WIPIP panel one: TM tarnishment and (c)

[title fixed because I can’t keep seasons straight]

Suneal Bedi, Bad Brands: Experimental Studies in Trademark
Tarnishment
What is the reputation of a mark?  Working on PhD in marketing at Penn;
marketing is the best discipline to answer this Q.  Brand associations and attitudes are the
reputation of a mark. TM isn’t just source indicator; it invokes nodes of
meaning.  Attitudes= liking;
associations= other meaning, like “Mexican” for Chipotle. Thinks that
tarnishing should have to affect preferences/attitudes—should move Chipotle
down in the ranked preferences/affect market share. So why not look just at
sales? The statute is focused on reputation, which is distinct from decreased
sales though it should predict such decreases. There can be instances of
reputation harm w/o harm to sales.  WIP
looks at isolating decreased sales; have to use sophisticated quantitative
methods. 
What predicts tarnishment? 1. Multiple exposures.  At minimal exposure, people don’t really
care. It’s an S shaped curve: middle exposure is high effectiveness; after that
there’s a saturation point, which is why it doesn’t matter for Pepsi to
advertise at the Super Bowl.  Tarnishment
is competitive advertisement harming the senior mark. But only awareness &
internalization of associations can do harm. 
A few exposures or one won’t affect reputation.  Empirical strategy: multiple exposures.
2. High cognitive load. 
Elaboration likelihood model predicts attitude change in 2 different
ways: (1) central (rational and thoughtful); (2) peripheral (positive or
negative cues, simple inferences). People use peripheral processing in times of
high cognitive load.  A double-take: your
mind is somewhere else, but as soon as you look close you aren’t really
confused. That’s an instance of high cognitive load, and that may predict
tarnishment.
Studies include pre-tested brand associations and attitudes
for several brands. Chick Fil A; fictional tarnishing brand, Chicks Fill A
gentleman’s club.  People prefer Chick
Fil A lower after exposure and find it to be less wholesome.  It makes it a little different but not a lot;
not on tastiness or liking at all. What happens about multiple exposures?  Embedded banner ads in news articles; asked
people to tell them about the news article—high cognitive load.  Zero ads v. 4 ads: Then there was an effect
on rank, tastiness, and liking.
[This is all an argument about the nonrational, nonfactual,
non-thought based nature of tarnishment which under current 1A doctrine should
put it off limits for the law, just as in the tobacco cases.]
Felix Wu: what implications for tarnishment cases?
A: courts aren’t using the right empirical evidence, or
requiring the right empirical evidence. Both under and overinclusive—actual
harm is underinclusive, but 6th Circuit’s presumptive harm is
overinclusive.  If it exists narrowly, Ps
must introduce good empirical evidence.
Lunney: The Streisand effect—most such uses you’d never hear
of except for the litigation.  Debbie
Does Dallas, Pillsbury Doughboy. 
A: The distribution of awareness—how many people see it;
also of the people seeing it, how many times they see it.  Both matter. 
People who saw the movie saw her once in the costume, according to
Lunney.  He says that it’s not therefore
likely to be tarnishing.
Q: what about the ridicule factor? It doesn’t necessarily
matter what the “tarnishing” is but just the challenge, mockery.
A: but how do we know it’s a mockery? Only if it’s
associated with something perverse. 
[Wacky Packages]
Lunney: is it ok to garrote the demand for something through
criticism, a la Campbell v. Acuff Rose?
A: Wal-Qaeda: Jacoby’s survey says there was tarnishment;
but overriding concerns like free speech matter.   Neutral on whether this is a good idea
(thinks it’s kind of dumb).  He’s ok with
tarnishment not being something the law regulates—the point of this was to
discuss the standard of proving tarnishment now, which is bad.
RT: Charts show 8 ad spike/recovery in ratings. 
A: he thinks it’s a demand effect b/c respondents started to
say “I think you were trying to get me to like Chick Fil A more” when he asked
them what they thought the survey was trying to prove when there were 8 ads. [This seems worth further investigation]
McKenna: what makes us think that consumers’ reactions have
anything to do w/the fact that it’s ads and not other things that might produce
exactly the same effect. [I noted that Victor’s Secret image he used was from
the Simpsons, not the actual Victor’s Secret shop.]  If there’s nothing unique about what the law
targets, it’s cherrypicking from the same activities.
A: what’s unique is that the point of using it is to draw
attention to the junior mark specifically people because people are aware of
it.  Criticism = not using Wal-Qaeda to
draw attention/coopt.
McKenna: now you’re just talking about free riding.
A: yep.  That’s the
actual harm of dilution/tarnishment.
Charles Duan, Implications of Oracle v. Google for Technical
Standard-Setting
Is it an infringement to implement someone else’s interface?
Most standardss come from private standard setting organizations that invite
participants from multiple groups who propose ideas and then the SSO chooses
for standardization. Ideas contributed by 3d parties.  Patentable inventions?  SSOs have very comprehensive patent policies
trying to prevent patent claiming. But fewer have copyright policies.  W3C’s policy changed in 2015, but Oracle v.
Google was 2014—may have been a response to that decision. Confirms his belief
that programmers didn’t think APIs and standards were ©able. Should courts
accommodate industry expectations? 
There’s value to that, though the law is not bound to follow experts in
the field.
SSOs as a practical matter may want to start adopting ©
licensing policies.  Standard-setting
organizations like IEEE might want to be more involved in these discussions in
©, though members may have conflicting incentives.
Q: what about ASTM—software standards varying from other
types of standards?
A: distinctions—gov’t mandate in ASTM case. That was copying
the standards text and not implementing the standard—as if ASTM were
challenging buildings made using their standards.
Carys Craig, Substantial Transformative Taking: Holistic
Comparison and the Non-Infringing ‘New Work’
Bakhtin’s idea of dialogue: what an utterance chain looks
like from a dialogic perspective and how that should influence ©.  Utterance as work: four connected things:
what has been said before, the already spoken (relational meaning); distal not
yet spoken (the still to be said;) the proximal not yet spoken (anticipated
response); distal already-spoken (broader cultural meaning). So how can ©
protect the already spoken while permitting the dialogic utterance in the chain
and leaving room for the not yet said?
What is a copy?  Analysis
at the moment of prima facie infringement at which you determine something is
substantially similar. Canadian case: Cinar Corp. v. Robinson: pitch and pinch:
someone pitches a story about a film, which is then made into another
film.  Claude Robinson had spent years
building materials for Adventures of Robinson Curiousité; then he saw it on TV anyway w/parallel characters,
settings, scenes throughout.  On appeal, Cinar
argued that court was wrong to compare the works without filtering out the
unprotectable elements.  Altai abstraction
filtration comparison test: Canadian SCt said it wasn’t appropriate for this
type of work which has to be compared holistically.  Shouldn’t dissect work, which eviscerates it—hard
to get a sense of the authorial contribution. 
Comparison, abstraction, filtration, then compare again if necessary.  Criticized for undue focus on protecting
author over downstream creators, influenced by very sympathetic facts.
Maybe we need to look at whether the defendant’s work is in
its whole something new—new expression. Holistic comparison can be used to
shift to asking about the dialogic relation b/t the texts and to see the D as a
possible creator too. Could consider transformativeness of the taking into our
assessment of substantial similarity, rather than waiting for fair use and fair
dealing.  By the time you’re searching
for an affirmative defense, you’re already on the wrong side of copyright’s
moral equation—seeking a reprieve by calling yourself an author too. We could
do this at the infringement stage instead. 
From Canadian perspective: transformative use isn’t actually available
as a defense, but we could put it in infringement. 
Example: Larrikin Music Pub’g v. EMI Songs Australia (Down
Under/Kookaburra song)—line taken from common folk song and reproduced in hit;
court could find no way to avoid conclusion that substantial part of the song
had been taken, and there was no defense. Holistic consideration could find a
new work even w/some copying of the “golden nugget.”  Substantial transformative taking should be
regarded as an original work—not derivative but responsive, new utterance in
the chain in a discursive struggle w/P’s already spoken work.
A: not that surprised—old English fair use cases were about
new works being created; not framed as a defense at all.
Q: what happens to the derivative work right?
A: Canada doesn’t have one and neither should you. But you
should also resist the collapse b/t derivative and dialogic.  A derivative work has to be a substantial
reproduction so we can use this framing to get over the derivative hurdle.
Rosenblatt: comprehensive nonliteral similarity v. fragmented
literal similarity?  You maybe want to
distinguish them.
A: yes.  Sampling
cases—solving a problem that can’t otherwise can’t be solved.  Blurred Lines: they failed to filter out what
should have been. But sampling, you can do the filtering and still look like you’re
left with “golden nuggets” that are substantial, even though there’s a new
work.
Q: so how do you distinguish b/t dialogue and “pinching”? [I
would frame this perhaps as: was Bakhtin’s formulation even set up to contemplate
“infringement” or other acts that might be considered illegitimate moves in a
dialogic chain? What if we care about things other than dialogue—can incentives
fit in?]
A: good Q. Wouldn’t necessarily get Cinar off the hook but would
limit attempt to control downstream uses?
Rob Walker, The Great Disappearing Doctrine: Making Sense of
Scenès à Faire
Doctrinal oddities: has a descriptive take but no solutions
yet.  Scenes a faire is apparently a term
from 19th c French dramaturgy, but he hasn’t been able to find  much/any use there, so if someone can figure
out what the judge who first used the concept meant that would be great.  [Paging Francesca Coppa.]
Hard to distinguish what courts are doing/what is or isn’t a
scene a faire, though we have some definitions, e.g. for software it’s
expression dictated by peractical realities; incidents, characters or settings
which are as a practical matter indispensable, or at least standard, in the
treatment of a given topic—in some ways this is just an application of
originality. 
What do we mean by indispensable? May be clear in literary
work with traditional structure, like Chekov’s gun.  But what about avant-garde works or genre-busting
works? Isn’t this idea of indispensability just a judgment about what a work
needs to be a “good” version of itself, contra Bleistein?  Is Star Wars a sf film, a fantasy film, or a
western?  What are the conventions that
might be standard to it?  Is an earnest
treatment of a topic using conventions in a traditional realist way
unprotected, whereas a parody of the conventions could be protected, e.g.,
Blazing Saddles and Young Frankenstein and Spaceballs?  What’s the time at which we set a convention—at
the time the P’s work was created, or the D’s? 
Using the conventions of Elizabethan drama to write a new play would be
strikingly unusual today, but not in Elizabethan times.
As courts get into the analysis, scenes a faire tends to
disappear into the ether and is replaced by idea/expression and merger. Example:
Fulks v. Knowles-Carter, in which avant garde filmmaker sued for infringement
in Beyonce’s Lemonade video.  Court’s
attempt to pinpoint scenes a faire collapses into idea/expression and merger.
The exception: software cases where functional elements, programming
conventions etc. matter.  But no guidance
in literary/artistic context. 

