Amazon case shows profound difference between DMCA safe harbor & 230 immunity

Kangaroo Mfg. Inc. v. Amazon.com Inc., No.
CV-17-01806-PHX-SPL, 2019 WL 1280945 (D. Ariz. Mar. 20, 2019)
The Amazon
Chronicles
often asks “what is Amazon?” 
An interesting question to build a law school course around might be “what
can Amazon do?”  Here, the DMCA doesn’t
let it avoid an infringement claim on a motion to dismiss or partial summary judgment,
suggesting that Eric Goldman has a point when he says the DMCA is useless in
actual litigation, whereas §230 gets rid of other claims about Amazon’s alleged
practice of merging counterfeit and legitimate listings for the same product.
Kangaroo sells emoji beach balls. On Amazon, third-party
sellers create their own listing for a product that they plan to sell,
including uploading their own images of the product, and set their own prices
for the product.
Each product is identified with a
universal product code (“UPC code”) and an Amazon Standard Identification
Number, and each product also receives its own product detail page (“PDP”). Multiple
sellers can list the same product for sale on the same PDP. However, only one
seller may be awarded the “Buy Box” on a PDP, which makes the seller’s item the
default for a customer’s purchase. When a seller signs up to sell products on
the Defendant’s website, it agrees to the terms of the Amazon Services Business
Solutions Agreement (the “BSA”) and the policies incorporated by the BSA.
Kangaroo alleged that Amazon, and third party sellers, sold
unauthorized/counterfeit products in violation of Kangaroo’s trademark and
copyright, including reselling some of the counterfeit product that it
re-purchased from Kangaroo as reimbursement for unauthorized sales.
Amazon didn’t seek summary judgment on the trademark
infringement claim or counterfeiting claim to the extent that Kangaroo alleged
that Amazon itself sold the accused products.
Copyright infringement: Amazon argued that third parties uploaded
the accused images and that it had a license to use Kangaroo’s images—the court
doesn’t address the licensing argument.  For
the DMCA, the court found genuine disputes “on when and whether the Defendant
knew of the infringing material on its website and whether the Defendant took
reasonable steps to quickly remove that content” because Kangaroo alleged that it
filed several complaints, while Amazon stated that Kangaroo “never submitted an
infringement report regarding the images used” for the emoji beach balls. [Can’t
both of these be true? Kangaroo complained generally, which isn’t enough, but
didn’t file a complaint about images?  This
seems like a sloppy treatment of the evidence for summary judgment; the court
is clearly annoyed that Amazon isn’t specific enough about when it’s seeking
summary judgment and when dismissal in its papers.]  Further, Amazon contended that it removed
infringing content “usually within days” of Kangaroo’s complaints, but Kangaroo
disagreed.  [I don’t understand this.  Did Kangaroo submit evidence that content
remained past “days”?  There are cases
finding that a period of days is expeditious as a matter of law.]  Amazon also allegedly continued to use the
protected images to sell counterfeit products after the notifications of
infringement.  This created disputed
issues of fact. 
Negligence: dismissed because of §230. The negligence
allegedly stemmed from Amazon’s improper merger of the UPC code assigned to Kangaroo’s
product with the code assigned to a competitor’s product. Amazon argued that
any content listed on a PDP is provided by third-party sellers, but the court
looked to Amazon’s contract, which made it clear that Amazon “had full control
over the content displayed on its websites. The Defendant’s pleadings
demonstrate that it took the responsibility of managing and cultivating the
content provided to it. Therefore, the issue is not the content that was
provided to the Defendant, but the Defendant’s alleged mismanagement of the
content through conflating UPC codes in a manner that harmed the Plaintiff.”  Nonetheless, Amazon was acting as an
interactive computer service under §230 when it took the challenged acts and
was immune.
Unjust enrichment: unavailable because of the contract
between the parties.
Unfair competition: not dismissed to the extent it was an
infringement/counterfeiting claim. But dismissed to the extent it was based on
allegations that Amazon harmed Kangaroo by earning fees related to sales made
by unauthorized competitors and counterfeiters.

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failure to show damages from literal falsity still allowed injunctive relief

