Saturday, August 30, 2008

Kamut responds on genericness

I received a very interesting letter from the makers of Kamut, a major component of the cereal I blogged about a few weeks back. I suggested (and still believe) that the Heritage O’s box uses the term KAMUT in generic fashion, leaving consumers with the clear impression that KAMUT is a term like “oats” and that there isn’t a different generic name for the variety. Kamut, the company, has now shared its views with me:

In 1977 the Quinn family began growing[] Khorasan, an ancient variety of grain, on their farm in Montana. Bob Quinn, the company founder and organic farmer, decided to sell the grain under the brand name “KAMUT” to protect the integrity of the variety in its original form. This word “Kamut” was taken from a hieroglyphic dictionary of the ancient Egyptian language.

Our goal is not to hide from people the true name of the variety, but to promote the grain under our branded program. On our website and in most marketing information we clearly identify the common variety name as Khorasan. However, today, due to many contributing factors, the grain variety is grown almost exclusively under our branded program and known as Kamut® brand grain. We are continually making efforts to educate consumers about our program, but as you have pointed out, many misconceptions still occur.

Misconceptions, however, become reality when it comes to genericity. If consumers won’t accept two terms, then they have chosen one as the generic, just as occurred with “aspirin.” It’s perhaps unfortunate for the original producer that no one can remember “acetylsalicylic acid,” but genericness doctrine prefers communication over private property where the two collide. Moreover, courts weigh generic uses by the trademark claimant pretty heavily; I would think that Kamut would want to have a discussion with its licensee Heritage Os about this use.

Regardless, I congratulate Kamut on its conduct: a temperate and reasoned explanation, rather than the bluster engaged in by too many trademark owners who should know better.

Music videos as victim impact evidence

SCOTUSblog has a preview of a death penalty petition raising a fascinating issue about victim impact statements. The defendant was convicted of killing Sarah Weir; at the sentencing stage, the prosecution introduced a video of Weir as part of the victim impact evidence. “Prepared and narrated by the victim’s adoptive mother, the film contained roughly ninety photos of the victim from infancy through high school graduation. Interspersed among the photos were a dozen video clips, some lasting a few minutes, showing the victim engaged in various childhood activities, such as playing with friends in a pool, readying her Halloween costume, and singing in a school choral group. In the background plays music by Enya – one of the victim’s favorite artists – an Irish musician known for layering recordings of her singing in different languages.”

SCOTUSblog is also hosting the video itself.

Though the death penalty issue is obviously more weighty, I think it’s actually entwined with the copyright issue. The video used the Enya song to make the narrative of the victim’s life more powerful. As SCOTUSblog notes:

The petition also contends the inclusion of background music serves no purpose beyond heightening the emotional experience of the viewer. Kelly’s attorney cites a 1940 essay in the New York Times in which composer Aaron Copland discussed his score for the movie, Of Mice and Men. “The quickest way to a person’s brain is through his eye,” Copland wrote, “but even in the movies the quickest way to his heart and feelings is still through the ear.” The petition argues that just as background music could not be played during in-court testimony, nor should it be allowed to accompany evidence on videotape.

Prior cases about copying in the service of court cases concerned materials more towards the heart of the case—a manuscript about the conduct of one of the parties to the case, for example, or allegedly infringed webpages, or the videotape in Scott v. Harris. Enya’s music, in itself, was not evidence. Was the use of Enya’s music to make an argument, in this case an emotional argument, fair use? If Copland was correct, as I think he was, then music is a different way of making a claim than narration or other rhetorical moves; using music to make an argument is different than using music for its standard entertainment value. Thus, I would deem the original in-court use a noncommercial, transformative one.

Regardless of whether the original was fair use, it seems to me indisputable that SCOTUSblog’s re-use is fair use. Having actually been considered by the jury in this case, the video is now at the heart of the legal issue. And the legal issue turns on whether the editing techniques and music employed in the video are too likely to have an improper emotional effect on the jury. (One can argue that emotion is perfectly proper in death penalty determinations, but even so, debate over how emotions can constitutionally be evoked is appropriate.) Examples of how music is actually used in victim impact statements allow citizens to assess the merits of the argument. Whether judges should rely on their own evaluations of the video is a separate issue—on this, see Kahan et al., discussed here—which is complicated because the question is not how the video makes a reasonable jury see the victim, but whether the rhetorical power of the video comes from impermissible sources. But informed public debate over the case will be vastly improved by access to the video, and therefore its use is fair use.

Monday, August 25, 2008

Comic tattoos

Talk about having skin in the game: are these tattoos infringing derivative works? Or does their inarguable personal significance to the wearer help make them fair use? Note that if the tattoo artist infringed, then the person wearing the tattoo does not have a lawfully made copy to display in public, so it's hard to separate the (almost certainly commercial) activity of the tattoo artist from the noncommercial activity of the wearer. For more: a law review note, an article, and a PowerPoint presentation about tattoos and copyright.

Friday, August 22, 2008

Jewelers mostly successful against replica site

Yurman Studio, Inc. v. Castaneda, 2008 WL 3861219 (S.D.N.Y.)

A number of high-end jewelers asserted claims against defendant, who offers cheap replicas of their designs at Copyright, design patent, and trademark claims were all involved, along with false advertising and consumer fraud.

Plaintiffs succeeded on some copyright claims, while others were held inappropriate for summary resolution; likewise, they succeeded on a few of the trademark counterfeiting claims, while the rest of the trademark issues, including whether “Cartier-esque” and similar terms constituted nominative fair use, required resolution at trial. (The court suggested that the third prong of the nominative fair use test, whether defendants did anything else to suggest source or sponsorship, might require a full-scale confusion analysis. While there are certainly cases that suggest this, they ought to be rejected, given that after a full-scale confusion analysis there is nowhere else to go, and that nominative fair use was aimed at preventing precisely this kind of expensive and risky inquiry in order to preserve competition and free speech. Also, why would anyone believe that “-esque” indicates source or sponsorship? It indicates precisely the contrary: a replica, an imitation, not the real thing.) Also, the design patent claims survived summary judgment.

On false advertising, the court took another step in the seemingly inexorable expansion of standing as a bar to suit: though the parties both sell jewelry, the price points are so different that defendants don’t compete with plaintiffs. Two of the high-end jewelers testified that they didn’t regard plaintiffs as competitors, which was snobbish and, in this instance, counterproductive. As someone who’s spent $500 on a piece of jewelry and also $5, I am dubious about this holding, but maybe people who spend $50,000 on jewelry don’t slum.

Plaintiffs’ New York consumer fraud claims also failed for lack of consumer injury or harm to the public interest, since no one’s health or safety was at risk.

Fish story on ice

The NYT on high schoolers' experiments showing that an extremely high proportion of a sample of fish sold in NYC was mislabeled. Though this is false advertising whether intentional or not, perhaps the most troubling legal angle is that the students, their parents, and their "academic mentor" all declined to reveal the sources from which the mislabeled fish were purchased "citing fear of lawsuits." Talk about a chilling effect. (I have a little more sympathy with the idea that it's not fair to name vendors when mislabeling can occur at any point in the process, but is it more fair to consumers to tell them they're eating one fish when they're actually eating another, with possibly a different safety profile and possibly endangered?)

Thursday, August 21, 2008

"Bottled at the source" is not an indicator of source

CG Roxane LLC v. Fiji Water Co. LLC; -- F. Supp. 2d --, 2008 WL 2782745 (N.D. Cal.)

CG sells Crystal Geyser bottled water, prominently featuring the phrase “Bottled at the Source” since 1990. CG applied to register “Bottled at the Source” in 2002, which was initially refused registration as merely descriptive. CG responded by averring “substantially exclusive and continuous use” and providing evidence of marketing efforts and sales success, and the mark was ultimately registered in 2003.

Fiji uses “Bottled at Source” on its water bottles, beginning in 1997 on the front label and, since 2005, on the back label. You can sort of see it in the picture above, in white text on blue.

CG sued in 2006 for a variety of torts; Fiji counterclaimed for cancellation based on genericity and lack of distinctiveness.

The registration was prima facie evidence of validity, which could be overcome by a preponderance of the evidence. Generic adjectives are as unprotectable as generic nouns, for the same pro-competitive reason. The basic question is whether the primary significance of a term is the product itself or the source. The court noted that, on its face, “bottled at the source” appears to be a generic term: it describes a type of water that is bottled at the source as opposed to bottled from a tap or a municipal source.