Biggest problem: shifts focus away from proper analysis of similarities b/t the
works and their substantiality; talks about the overall genre or milieu
instead.  Underprotects realist works and
over protects genre defying or defining works, creating a Bleistein
discrimination problem.  Sherlock Holmes:
when written, new/creative (maybe; he hasn’t done the research), but at a certain
point this character solidifies into a set of tropes copied in many different
versions over time—eviscerated?  [Public
domain?]
Fix: return to focus on originality at the time the accusing
work was created. In software, focus on functional/nonfunctional.
Q: relational context from Rosenblatt & Craig—Fulks submitted
his video to Beyonce’s producers.  You
lose the relational element.  Taylor
Swift: the court says that players gonna play is too banal.  Making old lyrics generic.  Timing: can Swift make anything generic
through success? Then we lose something about the contribution of the earlier
work.
Madison: Judicial biography: the judge who used the term
first was committed to balancing access & rights—a pragmatic intervention
along the fair use continuum; another way to get at similar scope problems.
Q: why when we think about genre works it would result in
underprotection? Why wouldn’t recognizing contribution of individual work
result in right-sizing?  Originality
might not give us right-sized results; shifts us to thinking about what the
author contributed, not what the author took.
A: Will look into relational interactions.  May change his under/overprotection analysis.
Rosenblatt: every scene a faire was invented by someone but
we often don’t know by whom. 
Functionally an expiration doctrine?
A: likes that. 
Certain things shouldn’t be protectable. If we start thinking about
originality and take Feist seriously—the bar is low, but it exists—that’s the
right conversation.
RT: Doesn’t originality assessment require an assessment of
prior art? The reason we try to figure out what other works have done is to
figure out what shouldn’t be attributed to the original work of the accusing
author.  And one function of scenes a
faire is that it deals with what the patent folks might call “Obvious to try”: someone
was the first to use the missed phone call instead of the missed appointment at
the top of the skyscraper but that doesn’t mean they should get the rights to
that plot point; see also the Jurassic Park case—once you come up with the idea
of a dinosaur island, certain tropes follow for anyone with minimal exposure to
narrative structures.  That’s the
function of scenes a faire that allows it to parse originality.

