Wednesday, April 30, 2008

museums and image permissions

Simon Tanner, Reproduction Charging Models & Rights Policy for Digital Images in American Art Museums (a Mellon Foundation study)

This was part of the background materials for the Corel v. Bridgeman panel I attended yesterday, and I found a couple of paragraphs particularly interesting:

Only 10% of the museums interviewed actively chased unauthorised use and did spot checks to look online and in publications for examples of misuse. The remaining museums mainly do not chase unauthorised use (unless particularly obvious or egregious) due to a lack of staff resources. Most museums will send a letter from the General Counsel’s office for blatant misuse. For lesser abuses the museum may look for retro-payment of the licensing fee, possibly order a cease and desist on the unauthorised use or just aim for a proper credit of the museum. However, such letters are frequently ignored by the infringers and the museums themselves never expressed a great sense of optimism about chasing infringement once it has happened. . . . . A large number of the museums interviewed also stated that none would be prepared to litigate even in clear cut cases and this may have much to do with the blurred lines between unauthorised uses against the license as opposed to a strict breach of copyright.

. . . . The interviewees were asked whether the museum would chase unauthorized educational use of public domain works or is this “fair use”.

90%+ of respondents felt that it is probably fair use as long as the museum is properly credited. All would defend educational use as a good thing, but many interviewees were concerned about losing control over the way the artwork might be depicted and also losing the credit line. All felt that text book uses are commercial use and thus not fair use in any circumstances.

One museum stated that they do not chase unauthorized educational use but feel it is definitely not fair use. Another museum stated that if used in a publication then it doesn’t matter if it is educational or not; they would be chased and would not be considered fair use.

This is a pretty clear practice, whatever the museums say.

Another notable section:

. . . . By market pricing, museums are making decisions about where they would like to be positioned on the scale of prices charged in the marketplace. Many factors drive this decision – would lowering prices drive more sales; higher prices might convey more prestige or efficiency; a mid price might show fairness? . . .. Most of the museums claimed to be pricing towards the bottom or middle of the market price range. What was not found in the interviews was a museum that perceived itself as leading the market price or defining the upper price limits (whatever other museums may think of their pricing).

In the museum field, then, all of the museums are below average. As with Lake Wobegone’s children, the mistake of fact there may produce distorted policies.

And finally:

A museum does not carry out image creation or rights and reproduction activity because of its profitability. These services exist because of the internal need for image creation and rights clearance matching up with an external desire to publish and use museum images. The need to promote the museum collections, to gain appropriate credit and to honour the artist and their work are the real driving factors that underlie these services. Most of these services are sunk costs to their museums that exist on budgets set according to the internal need for services and augmented with some external commercial and non-profit based usage. There are notable exceptions, but these museums do not represent the norm found in the survey or the interviews; and even here the success of the rights revenue is often based upon a small number (between 10 and 50) works which are iconic either to art history or the public sensibility.

The main financial goal of all the services interviewed is to make enough money to offset direct and visible costs like materials and new photography. However tempting it is for museums to look upon colleagues with 6 figure revenues with envy this would be a mistake. All those interviewed were spending as much or more money to provide services as they received in revenue and a high revenue generally represents large numbers of transactions or new imaging.

So, image permissions aren’t great revenue generators and there is no real prospect that they will become so. Given that, it seems that restrictive licensing is a mistake, unless we decide that a non-copyright owner is for some reason especially entitled to decide what “bad” uses are.

Bridgeman v. Corel, 9 years on

Who Owns This Image? Art, Access, and the Public Domain after Bridgeman v. Corel
Public Panel Discussion
Cosponsored by the Art Law Committee, New York City Bar Association; the College Art Association; ARTstor; and Creative Commons

A couple of notes: I’m struck by the similarity between museum image licensing and archive claims to rights in scanned documents—the claims to copyright are often the same, even though the archive claims are laughable even by the standards of the anti-Bridgeman side, because that side generally agrees that photocopies and other images that don’t require high technical skill to create don’t get new copyrights of their own. The reason that the archive and museum claims are the same is that the reason they want copyright—to control, and maybe if they’re lucky get paid for, uses of copies of the underlying public domain work—is the same; the theory that it’s the skill of the photographer that creates the copyright has nothing to do with the incentives or values at issue.

Also, the claim that specialized creative skills are required to create very good copies of public domain works seems very dependent on technology. Engravings are copyrightable because they visibly bear the marks of the engraver—different engravings of the same work look different. Well-done art photographs of public domain works really don’t—there were a bunch of examples on display at the panel, and I’m sure that experts could tell you the differences between them, but I would have just called them reproductions of the underlying work. The remaining claim to authorship is the judgment required to set up the photo, which is not particularly evident on the face of the photo. But as technology improves so that red-eye correction and other tweaks become standard, even the required judgment will recede, becoming perhaps at most technique or style rather than individual expression. A relevant data point might be Clay Shirky’s example of high-dynamic range photography, a technique that used to be very specialized and difficult and has, through Flickr and related social software, become much easier to learn and carry out (with the assistance of special computer programs).

I also wondered how often museums actually register the copyright in their photos of artworks. This may be one reason damages might often be low.

Virginia Rutledge, Chair, Art Law Committee, New York City Bar Association,

Vice President and General Counsel Creative Commons:

People continue to comply with assertions of copyright in photos of public domain images. Why? The claim that Bridgeman is wrong is a claim that access to a unique copy should also trigger control over all reproductions of that copy. What happens when both access to the underlying work and the photo of the work are restricted?

Judge Kaplan: Elements of photos deserving copyright: (1) Originality of rendition—angle of shot, exposure, lighting, filters, developing techniques—the focus must be on the effect of those technical choices on the image, as distinct from whether the choices took knowhow or skill. (2) Originality of timing—choice or pure dumb luck about the split second at which the photographer pressed the button. (3) Originality of composition.

What to do when the effort and the effect is to produce as close an identity as possible between the photograph and an underlying work of art? There’s nothing original about the timing or subject matter/composition. So originality must lie in rendition. Of course there are important choices about lighting and exposure that go into world-class photos. But he concluded in Bridgeman that such choices were closer to the “sweat of the brow” than the spark of originality required by Feist. The underlying artist is the one who controlled the effect; the photographer was trying to replicate that effect as best s/he could.

Judge Kaplan ended by expressing uncertainty over whether the award for a successful copyright claim would be worth the cost of litigation.

Dr. Theodore Feder, President, Art Resource, Artists Rights Society: This was a problem of a bad plaintiff’s attorney, as Judge Kaplan noted. He didn’t challenge the claim that the photos were “slavish copies.” Judge Kaplan had no alternative but to find for Corel. But that doesn’t make Bridgeman settled law—it’s just a district court opinion. Professional photos of artwork require creativity and professional judgment, which is why museums hire experts. (Comment: Also true of those who frame paintings for museums?)

All photos copy some object; a photo of a picture is original just like a photo of anything else (quoting older British case). Learned Hand: no photo is unaffected by the personal influence of the author, and in any event photos are protected without showing authorial influence. (Comment: Learned Hand is of course a great guiding light, but I believe he did write before Feist.)

It’s also important to remember that museums use contracts, which create separate obligations on users regardless of copyright.

The Victoria & Albert Museum and the Met have taken steps to make images available for scholarly use for free. But they haven’t renounced copyright—this is a way to meet scholarly needs while still being compensated for commercial use.

Christopher Lyon, Executive Editor, Prestel Publishing: He spent an hour at MOMA yesterday planning a complex shoot for an art book. Skill is definitely required, but photographs are not photographers. Photos of 2-D artworks are an extremely narrow category of photos; and there are distinctions in there—photos of photos, for example, in which MOMA claimed copyright, versus photos of marginally 3-D paintings using impasto or collages. Regardless, the convention of publishing is to eliminate dimensionality in images; photos that depart from that standard are compromised commercially.

Creativity has no role to play. The photographer doesn’t choose the subject. The photographer doesn’t compose the image. S/he may be instructed to capture details, but in an age of hi-res, the editor/author will want to select details themselves. The lighting is usually highly constrained. The lighting must be sufficient and even to reproduce the colors accurately in a four-color reproduction process, which is why color bars usually appear on the outside edge of an image.