Use by the media and by other competitors is important evidence. The more products consumers see using a term, the less likely they are to see it as an indicator of source. Fiji provided almost two dozen competitors’ bottles using the alleged mark. Fifty other bottled water companies use the phrase “bottled at the source” to describe their products to consumers on websites, in ads, and in other marketing materials, though not all sold water in the US. The court noted that in other cases, use by ten and even four competitors using the alleged mark had been sufficient to show genericity; Fiji outpaced that by an order of magnitude.

And this use is unsurprising: Like “kettle chips” for potato chips and “brick oven” for pizza, which describe or at least promise distinct characteristics, “bottled at the source” is a factual statement about the manufacturing process, and many companies—including Fiji and CG—use that process.

Media use also weighed in favor of genericity. Thirty-seven articles referring to “kettle chips” generically was strong evidence of genericity in a prior case. Here, Fiji offered about 50 popular press articles using “bottled at the source” generically. Further, CG’s own use of “bottled at the source” was inconsistent with its trademark claim. On CG’s own bottle and in its ads, the term was used to describe the product, e.g. “always bottled at the source to maintain the quality and freshness of our natural spring water” and “our spring water is bottled at the source.”

Thus, Fiji overcame the presumption of validity created by the registration and proved the phrase generic.

Fiji asserted several other defenses/counterclaims, all of which would also have worked. Given the high descriptiveness of the phrase, Fiji contended that it lacked secondary meaning. CG’s evidence of distinctiveness was basically that it had used the phrase for a while and spent a bunch of money on ads. But the evidence showed that CG’s use had been far from exclusive, and the ads didn’t direct consumers’ attention to the phrase or encourage them to use it as a mark, rather than as a descriptive phrase, and so the court found a failure to show secondary meaning as well. Moreover, the court agreed with Fiji that CG would have needed to show distinctiveness as of 1997, when Fiji’s use began, in order to prevail; there was no presumption of distinctiveness as of that date, because CG’s alleged mark was then unregistered. Fiji’s evidence, some dating back to 1985, established that the alleged mark lacked secondary meaning and was invalid.

CG vainly argued that a likelihood of confusion could show secondary meaning, but the court found no such likelihood, despite the similarity of the marks, the direct competition in goods, the use of the same marketing channels, and the relatively low care exercised by consumers. The bottles look very different and the primary marks are different; the totality of the impression given is strikingly different. The court pointed out that failure to comply with CG’s C&D letter didn’t show bad faith, given the genericity of the phrase and Fiji’s long history of use of the same phrase. No secondary meaning; no likelihood of confusion.

And then—illustrating the complaint that descriptive fair use as it exists now is not very helpful to defendants, who can only take advantage of it once they win lack of confusion—the court went on to assess, and accept, a descriptive fair use defense. Even were the phrase a valid mark, Fiji’s use is descriptive. Fiji doesn’t use the phrase as a trademark, but as a factual statement: in fact, its water is bottled at a source in Fiji. Putting a commonly used phrase in small font on the back of the bottle is a good-faith use. CG argued that the use was “as a mark” since the phrase was used alone and not as part of a sentence. But the descriptive phrase “bottled at source” “can naturally be placed alone to convey information to a consumer without it being considered a trademark.” Summary judgment for defendant on this as well.

Finally, CG’s related state and federal claims (including injury to business reputation, conversion (!), false advertising, and negligent/intentional misrepresentation) collapsed with the invalidity of its claimed mark. CG had no protectable interest at stake.

Comment: Hard to understand why CG litigated this fairly obvious loser. Perhaps having invested so much effort in getting the PTO to roll over on this generic term, it was overly confident of its ability to force a competitor to back down. But what harm was Fiji’s use doing, in any rational assessment? I’d use this case as a good example of the anticompetitive strike suit that Justice Scalia, in Wal-Mart, worried about with the expansion of trademark protection.

Terminations of transfer (and Dastar)

Classic Media, Inc. v. Mewborn, 532 F.3d 978 (9th Cir. 2008)

This case is most notable for creating an apparent circuit split between the 9th and the 2nd, the other key circuit for the publishing industry, about the effect of a post-1978 agreement purporting to affect termination rights under §304(c) when the agreement is executed before the termination window opens. The Ninth Circuit ruled that the agreement was an invalid “agreement to the contrary.” (Filewrapper offers a bit more summary.) The court relied in part on the analysis in the recently reversed SDNY case Steinbeck v. McIntosh & Otis, Inc., 433 F. Supp. 2d 395 (S.D.N.Y. 2006). (The facts there are complicated; at the time of the post-1978 agreement, Steinbeck’s widow—the person who made and benefited from the agreement--at least arguably held more than half the termination interest/expectancy and definitely held half, while at the time the termination windows opened, she had passed away and the remaining heirs, with whom she’d been in dispute, wanted their share.)

It’s not a big circuit split, but it’s an economically significant one, and the New York/Hollywood divide may create forum-shopping opportunities. I wonder if anyone’s considering a cert petition.

Of less general interest, the district court denied the rights owner’s motion for attorneys’ fees under the Lanham Act; the heir had brought a misattribution claim, which she lost. The court of appeals agreed that the district court didn’t abuse its discretion in refusing to find an “exceptional case” under the Lanham Act, a requirement the Ninth Circuit has construed narrowly. The heir’s claim involved “close questions in an unsettled area of the law,” because Dastar left open the possibility of attribution-based false advertising claims. Thus, the heir’s Lanham Act claim was “not so obviously foreclosed” by Dastar that her claim was groundless or unreasonable, and a fee award against her was inappropriate. (Contrast to cases like Antidote, from SDNY, rejecting such claims outright.)

Tuesday, August 19, 2008

Even I think this is a mistake

I don't believe that "generic" uses of famous marks run any risk of genericide; people can easily understand that kleenex is tissue and Kleenex is a brand of tissue. But that depends on ready knowledge of what else to call the thing at issue. Without a common descriptive name (and especially when the mark at issue isn't famous), generic use can make a term generic. For example, this picture of the back of a box of cereal we bought should be used to counsel clients on what not to do:
Kamut, for all that appears, is a type of grain, just like oats and barley. An Ancient grain, no less. Marking it with a registration symbol and a dagger that says the term is used under license won't help if people have nothing else to call the stuff. (ETA: I should clarify that I think the mistake is in claiming "kamut" as a mark; there doesn't appear to be a good generic term for the type of grain, so what they need is some sort of mark like KamWonderful.)

Monday, August 18, 2008

Reading list: rBST

Christina Cusimano, RBST, It Does a Body Good?: RBST Labeling and the Federal Denial of Consumers’ Right To Know, 48 Santa Clara L. Rev. 1095 (2008) (unavailable free online: Eric Goldman, what is up with that?)

The current labeling structure of milk and milk products derived from rBST treated cows is inadequate and misleading. The FDA has ignored evidence of health risks associated with the use of this synthetic growth hormone and consumers are unknowingly forced to do the same. For a decade, mandatory labeling has been prohibited because Monsanto's scientific reports, which did not include long-term testing, indicated no substantial difference between milk from treated and untreated cows. Like many FDA approved drugs, studies show serious risks associated with the use of rBST. Short of recalling the drug altogether, the Federal Government should amend the FDCA to mandate labeling of rBST milk, to protect the health and safety of our nation.

The note, because it takes the position that there are in fact human safety issues with rBST, doesn't spend much time on the argument that truthfully informing consumers about the use of rBST will cause them to draw mistaken conclusions about the harms of rBST, which are more persuasively established with respect to cows than to humans.

Sunday, August 17, 2008

Design, Dastar, (registration) dates and the DMCA

XPEL Technologies Corp. v. American Filter Film Distributors, 2008 WL 3540345 (W.D. Tex.)

The parties compete in producing designs for window film and paint and headlamp protection products for cars. XPEL sued two competitors for copying product images and distibuting them to other businesses and auto dealers. It alled breach of contract, violation of the Digital Millennium Copyright Act, copyright infringement, and the usual slew of business torts, including false advertising.

