Suing for false advertising as abuse of process

Posted on May 22, 2017 by rtushnet
Bobrick Washroom Equipment, Inc. v. Scranton Products, Inc.,
2017 WL 2126320, No. 14-CV-00853 (M.D. Pa. May 16, 2017)
In May 2014 SP sued Bobrick, alleging that it “carefully
orchestrated a campaign to scare architects, product specifiers, procurement
representatives, building owners, and others in the construction industry into
believing that Scranton Products’ toilet partitions are fire hazards, are
unsafe and pose health and safety risks if used in building projects across the
country.” After SP voluntarily dismissed the claim, Bobrick filed a complaint
asserting false advertising and wrongful use of civil proceedings under
Pennsylvania’s Dragonetti Act, as well as common law unfair cornpetition and
abuse of process claims.
Bobrick’s Lanham Act and unfair competition claims arose
from SP’s alleged misrepresentations of “thousands of its high density
polyethylene (‘HDPE’) toilet partitions sold for installation in schools and
other public and private buildings as being compliant with applicable fire,
life safety, and building code requirements.” SP allegedly falsely represented
that its HDPE toilet partitions comply with the requirements of the NFPA 286
room-corner test, a fire performance test promulgated by the National Fire
Protection Association, even though SP allegedly improperly modified and
manipulated the test methodology to produce a favorable result, thereby
invalidating the test, and sold toilet partitions with a different chemical
composition and physical structure than those it claimed to have successfully
tested under NFPA 286.
As for the abuse of process-type claims, Bobrick alleged
that SP knew or should have known that its central claims—similar to those
challenged in the false advertising claims here—were false, but sued anyway,
for “the improper purpose of stifling legitimate competition by Bobrick,
silencing Bobrick’s efforts to educate market participants about code
requirements in the interest of public safety, and inflicting financial harm on
Bobrick for unfair competitive advantage by increasing Bobrick’s costs and
otherwise.” The result was “[n]early three years of costly and time-consuming
litigation.”  SP also allegedly destroyed
numerous relevant documents while contemplating litigation and made discovery
more costly in various ways, including by miseading Bobrick and the court.


The court first found that false advertising was cognizable as unfair
competition under Pennsylvania common law, which was not limited to passing
off.  Then it refused to dismiss the
abuse of process claim. “Generally speaking, to recover under a theory of abuse
of process, a plaintiff must show that the defendant used legal process against
the plaintiff in a way that constituted a perversion of that process and caused
harm to the plaintiff.”  Though un-of-the-mill
discovery disputes cannot constitute an abuse of process under Pennsylvania
law, Bobrick alleged “facts far more detailed and nefarious: that SP knew that
some or all of its HDPE toilet partitions did not actually comply with NFPA 286
(i.e., its claims were baseless) yet SP nevertheless continued to prosecute
this lawsuit for nearly three years, all while stifling Bobrick’s legitimate
discovery efforts for the specific purpose of financially harming Bobrick and
gaining a competitive advantage in the marketplace.” 

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coffee cup lid trade dress survives functionality challenge

Posted on May 22, 2017 by rtushnet

If I have the right image of the defendant’s coffee cup lid, this is a good example of the difficulties separating scope from validity: the challenged design is noticeably different from the registered design, and it seems to me that the case that the overall concept is functional is stronger than the case that the specific implementation is functional.  I guess we’ll see.

Solo Cup Operating Corp. v. Lollicup USA, Inc., 2017 WL
2152424, No. 16 C 8041 (N.D. Ill. May 17, 2017)
Solo Cup has a registered product configuration mark for its
“Traveler” coffee-cup lid:

The lid was also the subject of design and utility patents that
expired in 2001 and 2003, and which were disclosed to the PTO during the registration
process.  Solo alleged that Lollicup’s
Karat lids infringed its mark.

