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

Posted on February 6, 2017 by rtushnet
Brighton Collectible, LLC v. Believe Production, Inc., 2017
WL 440255, No. 15-cv-00579 (C.D. Cal. Jan. 30, 2017)
Brighton sued Believe for infringing Brighton’s copyright in
a jewelry design and also engaging in false designation of origin/unfair
competition.  In particular, Brighton
alleged that Believe used photos of Brighton’s jewelry into the promotional
materials for Believe’s lower-quality jewelry. 
One Brighton collection includes a heart within a heart design, the Reno
Heart.

Reno hearts from Brighton

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

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

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Transformative work of the day, why would you even want that edition

Posted on February 6, 2017 by rtushnet
Among the notable things in this
story about ridiculously expensive houses, consider the description of a prior house with “a
master bedroom modeled after a Louis Vuitton store,” and “a chain saw featuring
Rolls-Royce hood ornaments, a giant Louis Vuitton syringe, and a huge Birkin
bag and stack of Louis Vuitton luggage all carved from honey onyx. Most of
those pieces were designed for the house.” 
Infringing?  Interesting that for
all LV’s litigiousness, these artworks seem to have gone unchallenged.
I couldn’t find a good image of the bedroom but note the … glass case of fire extinguishers?

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Blast from the past: claims to comply with vague industry standard weren’t literally false

Posted on February 3, 2017 by rtushnet
Lamons Gasket Co. v. Flexitallic L.P., No. H–14–0247, 2015
WL 12831719 (S.D. Tex. May 13, 2015)
The parties competed in the market for spiral wound gaskets
and other products used in the oil and gas industry to join and secure pipes. “A
spiral wound gasket consists of a piece of material wound tightly in a circular
form contained by a solid metal outer ring.” 
The American Society of Mechanical Engineers (ASME) issued relevant
industry standards, providing a specified range for the Outer Diameter (OD) of
a “4–inch” gasket. The ASME
standard did not, however, specify the method for measuring the OD and specifically didn’t provide whether the loose end, or “tail,” of the winding material should be
included in the measurement.
Flexitallic told customers that the outer diameter of Lamons’s
spiral wound gaskets failed to comply with the ASME standard.  Lamons alleged that this was false, because
Lamons’s spiral wound gaskets complied with the ASME standard if measured using
Lamons’s methodology.  Flexitallic alleged
that, in retaliation for Flexitallic’s statements about Lamons’s gaskets,
Lamons advertised that two Flexitallic spiral wound gaskets, depicted in a
photograph, failed to comply with the standard, and that Flexitallic had adopted
or endorsed Lamons’s methodology for measuring the OD of spiral wound gaskets.  Lamons sued for false advertising and
business disparagement, and Flexitallic counterclaimed for the same things.
Flexitallic had no evidence of actual deception, and thus had
to show literal falsity.  Lamons’s method
for measuring OD involved measurement with the gasket in a compressed state,
and included the tail in the measurement.  Flexitallic didn’t show that, measured using
this method, the gaskets didn’t comply with the ASME standard.  Flexitallic did show that if the OD was
measured using Flexitallic’s method or some variation of the Lamons method, the
OD was too small.  However, the ASME
standard didn’t address how the OD was to be measured. Indeed, after the Lamons
ad was distributed, the ASME Committee for Gaskets and Flanged Joints [I love the whole world and all its mysteries] discussed
the definition of “gasket outer diameter” and decided that “an inquiry [would]
be submitted in order to better clarify the definition.”  Dow Chemical Company also opined that the OD
standard was “vague” and subject to “open interpretation.”  Flexitallic’s evidence indicated that many—perhaps
most—companies in the industry measured the OD in a manner more similar to
Flexitallic’s method.  But that didn’t
show that Lamons’s method was impermissible under the ASME standard.  Thus, the claim was at most misleading and,
without evidence of actual deception, summary judgment for Lamons on the Lanham
Act counterclaim was proper.