As XPEL tells the story, some of XPEL’s designs are delivered through the internet, accessed by the end user’s computer. A EULA is required before a user may access its products; XPEL contends that charging for access is essential to its business model. XPEL registered the copyright in its Design Access Program in early 2005 and applied for copyright protection for its Kit Designs in August 2007. (Applied for, hunh? That suggests a lack of subject matter jurisdiction until the registration issues, but for some reason the defendant argued instead that no claims could be considered based on conduct before the Copyright Office received the application. This is bizarrely wrong, and the court stated it was awaiting further facts on the copyright claim.)

XPEL alleges that, since November 2002, defendants have intermittently provided XPEL Kit Designs to dealers and customers. They accepted the EULA, but kept “Capture” software to copy an XPEL Kit Design on their computers. (More details would be nice—if, as Remeirdes would have it, pointing a video camera at a computer screen to capture DVD output is not circumvention barred by the DMCA, then it really seems like taking a screenshot with capture software would also not be circumvention, since neither interfere with access controls.) At times, defendants responded to a customer request for an XPEL Kit Design by using a copied pattern without paying, and they sold copies or derivative works to car dealerships, which exceeded the scope of their license.

XPEL argued that defendants’ kit designs constituted a false designation of origin because they were created by modifying XPEL’s designs and defendants didn’t disclose that to customers. Under Dastar, that’s a plain loser, despite XPEL’s halting attempts to distinguish Dastar as a case about public domain works. XPEL argued that it was actually pleading a false advertising claim, as contemplated by Dastar. The court invited further briefing on the matter. I assume this can be pled correctly, but good luck showing matieriality, even if one could determine that it was false for defendants to fail to disclose the source of the designs they modified; the current cases suggest that whenever a party has some involvement in the ultimate product it provides—for example, modifying the design—it’s not false to identify that party as the source of the product.

Likewise, XPEL’s state-law conversion claim was dismissed because Texas doesn’t recognize a claim for conversion of intangibles. Defendants’ copying didn’t in any way interfere with XPEL’s own possession of its designs, only its economic interests.

Defendants’ arguments that most of the state claims were preempted were premature, in the absence of further factual development. However, the court noted that trade secret misappropriation could be found qualitatively different from copyright infringement. And the court was confident that contract claims weren’t preempted, even if some of the promises contained in the EULA simply track copyright rights. “Given the length and complexity of the EULA, it is impractical to go line by line through it to determine how each provision corresponds to the rights protected by the Copyright Act. Rather, the Court believes the more prudent inquiry to be whether the contract as a whole includes elements that are qualitatively different than those involved in a copyright infringement claim. Under such analysis, it is clear that additional elements are present.”

Defendants moved to dismiss the claims for statutory damages and attorneys’ fees because XPEL has yet to receive a registration. XPEL argued that its registration for its Design Access Program predated some of the infringement, and that its Kit Design registrations will be retroactive to the application date. (Note that copying the kit designs apparently doesn’t copy the design access program; it is only if breach of the EULA makes defendants infringers of the Design Access Program, rather than mere contract-breachers, that the registration for the Design Access Program matters.)

As defendants pointed out, however, if infringement begins before registration, statutory damages and attorneys’ fees are unavailable. But with multiple defendants, some of whom may have acted before the registration date and some after, the facts were as yet unclear. (Again, one thing that’s not unclear: XPEL has no currently viable claim for infringement of the Kit Designs, since the court will lack subject matter unless and until the registrations for the Kit Designs issue.)

Final note: Keep an eye on this DMCA issue. Though the court's discussion suggests that it's the violation of the EULA that allegedly violates the DMCA, a EULA is not a technical measure controlling access to a protected work. Moreover, we need to be clear about which work is allegedly accessed by circumvention here. At most, the design access program is itself a technical measure controlling access to the designs, but defendants didn't circumvent the design access program, they just allegedly used it as it was supposed to be used. A lie is not an act of circumvention. But if a court were to accept this kind of bootstrapping, then every internet infringement will quickly convert to a DMCA violation. This is part of the reason that it can be so important to separate copyright in a program from copyright in the content delivered by the program; see also the different registration statuses of the program and the Kit Designs here.

Eroded logic: keyword claim wins in soil erosion case

Soilworks, LLC v. Midwest Industrial Supply, Inc., 2008 WL 3286975 (D. Ariz.)

The parties compete in the market for soil erosion and dust control products. Soilworks makes Durasoil and Soiltac, while Midwest makes EK35, EnviroKleen, and Soil-Sement. In 2006, Midwest received two patents for EK35 and EnviroKleen. A month before the patents issued, Midwest sent Soilworks a letter about the pending patent applications, expresing concern that Durasoil infringed. Soilworks replied that it did not see any reason to fear infringement. After the patent issued, Midwest sent letters to a Soilworks customer regarding possible infringement, and also issued a press release.

Soilworks sued for false advertising, a declaratory judgment of patent invalidity and noninfringement, and the usual state-law claims; Midwest counterclaimed for patent and trademark infringement, false advertising, and the usual state-law claims.

On the Soilworks false advertising claim against Midwest: given that the allegedly false claims involve patent rights, Soilworks needed to show bad faith. This rule balances patent rights against the right to fair competition. The letters sent to Soilworks’ client said that a patent had issued, that Midwest had “invented the category of synthetic organic dust control agents” [comment: synthetic organic?], that no competitors could have the same formulation or method, and that the patent allowed Midwest to pursue anyone who sold “knock-off or imitators” of EK35 or EnviroKleen. Moreover, Midwest’s press release alegedly represented that competitors couldn’t design around the patent, making Midwest the exclusive source of synthetic organic dust control products.

Midwest argued that, as a matter of law, the letters couldn’t support a finding of bad faith, simply a legally accurate summary of Midwest’s rights. Case law establishes that bad faith allegations of patent infringement and of competitors’ inability to desing around a patent can be false advertising. In fact, the latter “exclusive source” statements are “inherently suspect,” both because most patents can be designed around and because such statements are nearly impossible to confirm before the fact.

The court agreed that the press release reasonably could be construed as making exclusive source statements; it stated that Midwest had gained “exclusive control” over the products and methods that define the synthetic organic dust control category, giving it the “exclusive rights” to sell such products. It further suggested an inability to desing around: “Midwest’s competitors may claim to offer synthetic organic dust control technology, but only Midwest can offer the products and methods that define this technology. Those competitors are either not supplying synthetic organic dust control technology ... or they are infringing Midwest’s patents.” This made bad faith inappropriate for resolution on summary judgment. While pre-litigation statements to a competitor may only be bad faith if they were objectively baseless, statements to the relevant consuming public are judged under a less defendant-favorable standard.

The statements were also sufficiently alleged to be false or misleading; case law establishes that false exclusive source claims can violate the Lanham Act. Moreover, the press release was disseminated sufficiently to the relevant purchasing public to constitute commercial advertisement.

Midwest, however, prevailed on a portion of its counterclaim for trademark infringement based on Soilworks’ use of Midwest’s trademarked term Soil-Sement in keyword ads on search engines and in metatags on its site. Under Ninth Circuit precedent, the court felt compelled to rule that the mere presence of the trademarks in keyword buys and metatags was infringing, because “Soilworks thus capitalizes on Midwest’s ‘Soil-Sement’ trademark to attract clients to its websites,” creating initial interest confusion. Though Ninth Circuit panels, shockingly, have been inconsistent in their use of IIC, it’s generally not in a defendant’s favor. The three “key” internet factors under one of the main cases,, Inc. v. Walt Disney Co., 202 F.3d 1199, 1205 (9th Cir. 2000)—similarity of marks, relatedness of the goods, and the use of the internet as a marketing channel—will condemn any competitive use of a trademark.

Here, Soilworks uses “soil sement” to buy ads on Google; uses “sement soil” in metatags for one of its site; and uses “sement” and “soil” “in close proximity” in a metatag for another site. “When used in Internet searches as metatags, they clearly are designed to divert persons interested in Midwest’s mark to Soilworks’ websites.” According to the three key factors, Soilworks’ use of metatags and keyword ads “has the effect of connecting web customers familiar with Midwest’s Soil-Sement mark to Soilworks’ websites.” Thus, though there’s no hint of source confusion, there’s initial interest “diver[sion]”—not even confusion—and therefore Lanham Act liability, though the court deferred any consideration of remedies.

