchasers. The parties represented that the fund was equal to 50% of Trader Joe’s profits on the products. But we’d need more information to understand what that implied about the percentage of purchasers who made a claim.)

Tuesday, July 15, 2014

on Thursdays, we're teddy bear doctors

The Hollywood Reporter on a lawsuit alleging infringement by the 2012 film Ted of a foul-mouthed teddy bear character that lives with humans.  This post brought to you by a reminder that Supernatural did it in 2008:
Giant teddy bear asking "Whyyyy?"

Sam and Dean: On Thursdays, we're teddy bear doctors
Yes, this is an actual line from the show.
THR says the characters allegedly share "a penchant for drinking, smoking, prostitutes," "similar physical attributes and similar vulgar traits, and that both live in a similar environment, have human friends and maintain an active social media presence."  Idea/expression and scenes a faire, anyone? 

Monday, July 14, 2014

Reading list: food law

Regent University’s law review had a symposium on food law.  Here are the resulting articles, essentially all about advertising/disclosures:
Michael T. Roberts
Nicole E. Negowetti
Fraud in the Market (about fraud in farmers’ markets)
Samuel R. Wiseman
Donna M. Byrne
Jennifer L. Pomeranz

Twiqbal kills consumer class action in 2d Circuit

DiMuro v. Clinique Laboratories, LLC, --- Fed.Appx. ----, 2014 WL 3360586, No. 13–4551 (2d Cir. July 10, 2014)
The Second Circuit quickly affirms the dismissal of a putative consumer class action based on Clinique’s marketing of seven different “Repairwear” cosmetics. First, the named plaintiffs only bought three of the seven.  They argued that they had standing for products they didn’t buy under NECA–IBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145, 162 (2d Cir. 2012).  (Of note because it suggests a securities law crossover that Ann Lipton would probably have a lot to say about; securities law is very different from consumer protection law and standing analysis should probably differ.)  The court of appeals didn’t disagree with the comparison, but held that the case was no help, because that case involved sales of related securities where the misrepresentations were nearly identical; different offering documents were insufficient to distinguish them.  By contrast, each of the seven products here had different ingredients and Clinique made different claims for them. 
The remaining consumer fraud claims were properly dismissed for failure to plead with particularity.  The complaint failed to disaggregate the different products or explain why the claims were false, beyond saying that the products can’t work:
Plaintiffs allege … that the products “do not and cannot live up to [Clinique’s] efficacy claims,” and that “no ingredient in any of the Repairwear Products can actually ‘de-age’ the skin.” Plaintiffs fail to allege what the specific ingredients in each product are and that these ingredients lack the ability to improve skin appearance. This bare-bones pleading is thus inconsistent with Rule 9(b).
The complaint also failed to allege that the plaintiffs used the product as directed, and to specify the claims on which they allegedly relied. Plaintiffs argued that they sufficiently specified because they alleged that Clinique’s advertised results could only be achieved by drugs, and since these were cosmetics these claims must be false.  This was both conclusory and implausible; plaintiffs didn’t allege facts to show, for example, that if the claim to “smooth out laugh lines” were true, the cosmetics would “affect the structure or function of the human body and therefore [would] be regulated as a drug.”
Finally, the plaintiffs alleged that Clinique’s dramatizations were fraudulent.  “But there is nothing misleading about a dramatization that presents ‘average results’ as long as the dramatization accurately depicts the average results consumers may achieve.”  (Note the weirdness introduced by “may” in describing an “average.”)  Anyway, the plaintiffs didn’t allege more than conclusorily that the dramatization was overly optimistic or portrayed effects that are above average.
Unjust enrichment and breach of warranty claims also failed; Rule 9(b) doesn’t apply to breach of warranty claims, but the allegations were too conclusory to survive Iqbal/Twombly because they just said that the products didn’t and couldn’t provide the promised anti-aging results.  (The court did not explain what more should have been said.)

