Copyright Office issues 1201 report

Available here.  It’s a lot to go through, but on first inspection they seem to be trying to address persistent problems, though in the main not by accepting the advice that participants had for them (like scheduling 1201 exemption proposals in a way that makes sense for law school clinics, and performing administrative factfinding rather than treating this as an adversarial procedure where the Office’s role is to adjudicate).  One immediate thought: even if the goal of making it possible to participate in the rulemaking without counsel were achieved, that won’t help if the exemptions continue to get ever more complex, so that you need counsel to use them.

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Slightly cooler take on Tam

I will have some more thoughts in Tam in a forthcoming amicus brief arguing that dilution is
unconstitutional.  I think this was about the least harmful affirmance the Court could have written, though for precisely that reason it leaves a lot up for grabs.  Right now, I will just
say a few things: (1) It is now even harder to distinguish between content- and
viewpoint-based regulation.  I thought
that disparagement should be deemed content-based but not viewpoint-based
because it was impossible to identify a disadvantaged “side”—whereas even in Rosenberger, one could identify a set of
religious perspectives that were excluded from university funding.  I don’t think there’s a distinctive subset of
disparaging perspectives in the same way. 
(Justice Kennedy’s rejoinder, that this logic would allow bars on
criticizing any government official, is particularly silly: because not
everyone is a member of the category “government officials,” that’s not a level
playing field at all.  Everyone is a
member of the category “persons,” Eric Trump notwithstanding.  Marty Lederman talked a bit about
this issue at Balkinization
.)  But how this
plays out in non-tarnishment/disparagement situations remains to be seen.
(2) The opinion for four Justices rejecting the “government
program” argument is hard for me to understand. It’s true to say that most of
the decisions on which the government relied almost all involved cash or their
equivalent, but the opinion does a poor job of explaining why that
matters.  The main argument is: well,
fire and police protection are services too, and you couldn’t deny them to
users of disparaging marks.  The answer
to which—completely unaddressed in the opinion—is “that’s what unconstitutional
conditions doctrine is for.”  Denying
trademark registration because a trademark is disparaging is a far cry from
denying police protection to the user of the mark.  Also, the opinion distinguishes two non-money
subsidy cases involving unions by saying they were very different.  That’s nice … why?  The opinion’s language suggests a kind of
speech/conduct distinction (“lawmakers chose to confer a substantial non-cash
benefit for the purpose of furthering activities that they particularly desired
to promote but not to provide a similar benefit for the purpose of furthering
other activities”), but not a very persuasive one, unless—again—we do an
unconstitutional conditions analysis.

(3) I’m glad the Court didn’t say anything about the
relationship between unregistrable marks and §43(a) protection, and highlighted
that it was not doing so. While I believe that the issue deserves resolution
one way or another, this was a poor vehicle for the question because so much
else was going on.  (But here’s a
question: after this decision, can the common
law
engage in the viewpoint discrimination entailed in denying registration
to immoral/disparaging marks by denying common law protection to such marks, as a number of states at least arguably do?)

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Court approves conjoint analysis to determine damages in consumer class action