The court rejected Soilworks’ argument that Lanham Act liability ought to require—get this—deception:

[T]he wrong in a metatag initial interest confusion case is not that the consumer is deceived into believing that he is purchasing the plaintiff’s products when in fact he is purchasing defendant’s, but instead is the diversion of the consumer’s initial attention to the defendant’s website using the plaintiff’s trademark and goodwill. When accomplished through the use of key words or metatags on the Internet, this wrongful conduct may involve no deception of the consumer. The consumer is simply led to the defendant’s website through the unseen keywords and metatags the defendant has purchased [sic] on the web….

To the extent that the doctrine adopted in Brookfield requires a showing of initial confusion-- that the consumer’s initial attention was diverted to the defendant’s website through confusion--the Court concludes that it has been established here. A person typing “soil sement” into a search engine presumably would be somewhat familiar with Midwest’s product and would be looking for the product or its maker, and yet would be directed by the keywords and metatags to Soilworks’ websites. The confusion--thinking one would be connected to Midwest when in fact Soilworks’ websites also appear in the search results--would entirely be caused by Soilworks’ use of Midwest’s mark. (emphasis added to the key words that make this doctrine crazy, without even getting into the factless presumptions about the consumer’s intent)

The court distinguished Designer Skin, from the same district, because that case involved metatags that informed searchers where they could find Designer Skin products (from an unauthorized source). Fine, but if there is a word in the above-quoted paragraphs that doesn’t apply to straight-up comparative advertising, I didn’t see it.

You know, I am just as depressed as Eric Goldman about this. The premise of the rest of the lawsuit—which, let us not forget, is proceeding—is that the parties’ goods are comparable. It’s not wrong to let consumers compare them. As Mark Lemley says, “unfair competition” is not redundant. Given these terrible cases, why don’t businesses put the indisputably legal “compare to X” statement in their metatags? (For keyword-triggered ads, the answer is: Google won’t let you use that as your ad text. This is an understandable rule from Google’s perspective, but it makes bad law worse from a competitive perspective.)

Separately, Midwest argued that Soilworks had engaged in false advertising by claiming that it’s the “innovator” and “manufacturer” of Durasoil; that Durasoil is “synthetic” and “oil-sheen free”; and that Durasoil is made from “proprietary ingredients” and represents “revolutionary state-of-the-art innovation.”

The court concluded that the “innovator,” “proprietary ingredients,” and “revolutionary state-of-the-art innovation” statements were mere puffery, too general, vague and unspecified to trigger a reasonable consumer’s reliance. The “manufacturer” claim was specific enough to be falsified; the testimony on whether it was true was conflicting. However, there was no evidence of materiality, and no particular reason (such as a deliberately false comparative claim, or the expenditure of substantial funds to promote the claim) to think that consumers cared about whether Soilworks was the manufacturer of Durasoil. Nonetheless, while barring Midwest from recovering damages on the claim because it failed to show causation and injury, the court allowed its injunctive relief request to proceed.

Materiality was not a problem for the “synthetic” claim; the evidence showed that this was important to consumers. Midwest didn’t produce a general definition of “synthetic” for the industry. Instead, it relied on one Soilworks principal’s testimony that he didn’t know whether Durasoil was synthetic and the fact that one of Soilworks’ suppliers wouldn’t consider it synthetic. That witness defined synthetic as something that isn’t “natural or naturally occurring,” and testified that, according to that definition, Durasoil was synthetic, because it contains a refined, non-natural product. The court thought this was more support for truth than falsity. With no triable issue of fact, the court granted summary judgment to Soilworks.

Soilworks also called Durasoil “oil-sheen free,” meaning it doesn’t leave a film on the surface of water. Midwest argued that Soilworks’ failure to test this attribute renders the claim false. But there was no evidence that consumers had been deceived, and no affirmative evidence that Durasoil left a sheen. (Also, this gets to the divide between “tests prove” and other claims; unless there’s evidence that consumers presume that tests stand behind a factual claim, in general an advertiser is free to make non-test-supported claims.) Summary judgment for Soilworks on this claim.

Saturday, August 16, 2008

"Tax-free cigarettes" case continues

Gristede's Foods, Inc. v. Unkechauge Nation, 2008 WL 3334032 (E.D.N.Y.)

Previous discussion here. Gristede’s sued the Unkechauge for falsely advertising its cigarettes as “tax-free,” when purchasers were supposed to pay the tax to the state.

First, the Unkechauge defendants argued that the Lanham Act claim was time-barred. The Lanham Act has no limitations period of its own, and borrows from coordinate state claims. The defendants argued that plaintiff’s claim was a statutorily created penalty, and thus subject to NY’s three-year statute of limitations for general penalties imposed by statute. Gristede’s contended that NY’s six-year statute of limitations for fraud was more appropriate. Since the Second Circuit has already held that the six-year fraud period is the most analogous statute of limitations, Gristede’s had the better of the argument. This was true even of Gristede’s claim for damages, which the defendants argued should be treated separately than the injunctive relief claim.

Next, defendants argued that the claim accrued in 2000, when Gristede’s became aware of a competitive injury. Under federal law, a claim accrues when a plaintiff discovers, or should have discovered, its injury. Though the complaint alleged that defendants have been falsely advertising “tax-free” cigarettes since 2000, a time bar doesn’t appear on the face of the complaint. Gristede’s filed in March 2006, so even assuming awareness as of 2000, there’s not necessarily a time bar.

The defendants then argued that, because N.Y. Tax Law § 471-a does not require payment of an excise tax for purchases of less than 400 cigarettes, “tax-free” isn’t false where no quantity term appears in the ads. The court found the complaint stated a Lanham Act claim. It specifically alleged that the ads induce non-tribe members to purchase “large quantities,” which may be more than 400 cigarettes (2 cartons). The defendants argued that, when an ad does’t contain a quantity term, no such term may be inferred to show falsity; the court saw no reason to apply such a rule.

Defendants then creatively attempted to turn the doctrine of falsity by necessary implication into a shield rather than a sword, arguing that “tax-free” must be evaluated in context and was not false, given that there was a debate in NY about the taxation of cigarette sales by reservation retailers to non-tribe members. In addition, defendants argued that they did not intend to convey a message of total tax exemption.

The court rejected these arguments. The “context” in which a particular claim must be evaluated is the ad itself, not the “larger political and social context.” And, if the larger context or intent were relevant, it would not be at the motion to dismiss stage.

Finally, defendants argued that the ads weren’t false, given that NY has a “policy of forbearance on the collection of taxes on cigarette sales made to Native American retailers for re-sale to the public.” The court had rejected this argument in its earlier opinion, holding that the law was clear that non-tribal consumers are in fact liable for the tax; it is a criminal misdemeanor to wilfully fail to pay it or attempt to evade it.

Friday, August 15, 2008

Recent reading

Dan M. Kahan, David A. Hoffman, & Donald Braman, Whose Eyes are You Going to Believe? Scott v. Harris and the Perils of Cognitive Illiberalism:

This paper, which includes a great survey of perceptions of the reasonableness of a high-speed police chase based on watching video of the chase, really made me think. Not only does the paper have a lot to say about the use of evidence that “speaks for itself,” it challenges the fact/value divide in a way that I find quite useful, given how false advertising law constantly slips between the two while maintaining the fiction that it’s all about facts:

What’s not nearly so well understood [as the problem of competing values] is the threat that competing understandings of fact pose to a liberal society. Indeed, forms of advocacy that feature seemingly neutral factual claims about how to promote societal welfare (“optimal deterrence,” “cost-benefit analysis,” “contingent valuation” and the like) are thought to be among the practices that dissipate illiberal conflict by avoiding reference to more contentious judgments of value. It might seem natural to see judicial idioms that focus on “facts” as conflict avoiding for the same reason. But because we inevitably recur to our cultural values to evaluate empirical claims about what conditions threaten our welfare and what policies promote it, a policy idiom of facts can polarize us every bit as much as one that deals with differences of value in a transparent way.

This discussion is obviously relevant to David McGowan’s claims that copyright should have more factual tests.

