False claims of FDA approval actionable under Lanham Act and state law

Innovative Health Solutions, Inc. v. DyAnsys, Inc., 2015 WL
2398931, No. 14-cv-05207 (N.D. Cal. May 19, 2015)
 
IHS sells a medical device called P–STIM.  DyAnsys used to be the distributor of P-STIM
in the US, but after it lost the distributorship it allegedly started selling a
knockoff device, first using the P-STIM name (which allegedly has secondary
meaning) and misrepresenting the device as having the same §501(K) clearance as
P-STIM.  IHS alleged that defendants
lacked FDA clearance for the “knockoff,” but used the §501(K) number assigned
to P-STIM and misrepresented that their device was FDA-approved.  The FDA published an import alert that
allegedly effectively prohibited the importation of defendants’ device because
it doesn’t have FDA clearance, but defendants continued to misrepresent its
clearance status.  In addition, defendants’
sales representatives allegedly used an official FDA document – FDA’s Summary
of Safety and Effectiveness for the FDA 510(K) number assigned to the P–STIM
medical device – “as a marketing tool to confuse, deceive and steal away IHS’
customers.”  The inferiority of defendants’
device allegedly damaged IHS’s reputation and goodwill.
 
In addition, DyAnsys allegedly appeared before the Centers
for Medicare and Medicaid Systems (CMS) and “falsely claim[ed] standing as the
‘manufacturer’ and seller of the P–STIM medical device.” They told CMS that
“the billing codes for P–STIM are unclear or ambiguous, and that they need to
be revised or clarified.” In fact, defendants allegedly knew that this argument
would cause reimbursement concerns within CMS, which led CMS to determine that
there was no justification for reimbursing P-STIM use through insurance
payments.  This decision allegedly effectively
drove IHS out of the P–STIM business. 
Then, defendants allegedly created a new name, AnsiStim, for their
device and applied for their own FDA 510(K) clearance number.
 
The complaint alleged false designation of origin, false
advertising, and related state law claims including trade libel.
 
Defendants argued that the false advertising claims should
be dismissed to the extent they were based upon defendants’ alleged misuse of
an FDA clearance number or violations of the FDCA.  They argued that PhotoMedex, Inc. v. Irwin,
601 F.3d 919 (9th Cir. 2010), meant that—“especially in the medical device
field – claims that require the court to interpret FDA regulations stray too
close to the exclusive enforcement domain of the FDA and should not be
permitted to proceed.” IHS responded that it wasn’t trying to prove FDCA
violations, but rather that defendants falsely advertised that their device was
interchangeable with the approved P-STIM.  JHP Pharms., LLC v. Hospira, Inc., 52 F. Supp.
3d 992 (C.D. Cal. 2014), held that the FDCA did not bar a Lanham Act claim
alleging that the defendant misrepresented its products as being FDA-approved
because “where the issue of FDA approval is straightforward, a Lanham action is
viable.” The court here agreed.  Further,
although PhotoMedex was not
specifically overruled by POM Wonderful,
its precedential value may be limited.
 
However, IHS also alleged that the DyAnsys P–STIM device
“undercuts the FDA regulatory framework,” was “unsafe and hazardous,” was
“mislabeled,” was “ineffective,” posed “numerous health risks,” endangered
patients, and violated the FDCA. The claims not about misrepresenting FDA
approval were dismissed with leave to amend to clarify.
 
Defendants also received Noerr–Pennington immunity for
claims based on their petitioning CMS and related communications with the
government agency, because these were constitutionally-protected activities  seeking relief from a government agency. IHS didn’t
allege facts showing that the activity was objectively baseless and a sham.

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FDA pre-approval doesn’t bar Lanham Act false advertising claim against device

Church & Dwight Co. v. SPD Swiss Precision Diagnostics,
GMBH, No. 14 Civ. 00585, 2015 WL 2359467 (S.D.N.Y. Mar. 24, 2015)
 
Earlier
discussion
.  SPD argued that the FDCA
barred Lanham Act false advertising claims against it because the FDA had
preapproved its pregnancy test and the labeling thereof.  Applying POM
Wonderful
, the court here disagrees. 
SPD sold a home pregnancy test kit called the “Clearblue Advanced
Digital Pregnancy Test with Weeks Estimator” that estimates the number of weeks
that have passed since the woman last ovulated. However, C&D contended that
the Weeks Estimator couldn’t provide a pregnancy duration estimate, because the
medical profession doesn’t define pregnancy with respect to ovulation but
rather at the time of a woman’s last menstrual period. Thus, the name and
advertising of the product falsely conveyed the message that the product could
tell a woman how many weeks she’d been pregnant.
 
The Weeks Estimator was a Class II medical device subject to
the 510(k) process, which requires the party seeking to market a device to notify
the FDA prior to marketing it.  The
notification requires “a description of the device and a statement of the
intended use of the device, the proposed labeling to be included on the device,
and the information necessary for the FDA to determine if the device is
‘substantially equivalent’ to a pre-existing device.”  The evidence revealed that, “unlike the
situation in POM Wonderful in which
the challenged product labeling was merely consistent with existing FDA regulations,
the Weeks Estimator’s product packaging and at least one internet commercial
(though not all of its advertising) were subject to extensive FDA pre-approval.” 
 
The court found that the FDA’s involvement lay somewhere in
between “full control” and “permission.” 
For example, the FDA issued a “Hold Letter” due to a concern that women
could misinterpret the results of the Weeks Estimator, with potentially adverse
health consequences because the Weeks Estimator would under-estimate
gestational age by an average of 2 weeks. The FDA identified specific changes
it desired to the Indications for Use and labeling, including removal of the
claim “Also Tells You How Far Along You Are.” The Hold Letter also rejected “Conception
Indicator,” which was SPD’s initial name for the product.  The FDA ultimately accepted “Weeks Estimator,”
but there was no indication that it would have rejected a third alternative.  Ultimately, SPD received clearance.  The Clearance Letter stated that “a new
510(k) is required before these limitations are modified in any way or removed
from the device’s labeling.” Further, it said that “FDA’s issuance of a
substantial equivalence determination does not mean that FDA has made a
determination that your device complies with other requirements of the Act or
any Federal statutes and regulations administered by other Federal agencies.”
 
C&D wrote to the FDA asking it to take “corrective
action” against SPD for alleged violations of the Clearance Letter’s labeling
restrictions. Its arguments overlapped with its claims in this lawsuit.  The FDA reached out to SPD and SPD submitted
a “mitigation proposal” for changes in some of its labeling and
advertising.  The FDA accepted some but
not all of these suggestions. The FDA ordered SPD to stop airing its TV
commercial because the commercial “still does not convey the limitations of
your Week[s] Estimator completely, nor does it clearly state that the device
can only estimate weeks since ovulation (and not weeks of pregnancy) and
therefore does not present a balanced and accurate description of your device
to consumers.” The FDA ultimately approved a modified commercial for internet
use only, which “display[s] the [Indications for Use] statement in its
entirety, in text and against a blank screen with sufficient time to allow the
statement to be read by the viewer.”
 