However, there was a genuine issue of material fact on the Lanham
Act and disparagement claims based on Lamons’s statements that two Flexitallic
spiral wound gaskets did not comply with the ASME standard, and that
Flexitallic had adopted or endorsed Lamons’s measuring methodology.  First, there was evidence that one of the
gaskets wasn’t Flexitallic’s, which meant literal falsity.  Also, there was evidence of literal falsity
in that Flexitallic steadfastly maintained that Lamons’s measuring method was
improper.

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Advertising a phone with an unauthorized screenshot of an app doesn’t violate the Lanham Act under Dastar

Posted on February 3, 2017 by rtushnet
Appjigger GmbH v. BLU Products, Inc., 2016 WL 4119720, No.
15–22313 (S.D. Fla. Mar. 7, 2016)
Appjigger makes apps, and has an exclusive license for the WP
CLOCK software app, which is available both to end users and also for licensing
and pre-purchase installation by retailers. 
BLU Products’ mobile device allegedly came pre-equipped with the WP
CLOCK. BLU Products also allegedly advertised its mobile devices “with screens
which are substantially indistinguishable from the screenshots of android smart
phones using Plaintiffs’ WP CLOCK.”
This motion to dismiss didn’t challenge the copyright claim,
but dealt with unjust enrichment/unfair competition/false advertising.  Appjigger argued that “[t]he
misrepresentation of fact made by Defendants is that they are the origin of the
software that is prominently displayed in their advertising,” but they weren’t.  However, passing off under Dastar requires the producer to
misrepresent his own goods or services as someone else’s.  There was no suggestion that BLU was passing
off its mobile devices as Appjigger’s; Appjigger doesn’t make mobile devices.  Appjigger alleged that it created “some of
the software, ideas, or concepts embodied in Defendants’ devices,” but not the
devices themselves. 
Appjigger argued that it was the “origin” of the software
while BLU was the origin of the devices, but the court did not accept that “a
single tangible good protected by the Lanham Act may have multiple origins,”
given Dastar’s focus on the producer
of the tangible good.  [Query: would
allegations of false endorsement have mattered? Here, I find it rather
implausible that consumers would think that app makers endorse any device on
which their apps may be found.]  Courts
have therefore easily dismissed claims that unlawful sales of copies of a
plaintiff’s works, with the defendant identified as the creator of the physical
objects, violate the Lanham Act.  This case
was Dastar, except with a valid
underlying copyright [as, indeed, the 9th Circuit found to be the
case on remand in Dastar].
The Lanham Act false advertising claim failed because
Appjigger didn’t identify any misrepresentation about the “nature,
characteristics, qualities, or geographic origin” of BLU’s phones.  Authorship isn’t a “nature, characteristic, or
quality” under the Lanham Act, to avoid pleading around Dastar. “A defendant does not violate the Lanham Act’s false
advertising provisions by promoting its product while failing to properly
attribute the source of the underlying technology embodied in the product.”  Nor could the allegations be re-interpreted as
a trade dress claim, because plaintiffs didn’t plead anything about non-functionality
or distinctiveness.
The coordinate state and common law claims for unjust
enrichment and violation of Florida’s Deceptive & Unfair Trade Practices Act
were preempted.  Appjigger argued that
the necessary extra element to avoid preemption was supplied by “the
advertising and promotion of Defendants’ mobile phones showing the unauthorized
image of the Appjigger WP Clock software home screen.” But “showing the
unauthorized image” was nothing other than an “act[ ] of reproduction,
performance, distribution or display.” Nor was intent to profit an extra
element.
Query: If the copies of the app actually on the BLU phones, assuming such copies were there, were properly purchased, can the use in ads be anything other than fair use?