Morales v. Kraft Foods Group, Inc., 2017 WL 2598556, No. CV14-04387
(C.D. Cal. Jun. 9, 2017)
Plaintiffs alleged that they were misled by Kraft’s use of
the term “natural cheese” on its “Natural Cheese Fat Free Shredded Fat Free
Cheddar Cheese,” bringing the usual statutory California claims. The court previously
certified a California class.  Here the
court partially decertifies the class but rejects Kraft’s challenge to
plaintiffs’ expert, who performed a conjoint analysis to try to determine the
incremental value to consumers of “natural.”
Dr. Anand V. Bodapati has been a Professor of Marketing at
the UCLA Anderson School of Management since 2000, teaching “Marketing,
Consumer Psychology, Consumer Behavior, and Statistical Methods for making
inferences from data on how consumers respond to product offerings, pricing,
advertising, and other marketing activity in the marketplace.”  He surveyed California buyers of Kraft
shredded cheese, presenting them choices between images of (a) the marketplace
offerings of some leading manufacturers, (b) Kraft’s shredded fat free cheddar
cheese product as it was offered in the marketplace with the “natural cheese”
label, and/or (c) a digitally altered image identical to the Kraft image except
without the “natural cheese” label. Each respondent chose between options 14
times, with price differences between the products ranging from $0.80 to $4.50,
randomly assigned.  The survey results
showed that 26% of consumers would pay more than $1 extra for a product with
the “natural cheese” label, and 12% would pay more than $2 extra for such a
product. Bodapati concluded that, on average, customers would be willing to pay
$0.747 more for a product with that label.
Kraft marshalled several experts in response.  Key challenges: (1) Was the proper group
surveyed?  Kraft argued that its fat free
cheese product was a niche product, so surveying all shredded cheese buyers was
inappropriate.  The court found that this
didn’t justify exclusion.  Bodapati explained
why he chose Kraft shredded cheese buyers—he didn’t have any reason to believe
that the value of “natural” would differ as between fat free and non-fat free
buyers, and he didn’t want to make the study more arduous.  Also, some of the evidence Kraft cited indicated
that consumers varied—its category review indicated that fat content was only
the third most important factor cited by consumers, while the use they intended
and the form of the cheese were more important; the review also said that
“[c]onsumers buy more than one health segment for different uses, household
members and taste preferences.” Thus, the markets didn’t seem that distinct.
Kraft then argued that the survey was irrelevant because it
didn’t calculate damages.  The survey
calculated the value to consumers, which was relevant to damages.  Kraft contended that a price premium theory
was the only allowable model for false advertising damage, and conjoint
analysis couldn’t be used. The court disagreed. Dourts frequently admit evidence
based on a conjoint analysis.
Additional challenges to survey methodology could be
addressed on cross.  Though the experts
disagreed about whether conjoint analysis could be used to compare products
with only one nonprice attribute, Bodapati testified that “having one attribute
only is good for the conjoint analysis in the sense that it reduces cognitive
overloading and thereby increases the fidelity of the decision making.”  As for whether the survey telegraphed its
purpose to respondents, Bodapati explained that respondents’ attempts to pick
the “right” answer weren’t worrisome to him because, in conjoint analysis,
there is no “right” answer. He also testified that he elected not to show the
back of the packaging out of a concern for verisimilitude—how consumers
actually understand the products.  And he
didn’t provide a none of the above option because, he said, conjoint analysis
works without that.  These and other
criticisms went to weight, not admissibility.
Decertification: willingness to pay can measure restitution
damages, but under California law restitution  is confined to restoration of any interest in
“money or property, real or personal, which may have been acquired by means of
such unfair competition.” But the conjoint analysis provided only evidence of
loss to the plaintiffs, not of gain to Kraft. While injunctive relief was still
possible, the court decertified the Rule 23(b)(3) class and sought additional
briefing on whether the class would be re-certifiable under Rule 23(b)(2). This
was possible because, under California law, deception and materiality need not
be proved as to every member of the class. Bodapati’s report and testimony showed
a triable issue as to materiality under the CLRA.

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Will B&B preclusion become typical?