The court concluded that there was no doubt that the FDA
applied “an extensive pre-approval process.” 
But did that preclude Lanham Act claims? 
No. POM Wonderful applies with
equal force to medical device labeling.  Fruit juice receives less oversight than
medical devices, true, but the Supreme Court’s reasoning wasn’t limited to a
specific area of the FDCA, and much of its analysis applied with equal force to
the rest of the FDCA.

First, POM Wonderful focused on the
two statutes as a whole,” emphasizing that they serve different, but
complementary, purposes.” The Lanham Act is for competitors, and the FDCA is
designed to protect the public health and safety. The Lanham Act uses private
enforcement and the FDCA doesn’t. There is an overlap, but not a conflict.  Neither statute expressly limits the other,
which is important because the two have coexisted since 1946, and Congress knew
how to preclude other claims if it wanted to. 
“By taking care to mandate express pre-emption of some state laws,
Congress if anything indicated it did not intend the FDCA to preclude
requirements arising from other sources.” Also, the FDA doesn’t have the same
expertise as day-to-day competitors do, and those competitors may be more
effective at getting rid of unfair competition. 
“Allowing Lanham Act suits takes advantage of synergies among multiple
methods of regulation.”
 
All these reasons applied with equal force to medical
devices, regulation of which has coexisted with the Lanham Act for nearly 40
years.  Plus, “Congress amended the FDCA
to include a pre-emption provision for medical devices that is substantially
similar to the pre-emption provision for food labeling discussed in POM Wonderful.”  And “the FDA’s perspective and expertise as
compared to the knowledge of day-to-day competitors is at least as limited with
respect to medical devices as it is for food and beverage labeling.”
 
SPD argued that the POM
Wonderful
opinion carved out Lanham Act claims that challenge labeling the
FDA has pre-approved because the opinion noted that “[u]nlike other types of
labels regulated by the FDA, such as drug labels, it would appear the FDA does
not preapprove food and beverage labels under its regulations and instead
relies on enforcement actions, warning letters, and other measures.” However, the
Supreme Court rejected almost identical arguments in two separate cases: First,
in POM Wonderful itself, the Court
rejected the Government’s position as amicus that distinguished label elements
specifically authorized or required by FDA regulations from other label
elements.  In addition to practical
line-drawing concerns, that argument wrongly assumed that the FDCA was a
ceiling on food and beverage regulation, but in fact the Lanham Act
complemented the FDCA, making FDA pre-approval beside the point. 
 
Second, the Court rejected an almost identical pre-approval
argument in Wyeth v. Levine, 555 U.S.
555 (2009), a preemption case otherwise on all fours with the facts here.  The Court declined to find pre-approval enough
to preempt state claims, because state law remedies further consumer
protection, and because Congress’s decision to expressly preempt medical device
claims contrasted with its silence on drugs. 
As in POM Wonderful, Congress’s
silence in the face of its awareness of these causes of action, plus the FDA’s
limited monitoring resources, justified the non-preemption of tort suits. “Since
the FDA’s pre-approval of medical device packaging is at least as rigorous as
its pre-approval of drug labeling, Wyeth’s
pre-emption analysis informs this Court’s approach to FDCA preclusion of the
Lanham Act.”
 
Although POM Wonderful
didn’t involve pre-approval, the fact that the FDCA is not a ceiling on medical
device regulation means that pre-approval isn’t a distinguishing element.  SPD argued that the FDA’s Hold and Clearance
Letters indicated the FDA’s intent to be the final word, but “[i]t is for
Congress, not the FDA, to determine whether the FDCA and its regulations are a
ceiling on the regulation of medical devices.” Plus, the court doubted the FDA
would agree with SPD’s position: the Clearance Letter expressly says that “FDA’s
issuance of a substantial equivalence determination does not mean that FDA has
made a determination that your device complies with other requirements of the
Act or any Federal statutes and regulations administered by other Federal
agencies.” There was no other indication that the FDA intended to preclude
Lanham Act claims.
 
SPD finally invoked Geier v. American Honda Motor Co., 529
U.S. 861 (2000), which held that an “action was barred because it directly
conflicted with the agency’s policy choice to encourage flexibility to foster
innovation.” But, as in POM Wonderful,
SPD couldn’t find FDA actions discussing the Lanham Act, and there was no
indication that the FDA considered “the full scope of the interests the Lanham
Act protects.”
 
Two post-POM cases
raised similar issues.  Catheter
Connections, Inc. v. Ivera Medical Corp., No. 2.T4–CV–70–TC, 2014 U.S. Dist.
LEXIS 98206 (D.Utah July 17, 2014), found that the only precluded claim was an
assertion that the defendant “has not complied with FDCA Section 510(k),” which
would require the court to decide in the first instance whether Section 510(k)
clearance is required—a determination left exclusively to the FDA. Claims
focused on the “substance of [defendant’s] representations in the context of
the medical device market and what drives buyers’ purchasing decisions” were
not precluded—consistent with the holding here.
 
JHP Pharmaceuticals, LLC v. Hospira, Inc., No. CV 13–07460,
2014 U.S. Dist. LEXIS 142797 (C.D.Cal. Oct. 7, 2014), suggested that
pre-approval could justify preclusion, but the court here disagreed; JHP didn’t address the Court’s rejection
of the Government’s argument in POM or
the similarity to Wyeth.
 
The only remaining question was whether C&D was trying
to enforce the FDCA (not okay) or bringing a separate Lanham Act claim. C&D’s
claims would only require the Court to “determine the message conveyed to
consumers by SPD’s marketing and then determine whether that message is either
literally false or likely to mislead and confuse consumers.” Nothing “requires
the Court to interpret, apply, or enforce the FDCA, the FDA’s regulations, or
the Clearance Letter.” SPD argued that, by challenging these claims, C&D
inherently challenged the FDA’s approval of the safety/accuracy of the
device.  But C&D wasn’t trying to
overturn clearance of the device for pregnancy detection and estimation of
weeks since ovulation.  The FDA didn’t
indicate that SPD couldn’t change the label or the name (other than calling it “Conception
Indicator”). 
 