Lollicup asserted a bunch of defenses, some of which the
court rejects here, including fraud on the PTO. 
Fraud occurs when the applicant “withhold[s] from the Patent and
Trademark Office … material information or fact which, if disclosed to the
Office, would have resulted in the disallowance of the registration sought or
to be maintained,” or makes “a deliberate attempt to mislead the PTO into
registering [the] mark by presenting materially false and misleading
information to the PTO when … seeking the trademark registration.” Lollicup
argued that Solo’s statements made during the application process about
non-functionality constituted fraud.
Under Traffix, the
existence of a utility patent that encompasses the product configuration
claimed “is strong evidence that the features therein claimed are functional,”
but not completely dispositive. 
Functionality isn’t a fact that can be withheld from the PTO but a
determination for the examiner. Thus, for fraud to relate to functionality, a
party must either withhold from the examiner information or facts that are
material to the determination of whether the mark is functional or present
false or misleading information that is material to the functionality
determination.  Lollicup argued that
Solo’s representations that certain features of its lid were ornamental were inconsistent
with representations made to the patent examiner about those features’
functionality. “But as any practitioner before the PTO would likely concede,
applications advocate for a result by highlighting facts that are favorable.
Where, as here, the trademark examiner was in a position to agree or disagree
with the characterizations contained in the application by studying the patent
itself, such an argument made by a trademark applicant does not give rise to a
reasonable inference of fraudulent intent.”
Similarly, Solo’s director of product development submitted
a declaration to the PTO stating that (a) the lid had the same basic functional
characteristics of competing lids and (b) the configuration didn’t affect the cost
of manufacturing the lid to the disadvantage of others in the marketplace.
These were potentially false and misleading but they characterized the
configuration in “broad terms that are not demonstrably false nor directly contrary
to the patent disclosure,” which claimed that the configuration assisted in
manufacturing.
The court similarly dismissed false advertising claims based
on Solo’s allegedly false use of the registration symbol on its lid.  The trademark was registered and the court
dismissed the fraud claims.  “[U]se of
the ® symbol on its registered lids cannot be a false statement of fact prior
to cancellation or abandonment of that mark.” Even if the trademark is
ultimately cancelled, it will still have been registered and thus there was no
false claim in prior use of the symbol.
A similar fate awaited Lollicup’s claims of
unconstitutionality of the registration and preemption under federal patent
law.  The right to copy a design upon
expiration of a patent is “far from absolute.” Thomas & Betts Corp. v.
Panduit Corp., 138 F.3d 277, 287 (7th Cir. 1998). 

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Reading list: Shakespeare’s literary disputes

Posted on May 18, 2017 by rtushnet

Bonus points for beginning with a great Hamlet quote (the best use of which I ever saw was a production that arranged the scenes so that when Hamlet disparages what he’s reading as “words, words, words” he is reading his letters to Ophelia, which she has returned to him).

Barbara Lauriat, Literary and Dramatic Disputes in Shakespeare’s Time
Journal of International Dispute Settlement, Forthcoming

Disputes over literary works and plays — between one authors and another, one publisher and another, and between authors and publishers — have arisen since the ancient world. This is to be expected, since publishing poems and plays and producing theatrical performances can have significant economic, political, and emotional implications all at the same time. The nature and legal frameworks governing these disputes have changed dramatically over the centuries, however, particularly with regard to the proprietary rights involved.

Though modern copyright law did not exist at the time, the Elizabethan age saw a high degree of professionalism of theatrical performance, book publishing, and dramatic authorship. When audiences are clamoring for novel entertainments, authorship is becoming a professional activity, and profits are to be made, customs and traditions inevitably arise — as do violations of those customs and traditions. This article discusses the framework of authorship and publishing in Shakespeare’s time and examines some of the disputes that arose and how they were resolved in a context where the legal remedies were limited. Methods from patronage to private guild “courts” to theft to public denunciation to outright violence were employed in attempts to maintain profitable businesses in publishing and theatre.

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New article: fixing incontestability

Posted on May 17, 2017 by rtushnet

With apologies to John Welch, who hates the term.

Fixing Incontestability: The Next Frontier?
Boston University journal of Science and Technology Law, Forthcoming

Abstract

Incontestability is a nearly unique feature of American trademark law, with a unique American implementation. The concept of incontestability allows a trademark registrant to overcome arguments that a symbol is merely descriptive of features or qualities of the registrant’s goods or services—for example, “Juicy” for apples. Incontestability provides a nearly irrebuttable presumption of trademark meaning, which is a powerful tool for trademark owners. Unfortunately, incontestability is not granted as carefully as its power would counsel. Courts may misunderstand either the prerequisites for, or the meaning of incontestability, allowing trademark claimants to assert rights that they don’t actually have

Incontestability needs clearer signals about what it is and when it is available. In the absence of serious substantive examination of incontestability at the PTO—which seems unlikely to materialize any time soon—changes designed to increase the salience of incontestability’s requirements to filers and to courts could provide some protection against wrongful assertions. Incontestability can only serve the trademark system if it is granted properly and consistently.

