Falsity claim isn’t the ticket for cancelled concert

Posted on March 5, 2018 by rtushnet

Universal Attractions, Inc. v. Live Nation Entertainment,
Inc., 2018 WL 1089747, No. 17 Civ. 3782 (S.D.N.Y. Feb. 12, 2018)
Universal, an entertainment company, produced the I Love the
90’s tour, a series of concerts by various artists from the 1990s. Universal
engaged promoters throughout the US to work with Ticketmaster to market and
sell tickets to the show. Prices for the tickets ranged from “the low $20s to
hundreds of dollars depending on seating and perks offered[.]” For the Vina
Robles Amphitheatre in Paso Robles, tickets were priced to be sold for $65,
$75, and $150, along with a group of VIP tickets set to be sold for the PR
Venue, which ranged from $250 to $375 per ticket.
Ticketmaster sold tickets in two phases: pre-sales (before
availability to the general public) and general sales.   For pre-sales, “a select group of consumers
were given codes through e-mail, social media, or other means that could then
be used to unlock the relevant pre-sales offer.”  For at least two venues, Ticketmaster only
listed VIP tickets in the pre-sale period; those with the codes could access
and buy the cheaper tickets, but members of the general public only saw the VIP
tickets.  As a result, Universal alleged,
fans were “turned off” and the number that left Ticketmaster’s site without
purchase was uniquely high, and the conversion to sales was uniquely low.  The Pasa Robles operator ultimately cancelled
the show due to the lower than expected volume of ticket sales.
The court rejected Universal’s argument that Ticketmaster
deceived members of the general by presenting them with only the VIP tickets
during presales, causing them to leave without purchasing any tickets and not
return because they believed that the VIP ticket prices were the only ones
available.  Failing to disclose
information isn’t literally false, and it isn’t misleading unless it renders any
affirmative statements false or misleading. But “the lack (or presence) of
tickets at prices lower than the VIP tickets on Ticketmaster’s website during
presales has no bearing whatsoever on the veracity of the VIP ticket prices
themselves.” 
This reasoning seems to me to avoid the challenge of
Universal’s argument, which is that the list of available tickets for a
particular show implicitly (mis)represents that these are not just the
available tickets, but the full range of tickets that will be available, especially for members of the general public who
believe, correctly, that they can’t buy tickets at present.  That is, the listed prices implicitly represent
that these are the only sets of tickets which members of the public may be able
to buy once general sales begin.  Thus,
the listed prices became misleading
because of the context.   That is certainly plausible—most events, after
all, want you to come, and it seems logical that they’d advertise the cheap
available tickets if there were any to be had. 
Sufficient disclosure could have come in other ways than in listing all
the different prices that tickets would be available at in the future, though
that’s one way to do it.  But the key
point, reinforced by the alleged behavior of consumers in not bothering to
return to the site after sales began, is that ticket-buying consumers presume
that information about what tickets will be available when the sales begin is
complete information.

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Article in Judges’ Journal is opinion, not actionable under defamation or false advertising law

Posted on February 28, 2018 by rtushnet

Board of Forensic Document Document Examiners, Inc. v. American
Bar Ass’n, No. 17 C 01130, 2018 WL 1014510 (N.D. Ill. Feb. 22, 2018)
The Board of Forensic Document Examiners, and seven of its
members, alleged defamation by an article appearing in The Judges’ Journal,
published by the ABA. Members of the Judicial Division of the ABA receive a
complimentary subscription to the Journal. In August 2015, a special issue titled
Forensic Sciences – Judges as Gatekeepers focused on various subjects of
forensic science that judges might encounter when qualifying experts. One
article, Forensic Handwriting Comparison Examination in the Courtroom, was
written by defendant Thomas Vastrick, who is a forensic document examiner
certified by a different board, namely, defendant American Board of Forensic
Document Examiners. Vastrick also sits on the board of the American Board and
is one of its past presidents. The court commented that he really should have
disclosed that affiliation, but still there was no viable cause of action.
The plaintiffs challenged four statements as
defamatory/false light invasion of privacy/false advertising under state and
federal law:
An appropriately trained forensic
document examiner will have completed a full-time, in-residence training
program lasting a minimum of 24 months per the professional published standard
for training. Judges need to be vigilant of this issue. There are large numbers
of practitioners who do not meet the training standard.
The American Board of Forensic
Document Examiners … is the only certification board recognized by the broader
forensic science community, law enforcement, and courts for maintaining
principles and training requirements concurrent with the published training
standards. Be wary of other certifying bodies.
In a section captioned, “What to
look out for,” the statements, “Certified by board other than the American
Board of Forensic Document Examiners” and “Member of American Academy of
Forensic Sciences but not the Questioned Document Section.”
Plaintiffs challenged these statements as false based on the
required training standards for certification, their specific backgrounds, and
the courts’ previous acceptance of practitioners certified by the Board. The
author and editor allegedly knew that the statements in the article were false,
because both knew that the Board and the American Board were each certified by
the same accrediting entity, and that the Board abided by published training
standards for certification.
Defamation: An actionable statement must sufficiently
identify the person who is being criticized to a “reasonable individual”
reading the statement. If “extrinsic facts and circumstances” are needed to
show that a statement refers to a particular plaintiff, it’s not defamation per
se. The challenged statements didn’t identify any particular person by name,
let alone any of the plaintiffs. Plaintiffs argued that this was group defamation:
a statement can identify the persons in the group if the group is “sufficiently
small and the words may reasonably be understood to have personal reference and
application to any member of the group.” Plaintiffs’ group was around 12
diplomates certified by the Board.  But
that wasn’t enough, because the first challenged statement could reasonably be
interpreted to refer to any forensic document practitioner who has not
completed the specified training program—not just the twelve examiners
certified by the Board. It even says, “There are large numbers of practitioners
who do not meet the training standard.”
So too with the second and third statements, which promoted
the American Board without explicitly naming the Board.  Plaintiff Sulner claimed that he was the
specific target of the fourth statement, “look out for” someone who is a “Member
of American Academy of Forensic Sciences but not the Questioned Documents
Section.” Sulner alleged that he was the only certified forensic document
examiner “known to be” a member of the American Academy of Forensic Sciences
but not a member of the Questioned Documents Section (because members can only
be in one section and as an attorney he was in the Jurisprudence section). But anyone who is a member of the American
Academy of Forensic Sciences but not the Questioned Documents Section fit into
the statement.  Also, Sulner didn’t
allege that a reasonable reader somehow has access to all the relevant
information and thus would interpret the statement to target him. “Even if some
extraordinarily enterprising reader of The Judges’ Journal pieced all of that
together, where a ‘speaker is meticulous enough to preserve the anonymity of an
individual … the speaker should not be exposed to liability for defamation
because someone ferrets out the identity of the individual.’”
Separately, the statements constituted non-actionable
opinion.  The court first framed the
overall context: it’s a “scholarly” journal, setting the stage for the article
to be received as opinion, “because reasonable readers (especially judges) know
that scholarly journals often present one side or the other in opinionated
debates.” And the relevant article explicitly presented itself as offering
suggestions for judges to consider in evaluating the expertise of document
examiners. The intro for “What to look for” and “What to look out for” “employs
the language of opinion, not hard facts”: “While judges are responsible for
being court gatekeepers, I, as a practicing forensic document examiner, would
like to respectfully suggest ways to differentiate between the true
professional and the lesser-qualified practitioners.” The entire section of the
article was called, “Gatekeeping Tips from a Practitioner,” indicating that
this is the author’s viewpoint.  
The individual statements also used the language of opinion,
such as “appropriately trained
forensic document examiner” (emphasis added), and “recognized by the broader
forensic science community, law enforcement, and courts ….”  There was no way to verify the American
Board’s “recognition” in the community, and the sweeping breadth of the
statement made it even less fact-like/verifiable.  The third and fourth statements were part of
the section “What to look out for,” which already spoke in the language of an
opinion. And the intro sentence says that the author “suggests” that judges
look for certain things to distinguish between a “true” professional and “lesser”-qualified
practitioners. “Suggests,” “true,” and “lesser” “all signify that Vastrick is expressing
his opinions in offering the lists.”
Without a factual statement, the false light and state-law
false advertising claims also failed, as did the Lanham Act claim–without even needing to address the question of whether the article constituted “commercial advertising or promotion.”