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Blast from the past: false price claims insufficiently pled

Posted on February 2, 2017 by rtushnet
Ashley Furniture Indus., Inc. v. American Signature, Inc., 2015
WL 12999664, No. 11-cv-427 (S.D. Ohio Mar. 12, 2015)
At this point I will just institute a “blast from the past”
category for Westclip.  This one made it
because of a discussion of Twiqbal
plausibility for false advertising claims based on allegedly false pricing.  Main
issue, focused on fair use in comparative advertising, discussed here.  As relevant here, defendant (aka Value City) counterclaimed
against its sofa-selling competitor, Ashley, under the Lanham Act and
coordinate Ohio state law.
Value City provided seven examples of purportedly false ads
involving items of furniture offered at a “sale” price along with one or more
higher prices for comparison. In several, the item of furniture was advertised
several months later with different “regular” and “compare” prices. In
addition, Ashley’s ads included “one day” sales and “limited quantity” sales,
but the items in those sales were offered on multiple occasions. Several ads
also said that the items were discounted by a specific amount or percentage,
but the ads didn’t identify the nature of the higher price, such as whether the
higher price was Ashley’s regular price or a competitor’s price. Value City
alleged, “upon information and belief,” that the “sale” prices in the
advertisements were in reality Ashley’s regular prices, and the “regular”
prices were artificially inflated prices used just for ads.
The court found that Value City had failed to plead plausible
false advertising claims.  Value City
argued that it was reasonable to infer that serial offers of the same “one day”
deal were false; that comparative prices that “yo-yo up and down” were not
actual prices from a competitor; and that a “compare” price “that suddenly
zooms up by $800” wasn’t based on bona fide sales of a comparable item at a
competing retailer.  The court disagreed.
The allegations gave rise to an inference that false advertising was possible,
but not plausible. 
Value City’s core argument was that the ad prices changed
over time, but there were a lot of possible explanations for that not involving
false advertising:  “Businesses routinely
adjust the prices of their products. The same is true of the allegedly
successive one-day and limited quantity sales. Supplies might be limited at one
point in time but not at a later date.” 
As for failure to identify the source of the comparison price, that made
the ads ambiguous, as was the meaning of “one-day” and “limited quantity”—did that
mean forever, or just for now?  Thus,
these weren’t plausibly literal falsehoods.
One alleged misrepresentation could constitute literal
falsity: the statement that Ashley’s advertised prices were sales prices when
in fact they were its regular prices. Further, allegations based upon
“information and belief” don’t necessarily fail Twiqbal. However, here, Value City’s “bald assertion” was “conclusory
and speculative,” lacking additional factual allegations to provide
plausibility—even if evidence that might support the allegations was uniquely
in Ashley’s possession.
Also, Value City didn’t plausibly plead materiality or harm
causation in connection with the non-literally false statements at issue.

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Political ad isn’t commercial, can’t be basis of Lanham Act claim

Posted on February 2, 2017 by rtushnet
Nichols v. Club for Growth Action, No. 16-220, 2017 WL
420111 (D.D.C. Jan. 31, 2017)
Club for Growth Action is a political organization that
broadcast a 30-second political ad on Wisconsin television and the Internet in
September 2015, challenging the record of former-Senator Russ Feingold, who was
then running for re-election against Ron Johnson.  The ad
featured the song Times of Your Life, with the majority of the lyrics
altered but not the composition.  Nichols,
the composer of Times of Your Life, sued for copyright infringement and
violation of the Lanham Act; the court allowed the former claim to continue
despite a fair use defense and dismissed the Lanham Act claim because the ad
was noncommercial speech.
On the fair use defense, Nichols argued that the sole alteration
was to the lyrics, and that the use took “from the very heart” of the
original.  Club for Growth argued that
the lyrics weren’t substantially similar, but that wasn’t an appropriate
question on a motion to dismiss, nor was fair use.

However, “the Lanham Act restricts only commercial speech,
as commercial speech is entitled to reduced protection under the First
Amendment.”  This was political speech,
not speech “in connection with any goods or services.”  Thus, the complaint failed to state a
claim.  (Dastar?)