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Another outlet price deception case, with pictures

Posted on May 15, 2017 by rtushnet
Stathakos v. Columbia Sportswear Co., 2017 WL 1957063, No.
15-cv-04543 (N.D. Cal. May 11, 2017)
The parties sued Columbia, bringing the usual California
claims, for alleged use of deceptive and misleading reference prices on merchandise
in its company-owned Columbia outlet stores. 
Columbia sold two categories of garments: (i) “Inline Styles,” which
were regular products produced for sale at any of defendants’ stores, wholesale
partners, or online; and (ii) “Outlet Special Makeup Builds,” which, starting
in 2014, were designed specifically for, and sold only at, defendants’ outlet
stores.  Before 2014, Columbia’s price
tags at the outlet stores showed both the higher price at which a garment
previously sold Inline and the lower price at which it could be purchased at
the outlet.  Outlet Builds also had price
tags showing two prices; these clothes were “styles based off an in-line style,
with slight aesthetic modifications,” and so the higher price tag represented
the price at which the “corresponding inline style sold for” whereas the lower
price was the “price at which the item could be purchased at the outlet (absent
a special sale at the outlet).”  But the
Outlet Builds were never sold anywhere other than outlet stores and never sold
for the higher reference price. There were about 580 Outlet Builds through the
time of the litigation.
Plaintiffs’ expert Ms. Goldaper, a fashion industry veteran,
was allowed to opine on the differences between the Outlet Builds and their
supposed main store (inline) counterparts, which she opined were often
material.  (Out of the garments she
reviewed, she found seven with major material differences from their
counterparts, nine had modest differences, two were counterparts, and one had
no counterpart whatsoever.)
Plaintiffs’ expert Dr. Compeau was also allowed to opine on
consumer behavior, specifically: (i) a review of the extant literature
demonstrates that consumers are affected and influenced by reference prices;
(ii) defendants utilize reference prices extensively; (iii) because the Outlet
Builds are never sold anywhere but the outlet stores and never at the reference
price, the reference prices were false and suggest savings to the consumer; and
(iv) the reference prices deceived consumers into buying Outlet Builds that
they otherwise would not have bought. 
However, he was not allowed to opine on a defendant’s corporate intent,
or on legal conclusions/matters outside the scope of his expertise, though he
could opine on whether practices might mislead consumers.
Columbia argued that their reference prices were valid under
section 17501 of the FAL, which reads: “No price shall be advertised as a
former price of any advertised thing, unless the alleged former price was the
prevailing market price as above defined….” A 1957 Attorney General Opinion
stated that the “phrase ‘prevailing market price’ means the predominating price
that may be obtained for merchandise similar to the article in question on the
open market and within the community where the article is sold.” But
California’s false advertising laws were not so narrow.  Even if the reference prices satisfied the
definition of “former price,” there could still be deception: the evidence
would let a jury conclude that consumers could not distinguish based on the
price tags between garments which were Outlet Builds that were never sold for
the advertised reference price and Inline styles sold at the outlets which were
at some point sold for the advertised reference price.
With respect to five items plaintiffs bought after the
original complaint was filed, defendants got summary judgment, because
plaintiffs couldn’t have relied on the idea that they were getting discounted
original store merchandise. But there were triable fact issues on the other
items they purchased.
Plaintiffs sought monetary relief.  Columbia argued that the only possible
measure of monetary relief here was the difference between the actual value of
the garments and the price paid, but that isn’t the only measure of restitution.
 Relevant principles: restitution can’t
be ordered just to deter; any proposed method for calculating restitution has
to account for the benefits a plaintiff received; and the amount must represent
a measurable loss supported by the evidence.
Plaintiffs argued that three different methods could work:
(1) full refund, (2) promised discount, and (3) disgorgement of profits.  The first wouldn’t work, even though
plaintiffs alleged that they wouldn’t have bought the garments without the
supposed discount; under California law, a full refund may be available as a
means for restitution only when “plaintiffs prove the product had no value to
them.” (E.g., Trump University programs. 
Makaeff v. Trump Univ., 309 F.R.D. 631 (S.D. Cal. Sept. 18, 2015).) But
these plaintiffs “undeniably obtained some value from the garments they
purchased”; they considered the color, fit and function of the garments before
they bought.
Turning to “promised discount,” plaintiffs argued that you
could start with the reference price, the outlet price, and an actual purchase
price, and calculate the percentage of the promised discount between reference
and outlet price, then apply that percentage to the actual purchase price,
giving the benefit promised by Columbia. Courts have split on this theory of damages;
the court agreed with the other court that rejected this model.  This discount model “seeks to award Plaintiff
the bargain she expected to receive without any focus on the amount of money
she lost in the process.”  Usually,
plaintiffs allege some sort of price premium enabled by the misrepresentation,
which could be calculated.  A proper
measure of restitution could be the difference between the price plaintiffs
actually paid and the price a reasonable consumer would have paid absent the
reference price, but the promised discount model here didn’t purport to measure
that difference.  Instead, the model
assumed that plaintiffs would have purchased such products only if the
“promised discount” were applied to the actual purchase price. This is the equivalent
of “awarding plaintiffs expectation damages, without accounting for the amount
of money plaintiffs actually lost in the process,” and that’s not what
restitution does.
Disgorgement: “Restitutionary disgorgement,” which focuses
on the plaintiff’s loss, is allowed under California law, but not “nonrestitutionary
disgorgement,” which focuses on the defendant’s unjust enrichment.  Again, plaintiffs’ model for disgorgement
focused on Columbia’s gain without accounting for benefits plaintiffs gained.