To the extent the photographer includes shadows, unless specifically instructed to do so, the photo is compromised. To a significant extent, the photo’s status in publishing is determined not by what it is but by how it’s used. That’s why licensors want print run information. An image can be positively valued for its inexpressiveness, its transparency to its subject. That’s how images of 2-D works are used in art world publishing, in which a photographer is part of a team including a production person, who works with the author/curator/artists (not with the photographer), the sizer, the separator who oversees color correction, and the pressmen who realize the preceding decisions in the actual printing. (Comment: my way of expressing this is that even if the original photo is copyrightable, the ultimate copy in the printed work could easily be so different that it wouldn’t infringe the thin copyright in the original photo. Under the intermediate fair use cases like Galoob and Kelly, that would get the publisher off the hook for infringement, though licensing remains an issue.)

Maureen Whalen, Associate General Counsel, J. Paul Getty Trust: She asked others at the Getty: Just because we’re rich enough to own 400-year-old paintings, why do we have the right to control uses of the images? Why not let them appear on shower curtains? Ken Hamma made the case in D-lib that museums should be putting these works out there as part of the mission, but the Getty hasn’t agreed.

The museum world is struggling with the principled basis for its policies. Licensing activity has exploded, but the staff is not there. Once the principles are articulated, museums need to figure out how to maintain the curatorial integrity of the artworks—and still put them on shower curtains. On a practical level, if you use an image of a public domain artwork owned by the Getty, and don’t use the Getty’s name other than in a First Amendment context, you won’t get a cease & desist letter from her.

William Patry, Senior Copyright Counsel, Google: As in-house counsel for a frequent defendant, he has no luxury to cross his fingers like Maureen and hope things work out. Don’t look to Congress for any help. If they can solve orphan works at the 1% successful level, it will be a bonus. Any solutions will have to be private.

As a former Copyright Office lawyer, he finds Bridgeman a standard application of the law; US copyright has no different standard of originality or shorter term for photographs, making it more generous than other countries. Bridgeman applies Feist, which pointed out that some compilations are protectable and some aren’t. Ditto photos. Judge Hand’s statement (which was also the statement of a mere district judge) was dictum in every sense; Justice Holmes also said that handwriting reflects personality, but he wasn’t suggesting protecting it. Originality is our standard, and it is fact-specific.

Anyway, why does copyright matter? Is it a validation of your worth as a photographer? Of the worth of a photo? The copyrightability standard is really low, and not real testimony to any sort of value. Artists should define their self-worth in other ways—peers, the market. Copyright is not a ruler for determining worth. If we assume (wrongly) that museums hire photographers for skill, not price, then that should be its own indicator of the value of skill. If someone is reproducing your reproduction, they’re not copying what you contributed; although people are reaping where they haven’t sown, they’re reaping what the original artist sowed. The incentive argument doesn’t make much sense to him in this case.

Rutledge: If I take a really excellent photo of the Mona Lisa, and you use it in your book, but the printing process strips out the excellent elements, have you infringed? (This is my intermediate works argument above.)

Judge Kaplan: Infringement requires copying and substantial similarity in the original elements of the works. If the reproduction is sufficiently poor that any original contribution disappears, there’s nothing left.

Patry: You set out to infringe, but you didn’t.

Rutledge: You might not need the very best image to illustrate your argument. Why not go scan someone else’s image from a book?

Whalen: If there’s a 400-year-old painting with a high-quality reproduction in a book, under Bridgeman you can scan the picture from the book (and put it on a shower curtain).

Feder: That violates our rights. The work isn’t in the public domain unless Bridgeman governs. If so, people like me who run institutions providing images will fold, and that’s a bad result.

If you really believe what Lyons said, why hire a skilled photographer at all? Why not some guy off the street?

Lyons: Not denying skill, denying originality from a publishing perspective. We don’t want your special snowflake interfering with our photo of the underlying public domain work!

Q from audience: Is this really a nonlegal question about how we perceive and consume art in a highly materialist world where we think about shower curtains, not about the public domain? Would Feder be comfortable with a world in which lower-quality images circulated freely, competing with the controlled images?

Q from editor of ArtForum: What about the money? If we said “damn the torpedoes” and fought a lawsuit, the fight alone would put us out of business.

Lyons: Commercial art publishers have their backs against the wall, just as you do, and the price of images is a big part of that. $30,000 for an average art book almost instantly makes it unpublishable. Publishing is distorted and skewed—the books that are published are different: they’re financed/supported by people with a professional or financial stake in the artist. The authority of the books suffers, and works created for the general public suffer.

Feder: We do reduce fees for books with lots of illustrations.

Jason Mazzone, Brooklyn Law School: How much impact did Bridgeman really have? I’m just going to obtain the license even if I think Judge Kaplan was right because the risk of litigation is just too high; my publisher won’t let me rely on Bridgeman.

Lyons: The weight of legal responsibility and risk has shifted to the author.

Patry: If the author has to indemnify, then for goodness sakes’ s/he shouldn’t have to clear everything either—s/he should be able to rely on fair use. Stand up for yourself as an author!

Feder: The publishers are taking advantage of non-prominent authors, shifting the costs of permissions to them.

Tuesday, April 29, 2008

Student note on Lanham Act standing

Gregory Apgar, Prudential Standing Limitations on Lanham Act False Advertising Claims, 76 Fordham L. Rev. 2389 (2008). Thanks to this note, which provides a nice overview of the standing cases and joins the chorus of criticism of Phoenix of Broward, it’s been brought to my attention that a silly Bluebook rule strips my name from law review footnotes citing my blog posts. Apparently a single-author blog doesn’t get an author name. You know, much like there’s no need to give the name of the author of a single book. So I am pondering a name change. Yes, I know, citation counts don’t matter. But they could not matter and be higher, right?

Monday, April 28, 2008

Who Owns This Image?

Art, Access, and the Public Domain after Bridgeman v. Corel -- a public panel discussion tomorrow, Tuesday, April 29, 6:30-8 at the NYC Bar Association, 42 W. 44th St. I'll be at the roundtable before and listening eagerly to the panel discussion.

More here. Ironically/tragically, most of the announcements of this panel on the web don't include "this image," which in my print invitation is attributed to Leonardo da Vinci, photograph copyright John Smith, 2007. Is the John Smith a joke? (Like, one is tempted to say, the copyright claim?)

Trademarks, the recession, and use in commerce

From the New York Times comes a story about brand values in the economic downturn:

Recession Diet Just One Way to Tighten Belt

[C]hains that emphasize low prices, like TJ Maxx and Wal-Mart, are thriving. And cut-rate supermarkets, like Save-A-Lot, are swamped.

“People are not not spending, but they are changing how they spend,” said Marshal Cohen, chief analyst at the NPD Group.

And they are often willing to sacrifice convenience or swallow their pride.

…. As the compromises mount, people are even coming up with clever schemes to hide their cost-cutting.

Holly Levitsky, a 56-year-old supermarket cashier in Cleveland, buys a brand of steak sauce called Briargate for 85 cents and surreptitiously pours it into an A1 steak sauce bottle she keeps at home.

“My husband can’t even tell the difference,” she said.

Let's hope A1 has better things to do than sending her a cease-and-desist letter. (And, one presumes, Levitsky hopes her husband neither reads the NYT nor has a Google Alert out on her.)

Sunday, April 27, 2008

Tastes like false advertising: more on chicken "raised without antibiotics"

Sanderson Farms, Inc. v. Tyson Foods, Inc., -- F.Supp.2d --, 2008 WL 1838719 (D. Md.)

Plaintiffs alleged that Perdue’s “Raised Without Antibiotics”/“Raised Without Antibiotics that impact antibiotic resistance in humans” (RWA and qualified RWA) claims were false advertising. Previously, the court ruled that claims against RWA ads weren’t preempted/precluded by the fact that the USDA approved, or at least failed to disapprove, the qualified RWA label. Preclusion aside, the allegation is that Tyson uses ionophores in its chicken feed and that ionophores are antibiotics. The court enjoined Tyson from all non-label advertising using both claims.

USDA, the FDA, and the American Vetinary Medical Association all agree that ionophores are antibiotics, and every single witness on both sides here agreed.

People fear that the rise of antibiotic resistance will create “superbugs.” But ionophores are not used in human drugs, so their use for chicken presents only a tiny threat—it is “as close to scientific certainty as possible” that ionophores won’t lead to antibiotic resistance in humans. The court noted in a footnote that experts used to think that fluoroquinolones have no impact on human antibiotic resistance, but were removed from the market by the FDA when—oops—it turned out that they did.

All the parties use ionophores in their chicken feed; indeed, it’s a widespread industry practice, because ionophores are effective against a common, deadly chicken disease. Tyson also injects antibiotics into its eggs 2-3 days before hatching. Tyson defines “Raised Without Antibiotics” to mean “from hatch until slaughter,” a definition it didn’t disclose to the USDA when applying for approval of its label and doesn’t give to the public either.