The footnotes discuss puffery as one relevant doctrine for deciding when facts (or non-facts) are so obvious that no reasonable person could disagree, though the authors are relatively sanguine about judicial use of the puffery doctrine to avoid jury resolution of factual disputes. With respect to advertising, however, I think conclusions about what counts as a material, factual claim are likely to vary with people’s individualist/communitarian and hierarchical/egalitarian orientations, which is the kind of variance that elsewhere the authors suggest should be of particular concern to judges inclined to rule that “no reasonable jury” could find other than how the judge does.

For earlier discussion of Scott v. Harris, see here.

Yes We Can ... sue?

Jones Soda is running Campaign Cola, offering people the ability to purchase Yes We Can Cola, Ron Paul Revolution Cola, Pure McCain Cola, and Capitol Hillary Cola (in order of popularity). Let’s assume they have copyright permission for the photos used on the labels. Right of publicity violation? Clinton in particular might be able to use the licensing fees.

NB: Jones Soda gave me one of my favorite trademark exam problems ever.

Thursday, August 14, 2008

Efforts to destroy competition end with damages award

Pedinol Pharmacal, Inc. v. Rising Pharmaceuticals, Inc., --- F.Supp.2d ----, 2008 WL 3287932 (E.D.N.Y.)

A jury heard Pedinol’s and Rising’s Lanham Act claims against each other and found that both sides engaged in false advertising. The jury awarded only $1 in nominal damages against Rising. Rising’s damages claims against Pedinol were reserved to the court. The court quickly disposed of both parties’ Rule 50 motions, praising counsel on both sides for their presentation of the evidence.

Under the Lanham Act, a successful plaintiff is entitled, subject to equitable principles, to recover (1) defendant’s profits, (2) plaintiff’s damages, and (3) costs. Rising sought an award based on Pedinol’s profits. The plaintiff must prove defendant’s sales, and defendant must prove deductions. If the court finds that profit-based recovery is either inadequate or excessive, it may enter a judgment for a just amount, subject to the principle that recovery must be compensatory and not a penalty.

Willfulness is not mentioned as a prerequisite for recovery, in contrast to the recent addition to the Lanham Act of trademark dilution remedies, which do explicitly require a willful violation before damages may be awarded. However, before the dilution amendment, the Second Circuit required willfulness before awarding lost profits. Courts in the Second Circuit have split on whether this rule remains good law. This court agreed that it did. The dilution amendment evinced no congressional intent to change the law governing the other damages provisions.

The court thus turned to willfulness, and found ample evidence of intentional deception. The facts involved Pedinol’s Lactinol 10% lactic acid product, which competed with Rising’s non-name brand lactic acid product. Rising’s version sold at a fraction of the price. Pedinol spent several years attempting to destroy Rising’s ability to compete, using the “aptly named” “Sinking Rising” campaign. Pedinol sent a series of false and deceptive letters to Rising’s customers. Pedinol’s management knew that Lactinol was not a “single source” product as understood by the relevant customers, but nonetheless sent thousands of letters, to everyone from small neighborhood pharmacists and large chain stores, falsely claiming that Lactinol was “single source,” which precluded any generic substitution.

These letters weren’t just false. They were threatening. The letters warned that substituting a generic for Lactinol “violates laws that govern the substitution of prescription pharmaceuticals,” and that failure to halt substitution would lead to “corrective action such as notifying the Office of Professional Discipline [and] New York State Medicaid....” Evidence at trial showed that these were empty threats, but it required no “leap of faith” to find that pharmacists were likely to rely on them. Pedinol’s knowing use of pharmacists’ fear of losing a license or being charged with Medicaid fraud established willfulness.

A court may award defendant’s profits using three different rationales: (1) unjust enrichment; (2) damages to the plaintiff; (3) deterring willful wrongdoing. The Second Circuit has emphasized that awarding defendant’s profits may be an inappropriate measure of the harm to the plaintiff; a windfall is not to be awarded. Relevant factors include: (1) the degree of certainty that the defendant benefitted from the unlawful conduct; (2) availability and adequacy of other remedies; (3) the role of a particular defendant in effectuating the wrongful conduct; (4) plaintiff's laches; and (5) plaintiff's unclean hands.

The court found that Pedinol was unjustly enriched by its false statements. Pedinol’s own records listed 21 large retailers that had left off substitution as a result of Pedinol’s threats, while 5 continued to do so, and CVS was mixed. Moreover, Rising’s evidence showed that Pedinol’s false statements were directly responsible for shutting Rising out of CVS. A CVS buyer who received the letter and was visited by Pedinol management refused to carry Rising’s product, costing $400,000 in sales; this evidence also showed damage to Rising’s reputation.

Rising argued that Pedinol’s unclean hands should enhance the award, while Pedinol argued that Rising’s unclean hands barred recovery of profits. The burden of showing unclean hands is on the party asserting the defense, who must show “truly unconscionable and brazen behavior.” A court may weigh the magnitude of the parties’ misdeeds against each other.

Here, Rising’s false advertising was insufficient to justify finding unclean hands. “Even the jury that found against Rising was unimpressed with the magnitude of its behavior, deciding to award Pedinol only nominal damages of $1.” At worst, Rising wrongly stated that the brand name of its product was Lactinol, which may have led to some confusion. This “pales” in comparison to Pedinol’s “barrage of false letters.”

Thus, the court awarded Pedinol’s profits during the three-year period in which the false statements were disseminated. Unsurprisingly, the parties disagreed on that amount, by an order of magnitude. Rising used a variant of the model Pedinol used at trial, at which point Pedinol was seeking Rising’s profits. When Pedinol sought an award of profits it claimed a profit rate of 66%; Rising cut that in half in its request; but at this point Pedinol claimed 8.5% profit. The court agreed that Rising’s showing was reasonable based on the trial evidence. However, there were various deductions, and awarding Rising all of Pedinol’s profits from every sale of Lactinol during that period would result in a windfall. Thus, the court awarded roughly $775,000 in lost profits.

Pedinol also sought an injunction barring Rising from advertising that its products are

“generic drugs, therapeutic alternatives, the pharmaceutical equivalent, of, or ‘bioequivalent’ of Lactinol,” and from stating that its product contains 10% lactic acid or that it can be compared to Lactinol. The court declined. First, Pedinol’s unclean hands, meaning its conduct aimed at destroying Rising’s ability to compete, barred relief. But more importantly, the evidence at trial didn’t justify such an order. There wasn’t sufficient evidence to disprove Rising’s 10% lactic acid claim. And the evidence was that “therapeutic equivalent,” “pharmaceutical equivalent” and “bioequivalence” were ambiguous; it was not clear how particular audiences would interpret “generic.” The proposed order was too broad and non-specific, which would create compliance and monitoring difficulties. Moreover, the court refused to bar nonmisleading comparative advertising.

Rising also sought injunctive relief barring Pedinol from stating that Lactinol is a “single source” product or is otherwise an FDA-approved drug, and from claiming that dispensing Rising’s product violates state or federal law or is not reimbursable by Medicaid. The court declined, ruling that the statements had been discontinued and that there was no reason to believe Pedinol would resume them, given that Rising has been compensated by the lost profits award.

Epistemology of the diaper

Procter & Gamble Co. v. Kimberly-Clark Corp., -- F. Supp. 2d --, 2008 WL 3103758 (E.D. Wis.)

Kimberly-Clark makes Huggies Natural Fit diapers, with sides contoured towards the center. Huggies’ global brand director testified that consumers would view this feature positively, allowing Huggies to advertise a better fit and greater comfort. Huggies tested size 4 diapers, under the theory that size 4 was the largest seller and spanned a large number of baby weight ranges. Single-size tests are supposedly common in the diaper industry, and size 4-wearing babies generally engage in the standard baby activities of crawling, lying down, etc. The study allegedly supported the “natural fit” claim, though not a claim of less bulk.

Huggies used ads emphasizing natural fit across multiple media. A big part of the campaign involves claims that Huggies are designed for “babies of the human variety” while the on-screen image suggests that other diapers are designed to fit inanimate bricks. Huggies’ own study concluded that the ad was very persuasive.

P&G was less impressed and filed suit, arguing that the “fits more naturally” claim is false.

The court found that “natural fit” and “fits more naturally” were puffery, not factual claims. The court identified two kinds of puffery. The first, exaggeration, is a general superiority claim—no one expects that consumers will take claims for “lowest” prices or “best” products seriously. Here, the puffery is different. Instead of exaggerating product quality, the puffing claim is immeasurable. Huggies’ claims about its diapers are “so vague and subjective that they are neither provable nor disprovable.”

