Annotating competitor’s ad is fair use

Miller UK Ltd. v. Caterpillar Inc., No. 10-cv-03770 (N.D.
Ill. Oct. 21, 2015)
 
Miller sued Caterpillar for breach of a contractual
restriction on the use of Miller’s confidential information, for trade secret misappropriation,
and for fraudulent inducement. Caterpillar counterclaimed for breach of
contract, defamation, disparagement, tortious interference, false advertising,
and copyright infringement. Most interesting: the court granted summary
judgment on the copyright claim because an annotated copy of a Caterpillar ad
was fair use.
 
Miller “made a coupler that allowed earthmover and excavator
vehicles to attach shovels, buckets, and other attachments to their mechanical
arms quickly without requiring the vehicle operator to leave its cab.”  It entered into a supply agreement with Caterpillar
to make couplers that Caterpillar sold under its own name. Caterpillar allegedly
used proprietary information about the coupler to make its own version and then
terminated the supply agreement. After Miller sued, Caterpillar distributed a
brochure to equipment dealers that compared its new coupler favorably to other
couplers.  
 
Miller replied with its own communication package, including
a letter from Miller’s chairman claiming that the Caterpillar coupler was
potentially unsafe because it lacked a mechanical backup.  The accompanying video showed the failure of
a coupler connection, the dropping of a bucket, and the decapitation of a
hard-hat wearing life-sized dummy. There was also a document that purported to
be a third party safety test of the Caterpillar coupler, and an annotated copy
of the Caterpillar coupler brochure, highlighting Miller’s assessment of the
competitive and safety deficiencies of the Caterpillar coupler.
 
Copyright: Market effect is the most important factor. Kienitz
v. Sconnie Nation LLC, 766 F.3d 756, 758 (7th Cir. 2014).  Miller’s annotated version of Caterpillar’s
brochure had no effect on the value of the brochure,
as opposed to the value of the product touted by the brochure.  Plus, negative impact on the value of a work
by convincing the audience that the work is no good is not harm for purposes of
copyright.  Thus, the first factor (?)
weighed in favor of fair use.  “[T]he
commercial value to Miller and any resulting decline in the commercial value of
the original work resulted not from the value of the original, but from the
Miller additions. Such uses are not considered substitutes for the original
work and are encouraged by the fair use doctrine.” The nature of the work—an
ad—didn’t favor Caterpillar, though the wholesale copying did.  Without separately analyzing factor four, the
court found that the annotated brochure was fair use as a matter of law.
 
The disparagement, defamation, consumer fraud, and false
advertising claims against Miller survived because the truth or falsity of
Miller’s statements that Caterpillar’s coupler posed safety risks was not
resolvable on summary judgment. 
Moreover, Caterpillar showed that Miller’s package caused it to take
steps to mitigating the impact on customers, and its expenses were recoupable
as damages.  Therefore, Caterpillar
didn’t need to show lost sales or profits. 
Mitigation expenses also counted as special damage for defamation
purposes.  Miller allegedly said that
Caterpillar made an unsafe product, which would count as incompetence in
business, which could be per se defamatory.

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2 Responses to Annotating competitor’s ad is fair use

  1. Nancy says:

    Just finished reading the piece in last week’s NY Times magazine. As I am not an attorney, I am unclear what you have told us happened. Did Miller UK prevail? (I would like that.) Did Cat’s big gun counsel and deep pockets prevail?

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