Nutrition Distribution LLC v. IronMag Labs, LLC, No. CV
15-8233-R, 2018 WL 6264986 (C.D. Cal. Nov. 16, 2018(
“This is a false advertising case between two competitors in
the business of selling fitness supplements.” IronMag allegedly unlawfully
marketed its products as “dietary supplements” and as having no side effects.” The
accused products allegedly contain Ostarine, a type of Selective Androgen
Receptor Modulator (SARM), deemed dangerous to human health by the FDA. ND sought
an injunction and damages under the Lanham Act, California’s UCL, and
California’s FAL.
The court granted summary judgment in IronMag’s favor on the
money damages claims.  This was a
noncomparative false advertising case, meaninig that actual evidence of some
injury was essential to recover damages. 
ND had no evidence of damages, and it also couldn’t recover profits
without proof of harm, again because this wasn’t a comparative advertising or
disparagement case, and it wasn’t a misappropriation case involving noncompeting
goods (where disgorgement also might be appropriate to deter). “Rather, the
parties are two of many competitors in an industry comprised of a broad range
of products, and Plaintiff has provided no basis to infer that any profits made
by Defendants would have otherwise gone to Plaintiff partially or in full…. The
Lanham Act requires that damages awards be compensatory and not designed to
punish. Because Plaintiff has offered no proof of actual injury, the Court has ‘no
way to determine with any degree of certainty what award would be compensatory.’”
Nor was this an exceptional case for purposes of a fee
award.
However, injunctive relief remained possible. It was
literally false to claim that products with Ostarine have “basically
non-existent” side effects.  No further
evidence of a tendency to deceive was required; IronMag didn’t rebut the presumption
of deception from literal falsity.  “Even
without this presumption, common sense requires a finding that statements
denying the existence of negative health effects in a fitness product have a
tendency to deceive a substantial segment of interested consumers.”
Common sense also showed materiality.  [There is a lurking contradiction—not a split—in
courts about this: some say that additional evidence is required, but I think
the court here is right.  Often the content
of the literal falsity itself can provide all the information required to find materiality.]
“It can naturally be assumed that consumers of fitness supplements take into
account the existence and extent of negative side effects when deciding whether
to buy them and in comparing different products.”
Even without showing past injury, there was a likelihood of
future injury if IronMag could keep selling Ostarine products with deceptive
advertising. As the Ninth Circuit has said, “competitors vie for the same
dollars from the same consumer group, and a misleading ad can upset their
relative competitive positions.”  The
injury was irreparable because of the presumption of deception.  “Monetary damages have not been awarded here
and in any case would be inadequate to protect the public in the absence of an
injunction due to the possibility of Defendants selling products in the future
which may pose a risk to public health and safety.” An injunction would issue.
The result was the same under state law.  Monetary relief is allowed under the FAL “to
restore to any person in interest any money or property, real or personal,
which may have been acquired by means of such unfair competition.” This “allows
awards of restitution, but not awards of non-restitutionary disgorgement,” which
was all ND was seeking here.

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survey isn’t evidence of actual deception, court says in First Amendment case w/TM relevance

Express Oil Change, L.L.C v. Mississippi Board of Licensure
for Professional Engineers & Surveyors, No. 18-60144 (5th Cir. Feb. 19,
2019)
Just as a matter of client advocacy, it is time for these
First Amendment cases about the government’s near-inability to regulate based
on the meaning of words to start being cited in run-of-the-mill trademark and
false advertising cases.  I don’t think
the results will be good policy, but at the very least we will see whether
courts mean what they say, or instead mean “legislative and administrative
entities shouldn’t get to regulate but it’s ok when private parties sue under
the same theories.”  In particular, where
trademark and false advertising treat “false and misleading” as the regulable
category (albeit with different standards of proof for “misleadingness” in
§43(a)(1)(B) cases than for falsity), First Amendment commercial speech law has
for decades made a distinction
between actually/inherently misleading speech and potentially misleading
speech.  Here the Fifth Circuit applies
that distinction to disregard a survey showing 55% deception—that’s just
“potential”—and hold that, without actual consumer deception, only a disclaimer
remedy is allowable.  (Among other
things, the First Amendment doctrine has yet to engage with what we know in
TM/advertising law about the ineffectiveness of disclosures and the range of
responses among consumers—a few actually confused consumers out of millions
don’t necessarily justify liability, especially where the challenged use provides
useful information to other consumers. 
The libertarian anti-statistical bent of this crop of judges may have
additional implications for their reactions to those arguments in trademark and
other First Amendment cases.)
Mississippi legally restricts the use of the term
“engineer.” Express Oil Change operates several automotive service centers in
Mississippi under the name “Tire Engineers.” In 2015, the Mississippi Board of
Licensure for Professional Engineers & Surveyors determined that the name
“Tire Engineers” violated the pertinent statutes and requested that Express
cease using it.  Express sued for a
declaratory judgment that its use was ok; the trial court ruled against it.
The district court found that “Tire Engineers” was inherently