Among the parties’ products, only Perdue’s Harvestland does not use any antibiotics at all; Harvestland is truthfully advertised with the slogan “No Antibiotics Ever.” Harvestland chickens are more expensive to produce because, without ionophores, Perdue has to use costly alternative measures to prevent disease. This cost translates to higher retail prices, which some consumers are willing to pay for antibiotic-free chicken.

The RWA claims allowed Tyson to compete with Harvestland, misleading consumers into believing that Tyson’s mass-marketed chicken is antibiotic-free just like Perdue’s specialty chicken. Tyson executives acknowledge that the RWA claims allowed them to “price up”—charge more for RWA chicken without losing sales.

The court found that USDA erroneously approved the unqualified RWA label on May 16, 2007, while listing ionophores in the feed ingredient list. As a result, Perdue sought similar approval for the same label language. Less than four months later, in September, USDA “unambiguously” informed Tyson of its mistake and its intention to revoke the approval. Tyson requested reconsideration, which was denied. In mid-December 2007, USDA approved the “Raised Without Antibiotics that impact antibiotic resistance in humans” label. A USDA undersecretary sent a letter confirming that Tyson and the USDA “reached an agreement” on the qualified RWA claim, because that claim described “the situation in a truthful and non-misleading way.” Tyson was granted time to transition to the qualified claim.

Meanwhile, Tyson was using both qualified and unqualified RWA claims in a multimillion-dollar nationwide ad campaign: TV, radio, billboards, print, posters, and point-of-purchase. “The advertisements uniformly featured smiling children, often accompanied by a parent. Many of the advertisements included a heading in large print declaring ‘Chicken your family deserves, raised without antibiotics.’” This was designed to strengthen the Tyson brand by appealing to safety and health concerns.

Feedback, unsurprisingly, was overwhelmingly positive. Consumers took away the message that Tyson didn’t use antibiotics and that the chicken was “better” or “safer” than competing brands. Consumer reaction groups readily reported the “safer” message; one person, for example, said that Tyson’s chicken “has made me very happy as I am a cancer survivor and I believe that all the antibiotics and artificial ingredients contribute to this major disease.” Tyson’s own data found that 9 out of 10 consumers considered antibiotic-free a desireable characteristic. Indeed, it was the second most important claim consumers looked for in chicken shopping. The campaign increased sales of Tyson chicken by 35 million pounds, an effect Tyson called “dramatic.”

This success was corroborated, the court found, by the fact that Tyson continued to run the unqualified RWA claim for nearly 6 months after USDA clearly informed Tyson that it had made a mistake and revoked the label approval. “It is quite clear to this Court that it was in Tyson’s financial interest to delay the phase-out period as long as possible.” Indeed, the chairman and CEO of plaintiff Sanderson Farms received a grocery store circular using the unqualified RWA language during the week of March 9, 2008. Tyson didn’t pay for the ad, but it didn’t tell its customers to stop using the claim either.

Hedging its bets and “[f]urther evidencing the aggressiveness of its marketing campaign,” Tyson started buying ads using qualified RWA language before the qualified label was approved. As a result, many recent Tyson ads contain qualifying language differing from the approved language. In some, the qualification was signalled only by an asterisk leading to a mouseprint disclosure. The court found that this didn’t correct the deception.

Tyson’s ads harmed plaintiffs, who submitted evidence of sales lost to Tyson. Tyson’s internal documents confirmed that the RWA campaign “wrecked Perdue’s overall enterprise strategy” and that “elevating the Tyson brand with RWA has also devalued the Perdue brand.” (Who sets out to kill a king, even a chicken king, had better succeed.)

The court found plaintiffs’ survey compelling as to the deceptiveness of both qualified and unqualified RWA claims. Four cells, each of about 150 shopping mall visitors who were likely chicken purchasers, were shown an unqualified RWA ad, a qualified RWA ad using the USDA-approved language, or a control touting “chicken with great taste, high quality and unmatched variety.” The results showed that consumers largely responded to unqualified and qualified RWA claims the same way, and they understood both claims to imply that Tyson’s chicken is safer and healthier than competitors’ chicken. “In short, consumers believe that there are no antibiotics given to Tyson’s chickens.” In the unqualified RWA cells, 71.4% and 85.1% reported a “no antibiotics” claim, whereas 63.4% did so in the qualified RWA cell. More than half in the qualified RWA cell, 54.9%, didn’t mention resistance. “9.2% of respondents mentioned ‘no antibiotics’ and ‘antibiotic resistance’ as separate but related ideas.”

The qualification, to the extent that consumers perceive it, generally means to them that resistance is a reason to avoid antibiotics, not an explanation of which antibiotics Tyson’s chickens don’t get:

Quite significant to this Court is the fact that only 4.6% of respondents understood the claim to mean what the experts at the USDA understood it to mean--i.e., that Tyson uses antibiotics, but that the antibiotics it uses do not cause antibiotic resistance in humans. … Indeed … this Court finds that the qualifying language may actually serve to reinforce the false impression that Tyson’s chicken is antibiotic-free…. Taken together, participants largely misunderstood the entire qualified claim to mean that Tyson’s chicken had no antibiotics and therefore could not impact antibiotic resistance in humans. (emphasis added)

The court cited a number of specific responses illustrating this point, e.g., “[The ad means t]hat this chicken is raised and fed right, without antibiotics so that people will not become resistant to antibiotics.”

Defendant’s survey expert made no dent, opining merely that the questions should have been more open-ended. The closed-ended questions, however, made clear that respondents believed that Tyson’s chicken was safer and healthier than competitors’, regardless of whether the ads used a qualified or unqualified RWA claim. Subtracting the percentages from the control cell, the net belief that the ads were claiming superior safety and health ranged from 21.9% to 35.7% (though the net difference in “better for you” was smaller). Because all the parties use ionophores, the court concluded that all these people were being deceived.

The unqualified RWA claim is literally false. In addition, plaintiffs demonstrated that consumers are being misled by both qualified and unqualified RWA claims. (Because the USDA approved the qualified RWA claim as not “false and misleading,” the court didn’t assess its literal falsity at this stage, only its misleadingness.) The percentage of consumers who reported an unqualified “no antibiotics” message after exposure to the qualified RWA claim was much higher than the 15% or so that is usually sufficient to show likely deception.

Even in the absence of any presumption (because the ads don’t name any competitors), the evidence showed that plaintiffs would continue to suffer irreparable harm absent an injunction. Plaintiffs and defendant all agreed that Tyson’s ad campaigns caused “incalculable” loss to Perdue. Such harm to brand value is “precisely the sort of loss that the issuance of a preliminary injunction is designed to prevent.” Tyson’s aggressive campaign, ignoring the USDA’s warnings, suggests that it might well take a similarly aggressive position awaiting trial on the merits.

On the other side, there was “virtually no harm” to Tyson from enjoining non-label ads with the unqualified RWA claim. Removing ads from the marketplace undoubtedly entails substantial costs. Fourth Circuit precedent requires district courts to consider even self-inflicted irreparable harm to defendants, in order to keep the balance of harms test from always favoring the plaintiff. But Tyson could have mitigated the harm through a “less aggressive marketing position.” The evidence showed that Tyson executives were well aware of the risk, but proceeded anyway. Moreover, the extremely high likelihood of success on the merits is a factor—denying a preliminary injunction would just put off the irreparable injury to Tyson. “Raised Without Antibiotics” is literally false; the qualifications don’t work; and the ads don’t explain that Tyson injects antibiotics into eggs before they hatch. Materiality was also clearly shown.

The public interest also favored an injunction. The public is interested in avoiding false advertising, even without an immediate health or safety concern.

Stale cheese: delay defeats infringement claim

Wisconsin Cheese Group, Inc. v. V & V Supremo Foods, Inc., 537 F. Supp. 2d 994

The TTAB granted V&V’s petition for cancellation of Wisconsin Cheese Group’s registration for QUESERIA CARIBE. Wisconsin Cheese sued to reverse the TTAB decision and V&V counterclaimed for trademark infringement of its DEL CARIBE trademark.

The court held that the counterclaims were lached: they were barred by V&V’s fourteen-year delay.

V&V used DEL CARIBE (basically, “Carribean”) for cheese in Illinois as of 1976. Wisconsin Cheese began selling cheese in Illinois in 1992 under the mark QUESO CARIBE (“Carribean cheese”). Its application to register the mark was rejected on descriptiveness grounds; Wisconsin Cheese abandoned the application.