True, SPD “might find itself stuck between a rock and a hard
place, trying to honor the FDA’s wishes while avoiding Lanham Act liability.”
But Wyeth indicates that’s not
dispositive: “A mere finding that a medical device is falsely advertised does
not necessarily proscribe use of a device that the FDA has pre-approved or
labeling that the FDA has required … [T]here may be any number of ways to
advertise the product that do not mislead consumers and comply with FDA
requirements.”  SPD can make changes to
the labeling with FDA approval, and there was no clear evidence that the FDA
wouldn’t approve a change, which means that complying with both laws wouldn’t
be impossible.
 

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4th Circuit adopts Rogers, lifts injunction against disparaging reference to NAACP

Radiance Foundation, Inc. v. National Association for the
Advancement of Colored People, No. 14-1568 (4th Cir. May 19, 2015)
 
The Radiance Foundation published
an article online entitled “NAACP: National Association for the Abortion of
Colored People” that criticized the NAACP’s stance on abortion. In response to
a cease-and-desist letter from the NAACP, Radiance sought a declaratory
judgment that it had not infringed any NAACP trademarks. The NAACP then filed
counterclaims alleging trademark infringement and dilution.
 
The district court granted an injunction and the court of
appeals reversed, saying some very useful things about trademark that I hope
they’ll remember in other cases.  As
usual, the conceptual tension between what gets said about First Amendment
protections against confusion liability and what gets said about dilution was
unaddressed, but that’s a small sour note. 
On the plus side, the Fourth Circuit resoundingly endorses Rogers v. Grimaldi, I think for the first
time.
 
The NAACP is the “oldest and largest civil rights
organization” in the US, “and one that holds a place of honor in our history.” The
Radiance Foundation is also a non-profit organization “focused on educating and
influencing the public about issues impacting the African American community”
from a Christian perspective. It runs two websites, TheRadianceFoundation.org
and TooManyAborted.com, along with a billboard campaign for TooManyAborted.com.
Radiance funds itself through licensing its artwork and through PayPal donations
from visitors to its websites.
 
Radiance posted an article criticizing the NAACP’s annual
Image Awards, entitled “NAACP: National Association for the Abortion of Colored
People.” The article “lambasted the NAACP for sponsoring an awards event to
recognize Hollywood figures and products that Radiance alleged defied Christian
values and perpetuated racist stereotypes,” and criticized other NAACP
positions, particularly its ties to Planned Parenthood and its position on
abortion. Contrary to the NAACP’s claims of neutrality on abortion, Radiance contended
that the NAACP’s actions actually demonstrate support for abortion.
 
National Association for the Abortion of Colored People next to billboard for TooManyAborted.com

Bumper sticker style “Civil Wrong” with “National Association for the Abortion of Colored People” label

The article appeared on Radiance’s site and the third-party
site Lifenews.com.  On
TheRadianceFoundation.com was also an image of a TooManyAborted billboard with
the headline “NAACP: National Association for the Abortion of Colored People” repeated
next to it. TooManyAborted.com used a graphic below of a red box with the words
“CIVIL WRONG” followed by the modified NAACP name. Adjacent to the article on
both pages was an orange button with “CLICK HERE TO GIVE ONE-TIME GIFT TO THE
RADIANCE FOUNDATION” printed around the word “DONATE.” On LifeNews.com, the NAACP’s
Scales of Justice appeared as a graphic underneath the headline.
 
This lawsuit resulted, and ultimately this appeal.  The court of appeals began with first
principles.  “Much like advertising
regulations that prohibit using false or misleading information, trademark
infringement laws restrict speech in order to promote the government’s interest
in protecting consumers from confusing misappropriations of product
identifications.” [And dilution?] But this doesn’t impinge on the First
Amendment rights of critics and commentators “so long as the Act hews
faithfully to the purposes for which it was enacted.”  The use of trademarks to convey ideas,
criticism, comparison, and social commentary must be carefully protected,
through the use of the canon of constitutional avoidance.  Thus, an actionable use of a mark in commerce
must also be “in connection with” goods or services in a manner that is “likely
to cause confusion” among consumers as to the goods’ or services’ source or
sponsorship.
 
So, was Radiance’s use of the NAACP’s marks was “in
connection with the sale, offering for sale, distribution, or advertising of
any goods or services”? To broadly construe this requirement would risk
liability for many noncommercial expressive and charitable activities, risking
a constitutional conflict.  At least five
other circuits use this element to protect all noncommercial uses of marks
against liability, though the Second Circuit doesn’t.  But at the very least, “in connection with”
shouldn’t cover “broad swaths” of noncommercial speech.  (Here we get one of many cites to Rogers.)   “[T]his provision must mean something more
than that the mark is being used in commerce in the constitutional sense,
because the infringement provisions in § 1114(1)(a) and § 1125(a)(1) include a
separate Commerce Clause hook.”
 
Thus, while the court did not hold that “commercial speech”
according to First Amendment doctrine would always
be coterminous with “in connection with,” it was the best guidance for applying
the Act.  [I take it the hesitation is in
order to provide some leeway for another United
We Stand
-type case, so that the Lanham Act could cover nonprofits using confusingly
similar names to fundraise.]  “The ‘in
connection with’ element in fact reads very much like a description of different
types of commercial actions: ‘in connection with the sale, offering for sale,
distribution, or advertising of any goods or services.’”  Thus, “if in the context of a sale,
distribution, or advertisement, a mark is used as a source identifier, we can
confidently state that the use is ‘in connection with’ the activity.” Even the
Second Circuit, which rejects noncommerciality as a complete defense, held that
a crucial factor was use not as commentary, but instead as a source identifier
for the infringer.  Thus, a mere “strained
or tangential association with a commercial or transactional activity” is
insufficient, given the First Amendment risks.
 
Okay, but then the Act is designed to cover a wide range of
products, and “goods or services” “remains a broad and potentially fuzzy
concept.”  Thus, there must be “a real
nexus” with goods or services to avoid a fatal First Amendment problem. 
 
Second, the use of a mark must be “likely to cause
confusion” among consumers regarding the
source or sponsorship of the goods or services
. “Here it is important to
remember that ‘trademark infringement protects only against mistaken purchasing
decisions and not against confusion generally.’”  There are lots of tests for assessing this “inherently
fact-bound and context dependent” question, but one must always bear in mind
that specific purpose.  “When the
infringer’s intent is something other than piggybacking off a mark holder’s
success by tricking consumers into purchasing his goods instead, the other
factors must be evaluated in light of that intent and purpose.”  That might not change the factors, but it
does influence their application. “For example, the strength of the mark and
the similarity between the marks often work in reverse for cases of parody and
satire as compared to a standard infringement case.”  Similarity (as long as there are also
differences) between a mark and a parody may only enhance the parody’s effect,
and the strong mark’s strength is the mechanism by which confusion is avoided. 
 