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NY AG proceeds against Charter for throttling providers while boasting of internet speeds

Posted on February 27, 2018 by rtushnet

 People v. Charter Communications, Inc., No. 450318/2017
(N.Y. Sup. Ct. Feb. 16, 2018)
Charter allegedly defrauded New York consumers by promising high-speed
Internet services and reliable access to online content that it knew it couldn’t
or wouldn’t deliver, in violation of Section 53(12) of the NY Executive Law and
sections 349 and 350 of the GBL.  Defendant Spectrum-TWC advertised specific
Internet speeds, available in tiers ranging from 20 to 300 megabits per second
(Mbps), with higher fees for faster-speed tiers. Spectrum-TWC assured
subscribers not only that they could achieve the advertised speeds, but that
subscribers were guaranteed “reliable Internet speeds,” delivered “consistently,”
“without slowdowns,” and otherwise without interruption. Spectrum-TWC assured
subscribers that the promised speeds would be delivered anywhere in their
homes, at any time, and on any number of devices, regardless of whether the
subscriber connected by wire or wirelessly.
However, for many customers, the promised Internet speeds
were allegedly impossible to attain because of technological bottlenecks for
which Spectrum-TWC was responsible. First, defendants determined that the older
generation modems they leased to many of their subscribers were incapable of
reliably achieving Internet speeds of even 20 Mbps per second. Spectrum-TWC’s modem
“replacement” program allegedly resulted in 900,000 subscribers continuing to
pay for promised speeds beyond the technical capabilities of their Spectrum-TWC-provided
modems, as Spectrum-TWC knew.
Second, Spectrum-TWC also failed to maintain its network as
necessary to deliver the promised speeds. Although Spectrum-TWC allegedly knew
the precise levels of network congestion at which customers would be prevented
from achieving the promised speeds, it deliberately hid and exceeded those
congestion levels to save itself money.
Third, due to older or slower wireless routers it provided,
and other technological limitations, Spectrum-TWC allegedly knew that its
subscribers could not achieve the same speeds wirelessly as through a wired
connection, as confirmed by at least three independent tests of Internet speed.
Next, Spectrum-TWC allegedly represented that its
subscribers would receive reliable, uninterrupted access to the Internet content
of their choice, but failed to deliver on these promises. Spectrum-TWC’s
assurances of reliability were allegedly specific and unconditional,
guaranteeing access to specific content with “absolutely no buffering,” “no
lag,” “without interruptions,” and with “no downtime.” “These promises were
explicitly tied to the delivery of some of the Internet’s most popular content,
including Netflix and online games, and Spectrum-TWC’s advertisements
prominently featured such content as being accessible without interruption.” Yet
Spectrum-TWC allegedly failed to maintain enough network capacity in the form
of interconnection ports (where one network connects to another) to deliver
this content as promised. It also allegedly “throttled” access to Netflix and
other content providers by allowing those interconnection ports to degrade,
causing slowdowns, then extracted payments from those content providers as a condition
for upgrading the ports. Spectrum-TWC’s subscribers thus suffered, generating thousands
of consumer complaints to NY’s AG.
The FCC regulates broadband Internet access service (BIAS)
providers like defendants in various ways, including requiring them to “disclose
accurate information regarding the network management practices, performance,
and commercial terms of [their] broadband Internet access services sufficient
for consumers to make informed choices regarding use of such services.” They
must disclose “expected and actual access speed and latency,” as well as
accurate monthly subscription rates and usage-based fees. The FCC established a
“safe harbor” program called Measuring Broadband American (MBA) to “measure the
actual speed and performance of broadband service,” and stipulated that a BIAS provider
could satisfy the transparency standard by “disclos[ing] data from the project
showing the mean upload and download speeds in megabits per second during the ‘busy
hour’ between 7:00 p.m. and 11:00 p.m. on weeknights.”  The FCC’s 2015 Open Internet Order states that
the FCC “expect[s] that disclosures to consumers of actual network performance data
should be reasonably related to the performance the consumer would likely
experience in the geographic area in which the consumer is purchasing service.”
The FCC also created a “Broadband Nutrition Label,” a second “voluntary safe
harbor for the format and nature of the required disclosure to consumers,”
modeled on nutrition labels used for food products. BIAS providers provide
consumers with the format for an easy-to-understand label that discloses a
service plan’s “typical speed[s],” i.e., “typical speed downstream,” and “typical
speed upstream,” which reflect averages measured during the peak usage period
of the service”
However, FCC regulations clarify that the provider could
still be found in violation of federal law if the content of the disclosure is “misleading
or inaccurate,” or if the provider “makes misleading or inaccurate statements
in another context, such as advertisements or other statements to consumers.”
TWC-Spectrum argued that it advertised only “up to” certain
maximum speeds (as measured in Mbps), and that it relied on the FCC’s safe
harbor to substantiate these performance claims. TWC-Spectrum further asserts
that the MBA reports regularly showed that its actual speeds, based on mean or median
peak-period speeds,met or exceeded the maximum advertised speeds. TWC-Spectrum also
participated in the FCC’s safe-harbor consumer labeling program.
The court rejected defendants’ conflict preemption argument.
They contended that the central allegation underlying the complaint is that Spectrum-TWC
failed to deliver the broadband speeds advertised to its customers, but this allegation
depended on methodologies for calculating actual broadband speeds starkly
inconsistent with the federal methodology. “[T]he ‘starting presumption is that
Congress does not intend to supplant state laws,’ unless its intent to do so is
‘clear and manifest,’” especially for state efforts to enforce consumer
protection laws. Spectrum-TWC didn’t identify any statutory provision that
preempts state anti-fraud or consumer-protection claims, and indeed there was a
broad savings clause.
“An administrative agency cannot exceed the authority
Congress has granted it,” so the FCC couldn’t preempt state consumer protection