Amended aggravation: Garcia v. Google

Never say an opinion (previously discussed here) can’t get worse. The amended opinion in Garcia v. Google manages that feat:
Nothing we say today precludes the district court from concluding that Garcia doesn’t have a copyrightable interest, or that Google prevails on any of its defenses. We note, for example, that after we first issued our opinion, the United States Copyright Office sent Garcia a letter denying her request to register a copyright in her performance. Because this is not an appeal of the denial of registration, the Copyright Office’s refusal to register doesn’t “preclude[] a determination” that Garcia’s performance “is indeed copyrightable.” OddzOn Prods., Inc. v. Oman, 924 F.2d 346, 347 (D.C. Cir. 1991). But the district court may still defer to the Copyright Office’s reasoning, to the extent it is persuasive. See Inhale, Inc. v. Starbuzz Tobacco, Inc., 739 F.3d 446, 448–49 (9th Cir. 2014).
Then why in blazes is she likely to succeed on the merits of her claim that her performance is copyrightable and owned by her?  (Implicitly, the majority must be saying that the Copyright Office is legally wrong in its analysis of the separate copyrightability of a performance fixed in a larger AV work, but it doesn’t address the Copyright Office’s reasoning on that point, presumably considering it pre-addressed in its original analysis.  But if individual performances are copyrightable as a matter of law, on what basis could the district court defer to the Copyright Office’s reasoning to the contrary, especially in a non-rulemaking context?)  (Oh and also, that opening clause “Because this is not an appeal …” is completely wrong/unnecessary, according to the cited case, but then why would this opinion be correct in a detail of copyright law when it can’t get the big picture right?)  The dissent nails it:
[T]he amended portions of the majority opinion only confirm that the law and facts do not clearly favor Garcia: “Nothing we say today precludes the district court from concluding that Garcia doesn’t have a copyrightable interest, or that Google prevails on any of its defenses.” Where the law and facts must clearly favor Garcia in order for her to prevail, the majority’s equivocation cements its error.

Friday, July 11, 2014

Self-promotion: ABA Blawg 100

So it's come to this: the ABA Blawg 100 is coming around again, and if you like 43(b)log, I'd love your help staying on it!  You can nominate by following this link.  Thanks!

Thursday, July 10, 2014

When all you have is a Captain Hammer ...

The costumed performers who importune passersby in Times Square are not universally beloved.  Via the WSJ comes this suggestion for getting rid of them:
State Sen. Brad Hoylman, whose district includes Times Square, said the companies that created the characters needed to "step up to the plate" and use copyright laws to assist in thwarting the undesirable presence of copyrighted characters. "They can do something to enforce their copyright and I'm convinced that that should be another route we should be taking," he said.
Unsurprisingly, the article mushes together copyright and trademark.  But this wouldn't make a bad exam question.  Assume the character costumes such as Spiderman were purchased from a licensed source.  First sale kicks in, but the performers seek payment for posing in photos with people.  Is there then a reproduction that they've induced?  What about the unfixed public performance of being the character (or being out of character)? 

As for trademark, I'm hard pressed to see likely confusion, but given how expansive the doctrine has become, you might not even need dilution, unless a court sees this as a Rogers v. Grimaldi-type situation where the "product" being sold is a performance.  As for dilution, is performing for money commercial speech?  First Amendment doctrine says no, but trademark cases routinely ignore First Amendment doctrine.

However, this is all a (literal?) sideshow: the problem that the article discusses is that there are too many people asking for money in Times Square (in the view of other people whose livelihood is earned in other ways, some of them competing).  The costumes are neither necessary nor sufficient to cause this problem, as the article notes when discussing "other peddlers" and referring to the problematic people as "panhandlers." The real trick would be to explain why that has anything to do with the policies justifying copyright and trademark law.  I'm not in favor of using intellectual property laws to solve non-IP problems, however much fun it is to discuss the theoretical underpinnings of such claims.