likely to deceive consumers that the services performed at Tire Engineers are
performed by tire engineers or under the supervision of tire engineers.” The
court accepted “substantial evidence” that “the term ‘tire engineers’ is used
by courts, universities, tire manufacturers, tire manufacturers, general
periodicals, specialized periodicals, and the general public to refer to actual
engineers who have expertise in the manufacture, selection, and repair of
tires.” A survey conducted by the Center for Research and Public Policy found
that “[s]ixty-six percent of the respondents expected that Tire Engineers ‘has
professional engineers on staff,’” and “[f]ifty-eight percent [of respondents]
expected Tire Engineers to use engineers to service tires.” Additionally, the
Board highlighted an Express advertisement claiming that “[a]ll of our Express
Oil Change & Tire Engineers have tire engineers who are qualified to
[service] . . . tires . . . .”  (Express
discontinued use of “Tire Engineers have tire engineers” in 2017, but the court
didn’t indicate that Express couldn’t bring the phrase back.)
“The party seeking to uphold a restriction on commercial
speech carries the burden of justifying it.” This “burden is a ‘heavy’ one,”
and may not be “satisfied ‘by mere speculation or conjecture.’” Commercial
statements that are actually or inherently misleading aren’t protected by the
First Amendment. “[A] statement is actually or inherently misleading when it
deceives or is inherently likely to deceive.” Joe Conte Toyota, Inc. v. La.
Motor Vehicle Comm’n, 24 F.3d 754, 756 (5th Cir. 1994). Statements that are
only potentially misleading, however, are within the scope of the First
Amendment, and their regulation is judged by Central Hudson (or, though the court doesn’t say so here, by Zauderer when the state’s remedy is
requiring an additional disclosure).
Express argued that “[t]he term ‘engineer’ is commonly used
to describe jobs and trades other than professional engineering” and pointed
out that the Fifth Circuit had already rejected the “circular” reasoning that a
term “is inherently misleading because it does not conform to [a state actor’s]
definition . . . of the term.”  The court
of appeals agreed with Express: “Because its essential character is not
deceptive, Tire Engineers is not inherently misleading. The name, first
trademarked in 1948, apparently refers to the work of mechanics using their
skills ‘not usu[ally] considered to fall within the scope of engineering’ to
solve ‘technical problems’ related to selecting, rotating, balancing, and
aligning tires.”  “Engineer” “can mean
many things in different contexts, and it is certainly not limited to those
professionals licensed by Mississippi to practice engineering.”  Since it was not “devoid of intrinsic meaning,”
it wasn’t inherently misleading.  [That
formulation, though derived from earlier cases, seems particularly unhelpful
here. Even if we think that non-onomotopoeiac words had “intrinsic” meaning,
that meaning would seem determine whether a use was inherently misleading—is
the use consistent with its meaning, or contradictory?  Words without
intrinsic meaning, by contrast, would seem more readily
non-false/non-misleading, as we hold in puffery cases.]
Lanham Act lawyers, pay attention: The court thought that
the survey cut both ways, given that it asked: “The company ‘Tire Engineers’
advertises that it has ‘qualified personnel’ to repair tires. As a result of
this advertising how strongly do you expect the following[:] . . . That the
company, Tire Engineers, is performing engineering services.” “Just over
one-half of all respondents with an opinion, [fifty-five percent], suggested
they believed a company that uses the name ‘Tire Engineers’ performs
engineering services for tires,” but nearly 45% percent of respondents stated
that they did not share this belief or were unsure. “While this suggests that
the name is potentially misleading, it also suggests that the name is not
inherently—that is, its essential character is not—misleading.”  If 55% deception isn’t enough for
actual/inherent deceptiveness, then no survey will be. 
In addition, the district court failed to account for the
way the Tire Engineers mark is used: “on the company’s website, which describes
its automotive services (not any professional engineering services), and at its
retail stores, which appear like any other store that performs automotive
services . . . .”
The district court separately determined that “Tire
Engineers” was actually misleading, based on a phone poll commissioned by the
Board, which found that “[a]lmost half of the respondents (47.8%) believed that
a company [using] the name ‘Tire Engineers’ performs engineering services for
tires.” This wasn’t evidence that any actual consumer had been misled, which is
required for “actual” misleadingness. 
But the court of appeals decided that Supreme Court and circuit precedent
required “evidence of deception” to find actual misleadingness, even though
none of those cases actually addressed whether survey evidence could be
“evidence of [actual] deception.”  [I am
even more convinced after this case that the rejection of probabalistic
evidence is a core aspect of today’s conservative jurisprudence, which
conveniently allows the rejection of all kinds of regulation/legislation that
is based on probabalistic calculations.]
The district court wasn’t wrong that the name was potentially
misleading, but its remedy—the ban on the use of “engineers”—flunked Central Hudson because it was more
extensive than necessary.  Express wanted
at most “a simple point-of-sale disclaimer that ‘Tire Engineers does not employ
professionally-licensed engineers or provide engineering services.’” [Express
has no worries about initial interest confusion/bait and switch,
apparently.]  The court of appeals didn’t
rule on what kind of disclaimer would be sufficiently tailored, but the Board
needed to consider less restrictive means such as a disclaimer.
Because of all this, the court of appeals didn’t reach
whether INS v. Sorrell trumped Central Hudson.