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WIPIP: Opening plenary

WIPIP Plenary
[Standard disclaimer: these are just my notes; I miss stuff
or it’s about patents and I don’t necessarily get it; I also have to pick and
choose from many attractive panels and this year I’m only at the first day,
which makes me sad.]
Colleen Chien, Innovation, Inequality, Innovators: 4
hypothesis: Two-pie hypothesis: distribution of patented innovation supports
two stories, increasing abundance and increasing scarcity; innovation  can increase or decrease equality and IP can
play a role (both and); quality of innovation depends on inclusion across the
innovation pipeline (inclusive innovation); to measure inclusion we can look at
inequality and small entities.
1894, Animal trap patent, William Hooker of Illinois—at the
time, Midwest was 2d top region for patenting. Mechanical patent, individual
innovator.  1976, different
representative patent: Goretex, Delaware, chemical patent, innovator working
with his father.  2015, Larry Ellison,
California patent on database automation; 8 other inventors named, many South
Asian immigrants.  California has been
the top patent origin for a while now, mostly just the Bay Area.  Moved away from mechanica, instruments,
chemistry to electrical engineering—now 50% of patents.  Individual inventors are a small percentage
now.  CS grad students: Temporary visa
holders are now over 60%; white Americans going down, Hispanics,
African-Americans, Asian-Americans holding tiny.  Foreign company patenting going up.
Bigger pie: digital abundance, involving diversity and high
skilled immigration, Silicon Valley leads the world and provides consumer
surplus. But: less innovation in mfg; increasing domination by foreign
innovators; domestic brain drain.  So
what is the relationship between innovation, IP, and inequality?  Inequality of production and consumption can
differ. 
Innovation drives sorting, segregation, agglomeration and
concentration—best institutions get bigger market share, tournament rewards for
individuals who manage to make it to Google/Stanford. Patenting and 1%
inequality are correlated including geographically.  Rigged system (in left and right wings);
privileged patenting and tax avoidance. 
Patent and copyright rents (left wing critique); tech companies buying
up academics and lobbyists and capturing all the gains (right wing critique)—IP
lobbying top clients include Alphabet, Comcast, iHeart Media, Microsoft whereas
in 1998 it was the RIAA, BSA, MPAA while only the BSA is left in the top
ten.  Golden rule: he who makes the gold
makes the rules.  Privileged patenting:
later patent rates for those w/top 3d grade math test scores is highly
associated with parental income.
Inequality in consumption: overinvestment in markets where
rents are possible–$400 juicer in Silicon Valley while tropical diseases go
understudied.  Rent-seeking prices, not
just b/c of patents, but painkillers that once cost $138 now cost $2979.
Innovation and decreasing inequality in production:
innovation can foster growth and social mobility. Consumption: price of
electronic goods has gone down a lot, except for cable service; Larry Ellison’s
surplus creation is at least partly shared. 
Top 10% patenting entities took home 26% of patents in 1900s, now over
60%.  There are industry effects; 83% of
electrical engineering patents are held by the top 1% of holders.  Except for chemicals, there’s increasing
concentration in other fields as well. 
No evidence that first to file disadvantages small inventors, but
further disaggregation of the data (to screen out university entities) is needed.  Small entity share declines over the patent
lifecycle—filing, actual issuance, first, second, and third maintenance
fees.  Are they dropping out or becoming
larger? Seems to be dropping out. Give us pause: we encourage filing at the
front end, but people in small entities don’t seem to be getting as much value
from them, so are we encouraging them to waste their money?
Michael Meurer: isn’t this IT and inequality as much as it
is IP and inequality?  Increasingly hard
time showing up in your data for startups; perhaps it’s increased investment
required in sufficient scale of IT that is a big part of that.
A: There are significant industry effects, true. But tech is
not destiny.  Automation in textiles: low
skilled textile workers gained, but high skilled artisans lost their jobs.  There are other non-IT specific mechanisms
such as capture of institutions; education system; pharma lobbying to set the
rules.
Michael Madison: Local/regional aspects—Cleveland, different
than/overlapping with Silicon Valley. Encourage you to push on that part of the
argument.  Industrial, economic, social
history differs in different places.
RT: Having just finished Ta-Nehisi Coates’ recent book, I
wonder whether this isn’t all the result of the specific history of suppression
of African-Americans over centuries.  The
IP professoriate too tracks the results of this suppression.  IP and IT may demonstrate the results but are
they places to look for solutions?
A: Inequality in patenting is one way of tracking inclusion;
it’s one way of rigorously tracking the pipeline.  There are some “valleys of death” in the
pipeline; IP policy may not be the place for a fix, but it is one way to
measure what we are losing.  Institional
history of patent system in specific: patenting was initially limited to
citizens, no slaves or nonwhite foreigners; married women’s patents were also
questionable until the late 1880s. 
Article on the invention of the slave: cotton gin etc. had many
contributions from slaves but masters took the credit.
Mark Lemley: This maps to all US history: all the trends you
describe look like trends in the economy generally/patents aren’t actually
different than the economy but move in lockstep with it, e.g. Gini coefficient.
A: Yes, as an empiricist wanted to see what was going on
w/innovation system and its self-image as egalitarian and meritocratic.
Saurabh Vishnubhakat, Rethinking Patent Law’s Validity Power
Power used to reside ex ante in the PTO, ex post primarily
in the courts; ex post power has been progressively reallocated from courts to
PTO: Bayh-Dole Act, 1980, American Inventors Protection Act, 1999, America
Invents Act, 2011—largely a story about expertise. Neglected story: a desire
for political input. A certain industry/tech, business methods, has been singled
out for special treatment, which isn’t just an expertise story.
How it’s been used in practice is part of the politicization
of the patent process, particularly the validity power: Adjudicatory process
has been used by PTO to do both things Congress intended and things it
didn’t/stakeholders were worried about. 
PTAB panels have been packed w/admin judges who are picked by those on
high. Judicial oversight: resisting review of case selection (PTO uses nonreviewable
decisions as shield from Fed Cir review); evading review of statutory
boundaries; evading review of adjudicatory duties.
Panel stacking: 3 APJs per panel usually, but can be
expanded, which is not random. Supposed to include field experts.  Members are chosen by agency leadership and
can include leadership.  One senior and
one junior person at least—to ensure that new people are acculturated.  The effect is to control outcomes, especially