law either. Though defendants argued that NY’s contentions “thwart[]” the FCC’s
purposes and objectives in promulgating the Transparency Rule, and that it would
be “impossible for broadband providers in New York to rely on the FCC’s safe
harbors without running afoul of state law,” “the FCC’s purposes and objectives
are irrelevant to the preemption analysis where, as here, Congress has
expressly preserved state laws.” Plus, the Transparency Rule recognizes
concurrent state authority over deceptive practices; although the Transparency
Rule requires certain performance disclosures by BIAS providers, it doesn’t
provide a safe harbor for statements outside those disclosures. The Rule provides
a limited federal “safe harbor” from FCC enforcement actions on transparency
grounds for broadband providers who participate in the MBA program, insofar as their
official disclosures comply with the “format” specified by the FCC. But there’s
no insulation from liability for misrepresentations made in other consumer
communications; the FCC specifically explained that “providers may still be in violation
of FCC rules if the content of their labels is misleading or inaccurate or if
they make misleading or inaccurate statements to consumers in ads or elsewhere,”
and that “a provider making an inaccurate assertion about its service
performance in an advertisement, where the description is most likely to be
seen by consumers, could not defend itself against a Transparency Rule
violation by pointing to an ‘accurate’ official disclosure in some other public
place.”
Separately, Spectrum-TWC’s preemption argument didn’t apply to
the claims relating to modem failures, wireless failures and service
reliability failures, because those claims were entirely unrelated to
Spectrum-TWC’s Transparency Rule disclosures, as well as claims relating to
service failures in the 100, 200, and 300 Mbps plans, which weren’t comprehensively
measured by the MBA program, and were thus not part of Spectrum-TWC’s Transparency
Rules disclosures. As for the remaining claims, “the FCC’s goal of promoting
competition through the Transparency Rule is not thwarted by state laws that
require broadband providers to speak truthfully.” New York’s laws don’t require
Spectrum-TWC to disclose anything, but only demand that defendants refrain from
fraud, deception, and false advertising when communicating with New York
consumers.
What about the NY AG’s alleged use of “metrics that cannot
be squared with federal law, which looks to the average peak-period speeds
measured by the MBA as the appropriate way to measure and describe actual
broadband performance”? First, many of the allegations of the complaint explained
why the disclosures were deceptive, without reference to particular speed tests.  Second, NY wasn’t challenging the “typical
speed downstream” and “typical speed upstream” disclosures made by Spectrum-TWC
in the format specified by the Transparency Rule, but rather its TV ads ads in
other media “that conveyed the overall impression that subscribers would have ‘consistent’
or ‘reliable’ service at the speeds advertised for the plans that they paid
for.” There was conflict with the purposes and objectives of the Transparency
Rule.
Defendants also argued that federal law preempts state
regulation of interconnection disputes, and that NY was trying to do so by
alleging that Spectrum-TWC deceived its customers by “fail[ing] to maintain
sufficient ports at its interconnection points with backbone and content
providers” and knowingly causing “interruptions and slowdowns during peak hours.”
This argument was “baseless.” NY wasn’t trying to regulate bilateral agreements,
but regulating Spectrum-TWC’s advertising that specific online content would be
swiftly accessible through its network, while it was simultaneously
deliberately allowing that service to degrade that service and failing to
upgrade its network’s capacity to meet demand for this content.  An internal email, for example, observed that
the company’s approach to intentionally delaying capacity upgrades “may be
artificially throttling (subscriber] demand.”
Next, Spectrum-TWC argued that it advertised its broadband
service plans as providing speeds “up to” a particular speed, so reasonable consumers
should have expected to receive the advertised speeds or less.  That conflicted with NY law on “up to” claims
where, as alleged here, the advertised “up to” speeds were functionally
unattainable as a result of the defendants’ knowing conduct. In a consumer
fraud action, the phrase “up to” does not reflect a maximum, but expresses a
representative amount a consumer would receive. The NY AG alleged this to be what
consumers expected, and also that Spectrum-TWC knew it couldn’t meet those
expectations. FTC pronouncements are persuasive authority in the context of
consumer protection suits brought under GBL sections 349 and 350, and the FTC
interprets “up to” language similarly.
Spectrum-TWC argued that its statements about speeds,
reliability and access to content were mere “puffery.” It cited claims to have
a “blazing fast, super-reliable connection” and campaigns that said “[e]njoy
Netflix better” or “[s]tream Netflix and Hulu movies and shows effortlessly.” But
“advertising claims that are easily capable of being proved to be true or false
through common testing methodologies are, by definition, not puffery,” and statements
such as “no buffering,” “no lag,” with “no slowdowns,” “without interruptions,”
and “without downtime” “are all highly specific claims that are easily capable
of being proven to be true or false through common testing methodologies, and,
by definition, are not puffery.” The puffier statements couldn’t be read in
isolation; it’s the net impression that matters.
Finally, the court declined to stay the action in deference
to the FCC’s “primary jurisdiction” over this suit. This doctrine was irrelevant,
given that the case involved “purely state law claims over which the FCC has
neither jurisdiction nor expertise, and which involves misrepresentations in
advertisements and other media not governed by FCC regulations.” The heart of
the case was not a “complex and technical question[] of engineering and policy,”
but a traditional deceptive practices claim that falls traditionally within the
“conventional competence of courts.”
Even net neutrality repeal didn’t change things; the FCC’s
order said: “[a]lthough we preempt state and local laws that interfere with the
federal deregulatory policy restored in this order, we do not disturb or displace
the states’ traditional role in generally policing such matters as fraud,
taxation, and general commercial dealings, so long as the administration of
such general state laws does not interfere with federal regulatory objectives.”