First, claims about natural fit are vague “by their very nature.” Neither of the parties were able to identify “a fixed set of criteria” for what “fit more naturally” might mean. There are better and worse fits in general, but the court asked: “which garment fits a woman more “naturally”-a tailored English business suit, a Japanese kimono, or an Indian sari?” Indeed, testimony suggested that consumers’ standards for measuring fit vary widely because fit is subjective, and even depends on the diapers’ appearance.

Despite extensive testing, P&G still doesn’t know how consumers decide that a given product “fits naturally.” (Would this matter if the issue were “tastes better”? Overall taste test claims are considered verifiable, even though individual tastes are subjective and difficult to explain.) In fact, P&G’s designers were once convinced, using quantifiable measures, that a particular diaper would be an excellent fit, but consumers disagreed and “won.”

Given that the benchmark concept is incapable of concrete definition, “fits more naturally” and “natural fit” could neither be proved nor disproved, and thus they could not be falsified. In fact, even if we could all agree on what it meant for a diaper to “fit more naturally,” our individual conclusions on which diaper did so “would be based on purely subjective judgments.” Such “opinion puffery” can’t be proved.

At the end of the day, “the only way of measuring natural fit is through consumer testing.” P&G’s expert noted that different consumer populations use different diaper brands and have different fit goals. So even if P&G internally considers Pampers Cruisers its best-fitting brand, consumers might not agree.

P&G argued, reasonably enough in my opinion, that because consumer testing can substantiate a diaper fit claim, such claims are verifiable through consumer tests. But the court concluded that even if consumer testing provides companies with useful market information, that doesn’t make it a legitimate way of assessing truth or falsity for Lanham Act purposes. The court was guided by the Pizza Hut decision, in which the Fifth Circuit rejected a falsity claim for “Better Ingredients. Better Pizza.” “Better Pizza” was typical puffery, and in context so was “Better Ingredients.” (This is something of a simplification: the court of appeals held that “Better Ingredients” might, in context of slightly more specific claims about quality sauce or dough, have been actionable, except that there was no survey evidence of materiality. Given the apparent evidence of materiality here, in the context of ads showing other diapers fitting bricks better than babies, I would think the analogy would support potential liability.)

The court held that, just as it’s impossible to prove which pizza is better, it’s impossible to demonstrate “conclusively” whether one diaper “fits more naturally.” “[A]n assertion whose truth depends solely on consumer opinion is an inactionable one.” Thus, taste tests showing that Pizza Hut was preferred by 75% of consumers over Papa John’s still wouldn’t have disproved the “Better Pizza” claim. (This is to say that the court is unwilling to believe that consumers perceive an implied representation of a factual basis for a claim as general as “Better.” Depending on the claim, however, consumers may well perceive an implied representation of a factual basis. Imagine, for example, if the diaper claim was “gentler”—which says something to me, as a frequent diaper consumer, about the effects on a baby’s skin—or, perhaps for another product, “safer.”)

Thus, “[w]henever subjective preference is the arbiter of a claim--whether of pizza or natural fitting diapers--resort to consumer studies is of limited value in the Lanham Act context and only underscores the inherent difficulty in disproving such claims.” In fact, the court held, the study results presented to it demonstrated that consumers couldn’t agree on which diapers fit more naturally. For several sizes, 51% of consumers found that Pampers fit more naturally, while 45% preferred Huggies and 4% had no preference. The court called this a “coin toss” based on individual preference, not objective truth. (Hmm. It seems to me that the objective truth is that you are just about as likely to prefer the fit of Huggies as the fit of Pampers, which is probably good news for competition. The court is shifting back and forth between individual preference—subjective—and population results—not subjective. It may get to the right result, but on this evidence it doesn’t seem right to accuse Pampers of being designed to fit bricks.)

Finally, the court pointed out that the studies weren’t just of subjective impressions. They were the subjective impressions of the consumer, not the actual wearer, who ought to be the judge of “fit.” The court was struck by the fact that the “aesthetics of the diaper” play a role in “mothers’” [sic] perception of natural fit. (I’m pretty sure that aesthetics play a significant role in everyone’s perception of fit, even with their own clothes.)

Even if the “fit more naturally” claim were more than puffery, the court concluded that P&G had not disproved it. First, the court pointed out that (in the absence of some signal in the ad itself that there is substantiation) the Lanham Act doesn’t require testing to support a claim’s truth. Thus, challenging the Huggies study does not in itself show falsity: when test evidence isn’t incorporated into an ad, a Lanham Act plaintiff can’t show falsity merely by attacking “any tests that might happen to exist.” It is the difference between “that claim is false” (actionable) and “you have no proof” (not). (Note that the result may be different in courts, like the Third Circuit, that hold that consumers reasonably expect a minimum level of substantiation from factual claims—that is, consumers don’t assume that advertisers pick their claims by throwing darts at a board marked with possibilities. Even such courts, however, are likely to attempt to cabin this substantiation doctrine to cases in which the claims are reasonably specific, so I can’t imagine this rule changing the result here.)

P&G argued, however, that its criticisms and its own tests could actually show falsity. The court disagreed, persuaded by Huggies’ expert that its test was generally reliable, despite minor flaws (the possibility of a “halo effect” leading to positive answers on multiple attributes given that the survey asked 26 questions; the limitation of the test to only size 4 diapers). Huggies’ expert had an interesting mirror-image criticism of P&G’s survey, which only asked about “fit.” He testified that the results indicated “dumping,” meaning that consumers answered the “fit” question even though a “fit attribute” wasn’t driving their opinion, because it was the only way to express a preference for one diaper over another. The court found this “persuasive in some limited sense,” but not enough to make the survey unreliable—or to skew the results.

In sum, the court found that consumer preference as to natural fit was a “close call.” Both sides had decent but not perfect surveys. The court concluded that the experts’ criticisms, in particular the focus on the “halo effect,” pointed in the direction of finding all the surveys unreliable: “[I]f consumers are so fickle that their own survey responses are swayed by such phenomena as dumping and halo effect, how can a Lanham Act falsity claim ever be premised on consumer preference surveys?” (Well, that statement’s never going to be applied out of the context of a vague product claim! I had thought it was well understood that surveys can readily be used to manipulate even apparently objective reactions.)

In the end, P&G’s claim failed because of an “epistemological problem”: how one can “know,” much less “prove,” whether certain diapers fit more naturally than others.

The court also found that there was no evidence of irreparable harm. P&G moved for preliminary relief 9 months after filing suit, and Huggies submitted credible testimony that ads like the “Brick Baby” ad have a limited lifespan. Moreover, P&G’s own brand manager testified that damages are calculable now. This is a good reminder that a large company needs to act fast on false advertising: the larger you are, the more closely you ought to be monitoring the market unless you wish to be charged with relief-defeating delay, and the more evidence you'll have establishing your own damages, making irreparable harm harder to show.

It’s important to be clear about the meaning of this result, and others: When a court determines that a claim is puffery, then even evidence of materiality—effects on consumer purchasing decisions—will be irrelevant. As others have, I find this somewhat paradoxical given that the core stated justification for the puffery doctrine is that consumers aren’t influenced by mere puffing. See Ivan L. Preston, Puffery And Other "Loophole" Claims: How The Law's "Don't Ask, Don't Tell" Policy Condones Fraudulent Falsity In Advertising, 18 J.L. & Com. 49 (1998).

However, the doctrine does fit into the American approach to advertising regulation: you can fool people into making decisions based on irrelevant criteria as long as you don’t actually deceive them. What’s the difference between being deceived and being fooled? It’s in the specifics of the claim. Not a very stable division. But the alternative, which is more European, would be to say that you can only influence consumer decisions based on (a) brand value or (b) objectively verifiable claims, and that’s not a particularly easy row to hoe either.

Monday, August 11, 2008

Colbert and branding

Stephen Colbert, himself something of a branding genius, interviews author Lucas Conley on branding mistakes—the intro made it sound like Conley was anti-branding, but the interview was more Conley admonishing marketers for self-dilution, trying to port brand attributes to incompatible extensions.

false marking, not false advertising

Forest Group, Inc. v. Bon Tool Co., 2008 WL 2962206 (S.D. Tex.)