The court did, however, certify a Rule 23(b)(2) class,
though it rejected a damages class. Columbia’s main argument on commonality
centered on its expert’s survey. Its expert opined that (i) consumers were
driven, in large part, by the garment’s attributes rather than price; (ii) only
a few consumers rated the perceived discount as a very important factor; (iii)
many consumers would have still purchased the item knowing that the reference
price only concerned a price at which a similar item sold; and (iv) there was
no uniform understanding of what the reference prices represented.  This wasn’t enough to rebut the presumption of
reliance and materiality at this stage of the case.  Plaintiffs’ rebuttal expert, Dr. Poret,
identified flaws in the coding that arguably supported plaintiffs’ theory that
many people were deceived and considered the amount of savings they received
significant.

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a true story of a false advertising claim based on a “true story”

Posted on May 12, 2017 by rtushnet
Incarcerated Entertainment, LLC v. Warner Bros. Pictures,
No. 16-cv-1302 (M.D. Fla. May 10, 2017)
Plaintiff alleged that it owned the rights to the life story
of Efraim Diveroli and sued Warner for false advertising and unfair competition,
based on Warner’s promotion of the movie War Dogs as the “true story” of Diveroli’s
path to becoming an international arms dealer. At 18, Diveroli allegedly
started a small business specializing in arms,  ammunition trading, and bidding on U.S.
Government defense contracts, and was awarded a $298 million contract to
support the United States’ war effort in Afghanistan. At  age 22, Diveroli was indicted by a federal
grand jury in Miami for his company’s violation of arms embargos and ultimately
accepted a four-year plea deal. Guy Lawson wrote an article in Rolling Stone, The Stoner Arms Dealers:
How Two American Kids Became Big-Time Weapons Traders, featuring accounts by
both Diveroli and one of his employees Packouz. Lawson optioned the movie
rights for the article to Warner and later expanded the article into a book,
Arms and the Dudes.  (Well played!) Diveroli
marketed his own manuscript, Once a Gun
Runner, and his business partner contacted a number of producers and
studios, including Warner, which declined to pursue a consulting arrangement
with Diveroli but retained Packouz as a consultant and enlisted Guy Lawson as a
producer.
The complaint alleged that Warner grossed more than $85
million by promoting War Dogs as Diveroli’s “true story” when it was not the
true story, shutting the plaintiff out of the marketplace because consumers
would purchase a ticket to War Dogs
instead of buying Diveroli’s memoir, Once
a Gun Runner.  Star Jonah Hill, for
example, claimed of the movie that “it’s all true,” while another promoter told
interviewers “these are real people,” and another explained that “we certainly
tried to follow what happened as closely as possible I think. If you know the
story at all, we pretty much stick to the facts as much as we can.”
The court, perhaps surprisingly, found that the challenged
statements were “commercial speech.”  The
statements were used for promotional purposes, referring to a specific product,
and with an alleged economic motivation: Warner knew that representing the
story as “true” would induce consumers to see the movie. The court rejected Warner’s
argument that the promotions were “intertwined” with non-commercial speech, including political and artistic
commentary, and were protected because they related to a movie, which is a
protected expressive work.  But movies “are
also sold in the commercial marketplace like other more utilitarian products,
making the danger of consumer deception a legitimate concern that warrants
some government regulation.” Rogers v.
Grimaldi.
The intertwining theory couldn’t be resolved on a motion to
dismiss.  Rogers typically applies only to titles or other expressive works,
not to ads, e.g., Facenda (a “making
of” documentary about a  videogame whose
aim was to promote another creative work).  The challenged movie trailers, social media
posts, and interviews could be subject to Facenda
treatment.
Warner argues that “based on a true story” couldn’t be
actionable because it conveys that the movie “is obviously fictionalized in part.”
There was no such clear-cut rule; the entire trailer in context included a
realistic news report by Wolf Blitzer, a well-known CNN anchor, and the entire
ad has to be considered.  As for
interviews with principals, the question whether they, in their full context,
falsely or misleadingly portrayed War Dogs as a true story called for a
fact-intensive inquiry that couldn’t be done on a motion to dismiss. 
The complaint also plausibly alleged that statements by
Larson and Packouz were made as agents of Warner. Lawson was a producer of the
movie, and Packouz was retained as a consultant and had a cameo in the movie.  An agency relationship with Warner could be
plausibly inferred.  Warner argued that
their statements were opinion or puffery.  Lawson stated on his Facebook page that War
Dogs was “amazingly close to the real truth of the story” and that War Dogs was
inspired by his own book. A reasonable person could infer that Lawson knew the
true story and his characterization of War Dogs “fairly implie[d] a factual
basis.” Likewise, because Packouz identified himself as the subject of the movie, his statement
that “this is exactly how it happened” at least arguably implied a factual
basis.
Warner argued that plaintiff didn’t properly allege
deception, but no factual evidence of consumer deception is required at the
pleading stage. As to materiality, plaintiff alleged sufficient facts to
support an inference that the truthfulness of War Dogs was an “inherent quality
or characteristic,” alleging that consumers are drawn to true stories and that
a test screening for War Dogs revealed that one of the main things people liked
was that it was based on a real story. Plus, because plaintiff wasn’t alleging
that scenes from the movie itself  were
false or misleading, the accuracy of the movie wasn’t relevant to the issue of materiality.
 (Hunh?)
Warner finally challenged standing under Lexmark. 
Plaintiff alleged that it was a direct victim of Warner’s advertising because
War Dogs diverted book sales from it. Thus, the plaintiff plausibly alleged
that its injuries “flowed directly” from Warner’s advertising.