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Reading list: further on global mandatory fair use

Posted on February 27, 2018 by rtushnet

Tanya Aplin & Lionel A. F. Bently, Displacing
the Dominance of the Three-Step Test: The Role of Global, Mandatory Fair Use,
Forthcoming in Wee Loon Ng, Haochen Sun, and Shyam Balganesh (eds) Comparative
Aspects of Limitations and Exceptions in Copyright Law (CUP, 2018).
Article 10(1) of the Berne
Convention mandates a quotation exception that is broad in scope, one that is
not limited by work, nor type of act, nor by purpose, and is only subject to
the conditions in Article 10, namely, the work has been lawfully made available
to the public, attribution, fair practice, and proportionality. We call this
“global, mandatory fair use”. This overlooked norm in international copyright
law is unaffected by and distinct from the three-step test and, as such,
potentially dislodges its dominance. In turn, this creates different
possibilities for how to conceive of and assess copyright exceptions at
national level. To substantiate our argument, this chapter is structured in
three parts. Part I outlines our underpinning contention, namely, that Article
10(1) creates a global, mandatory “fair use” type obligation. Part II explains
why this obligation is unaffected by the three-step test in international
copyright law. Finally, in Part III, we draw out the differences between
Article 10(1) and the three-step test and illustrate the potential relevance of
this for national law using the specific case of U.S. “fair use”.

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University-adjacent is not university-approved in supplement ads

Posted on February 27, 2018 by rtushnet

Obesity Research Institute, LLC v. Fiber Research
International, LLC, 2018 WL 1001089, No. 15-cv-00595 (S.D. Cal. Feb. 21, 2018)
Despite the high-falutin’ names, the parties compete in the
market for glucomannan dietary supplements. Glucomannan is a soluble-viscous
fiber derived from the Konjac plant root used in weight loss supplements. The
parties agree that numerous studies have shown that at least some types of
glucomannan are effective for losing weight, but dispute whether different
types, grades, places of origin, processing procedures, and/or characteristics,
including viscosity, of the specific glucomannan products alter its
effectiveness on weight loss.
ORI’s former products sourced glucomannan from another company, Shimizu. Currently,
ORI sells its supplements branded as Lipozene, which is not manufactured with
Shimizu’s glucomannan.  ORI (with a
supplier) funded a study purporting to find significant weight reductions, of
which 78% was fat, using Shimuzu-supplied glucomannan.  ORI references the study in promoting
Lipozene, characterizing it as a “major university double blind study.”
Lipozene’s packaging stated that there are “[n]o known allergens in this
product.”
Shimizu assigned any false advertising claims it might have
to FRI, as well as the rights to distribute its glucomannan. The court found that FRI had statutory standing under the
Lanham Act to bring claims on behalf of Shimizu.  Though trademark claims require “an interest
in the asset allegedly harmed,” under §43(a) standing is broader.  Under Lexmark,
Shimizu had standing: it invested millions of dollars into developing its
products, and created a relationship with FRI to serve as its newest U.S.
distributor, largely because FRI was in a stronger position to “launch
direct-to-consumer” products than Shimizu, given its location in Japan. Though it
isn’t a direct competitor with Lipozene, Shimizu also distributes glucomannan and
supplies glucomannan to FRI, who seeks to compete with Lipozene in the
glucomannan supplement market. Thus, Shimizu likely suffered an injury to a
commercial interest in reputation or sales and ORI proximately caused Shimizu’s
injuries by using a clinical study analyzing Propol to sell an allegedly inferior
glucomannan product. “Because a valid assignment allows for an assignee to ‘stand
in the shoes’ of the assignor, the Court finds FRI has standing to proceed with
Shimizu’s Lanham Act claim.   
FRI also showed standing to sue on its own
behalf.  FRI’s declarations included
testimony that “[a]s a direct result of ORI’s use of claims derived from the
Propol® studies to sell an inferior product, FRI has been unable to make
inroads into the direct to consumer glucomannan supplement marketplace.” Though
FRI didn’t have a sale when it counterclaimed,
having a sale is not the sole
mechanism for standing under the Lanham Act. The law is clear that a party does
not need to show a loss of sales. Moreover, a lack of sales is consistent with
FRI’s alleged economic injury that it was shut out of the glucomannan
supplement market because of ORI’s false advertisements. Based on the evidence
presented, a reasonable juror could find that FRI sought to enter the
glucomannan supplement market, but found it was blocked from doing so in part
by ORI utilizing a clinical study on its exclusive source of glucomannan.
Though the Court didn’t consider FRI’s post-counterclaim activities
for standing purposes, its later market activities were consistent with its
claims: it registered a website, launched a direct to consumer Propol, and made
a sale.
Falsity: FRI challenged a bunch of ORI’s statements
allegedly based on clinical studies; instead of studying Lipozene, the key
studies (by Kaats & Walsh) evaluated Shimizu’s Propol-branded glucomannan,
a distinct product. ORI disagreed, arguing that the product was the same and
that it used the specifications from the Kaats Study as a guide and “floor” for
the ingredients they ultimately chose. These disputes were best presented to a
jury, so the court denied summary judgment.
ORI also advertised that the Kaats Study is a “major
university study.” But the study was conducted by Dr. Kaats’s then-private
clinical research organization. ORI responded that the study’s design was
approved by Texas Women’s University’s IRB and that two of the named reviewers
of the study were affiliated with two major universities—Georgetown University
and the University of Texas.  Nope.  Kaats stated that he isn’t affiliated with a
major university, that no university was involved in the measurements for the
study, and that he does not consider the study a university study (and even
told ORI to stop calling his study university sponsored).  There was no evidence that IRB involvement “transforms
a study’s sponsorship or affiliation into that of the IRB,” or that a
reviewer’s affiliation with a university allows the study to adopt that
university’s affiliation or sponsorship.  FRI was entitled to summary judgment on the
falsity of this claim.
ORI also advertises that, in the Kaats Study, the test
subjects were “asked not to change their lifestyle” and “asked not to change
their diet or exercise” and lost weight anyway. FRI argued that this statement was
literally false because the test subjects were given no instruction—one way or
another—as to their lifestyle, including diet and exercise. In fact, the study
states that “participants were free to follow any diet/exercise plan of their
own choosing.”  The court found literal
falsity: ORI sought to communicate that study participants “were affirmatively
asked not to change their diet and exercise, implying that any weight lost
while taking Lipozene could not be due to a lifestyle change.” But that message
is not true, although a jury could find it immaterial.
FRI also challenged ORI’s “pure glucomannan” claims such as “Take
pure Glucomannan from the finest Konjac Plants and see results” and “Lipozene
is made with 100% pure Glucomannan, which comes from the root of the Konjac
plant.” Lipozene is made of a combination of ingredients, with the majority
being glucomannan.  No reasonable jury
could find literal falsity—the message was that Lipozine was “made with”
glucomannan, not “made entirely of” glucomannan, and there was no evidence of
actual deception, so that falsity claim was gone.
Finally, ORI claimed that Lipozene contains “no known
allergens,” but FRI argued that it contained excessive sulfite levels, which qualify
as a “known allergen” under FDA regulations. The court couldn’t grant summary
judgment either way; FRI didn’t show that these FDA requirements should apply
to ORI’s statement, and ORI didn’t show that the absence of “major food
allergens” was the same as having “no known allergens.” A jury could find that
this statement only applied to the commonly known major food allergies, such as
nuts, milk, and other common allergies, or that it instead meant additional
irritants, such as sulfites.
Deception: falsity and deception are linked; “[t]he
expenditure by a competitor of substantial funds in an effort to deceive
consumers and influence their purchasing decisions justifies the existence of a
presumption that consumers are, in fact, being deceived.” FRI was entitled summary
judgment as to the deception element of its Lanham Act claim for the “major
university” and “no lifestyle change” statements.
Materiality: The court mostly declined to find that, as a
matter of law, the challenged statements were material, but neither did ORI
show immateriality. For the false-as-a-matter-of-law statements, “major
university study” and “no lifestyle change,” FRI argued that false claims were
presumed to be material, but the court disagreed, and anyway ORI rebutted such
a presumption for the “no lifestyle change” statement by arguing that the
difference between the true and false statements wasn’t material to a consumer.
Though “extensive” empirical evidence isn’t required, FRI needed something.  Nor was “no lifestyle change” an “inherent
quality or characteristic” of the product in the same way as statements
relating to Lipozene’s product composition and proven effects on weight loss.  However, the court did find that no reasonable
jury could find that “major university” was immaterial. “[A] ‘major university’
affiliation invokes a level of legitimacy and assurance for a consumer that
would likely affect a consumer’s decision to purchase Lipozene,” which
accounted for ORI’s desire to have a “university affiliated” study.
Although there was a genuine issue of material fact as to
whether FRI and Shimizu were likely injured, they failed to show irreparable
harm absent injunctive relief. Even assuming the Ninth Circuit would still
presume irreparable harm from falsity [no], ORI rebutted the presumption, so
the issue was best suited for a jury.