Forest sued Bon Tool for patent infringement. Bon Tool counterclaimed for false marking under 35 U.S.C. § 292 and false advertising under the Lanham Act, along with invalidity. Bon Tool won summary judgment on noninfringement.

The patent at issue, No. 5,645,515, covers a stilt used in construction to allow people working on suspending ceiling structures to walk around more freely. In this and a separate patent case against another party, the courts ruled after Markman hearings that the patent was not infringed by products that lacked a resiliently lined yoke. However, Forest’s actual product also lacked a resiliently lined yoke until after the courts ruled on the patent. Beginning in February 2008, Forest’s product now has a resilient lining.

Marking an unpatented article with “patent” or a patent number for the purpose of deceiving the public violates the patent law. The intent requirement is that a party must act with sufficient knowledge that it is not telling the truth and that the recipient will be misled. Intent to deceive can be established by objective evidence; false marking plus proof of knowledge of falsity is enough to create an inference of deceptive intent. A plaintiff must show that the false marking defendant did not have a reasonable belief that the articles were properly marked.

§ 292 means that a patent holder can’t mark its product with a patent number when the product doesn’t conform to the patent claims. The court cautioned, however, that this obligation “contrasts and sometimes conflicts with” the obligation to mark a product consistently and continuously to provide constructive notice of the patent; notice is necessary to entitle a patentee to damages. So, if a patent holder stops marking its product, even only temporarily while a lawsuit is pending or after an interlocutory adverse Markman ruling, it will lose the ability to recover damages from infringers, even if it ultimately succeeds in establishing that the asserted patent covers the product. Thus, the “tension” between § 292 and the notice provision puts the patentee in a “precarious” position.

(The court cited a 1966 6th Circuit case for the proposition that suspension of marking after an adverse interlocutory ruling destroys the ability to recover damages from infringers; it seems wrong and unlikely to be current law for precisely the reasons the court identifies. The solution is not to read the false marking statute incredibly narrowly, but to hold that stopping marking a product that a court has told you shouldn’t be marked doesn’t keep you from the benefits of constructive notice, at least if marking resumes when the adverse decision is reversed. Not to mention that actual notice will still be another route to getting damages, so the peril is not necessarily as great as all that. But then, patent law may have nuances I’m missing.)

Anyway, §292 needs strict construction, especially when the false marking allegedly occurred during pending litigation. A single district court adverse claim construction shouldn’t suffice to establish false marking.

In this case, however, the court found “unusual circumstances”; Forest was liable when it could no longer reasonably believe that the articles it was making were covered by the ‘515 patent. Forest’s principals genuinely believed that the stilts were covered by the patent, which was written by experienced patent counsel who possessed an exemplar of the stilt.

But after November 2007, Forest engaged in false marking. At that point, Forest had been sued for a finding of noninfringement by another company; it had received an opinion of counsel in 2005 advising that a stilt without a resiliently-lined yoke didn’t literally infringe the patent; it had two separate adverse Markman results and two summary judgment rulings; and it had retained experienced patent counsel who advised it to modify its stilts. At that point, Forest had no reasonable belief that its stilts were properly marked. Forest’s principal is not a native English speaker or experienced in fields that require interpreting patent language; it was not until November 2007 that he realized the serious implications of the 2005 legal opinion—that his own product wasn’t covered by the patent. Moreover, the decisions’ lack of finality counsels against an intent finding, but that factor was overcome by the existence of four rulings from two separate district courts on a straightforward patent. The court was also influenced by the fact that, at trial, none of Forest’s witnesses could explain how the lining of their stilt was “resilient” in any way.

The court didn’t credit Forest’s testimony that it directed its manufacturer to stop marking the old stilts with the patent number. There was no documentary evidence of such an order, and the court thought an international businessman should have immediately and carefully checked the new batches for compliance. The fact that, a week before trial, the stilts were still arriving marked with the number suggests that Forest did not try to stop such marking. In fact, its failure to notice the continued presence of the markings was strong circumstantial evidence of intent to deceive.

All this, for what? False marking is penalized at $500 per offense, one-half to the claimant and one-half to the US. Cases are divided on how to count “offenses.” The court rejected a per-stilt calculation. The issue is whether there was a single, continuous act or change in the time and circumstances of the false marking sufficient to separate the offenses. Separate orders placed by the patentee for falsely marked articles, for example, might show separate offenses. The court rejected a time-based approach (e.g., one offense each week) as unsupported by precedent or statutory language. Here, Forest made only one separate, distinct decision to mark its stilts after it knew they weren’t covered. $500 in damages.

Bon Tool also alleged that Forest’s advertising that the stilts were covered by the ‘515 patent constituted false advertising. In the patent context, the elements of a false advertising claim must be made out by clear and convincing evidence. Falsity was undisputed and, because the statement was false rather than misleading, the court assumed consumer deception.

What about my good friend materiality? Bon Tool had no evidence that the false claim of patent protection was likely to influence purchasing decisions by consumers. Likewise, Bon Tool couldn’t establish that it had suffered injury; even with falsity by a competitor, there’s no presumption of causation and harm in the absence of a comparative falsehood.

Both parties’ fee requests were denied.

Sunday, August 10, 2008

IPSC 2008: Closing plenary

Copyright Through a Liberty Lens
Abstract | Paper
Jennifer Rothman
Loyola Law School

Proposes a fundamental shift in thinking about copyright uses, away from free speech as an outer limit on copyright. This dominant approach has been a virtual failure in facial and as-applied challenges. Why do we keep beating the First Amendment drum when it’s not working? (Comment: Fred Schauer has something to say about this.)

Lawrence v. Texas has a lot to say for a small subset of uses: identity-based uses unrelated to political or cultural dialogues.

Why did the 1A fail? Copyright as a free speech exception; copyright as already incorporating speech protections; copyright as the engine of free expression. Even if it worked, it would be highly constrained in defending identity-based uses. The vast majority of 1A scholarship on copyright has focused on the democratic civil society, valuing the political over the personal, ideas and facts over expression, and transformative over non-transformative uses.

What does she mean about identity? Our understanding of ourselves; important life-altering experiences; our beliefs and values. These all become intertwined with copyrighted works. Religious works: one’s entire belief/value system could be entwined with copyrighted works. Or a particular song could have been playing during a vital life event, as for example a woman who was raped while a particular song was playing. Or a photographer could have taken a picture of Lindsey Lohan kissing Samantha Ronson, and Ronson could put the picture up on her personal website. This is a heartland identity use because it documents something that happened to her and it doesn’t matter that she wasn’t the one who took the photo.

Why liberty is better at this: Substantive due process connects up better with our understanding of the freedom at issue than First Amendment concepts. This is more a feel argument than a doctrinal argument. Lawrence: “Liberty presumes an autonomy of self that includes freedom of thought, belief, expression, and certain intimate conduct.” Copyrighted works are important to self-definition. So we should focus less on freedom of speech and more on freedom of a person.

If we try users’ rights as speech rights, copyright owner will likely prevail—copyright is supposed to generate more speech overall. Or, if copyright is property, there’s no right to “make someone else’s speeches.” If a user’s interest is a liberty interest, liberty can trump property—the Civil Rights Acts weren’t viewed as takings (comment: note that this was a legislative enactment; the courts didn’t find a liberty right). If you call the copyright owner’s interest a speech one, speech has to be balanced with user’s liberty (and there’s no issue of compelled speech); likewise if you call the copyright owner’s interest.

Implications: no permission should be required; no payment should be required; entire works may be copied. The liberty based approach asks for the reason for a use, not whether copying the entire thing was necessary. (Comment: I don’t see how this is consistent with interest balancing. Can’t the user who was raped while a certain song was playing express that by playing thirty seconds of the song, in recognition of the copyright owner’s competing interests?)

Likewise, the private/public nature and the commercial/noncommercial divides would not be important. And it wouldn’t be necessary for the use to have a role in political dialogue or public debate. A lot of the work would be done through as-applied challenges.

Comments: This seems to me essentially a variant of fair use, with a constitutional candy coating. I’m happy with anything that gets us to think that there are a bunch of different possible fair use configurations, including self-expressive use. Amour-propre also compels me to note here that I’ve written on these issues, both standard First Amendment doctrine and an extended defense of nontransformative copying done in the service of personal commitments or meanings.