on rehearing: rehearing may be granted with a different, larger panel.  Colloquoy b/t judge and PTO counsel: “the
Director is trying to ensure that her policy position is being enforced by the
panels.” Consistency & uniformity are desirable, but there are rule of law
concerns.  Target v. Destination
Maternity: original panel was 3 APJs; were about to decide an issue in a way
leadership would have disagreed w; before decision expanded sua sponte to 5
including 2 lead APJs, but still got 3-2 decision holding firm; panel was
expanded again, to 7 with 2 more senior APJs, and finally got the “right”
outcome, 4-3 the other way.
Judicial oversight: more subtle, more defensible but still
ultimately problematic. Past: a finding that no substantial Q of patentability
existed was nonreviewable.  Should a
decision to proceed also be nonreviewable, meaning no interlocutory
review?  Preliminary decision to proceed
would merge into final merits decision, if any. Cuozzo majority disagreed; best argument was the canon against
surplusage, given what the APA says.  But
then what does the statute mean for a decision to proceed in order to be “final and nonappealable”?  The high standard for presumption of judicial
review to be overturned from the APA was not met, in SV’s opinion.  Cuozzo
was a strong victory for the PTO, allowing additional claims to unreviewable
discretion. Why is this so potent a vehicle for policy autonomy?  The validity power is exercised
separately—power to screen cases for likely merit, and separate power to
adjudicate cases actually chosen. Decision to screen is directed to Director by
statute, which is subdelegated to the PTAB which has power to adjudicate, but
there’s no statutory command and it may be problematic to have the same panel
do both. Screening is unreviewable, and adjudication power is reviewable.  That reviewability is a key factor in the argument
that the scheme is constitutional and appropriate. Natural agency incentive:
make things look more like screening than adjudication, and it’s not that hard
to do b/c screening std is whether there’s likely success on the merits.
Stacking has some justification in uniformity; SV thinks
that there’s even an argument for Chevron deference when the Director is
sufficiently clear.
Costs: injury to stable property rights; injury to credible
commitments of Congress and agency; self-reinforcing injury to oversight—can
you trust the Directors who come after not to exercise their political power
against us?
Solutions: make it more judicial.  Have some decisions be precedential if you
like them; make decisions precedential and train APJs to follow them.  Done for ex ante clarity.  Also: separate screening from adjudicating,
raising the cost for the agency to evade review.
Betsy Rosenblatt, Copyright’s One-Way Appropriation Ratchet
Rolling Stone review: Beck incorporates a “cross
pollination” of styles which shows him to be one of the most innovative and
forward-looking artists—he used hip hop, soul, etc.
Courts sent a very different message from Rolling Stone when
hip hop artists sample—start with scare quotes around “rap music” and intoned
“thou shall not steal.”  Similar message
to NWA from 6th Circuit: get a license or do not sample; this
doesn’t stifle creativity at all.
In 2016, the 9th Circuit disagreed w/6th
Circuit for de minimis copying; the infringer in the 6th was the
NWA, whereas in the 9th the noninfringing defendant was Madonna, and
the plaintiff was a group of African-American musicians, even though Madonna
adopted the cachet of a subculture not her own.
If you make slides for class of music cases, though there
are exceptions like He’s So Fine, mostly white artists appropriate with
impunity and are often lauded, but minorities who appropriate find legal
challenge and often moral condemnation. 
This is a social as well as legal product, reflecting societal and
judicial bias but it’s also systematically baked in to the discourse of value
in © law and practice.
© presents as facially neutral but inherently/discursively
assigns value to some expression over others. Doctrine combine with judicial
attitudes and risk imbalance to reflect and reinforce racial bias.
Responses are often to give more ownership to oppressed
peoples, and there is sense to this, especially if we’re interested in profit
maximization.  Merges/Hughes
proposal.  If one’s goal is to create a
few especially wealthy members of minority groups, expanding substantial
similarity is a tool, but that is unlikely to promote equality broadly and
ignores the wider effects on creativity by favoring artificial concept of
originality.  That proposal also doesn’t
help those who don’t have resources already or who want to talk back to
inequality.  Don’t double down on a
flawed system; adjustment has to come by making it thinner in a way that
recognizes the dialogic nature of expression.
The traditional is reduced to the primitive; the doctrine
freezes works and attributes ownership to anyone who fixed them.  Devalues improvisation and creates a “right”
version of the work. Derivers from “unauthored” works get to own the whole
thing; this lets them create the narratives/colonize the work of minority cultures,
taking from but not giving back—Deep Forest can stop others from similarly
using the work of Solomon Islanders. Makes it seem that they have more value
than those they’ve built upon—assigns value to things that might just be
practical limits on ©’s grant of exclusivity.
Have to use dominant works to critique dominant narratives,
but cramming this into fair use distorts the activity—makes Alice Randall call The Wind Done Gone a parody.  Makes the use for critique more risky.  Semiotic disobedience would be even harder
w/thicker ©.  People who don’t trust the
system are more likely to withdraw/refrain under conditions of uncertainty.
Minorities are less likely to register, to own (as opposed
to transferring—Spike Lee in Malcom X; George Clinton’s works are owned by an
unrelated party).
Takeaway: more of the same isn’t better. Not interested in
tearing down copyright.  More recognition
that all communication is in some way derivative.  A deriver should be understood to own only
what’s contributed to the “prior art”—allow more derivation and appropriation
by all. 
Vishnubhakat: you seem to posit crowding out of © space;
doesn’t that mean that if you allowed closer imitations the “more” innovative
minority voices would be crowded out?
A: Doesn’t posit crowding out; doesn’t mind appropriation as
long as the appropriators don’t get as much out of it as they do now.  Doesn’t see it as a zero sum game: there’s an
infinite capacity for creative expression.
Lunney: Note that the most wealthy African-Americans come
disproportionately from the © space compared to whites; should that change the
analysis?
A: No: many of them are actually from negative spaces like
fashion, cuisine, talk shows, the famously constrained hip hop. Also making a
few people rich is not a social justice strategy.
Q: One way downward ratchet? 
Some examples of cases are minority v. minority. Should we relax the
standard for fixation? 
A: gut instinct is that relaxing fixation would benefit
improvisers in particular, which might be good. But it has all sorts of
practical difficulties.  A lot of these
doctrines exist for good, practical facially neutral reasons. We should think
about mitigating their disparate impact. 
Termination of transfers also has its place.

