use of P’s jewelry in D’s ad is regular passing off, not reverse passing off

Brighton Collectible, LLC v. Believe Production, Inc., 2017
WL 440255, No. 15-cv-00579 (C.D. Cal. Jan. 30, 2017)
Brighton sued Believe for infringing Brighton’s copyright in
a jewelry design and also engaging in false designation of origin/unfair
competition.  In particular, Brighton
alleged that Believe used photos of Brighton’s jewelry into the promotional
materials for Believe’s lower-quality jewelry. 
One Brighton collection includes a heart within a heart design, the Reno

Reno hearts from Brighton

Believe publishes product catalogues used in student
fundraisers.  Brighton alleged that the
infringing products were substantially similar to the Reno Heart earrings and
bracelet, but lower quality and priced lower. Believe sold 5,414 of the
bracelets (at $19.50) and 3,849 sets of the earrings (at $14), less than half
the price of Brighton’s analogous items.

Believe promo image from opinion
Promo image, Brighton heart, Believe heart side by side
Defendant sought to exclude the testimony of Robert
Wunderlich and Margaret Campbell regarding damages. Wunderlich was a principal
at Discovery Economics, a professional services firm that consults on economic,
financial, and accounting issues. 
Wunderlich estimated Brighton’s lost profits, including his calculation
that customers who purchased an item of jewelry from a Brighton retail outlet
also bought an additional 1.27 other items, on average.  Campbell would opine regarding “the
anticipated effects of knockoffs or imitation products on an authentic brand,” including
on likely confusion and on lower willingness to pay for Brighton products.
The court allowed Wunderlich’s testimony, which indicated a
decline in Reno Heart sales relative to Brighton’s other lines, even though
Wunderlich failed to account for all the possible other sources of lost sales.
He didn’t ignore something so central to the case as to make his opinion
inadmissible.  Also, the court allowed
him to testify about the 1.27 multiplier, which the jury might accept if it
made its own findings about how many sales Brighton lost.
The court also allowed Campbell’s opinions about the damages
she expected to follow from Believe’s alleged use of Brighton’s jewelry to sell
lower-quality products and the relative prices of Believe and Brighton’s
jewelry: lost sales and brand “dilution.” “Courts regularly permit marketing
experts to testify to the role of branding, distinctiveness, and design in
consumer behavior as well as what effects they would expect based upon the
facts of any particular case.”  Here, Campbell’s
opinion was sufficiently grounded in the evidence. Failure to conduct a
consumer survey didn’t undermine the reliability of her opinion.  (The court doesn’t explicitly discuss her
opinion on the likelihood of confusion. 
If the court is really allowing expert opinion on likely confusion to
substitute for a consumer survey, that’s an outlier.)
The court also found sufficient evidence of lost sales to
allow Brighton to proceed on its claim for actual damages.  Where a party’s marketing is misleading, there
may be “no need to require appellant to provide consumer surveys or reaction
tests in order to prove entitlement to damages.”  To recover lost profits, “a plaintiff must
make a ‘prima facie showing of reasonably forecast profits.’ ” Here,
There is evidence suggesting that
Believe disseminated nearly 700,000 sales catalogues nationwide wherein Believe
used photographs of Brighton products to sell similar, lower-quality jewelry
for less than half the cost of Brighton’s analogous Reno Heart products. After
Believe sold over 9,000 bracelets and earrings using photographs of Believe’s
copyrighted design, Reno Heart Collection sales declined at a higher rate than
Brighton’s other jewelry sales.
That was enough to create a material issue of fact. Plus,
Believe’s allegedly infringing sales provided an upper range for an award of
Believe argued that the unfair competition claim was
preempted by the Copyright Act.  Reverse
passing off—allegations that Believe sold Brighton jewelry as its own—would be
preempted.  But this allegation was that
“Believe’s sales of lower-quality, but confusingly similar products using
pictures of Brighton products gave them an unfair advantage in the marketplace
and constituted unfair competition.” That was regular palming off, and not
preempted.  (Under Dastar, does the allegation relate to the origin of the physical
objects, or the origin of the creative spark behind the objects?  Does the answer depend on whether consumers consider the bracelet they receive to be “the same” as the bracelet in the photo?)

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