Q: A rule providing that no payment is required disturbs me where the loss is unambiguous. If you took someone else’s personal property without permission just because it was iconic for you (your foreclosed house, your repossessed car), we wouldn’t allow that. Imagine if I license my work for $10, but you refuse to pay. Why can’t I get my $10?

A: This is a concern about line-drawing. It would be a limited defense—the work has to be integrated into your life. The court would have to look at motivation.

My question: Where is “the right to communicate yourself to others” in liberty? See, e.g., Boy Scouts v. Dale, don’t ask don’t tell—you have no interesting right to communicate core aspects of your identity, at least not if that core is your gayness. As applied here: Why should you be able to play a song that’s important to you to other people online who don’t know you? If you should be able to play it, should you be required to take reasonable measures to prevent downloading?

A: One could argue that the 1A and free speech is really contained in liberty. This has an interaction with the autonomy-based, self-expressive features of the First Amendment; this is just a way to hook up liberty principles. W/r/t downloading, your identity interest doesn’t extend to others’ downloads, so you’d have to find a way to limit access. (I guess I have trouble seeing why your liberty interest extends just far enough to let them hear it while they’re visiting your page, but no farther. What interest do you have in their hearing it? How is it a liberty and not an expression interest?)

Wendy Gordon: Why do you think liberty will be any more successful? What cases are your models?

A: Lawrence is a fundamental broadening of our contemporary understanding of substantive due process, from privacy to autonomy.

Samuelson: This seems like fair use.

A: She is not trying to revitalize fair use. Her perception is that the 1A has failed as an outer limit, and she’s trying to find something else. She wants to remind courts that there are real people involved in using these works, and if that affected fair use that would be great.

Justin Hughes: A right of private performance would be the type of thing barred by your framework.

A: Even on a facial challenge. (Really? Because while Integral is a song vital to my self-concept, Boy with a Coin isn’t; if we really require investigation of motive, then a private performance right would generally be okay except where there was a specific reason to reject control over a particular person’s use of a particular work.)

Patent and Antitrust: Differing Shades of Meaning
Abstract | Paper
Robin Feldman
U.C. Hastings

The trend has been to harmonize the bodies of law by folding antitrust into patent, but it hasn’t worked well. The divide is deeper than courts/commentators realized—it’s not just that one encourages monopoly and the other restricts it, but that the fields use the same terms to mean different things, and that makes reconciling them very hard.

Two examples: The concept of exclusivity and the definition of product. Antitrust: exclusivity means one party can do something to the exclusion of all others. Using that language, people analyze patent rights as if there was a right to exclude everyone from the sphere defined by the patent, but that’s not always true. A patent doesn’t grant the right to make, use and sell the invention. She’s not talking about the availability of competing substitutes, but something more fundamental. Suppose a patent holder has a patent on use of a substance as an industrial cleaner, and the patent says “all uses.” If someone else discovers that the same substance treats breast cancer; she can patent that use. Anyone who wants to use that substance to treat breast cancer will have to negotiate with both of them, as with an improvement patent. That’s far less powerful than complete control.

The misperception that the patent holder is like a monolithic power in a particular space overestimates the power of the patent grant, encouraging courts to make improper assumptions about patent markets and be overly lax in defining patent markets.

Second example: what’s a product? The patent shouldn’t be looked at as a product in itself, because patent power often comes from interaction with other patents. E.g., defensive patenting. Biotech firms may engage in selective suppression, holding patents on multiple paths and only working on one at a time. This might be ok or not, but if you look only at the single patent you won’t be able to analyze it properly. Likewise, pharmaceuticals can have interactions that antitrust doesn’t quite notice, like the difference between a chewable and a nonchewable form of the same medication. Or selling two medications together could be tying, but putting them in the same pill has the same anticompetitive effect but is only one product. Or look at Roundup and Roundup Ready grain—is that one product or two?

Antitrust law’s conception of a monopolist has an explicit conception that some consumers enjoy the product or at least some substitute. Patent doesn’t assume that consumers get anything during the term, allowing perfect suppression. So treating the patentee like a monopolist underestimates the amount of competitive damage accepted under patent law.

Pragmatism, Knowledge, Copyright
David McGowan
University of San Diego

This is in part a descriptive model of academic discourse about IP, and in part a normative model, with an acknowledgement of limitations. Arthur Leff’s classic Some Realism about Nominalism: we like to talk about things, but the critique of knowledge has been so powerful that we have few tools left. The economic analysis of law was a way to keep talking without saying anything. Conversation requires common vocabulary, and Posner’s law and econ has drained the appearance of conflict out of our definitions. We’ve stripped out the things motivating us and speak of costs and benefits.

Deirdre McCloskely pointed out that much of what passes for economic analysis is actually the product of introspection; we rarely have data, even crude data. So we introspect about what a rational actor would do, according to us, and then we call that consequentialist/utilitarian analysis. And we never measure or net it out; our graphs don’t even have numbers.

How people argue about IP: his introspection suggests that we retreat from extreme reflexive positions until we find safe ground within the range of plausible consequential arguments. Law profs are practical and like to talk about consequentialism, but all arguments within the space are structurally/logically sound, and choice between them is a matter of psychology. McGowan would like to shrink the area of “plausible consequential arguments” in order to make it less likely that we will be talking past one another.

Facts shrink the area. So our copyright policy should adduce facts, rather than suppress their production. We tend in copyright to opt for the suppression of facts. We substitute moralism for utilitarianism—Grokster. This calls into question the extent to which copyright is utilitarian.

Examples: (1) Parody/satire. Walking Mountain case: Mattel had a mall intercept survey about what people perceived when looking at photos of Cactus Barbie and the like. He doesn’t believe surveys are probative in the slightest, but he still thinks that the survey should have been considered in the copyright half of the case (hunh?). People were asked, along with sponsorship, about the message/meaning. 97% of people didn’t mention parody. OTOH, 25% of people surveyed in a mall intercept thought that Joan of Arc was Noah’s wife.

The 9th Circuit refused to consider the survey on the copyright side. That doesn’t mean that there will be no parody/satire analysis. It means that the panel will be the one to do it. Given our socioeconomic status and our verbal agility in this room, we’re all going to want the hoi polloi to be kept out of it—they might miss the point and suppress speech. A utilitarian has to reject that, because if people miss the point, than the utility of the parody is not what we introspect it to be.

One of the things the free speech argument in copyright does is make facts irrelevant: that’s the point of a right. It doesn’t matter if porn leads to rape: you have a right.

Second example: Perfect 10 v. Visa: Perfect 10 argued that the ability of credit card payment increased the availability of porn/infringing porn. One could measure the incremental effect of access to credit on consumption of porn, but the 9th Circuit said that inducement was not a matter of actually causing incremental infringement. Likewise, Sony is a fact-suppressing doctrine because it doesn’t examine how much infringement actually goes on; if there are potentially significant noninfringing uses the case is over.

His proposition: get facts. Inquiry is costly, and his proposal is costly. Limitations: Perfect 10 v. Amazon. The court says that proof of market harm is required. And yet there’s a standard Texaco circularity problem: how do you know there’s harm before knowing there’s a right? Demanding harm is unrealistic because you need to know the scope of the right first. That is a limit on his thesis—you can’t reduce all uncertainty with facts.

Second, is tailored pricing working? He likes tailored pricing, pay per use. But there are positive externalities from use and pricing is costly. The question whether the pricing mechanism is worth it drives a lot of copyright discourse, and it’s very difficult to get a handle on. We should focus less on questions of law—this is a contrast to Rothman’s paper—liberty, freedom, and speech are too diffuse and cut off inquiry.

Lemley: You’d add property to the list of those concepts, right?

A: Yes.

Lemley: The level of generality at which facts are valuable to us. How many people find this to be a parody? Or something else might be relevant—not this particular work, but the broader effects that having a category of parody has on innovation and creativity. How do you think about that?

A: As a function of a cost of inquiry/uncertainty. It’s rule/act utilitarianism.

Gordon: Yes, we all love facts, but we can’t jump to the position that there are no rights arguments or principled arguments worth making. Just because we’re a practical bunch doesn’t mean we’ll all follow you on this—we look at particular facts because they plug into particular values.

A: He doesn’t mean to deny framing based on priors, or the relevance of moral debate. But where is it going?