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Failure to show causation leads court to overturn jury verdict against false advertising

Posted on February 2, 2017 by rtushnet
A.L.S. Enters., Inc. v. Robinson Outdoor Prods., LLC, No. 14-CV-500,
2017 WL 393307 (W.D. Mich. Jan. 30, 2017)
ALS sued Robinson for false advertising of Robinson’s
Trinity scent-control hunting clothing. The jury returned a verdict for ALS, awarding
ALS $1.3 million in lost profits plus $2 million in damage control costs, and
found that ALS was entitled to disgorgement of Robinson’s profits in the amount
of $500,000. Finally, the jury found that Robinson acted willfully. The court
granted judgment as a matter of law on all the money and denied attorneys’
fees, though it did grant a permanent injunction.
The parties sell scent-control clothing designed to mask (adsorb)
human scent or odor from animals, and market their products primarily to bow
hunters. They share many of the same retail customers.  Robinson began to use synthetic polymers,
specifically a product called Macronet.  Robinson had Dr. Roger Pearson perform a
static adsorption test using the same size pieces of fabric containing four
different adsorptive technologies using butyric acid to mimic human scent.  The product that Robinson ultimately sold as
Trinity contained one-sixth of the Macronet per square meter than the fabric
sample Pearson tested.
Robinson told retailers: (1) 1 ScentBlocker Jacket with
Trinity has the scent adsorbing capacity of 3 Scent-Lok jackets with carbon
alloy and 8 Under Armour jackets with Zeolite (the 8-3-1 claim); (2) activated
carbon technology has 44% of the odor adsorption capacity of the Trinity
technology (the 100-44 claim); and (3) Trinity technology adsorbs up to 40%
more odor than carbon and up to 200% more than Zeolite (the 40/200 claim). Only
the 40/200 claim was made to all of Robinson’s retail customers and to
consumers.
Robinson ordered another test to determine the validity of
ALS’s national ad campaign stating that Scent-Lok products were 16 times more
effective than ScentBlocker products. The results of the test showed that ALS’s
and Robinson’s products performed at about the same level.
In deciding a motion for judgment as a matter of law, the
question is “whether there is sufficient evidence to raise a question of fact
for the jury.” The evidence must be viewed in the light most favorable to the
party against whom the motion is made.
Robinson admitted that the 8-3-1 and 44-100 claims were
literally false. However, ALS was still required to show that these statements
were material to the retailers’ purchasing decisions and that there was a
causal link between these statements and some harm, but it didn’t. As to
materiality, while both statements could influence a purchasing decision, both
statements were always presented together to the retailers, and often near the
40/200 claim. “Given that these statements were mathematically at odds with one
another, it is implausible (without testimony from the retailers) that
sophisticated and knowledgeable retail buyers would have relied on either
statement.”  [Given the court’s argument
below that “technology” is not the same as “product,” these statements are not
mathematically at odds with one another. 
Also, expecting even sophisticated retail buyers to do
non-purchase-related ratio math is probably expecting too mcuh.]
And ALS failed to offer any evidence sufficiently linking
these statements to any retailer’s purchasing decision.  It wasn’t enough to show that one retail
representative “was impressed” with a slide making the 8-3-1 claim and said
that Robinson “truly ha[d] innovation that changes the game.” Being impressed
with a single slide out of many that were presented doesn’t show that it
actually influenced buying decisions, especially since Robinson was marketing
its Trinity technology as something new that allowed for more flexible, less
bulky fabrics. ALS argued that, after being shown the 8-3-1 and 100-44 slides, another
retailer ordered Trinity products, but “inferences of causation based solely on
the chronology of events” cannot alone establish a link to harm “where the
record contains…other equally credible theories of causation.” It was equally
plausible that the product’s other new features, rather than the 8-3-1 and
100-44 statements, influenced the retailer’s purchasing decisions. The jury