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Star Trekkin’ across the universe of fair use

I like Star Trek better than Dr. Seuss, ok?
Dr. Seuss Enters., L.P. v. ComicMix LLC, No. 16-CV-2779 JLS
(BGS) (S.D. Cal. Mar. 12, 2019)
DSE owns the copyrights to the works of Theodor S. Geisel, better
known as Dr. Seuss. It licenses additional works under the Dr. Seuss brand,
including Oh, the Things You Can Do That Are Good For You!; Oh, the Pets You
Can Get!; Oh, Baby! Go, Baby!; Oh, the Places I’ll Go! By ME, Myself; Oh, Baby,
the Places You’ll Go!; and Oh, the Places I’ve Been! Journal. Seuss’s Oh, the
Places You’ll Go! is a very popular gift for graduates, is DSE’s best-selling
book, and is the perennial number one selling book on The New York Times Best
Sellers list each spring during graduation season.  DSE also extensively licenses other
entertainment products and merchandise, including “The Wubbulous World of Dr.
Seuss, a television and book series with The Jim Henson Company that featured ‘muppetized’
Dr. Seuss characters; Grinch Panda Pop, a digital game that combines Jam City’s
Panda character with the Grinch character; Dr. Seuss Funko figurines, which
combine Funko Inc.’s distinctive toy designs with Dr. Seuss characters; and a
line of Comme des Garçons clothing combining Comme des Garçons’ well-known
heart design with Grinch artwork.”
David Gerrold has written Star Trek episodes (including some
of the most beloved), and suggested to defendant Hauman that, “if we could get
a license, we should do a Star Trek Primer.” The original idea was to combine
Star Trek themes with Pat the Bunny, “although they also considered using Fun
with Dick & Jane, Goodnight Moon, and The Very Hungry Caterpillar, before
finally settling on Go!” Hauman invited defendant Templeton to join the project:
“this would be Seuss-style [(Star Trek: The Original Series)] backgrounds,” and
that “we’re going to want the cover and at least a background art piece for
promotions, as well as be able to use the cover for posters, mugs, and all the
merchandise that will push this thing over the top.” Templeton responded, “Holy
CRAP that’s a cool idea. The title is like printing money. I’m totally in.”
Each of the three testified that they considered Boldly a parody, a mash-up,
and a transformative work.  
Hauman scanned a copy of Go! because he wanted to “parallel [Go!]
as close as [he] c[ould]” Although Gerrold wrote his first draft “from scratch”
and without access to Go!, he later rewrote the text to more closely match Go!
Hauman created a side-by-side comparison of the text, to assist in their effort
“to parallel the structure of [Go!].” Templeton’s illustration of one page took
him about seven hours because he “painstakingly attempted to make” his
illustration “nearly identical” in certain respects to one illustrated by Dr.
Seuss.  He testified that this was “essential
to the parody . . . that people recognize the source material in poses since
they WON’T be seeing the Grinch or the Whos or the Gox” or any other character
from Dr. Seuss, and Templeton was therefore “concerned if we try to completely
ignore everything about the source material the gags fall apart.”
Defendants included two disclaimers on the copyright page of
the unpublished draft. The first read: “This is a work of fair use, and is not
associated with or endorsed by CBS Studio or Dr. Seuss Enterprises, L.P.” Id.
The second stated, “Copyright Disclaimer under section 107 of the Copyright Act
1976, allowance is made for ‘fair use’ for purposes such as criticism, comment,
news reporting, teaching, scholarship, education, research, and parody.”
Along with working on a deal with ThinkGeek to distribute
the book, defendants launched a Kickstarter for Boldly. The “Risks and
Challenges” section included: “While we firmly believe that our parody, created
with love and affection, fully falls within the boundary of fair use, there may
be some people who believe that this might be in violation of their
intellectual property rights. And we may have to spend time and money proving
it to people in black robes. And we may even lose that.” They raised nearly
$30,000.
An editor at publisher Andrews McMeel Publishing (AMP) saw
the Kickstarter page, reached out to defendants, and subsequently presented a
proposal to AMP’s Acquisitions Committee for publishing Boldly, describing the
intended audience as “Graduates and parents of graduates (college, high school,
8th grade); fans of Star Trek; fans of Dr. Seuss.” AMP’s VP of Sales advised seeking
“an on-sale date” that would allow them to “try and capture some grad biz.”
After the lawsuit begain, Gerrold suggested that re-drawing
the illustrations could be a “way out” of the litigation and Templeton offered
to revise the artwork to follow Go! less closely. Later, ThinkGeek contacted
Hauman for an update, as it would “LOVE to be able to offer [Boldly] for
Graduation.” Mr. Hauman replied, “I would LOVE to offer it to you, but the
lawsuit grinds on.” Boldly remained unpublished.
Previous rulings in the case held that Boldly was
transformative, but DSE urged the court to reconsider in light of Oracle
America, Inc. v. Google LLC, 886 F.3d 1179 (Fed. Cir. 2018), which held that Google’s
use of Oracle’s Java program was not transformative, despite the fact that
Google only used 37 of the 166 Java SE API packages and created its own
implementing code. But Google copied those 37 packages wholesale, while in
Boldly “the copied elements are always interspersed with original writing and
illustrations that transform Go!’s pages into repurposed, Star-Trek-centric
ones.”  There was no verbatim copying of
text or illustrations; the borrowed elements were always adapted or
transformed. This was highly transformative. Nor did Boldly have “the same
intrinsic purpose and function as Go!,” i.e., “providing an illustrated book,
with the same uplifting message that would appeal to graduating high school and
college seniors.” DSE holds no monopoly over an illustrated book with an
uplifting message, and defendants’ is tailored to fans of Star Trek’s Original
Series. As to good/bad faith, discussing the necessity of a license and
determining that Boldly was a “fair use parody” without seeking the advice of
counsel isn’t bad faith. Even if it’s a derivative work under §101, it can
still be a fair use, since all the §106 rights—including the right to
create/authorize derivative works—are limited by §107.
Nature of the work: weighs only slightly in DSE’s favor
because Go! is creative but long and widely published.
Amount used: though “there is no dispute that Boldly copies
many aspects of Go!’s and other Dr. Seuss illustrations[,] . . . Boldly does
not copy them in their entirety[,]” but rather “infuse[s each] with new meaning
and additional illustrations that reframe Seuss images from a unique Star-Trek
viewpoint.” Nor did Boldly “copy more than is necessary to accomplish its
transformative purpose.” DSE pointed to defendants’ emails weighing the
possibility of creating “whole new artwork, not specifically based on any
individual drawing by Seuss, but close enough to his style to match the text”
as evidence that Defendants “could have taken far less from Go! to create a
‘mash-up.’”  The court disagreed. It’s
always possible to argue that an infringement defendant could have used less.  Here, defendants sought to “mash up” the Star
Trek original series with Go! in particular, rather than “Dr. Seuss” in
general.
The court found Leibovitz v. Paramount Pictures Corp., 137