V&V became aware of Wisconsin Cheese’s QUESO CARIBE no later than 1993; in March of that year, V&V sent a cease and desist letter to Wisconsin Cheese, describing V&V’s mark as QUESO BLANCO SUPREMO DEL CARIBE (registered in Illinois). Despite V&V’s demand, Wisconsin Cheese refused to take any action. And neither did V&V for the next seven years. During that time, Wisconsin Cheese began selling QUESO CARIBE exclusively to Costco, with sales 1996-2000 of over $1.3 million.

In 1995, V&V applied to register DEL CARIBE, though it didn’t disclose in its application that Wisconsin Cheese was using QUESO CARIBE. The registration issued in late 1996. In 2000, V&V sent a cease and desist letter to CheesAmerica objecting to its use of CARIBE. Somehow, Wisconsin Cheese learned of the letter, but neither CheesAmerica nor Wisconsin Cheese agreed to change its marks. In the following 20 months, Wisconsin Cheese sold over $3 million of QUESO CARIBE. At the end of 2001, Wisconsin Cheese received another cease and desist letter. It ignored the letter; V&V took no action.

In 2003, Wisconsin Cheese applied to register QUESERIA CARIBE, and over the next year switched from QUESO CARIBE to QUESERIA CARIBE. Mid-2004, the application was published for opposition; V&V did not oppose. Once the registration issued, V&V filed a petition for cancellation, which was granted in early 2007.

Both parties have sales in the millions of dollars, experiencing substantial growth in the last decade, for a total of roughly $23 million on each side in the past decade..

Laches requires (1) knowledge, (2) inexcusable delay, and (3) prejudice. Laches is particularly important for the Lanham Act, which has no limitations period of its own and thus borrows from analogous state statutes. Under Wisconsin law, the analogous state statute has a three-year limitations period; after three years, then, there’s a presumption of laches.

Knowledge since 1993 was easily established. The change from Queso to Queseria is meaningless, since it’s the word Caribe that’s the alleged problem, and V&V’s letter singled out that word. The 14-year delay, nearly five times more than the 3-year statute of limitations, was also inexcusable. V&V argued that it had no knowledge of Wisconsin Cheese’s use of Caribe from 1993-2001. But lack of actual knowledge isn’t a complete excuse for unreasonable delay. Trademark owners have the affirmative duty to police their marks, and what V&V knew in 1993 gave it the duty of inquiry. It was unreasonable to assume that Wisconsin Cheese stopped using the mark on receipt of a cease and desist letter. V&V demanded a response, but didn’t get one (or not a favorable one; the facts here were contested, but no matter what, V&V had no reason to think that Wisconsin Cheese had stopped). In any event, V&V had no excuse from 2001 to 2007. Even if it had been reasonable to assume Wisconsin Cheese had ceased use of Caribe in 1993, V&V should have learned from its mistake after the second letter.

V&V also contended that the doctrine of progressive encroachment excused its inaction. Progressive encroachment excuses delay when a defendant begins use of a mark, then changes marketing or manufacturing to place itself more squarely in competition with a plaintiff. Not all changes in marketing or manufacturing matter: only those changes that worsen a potential likelihood of confusion. Increased sales aren’t progressive encroachment. A trademark owner who knows about infringement isn’t permitted to wait and see how successful a competitor will be and then destroy the competitor’s investment. Given that investment in advertising and marketing serves as evidence of prejudice, it would be “illogical” to treat increased sales as a rebuttal to laches.

V&V argued that Wisconsin Cheese entered new trade areas where V&V’s mark was already established. But the very first letter discussed the overlap in Illinois. Nor did the change to QUESERIA CARIBE put Wisconsin Cheese more squarely in competition with V&V. Finally, sending two cease and desist letters in 14 years didn’t excuse the delay. Attempts to resolve a dispute without litigation shouldn’t bolster a finding of laches, but at the same time a sparse letter writing campaign isn’t a serious attempt to resolve matters without litigation.

Prejudice is judged on a sliding scale: a short delay requires a greater showing of prejudice than a lengthy delay. Prejudice occurs when delay causes the alleged infringer “to build up a valuable business around its trademark in a way that would not have happened if the trademark owner had asserted its rights promptly.” Wisconsin Cheese relied on V&V’s delay when it “decided to invest millions of dollars in promoting its cheese under the ‘Caribe’ mark.” If V&V had acted earlier, Wisconsin Cheese could have changed its investments or simply renamed the cheese. Wisconsin Cheese’s investment, plus its increased sales, constitute prejudice as a matter of law. In any event, V&V failed to rebut the presumption of prejudice.

V&V argued that there was no prejudice because Wisconsin Cheese relied on its lawyer’s opinion on noninfringement and not on V&V’s inaction. The court agreed that prejudice requires reliance. But the circumstances establish reasonable reliance—notice of claimed infringement, coupled with a threat to sue, followed by a long period of inaction is conduct from which an alleged infinger could reasonably infer that the claimant had abandoned any claim. When there is a legal presumption of laches, the presumption can’t be rebutted merely because the alleged infringer relied in part on a lawyer’s opinion.

Then there was the question of whether laches bars an injunction, or only damages/profits. It’s easier for the latter to be lached, but in some cases delay can be long enough and prejudice significant enough to make an injunction inequitable. This was one of those cases. “It would inequitable to force plaintiff to abandon its ‘Caribe’ mark now, facing loss of its major investments and essentially taking the fall for defendant’s failure to satisfy its legal duties as a trademark owner.”

Saturday, April 26, 2008

Paul Heald on the nonexistent tragedy of the intellectual commons

Paul J. Heald, Testing The Over- And Under-Exploitation Hypotheses: Bestselling Musical Compositions (1913-32) And Their Use In Cinema (1968-2007)

Excerpts (footnotes omitted):

Landes and Posner assert that the value of “a novel or a movie or a comic book character or a piece of music or a painting” could be depleted in much the same way as “unlimited drilling from a common pool of oil or gas would deplete the pool prematurely.” Others suggest that the value of ownerless works could be dissipated through excessive or inappropriate uses. Mark Lemley has noted that “this justification for intellectual property depends on proof that there is in fact a tragedy of the commons for information.” Since proponents of the under- and overexploitation theories have not tested their hypotheses, the present study fills a significant gap in the literature.

. . . .

In Part I of the article, I explain the methodology of my study of popular musical compositions from 1913-32 as they appear in movies from 1968-2007. Studying musical compositions has several advantages. … [T]racking the appearance of compositions in movies provides data on the exploitation of derivative works. Musical compositions appear in movies as works realized by someone other than the original author. In a movie we hear a recording of the composition, a derivative work under the Copyright Act. Since those worried about over-exploitation inevitably cite to unauthorized derivative works as their most serious potential concern, the study provides especially relevant data. In Part II, the results of the study are reported: Public domain songs are exploited at approximately the same rate as copyrighted songs, indicating that in this context worries of both over- and under-exploitation are misplaced.

Heald also specifically addresses what I call the “Centerfold” problem—audiences who are harmed by alternative representations of their favorite characters:

Virtually every commentator who takes the possibility of debasement seriously points to unauthorized uses of fictional characters as their prime example, not to the making of unauthorized copies of books or songs. The entire debate seems to turn on the effect of having unauthorized porn movies starring Mickey Mouse or Superman. No commentators worried about unauthorized pornography seem aware of the vast amount of unauthorized “inappropriate” works that have already been produced. A quick search of the Internet Adult Film Database ( reveals six pornographic movies with “Cinderella” in the title, including Cinderella in Chains and its two sequels, three with Snow White in the title, and a whopping 19 featuring Santa Claus. …. Unauthorized porn fan fiction (“slash fiction”) also abounds, starring such characters as Harry Potter, Captain Kirk and Mr. Spock, and Starsky and Hutch.

I’m grateful to see a dose of realism about this so-called problem from another source, and pleased to see Heald refer to both newer and old-school slash, but sadly he’s made the rather common outsider slash = porn mistake. Not all slash is porn, and not all fanfiction porn is slash; there’s plenty of het out there too (I can provide recommendations).

Friday, April 25, 2008

Causation in a competitive market

It’s causation day at 43(b)og!

IDT Telecom, Inc. v. Voice Distributors, Inc., 2008 WL 1800102 (Mass. Super.)

Plaintiffs sell PINs for prepaid calling cards and provides related services and distribute the cards. Defendants are competitors. Plaintiffs alleged that defendants falsely advertise an inflated number of minutes on their cards, causing diversion of business.