didn’t hear from the retailer.
The evidence established that the 40/200 claim, made to
retailers and consumers, was literally true, given that Robinson showed that
the underlying tests used an acceptable methodology (there was no industry
standard).  ALS argued that the prototype
used in that test was never commercialized, and the only product at issue
contained 1/6th the amount of Macronet used int hat test.  But the first test compared technologies,
while the second compared products. 
Because the 40/200 claim only referred to “Trinity Technology,” it
wasn’t literally false.  [Ugh.  Why would a reasonable consumer or retailer
think that “technology” meant something other than “the technology as applied
to the product actually being touted to you”? I’d have gone with falsity by
necessary implication]
The court did find that the 40/200 claim was misleading to
consumers, as proved by a consumer survey. 
Among other things, many consumers [naturally!] interpreted the 40/200
claim as referring to the product itself—meaning that the ScentBlocker product
itself allowed a hunter to get closer to a deer. Also, around 70 percent of
respondents thought that the “up to 40 percent odor claim” meant that the
product’s superior adsorption would last the whole time hunting and not just up
through 7.5 hours, which was all that was supported.
But ALS didn’t show survey or other witness testimony about
deception of retailers.  The fact that
two retailers repeated Robinson’s claim showed that those two were deceived,
but not that a “ ‘significant portion’ of the [retailer] population was
deceived.”  [This again seems
bizarre.  Why isn’t that a reasonable
inference for the jury to make, under the circumstances?  It’s hard to get direct evidence of consumer
deception, and individual examples can be representative, or we wouldn’t admit
them at all.]
The court also found that ALS showed materiality to
consumers, but not to retailers.  ALS
presented evidence at trial that there is a well-established market for
scent-control hunting apparel and that scent control is an important feature in
hunting apparel, and that was enough for the jury to find materiality.  The jury was properly instructed that a
statement is material if it likely influenced purchasing decisions. “Evidence
that a statement concerned an inherent quality or characteristic of a product
is evidence of a likely influence on purchasing decisions.”
But for the retailers, that wasn’t enough—not the centrality
of the claim, and not the fact that Robinson “inundated” retailers with the
40/200 claim. [What did ALS do to make this judge disbelieve its claim?  Those sound like decent pieces of evidence to
me.]  Robinson was an established player
in the market for scent-control clothing, and there was no evidence that,
without the statement, their purchases would have been lower, and there were
other claims made about the Trinity products that might have motivated
retailers’ purchases.  [What happened to
“evidence that it’s an inherent quality is evidence of likely effect on
decisions,” one paragraph ago?]
ALS also failed to establish causation at the consumer
level.  It argued harm at the retailer
level—lost clothing and fabric sales to one retailer, lost clothing sales to another,
and institution of a buy-back program at a third.  Although ALS may have been entitled to a
presumption of damage because the ad specifically targeted its product, any
presumption was overcome by evidence of no marketplace injury.  Two factors unrelated to Robinson’s advertising
affected the market during the relevant period: first, Under Armour entered the
scent-control hunting clothing space and was having a noticeable impact on the
market.  For example, one respondent
indicated that Under Armour was beating ALS because Under Armour was “new
in…the hunting industry and ha[d] inundated it with marketing,” and a
retailer representative told ALS that “UA sells” regardless of whether its
scent-control clothing worked. Second, retailers showed increasing preference
for their own in-house brands.  ALS’s
fluctuating sales revenue didn’t show that false advertising had caused sales
declines; there were downward trends before the ads, and Robinson’s sales to
one retailer also went down or were flat, which suggested that Robinson hadn’t
taken sales from ALS.
ALS argued that it initiated a guaranteed buy-back program