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Crowning inglory: no trade dress in short-lived ads

Posted on February 27, 2018 by rtushnet
EZ Pedo, Inc. v. Mayclin Dental Studio, Inc., No.
16-cv-00731, 2018 WL 934552 (E.D. Cal. Feb. 15, 2018)
EZ-Pedo sells “prefabricated pediatric zirconia crowns,”
which are colorless, durable, all-ceramic crowns that mask disfiguration or
stains on children’s teeth. Mayclin sells similar pediatric zirconia crowns
under the business name Kinder Krowns.  EZ-Pedo sued over the copying of several ads
it made from stock photos, but its trade dress claims failed.
EZ-Pedo used the “Beach Girl” ad at the 2014 annual meetings
of the California Society of Pediatric Dentistry and the American Academy of
Pediatric Dentistry; both organizations also featured the Beach Girl
advertisement in their trade journals; and EZ-Pedo displayed the image on
secondary pages of EZ-Pedo’s website. EZ-Pedo alleged that it stopped investing
in this “trade dress” within four months after its first use, after discovering
Kinder Krowns had used it in AAPD’s July 2014 print journal.
EZ-Pedo’s “Gears” design is in an ad that shows a photo of
metal gears plaintiff downloaded from a third-party website; the photograph is
placed beside the slogan, “engineered for a precision fit,” and Kinder Krowns
allegedly copied it to advertise its “Less Prep” crown line on its company
website, causing EZ-Pedo to abandon it after about a year.   The
“Blue CAD” design depicts a computer-aided drawing of a deep-blue-colored tooth
with visible contours. The image was created with 3Shape 3D Viewer, and deep
blue is one of three default color choices. 
The image was featured in print ads, trade-show banners, brochures,
flyers and on its website. Kinder Krowns allegedly copied the Blue CAD trade
dress to advertise its own line of “Less Prep” crowns.    
Beach Girl ads

Blue CAD images

Gears
Promotional flyers/ads could in theory be
covered by trade dress protection; courts have said as much about a website’s
“overall look and feel.” Nonetheless, the burden of establishing protectability
is a serious one.  EZ-Pedo argued that
its ads were inherently distinctive trade dress because each contains
“beautiful, glamorous, fanciful, recognizable” imagery.  But it couldn’t meet the “demanding”
standard; Wal-Mart cautioned against
vague tests for inherent distinctiveness. 
At least inherently distinctive trade dress requires “manifestly unique
arrangements,” and a plaintiff can’t just point at an “overall look”; it must
“articulat[e] the specific elements which comprise its distinct dress.”    EZ-Pedo’s claims couldn’t meet this standard.  For Beach Girl, adjectives like “unique” and
“distinctive” weren’t sufficiently specific. 
“As currently defined, the court and competitors remain in the dark as
to what EZ-Pedo purports to own. Are competitors never to advertise using the
same third-party stock photograph? Can they use the same photograph, but pair
it with different text, logo and company information?” Vague descriptions may
also cause “jurors viewing the same line of products [to] conceive the trade
dress in terms of different elements and features” and so the verdict may drive
from “inconsistent findings.”  