Under Massachusetts state consumer protection law (art. 93A), loss of market share isn’t recoverable, since the law only covers “loss of money or property.” Lost profits must be proximately caused by the defendant’s false advertising and must be proven to a degree of reasonable certainty.

The big problem is causation. Plaintiffs represent only part of the market for truthfully advertised calling cards and they can’t show that defendants’ customers would have bought from them instead. Even if there’s false advertising, there may still be no standing. In highly concentrated markets—the court said “two-firm”— this problem of proof can be overcome by presumption. But here direct evidence of causation is required, which could include testimony by lost customers as to why they decided not to buy plaintiff’s products.

The court ruled that the “economic loss doctrine” didn’t bar claims for damages caused by false advertising—otherwise there’d be very little left of the tort—and the competitive status of the parties generally put plaintiffs within the scope of 93A. But more discovery was necessary on proximate causation.

The meaning of "commemorative baseball bat"

Florczak v. Oberriter, -- N.Y.S.2d --, 2008 WL 1821834 (N.Y.A.D. 3 Dept.)

The parties compete in making and selling baseball bats near the Village of Cooperstown. Plaintiff (d/b/a Where It All Began) alleged that defendant (d/b/a Cooperstown Bat Co.) engaged in false advertising of its commemorative baseball bats in Cooperstown, falsely claiming to “manufacture” and “make” baseball bats and to make them in Cooperstown (“where it all began”), when in fact the bats are mostly made in defendant’s factory two miles outside Cooperstown. Defendants used to make the bats in Cooperstown, but for the past eight years they’ve been processing and finishing blank wooden billets in nearby Fly Creek. Their retail store in Cooperstown has a basement workshop which does some engraving. Only about 5% of the bats defendants sell come from Fly Creek; the remaining 95% are produced from formed, wooden billets from a non-Cooperstown company.

The big problem was that plaintiff had no evidence that it had lost sales as a result of the false advertising. It couldn’t just claim damages in the amount of bats defendant sold. Nor did plaintiff prove that the advertising would be deceptive or misleading to a reasonable consumer. The ads indicated that the Cooperstown facility is the retail store, while there’s also a factory in Fly Creek, e.g. “[d]rop by [the] store at 118 Main Street in Cooperstown, or just over the hill at their Fly Creek factory, to smell the wood chips and see what they do.” Moreover, the provenance of the wooden billets isn’t key: “the fact is” that the billets “become commemorative baseball bats as a result of the work performed on them by defendants.” What matters is the coating, staining, engraving, and placement of decals.

Plaintiff’s site advertises itself as selling “the Only Bats made in Cooperstown.” If defendant’s claim isn’t false, is plaintiff’s claim then false?

Thursday, April 24, 2008

Trademark thought of the day

Here's a proposition: If trademark owners successfully push the concept of trademark as basically property, protected for incentive-based reasons and not fundamentally a consumer protection tool, then it is entirely fitting to apply eBay v. MercExchange to assess the propriety of injunctive relief to trademark cases.

This argument brought to you by the final day of class.

Wednesday, April 23, 2008

Fruit Juice Snacks neither fruity nor snacky

Williams v. Gerber Products Co., -- F.3d --, 2008 WL 1776522 (9th Cir.)

District court opinon discussed here. The Center for Science in the Public Interest identified Gerber’s “Fruit Juice Snacks” for toddlers as highly misleading. The package showed pictures of oranges, cherries, and strawberries, but the leading ingredients are corn syrup and sugar. Appellants, parents of small children, brought a putative class action against Gerber for deceptive advertising, and the district court granted Gerber’s motion to dismiss.

Appellants alleged that they bought the Fruit Juice Snacks because they sought healthy snacks for their toddlers and because they trusted the Gerber name. They argued that (1) the use of “Fruit Juice” along with images of oranges, peaches, strawberries and cheries was deceptive because the only fruit juice in the product was white grape juice from concentrate; (2) the statement on the side panel that the product was made “with real fruit juice and other all natural ingredients” was deceptive because the two most prominent ingredients were corn syrup and sugar; (3) the statement that the snacks were “nutritious” was deceptive; (4) the label “snacks” instead of “candy,” “sweet,” or “treat” was wrong; (5) the phrase “naturally flavored” violated applicable type size requirements. After the complaint was filed, Gerber took out “and other all natural ingredients”; removed “nutritious”; and changed “Snacks” to “Treats.”

The district court granted Gerber’s motion to dismiss on the grounds that the statements couldn’t deceive a reasonable consumer, especially given that the ingredients are on the side of the box, and because “nutritious” was puffery. The court of appeals reversed.

The court of appeals refused to consider Gerber’s preemption argument, because it wasn’t raised to the district court and nothing in the complaint suggested that plaintiffs were attempting to enforce the FDCA.

Under Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007), plaintiffs can survive a motion to dismiss by pleading enough facts to state a claim to relief that’s plausible on its face, not merely speculative. Here, the district court relied on its own review of the packaging. Though the primary evidence in a false advertising case is the ads themselves, the deceptiveness of a business practice is usually a factual question unsuitable for resolution on a motion to dismiss. This case is not the rare exception.

Specifically, calling the product “fruit juice snacks” and showing a number of different fruits on the package potentially falsely suggests that those fruits or their juices are in the product. (“Potentially,” yeah.) The “fruit juice and other all natural ingredients” statement “could easily be interpreted by consumers as a claim that all the ingredients in the product were natural, which appears to be false.” Moreover, the statement that the product was “just one of a variety of nutritious Gerber Graduates foods and juices that have been specifically designed to help toddlers grow up strong and healthy” added to the potential deception.

While “nutritious” on its own would arguably be puffery—nutritiousness can be “difficult to measure concretely—it is not on its own, but in the context of the packaging as a whole. The court of appeals declined to give Gerber the benefit of the doubt on a motion to dismiss, given that it’s not hard to advertise truthfully.

The district court reasoned that a reasonable consumer, reviewing the package as a whole, wouldn’t conclude that the product contained actual juice from the fruits displayed on the front of the package, given that the ingredients are listed. The court of appeals disagreed that “reasonable consumers should be expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list in small print on the side of the box.” True, the ingredient list is useful and complies with FDA regulations. But “a busy parent walking through the aisles of a grocery store should [not] be expected to verify that the representations on the front of the box are confirmed in the ingredient list.” Rather, reasonable consumers “expect that the ingredient list contains more detailed information about the product that confirms other representations on the packaging.” The ingredient list isn’t a liability shield for misleading statements elsewhere on the package.

Side note: The California AG’s amicus brief emphasized that photorealistic pictures of fruit on a package, without more, can convey the message that the package contains real fruit, even if no words are used. The AG also argued that there would be no preemption by the FDCA. For an explanation of the basic anti-preemption argument, see here.

The First Amendment is dead. Long live obscenity law.

A couple of related ideas:

Roger Alford on Judge Kozinski’s recent speech on the death of the First Amendment:

… [T]he essence of his speech was that, in a day when Internet speech is not capable of suppression, the ability of the First Amendment to have a moderating effect is now gone. What use does a constitutional limitation have on government restrictions on speech when the government no longer has the ability to control speech?

Kozinski argued that today we live in an age when whistleblowers are unknowable, documents are leaked without consequence, blogger journalists are anonymous and judgment proof, and the mainstream media is in financial peril. Any attempts to restrict speech results in that speech replicated a thousand times over. As such, the First Amendment jurisprudence that we cherish so dearly is now obsolete.

Amy Adler, All Porn All the Time, 31 N.Y.U. Rev. L. & Soc. Change 695 (2007)

In the escalating war against pornography, pornography has already won. I make this claim not to take a side in the porn wars, but rather to observe, bluntly, the new world in which we live. Because of shifts in our culture and, most prominently, shifts in technology . . . pornography has been transformed.

Where Kozinski declared defeat, at least rhetorically, Adler argues that the victory of pornography has, perhaps paradoxically, led law enforcement to focus on obscenity law, rather than child pornography or regulation of content harmful to minors, because only obscenity law offers the flexibility to attack everything that’s now available.

Monday, April 21, 2008

Recent reading: cultural property and same-sex marriage

Marc R. Poirier, The Cultural Property Claim within the Same Sex Marriage Controversy—from the abstract:

This article argues that traditionalist opposition to same sex marriage can be understood as a cultural property claim - the sort of claim that is often made by Native American tribes and other indigenous or subordinated cultural groups of a right to control the uses of sacred or culturally central rituals, places and objects. Ultimately, the article disagrees with the traditionalist position, and suggests several arguments against allowing traditionalists to claim a property-like right to exclude same sex couples from marriage. Nevertheless, the stakes in the part of the marriage equality controversy that centers around name and status are not adequately understood, and this article offers an analytical advance by bringing the idea of a cultural property claim to bear.