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court awards sanctions for misrepresenting website as independent review site in false advertising case

Purple Innovation, LLC v. Honest Reviews, LLC, 2018 WL
840035, No. 17-cv-138 (D. Utah Feb. 12, 2018)
A rare sanctions order in a false advertising case, in which
the court grants sanctions based on the defendants’ submission of misleading
and false statements to the court in opposing PI’s request for preliminary
injunction. PI sells bed-in-a-box mattresses and other bedding products and relies
strictly on e-commerce, meaning that online comment and review websites can
have a significant impact on its business. A new mattress review
website—www.honestmattressreviews.com—owned by Honest Reviews and operated by its
sole owner, Monahan, began to post reviews.  The HMR website repeatedly stated that it wasn’t
influenced by any mattress company and that it didn’t receive financial
compensation for its reviews, e.g., HMR was “free from corporate or
conglomerates…[that] silence or shape editorial narratives and truths,” and
HMR posts “have total editorial independence” for which “[n]o one has
influence.”
HMR’s reviews or “articles” about PI’s products suggested a
link between a white powder used on some of Plaintiff’s products and
cancer-causing agents, for example comparing the powder to a “ground
down…plastic mustard container” or “glass coke bottle,” which consumers will
inhale every night for “eight to ten hours.” PI received low marks on the HMR
site, including an image of a large red “X,” while its competitors, including defendant
GhostBed, received favorable ratings. 
PI’s lawsuit alleged that Monahan, the sole owner and
operator of HMR, was closely affiliated with GhostBed, making the purported
“reviews” actually commercial advertising and promotion that “materially
misrepresented the nature, characteristics, and qualities” of PI’s products,
while failing to disclose the close affiliation with its competitor. The court
initially denied a motion for a TRO, then granted it after PI showed multiple
attempts to notify defendants of the case, “including indications that Defendants
had received actual notice and that Defendants appeared to be avoiding service
of process.”
PI then moved for contempt, based on an alleged failure to
comply with the TRO.  Defendants opposed,
submitting declarations by Marc Werner (CEO of GhostBed) and Ryan Monahan. Werner
stated that “GhostBed does not have any affiliation whatsoever with
co-defendants Honest Reviews LLC or Mr. Monahan,” with no control or
compensation relationship with HMR.com. 
Further, Werner stated, when Monahan identified himself on Twitter and
LinkedIn as “Chief Brand Officer” of GhostBed, he did so “mistakenly.”  Werner acknowledged that GhostBed used Achieve
Marketing for branding and marketing consultation services and that “[i]n the
past, Achieve used another entity, Social Media Sharks, to consult on online
presence issues for its clients, including GhostBed.” Social Media Sharks was
associated with Monahan, but Werner did not acknowledge any current
relationship between GhostBed and Social Media Sharks or GhostBed and Monahan.  Monahan’s declaration was similar, though it
stated that Achieve used Social Media Sharks to provide contracted services
with GhostBed. Monahan stated that the website had a single source of income, Google
Adsense. 
At the hearing, Monahan’s counsel “strongly argued that
Monahan was an independent journalist entitled to full protection under the
First Amendment,” and that Monahan wasn’t hiding his status as a contractor. GhostBed’s
counsel also stated that no relevant business relationship existed between
Monahan and GhostBed, stating that “Monahan is a marketing consultant and he
works for many, many organizations and clients …, including GhostBed[.]” Based
on these representations, the court dissolved the TRO.
PI later renewed a motion for a preliminary injunction with
a newly obtained declaration from GhostBed’s former Director of Marketing,
Calisha Anderson, who “confirmed the bulk of Plaintiff’s suspicions regarding
the relationship between Monahan and GhostBed.” 
She declared that, shortly after beginning her new job, she learned she
had “very little actual authority for GhostBed’s marketing” and Monahan “was
the real ‘Director of Marketing.’ ” Monahan controlled the GhostBed website,
was active in participating in staff meetings, used a ghostbed.com email
address, held himself out as the Chief Brand Officer, and was able to veto
Anderson’s decisions.  Anderson also stated
that GhostBed made similar claims about the powder on PI beds.   
Monahan’s counsel called the declaration “lies” and expressed
hope that she’d be charged with perjury when he showed that she lied.  The court decided to hold an evidentiary
hearing. That hearing established, among other things, that Monahan continued to
provide extensive marketing services to GhostBed, for which Social Media Sharks
received $10,000 per month, half of which went to Monahan; he also helped
GhostBed place competitive ads that targeted PI. The court concluded that
Monahan and Werner had materially misrepresented the relationship between HMR
and GhostBed, as well as Monahan’s status as an independent journalist. Anderson’s
credible testimony wasn’t seriously challenged by cross-examination. The court
thus entered a preliminary injunction, after which PI moved for sanctions.
In determining the appropriateness of sanctions, courts consider
“(1) the degree of actual prejudice to the [party requesting sanctions], (2)
the degree of interference with the judicial process, (3) the litigant’s
culpability, (4) whether the litigant was warned in advance that dismissal was
a likely sanction, and (5) whether lesser sanctions would be effective.” The
court found significant prejudice here—the dissolution of a TRO, depriving PI
of the injunctive relief it deserved and requiring PI to spend time and
resources to get its injunction a second time. There was also “substantial” interference
with the judicial process here was substantial. “Defendants and their counsel
adamantly defended misleading representations that Monahan and GhostBed had no
meaningful association and that Monahan was a consumer journalist entitled to
the fullest possible protection of the First Amendment,” resulting in a full
day evidentiary hearing to determine the truth.
Defendants now conceded that the misrepresentations “lacked
the level of candor and attention to detail necessary to ensure that all of the
material facts were clearly stated and understood by all parties and the Court”
but claimed they were “made in the heat of battle.” But “Monahan, Werner, and
counsel for each were given numerous opportunities” before the hearing to
correct and clarify previous, misleading testimony, but they “doubled down”
instead. There was no explicit advance warning that misleading the court by
sworn testimony was sanctionable conduct, but they should have known that, and
Monahan’s lawyer’s statements about perjury demonstrated his clear
understanding of the potential results of submitting a false declaration to the
court.  “Indeed, … the misrepresentations
by Werner and Monahan were sufficiently egregious that perjury prosecutions
would, and perhaps should be, an appropriate consideration.”
Given the egregious nature of Werner’s misrepresentations,
the court struck GhostBed’s counterclaims as an appropriate sanction, along
with the award of PI’s reasonable attorneys’ fees and costs expended in
pursuing its second motion for a preliminary injunction and the sanctions
motion, shared jointly between Monahan/HMR and GhostBed. “The court will also
issue an adverse jury instruction if deemed appropriate when this case goes to
trial.” 

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Settlements allowing competitors to use term doesn’t insulate Clorox from its own possible deception

Gregorio v. Clorox Co., 2018 WL 732673, No. 17-cv-03824
(N.D. Cal. Feb. 6, 2018)
Gregorio alleged that, to capitalize on consumer demand for
“natural” home cleaning products, Clorox falsely advertised its “Green Works”
cleaning products as “natural” or “naturally derived.” The “naturally derived”
representation appears above the cleaning product type:

The back label of each green works products has an
ingredients list, and refers consumers to two websites. The
greeworkscleaners.com website concedes that the green works products are not
entirely naturally derived: “[T]he products are “95% to 99% naturally derived …
such as filtered water, plant-based cleaning agents, essential oils, corn-based
ethanol and wood-based fibers. The other ‘1% to 5%’ are a combination of
preservatives, fragrances and dyes.”  The
ingredientsinside.com website lists each particular products’ ingredients, but doesn’t
indicate whether the ingredient is natural or non-natural.
Plaintiffs alleged that the products fail to meet reasonable
consumers’ expectation and definition of all-natural products, and they brought
the usual California claims, as well as New York claims and Magnuson-Moss
Warranty Act claims (the last of which was dismissed for failure to allege key
facts about the value of the transactions).
Clorox argued that reasonable consumers wouldn’t have been
misled by “naturally derived.”  It
pointed to various disclosures, and to three class action settlements involving
competitors’ products that used the terms “100% natural” or “all natural.”  In the settlements, competitors agreed to
stop using the terms “100% natural” and “all natural” and instead use the terms
“naturally derived” or “natural,” as well as to provide additional ingredient
information on their websites. Clorox already does these things. Clorox argued
that these court-approved settlements showed that a reasonable consumer would
not be misled, “particularly given that one of those cases was pursued and
settled by the same lawyers pursuing this case.”
True, the companies party to the settlements “now have
strong defenses against any future class action challenging their use of ‘naturally
derived,’” which Clorox doesn’t have, and if the plaintiffs here win, . “Clorox
may no longer be allowed to use the exact same phrase as its competitors can
use with theoretical impunity.”  That’s
unfair, but there’s no authority showing that potential unfairness overrides
the reasonable consumer test.  “Further,
private settlements cannot and do not serve as a substitute for the court’s own
determination regarding whether it is plausible that Clorox’s labeling would
deceive a reasonable consumer. In fact, those settlements—involving different
parties, litigating over different products, displaying different allegedly
deceptive terms—barely amount to persuasive authority that a reasonable
consumer would not be misled by the labeling at issue here.”  Plus, “by their very nature settlements are a
product of compromise that involve numerous variables.”  Too bad for Clorox.
Further, the complaint plausibly alleged misleadingness. “It
is not unreasonable as a matter of law to expect a product labeled ‘naturally
derived’ to contain no synthetic ingredients. It is also far from unreasonable
to expect the same product to contain only ‘naturally derived’ ingredients—a
representation apparently contradicted by defendant’s own website.” Though
“100% natural” and “all natural” would also be misleading, “the court is not
free to dismiss claims because defendant chose not to use a potentially more
misleading phrase.”  The ingredient list
didn’t shield Clorox from liability, because reasonable consumers expect it to
include more detailed information, not to contradict other representations on
the packaging. A jury would have to decide.
Nor would the court stay the case under Clorox’s hail-Mary
attempt to invoke the primary jurisdiction doctrine, based on the FDA’s
rulemaking regarding “natural” foods that began in November 2015. The FDA doesn’t
regulate the cleaning products at issue here.