F.3d 109 (2d Cir. 1998), analogous. That case cautioned that, “[i]n assessing
the amount and substantiality of the portion used, [the court] must focus only
on the protected elements of the original.” For the cover of each work, for
example, DSE could claim copyright protection in “the unique, rainbow-colored
rings and tower,” but not “any disc-shaped item tilted at a particular angle.”  And on Boldly’s cover, “Defendants drew a
similarly-shaped but decidedly non- Seussian spacecraft—the USS Enterprise—at
the same angle and placed a red-and-pink striped planet where the larger of two
background discs appears on the original cover.” Boldly’s cover also features a
figure whose arms and hands are posed similarly to those of Go!’s narrator “and
who sports a similar nose and eyes, but Boldly’s narrator has clearly been
replaced by Captain Kirk, with his light, combed-over hair and gold shirt with
black trim, dark trousers, and boots.” Captain Kirk was not the unnamed “boy”
protagonist of Go! “Finally, instead of a Seussian landscape, Boldly’s cover is
appropriately set in space, prominently featuring stars and planets.” To sum up,
“portions of the old work are incorporated into the new work but emerge imbued
with a different character.” Indeed, defendants here took less from DSE both
quantitatively and qualitatively than Paramount did in Liebovitz, which “incorporated nearly the entirety of the
plaintiff’s photograph, except for superimposing a different face onto the body.”
Here, defendants took only “discrete elements”: “cross-hatching, object
placements, certain distinctive facial features, lines written in anapestic
tetrameter.” Those are indeed significant, but defendants didn’t use Dr. Seuss’
words, his character, or his universe. This was no more than necessary for
their purposes: a “mash-up” of Go! and Star Trek.
Market effect: where a work is highly transformative, market
harm could not be presumed, and it hadn’t been shown. DSE didn’t meet its
burden by showing that it licensed a lot of other stuff and arguing that if
mash-ups were okay, “the entire market for authorized collaborative works would
be threatened.” Instead, the “potential harm to [Plaintiff]’s market remains
hypothetical.” The court found that Boldly didn’t substitute for the original
and served a different market function than Go!, targeting “consumers who have
already read and greatly appreciated Go! and Dr. Seuss’s other works, and who
simultaneously have a strong working knowledge of the Star Trek series.”
Although Boldly was supposed to be “safe” for kids, it wasn’t targeted at them.
It still “touches on more adult subjects, including ‘lovers . . . [who]’ll
never be back for an episode two.’ Even the illustrations are imbued with
sexual innuendo, with one page depicting a number of women (and possibly one
man) with whom Captain Kirk has slept,” showing him pulling on his boots as a
signifier of post-coital status.  As
Gerrold testified, Boldly was intended “for adults who are familiar with all
the episodes [of Star Trek]” and “would not work for kids who have not seen the
episode[s].”
Go!’s graduation and derivative markets were a closer
question, but DSE still introduced no evidence that graduation substitution
purchases were likely. And these defendants clearly intended to market Boldly
to fans of Star Trek. “Although it is certainly conceivable that some would-be
purchasers of Go! would instead purchase Boldly for a Trekkie graduate, there
is a dearth of evidence or expert testimony permitting the Court to extrapolate
the likely effect—if any—that Boldly may have on Plaintiff’s sales of Go!”
So too with DSE’s derivative market. There was no evidence
tending to show that it would lose licensing opportunities or revenues as a
result of publication of Boldly or similar transformative works. DSE’s argument
“risks circular reasoning,” in that “it is a given in every fair use case that
plaintiff suffers a loss of a potential market if that potential is defined as
the theoretical market for licensing the very use at bar.” DSE’s proprietary “Style
Guide” supported defendants’ argument that Boldly was not part of a traditional
or likely to develop argument. DSE instructs its licensees not to show
characters with items “not from [the Seuss] world” and not to “use Seuss
characters with third party’s characters.” Licensees are also not supposed to
“make up Seuss-like rhymes.” Boldly broke those rules, e.g., “Your big ship
will take you to alien skies. / It’s the best that we’ve got for your great
enterprise.” Licensing derivative works doesn’t allow a copyright owner to
squelch transformative ones.
On balance, this was a fair use, and defendants won summary
judgment on the copyright claims.
Surviving trademark claims: the court previously kicked out
claims based on Boldly’s title, but did not rule on defendants’ alleged
misappropriation of “the stylized font that [Plaintiff] uses consistently
throughout the Dr. Seuss books” and “Dr. Seuss’s unique illustration style.” The
court determined that these were not protectable elements under trademark
law.  DSE’s survey purported to show that
“24% of consumers are confused as to origin [of Boldly] because Defendants
deliberately used [Plaintiff’s distinctive illustration style and font].” But
“[c]ourts have almost uniformly said no” trademark protection exists for an
artistic style.  [Citing McCarthy; a see
also for Dastar.]  This is copyright’s job.
Typeface: As Jacqueline Lipton explains, “a typeface is the
artistic creation of a typeface designer, while a font is the result of an
industrial process to enable the reproduction of typefaces in the printing
process.” Jacqueline D. Lipton, To (c) or Not to (c)? Copyright and Innovation
in the Digital Typeface Industry, 43 U.C. Davis L. Rev. 143, 148 (2009)
(footnote omitted). A typeface is no more susceptible of trademark protection
than a general style. “Although The New Yorker may trademark the name of the
typeface or its mark in that stylized typeface, see THE NEW YORKER,
Registration No. 0844606, it cannot trademark (or copyright, see 37 C.F.R. §§
202.1(a), (e)) the typeface itself.”  It
couldn’t, therefore, turn to trademark to protect against another’s use of its
typefaces, even if there was de facto secondary meaning.  The court was bolstered in its conclusion by
evidence that “Boldly does not use th[e] ‘Seuss font[s]’” DSE urges licenses to
use in its Style Guide.  [This isn’t
fully played out in the opinion, but the reason that defendants’ use of a
different typeface matters is that trademark protection in a style or typeface
would be essentially boundless—as long as confusion was allegedly likely,
people could be sued for getting too close in their own expressive works.]
Previously, the court had first concluded that defendants
hadn’t made a nominative use because they’d taken too much of the Go! trade
dress in lettering the titles, including the shape of the exclamation point.
But on review of Twentieth Century Fox Television v. Empire Distributions,
Inc., 875 F.3d 1192 (9th Cir. 2017), it then found that “the title of Boldly .
. . is relevant to its own content” and didn’t explicitly mislead as to source.
Now, it reasoned that use of Seussian typefaces, not in conjunction with an
enforceable mark, couldn’t support a claim for violation of the Lanham Act or
California’s UCL. It therefore didn’t need to address defendants’ Rogers argument.
Bonus: here’s John Oliver’s Oh! parody from his recent segment on online shaming:

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court, while uncomfy with some Amazon techniques, declines to grant PI

Comphy Co. v. Amazon.com, Inc., NO. C18-1460RSM (W.D. Wash.
Mar. 12, 2019)
The Comphy Company markets itself as a luxury company,
historically supplying its linens to luxury spas. Ultimately, Plaintiff decided
to start retailing its products online through its own website, though it
doesn’t market directly to customers and instead relies upon word of mouth and
first-hand exposure at hotels, spas, and bed and breakfasts utilizing its
products.
Amazon solicited Comphy several times to sell its products
on Amazon’s platforms, but Comphy declined based on its luxury strategy.
Nonetheless, Amazon bought keyword advertising utilizing keywords including
COMPHY from several search engines, resulting in ads for, e.g., “Comfy Sheets
Queen”; “Shop Comfy Sheets” “Comphy Co Sheets”; and “Comphy Company Sheets at
Amazon.” Likewise, if consumers use Amazon’s own-site search and start typing “comph,”
Amazon’s search bar provides possible searches including for “comphy sheets,”
“comphy company sheets,” and “comphysheets” along with seven other unrelated
possible searches. Because Comphy’s products are not available through Amazon,
a search for “comphy sheets” provides products similar to Plaintiff’s products,
including bedding offered for sale by “Comfy.” On one product advertised in
response to a search for “comphy sheets,” Amazon prominently displayed
“Amazon’s Choice for ‘comphy sheets,’” though Amazon represented that it had
stopped doing that specifically (but didn’t agree to an injunction requiring
that cessation).
Comphy projected a significant increase in its online sales
in 2018 but hadn’t met that growth rate. It requested an injunction against
Amazon’s allowing third parties’ unauthorized use of COMPHY or highly similar
terms such as COMFY to promote bedding, sheets, pillows and related products;
selling merchandise under the COMPHY COMPANY, COMPHY SHEETS or COMFY SHEETS
storefront in connection with those products; using “Comphy Company Sheets”, “Comphy”
(either alone or with other words), or “Comfy” applied to allegedly infringing
products (either alone or with other words) to display “infringing and
unlabeled third-party sheets”; autosuggesting searches for “Comphy”, “Comphy
Sheets”, “Comphy Company” and “Comfy Sheets” when users begin to type the first
few letters; using “Comphy” on product search result pages in phrases like
“Amazon’s Choice for Comphy Sheets”; and using COMPHY or COMFY SHEETS as
keywords with online advertising networks. The breadth of Comphy’s claims and
its failure to segregate particularly disturbing uses from the other behavior
it challenged doomed its request for injunctive relief.
Comphy’s failure to disaggregate Amazon’s uses made it
unlikely to succeed on the merits overall.
First, it wasn’t clear whether or to what extent Comphy had
a valid mark in “Comphy” alone. Its registrations were for stylized versions of
its name. The presumptive validity of the registration was rebutted for these
purposes because, first, the registration was for goods other than those at
issue here, specifically: “Linens and bedding for health spas, namely, towels,
pads in the nature of bed pads, mattress pads and table pads, sheets, duvets,
comforters, pillow cases, pillow shams, and table skirts.” That didn’t cover the
consumer bedding at issue here; Amazon wasn’t alleged to infringe on the spa
market. Second, the registration didn’t cover the “bare” word mark, which
matters because “comphy” is a mere misspelling of the descriptive-for-linens
term “comfy.” Comphy itself testified that it consistently used the
design/logo.