In the end, I wish the piece had engaged more with the cultural property debates—Poirer cites Michael Brown’s Who Owns Native Culture? but only in a footnote—but it was still a persuasive analogy.

NYC calorie disclosure regulation upheld

New York State Restaurant Ass’n v. New York City Board of Health, 2008 WL 1752455 (S.D.N.Y.)

NYC passed a regulation requiring chain restaurants selling standardized meals to post calorie information in menus and on menu boards. The court had struck down a previous version as preempted by the Nutrition Labeling and Education Act (NLEA) because it only applied to restaurants that already voluntarily disclosed nutrition information; NYC responded by making the regulation mandatory for all restaurants of a defined size (15 or more locations nationally) and type. The court sustained the new version against preemption.

Background: Obesity is a big problem, nationally and in NYC, where over 56% of adults are obese or overweight. Seventy percent of NYC deaths come from conditions whose incidence increases with obesity and overweight. One-third of Americans’ calories come from food bought outside the home. Many fast food restaurants already provide nutritional information on their menu items on posters or online, but NYC’s survey demonstrated that few customers actually saw that information. So the new regulation requires calories to be posted on menus and menu boards in a font and format comparable to that used to display name or price.

The NLEA has two components: (1) specific, uniform disclosures for food labels—the “Nutrition Facts” panel with its list of calories, etc.; and (2) regulations of when and how a seller may make voluntary claims about nutrients or health benefits. The NLEA expressly preempts state regulations with respect (2), but does not preempt regulations regarding (1). Restaurants are exempt from mandatory federal nutrition labeling, but subject to NLEA provision (2) insofar as they voluntarily make nutrient content claims—at which point federal preemption kicks in. The court reasoned that a mandatory calorie disclosure falls under (1) and not (2). Among other things, the court believed that a mandatory disclosure is not a “claim,” which is a voluntary assertion by a speaker. FDA regulations also distinguish between (federally mandated) nutrition labeling and “claims” regulable under (2).

And Congress wanted to preserve state power in this area—in fact, the NLEA by its terms bars implied preemption. The preemption provisions bar any non-identical state requirements for nutrition labeling, except for requirements that apply to food exempt from (1). Since restaurant food is exempt from (1), “state authority to impose mandatory nutrition labeling on restaurants is necessarily preserved.” The restaurant association argued, however, that restaurants making voluntary nutrient content claims get the benefit of preemption, because NLEA preempts states from regulating nutrient content claims subject to federal regulation under (2). The court found this position internally consistent, but wrong given the voluntary/mandatory architecture of the law and Congress’s intent to preserve state authority. The association’s interpretation would “create a regulatory vacuum in which neither federal nor state authorities have the power to require restaurants to disclose nutrition information to consumers. A far more persuasive reading is that Congress chose not to exercise this power and explicitly left it to the states to do so.”

The court also rejected the association’s claim that the regulation violated members’ rights against compelled commercial speech. The court began with language indicating the association’s uphill climb: the reason the First Amendment protects commercial speech is to further the public interest in good information about economic decisions. Regulations that require disclosure of “factual and uncontroversial” information are subject to “more lenient review,” and need only be reasonably related to an interest in preventing consumer deception. In commercial speech, disclosure requirements are more readily tolerated than suppression. Zauderer v. Office of Disc. Counsel, 471 U.S. 626 (1985); National Electrical Manufacturers Ass’n v. Sorrell, 272 F.3d 104 (2d Cir. 2001) (upholding a Vermont law that required manufacturers of certain products containing mercury to label them with an indication that the products contained mercury and should be disposed of as hazardous waste).

In Sorrell, the court found that the state’s purpose of protecting the environment from mercury was “inextricably intertwined” with the goal of increasing consumer awareness of the presence of mercury in various products. Thus, though the statute was not directed at consumer confusion or deception “per se,” it was still consistent with the rationale for First Amendment protection for commercial speech—the robust and free flow of accurate information. There was a reasonable relationship between the disclosure requirement and the state’s goal because it was probable that some buyers would use the information to dispose of the products properly, thereby limiting mercury pollution.

Like the laws upheld by these previous disclosure cases, NYC’s regulation compels only the disclosure of pure facts, addressing the state’s policy interest by making information more available to consumers. The necessary “rational connection” between the mandate and the city’s purpose was present.

The association argued that the government isn’t allowed to require an entity to subsidize a message with which it disagrees (US v. United Foods, Inc.), and that its members don’t want to promote the government’s messages that customers “must consider the caloric content of food when ordering in a restaurant, and that calories are the only nutritional criterion that patrons need to consider.”

The court disagreed. The regulation doesn’t force any restaurant to “take a position in any ongoing debate.” It doesn’t require any statement, express or implied, about the relative nutritional importance of calories or appropriate decision metrics for consumers. “Of course, it would be possible to recast any disclosure requirement as a compelled ‘message’ in support of the policy views that motivated the enactment of that requirement.” But that would be inconsistent with the case law, which supports disclosure requirements in commercial speech contexts. A case striking down a requirement that game retailers use a “sexually explicit” label was not to the contrary, since “sexually explicit” isn’t a purely factual disclosure. (My read of the ruling: of course it’s true that every mandatory disclosure also enacts a policy preference about consumer choices, since statements of facts are also statements about what consumers ought to value, which is why explicit factual claims are generally presumed to be material in advertising regulation. But, for First Amendment purposes, factual claims trump whatever value statement is expressed.)

The association then claimed that at least the law had to be analyzed under Central Hudson’s four-part test, a more demanding standard than the “reasonable relationship” test used in Zauderer and Sorrell. Though the Supreme Court is trending towards more protection for commercial speech, the association had no direct precedent superseding those cases. The Second Circuit’s use of Central Hudson in an earlier disclosure case,

International Dairy Foods Association v. Amestoy, 92 F.3d 67 (2d Cir. 1996) (comment: wrongly decided!), was based on the fact that the state’s disclosure requirement was only based on “consumer curiosity,” not any other interest.

The association argued that Zauderer is limited to laws necessary to prevent deception. United Foods distinguished Zauderer on the grounds that mandatory assessments to promote mushroom sales were unnecessary to make voluntary ads nonmisleading. But the assessments in United Foods were used not for factual disclosures, but to create persuasive ads touting mushrooms generally. Whether Zauderer is interpreted broadly as being about accurate commercial information, or narrowly as being about correcting deception, it’s inapplicable to United Foods, where the ads “were presumably intended to benefit mushroom producers, not consumers.” (Comment: interesting thought there—surely regulators thought that mushroom consumption would at least not be bad for consumers, as well as good for producers.) Anyway, United Foods didn’t limit Zauderer.

Moreover, Sorrell specifically rejected a narrow reading of Zauderer. The state’s interest isn’t “limited to an interest in correcting affirmatively misleading statements and may include an interest in remedying consumers’ ignorance or misinformation.” NYC submitted evidence that consumers underestimate the calories in restaurant meals, sometimes significantly. (The association’s expert conceded that this is true for large meals/items, but suggested that surveys were unreliable because consumers may intentionally misrepresent their beliefs about calories in order to preserve their own illusions of being “reasonable” eaters. Though the expert needn’t concern himself with this, that argument actually cuts out the heart of the justification for enhanced First Amendment protection for commercial speech, which presumes a rational consumer capable of acting in her/his own best interest.)

Anyway, NYC is fighting obesity by addressing the “information gap,” which is consistent with First Amendment interests in the area of commercial speech—the discovery of truth, the efficiency of the marketplace of ideas, and the protection of accurate information.

The association further argued that the regulation didn’t directly advance the government interest of reducing obesity, because “more research is needed on the relationship between calorie information and consumer behavior and that there is no evidence that [the regulation] will be effective in lowering obesity rates.” NYC’s evidence included “that the recent rise in obesity is in some part attributable to excess calorie intake, that even modest changes in calorie intake can affect weight, that record-keeping and self-monitoring of food and calorie intake are important components of weight-management programs, and that people tend to underestimate the calorie content of restaurant foods” (citations omitted). Moreover, many people self-report responding to calorie information on packaged foods, and the packaged food market responded to mandatory labeling by adding “nutritionally improved” products, suggesting that labeling increases consumer demand for such products. (Again, notice the impossibility of distinguishing between shaping preferences and inducing the revelation of preferences.)