Buzz Seating, Inc. v. Encore Seating, Inc., No. 16-cv-1131
(S.D. Ohio Jun. 16, 2017)
This case suggests that B&B
is quite a broad decision, despite some cautionary statements in the Court’s
opinion—you can avoid B&B
preclusion if you sell goods other than
those in the refused registration
, but otherwise, watch out. 
Buzz, a maker of office chairs under the mark FLITE, sued
Encore, which also makes an executive chair under the mark FLITE for trademark
infringement and related claims. They allegedly advertise in the same
publications, attend the same trade shows, and hire the same dealers and  sales representatives.
Encore applied to register FLITE for “Office furniture,
including chairs” in 2011; Buzz opposed and filed its own application in
2013.  The TTAB sustained Buzz’s
opposition because the marks were identical and the goods and channels of trade
were legally identical (describing Buzz’s use as “for stacking or side
chairs”).  Instead of appealing, Encore
abandoned its first application and filed for a concurrent use application,
allowing use in 24 states and concurrent use by Buzz in Ohio.  Buzz sued, and Encore answered and
counterclaimed seeking a declaration of noninfringement and an order directing
the PTO to reject Buzz’s application.
B&B preclusion
applied to likely confusion, given that Encore had already argued before the
TTAB that “there is no likelihood of confusion because Buzz Beating’s FLITE
stacking chairs are vastly different from Encore’s FLITE executive chairs, are
not sold to the same customers, and do not compete in the marketplace.” Encore
argued that the TTAB considered only whether the broad category of goods identified
in its application were likely to cause confusion, but here it was arguing that
the specific executive chairs actually sold under the FLITE mark are not likely
to cause confusion when compared to Buzz’s side chairs. But B&B says that preclusion will apply
“[i]f a mark owner uses its mark in ways that are materially the same as the
usages included in its registration application.”  The description of the class of goods
encompassed the specific goods, executive chairs, Encore was selling, and thus
there were no material differences between the usage identified in the
application and actual usage.  Comment:
under this reasoning, it’s hard to see why B&B
wouldn’t always demand preclusion in this posture. 
The court pointed out that the TTAB already rejected this
nonconfusion argument; Encore to told the TTAB that its chairs were “premium
executive chairs sold to corporate customers for use  behind a desk or in a conference room,” and
that “a person purchasing a stacking chair such as [Buzz Seating’s] Flite chair
would not buy an executive chair and vice-versa.”  Of course, a “crucial” fact in the TTAB’s
rejection was that Encore didn’t limit its identification of goods to executive
chairs, but the TTAB also held that the differences didn’t avoid a likelihood
of confusion, because the question was not whether the chairs would be confused
but rather whether there’d be source confusion, and the evidence showed that
executive chairs and side chairs were closely related, and sold by the same
dealers or distributors to the same customers. 
Indeed, Buzz sold both executive chairs and side chairs, and used the
same mark at least once.
Even if the court found the differences material under B&B, Encore’s claim would still be
barred under claim preclusion, because the issue could have been raised before
the PTO.  Encore offered to limit its identification
of goods, but the TTAB found it had done so too late.  And this holding further expands B&B—if one can imagine limiting the
registration in a way that avoids likely confusion, one should have done so
already.  Thus, the noninfringement
counterclaim was dismissed.
The court declined to rule on Encore’s counterclaim about
priority of registration because it doubted it had jurisdiction over a
registration issue for a registration that had yet to issue; the court sought
more briefing.

The court also struck affirmative defenses that concerned
the same issues, including Encore’s abandonment defense, but it did not strike
the defense that Buzz hadn’t used Flite, or made more than de minimis use, in
certain regions of the US and that therefore Encore was the senior user in
those regions.  The TTAB held that Buzz
could succeed in its opposition without proving priority of use on a
state-by-state basis, as long as there was prior use in the US, and thus the
TTAB didn’t resolve that priority question. 

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TM question of the day, we all scream edition

I’m reasonably sure Joy ice cream cones aren’t not owned by the owner of rights in Pepperidge Farm goldfish or Teddy Grahams, so how should we think about these suggestions on the back of the package?

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Failure to plead with particularity dooms supplement false advertising claim