at Dick’s in 2014 in response to Robinson’s advertising statements, which
resulted in $53,000 in reduced profit for that year. But ALS didn’t link that
to the false statements, since the program was voluntarily adopted “to temper
the negative effects of Robinson’s false advertising.”  [I don’t quite get that—in a footnote, the
court suggests that the program wasn’t a factual rebuttal of Robinson’s ads,
which makes a bit more sense—though I agree that this rationale makes the
damages “more akin to damage control expenses rather than marketplace damages.”]
Retailer testimony was “noticeably absent.”  Plaintiffs are often reluctant to solicit
customers, who might be at risk of being subpoenaed, out of fear of alienating
them.  But that doesn’t remove the
requirement of evidence that Robinson’s advertisements influenced the
retailers’ purchasing decisions.  “At
bottom, ALS tried its case on a theory of post hoc ergo propter hoc,” but that
wasn’t enough in the presence of other equally credible theories of
causation.  [Why wasn’t that a question
for the jury to answer?]
For the same reasons, the jury’s award of Robinson’s profits
went away.  Also, ALS entered into several
contracts with Bone Collector, a celebrity hunting group with its own hunting
television show, as part of a marketing campaign. The agreements called for ALS
to pay Bone Collector a total of $5 million. ALS claimed that the Bone
Collector deal was necessary for ALS to effectively respond to Robinson’s
40/200 advertisements; the jury awarded ALS $2 million as damage control
expenses. But this deal wasn’t a necessary corrective measure to address the
false advertising, and so it had to go. To be recoverable as damage control
costs, corrective measures must be “reasonable under the circumstances and
proportionate to the damage that was likely to occur.” They can’t be “general
image polishing costs” but must instead be incurred to correct specific false
representations made by a competitor. “For example, Ford could not recover its
total advertising costs from Volkswagen if Volkswagen falsely represented the
fuel economy of its vehicles.”  [I see
the point, and it seems fair, though if we were really serious about goodwill
being a kind of lump thing we should be more open to general image advertising
to restore goodwill.]
Also, before trial, ALS described the Bone Collector deal as
being about other things, such as correcting a lack of celebrities in a “celebrity-centric
industry.”
In the alternative, the court granted Robinson’s motion for
a new trial.
The court did grant a permanent injunction.  Likely confusion satisfies the requirement of
irreparable harm.  [I’m a little
surprised the court didn’t discuss eBay,
given how hard it’s been on ALS in every other element.]  Robinson argued that there was no irreparable
harm because Robinson ceased using the 40/200 campaign in mid-2014, and as part
of its settlement efforts, it took steps to remove the 40/200 hangtags from
clothing in its warehouse and at retailers. Also, ALS’s inability to quantify
its damages, and its decision not to seek damages for 2015 or 2016, allegedly
showed lack of injury. 
The court found this to be a “close call,” but still warranting
injunctive relief.  In spite of
Robinson’s efforts, ALS showed evidence that the 40/200 claim remained in the
marketplace, on retailer websites and on products at retail stores.  The risk of harm was continuing, and there was
no adequate remedy other than an injunction requiring further removal efforts,
including steps to ensure that references to the 40/200 claim are removed from “non-retailer
hunting-related websites.”
This was not an exceptional case justifying attorneys’ fees
for ALS, even under the more forgiving Octane
Fitness standard.  Robinson’s defense
was fairly strong, given its evidence that the product worked.  Though it conceded that the 8-3-1 and 100-44
claims were false and that it showed them to retailers in multiple
presentations, there was no evidence of materiality. “As for the 40/200 claim,
Robinson showed that a significant portion of retailers were not deceived by it
and that the 40/200 claim was not material to the retailers’ purchasing
decisions.”  Robinson also had
“compelling” evidence about the lack of connection to any lost sales.  Also, Robinson didn’t litigate in an
unreasonable manner, with only typical “hiccups.”