Nor was there a
triable issue on secondary meaning. “Not one of its promotional advertisements
was on the market for more than a year before the alleged infringements
happened.” That was too short, especially given the lack of any consistent
theme in the ads and indeed the drastic differences among them.  Nor were any of the ads ever placed on
EZ-Pedo’s product or product packaging, “further weakening any association.”  And there was no direct evidence of any consumer meaning, let alone meaning
to a substantial portion of consumers.  A
vague, self-serving declaration from EZ-Pedo’s founder that “[t]he pediatric
dentistry community has come to associate the Blue Crown CAD imagery with
EZ-Pedo’s products. I know this…from specific conversations I have had with
purchasing pediatric dentists who have stated they recognize the Blue Crown CAD
as symbolizing our products,” was insufficient. So too with claims of
“thousands” of ads distributed and “substantial time and energy” promoting the
imagery. “[P]rominent display” in a trade journal “is not the kind of media
coverage that shows the ‘enthusiasm and loyalty’ of plaintiff’s customers.”  

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Sanderson can’t chicken out of false advertising claims

Posted on February 26, 2018 by rtushnet

Organic Consumers Assoc. v. Sanderson Farms, Inc., 2018 WL
922247, No. 17-cv-03592 (N.D. Cal. Feb. 9, 2018)
OCA sued Sanderson, a poultry processor, over ads that
allegedly mislead consumers about the nature of Sanderson’s chicken products
and farming practices. OCA and co-plaintiffs FoE, and CFS are non-profit
organizations that “work to safeguard the rights and promote the views and
interests of socially responsible consumers and farmers.”  OCA challenged claims that Sanderson’s
chicken is “100% Natural,” has no “hidden ingredients,” and that “at Sanderson
Farms, being 100% natural means there’s only chicken in our chicken.” In TV
ads, two men wearing Sanderson Farms baseball caps make comments such as, “no
antibiotics to worry about here” and “good, honest chicken.” But USDA testing found
49 instances in which Sanderson’s products tested positive for antibiotics,
pharmaceuticals, and other unnatural substance residues, causing the plaintiffs
to undertake efforts to warn customers and educate the public about the true
nature of Sanderson’s products and chicken raising practices.
The court found organizational standing under the UCL and
FAL, which is available where there is  “(1) frustration of [the plaintiff’s]
organizational mission; and (2) diversion of its resources” to combat the
challenged actions by defendant. OCA’s research into Sanderson’s farming practices
and advertising, preparation of internal memoranda, strategy meetings, and coordination
of a multi-organization consumer outreach plan diverted resources and staff
time away from OCA’s policy and consumer education work on other issues.  So too with the other organizational
plaintiffs.
The court also rejected Sanderson’s argument that state law
claims challenging its advertising were impliedly preempted by the Poultry
Products Inspection Act (PPIA) and Federal Meat Inspection Act (FMIA), given
the congressional intent to provide uniform national standards for monitoring
food producers and ensuring they do not mislead consumers as to the contents of
meat products. Also, the USDA approved the “100% Natural” language.
But consumer protection laws “are within the historic police
powers resting with the states and are therefore subject to the presumption
against preemption.” There was no manifest purpose to displace them, and
avoiding misleading advertising was consistent with the federal statutes’ aims
to ensure quality and proper labeling. And USDA approval wasn’t enough to avoid
misleadingness: “Label language is reviewed for technical and scientific
accuracy. Yet common sense suggests even ‘language that is technically and
scientifically accurate on a label can be manipulated in an advertisement to
create a message that is false and misleading to the consumer.’”  Also, Sanderson’s ads included “images,
representations, and language that go beyond what is included on the USDA
approved label.”
Plausibility: Sanderson argued that a reasonable consumer wouldn’t
interpret “natural” as stringently as the plaintiffs propose or be surprised to
learn that Sanderson’s products have trace amounts of synthetic materials like
antibiotics.  The court disagreed:
Plaintiffs alleged the existence of surveys indicating a majority of consumers
believe: a) a “natural” poultry product is produced without the use of
antibiotics or other drugs at any point; and b) it is important to reduce
antibiotic use in food production and improve the living conditions of animals.
The allegations were plausible.

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claiming to provide services then referring out can be false advertising, but P must still show harm