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remedial actions prevent finding of irreparable harm for TRO

Posted on May 10, 2017 by rtushnet
Ocusoft, Inc. v. Walgreen Co., 2017 WL 1838106, No. H-17-1037
(S.D. Tex. May 8, 2017)
Ocusoft sells “the first commercially available eyelid
cleanser, Ocusoft Lid Scrub,” which Walgreens aells alongside its private label
eyelid cleansing pads, which are routinely placed next to Ocusoft’s products on
store shelves.  Ocusoft sued for false
advertising and unfair competition under the Lanham Act, federal patent
infringement, and unfair competition, dilution, misappropriation of goodwill,
and unjust enrichment under Texas common law. In support of its accompanying
motion for a TRO, Ocusoft alleged (1) that store clerks at three Walgreens
stores in Texas made false representations that the Walgreens Private Label and
the Ocusoft products were the same or were made by the same manufacturer, (2)
that one local store in Texas falsely advertised consumer savings on a
compare-and-save label showing a $7 discount, when the actual savings was
$3.50, and (3) that Walgreens’s online advertisements displayed the 2015
Walgreens Rinse-Free Pads, but customers were shipped the 2016 Walgreens Rinse-Free
Pads, which contained different ingredients.
Walgreens argued that it “never instructed its local store
employees to inform customers that Walgreens-branded products are the same as,
or are manufactured by the same company, as Ocusoft eyelid pads.” t argued that
“these isolated incidents, including a single incorrect savings tag in one
store, were unlikely to influence the purchasing decisions of consumers.” Walgreens
denied awareness of any customers other than Ocusoft’s agents who asked whether
the products are the same or were made by the same manufacturer, or of any
online customers (less than 1% of eyelid care customers) who complained about
receiving the 2016 version of the product instead of the 2015 version. However,
Walgreens also claimed that it had corrected the alleged misrepresentations,
including replacing the incorrect compare-and-save tag, issuing internal
communications to all store managers nationwide to instruct local store
employees to not tell customers that the Ocusoft and Walgreens Private Label
products are the same or are from the same manufacturer, and removing images of
the 2015 Walgreens Rinse-Free Pads from its website.
Ocusoft argued that a TRO was still necessary because at
least one Walgreens store in Florida displayed an incorrect compare-and-save
tag and an employee who was questioned about the Walgreens Private Label and
Ocusoft products said that they were the same.
The court found that Ocusoft hadn’t shown irreparable
injury, although the court wasn’t persuaded that Ocusoft’s ten-week delay in
seeking a TRO rebutted any presumption of irreparable harm. Ocusoft argued that
it filed its TRO after completing its investigation, which included store
visits, lab testing, and a survey; the court found that a two-to-three-month
delay in seeking a TRO does not foreclose injunctive relief.
In addition, Ocusoft alleged loss of market share, goodwill,
or reputation due to Walgreens’ false statements, but presented no record
evidence. Speculative injury isn’t sufficient. 
Though Ocusoft argued that lost market share was irreparable harm, it
didn’t present any data on that alleged loss.