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older case about materiality v. consumer skepticism: a question of fact

Posted on February 1, 2017 by rtushnet
Duraflame, Inc. v. Hearthmark, LLC, 2013 WL 12177870, No. CV
12-01205 (N.D. Cal. Feb. 2, 2013)
Duraflame alleged that many people bought Duraflame’s
artificial firelogs because they used renewable resources, and consumers are
willing to pay a premium to purchase such products. Hearthmark also markets
“natural” firelogs made from “renewable” resources, but Duraflame alleged that
consumers wouldn’t think that such firelogs contained or were derived from
petroleum, coal, natural gas or petrochemicals, and that Hearthmark’s firelogs did.
In addition, Duraflame alleged that Hearthmark reduced the
weight of its firelogs and began selling them as “2 Hour Fire,” “3 Hour Fire,”
or “4 Hour Fire” logs, which was likely to lead consumers to believe that the
new, lighter “2 Hour Fire” firelog was comparable to the three-pound firelog
that had been marketed as burning for up to two hours, etc.  Duraflame also alleged that a substantial
percentage of defendant’s products fail to burn for the length of time
advertised on the package.
Here, the court denied Hearthmark summary judgment on
several issues that recur from time to time. 
 Hearthmark argued that the terms
“natural” and “renewable” have no precise definition within the firelog industry,
and that no regulatory body with jurisdiction over the industry has imposed a
definition.  But Hearthmark itself
dedicated “much of its marketing efforts to educate potential customers on the
distinctions between its natural-and petroleum-based products.” Market research
apparently confirmed that end consumers both prefer a “plant-based” wax firelog
over a petroleum-based one and that a majority are willing to pay a premium for
such a product. It was at least a question of fact whether consumers understand
“all natural” or “renewable” to be synonymous with “plant-based,” and Duraflame
had test results indicating the composition of Hearthmark’s firelogs wasn’t reliably
free of petroleum-based materials.  Plus,
Hearthmark’s business model is to to produce products similar to Duraflame’s,
but to offer them at lower prices, so it was reasonable to infer that
Hearthmark’s interpretation of the terms “all natural” and “renewable” was the
same as Duraflame’s.
Materiality was also a question of fact for the jury, given
that  31% of firelog purchasers say “made
from 100% natural materials” is ‘Extremely’ or ‘Very’ important to their
purchasing decision. Even if that only showed that consumers generally like the
“concept” of “natural” and “renewable” firelogs, such a preference was enough
to go to the jury.
Hearthmark argued that Duraflame hadn’t shown materiality
the primary customers for these two companies – the retail giants who make
purchasing decisions for the store’s inventory—but the retail giants were sophisticated
purchasers who were aware of the preferences of the end consumers, and made
purchasing decisions accordingly. Major retailers even requested sales
presentations focused on “natural” and “renewable” products.
Although Hearthmark didn’t submit any evidence to show that
its products were free from non-renewable materials, the burden was on Duraflame
to prove that Hearthmark was indeed selling products that are not “all natural”
or made from “renewable products.”
Duraflame also raised a question of fact whether a
significant percentage of Hearthmark’s 4.8 pound “4 Hour Fire” logs burn for
less than four hours. In one of the few explicit considerations of the role of
individual product variance, the court noted that Hearthmark’s own minimum
acceptable burn time for its “4 Hour” firelogs is three hours and twenty
minutes, and the upper end of the target range is six hours. “A trier of fact
must determine whether this window of acceptable burn times accurately reflects
Hearthmark’s statement that its firelogs burn for four hours.”

And in one of the few explicit considerations of customer
skepticism about ads, Hearthmark contested materiality by pointing to
Duraflame’s customer surveys in which purchasers of both parties’ firelogs
stated they believed the “4 Hour” firelogs would burn, on average, for three
and a half hours.  The court found that
whether this survey showed immateriality was a question of fact, not of law; I
would have preferred rejecting this as a matter of law, since consumer perception
of what claim was made should govern, not consumer skepticism about advertising.  Moreover, Duraflame pointed to evidence that
consumer complaints about the short burn time of Hearthmark’s products was a
major issue for the company, and to consumer surveys indicating that burn time was
the most important feature in making a purchasing decision.  This raised a question of fact for the jury.