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TrueNorth not truly famous, court rules on motion to dismiss

TrueNorth Companies, L.C. v. TruNorth Warranty Plans, LLC,
No. C17-31, 2018 WL 794700 (N.D. Iowa Feb. 8, 2018)
TrueNorth sued TruNorth for trademark infringement and
dilution based on their respective marks; here the court dismisses the dilution
claim for failure to plausibly plead fame.
TrueNorth alleged that it consistently used the word
“TrueNorth” and two specific logo designs in commerce in connection with its
business since 2000. Since 2001, TrueNorth invested well over $30 million in
marketing efforts to strengthen the TrueNorth brand.  It alleged that its brand was “well-known and
recognized in the transportation industry as a leader in insurance and
financial strategies, as evidenced by TrueNorth’s partnerships with some of the
nation’s leading motor carriers, as well as TrueNorth’s work with
transportation associations.” It also had three registered marks.

TrueNorth argued that it had done enough to plausibly plead
fame under Twiqbal, and cited cases
allowing minimal pleading, including a case accepting that BoatU.S. and
TowBoatU.S. were plausibly pled to be famous marks.  Nope. 
Dilution fame requires fame beyond a niche market. “While the pleading
standard itself is not rigorous and this type of claim is not subject to a
heightened pleading standard (such as claims that fall under Rule 9(b)), the
nature of a dilution claim itself makes it difficult to ‘state a claim to
relief that is plausible on its face.’”  
Even accepting TrueNorth’s allegations, they fell well short
of plausible fame, a rigorous standard. 
Allegations of $30 million in marketing efforts since 2001, with no
further details regarding the extent or geographic reach of its advertising and
publicity, were too vague.  TrueNorth
alleged that it has offices in six states, provides financial and insurance
services to a wide variety of client types across the United States, and
services clients around the country, but that wasn’t enough detail in terms of
“amount, volume, and geographic extent of sales of goods or services offered under
[its] mark.”
Conclusory allegations that the brand was well-known and
recognized in the transportation industry, as evidenced by its partnerships,
were insufficient because a mark’s fame must go beyond a niche market, such as
the transportation industry. And registration alone was insufficient to
establish plausibility of dilution fame: “[o]ne cannot logically infer fame
from the fact that a mark is one of the millions on the Federal Register.”  Dilution claim dismissed.
[Comment: given the similarity of the parties’ marks, is
dilution likely to be an important issue?]

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Tiger, tiger burning bright: Did he who made the Lokai make thee?

Lokai Holdings LLC v. Twin Tiger USA LLC, No. 15-CV-9363, 2018
WL 739435 (S.D.N.Y. Feb. 6, 2018)
Lokai sued Twin Tiger for trade dress infringement, unfair
competition, and false advertising based on Twin Tiger’s sale of bracelets
similar to those of Lokai; both parties’ bracelets include dark and light beads.
 Lokai alleged that “the contrasting
beads of its bracelets are intended to represent balance and the cycle of life
with the dark bead filled with mud from the Dead Sea, the lowest point on
earth, and the light colored bead filled with water from Mount Everest, the
highest point on earth.”  Here, the court
dismissed Twin Tiger’s counterclaims based on failure to disclose that the
water could leak out of the beads and that endorsers were compensated for
social media promotion. In addition, Twin Tiger counterclaimed based on letters
Lokai sent to Twin Tiger’s customers, requesting that they cease selling Twin
Tiger’s bracelets and threatening litigation based on infringement of Lokai’s
intellectual property rights.
Lokai bracelet

Twin Tiger bracelet

The court found both alleged falsehoods insufficient to make out a Lanham Act
claim.  Lokai’s website says “The white
bead carries water from Mt. Everest, and the black bead contains mud from the
Dead Sea.” The idea that the water would always stay in the white bead wasn’t
the only reasonable interpretation of the statement, and thus it couldn’t be
literally false.  Nor did Twin Tiger
sufficiently plead implicit falsity; at the pleading stage, the plaintiff must “offer
facts” to support the allegation that consumers or retailers were misled or
confused by the challenged ad, though consumer survey or other extrinsic
evidence isn’t required to be incorporated into the complaint.  [What would
suffice?  Is an allegation that
“reasonable consumers believe that the water would stay in the bead for the
working life of the bracelet” an allegation of fact, or is it conclusory?  What about allegations that leak-resistant
containers this size do exist, and that reasonable consumers would expect that
their jewelry would be leak-resistant? 
Courts are not always too clear about what they want here.]
As for failure to disclose that Lokai compensates certain
influences, celebrities, and media outlets for their endorsement of Lokai
products in online and social media advertising, Twin Tiger argued that this
violated FTC guidelines.  The FTC directs
that “a connection between the endorser and the seller of the advertised
product that might materially affect the weight or credibility of the
endorsement (i.e., the connection is not reasonably expected by the audience)
… must be fully disclosed.” There’s no private right of action under the FTC
Act, though its interpretation “can and should inform what constitutes false
advertising under the Lanham Act.” 
However, “the Lanham Act requires an affirmative misrepresentation or an
omission that renders an affirmative statement false or misleading—not a
failure to disclose something material.” [What about the implicit
misrepresentation that the celebrities/influencers chose to promote the
bracelets because they liked them, rather than because they were paid to do so?
That’s the premise of the FTC Endorsement guidelines, after all.]
           
The California and New York state law claims failed too,
though with some details differing. Under California law, “the presence of a
disclaimer or similar clarifying language may defeat a claim of deception.” On
Lokai’s website, albeit not on the same webpage, Lokai states: “Injected with
water sourced by sherpas from the heights of Mt. Everest, the white bead
represents life’s highest moments … The water may evaporate over time.” This
disclosure made it unreasonable “for any consumer or retailer to believe that
water will remain permanently in the bracelet.” [This reasoning seems to
contradict the general rule that the disclaimer has to be one that reasonable
consumers will perceive—under Williams v.
Gerber Products
, will reasonable
consumers read through multiple webpages to find qualifications?]
Likewise, “Twin Tiger cannot engineer [a private cause of
action under the FTCA] through California law.” 
[What about California law’s “unlawful” component, which does exactly
that, though perhaps not with Endorsement Guides that lack the force of formal
rules?]  “More important, outside of
conclusory allegations of a violation of the FTC Guidelines, Twin Tiger has not
alleged any facts that plausibly raise an inference that the non-disclosure of
paid endorsements is likely to lead consumers to believe that the endorsements
are unpaid.”
Finally, and failing to note the developing split on this
issue, the court ruled that the New York § 349 claim didn’t allege sufficiently
“consumer-oriented” conduct, because harm to competitors was the core of the
claim here, even though the FTC regulations were relevant to § 349, which is
“substantially modeled on the Federal Trade Commission Act.”
The tortious interference counterclaims were dismissed
because Twin Tiger didn’t allege sufficient facts on the specific contracts or
business relationships at issue. The names of the entities weren’t enough
without details about when the contracts were formed, when they took place, and
what the major terms were; attaching the contracts to the complaint might have
worked.
Furthermore, the court struck Twin Tiger’s affirmative
defense of unclean hands because the alleged misconduct wasn’t sufficiently
related to the subject matter of the litigation.  Trade dress infringement was distinct from
advertising about the bracelets or alleged inequitable misconduct in obtaining
a design patent.