Nutrition Distribution, LLC v. New Health Ventures, LLC, 2017
WL 2547307, No. 16-cv-02338 (S.D. Cal. Jun. 13, 2017)
Nutrition Distribution sued New Health for false advertising
of supplement products containing various “Selective Androgen Receptor
Modulators (“SARMS”)” such as “Ostarine.” After New Health moved to dismiss,
Nutrition Distribution filed a proposed amended complaint for false advertising
(and RICO violations, of which no more will be said), based on New Health’s sale
of products containing Dimethazine (“DMZ”). 
Applying Rule 9(b), the court denied leave to amend on grounds of
futility and dismissed the complaint.
The court first found that the proposed complaint wasn’t futile
as barred by the primary jurisdiction doctrine. 
The basic claim was that New Health’s failure to disclose DMZ’s health
effects was misleading.  This claim doesn’t
depend on whether DMZ is “safe” or not. 
Instead, it is about misleading consumers through lack of disclosure; determining
misleadingness doesn’t require the FDA’s technical and policy expertise (as Pom Wonderful indicated).
Nutrition Distribution also sufficiently pled that DMZ was a
controlled substance because it is derived from, and structurally similar to,
Methastorone—a chemical already deemed to be an anabolic steroid under federal
law.  However, New Health’s alleged
failure to disclose that DMZ is banned by anti-doping organizations was legally
insufficient because it wasn’t an actionable omission. Under the Lanham Act,
omissions are only actionable if they render affirmative statements false or
misleading, and Nutrition Distribution didn’t identify any such statements,
only claims that New Health’s product was “hands down the strongest anabolic
Pre-Workout on the market today!” and “an extremely potent, high-intensity,
high-stimulant and highly anabolic pre-workout concoction.”

Likewise, pleading that New Health  “purposely made false and misleading
descriptions of fact concerning the nature, characteristics and qualities of
its DMZ products by … failing to disclose their status as controlled
substances and failing to disclose the overwhelming clinical evidence that such
products pose extreme health risks” was insufficient to plead a misleading
advertisement with particularity.  The
same was true with the initial complaint.

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Fair use is the fifth season in Jersey Boys case