Tuesday, July 08, 2014

Purpose-transformativeness versus content-transformativeness

In 2008, Tony Reese presciently told us that the case law on fair use "transformativeness" showed a trend towards favoring transformative purpose over transforming content, so that exact reproduction could have a very good shot at fair use.  Today's example, via Eric Goldman, involves Westlaw and Lexis's creation of databases containing the full text (minus some privacy redactions) of legal filings.  In a quick opinion, the court deems this conduct clearly transformative--it results in the creation of a completely new thing, a legal research database--and not harmful despite being commercial and involving full copies (or as near as makes no difference).  At this point, I think it's safe to say that it's easier to win a fair use case by engaging in large-scale, wholesale copying to create a database than it is to win a fair use case by altering the content of a single work--there are plenty of cases in the latter category, of course, but there are also cases finding infringement, and so far there aren't any in the former category.  I would be surprised if the Authors' Guild v. Google case became the first.

Critics of so-called "expansive" fair use holdings sometimes argue that (1) favoring databases is an unjustified extrapolation from Campbell, which after all was a content-transformativeness case, and (2) that conceptually, "transformativeness" overlaps with the derivative works right, which also speaks of how a work may be "transformed" or adapted.  (1) and (2) are, it seems to me, really in conflict--any need to constrain content-transformativeness for fair use purposes in order to protect the derivative works right doesn't apply to purpose-transformativeness, which generally needs to work with reproductions to achieve its aims.  Anyway, Reese's careful framework seems to me to explain the subsequent six years of cases too.

Deceptive whiskey?

The Whiskey Reviewer announces a series evaluating the marketing claims of various whiskeys. What I found quite striking was that the claims of interest were very much centered around "authenticity," both in production and in narrative:

  • Potemkinism: Does the company run what Chuck Cowedery labeled a “Potemkin Distillery,” where they claim to be a distillery but are in fact a bottler?
  • Back Story: Are there bogus elements in the company’s historical claims, and if so how bogus are they?
  • Marketing Flim Flam: Other elements of the company’s image and marketing practices that some find objectionable.
  • As with so many things, stories matter.

    H/T James Milles.