Even the association’s expert, while playing the uncertainty card, admitted that it’s reasonable to predict that providing calorie information at the point of purchase would affect obesity. To his credit, though he argued that NYC’s move was not supported by randomized controlled trials or observational epidemiologic studies, he acknowledged that the former are essentially impossible and the latter hamstrung by the fact that most restaurants won’t voluntarily disclose calories. It’s not a great argument to contend that the First Amendment requires, before action, studies that the First Amendment precludes.

The court agreed that there was no “scientific certainty” that NYC’s regulation will succeed in combating obesity. But conclusive proof isn’t the standard. The evidence, along with common sense, supported a reasonable relationship between the city’s interest in decreasing obesity and the disclosure requirement. In Zauderer, by comparison, the Court didn’t require any survey to establish the “self-evident” proposition that nonlawyers are often unaware of the technical meaning of “fees” and “costs.”

The association also noted that the regulation only affects 1/10 of the restaurants and 1/3 of the restaurant meals in the city—which translates to at least 145 million meals per year. A regulation can be reasonably related to its goal even if it doesn’t address the entire problem; governments are generally entitled to attack problems piecemeal.

Sunday, April 20, 2008

Online advertising conference: advertiser perspectives

Panel on Advertiser Perspectives on Online Advertising

Moderator: Eric Goldman, High Tech law Institute

Jeffrey Rohrs, ExactTarget

Explosive growth in targeted and untargeted ads—above the line (direct marketing, direct phone) or below the line (mass media) have both multiplied in possible tactics (SMS for above, Twitter for below, just as a couple of examples).

Jason Schultz, Samuelson Law, Technology & Public Policy Clinic

What does it mean to be an advertiser? Individuals can purchase ads to convey messages.

He expects more TM lawsuits over ads that appear in context: AdWords placement could differ for every single user and every single page view. Also, more lawsuits over user-generated content used as advertising. There’ve been a number of attempts to put material out for users to remix. Who’s the advertiser? Chevy Tahoe remixes—the advertiser is still Chevy. With Quiznos, there’s a false advertising issue, but it could also be trademark or copyright infringement. Likewise, the AdultFriendfinder case: the personal ad at issue was used as a teaser—advertising for the service. But those ads could appear anywhere. This is a problem of user-generated content.

Another issue: lawsuit against Blockbuster for Facebook’s Beacon service. Large ad networks that use user info could draw advertisers into litigation.

Rohrs: 95% of the legal issues he was discussing in 2001 have yet to be resolved today. The speed with which marketing environment is changing far outpaces what anyone can do to keep up.

Email behind the scene is the core of internet marketing. CAN-SPAM doesn’t require opt-in, just a business relationship. Best practices: confirm opt-in. There are nefarious folks renting or selling lists—clients may consider “buying” a list that’s not subscriber-based. Keep your ears perked: you never want your client to purchase email addresses, unless you’ve got a very clear opt-in chain. Preferred practice: “rent,” in which a person sends a message on your behalf and you provide the creative. But those tactics underperform compared to having a relationship of your own. Email has the highest ROI (return on investment) of any tactic, when limited to your own subscriber base--$48 for every dollar spent. It’s a long-view medium that’s too often handled with short-term employees.

Goldman: There tends to be fingerpointing about who’s responsible for downstream harm. Advertisers fund spyware/adware, but there are layers between them and the download. What responsibilities do they have to manage the ecosystem created by the activity they fund?

Rohrs: Get as much info as you can about distribution, but even Google only recently began to provide more on/off functionality with contextual search. Past problem: no means of exclusion. Now, led by fears of click fraud, you have more on/off capability, but the reality is that automation is the key to Google’s success. The more manual controls marketers have, the less likely they are to use them—how likely are you to read a privacy policy? Advertisers have so much to deal with; only big spenders can afford to deal at the granular level. There’s an inherent risk in the medium especially as you get away from the biggest players.

Alissa Cooper, Center for Democracy & Technology

It’s useful for advertisers to look at this as brand protection. You don’t want your ad above an adult video store, or in a software program users hate. You’re never going to be perfect, but when you sign up with affiliates, you may be unable to control the smallest, most numerous players. Try to keep as much control as possible through having contracts in place. Affiliates’ motivation is to place as many ads as possible as cheaply as possible, which leads to adware, typosquatting, and spam.

Schultz: It’s good to let small advertisers compete, but that means more risks, especially for advertisers that aren’t actually businesses, like individuals or nonprofits.

Rohrs: Marketers are now trying to tame the Wild West. Affiliates are good at getting your ads into the cracks of the internet. They only make money if you make a sale, which is a different motivation than your own marketing team. They’ll do anything, unless you tell them they can’t (and sometimes even then). A big change in the last few years: some marketers say “you can’t buy our TM”—no paid search. Some are now allowing sale of some select terms because affiliates are better at monetizing.

Cooper: 20-30% of adware ads were from high-profile brands a few years ago; there has been a learning curve, some from negative reputation of the marketing model and some because the NY AG settled with some advertisers, bringing the point home that big advertisers needed to pay more attention.

Goldman: Is contract enough?

Rohrs: A big company needs a dedicated affiliate manager who’s in the loop for all the types of marketing the affiliates are doing. Moreover, when it comes to the internet, what a user sees in Cleveland will differ from what you see in NYC, so you need to be aware of that and watch for red flags.

Goldman: Doesn’t that degrade the ROI? Isn’t that expecting more of advertisers online than off?

Cooper: No, the way you meet expectations is different. Controlling whether your ad is above an adult bookstore is done differently than controlling where your internet ad appears, but they’re both brand protection.

Schultz: The dynamic nature of content is a challenge. It’s hard to keep records of what the ad was, where it was, etc.

Rohrs: High ROI in the past may have come from people who didn’t comply with the law—you do have to put more bodies on your ads than you did 5 years ago. 5 years ago SEO was simple to put your client at the top of Google; now it’s harder, and there are more legal issues from bidding on keywords.

Cooper: FTC’s proposed definition of behavioral ads may also include contextual ads—may be based on your activity of the moment, not just your activity history, and doesn’t distinguish between first- and third-party ads. Comments to the FTC thus reveal disagreement over the appropriate breadth of the definition. There’s a question about “what is context?” What about my last 3 searches, or where I’ve been on the site today, or moving from CNN to AOL which are owned by the same company? Conceptually it may be clear, but in practice it might get muddy. Advertisers need to know what they can target based on—page context, demographics, web browser, etc. They need to understand what web publishers are trying to sell them: what does “behavioral targeting” mean? It’s not clear from publishers’ ads. Advertisers should be careful about what they’re getting.

Goldman: TM keywords?

Rohrs: He thinks it’s nasty free riding, but doubts there’s confusion. Aciphex, a new competitor to Prilosec and Prevacid, will buy ads based on searches for those. This may be an issue for legislative resolution. Placement in stores is different because people expect to see a million different brands in stores, whereas if I search for Prilosec I expect to get Prilosec, and people talking about Prilosec.

As a marketer, other people’s brands aren’t great for marketing, because the clickthrough is not great, and then the ad quality goes down and our link drops off the radar. So the market may be dealing with this. Consumers aren’t idiots. If you search for one brand and see another, you’re not going to be confused. But investment in creating unique brands can be very high, and we should ask about legislative protection.

Goldman: Some consumers do use the leading brand as a keyword to access the class of goods of which the brand is a representative.

Rohrs: All the more reason for the leading brand to be ticked off.

Schultz: This may be changing constantly, making legal regulation difficult. The unexpected search result may be the most fun—a video, or information about a friend you didn’t know. There can be social benefit to being surprised: serendipity.

Q: Adteractive was recently fined $600,000 for misuse of “free” on its ads. Comments?

Rohrs: The CMO of Kodak told a story—they sponsored Celebrity Apprentice. One of the challenges was about their new color printer, which could save consumers money on ink. The celebrities condensed “up to 50% off” into “save 50%” and now Kodak is in the crosshairs of an FTC complaint. Language matters. (Talk about a user-generated content problem!)

Schultz: Law tries to have thresholds or proxies for liability. Compared to people who put material up for free on the internet, business entities are inevitably going to be held to a higher standard of behavior.

Rohrs: And remember competitors are policing the environment. A competitor raised the Kodak issue with the FTC.

Goldman: He didn’t find the issue all that interesting, since the FTC has had rules about “free” for a very long time. But some of what they were trying to do was game the affiliate network through the use of “free” offers.