Posted on February 26, 2018 by rtushnet

Larry Pitt & Associates v. Lundy Law LLP, No.. 13-2398,
— F.Supp.3d —-, 2018 WL 925011 (E.D. Pa. Feb. 15, 2018)
The parties are Philadelphia-area law firms that advertise
for personal injury, social security, and workers’ compensation cases. Pitt
sued Lundy Law and its managing partner, L. Leonard Lundy (“Lundy), asserting
wrongful use of civil proceedings, false advertising, and trade secret
misappropriation. Lundy sought and received summary judgment.
“In Pennsylvania, unlike in many other jurisdictions, an
attorney or a law firm is permitted to refer a case to another attorney or law
firm and earn a portion of the clients’ fees without performing any work on the
case, so long as the arrangement is disclosed to the client and the fee is not
excessive. However, a law firm may not actively advertise in its own name for
certain categories of cases for the purpose of referring those cases to other
law firms.”  Lundy Law, a personal injury
law firm, has used the slogan “Remember this Name” and its mnemonic hotline
number 1-800-LUNDYLAW for years.
Lundy had agreements with other firms that they’d share in
the cost of Lundy Law’s advertising for social security disability cases in the
Philadelphia area, and Lundy Law would refer all of its potential social
security disability cases directly to the other firm in return for referral
fees; the most recent version of the agreement involved Lundy hiring a
part-time Social Security lawyer to handle up to five cases a month.  For workers’ comp, Lundy Law had a referral
agreement with the Law Offices of Lenard A. Cohen, P.C., under which Lundy Law
refers all its potential workers’ compensation cases in Pennsylvania to LOLAC
in exchange for a referral fee. Cohen himself has been covered under Lundy
Law’s liability insurance policy as “of counsel” to the firm since 2009 and
keeps Lundy Law business cards and a Lundy Law email address, as well as other
connections to Lundy Law.
Some Lundy Law ads featured 1-800-LUNDYLAW in large font
with the words “Injury and Disability Lawyers” or “Injury, Disability &
Workers’ Compensation lawyers,” in smaller font above or below the telephone
number. Some ads feature dtestimonials from purported social security
disability or workers compensation clients that they were glad they “remembered
the name.”  Some TV ads specifically promoted
workers’ compensation and social security disability services, e.g., “Lundy Law
gets you the social security benefits you deserve.”  Pitt asserts that all of these ads were false
and misleading because Lundy intended to refer, rather than handle, any
potential workers’ compensation and social security cases.
Separately, Lundy Law purchased ad space on SEPTA buses,
trains, and transportation stops for years, and throughout that time, Leonard
Lundy’s daughter, Sara Lundy, was an account executive at an ad firm. She
provided Lundy Law with photos of ads used by other law firms and information
on their locations as well as transit ridership information. Pitt alleged that
these disclosures constituted misappropriation of confidential information about
the advertising strategies of Lundy Law’s competitors, including Pitt.
False advertising, workers’ comp: Pitt didn’t raise a
genuine issue on material falsity/misleadingness.  Pitt didn’t show that the nature of Cohen’s
relationship with Lundy “differed materially from a consumer’s reasonable
understanding of the relationship between a law firm and its attorneys,” since
a potential client “would meet with an attorney physically present in the
office and would have recourse to Lundy Law’s malpractice insurance for the
attorney’s conduct, if necessary.”
Social Security: There was no evidence of consumer
deception, so Pitt had to rely on literal falsity. Most of Lundy’s statements
were too general/ambiguous to qualify, but there were a few more specific
statements in TV ads such as “Lundy Law gets you the social security benefits
you deserve. • We’ll help you through the process. That’s what we do.”  Although Lundy argued that the ads didn’t
indicate that Lundy employees would “themselves handle the viewers’ social
security disability claims from beginning to end,” “when a law firm releases a
commercial directed specifically at social security disability cases, and tells
viewers that it will help them through the process of obtaining social security
benefits because ‘that’s what [they] do,’ such a message necessarily implies
that lawyers within the law firm handle their clients’ social security claims.”
And if Lundy didn’t handle any aspect, that was literally false. So too with
Lundy’s listing “social security” among its “practice areas”: “it unambiguously
implies that attorneys at the firm handle cases within that practice area.”  Between late  2008 and late 2013, Lundy Law referred all of
its potential Social Security cases directly to other law firms, creating a
genuine issue on literal falsity.  But
after that, a part-time attorney came on to handle Social Security cases; even
if she handled only a few, the post-2013 ads didn’t “unambiguously represent
that the firm would take on more than five cases per month.”
But Pitt couldn’t show damages: it had to show a causal link
between its alleged injury and Lundy’s specific misrepresentations by showing
that Lundy’s statements actually deceived and influenced consumers. Evidence
that potential clients responded to Lundy Law’s advertisements wasn’t enough to
show that the clients relied on any of the specific false representations. And
there was no evidence linking an increased Social Security intake to the use of
any specific ads; it might have resulted from Lundy’s non-false advertising,
such as the firm’s more general “injury & disability lawyers” ads or its
personal injury ads. This defeated Pitt’s damages claim, and also its request
for disgorgement of profits and corrective advertising.  
There was no reason to proceed to trial for injunctive
relief; though Lundy could once again farm out all its Social Security cases
while misrepresenting that its attorneys handled those cases, there was no
evidence that Lundy intended to do so.

The same analysis applied to the state UCL deceptive marketing claim.
The trade secret claim failed because, while the nepotism
might concern Titan (the ad agency) and SEPTA, there was no evidence that any
of the information Sara Lundy shared with Leonard was confidential.  “[T]he content and location of a law firm’s
advertisements is generally intended to be public.”
The court concluded with a cautionary note: “In many
instances, a complaint to the state attorney disciplinary boards may be the
most effective means for quickly ending and sanctioning plainly unethical
conduct. Thus the Court’s decision should not be read to condone or excuse
Defendants’ alleged actions, but should instead serve as a reminder of the
burden that plaintiffs bear when they choose to seek relief against their
competitors in court.”

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When an author’s name isn’t CMI

