Don’t send misappropriation to do copyright’s job

Alaskasland.com, LLC v. Cross, No. S­15270 (Alaska Sept. 25,
2015)
 
A realtor group listed property adjacent to a neighboring
subdivision, Susitna Shores, using three photos taken from the subdivision’s
marketing materials, including one showing the subdivision’s stylized entrance
sign.  The listing also contained a
property appraisal stating that (1) based on plat­related information, existing
legal access to the property might compromise the neighboring subdivision’s
gated community perimeter fencing, and (2) based on statements made to the
appraiser by employees of the local electric association, the neighboring subdivision’s
electric service might be subject to legal issues. The subdivision’s developer sued
for misappropriation of the photos, trade name infringement, and defamation.
The superior court granted summary judgment to the realtors, and the state
supreme court affirmed.
 
Of Susitna Shores’ 37 lots, 15 had been sold by the time the
superior court granted summary judgment in July 2013; the most recent sale was
in May 2011.  In 2009, a couple, the
Goodes, inherited property bounded on three sides by the subdivision and on the
fourth by the Susitna River.  Alaskasland
had unsuccessfully offered the previous owner $45,000 for it in 2007.  An appraiser appraised it at $150,000 and
noted that “[t]he electric service in the [Susitna Shores]  subdivision may be subject to legal issues due
to the lack of [Matanuska Electric Association] participation in construction
of the infrastructure.”  In addition, he
wrote, “the [Goode property] has an undeniable access right that crosses the
access to [the Susitna Shores] subdivision boat ramp — and that access could be
developed and probably left open, thereby defeating the gated subdivision.”
 
In August 2011, the Goodes listed their property for sale
with realtor Kevin Cross for $146,000. 
The Goodes didn’t provide any photos, so Cross’s assistant used photos
from the internet, specifically from Alaskasland’s website.  The appraisal was appended to the property
listing on a realtor-only website.  When
Alaskasland discovered that the Alaskasland photos were being used this way, it
promptly notified the multiple listing service of the improper use, and
contacted Cross about buying the Goode property.  Alaskasland’s GM offered to buy the Goode
property for $95,000, which offer the Goodes promptly rejected.  The Goodes cancelled their listing in
mid-December 2011; the appraisal remained on the MLS site until May 2013.  Shortly after Alaskasland sued, its GM
reached an agreement with the Goodes to purchase their property for $155,000.
 
Misappropriation claims based on copying the photos were
preempted by the Copyright Act. The photos were within the subject matter of
copyright, and there was no extra element distinguishing the misappropriation
claim from a copying claim.  Alaskasland
argued that there was an unauthorized use of its goodwill and reputation, but
that’s just a passing off claim (see below). 
It also argued that creating the sign in the picture took $40,000 and
that defendants engaged in free riding on its extensive advertising and
marketing efforts.  “But the
misappropriation of ‘sweat equity’ expended in the creation and advertisement
of a copyrightable work is ‘precisely the type of misconduct the copyright laws
are designed to guard against.’”
 
The superior court rejected passing off/trademark
infringement claims because “Susitna Shores” was geographically descriptive, and
Alaskasland’s failure to sell at least half its lots — and none in the prior
two years — “evidenced that its marketing efforts had failed to produce a
secondary meaning in the minds of the public.” 
The state supreme court wasn’t even sure Alaska recognized the common
law tort of passing off, but that didn’t matter because Alaskasland couldn’t
show damages.  The only relevant sale
here was Alaskasland’s own purchase of the property.  There was no evidence anyone was deceived,
and Alaskasland certainly knew that what it was buying wasn’t part of its
subdivision.  Even if dozens of people
viewed the Goode listing online, there was no injury shown from those viewings,
nor any indication that anyone who saw the photos expressed interest in the
Goode property or lost interest in Susitna Shores as a result. 
 
One of Alaskasland’s expert reports on damages assumed lost
licensing fees and lost advertising value, preempted theories.  A reasonable royalty measure of damages was
also inappropriate for passing off, as opposed to patent or trade secret; the
concrete sign that was allegedly appropriated was visible to anyone who went
by, and the calculation of a royalty didn’t itself show that an injury had
occurred.  Another expert claimed that
the photos and similar keywords diluted Susitna Shores’ online marketing
efforts—maybe this was a viable theory, the court said (ugh), but there was no
genuine issue of fact on this record that it had been harmed thereby.
 
Anyway, the standard remedy for infringement is an
injunction, and the injunction claim here was moot.
 
Finally, the statements in the appraisal were non-defamatory
opinions.  Alaskasland argued that the
statement about possible legal issues with electricity was defamatory because
the local government had actually accepted Susitna Shores’ electric service, so
it could not therefore be subject to “legal issues.”  Likewise, the claim that the Goode access
right could be developed and left open, defeating the gated part of “gated
subdivision,” was allegedly defamatory because “no matter how the Goode
Property was developed, Susitna Shores could always maintain the security of
its gated community and road.”
 
However, the type of language used indicated that the
appraiser’s conclusions were opinions. 
The electricity statement was made in the context of interviews with the
local government’s “staff,” but made clear that the appraiser only spoke to a
few people and didn’t find out all the possibly available information, e.g., “[t]he
exact nature of the difficulty, if any, was not disclosed by the staff member
interviewed.”  The phrase “may be subject
to legal issues” connoted the appraiser’s uncertainty.  Likewise, the gated security statement used
the cautionary and speculative terms “could be” and “probably.”
 
Context also confirmed that the statements were opinions: by
statutory definition, an appraisal is an opinion.  Furthermore, the appraisal was intended to
establish the value of the Goode property, and not intended to be read by
prospective purchasers of Susitna Shores’ lots. (Which also suggests that there’s
less need for reliance on statements about that property.)
 
Likewise, reference to possible future events signaled
unverifiable future opinion, not currently verifiable fact.  And, considering the broader social circumstances,
classification as opinion was appropriate, because appraisers serve an
important social function by clarifying the value of real estate; they should
therefore be free to express complete and candid opinions.  There are other safeguards against negligent
or incompetent appraisers, “and we decline here to invent a sweeping rule
making real estate agents vicariously liable for the alleged misdeeds of
appraisers upon whose appraisals these agents rely for their livelihoods.”
 
Finally, the opinions here didn’t imply the existence of
undisclosed defamatory facts supporting them. 
Instead, the appraiser revealed the underlying facts on which his opinion
relied.

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