Cooper: Those ads are huge in adware: super-annoying lead generation ads, and it baffles her that this is a real business model and that the only problem appears to be the word “free.”

Bracha: Seems like responsibility is being pushed back up the advertiser chain. Is that good?

Schultz: It’s hard to tell. Example of worrisome case: Marvel v. NCSoft, lawsuit over City of Heroes because people were creating player characters like the Hulk. He worries about the chilling effect on innovation if you push liability up too far or too strictly.

Cooper: In spyware/adware, a multipronged approach is most successful. Some advertiser liability/settlement out of fear of state AGs, but distributors are also being held liable, and antispyware software empowers the consumer to keep the bad stuff off computers.

Online advertising conference: publisher perspectives

The Law & Business of Online Advertising: Berkeley/Santa Clara

Panel on Publisher/Intermediary Perspectives on Online Advertising

Moderator: Paul Schwartz, BCLT

Oren Bracha, University of Texas School of Law

Bracha discussed his paper with Frank Pasquale, Federal Search Commission? Search engines are advertisers in a broad sense, an important link in conveying information to the public. They’re also more and more entangled with ads in the classic sense—Google is now using snail mail to solicit new AdWords clients. What happens when Google drops your site from #3 to #50, collapsing your traffic? Google may have a legitimate reason, but right now it’s a black box. Does the First Amendment prohibit any regulation?

The internet is not a soap box for everyone, as early plaudits said, because to exist is to be indexed by a search engine and vice versa. Market/technology won’t take care of the problem of hidden bias. With high fixed and licensing costs, entry’s not that easy. And users are unlikely to understand what they’re not getting. Subtle distortions are not easily evaluated; search engines can shape preferences. Eric Goldman argues that personalized search can fix this. Personalized search might solve the structural bias towards commercial sites and majority preferences, but makes it harder to deal with targeted bias towards users/classes of users—personalized search makes each manipulation more valuable.

Peter Swire, Moritz College of Law, The Ohio State University

Two topics: (1) a technical fix for opt-out cookies. A brief summary of his comments to the FTC on technical issues in behavioral advertising. New consumer poll: 63% of consumers rate opt-out’s importance as 10 out of 10, and 84% rate it 8 or higher. The industry also has consensus on consumer choice as an important value. The opt-out cookie is broken, though. Antispyware software deletes all cookies, including opt-out cookies, or browser software deletes it, and tracking is turned on again.

There are simple technical fixes available. There are problems with doing opt-out through cookies, but it’s technically feasible and scalable now. If we don’t do it, the industry and FTC will fail at enabling customer choice.

(2) Privacy and antitrust

Privacy is a nonprice metric against which to measure the competitive effects of mergers. Privacy can be a form of nonprice competition, and all 5 FTC commissioners recognized this point in Doubleclick/Google merger review. Consumers might be harmed if surveillence increased due to less competition. There is competition in privacy now—e.g., AskEraser.

Privacy concerns could also justify putting conditions on a merger. Or it could be part of a second request by the FTC for information on practices in data-rich industries. This points to a new role for Chief Privacy Officers in mergers and other transactions.

Limits: this approach doesn’t treat privacy as a fundamental right or investigate the quality of privacy practices independent of mergers.

Rebecca Tushnet, Georgetown University Law Center

I began with a point Peter Swire made when we were discussing the panel: New, big institutions invite a lot of different regulatory responses. Radio & TV got the FCC; no single regulatory entity has yet emerged in online advertising, but there are lots of issues.

I focused on intermediary liability. Internet intermediaries tend to make 2 claims: (1) we have a First Amendment right to do what we want. For example, comments to the FTC claim a First Amendment right to target users in behavioral advertising, because it’s a publishing decision. (2) it’s not our speech, so don’t hold us liable if it’s unlawful. With search engines, we see this particularly in the trademark keyword sales debates.

However, this has all proceeded with little discussion of First Amendment constraints on intermediary liability. The policy space seems fairly open, and we have different regimes. (1) DMCA for copyright, with notice and takedown in response to allegations of links to infringing materials. An injunction remains possible, but it’s not worth it; the takedown does everything the copyright claimant wants. (2) CDA immunity from being treated as a publisher (or distributor). Eric Goldman has noted that the CDA was enacted at the height of internet exceptionalism. (3) Other IP, including TM, where no special rule applies and courts are still working out how to apply prior precedent on direct and secondary liability.

A couple of points: (1) Intermediaries are not great representatives for speaker interests. The mismatch between intermediary and user interests with respect to the DMCA is well-known. Mark Lemley also makes the point that Google—no slouch with respect to asserting user rights in general—bans the use of competitors’ trademarks in the text of ads, even ads that are explicitly comparative and thus obviously legitimate under US TM law. Google doesn’t want the bother or risk of screening, so advertisers aren’t allowed to do it.

(2) There is substantial pressure as the internet matures to move away from CDA immunity, especially for business torts. is an example, where the violation is inducing illegal acts by suggesting terms; so is the AdultFriendfinder case, involving false advertising/endorsement; and we may see a similar result in the Subway/Quiznos case, where Quiznos encouraged people to create comparative ads and some of the ads were allegedly negative enough to constitute actionable product disparagement.

We haven’t spent much time asking what the constitutional boundaries of intermediary liability are, because the CDA preempted so much of that. Here’s one story: NYT v. Sullivan, the foundational case for the modern First Amendment, is a case about advertising and intermediaries. The NYT ran an ad about segregationist misbehavior containing minor factual errors. Alabama commissioner Sullivan sued and got a huge libel judgment against the New York paper. The Supreme Court held that liability could not constitutionally be imposed for statements about a public figure without actual malice—knowledge or reason to know of the falsity.

The Court’s opinion was explicitly designed to enable business models that involve transmitting others’ speech. An intermediary is less able to verify the truth of speech given to it than it is to verify its own speech; less committed to the initial speaker’s cause then the initial speaker, and thus less likely to underestimate its chance of being sued or overestimate the extent to which the rest of the world will agree with the justness of its cause; and more likely to have litigation-attracting deep pockets. For all these reasons, it’s easier to chill, and Sullivan is designed to protect the intermediary business model.

This view of Sullivan might give us a way to think about how to regulate intermediaries and possibly revisit the CDA. The NYT can prescreen for content in the print edition; internet intermediaries have more difficulty doing so. Sullivan may be too restrictive a standard to apply online. Even notice of claimed unlawfulness might not be enough to justify a takedown requirement—much less damages.

Q for Bracha: How does the elasticity of demand between organic and paid search results affect your analysis? Both are sources of traffic, and organic is free in theory but you might be paying a SEO for it.

Bracha: He’s much less worried about the paid results. Usually paid ads just trigger TM complaints.

I said that the big lie of the keyword debate is that it’s just about paid search. When you sue websites for TM use in keywords, you affect, or desire to affect, the organic results. The TM use debate is about controlling the whole page.

Swire: The good news is that the organic/paid line is brightly delineated. In other markets, “advertorials” and other practices sneak in ads deceptively.

Varian: Nonprice competition is relevant to antitrust, but another element is product quality/relevance. If there’s a tradeoff, that should also be a concern; why stop at privacy?

Swire: True. Mergers are touted as efficient for consumers. To the extent relevance is part of a merger it should be netted against the disadvantages, including privacy.

Varian: If Google changes its algorithm, there are still just as many results in the top 10 as there were before. Helping some people hurts others.

Bracha: There’s no metaphysically neutral search result. Bias has to be judged normatively. Right now Google’s a black box no matter what. In many situations, Google should be able to choose, but perhaps not all.

Q: By merging, even companies with lousy privacy policies may decrease potential future privacy competition.

Swire: Then we take that into account. But if merger won’t change privacy policies, it’s hard to say that the merger causes privacy harm. Showing a causal role in harm is a high burden for regulators.

My question: Why wouldn’t bad privacy practices necessarily get worse if they joined forces? That is, if Amazon’s privacy policies are bad and suddenly it knows what (bad) eBay knows, isn’t there a synergistic harm?

Swire: The extra harm is not an antitrust problem—it’s just increased harm to consumers, just like increased pollution from a merger.

(Ok, but then I don’t get why we count improved relevance, as Varian said, as a benefit of a merger.)

Varian: Don’t do things like environmental regulation through competition policy: regulate environmental impact directly.

Swire: The counterargument: if you have a harm sitting in front of you, one might ask, why not weigh it? The FCC standard is the public interest and convenience, though that’s not the FTC standard.

Comment: Privacy as a feature is the province of antitrust. Privacy as a good is the province of consumer law.