When a mark is only being used to describe, rather than to
identify the source of defendant’s things, “restricting speech does not serve
the purpose of the Lanham Act.” As a result, “[e]ven some amount of ‘actual
confusion’ must still be weighed against the interest in a less fettered marketplace
of social issues speech.”
 
Given this background, the district court erred in several
ways.  First [and this error was invited
by prior Fourth Circuit precedent], the district court held that because the
Radiance article appeared in a Google search for the term “NAACP,” it diverted
“Internet users to Radiance’s article as opposed to the NAACP’s websites,”
which created a connection to the NAACP’s goods and services. “But typically
the use of the mark has to be in connection with the infringer’s goods or services, not the trademark holder’s.”  If the rule were otherwise, “even the most
offhand mention of a trademark holder’s mark could potentially satisfy the ‘in
connection with’ requirement,” which would make it equal or surpass the
jurisdictional “in commerce” element, making the jurisdictional requirement
superfluous and threaten the First Amendment.
 
True, in People for
the Ethical Treatment of Animals v. Doughney
, the Fourth Circuit stated
that an infringer “need only have prevented users from obtaining or using [the
trademark holder’s] goods or services, or need only have connected the
[infringing] website to other’s goods or services” in order to satisfy the “in
connection with” requirement. “But that rule applies specifically where the
infringer has used the trademark holder’s mark in a domain name.” [Because
why?]  That didn’t happen here.  [Translation: PETA was and remains wrong, as we already recognized in Lamparello, but we still don’t want to
go en banc to tidy this up.]
 
The district court then found that Radiance’s use of the
NAACP marks was also in connection with Radiance’s
goods or services, but it failed to show a sufficient nexus between Radiance’s
specific use of the marks and the sale, offer for sale, distribution, or
advertisement of any Radiance goods or services. The district court first found
that there was a sufficient nexus “with Radiance’s own information services”
because Radiance “provided information” on its website. “That ruling, however,
neuters the First Amendment. The provision of mere ‘information services’ without
any commercial or transactional component is speech — nothing more.”  Then the district court reasoned that
Radiance’s use was “part of social commentary or criticism for which they
solicit donations and sponsorship.”
 
While the court of appeals declined to make an “absolute”
rule,
 
the specific use of the marks at issue
here was too attenuated from the donation solicitation and the billboard
campaign to support Lanham Act liability. Although present on the article page,
the Donate button was off to the side and did not itself use the NAACP’s marks
in any way. The billboard campaign was displayed on a different page
altogether. A visitor likely would not perceive the use of the NAACP’s marks in
the article as being in connection with those transactional components of the
website.
 
[Query: So would a Radiance campaign raising money to fight
this case against the NAACP qualify for protection against infringement
liability?  My sense is no, not on this
rationale, but what the court says later may make that kind of salami-slicing
irrelevant.]  The court of appeals noted
that the article was just one piece of Radiance’s larger content. “That the
protected marks appear somewhere in the content of a website that includes
transactional components is not alone enough to satisfy the ‘in connection with’
element.” Charitable appeals for funds are within the protection of the First
Amendment, and not pure commercial speech. Courts should thus “tread cautiously
when a trademark holder invokes the Lanham Act against an alleged non-profit
infringer whose use of the trademark holder’s marks may be only tenuously
related to requests for money.”
 
Not all solicitations by nonprofits are categorically immune
from Lanham Act liability, if there’s a sufficient nexus between the
unauthorized use of the protected mark and clear transactional activity. “Such
a nexus may be present, for example, where the protected mark seems to denote
the recipient of the donation.”  But
here, the “in connection” requirement wasn’t met.
 
The district court further erred in its likely confusion
analysis.  First, it found confusion
based in large part on whether consumers thought “NAACP” actually stood for
“National Association for the Abortion of Colored People.” But trademark
infringement doesn’t protect against confusion about the marks themselves. “Thus
confusion about what a particular trademark says or looks like is not relevant
for infringement claims.” Nor is infringement law designed to protect mark
holders from confusion about their positions.  If people took issue with the NAACP’s
supposed support for abortion as a result of Radiance’s articles, that’s not
trademark infringement.  More speech is
the trademark owner’s only remedy.  The
NAACP has a big megaphone of its own by which to correct any errors about its
position by virtue of its status.  “‘Actual
confusion’ as to a non-profit’s mission, tenets, and beliefs is commonplace,
but that does not transform the Lanham Act into an instrument for chilling or
silencing the speech of those who disagree with or misunderstand a mark
holder’s positions or views.”
 
The district court also found potential confusion about
affiliation between Radiance and the NAACP. 
But that’s bizarre, given the article’s strong criticism of the
NAACP.  The mark was used “primarily to
identify the NAACP as the object of Radiance’s criticism, resembling a
descriptive or nominative fair use albeit by employing a modified version of the
name.”  True, internet attention spans
may be short, “but the briefest familiarity with the article would quickly
create the impression the author was no friend of the NAACP.”  Criticism isn’t confusion (citing New Kids).  Purpose is always essential; the district
court stopped when it found that Radiance hadn’t engaged in successful parody. 
But if “National Association for the Abortion of Colored People” isn’t
parody, it’s still akin to satire, which “works by distort[ing] . . . the
familiar with the pretense of reality in order to convey an underlying critical
message.”  That may be distortion, but it’s
effective distortion.  “[P]arody or
satire or critical opinion generally may be more effective if the mark is
strong and the satirical or critical version is similar to the original. The
critical message conveyed by the satirical mark itself and in the commentary
that follows ensures that no confusion about the source of the commentary will
last, if in fact it is generated at all.”
 
Moreover, the full context diminished any likely confusion
even further.  The domain names and
webpage headings clearly denoted other organizations: The Radiance Foundation
or TooManyAborted, and each site carried dozens of articles on social and political
issues. But even if a viewer only caught the title, “NAACP: National
Association for the Abortion of Colored People,” the claim would still
fail.  “Titles, as part of expressive
works, ‘require[] more protection than the labeling of ordinary’ goods.” Rogers. 
Consumers understand titles to refer to the contents of a work rather
than its author or publisher.  Under Rogers, if there’s a connection to the
contents and no use in a way to clearly suggest authorship, use of a mark in a
title won’t generally be confusing in the Lanham Act sense.  Here, the title conveyed the subject of the
article.  The “satirical modification” of
the NAACP’s name “was designed, as many titles are, to be eye-catching and
provocative in a manner that induces the reader to continue on.” That didn’t
create likely confusion.
 
Dilution: Radiance’s use fell squarely within the statutory
exceptions.  Infringement protects
consumers; dilution “defends the trademark itself.” [And survives First
Amendment scrutiny because … never mind.] Tarnishment, alleged here, is an
association “that harms the reputation of the famous mark.”
 