Posted on February 26, 2018 by rtushnet

Fischer v. Forrest, Nos. 14 Civ. 1304, 1307, 2018 WL 948758
(S.D.N.Y. Feb. 16, 2018)
This very outdoorsily named and themed litigation arose out
of the termination of a longstanding business relationship between plaintiff
Fischer and defendants, including Brushy Mountain Bee Farm, alleging that they
used his likeness and proprietary text and images to promote their own
competing knock-off version of his product, Bee-Quick, a honey harvesting aid.  He sued for copyright infringement, 1202 CMI
violations, and false advertising/NY unfair competition. (Previous
discussion of report & recommendation here.)  The court adopted and elaborated on the “thorough
and persuasive Report and Recommendation.”
Fischer began using certain phrases in advertising on his
website in 2000. From 2002 onwards, Brushy used similar words to promote
Bee-Quick in advertisements. The parties disputed who wrote the ad copy. Around 2010, Brushy decided to sell its own version of the product,
Natural Honey Harvester, obtained from a third-party vendor. For purposes of
this lawsuit, the court then accepted that Brushy at that point no longer had any “right,”
“license,” or “permission” to use Fischer’s intellectual property, but Fischer
didn’t say that until April 2011, when he sent a C&D complaining about
copyright infringement.  Brushy responded
that “there [did] not seem to be grounds for [Fischer’s] request,” and that
Brushy would “review” Fischer’s concerns if he was more “specific.”
Photos of Bee-Quick remained on Brushy’s website until at
least January 2011, and images of Bee-Quick may have remained available on
Brushy’s website much longer (though it’s not clear whether any full pages used
those images).
In 2011, Brushy introduced its Natural Honey Harvester
product, using much the same language as before but with a different name, with
the intro “For years we have promoted the use of a natural product to harvest
honey but an unreliable supply of such a product has forced us to come out with
our own.” Fischer alleged that defendants removed CMI and that defendants’
alteration of their online and print advertisements altered CMI by replacing,
inter alia, the term “Fischer’s Bee-Quick” with “Natural Honey Harvester” in a
sentence describing the product.
Copyright: Fischer’s statutory damages claim failed as a
matter of law because his registration postdated the uncontested date of first
use of the allegedly infringing work. 
Fischer tried to get around this by arguing that Brushy didn’t lose its rights to use his works
when it announced to him its cessation of sales of Bee-Quick, but only until he
sent the C&D (which was after his registration).  But this argument wasn’t available at this
late date, when Fischer’s complaint pled directly contrary to that theory, and
it was too wasteful to allow a fully briefed and decided issue to be completely
changed now; “[a] proceeding before a magistrate judge is not a meaningless
dress rehearsal.”  The changed theory
would be even more wasteful because to decide it, the court would have to
figure out whether Brushy exceeded the scope of its license by using Fischer’s
material to promote Natural Honey Harvester, and thus infringed, before
2012.  And, the court noted, Fischer had
consistently contended that these acts by Brushy were unauthorized; the court
had already found it highly improbable “that Fischer[’s license] [would] allow[
] a competitor to repurpose original works he had created, copyrighted, and
continued to use to promote and sell his own product.”
Likewise, Fischer couldn’t claim statutory damages based on
secondary infringement based on the acts of third-party vendors. These
infringements were “part of a series of related infringements by defendants and
the [third parties] of the same copyrighted work” that predated Fischer’s
registration of his copyright. The fact that Fischer filed two separate
lawsuits, rather than consolidating his claims against Brushy into a single
lawsuit, didn’t change anything.
DMCA 1202: Fischer argued that Brushy removed CMI in
violation of § 1202 when, in revising its ads from promoting Bee-Quick to
promoting Natural Honey Harvester, it substituted, in a sentence, the term
“Natural Honey Harvester” for the term “Fischer’s Bee-Quick.”  CMI includes the name of the author or
copyright owner and can be “contained in the body of a work,” so “Fischer’s”
was capable of constituting CMI.  “But,
to qualify, the word or words said to constitute CMI must also be ‘conveyed in
connection with copies … of a work … or displays of a work ….’” and “[a]n
action for removal of copyright management information requires the information
to be removed from a plaintiff’s product or original work.” 
The works Fischer identified didn’t qualify.  Even assuming that the works Fischer
submitted in conjunction with his copyright registration were covered, no CMI
was removed from those or exact copies/displays of of them; instead, four
discrete phrases were allegedly copied.  
“In those cases where claims of removal of CMI have been held viable,
the underlying work has been substantially or entirely reproduced.” An ad “based
upon an earlier advertisement which in turn drew upon various materials Fischer
sent Brushy” is a kind of “composite” work not covered by 1202.  The four phrases themselves also couldn’t form
the basis of a DMCA claim.  “CMI exists
to inform the public that a work is copyrighted and by whom.” But the four
phrases weren’t CMI; only one even mentioned Fischer, and no reader would find
that “Fischer’s” as used in the phrase “Fischer’s Bee-Quick is a safe, gentle,
and pleasant way to harvest your honey” “speaks to copyright ownership” of that
phrase or the others:
Imagine that the back cover of the
Ian Fleming novel Dr. No. contained the following encomium: “In Ian Fleming’s
Dr. No, Fleming shows his mastery of Cold War spycraft.” Imagine then that a
person lifted language from that review to promote a different thriller,
writing: “In John Le Carré’s Tinker, Tailor, Soldier, Spy, Le Carré shows his
mastery of Cold War spycraft.” Whatever the other legal implications of such
conduct might be, it is inconceivable that a DMCA claim would lie from the
elimination of Fleming’s name. The expression at issue does not connote
Fleming’s copyright ownership of anything, much less the language common to the
two book-promoting blurbs. Fischer’s name—whose deletion Fischer’s DMCA claim
challenges—similarly has no CMI relevance as used in Defendants’ advertisement.
It neither informs the reader that Fischer wrote either the phrase to which
“Fischer’s” is attached or the surrounding text.
False endorsement: Fischer argued that defendants violated
the Lanham Act by including his name in the post-domain path of URLs that
linked to Defendants’ Natural Honey Harvester, e.g., http://brushymountainbeefarm.com/images/799fischers.jpg.  As a matter of law, Fischer couldn’t show
confusion. There was no evidence of actual confusion.  Fischer pointed to a review from Brushy’s
website stating that an later shipment of a product was not as good as an
earlier shipment, but there was no evidence that these were the parties’ respectively.  Fischer also failed to show that the
post-domain path names were the cause of Google search results, and his
evidence showed that Google provided mostly results for his product, which
would indicate that consumers wouldn’t be led astray.  His claims of initial interest confusion were
“factually threadbare” and failed to show intentional deception, which is
important online because consumers can so easily click back.
Bad faith: There was no evidence that the use of his name in
the post-domain URL was knowing; the use of existing URLs was inadvertent,
according to Brushy.  Although two
archived links on the website contain Fischer’s name, they don’t appear on any
webpage advertising Brushy’s products, and were retained to avoid spoliation
concerns.
Consumer sophistication: As the report indicated, “Whether
defined as the typical consumer of beekeeping products, or Internet users writ
large, no ordinary consumer is likely to see Fischer’s name in the post-domain
path of the URL and wonder if that signified his endorsement of a completely
different product in the accompanying web page.”  Plus, precedent indicates that post-domain
paths usually don’t signify source. 
Fischer argued that the continued use of a mark after the
termination of a licensing agreement should be a factor in his favor. Courts in
this district have indeed held that “[w]hen an ex-licensee continues to use a
mark after its license expires, likelihood of confusion is established as a
matter of law.” But here, Brushy hadn’t been using Fischer’s name as a
mark.  The per se rule of the former
licensee cases was inapplicable.
False advertising: Fischer argued that the “Come out with
our own” claim was false because Brushy bought its product from a third
party.   This statement wasn’t literally
false; it didn’t “unavoidably signify that the product offered by Brushy was
created in the first instance by Brushy.” Nor was there evidence of deliberate
deception or consumer confusion.

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Conference: administrative law/private law interface in IP

Posted on February 26, 2018 by rtushnet

The Administrative-Private Law Interface in IP,  March 29, 2018
A conference co-organized by the Project on the Foundations
of Private Law at Harvard
Law School and the University of Texas School of Law,
sponsored by Qualcomm Inc.

More info here.

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