Without deciding whether Ocusoft was entitled to a
presumption of harm, the court held that Walgreens’ corrective action avoided
any alleged imminent harm. One additional allegation of an incorrect
compare-and-save tag in one store in Florida was insufficient to revive Ocusoft’s
claim.

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allegedly false claims of official endorsement by Trump can be false advertising

Posted on May 10, 2017 by rtushnet
Bobbleheads.com, LLC v. Wright Brothers, Inc., 2017 WL
1838932,  No. 16-CV-2790 (S.D. Cal. May
8, 2017)
Bobbleheads.com makes bobbleheads, including the Hillary Clinton
Striped Prison Pantsuit Bobblehead, an application for copyright registration
for which was filed Sept. 2, 2016 (and an application covering just the head
was filed in May 2016).

Bobbleheads argued that defendants made unauthorized copies
in two of their bobbleheads:

(I see the claim for the first, but the second?  How is that anything more than the same idea?)
Several days after filing for the copyright registration,
Bobbleheads sent a C&D to defendants, and defendants allegedly took steps
to make it appear that they had temporarily discontinued the sale of the first
version.  Bobbleheads also sent numerous
DMCA takedown notices to ISPs, allegedly causing defendants to shift their advertising
and sales to other platforms and outlets.
Bobbleheads also alleged that defendants falsely advertised that
their products were sponsored or otherwise affiliated with the Trump/Pence
Presidential campaign (using the Trump/Pence campaign logo on websites and
other advertisements; indicating that a copyright for their website was owned
by or affiliated with Trump; and stating in their advertisements that
Defendants’ bobbleheads were “The official bobble head doll of the 2016 Donald
Trump Presidential campaign”). Plus, defendants allegedly falsely advertised
that they were selling the second version, but actually shipped the first
version.
The court first considered whether Rule 9(b) applied to the
Lanham Act claim, and held that it did where the claim is grounded in fraud, as
here. Under that standard, the claims survived in part, with the exception of
conclusory allegations that defendants used Bobblehead’s pictures of its own
bobblehead to sell their competing bobbleheads.
Defendants also successfully argued that Bobbleheads lacked
standing under Lexmark because it
failed to allege any kind of reputational or economic injury as a result of the
conduct charged.  Merely stating that
defendants’ false advertising “somehow caused Plaintiff to suffer damages” was
not specific enough—there were no more specific allegations of, “at the very
least, lost sales or damage to its reputation.” This wasn’t enough to plead
proximate causation.  Bobbleheads argued
that “if one product is the ‘official’ product, every other product is
unofficial and therefore inferior. Consumers in the market are likely to choose
the official product over the unofficial one and thus Defendants, through their
false advertising campaign have diverted sales from the Plaintiff….” Such
allegations might be sufficient, but they weren’t in the complaint; Bobbleheads
could replead.
Defendants argued that Dastar
barred any relief.  But Dastar is about false authorship claims,
not false endorsement.  Bobbleheads didn’t
allege reverse passing off, or anything about the manufacturer of the
goods.  Instead, Bobbleheads’ false
advertising claim was based on misrepresentations about “official” Trump endorsement.
This claim was “unrelated to the authorship or origin of Defendants’
bobbleheads,” and thus not covered by Dastar.
Defendants also argued that, “to the extent Plaintiff
complains of Defendants using an alleged false copyright notice, such a claim
must fail because the Copyright Act covers that kind of activity, but does not
allow for a private right of action.” But Bobbleheads wasn’t asserting a claim
for misuse of a copyright notice; instead the allegedly false copyright notice
was part of the overall false advertising claim based on misrepresentation of “official”
Trump campaign status.
Defendants further challenged the plausibility of
materiality here: It doesn’t matter if some customers who thought they were
ordering the second version received the first version because “the joke of the
bobblehead is the same regardless of the subtle variation in her hand position.”  But literally false statements and images
were allegedly used to market the bobbleheads, and literal falsity is presumed
to have deceived consumers.  Defendants
could attack materiality later.
Finally, defendants argued that associations with the Trump
organization were opinions/puffery, not actionable facts.  The court disagreed. “Whether or not the
Trump organization did, in fact, sponsor Defendants’ bobbleheads or claim
copyright in the website are ‘knowable’ facts, not opinions.”  There was a conceptual difference between use
of a symbol (TM or ©) indicating one’s belief in one’s own alleged rights,
versus use of a symbol indicating that someone
else, e.g. the Trump organization, claims rights in defendants’ website—the
latter is an ascertainable fact.