Unfortunately, the court of appeals accepted the idea that
Radiance’s conduct did create a likelihood of tarnishment, because similarity
between Radiance’s mark [which the court held above was not being used as a mark by Radiance] and the NAACP’s mark was
likely to harm the reputation of the famous mark, because harming a famous mark’s
reputation means “creat[ing] consumer aversion to the famous brand.”  That can happen when the famous mark is
“linked to products of shoddy quality, or is portrayed in an unwholesome or
unsavory context.” Radiance didn’t challenge the finding of likely harm to the
NAACP’s marks. “Indeed, the whole point of the article was to criticize the
NAACP [note: not to criticize the NAACP’s marks!], and Radiance attempted to
accomplish that goal in part by playing off the NAACP’s name.”
 
But Radiance’s speech fell plainly within the fair and
noncommercial use exclusions.  The fair
use exclusion covers “[a]ny fair use, including a nominative or descriptive
fair use,” and “including use in connection with,” among other things, “identifying
and parodying, criticizing, or commenting upon the famous mark owner or the goods
or services of the famous mark owner,” as long as it’s not a designation of
source of the diluter’s own goods or services. 
Radiance used the NAACP’s marks to comment on what it deemed the NAACP’s
policies.  Even taking the title out of
context, the use was still nominative, because it explicitly referred to what Radiance
believed the NAACP stands for.  Even if
the use wasn’t a parody, it was still criticism or commentary, also covered by
the exclusion.
 
The noncommercial use exclusion also applied.  The district court held that because Radiance
“offered various opportunities for visitors . . . to donate to Radiance, pay to
sponsor billboards, secure license content, or erect state-specific webpages
for a fee,” the use of the NAACP’s marks was commercial. But the article itself
wasn’t an ad and didn’t mention Radiance’s services, even if the websites
generally provided opportunities to engage in financial transactions. “The key
here is the viewpoint of a reasonable reader. A person navigating to the
article, even if through a Google search for ‘NAACP,’ is highly unlikely to
read the article as advertising a Radiance service or proposing a transaction
of any kind.”

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Pop goes the lawsuit: “original” ice pop claim could be false advertising

Conopco Inc. v. Wells Enterprises, Inc., No. 14 Civ. 2223, 2015
WL 2330115 (S.D.N.Y. May 13, 2015)
 
Wells makes the Bomb Pop, the first red-white-and-blue
rocket-shaped ice pop sold in the US, created in 1955, and markets it as the “original
Bomb Pop,” with “original” prominent on the packaging.  Wells owns nine trademark registrations for
the name and design elements of the bomb pop. 
Conopco (Unilever) sells a rocket pop, the Firecracker, which strongly
resembles the Bomb Pop, but was introduced nearly thirty years after the Bomb
Pop.  I found a blog post with some
interesting background, including design
patents for the pops and previous package designs
. 
 
Bomb Pop “The Original” with blue package

Bomb Pop “The Original” with blue and yellow package

Popsicle “The Original Firecracker” yellow package

In 2014, Unilever sued Wells for trademark infringement
etc., arguing that the Bomb Pop packaging was confusingly similar to the
Firecracker trade dress.  Wells
counterclaimed, alleging that Unilever “recently altered its Firecracker
product packaging to prominently feature the phrase ‘The Original,’ knowing
that the Bomb Pop was the first red-white-and-blue rocket shaped frozen ice
treat,” and therefore engaged in false advertising. Wells argued that if a
likelihood of confusion does exist, it does so as a “result of Unilever’s
infringement of Wells’ trademarked Bomb Pop design.” [Given the long duration
of both parties’ use, this strikes me as almost like a Shredded Wheat
situation: given that both might be entitled to use their own rocket shapes,
what duties to avoid other similar trade dress elements might they have?]
 
Wells argued that the words and pictures of the Firecracker
packaging necessarily and falsely implied that the Firecracker was the first
rocket ice pop. Unilever argued that “original” literally, clearly and
truthfully indicated only that the product was the original Firecracker. Wells
rejoined that, in the context of the whole package, “original” wouldn’t apply
solely to the noun Firecracker, but would necessarily be associated with the
rocket ice pops prominently displayed on the package.  The court found this sufficient to state a
claim for falsity. “While it is true that manufacturers often deploy the term ‘original’
in a brand-specific way, to modify only the product name, it is not evident
from the face of the pleadings that the word ‘original’ must be read in this
manner.”  When used in a brand-specific
way, “original” generally distinguishes between different versions, so “original”
differs from, e.g., “diet,” “low-salt,” “baked,” “creamy,” or “fun-shaped”
versions.  On the pleadings, the
“original Firecracker” was the only Firecracker that existed, which made the
brand-specific interpretation of the phrase tautological and suggested that
“original” might differentiate “the original Firecracker” from other rocket ice
pops instead of from other varieties of Firecracker.  This interpretation was further supported by
Unilever’s use of “original” elsewhere on the package to indicate—truthfully—that
Unilever’s “Popsicle” was “The Original Brand” of ice pop, that is, the first
of its type.  The court found further
support for its conclusion in other cases that found that “original” could be
literally false in similar circumstances.
 
In the alternative, Wells sufficiently pleaded misleadingness,
because it was plausible that consumer studies would show that consumers
interpret “original” on the Firecracker’s packaging to indicate that Unilever’s
“Firecracker” is the original rocket ice pop. Note that the court did not
require Wells to have such studies in hand for plausibility—Wells was simply
allowed to develop facts supporting its theory.
 
Unilever disputed materiality, but that’s generally a fact
question.  Plus, “Unilever’s own decision
to highlight the word ‘original’ on its packaging, at the forefront of the box
and as the largest word other than the product’s name, suggests the relative
importance, and hence materiality, of the claim to originality in its marketing
of rocket ice pops.” Also, “given that very little distinguishes one rocket ice
pop from another, it is plausible that such a claim to originality could sway a
consumer, either by intimating that the manufacturer has a proficiency in
producing ice pops that has withstood the test of time or by intimating that
these ‘original’ ice pops are the ones the consumer remembers fondly from his
childhood.”
 
Unilever argued that Wells failed to allege injury
proximately caused by the alleged misrepresentation.  But Wells alleged that it had touted its own
originality for 19 years, amassing goodwill, and Unilever’s claim could
jeopardize that. At the pleading stage, this was enough.
 
NY GBL §§ 349 & 350: these provisions require consumer
injury or harm to the public interest. Trademark infringement alone isn’t
enough to state a claim.  Wells argued
that its claims were about false advertising, but the harm wasn’t sufficiently
directed at or borne by consumers to constitute the gravamen of Wells’s
complaint.  False advertising claims come
within the GBL when they pose a danger to consumers, but not when they “merely
encourage consumers to buy an inferior product or buy a product from one
company where they may have preferred to buy it from another.”  The harm alleged here wasn’t the type that
would trigger FTC intervention or involve governmental functions or agencies,
as has been found sufficient in other cases. The “lessened enjoyment of a confection
of sugar, water, and flavoring from a company other than the one intended” just
wasn’t significant; the primary injury was to Wells’s business.
 