The registered marks

Comphy didn’t succeed in establishing rights in “comphy” as
a text mark. Plaintiff may not “remove a common descriptive word from the
public domain by investing his goods with an additional quality, thus gaining
the exclusive right to call his wine ‘rose,’ his whisky ‘blended,’ or his bread
‘white.’” “Similarly, Plaintiff does not have the exclusive right to call its
goods ‘comfy.’” Comphy didn’t establish commercial strength; it argued that it
was the “brand standard” for luxury hotels, spas, and bed and breakfasts and
that it has “expended extensive sums annually since 2003 on advertising to
promote its Comphy brand and branded products, via trade shows and other advertising
and marketing in industry publications targeting bed and breakfasts.” But that
all involved use of the stylized “C” mark, “which lends distinctiveness to the
mark.” Nor did strength in the luxury spa market indicate strength in the
consumer retail market, especially since Comphy doesn’t market to consumers but
relies on personal exposure and word of mouth.
Nor was Amazon’s use clearly confusingly similar. Whether
the use was confusingly similar depended, in part, on the strength of the mark.
Network Automation thought that having
an inherently distinctive mark could lead to an inference that a consumer who
uses the mark is searching only for that particular source (an assumption that
is itself often unwarranted), but that reasoning didn’t apply here. Amazon
argued that COMPHY is a common misspelling of “comfy”: within Amazon reviews,
COMPHY is used in reference to bedding only 9% of the time and used in
reference to Comphy’s goods only slightly more than 1% of the time. The court
agreed that use of “comphy” as a search term didn’t necessarily indicate an
intent to search for Comphy’s products, even when it was used in reference to
bedding. Amazon’s survey also determined that 13% of consumers regarded COMPHY
as referring to a particular source for bedding, but that more than 12% of
those consumers also regarded “comfort”—a non-existent control—as also
referring to a particular source for bedding. [Clever control, since there are
“comfort + other word” marks out there.]
Proximity of goods and similarity of marks did weigh in
Comphy’s favor. In a footnote, the court indicated that its analysis might
differ “profoundly” if Comphy had focused only on Amazon’s search engine ads for
“Comphy Co Sheets” at Amazon, which makes sense to me, or on Amazon’s use of
the search term “comphy sheets” within its own website to offer consumers
“comfy” brand sheets or other sheets marketed as comfy or comfortable, which as
stated doesn’t—if the sheets are plausibly comfy, then descriptive use should
be just fine. (Though admittedly that isn’t easy to show in the Ninth Circuit,
given its defiance of the Supreme Court’s view in KP Permanent.) Anyway, Comphy “elected to lump the contexts and
uses together, and the Court declines the invitation to scour the limited
record to craft a legally defensible injunction.” In particular, only uses of
“comphy” by an Amazon customer who perceived that word as a mark but who
confusedly bought “comfy” sheets instead would involve confusion; other
scenarios involved no confusion at all, or at most diversion. “And, the Court
can only determine whether a customer knows of Plaintiff’s sheets based upon
the strength of the mark.”
There was evidence of actual confusion, including Amazon
reviews referring to Comphy and a declaration from an Amazon consumer who
intended to purchase Comphy sheets, bought “Comfy Sheets” on Amazon, realized
his mistake when the sheets arrived, and returned the Comfy Sheets. The court
found the evidence of actual confusion “often compelling,” but this was only a
small percentage, and Amazon pointed out that people who pick descriptive terms
invite a certain amount of confusion. “The Court agrees that some actual
confusion may exist even if a reasonably prudent consumer would not be
confused.”
Marketing channels: favored Comphy. Degree of care: Comphy’s
self-positioning as a luxury company meant its consumers weren’t “wholly
unsophisticated”; neutral.
Amazon’s intent: Amazon’s prior solicitation of Comphy’s business
didn’t indicate a bad intent; there was no evidence that the prior business inquiries
were related to Amazon’s current actions. Intent was “essentially neutral.”
Balancing the factors, there wasn’t a likelihood of success
on the merits.
Separately, Comphy didn’t show irreparable harm. Sales
growth short of Comphy’s ambitions wasn’t irreparable harm, nor did Comphy
adequately tie its lower-than-desired rate of increase to Amazon’s actions. Nor
would money damages be inadequate to remedy this “mainly financial” harm.
Lost control over reputation: “misuse of a trademark no
longer results in a presumption of irreparable harm.” Comphy showed evidence of
consumer confusion and dissatisfaction, but dissatisfaction with Amazon’s
offerings in the absence of confusion wasn’t relevant. Only if dissatisfaction
were attributed to Comphy would there be harm to its brand, and there wasn’t
evidence of that. Nor did Comphy explain why final remedies wouldn’t be
adequate. “Indeed, this case appears quite distinct from prior cases where
interaction with confused consumers cannot be remedied because those consumers
are unknown to the parties. Here, there seems to be a much higher chance that,
if liable, Defendant could contact almost every purchaser of the allegedly
inferior products and seek to repair any damage that may have been done to
Plaintiff’s brand.”
In conclusion, the court suggested that Amazon was very
close to (and perhaps even over) the legal line in some of its acts (“Comphy
Co.” in keyword-triggered ad text!), but still declined to grant relief on this
record.

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Apple’s misleading use of “episode” to describe promo clips could lead to liability (w/o its contract)

Zaragoza v. Apple Inc., 2019 WL 1171161, No. 18-cv-06139-PJH
(N.D. Cal. Mar. 13, 2019)
Plaintiffs sued Apple for how it sells TV seasons on its
iTunes store. The home page for each season “provides general information about
the season and three purchasing options,” which include buying individual
episodes, buying an existing full season, and buying all current and future
episodes of an as-yet-to-be-completed season (Season Pass). Apple represents
the number of “Episodes” available in a season on each season’s home page, with
individual video clips in a horizontally scrolling list along the bottom, with
cost information and text along with a thumbnail image.