The court also deferred ruling on defendants’ argument that Bobbleheads couldn’t
get statutory damages and attorney’s fees because Bobbleheads learned of the
alleged infringement before it applied for the registration.  (Only the full doll registration was relevant
because the allegations of copying focused on everything but the head.)  On the allegations of the complaint, the date
on which defendants began their infringement was unknown.
Plan P2 Promotions, LLC v. Wright Brothers, Inc., 2017 WL
1838943, No. 16-CV-2795  (S.D. Cal. May
8, 2017)
Same story, different bobblehead, here the Donald Trump Red
Hat Bobblehead, published in 2015, application for registration filed October
19, 2016.
Here, based on the dates, PPP agreed that it wasn’t entitled
to statutory damages/attorney’s fees under the Copyright Act, but the court
refused to dismiss its request for attorney’s fees under the Lanham Act.  PPP adequately pled that this case was
exceptional in that defendants “were willfully blind and acted in reckless
disregard” of plaintiff’s rights, defendants falsely claimed an association with
the Trump organization; and that defendants engaged in a bait-and-switch
advertising campaign in order to hide their infringement of PPP’s bobblehead
and deceive consumers into purchasing a product they did not order.

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CFP: 2018 AALS Annual Meeting

Posted on May 8, 2017 by rtushnet

To encourage and recognize excellent legal scholarship and to broaden participation by new law teachers in the Annual Meeting program, the association is sponsoring a call for papers for the 32nd annual AALS Scholarly Papers Competition. Those who will have been full-time law teachers at an AALS member or fee-paid school for five years or less on July 1, 2017, are invited to submit a paper on a topic related to or concerning law. A committee of established scholars will review the submitted papers with the authors’ identities concealed. [Disclosure: I am on the committee this year.]

Papers that make a substantial contribution to legal literature will be selected for presentation at the AALS Annual Meeting in San Diego, California, in January 2018.
Inquiries: Questions should be directed to scholarlypapers@aals.org.

More details at the AALS site.

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False advertising and the privatized state