Trademark infringement: Unilever argued that Wells failed to
state a claim in that it was arguing only conditionally that, if likely
confusion existed, the fault was Unilever’s. Wells was free to assert a
counterclaim conditional on the outcome of Unilever’s infringement claim.
Nonetheless, Wells didn’t make an affirmative allegation of consumer confusion;
it could do so “by simply denoting that any allegations of consumer confusion
are limited solely to this particular counterclaim.” Thus, the court dismissed the
counterclaim without prejudice and with leave to amend.

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His red (copy)right hand

Transformative work of the day, Dr.
Seuss meets Nick Cave and the Bad Seeds edition
.

“He’ll rekindle all the dreams it took you a lifetime to destroy.”

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Garcia v. Google reversed; many sigh in relief

Garcia v. Google, Inc., No. 12-57302, — F.3d – (9th Cir.
May 18, 2105) (en banc)
 
Judge McKeown wrote the majority opinion. Garcia was fooled
into taking part in a movie that turned out to be the awful Innocence of Muslims, and received death
threats because of it. She sought an injunction on copyright grounds, which was
first denied, then granted, now lifted as the en banc court affirms the
district court’s denial of an injunction.
 
The court began by describing Garcia’s burden as “doubly
demanding: Because Garcia seeks a mandatory injunction, she must establish that
the law and facts clearly favor her position, not simply that she is likely to
succeed.” It’s a mandatory injunction because it requires Google to take
affirmative action to remove, and keep removing, Innocence of Muslims from Google sites. Mandatory injunctions are
disfavored except on strong showings of entitlement.
 
Starting with likely success on the merits: Garcia’s
five-second “acting performance” didn’t give her a claim in a copyright. She
might have publicity, defamation, or contract claims, but not copyright.
 
Copyright subsists “in original works of authorship fixed in
any tangible medium of expression . . . [including] motion pictures.” Fixation
must be done “by or under the authority of the author.” Here, Innocence of Muslims is a motion picture
and a derivative work of the script. Garcia was the author of neither, but
instead claimed separate protection for her five-second performance. The
Copyright Office found that her performance was not a copyrightable work of its
own, explaining that its “longstanding practices do not allow a copyright claim
by an individual actor or actress in his or her performance contained within a
motion picture.” For copyright purposes, “a motion picture is a single
integrated work.” The court credited this expert opinion, which “reflects a
‘body of experience and informed judgment to which courts and litigants may
properly resort for guidance.’”
 
By contrast, the dissent’s invocation of the Beijing Treaty
on Audiovisual Performances was misplaced. First, the treaty is not in force;
only six of the necessary thirty countries have ratified it. Second, though the
US signed the treaty, the Senate has not ratified it. Though the PTO issued a
fact sheet saying that performers’ performances were protected by copyright
law, the PTO lacks legal authority to interpret the Copyright Act. (RT: Also,
it may still be the case that primary performances
make performers co-authors or even sole authors where they control the
recording—Garcia didn’t rely on joint authorship or sole authorship claims as
to the film as a whole.)
 
Aalmuhammed v. Lee, 202 F.3d 1227 (9th Cir. 2000), was a
useful starting point; the meaning of “work” is the first step in analyzing
joint authorship.  When a work is
“prepared by two or more authors with the intention that their contributions be
merged into inseparable or interdependent parts of a unitary whole,” the work
becomes a “joint work.” But Garcia disclaimed joint authorship of the film.  Defining a “work” based upon “some minimal
level of creativity or originality . . . would be too broad and indeterminate
to be useful.”  Aalmuhammed’s animating concern was that a broad definition of “work”
“would fragment copyright protection for the unitary film Malcolm X into many little pieces.” We shouldn’t splinter a film
into many different “works” in the absence of independent fixation. “Treating
every acting performance as an independent work would not only be a logistical
and financial nightmare, it would turn cast of thousands into a new mantra:
copyright of thousands.”
 
The dissent’s hypotheticals could be addressed with careful
application of statutory definitions. 
(The IP profs are still going at this, but I’m with the majority here.)  The dissent’s reliance on Effects Associates,
Inc. v. Cohen, 908 F.2d 555 (9th Cir. 1990) ([pointedly] Kozinski, J.), was
inapposite, because no one in that case challenged the existence of an
independent copyright on the special-effects footage that was independently
fixed. 

Contracts and WFH govern “much of the big-budget Hollywood performance and
production world,” and implied licenses often take care of the rest (the district
court found one here). “But these legal niceties do not necessarily dictate
whether something is protected by copyright, and licensing has its limitations.
As filmmakers warn, low-budget films rarely use licenses.” Plus, contracts aren’t
perfect, especially for third-party distributors like YouTube and Netflix, who won’t
have easy access to any licenses; “litigants may dispute their terms and scope;
and actors and other content contributors can terminate licenses after thirty
five years. Untangling the complex, difficult-to-access, and often phantom
chain of title to tens, hundreds, or even thousands of standalone copyrights is
a task that could tie the distribution chain in knots.”  And filming group scenes “like a public
parade, or the 1963 March on Washington, would pose a huge burden if each of
the thousands of marchers could claim an independent copyright.”
 
In a footnote, the court of appeals found that the district
court’s implied license finding wasn’t clearly erroneous.  “Although Garcia asked Youssef about Desert
Warrior’s content, she in no way conditioned the use of her performance on
Youssef’s representations.”
 
In addition, the court held, Garcia didn’t fix her acting
performance in a tangible medium.  She
wasn’t the one who did the fixation. 
(The court noted the Copyright Office’s distinction between acting
performances “intended to be an inseparable part of an integrated film” and “standalone
works that are separately fixed and incorporated into a film,” the latter of which
could be protected by copyright.) 
Youssef and his crew did the fixation. 
And Garcia claimed that she never agreed to the film’s ultimate
rendition “so she can hardly argue that the film or her cameo in it was fixed ‘by
or under [her] authority.’”
 
The district court didn’t err, and the law didn’t clearly
favor Garcia.  But just in case, the
court went on to address irreparable harm, because of the alleged threat to
Garcia’s life. “Garcia understandably takes seriously the fatwa and threats
against her and her family, and so do we.” 
The problem was that there was no match between these risks and her
substantive copyright claim. 
 