Plaintiffs alleged that Apple delivers fewer than the
advertised number of episodes with its “Buy Season” or “Season Pass” options,
because Apple counts both promotional videos and what consumers allegedly
understand the word “episode” to mean—plot-based episodes of a television
show—in its advertised number of episodes. Plaintiffs thus received fewer
episodes than they believed they were purchasing, and also received a smaller
discount by buying the entire season than they believed they were getting
compared to buying individual episodes. For example, plaintiff Zaragoza
purchased a season of “Genius: Edison” that advertised “13 Episodes” at the
time of purchase, but only six of those 13 were plot-based episodes, and seven
were promotional videos. By season’s end, Zaragoza received only four more plot-based
episodes and iTunes was advertising “22 Episodes,” which included ten
plot-based episodes and 12 promotional videos. Likewise, iTunes ultimately advertised
“17 Episodes” for the first season of “Killing Eve,” but only eight of those
videos were actually “episodes,” as plaintiffs allegedly understood the term.
Each “episode” can also be selected, which then presents
more detail about it, including a title, the “episode number,” the length of
the video clip, its individual price, and a written description.
Apple argued that plaintiffs’ interpretation of “episode”
was implausible and that a reasonable consumer had to understand that “episode”
includes advertisements, trailers, promotional videos, and other videos that
are not part of the show’s narrative. Apple contended that its scrollable list
of videos appearing immediately below the word “Episode” provided context that
necessarily dispels any belief to the contrary.
This was not the “rare situation” where plaintiffs’ alleged
understanding of the word “Episodes” was implausible as a matter of law. “It is
plausible that consumers understand the word ‘Episode’—particularly in the
context of a description of a season of a television series—to mean an episode
that is part of the television show’s season, and not a commercial for the show
or another type of promotional or behind-the-scenes video. Reviewing the word’s
definition in readily-available dictionaries confirms that plaintiffs’ alleged
understanding could be found reasonable by a trier of fact.” [Notably, those
dictionary definitions didn’t suggest that Apple’s interpretation was also
reasonable.] Though context does matter, the court wasn’t willing to hold that,
as a matter of law, a reasonable consumer must scroll through the list of
videos in sufficient detail to view the curative information. Moreover, there
was a factual issue about what consumers of the Season Pass feature would be
able to view in the list of videos when making their purchases. “The Apple TV
appears to make no representation about how many future episodes there will be,
but rather reports only on the total number of video clips associated with a
show’s season at the time the consumer views that season’s home page.” If it
said there were 10 episodes at the time of purchase and there were 5 narrative
episodes and 5 promo videos at the time, a reasonable consumer might expect
that 10 episodes was the total number of narrative episodes in the season.
Moreover, there were factual questions “concerning how much a consumer would
have to investigate into the Apple TV menu structures to be exposed to much of
the allegedly-curative information Apple describes.”
Apple also argued that it didn’t sell “goods or services”
within the meaning of the CLRA, but only licenses to view content. The CLRA definitions
say “(a) “Goods” means tangible chattels bought or leased for use primarily for
personal, family, or household purposes, … (b) “Services” means work, labor,
and services for other than a commercial or business use….” And it provides that
it “shall be liberally construed and applied to promote its underlying
purposes, which are to protect consumers against unfair and deceptive business
practices and to provide efficient and economical procedures to secure such
protection.” The complaint alleged that the “Season Pass” was a service, including
a promise to offer current and future episodes for viewing on an ongoing basis
as the season progresses. The court refused to take judicial notice of the
alleged contract between the parties. Though these purchases weren’t “tangible
chattels,” plaintiffs plausibly alleged a purchase of services and there was at
least a factual dispute. [We call VOD a service, even if it inherently involves
“licenses” as well.]
Warranty claims survived for similar reasons, though the
California U.C.C. applies only to contracts for the sale of “goods.” Unlike
under the CLRA, goods are “all things (including specially manufactured goods)
which are movable at the time of identification to the contract for sale[.]” Courts
look to the “essence of the agreement” and “have generally found that
‘mass-produced, standardized, or generally available software, even with
modifications and ancillary services included in the agreement, is a good that
is covered by the UCC.’ ” Plaintiffs adequately alleged that the essence of the
agreement concerned the sale of the episodes. (See also the “Buy Now” button
and this
very helpful article by Aaron Perzanowski & Chris Jay Hoofnagle
.)
“Episode” could be an affirmation of fact or promise relating to the goods sold
and therefore a warranty.

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Lanham Act claim based on patent threats fails even with invalidation of the patent

American Fireglass v. Moderustic, Inc., — F.Supp.3d —-,
2019 WL 1227963, No. 15-CV-2866 JLS (BGS) (S.D. Cal. Mar. 15, 2019)
The parties compete in the market for pieces of broken
tempered glass for use in fireplaces and fire pits (Moderustic also sells
“fireglass” for use in aquariums), where it apparently gives an appealing
visual effect (fire on ice). Moderustic obtained a patent for a method of
creating tumbled tempered glass and began contacting American Fireglass, its
dealers, and other glass sellers alleging infringement. In a newspaper article,
its principal stated that “he hopes to shut down competition and bring his
annual sales up.”
American Fireglass originally tumbled many of its products,
but by November 2014 it had completely “stopped tumbling the tempered glass
fragments that it sold because tumbling slowed production and caused the glass
fragments to become scratched and dull and less desirable.” It “began removing
references to tumbling its fireglass from its advertising and promotional
material, including its web site.” However, it “mistakenly overlooked some
products that appeared on its website” but “removed these remaining references
to tumbling … immediately after it was brought to [Plaintiff’s] attention in
August 2016.”
American Fireglass sued Moderustic to invalidate the patent
and for its patent-related threats; Moderustic counterclaimed for false
advertising about tumbling. The court invalidated the Moderustic patent as
obvious. Its remaining counterclaim, false advertising, survived summary
judgment because the claims on the website were literally false as to some
products, and there is no “de minimis damage” exception to the Lanham Act. [The
real issue here sounds like it might be materiality.] “[A]n inability to show
actual damages does not alone preclude [ ] recovery” under the Lanham Act, but
the real issue was American Fireglass’s lack of evidence on lack of harm.
Moderustic sought summary judgment on the patent-based
Lanham Act/UCL claims. In the Ninth Circuit, “where Lanham Act claims … are
based on a defendant’s representation that someone infringed his patent,
plaintiff must show that defendant’s representation was made in bad faith.” Moderustic’s
statements in letters that it had been issued patents covering its methods
weren’t literally false—it had an issued patent at the time, and while the PTO
had rejected a different patent, “it was technically being reconsidered by the
Federal Circuit at that time the letters were sent” and the letter clearly
indicated its status. Thus, no reasonable jury could find the statements
misleading, especially since the second patent was duplicative of the first.
Nor was there evidence of bad faith. “Without a showing that
Defendant had some malicious intent, rather than simply asserting its rights as
the patentholder, the Court cannot find bad faith present here.” The same
result obtained under California’s UCL.

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