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repeating a tested claim about later product editions isn’t literally false without relevant differences between editions

Strategic Partners, Inc. v. Vestagen Protective
Technologies, Inc., No. 16-CV-05900, 2017 WL 5951881 (C.D. Cal. Nov. 13, 2017)
Vestagen makes Vestex scrubs, a product made with a fabric
containing a fluid barrier and antimicrobial agent that inhibits the growth of
bacteria on the fabric. SPI sued for false advertising, and a jury returned a
verdict in favor of Vestagen, finding that SPI failed to prove its false
advertising case. (Previous
discussion of SPI’s claims
.) The court denied SPI’s motion for judgment as
a matter of law/for a new trial. 
Post-verdict JMOL is proper if the evidence presented at trial “permits
only one reasonable conclusion, and that conclusion is contrary to” the jury’s
verdict.  Here, there was evidence that
could have favored Vestagen on each claim. 
Among other things, SPI argued that Vestagen changed the
composition of the fabric used in Vestex scrubs in 2015, but continued to cite
to a 2012 study as showing that Vestex scrubs reduce the amount of harmful
bacteria on the fabric. SPI argues that “advertising is ‘literally false’ if it
makes claims regarding the findings of a study wherein the study did not test
the same product as advertised.” However, to take advantage of this rule, SPI
would have to show that there were relevant design differences between the
tested product and “later editions” of the same product.  “Both editions of the scrubs incorporated the
Vestex antimicrobial technology. SPI cited no evidence showing that the change
in fabric negatively affected its antimicrobial properties,” and indeed there
was evidence to the contrary.
SPI also argued that Vestagen falsely advertised that
“Vestex fabric is currently registered with the FDA,” even though the FDA does
not permit registration of a fabric and the fabric itself is not in fact
registered. But Vestagen introduced evidence that the surgical scrub that is
made out of that fabric is registered with the FDA, and that it made the claim
only in the context of the scrub. This was enough to allow the jury to reject a
literal falsity argument.  Likewise, the
situation didn’t justify a new trial.

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Cal’s anti-SLAPP law protects some commercial speech, especially when it’s not really commercial

Dean v. Friends of Pine Meadow, 2018 WL 774065, No. A149735
(Cal. Ct. App. Feb. 8, 2018)
Dean (shorthand here for Dean & other plaintiffs) sued
defendants for allegedly false statements and publications regarding Dean’s
plan to construct a housing development on the Pine Meadow Golf Course in
Martinez. The trial court granted defendants’ special motion to strike under
the anti-SLAPP law and the court of appeals affirmed.
Pine Meadow Golf Course was owned by individual members of
the Dean and Coward families, who executed a contract to sell the golf course
to plaintiff DeNova, a “leading community-oriented, family-owned private
homebuilder with deep-seeded roots in local philanthropy and community
service.” The city of Martinez then approved a development application, which
“allowed for the development and construction of a 99-unit single-family home
subdivision.”  Dean alleged that the
named defendants consistently “opposed any development on the Pine Meadow
Golf Course property.” “Using the name ‘Friends of Pine Meadow’ for the first
time,” defendants circulated a petition for a referendum to reverse the City’s
resolution approving a general plan amendment to allow for the planned
development.

The alleged deception was using the name “Friends of Pine Meadow” “in order to
deceive fellow citizens into believing they were friends with the golf course
owners, including Dean who is a prominent citizen, and that they represented
the interests of these owners and the golf course.”  [Wow, all else aside, that doesn’t even pass
the laugh test, inasmuch as I snorted when I read that.  The “Friends of” formulation is widely used
to identify people who support keeping a place in a particular condition.]  When Dean and the other golf course owners
attempted to inform people “about the true nature of the Friends of Pine
Meadow,” defendants allegedly responded by publishing allegedly false
accusations that some or all of the plaintiffs were “ ‘hassling’ the signature
gatherers” and using “ ‘intimidation, threats, and obscene, derogatory name
calling.’ ”  There were further alleged
misrepresentations, including ones related to the idea that without development
the golf course would be kept as open space, ones about the scope of the development
plan, and ones about the scope of opposition.
The court of appeals first agreed with the trial court that
all Dean’s causes of action arose from protected activity. “Most, if not all,
the material allegations pertain to statements that were made during or in
connection with proceedings to amend the City’s general plan,” which made it
petitioning activity, and all the challenged conduct was “speech or petitioning
activity relating to an issue of public interest.”  Indeed, “the plaintiffs’ complaint is a
paradigm of the problem that [the anti-SLAPP law] was designed to address. ‘The
typical SLAPP suit involves citizens opposed to a particular real estate
development. The group opposed to the project, usually a local neighborhood,
protests by distributing flyers, writing letters to local newspapers, and
speaking at planning commission or city council meetings. The developer
responds by filing a SLAPP suit against the citizen group alleging defamation
or various business torts’” [citing a law review article about SLAPPs].
On appeal, Dean argued that defendants’ claims were
commercial speech, which couldn’t constitute protected activity.  First, no. The complaint targeted “individuals
who formed a community group in order to oppose an amendment to the City’s
general plan. On its face, this type of speech is political rather than
commercial in nature.”  Dean argued that defendants
acted like competitors by proposing
that the golf course be used for some purpose other than a housing development/be
bought by someone else.  That’s not what
competition means. 
Second, not all commercial speech is categorically excluded
from anti-SLAPP protection.  Defendants’ speech
and petitioning activity were covered “because the challenged statements were
made during or in connection with an official City proceeding authorized by
law, in public forums, and in connection with a matter that was both a public
issue and an issue of public interest.” 
That’s different from excluded commercial speech, which occurs in false
or misleading advertising pertaining to the business of the speaker or his or
her competitor, as delineated by Nike v.
Kasky
.  “[A] plaintiff cannot
preclude a defendant from establishing that a cause of action arises out of
protected activity simply by alleging there is some commercial element to the
parties’ dispute.”  [As I read this, the
court is saying that Nike’s statements to legislators and regulators would thus
have been protected by the anti-SLAPP law.] 
Even if the constitutional definition of commercial speech is broader
than advertising about the speaker or its competitor, the anti-SLAPP law does
not limit its protections to the contours of the First Amendment commercial
speech doctrine.  As the California
Supreme Court explained, “the anti-SLAPP statute is to be ‘construed broadly’
so as to ‘encourage continued participation in matters of public significance,’”
so statutory protection “may extend beyond the contours of the constitutional
rights themselves.”  The statute itself
provides “objective guidelines that lend themselves to adjudication on pretrial
motion.”
After that, the court of appeals found that Dean didn’t meet
the burden of showing that the claims were legally sufficient and factually
substantiated. The absolute litigation privilege in California extends to any
communication with some relation to a “legislative proceeding,” a “judicial
proceeding,” or “any other official proceeding authorized by law.”  Dean argued that the litigation privilege
didn’t apply because the complaint was seeking to hold defendants liable for an
unlawful course of conduct evidenced by their speech, but the record showed
otherwise: “Every claim in the complaint seeks to punish and/or suppress speech
that relates to an official proceeding about a public issue.” 
Nor did the Noerr-Pennington
exception to immunity for petitioning activities for sham petitions aid
Dean.  Dean argued that they’d alleged
facts to show that defendants’ petitioning activity was part of a misleading
campaign, pursuant to which they “deliberately” chose a deceptive name for
their group, mischaracterized the “current status” of the golf course property
and the plaintiffs’ development plan, and falsely accused plaintiffs of misconduct.
 Given defendants’ concededly genuine
opposition to the general plan amendment, their petitioning activity, no matter
how deceptive, wasn’t a sham. 