For irreparable harm in a copyright claim, as opposed to a
fraud or false light claim, her harm needed to be “harm to her legal interests
as an author.”  Copyright is supposed to
promote progress and create an incentive to disseminate works; its justification
is the protection of an author’s commercial interest, not the protection of
secrecy.  Garcia’s “severe emotional
distress, the destruction of her career and reputation,” and receipt of
credible death threats, were “untethered from—and incompatible with—copyright
and copyright’s function as the engine of expression.”  Copyright’s function is not to protect
privacy or to guard against emotional distress: “such damages are unrelated to
the value and marketability of [authors’] works.” US law doesn’t provide a
right to be forgotten or moral rights. “We do not foreclose that in a different
circumstance with a strong copyright claim, a court could consider collateral
consequences as part of its irreparable harm analysis and remedy. But such a
case is not before us.”
 
In addition, Garcia waited months to seek an injunction, and
it wasn’t an abuse of discretion to weigh this delay undercut her irreparable
harm claim.  Garcia acted once the film
was translated into Arabic and sparked death threats against her. “But that
proves the point: the gravamen of Garcia’s harm is untethered from her
commercial interests as a performer, and instead focuses on the personal pain
caused by her association with the film.”
 
The panel’s injunction, which ordered Google to take down
all copies of the film from all platforms under its control, and take “all
reasonable steps” to prevent further uploads, was wrongly granted.  Even in its amended form, which allowed the
posting of any version of the film without Garcia’s performance, was wrong,
putting the court “in the uneasy role of film editor.”  It would only matter if Google (or someone
else) decided to edit another’s copyrighted film.  “To no one’s surprise, the end result was the
same: the entire film remained removed from YouTube.”  Not only was this order incorrect as a matter
of law, it disserved the First Amendment by suppressing a politically significant
film.  Copyright isn’t categorically
immune from First Amendment challenge, and the takedown order directed at “a
film of substantial interest to the public” was a classic prior restraint.  A thin copyright claim was no warrant for
such action.
 
Judge Watford concurred, and would have ruled solely on
irreparable harm, reserving touchy copyright issues for later.  He would have accepted that the risk of death
qualified as irreparable injury, but concluded that Garcia couldn’t prove a
causal connection between the irreparable injury and the conduct she sought to
enjoin: she couldn’t show that removing the film from YouTube would materially
reduce the risk of death she faced. “Garcia is subject to the fatwa because of
her role in making the film, not because the film is available on YouTube.”  Correcting misperceptions about her role in
the film—she was duped into participating, she never said the offensive words
her character speaks in the film, and she strongly opposed the film’s message—could
help, but she’s already done everything within her power to dissociate herself
from the film.  Garcia’s expert on
Islamic and Middle Eastern law didn’t claim that removing the film from YouTube
would likely cause the fatwa against her to be lifted, but merely opined: “If
she is successful in pulling the content down from the internet, it will likely
help her in terms of believability of her message condemning the film and its
message.” That was too little in the way of evidence of likely impact on the
key audience, especially given that demanding
the takedown alone spoke of her sincerity.
 
Judge Kozinski dissented. Garcia’s dramatic performance had
the minimal creativity to be copyrightable subject matter, it was original, and
it was fixed at the moment it was recorded. 
That’s enough.  [That’s enough to
make it at least part of a work … but who’s the author of that work?]  The majority says that Garcia’s performance
wasn’t a work, “apparently because it was created during the production of a
later-assembled film. But if you say something is not a work, it means that it
isn’t copyrightable by anyone.” So the majority’s definition of work means that
no one has a copyright in any part of Garcia’s performance, “even though it was
recorded several months before Innocence
of Muslims
was assembled.” If only the film is a work, then the
copyrightability of “vast swaths of material created during production of a
film or other composite work” is in doubt, such as every take that doesn’t
become part of a final movie. “If some dastardly crew member were to run off with a copy
of the Battle of Morannon [from Lord of the Rings], the dastard would be free
to display it for profit until it was made part of the final movie. And, of
course, the take-outs, the alternative scenes, the special effects never used,
all of those things would be fair game because none of these things would be ‘works’
under the majority’s definition.”  The same
for draft chapters of books, or parts thereof.
 
RT: There may be unusual cases, but most takes, for example,
should be at least derivative works or reproductions of the script, which is
copyrightable, so I don’t see a practical problem developing. The question is
which hypotheticals you find most troubling/plausible, and I think the risk of
making every five seconds into its own work—with corresponding effects on
substantial similarity and fair use analysis—justifies taking the risks
Kozinski identifies instead.
 
Effects Associates
dictates a contrary result, because it held that a special effects company
retained a copyright interest in its footage even though it became part of the
film.  Like the special effects shots,
Garcia’s performance was also “separately fixed and incorporated into” Innocence of Muslims.  Youssef could’ve sold the clip featuring Garcia
to someone else; it might not have had much value, but then neither did the
special effects from The Stuff. 
 
Here I think Kozinski cleverly equivocates between “Garcia’s
performance” and “the footage.”  Garcia’s
performance was not separately fixed
from the other elements that made up the movie that were in the shots with her;
it was fixed along with them.  That wasn’t
true of the distinct shots created in a different place and at a different time
in Effects Associates.  If (as Kozinski ten suggests) the effects had
been later added into a greenscreened performance where the actors were staring
at tennis balls, I think you’d get the Garcia result and not the Effects Associates result.  I don’t think we’ll ever get a perfectly pure
rule here, but that’s copyright for you.
 
This isn’t an unfamiliar question. Statutory damages cases
ask us to identify how many “works” are at issue, and while the statute
provides an answer for compilations that are infringed, it doesn’t provide all
the answers.  For example: suppose someone
makes a for-profit, nontransformative, non-fair use Batman movie—alley, gunshot, pearls falling into a puddle, all that
jazz.  I take it we wouldn’t want to say
that the infringer had infringed each of the gazillion registered works that
make up the Batman corpus and recount
their own versions of this story.  What
the infringer has done is infringe the Batman
story (we can also count characters, but then we have to ask whether the characters are registered; anyway,
counting by number of characters is a very different thing than counting by
number of registered works).  By
contrast, someone who reproduces the Dark
Knight
movies has copied specific works and the statutory damages should be
calculated that way (and not as an infringement of all the other registered works that also tell the Batman story).  Of course we get
slightly different definitions of “works” from the different situations,
because we have different concerns about the interests invaded. But I don’t think
that makes the whole edifice illegitimate.
 