Posted on May 8, 2017 by rtushnet
Hansen v. Scram of California, Inc., No. 17-cv-01474, 2017
WL 1628401 (C.D. Cal. Apr. 28, 2017)
When the carceral state becomes a business, can it commit
business torts?  Plaintiffs sued Scram
and Alcohol Monitoring Systems (AMS) for the usual statutory California claims
and fraud, arguing that they misrepresented the capabilities of the transdermal
alcohol monitoring devices that AMS manufactures and Scram distributes.  The devices, worn on an ankle, were designed
to detect and record any instances when a wearer consumes alcohol by detecting
alcohol vapors caused by ingested alcohol diffusing through the skin.
Plaintiffs alleged that the devices were inherently susceptible to detecting false-positive
alcohol readings as a result of “environmental alcohol,” including vapors from
cologne, aftershave, hand sanitizer, household cleaners, and gasoline.  Defendants allegedly did not inform buyers of
the risk and affirmatively misrepresented it.
Defendants’ business model relies on court mandated
rehabilitation programs, as a condition of probation or bond, and other criminal
justice system functions.  People enter
into private contracts with defendants and pay monthly fees. Users sync the
device daily with a monitoring station; if the device concludes that any alcohol
vapor readings were caused by an “alcohol consumption event,” defendants inform
the relevant law enforcement agency or court exercising jurisdiction over the
wearer that the individual consumed alcohol, but they don’t alert the wearer,
nor does the device alert in real time. Thus, users can’t get time-sensitive
evidence—an immediate blood or breath alcohol test—to challenge any resulting
revocation of their bond or probation.
Defendants allegedly advertised their device as “a
cost-effective and accurate alternative for law enforcement agencies and courts
to track the alcohol usage of at-risk individuals,” and told the public and the
governmental agencies with which they seek to work that the device could tell
the difference between alcohol vapors from ingested alcohol and alcohol vapors from
enviromnental alcohol because the rate of alcohol dissipation purportedly
differs.  Plaintiffs alleged two
instances involving third parties in which courts rejected the device’s results
as “biologically impossible and scientifically unreliable.” Plaintiffs also
cited a study that concluded that the “methodology used by AMS cannot separate
ethanol [drinking alcohol] from other contaminating alcohols and therefore is
not a reliable method.”
Plaintiffs alleged that they experienced false
positives.  For example, plaintiff Hansen
wore the device while living in a residential alcohol treatment center; the day
after she tested negative on a breathalyzer at the center, AMS sent a report
indicating that she’d consumed alcohol for a day-long period.  When Hansen received the report, she again
tested negative for alcohol and a follow-up blood test reported the same. As a
result of the report, she was subject to an additional year of alcohol
monitoring; she paid $6,400 to Scram, $300.00 for a urine test from a certified
laboratory, and $2,000 in attorneys’ fees to defend against the alleged alcohol
consumption.  (It seems like a dangerous
business model to profit from false positives when the person who is ordered to
pay faces jail if she says no.)  Hansen
alleged that, had she known about the false positives and the lack of timely
notification to users, she wouldn’t have agreed to buy the alcohol monitoring
service as a condition of her bond.
Similarly, plaintiff Oh paid Scram $225 per week for its
monitoring services and a $325 enrollment fee. A Scram employee allegedly denied
Oh’s request for a fee reduction and warned that if Oh did not pay, Scram would
report to the trial court that Oh had violated her “Scram conditions.” Scram
reported that Oh was in violation of her monitoring conditions for consuming
alcohol from June 5 to June 7, 2015; the resulting report “indicated that Oh’s
transdermal alcohol concentration stayed constant for two days, which
plaintiffs assert is a biological impossibility.” When she became aware of the
report, Oh allegedly had her urine tested for alcohol at a state certified
laboratory and that test was negative. Oh challenged defendants’ report in
court and the “trial Court was unable to come to a resolution[.]”  Oh also alleged that she lost money in
reliance on the false representations/omissions.
Defendants argued that they were entitled to quasi-judicial
immunity and the litigation privilege, because this wasn’t really a false
advertising case but a case about monitoring alcohol consumption and reporting
the resulting information to a court. Quasi-judicial immunity is “extended in
appropriate circumstances to non jurists who perform functions closely
associated with the judicial process.” “However, it is only when the judgment
of an official other than a judge involves the exercise of discretionary
judgment that judicial immunity may be extended to that nonjudicial officer.” Defendants
didn’t claim to exercise any discretion when they offer their services on
behalf of courts. Plus, plaintiffs alleged misconduct beyond defendants’ work
on behalf of courts, extending to misrepresentations about their device to
individual customers, law enforcement agencies, courts, and the general public.
Similarly, defendants argued that they were protected by
California’s litigation privilege because plaintiffs’ essential claim was that
defendants communicated information about plaintiffs’ consumption of alcohol to
courts in connection with ongoing criminal matters. The California litigation
privilege “applies to any communication (1) made in judicial or quasi-judicial
proceedings; (2) by litigants or other participants authorized by law; (3) to
achieve the objects of the litigation; and (4) that have some connection or
logical relation to the action.” Again, the court disagreed: plaintiffs’ claims
relied on defendants’ alleged misrepresentations made to people in plaintiffs’
position.

However, plaintiffs failed to allege their common law fraud
claim with sufficient particularity, which also doomed the statutory claims
because each claim relied on defendants’ allegedly fraudulent misrepresentations.
Plaintiffs needed to allege who made the representations, when the
misrepresentations were made, and how they were communicated. They didn’t
describe the content of defendants’ ads or when plaintiffs viewed them. Also,
plaintiffs failed to provide defendants of thirty days’ notice of the alleged
CLRA violations, as required for damages under the CLRA.  Plaintiffs were allowed leave to amend. 

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