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Lexmark allows false advertising claim against law firm for soliciting timeshare clients

Diamond Resorts Int’l, Inc. v. Aaronson, 2018 WL 735627, No.
17-cv-1394 (M.D. Fla. Jan. 26, 2018)
Diamond is a timeshare developer managing more than 420
membership resorts worldwide. The Aaronson defendants are an Orlando-based
attorney and his law firm focusing on soliciting Diamond’s timeshare members to
become clients of Aaronson’s services to free them from financial obligations
under their purchase and financing contracts. Diamond alleged false
advertising, resulting in members ceasing to pay under their timeshare
contracts, and subjecting Diamond to baseless arbitration proceedings.  Diamond sued for (1) violations of the Lanham
Act; (2) tortious interference with a contractual relationship; (3) trade libel;
(4) violations of Florida’s Deceptive and Unfair Trade Practices Act; (5)
malicious prosecution; and (6) RICO violations (of which no more will be said,
because they’re RICO claims).
The court rejected Aaronson’s argument that its speech
wasn’t “commercial advertising or promotion” under the Gordon & Breach test, because it wasn’t in competition with
Diamond.  The court unsurprisingly
rejected that argument in light of Lexmark
(which functionally amended the Gordon
& Breach
test).  Where, as here,
“a party claims reputational injury from disparagement, competition is not
required for proximate cause; and that is true even if the defendant’s aim was
to harm its immediate competitors, and the plaintiff merely suffered collateral
damage.”
Nor could the court resolve whether the advertising was
merely opinion or puffery at the pleading stage.  (Indeed, it wasn’t clear from the court’s
analysis whether Diamond alleged specific statements, or merely “ ‘material
false and misleading statements,’ which have deceived Plaintiffs’ timeshare
members into believing that Plaintiffs have engaged in unlawful activity and
caused them to stop making payments on their Timeshare Contracts.”  The court also cited precedent holding that an
opinion may be actionable under the Lanham Act “if it fairly implies a factual
basis.”
The state-law claims weren’t precluded by Florida’s
litigation privilege, which provides absolute immunity for acts or statements:
(1) made or committed in the course of judicial or quasi-judicial proceedings;
and (2) “connected with, or relevant or material to, the cause in hand or
subject of inquiry.” This includes “conduct that is ‘necessarily preliminary’
to a judicial proceeding,” which is confined to pre-suit communications that
are a statutory or contractual condition precedent to suit.  Diamond’s claims arose out of the challenged
advertising, which wasn’t required by, permitted by, or even related to the
subsequent arbitration proceedings.
For similar reasons, the court rejected Aaronson’s argument
that, when they rendered legal services to Diamond’s timeshare members, they
were agents of those members and couldn’t be a third party for purposes of
tortious interference claims, which require a third party to interfere.
The trade libel claims sufficiently alleged special damages:
(1) the costs of arbitrations; (2) the costs of defending arbitrations; and (3)
members’ unpaid promissory notes.  FDUTPA
claims also survived.
The malicious prosecution claim failed, however, because malicious
prosecution claims are generally disfavored under Florida law, and other
jurisdictions have rejected malicious prosecution claims based on arbitration
proceedings. Thus, the court would not predict that the Florida Supreme Court
would expand this claim to arbitration proceedings.

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A trace of deceptiveness in bourbon age labeling

Penrose v. Buffalo Trace Distillery, Inc., 2018 WL 705054,
No. 17CV294 (E.D. Mo. Feb. 5, 2018)
Plaintiffs brought a putative class action claiming that BT misrepresented
that  Old Charter bourbon has been “aged
8 years.” The court mostly refused to dismiss the complaint.
closeup on neck label, before and after

the whole bottle

Old Charter used to be aged for 8 years; as of 2014, it isn’t,
but the bottle still says 8 prominently. 
(See a discussion
at
this link.)  “Eight” or “8” appears
three places on the bottle: on the neck, on its own label on the top of the
body, and in the text portion which reads “gently matured for eight seasons in
century old brick warehouses.” All BT did was remove “aged” and “years” from around
the 8 on the label.  “Seasons” means
years to reasonable consumers, plaintiffs alleged, given BT’s prior eight-year
and ten-year Old Charter products, which claimed to be matured for “eight
seasons” and “ten seasons,” respectively. The number isn’t part of the name; BT’s
own website used “Old Charter,” as did BT’s application for the label with the Alcohol
and Tobacco Tax and Trade Bureau (TTB). 
Published reviews indicate a significant decline in quality, such as:
“for Old Charter 8 the NAS [non age-stated] release was strikingly inferior to
the age-stated product.”  Consumers have
complained, e.g., “what’s said is deceptive, very deceptive in fact…It’s
still hogwash though and deceptive…because what you’re really doing is
selling younger whisky while pretending it’s older.” Nonetheless, BT receives a
price premium for its apparently age-stated bourbon, as shown by premiums paid
for other age-stated versions.
BT argued that no reasonable consumer would infer that Old
Charter is aged for 8 years because of the number 8 alone. “The Court cannot
conclude as a matter of law and at this stage of the litigation that the
packaging is not misleading, particularly in light of Plaintiffs’ allegations
that previously, Old Charter was aged 8 years. Consumers may just as likely
have seen the 8, and based on previous purchase, thought the 8 represented the
years of aging.”  Nor did state law safe
harbor provisions apply despite the TTB’s approval of the Old Charter label; “deceptive
conduct, viewed as a whole, is often broader than the otherwise regulated
conduct; therefore, in those circumstances, the doctrine does not apply.”
Claims based on the Magnuson-Moss Warranty Act failed
because bourbon’s age is a description of the product and in no way promises
any level of performance for any period of time, as required under the MMWA. Nor
was there a breach of the implied warranty of merchantability pled, because
even un-aged bourbon is merchantable: it’s are “fit for the ordinary purposes
for which such goods are used.”
Fraud claims, however, were pled with the requisite
particularity (I must admit to always being a bit amused by the “where” in
these cases—on the label!)  Plaintiffs
also stated a claim for unjust enrichment, in the alternative to their properly
pleaded breach of contract/express warranty claims.

It was too early to decide any class action issues, but the
court did dismiss claims for injunctive relief, since the named plaintiffs wouldn’t
be fooled again even if they expressed willingness to buy properly labeled Old
Charter bourbon.

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