    Monday, July 07, 2014

    intent to use successful term in ads isn't intent to confuse

    Overstock.com, Inc. v. Nomorerack.com, Inc., No. 2:13-CV-1095 (D. Utah June 30, 2014)
    Overstock sells a lot of stuff online: over one million products, with over six million customers last year. Nomorerack directly competes with Overstock, and has sold more than $420 million worth of products to nearly 5.2 million customers since it was founded. Overstock owns a number of registrations for OVERSTOCK.COM, and sued Nomorerack for using “overstock” in ads, like so:
    The court denied a preliminary injunction.
    First, the court found the similarity between the marks to favor defendants. (This might be an example of stampeding the factors.) Marks aren’t to be dissected, so the court rejected the argument that “overstock” was nearly the same as “overstock.com.” The marks have to be considered as they’re encountered in the marketplace, including Overstock’s stylization of its mark. By contrast, Nomorerack didn’t use a stylized “O” design and it didn’t use .com. It used “overstock” in combination with other words, such as “overstock clearance,” generally in all caps, and always with a reference to “nomorerack” or “nomorerack.com.” Though Nomorerack used text-based ads that didn’t have distinct stylization, the domain name was always clearly displayed in those. Thus, there was little visual or aural similarity between the marks. There was similarity in meaning: the sale of discounted products. But Overstock used the term to identify its company, while Nomorerack used it to identify a type of product or sale. 
    Next, the court found Nomorerack’s intent unproblematic. The court refused to infer intent to confuse based on Nomorerack’s knowledge of Overstock. Intent to copy a mark can justify an inference of likely confusion, but intent to copy a product can’t justify that inference; so therefore with awareness of the plaintiff. Instead, the evidence was that Nomorerack used a number of different terms in ads—“Cyber Monday, Black Friday, Free Shipping, Blowout Sale”—and settled on “overstock” because that word had the best performance. The intent was not to copy, but to sell more effectively. “Whether the success of this term is based on Plaintiff’s reputation and good will or some other reason is not clear.” Continued use after receipt of a C&D also didn’t justify an inference of bad intent, since intent at the time of adoption is key.
    Overstock argued that Nomorerack moved away from its own green and white color scheme to adopt Overstock’s red and white colors. But the evidence didn’t justify that finding; instead Nomorerack used a variety of color schemes in its ads. Intent weighed in Nomorerack’s favor.
    Actual confusion: All Overstock had were isolated, anecdotal instances of confusion, which could be disregarded, given the large volume of transactions at issue. Overstock received ten consumer complaints about Nomorerack, and Nomorerack produced over 200 complaints. Some consumers who bought from Nomorerack thought they were buying from Overstock; others thought that Nomorerack somehow “hijacked” their order; others believed that Nomorerack’s ad was an ad for Overstock; others believed that the parties were somehow affiliated. (Other than the ad-based ones, how do we know these incidents derived from ads using “overstock” in the text?) However, even in the evidence provided by Overstock, some consumers clearly recognized the difference. E.g., one consumer said “[s]ome items listed on Nomorerack.com are cheaper than the same items that Overstock.com has” and that they found “better pricing on nomorerack.com.” Plus, in the context of millions of customers and millions of sales per year, “relative to the total volume of sales, the limited evidence of actual confusion provides little weight.”
    Overstock argued that Nomorerack’s denominators were meaningless because we don’t know how many consumers saw the infringing ads. But that weighed against Overstock, which bore the burden of proof. It only provided a handful of complaints, which could be disregarded.
    Similarity in products/manner of marketing: this favored Overstock.
    Degree of care: The expense of the parties’ products varied widely, but price isn’t determinative. What matters is the consumer’s degree of care exercised at the time of purchase. Overstock argues that consumers trying to get a good deal wouldn’t be careful about the source of the offer, but Overstock’s VP of marketing said that a high percentage of its customers engage in comparison shopping, and Overstock prices products on the assumption that people are comparing prices. “Because both parties purport to offer items at discounted prices, the Court believes that consumers will exercise care to find the best price for the product they seek to purchase, rather than purchasing the item on impulse.” This favored Nomorerack.
    Strength of the mark: OVERSTOCK.COM was incontestable, but that didn’t make it strong. The court found the conceptual classification “close,” but ultimately “overstock” was descriptive: it conveyed the characteristics of the products, that they were excess or surplus inventory. Overstock originally began as an Internet-based liquidator of excess or surplus inventory. Overstock argued that it now carried more goods and services than that, but descriptiveness doesn’t require that a term convey all of a product’s characteristics, uses, or functions. (And relatedly, a term can be descriptive of some of a business’s products/services and be descriptive for the business as a whole—e.g., In re Quik-Print Copy Shops, Inc., 616 F.2d 523 (C.C.P.A. 1980), where the business provided services other than quick printing.)
    Commercial strength: Overstock provided evidence to support a finding of commercial strength. It submitted a study indicating that approximately 73% of United States consumers and 89% of online shoppers had heard of Overstock.com or “the Big ‘O.’” The commercial strength of the mark made up for its conceptual weakness, making the overall factor favor Overstock.
    The particular factors favoring Nomorerack indicated that confusion was unlikely. Thus, the court didn’t need to evaluate Nomorerack’s descriptive fair use defense, though it noted that Nomorerack’s evidence on this was compelling: it submitted evidence that it wasn’t using the term as a mark (query what would count as “evidence” of this), that the term was descriptive, and that its use was fair and in good faith.
    Belt and suspenders: Overstock also didn’t show irreparable harm, given the minimal actual confusion, and given that its evidence of lost sales suggested that cost and product selection could explain consumers’ choices to buy from Nomorerack instead of confusion. By contrast, an injunction would require Nomorerack to stop using one of its most effective ad campaigns, harming it.