Corbello v. DeVito, No. 08-cv-00867 (D. Nev. Jun. 14,
2017) 
One reason fair use jurisprudence can be frustrating is that it has become the place to store many conclusions that the defendant didn’t copy enough of what was protectable in the accusing work to infringe.  Because the de minimis doctrine is itself so tiny (without good reason), and because courts are so reluctant to say that nothing protectable was copied, judges reconsider those issues in the multifactor fair use test, and unsurprisingly the fact of minimal copying of expression leads to favorable findings on the other factors.  I would still favor a more robust standard for finding copying so that we didn’t have to waste so much time on the other factors, some of which (as the court here notes) may not be appropriate when the issue is minimal copying.
Corbello is the widow and heir of Rex Woodard, who assisted Tommy
DeVito in writing his unpublished autobiography Tommy DeVito — Then and Now,
telling the story of his career with the musical group The Four Seasons. Woodard
and DeVito tried to find a publisher for the book, and provided an outline to
actor Joe Pesci to explore adaptation to a screenplay. But nothing worked out,
given waning interest in The Four Seasons. 
DeVito falsely represented that he was the sole author, and used the
work to develop the screenplay for Jersey Boys, a hit musical.  After lots of back and forth, a jury found defendants
liable for infringement, found that there was no fair use, and found that 10%
of the success of the play was attributable to infringement of the work.
During trial, the court stated it believed that defendants
were entitled to a directed verdict on the fair use issue but did not want to
risk a retrial in the case of reversal. 
True to its word, the court here explains why, though fair use is often
a jury question, the record here entitled defendants to judgment as a matter of
law.
Market effect was the most important, so the court started
there. Before the play debuted, the work had no market value, as various people
had tried to get it published from 1990-2005, to no avail because of lack of
public interest.  Any profit potential
today is almost certainly because of the play, which itself was over half
musical performance by running time, and the remainder of which used less than
1% of the work.
Factor one: Commercial use weighed against a finding of fair
use.
Factor two: The biographical, factual nature of the work
favored fair use. The unpublished status of the work would ordinarily disfavor
fair use, but here the publication of (small parts of) the work did not
diminish its value by preempting plaintiff’s right of first publication.  The reason the work hadn’t been published was
that it was unpublishable, despite years of effort, creating an atypical
situation in which there was no deliberate choice to withhold the work from the
public. Thus, the biographical nature of the work predominated, favoring fair
use.
Factor three: After discounting similarities due to
unprotectable elements of the work, the jury was permitted to consider 12
similarities between the work and the play. The amount of protectable, creative
material potentially copied in relation to the work as a whole was less than
1%.  The extent of the similarity was
minimal, as two examples indicate: a discussion about the song title and
subject matter “Walk Like a Man” had very similar dialogue, though with
different characters and tone. “Assuming the jury believed the dialogue was not
a historical recounting but a creation of DeVito and Woodard—a finding that is
unlikely and perhaps not even permissible given the Work’s claim of historical
accuracy—the closely copied dialogue consists of about 65 words.”  Similarly, the work said, “[T]he Beatles come
to represent a whole social movement. We never aspire to be more than
entertainers,” and the “social movement” line was “arguably protectable as
original expression beyond bare historical fact.”  The play said,  “We weren’t a social movement like the
Beatles. Our fans didn’t sit and put flowers in their hair and try to levitate
the Pentagon.…”  And so on.
At most, the jury could have found about 145 creative words
to have been copied, whether as dialogue or creative descriptions of events, or
about 0.2% of the approximately 68,500 words in the work.  This factor strongly favored fair use, if the
“heart” of the work wasn’t infringed. 
Here, the “heart” of the work was unprotectable facts.  “Woodard’s writing style, which is the only
aspect of the Work producing protectable elements, although necessary to
production of the Work, was not the heart of the Work.”  A biographer’s writing style could maybe be
the “heart” of a biographical work “in an extreme case, for example where the
facts of the subject’s life were already known to the reader or mostly
uninteresting but where a highly skilled writer celebrated for his wit and
commentary had written the biography.” 
(I just finished Patricia Lockwood’s Priestdaddy,
which I think would qualify easily.)  But
that wasn’t the case here. There was no evidence that there was any market for Woodard’s
writing in and of itself; the attraction was the historical information he had
to convey.
The court considered transformation separately, and found
both a change of purpose and a change of character.  Purpose changed when the script, most of
which wasn’t from the work, was incorporated into musical performances in order
to entertain, whereas the purpose of the work was primarily to inform, to
vindicate DeVito’s perspective, and to reveal hidden truths. Even if the
purpose of the play were primarily to inform, the play would still have a
different character because it incorporated DeVito’s “singular” perspective “into
a more complete and balanced description of events based on competing
perspectives of all four band members.” 
In fact, the play was structured around this concept, with the four key characters
each in turn narrating the play from their own perspectives during the Spring,
Summer, Fall, and Winter portions of the play. 
The Four Seasons, get it?  This
additional creative expression was significantly transformative.
Thus, the first factor weighed against fair use “as in any
typical case of commercial use,” the second factor weighed in favor of fair
use, the third factor weighed “heavily” in favor of fair use, the fourth and
most important factor weighed heavily in favor of fair use, and the
transformative use “diminishes the significance of the sole factor weighing
against fair use.”  To permit a finding
of no fair use based solely on commerciality, when the other factors including
transformativeness favored fair use, “would be to impermissibly treat the first
factor as conclusive” and would hinder copyright’s purposes with respect to
biographical works.

If this were overturned on appeal, the court would still
grant a new trial on the issue of an implied nonexclusive license and on the
damages award.  The jury’s verdict on the
contribution of the copying of protected elements of the work to the play was
against the clear weight of the evidence. The 12 similarities considered by the
jury constituted approximately 0.4% of the playscript, which itself accounted
for less than half of the play’s running time, the rest of which was music. Assuming
that the music accounted for roughly half of the play’s success, a finding of
10% implied that the few words copied from the work accounted for roughly 20%
of the success of the play attributable to the dialogue. Although the jury’s
job is not to make a strict, mathematical calculation, the verdict must be
supported by sufficient evidence, and it wasn’t.  There was instead substantial evidence that
many additional elements contributed to the worldwide success and profits of
the play, including the additional inventive material in the script; the
stagecraft; the use of music; the employment of world-renowned writers,
directors, and producers; and advertising and promotion efforts. 

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