Anyhow, back to the dissent: the majority erred in saying
that Garcia couldn’t be an author because she didn’t play a role in the
fixation.  A work is fixed when the
fixation is by or under the authority of
the author.  She’s an author because
without her, there was only a script. 
Her performance had at least “some minimal degree of creativity.” “To
dispute this is to claim that Gone With the Wind would be the same movie if
Rhett Butler were played by Peter Lorre.” (RT: Okay, that’s overblown. Innocence of Muslims is surely no GWTW,
and Garcia’s 5-second character no Rhett Butler.  Actually, now that I’m thinking about this,
isn’t Kozinski’s argument here a workaround for the rule that a character has
to be sufficiently defined to be protected by copyright?  After all, Garcia’s physical characteristics
aren’t “creative” or “original” in the copyright sense, so it’s just what she
does in those five seconds that he argues makes her an author.)

Because Garcia didn’t sign away her rights, she acquired a copyright in her
performance the moment it was fixed. “It’s not our job to take away from
performers rights Congress gave them.” The Register of Copyrights was a member
of the U.S. delegation that signed the Beijing Treaty on Audiovisual
Performances, which would recognize Garcia’s rights in her performance because
it provides that “performers” have the “exclusive right of authorizing . . .
the fixation of their unfixed performances,” and “reproduction of their
performances fixed in audiovisual fixations, in any manner or form.”  The PTO said that U.S. law was “generally
compatible” with the Treaty, as “actors and musicians are considered to be
‘authors’ of their performances providing them with copyright rights.” The
Copyright Office surely wouldn’t have signed on if it believed that the
Treaty’s key provisions were inconsistent with U.S. copyright law. (Surely!
After all, US negotiators are never
captured
and never
engage in policy laundering
of that type.)
 
The Copyright Office said “an actor or an actress in a
motion picture is either a joint author in the entire work or, as most often is
the case, is not an author at all by virtue of a work made for hire agreement.”
But Garcia isn’t in either category, so she must be an author.  (It’s the “so” where we part company.  This really should be fixed by a better
understanding of joint authorship.)
 
There’s not much risk of harm from Kozinski’s position,
since “[t]he vast majority of copyright claims by performers in their
contributions are defeated by a contract and the work for hire doctrine. And
most of the performers that fall through the cracks would be found to have
given an implied license to the film’s producers to use the contribution in the
ultimate film.”  The remaining few wouldn’t
be able to claim the “valuable” rights of joint authorship. (RT: Yeah, only
total ownership of a chunk!  That doesn’t pose any problems at all!) That’s why Effects
Associates
didn’t cause filmmaking to grind to a halt. Anyway, the Supreme
Court said in Tasini that
“speculation about future harms is no basis for [courts] to shrink authorial
rights,” and neither the predicted database disasters or the disasters
predicted by amici in CCNV took
place.  (Actually, the Tasini situation is rather more
complicated than that, and the case just ended after two decades—but at least
that was susceptible to class treatment!)
 
The risks that this rule imposes on producers and ISPs is
for them to fix by contract.  “Google
makes oodles of dollars by enabling its users to upload almost any video
without pre-screening for potential copyright infringement. Google’s business
model, like that of the database owners in Tasini,
assumes the risk that a user’s upload infringes someone else’s copyright, and
that it may have to take corrective action if a copyright holder comes forward.”  (Takeaway: Kozinski really, really doesn’t
like ISPs.)
 
Doomsday claims are overstated: “our injunction has been in
place for over a year; reports of the internet’s demise have been greatly
exaggerated.” Garcia’s copyright claim was likely to succeed and she made an
ample showing of irreparable harm. “It’s her life that’s at stake.”

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Close but no cigar: “worked closely” claim is puffery

Springbrook Software, Inc. v. Douglas County, 2015 WL
2248449, No. 13–cv–760 (W.D. Wis. May 13, 2015) (magistrate judge)
 
Springbrook sued Douglas County and the City of Superior for
breach of contract and related claims after they stopped paying fees owed under
a contract for Springbrook’s financial system software for local governments. Defendants
counterclaimed for misrepresentation, fraudulent inducement, false advertising,
breach of the covenant of good faith and fair dealing and unjust enrichment. The
magistrate judge granted Springbrook’s motion for summary judgment on the
breach of contract claim and got rid of the counterclaims except for the counterclaim
for breach of the duty of good faith and fair dealing.
 
Defendants issued a formal Request for Proposals seeking
bidders from qualified firms “to supply and install Financial System Software.”
Springbrook, meanwhile, was developing a one-page flyer to promote its work
specific to the needs of Wisconsin county highway departments, which it had
done with assistance from the Wisconsin Department of Transportation.
Springbrook’s product manager emailed Doug Meek at the state Department of
Transportation to ask if Meek “would object to [Springbrook] including verbiage
like ‘We worked closely with Doug Meek at the Wisconsin Department of
Transportation to ensure our software meets the needs of Wisconsin county
highway departments?’” Meek responded: “I don’t object to your referencing
working with me, but I don’t think that ‘working closely’ is accurate.” In
response to Meek’s request, the product manager replied that he would be happy
to share a draft document and would use Meek’s name only in a manner that Meek
approved.
 
However, Springbrook’s RFP response to the City included a one-page
ad, “Highway Department Solutions,” in which Springbrook stated that it had
“worked closely with the Wisconsin Department of Transportation to develop a
highway department solution that is fully compliant with state requirements.”  Springbrook won the contract, but the
relationship broke down and the defendants stopped paying, resulting in a
lawsuit.
 
The court found that defendants’ claim under the Wisconsin
Deceptive Trade Practices Act survived the economic loss doctrine, but failed
on other grounds.  Defendants alleged
that the “worked closely” claim was false, and provided affidavits from the
City and County finance directors declaring that the ad was the “tipping point
and the reason Springbrook was selected.”
 
First, the judge found this testimony “not specific enough
to create a genuine dispute on the element of causation,” since the only thing
Springbrook allegedly misrepresented was the closeness of its working
relationship with the Wisconsin DOT. “After all, Meek did not deny that he had
worked with Springbrook; he took issue only with the adverb ‘closely.’” Neither
affiant stated that she would have voted against awarding the bid to
Springbrook if she had been told simply that Springbrook had “worked with”
WisDOT, rather than “worked closely” with it.
 
Relatedly, “worked closely” was puffery.  “The adverb ‘closely’ is not a term of art
and it can mean different things to different people.” It expressed “only
Springbrook’s judgment as to the nature of the relationship, not a specific
fact that can be substantiated or refuted.” Even Meek has acknowledged that the
question was a matter of opinion by stating that “I would not characterize my involvement as ‘working
closely’ with Springbrook ….. [l]imited emails and phone calls answering
questions is not my definition of ‘working closely’” (emphasis added). This “difference
of opinion” wasn’t enough to constitute false advertising.
 
By contrast, Springbook’s representation that it had a
highway department solution that was “fully compliant” with state reporting
requirements arguably could have been substantiated or refuted, but the City
didn’t press its argument about this claim.
 

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