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TCPA survives strict scrutiny

Posted on January 31, 2017 by rtushnet
Brickman v. Facebook, Inc., No. 16-cv-00751, 2017 BL 25487
(N.D. Cal. Jan. 27, 2017)
One criticism of expanding strict scrutiny is that courts
will be extremely tempted to find that sensible regulations pass strict
scrutiny, thus watering down its protection for when it is needed.  Consider this decision, finding that the
Telephone Consumer Protection Act survives strict scrutiny: is that evidence of
the feared phenomenon?
Facebook sent computer-automated “Birthday Announcements
Texts” to cell phones of Facebook users informing them of friends’ birthdays.  Brickman sued on behalf of a putative class
for violation of the TCPA. A violation requires that (1) the defendant called a
cellular telephone number; (2) using an automated telephone dialing system
(“ATDS”); (3) without the recipient’s prior express consent.  Skipping a bunch of analysis, Facebook’s
system allegedly qualified because of the automation despite the involvement of
humans in selecting their own friends and entering birthday information.  Nor did the court need to address whether
Brickman actually consented, contrary to his allegations, at the motion to
dismiss stage.
The court agreed that, under Reed v. Gilbert, 135 S. Ct.
2218 (2015), the TCPA was content-based because its exceptions for any “call
made for emergency purposes” and any call “made solely to collect a debt owed
to or guaranteed by the United States.” Each of these exceptions would require
a court to examine the content of the message that is conveyed in order to
determine if a violation of the TCPA has occurred.  Brickman argued that the debt-collection
exemption was based on a relationship, not on content, but the court disagreed,
because “[t]he plain language of the exception makes no reference whatsoever to
the relationship of the parties” and referred instead to the purpose of the
calls. [I’m not sure the purpose can be disentangled from the relationship, but
that’s Reed for you.]  The FTC’s authority to create further
exceptions to protect privacy interests was not content-based; the FTC could
create content-neutral, relationship-based exceptions.
Fortunately, the TCPA passed strict scrutiny.  The compelling government interest was that
in protecting residential privacy, an interest strengthened when individuals
seek protection from unwanted speech. 
From Frisby: “[A] special
benefit of the privacy all citizens enjoy within their own walls, which the
State may legislate to protect, is an ability to avoid intrusions.”
Next, the TCPA was narrowly tailored.  Facebook argued that it was underinclusive
and overinclusive, and because there were less restrictive means of achieving
the compelling interest.
While “underinclusivity raises a red flag, the First
Amendment imposes no freestanding ‘underinclusiveness limitation.’” Underinclusiveness
can raise doubts as to whether the government is really pursuing a stated
interest or whether the statute actually furthers that compelling interest. Because
“[a] State need not address all aspects of a problem in one fell swoop,” the
Supreme Court has “upheld laws — even under strict scrutiny — that conceivably
could have restricted even greater amounts of speech in service of their stated
interests.”
Facebook argued that texts about emergencies or government
debt were no less intrusive than other types of calls.  But that’s not true.  First, the TCPA isn’t “riddled” with
exceptions, as the code in Reed was.  Nor would these exceptions allow “unlimited
proliferation” of calls.  Emergencies by
definition are limited in time and purpose, and Congress specifically found
that limiting automated calls except with consent or in emergency situations
was “the only effective means of protecting telephone consumers from the
nuisance and privacy invasion.” Telephone Consumer Protection Act of 1991, Pub.
L. No. 102-243, § 2(12), 105 Stat. 2394 (1991). 
Thus, the exception was narrowly tailored and carefully balanced to
address both privacy and health/safety.  Reed recognized that a speech regulation
narrowly tailored to address the challenges of protecting safety “well might
survive strict scrutiny.”
The government debt exception was likewise limited by the
fact that such calls would only be made to those who owe a debt to the federal
government.  Anyway, the US wouldn’t be
subject to the TCPA regardless because it hasn’t surrendered its sovereign
immunity.  That exception “merely carves
out an exception for something the federal government is already entitled to
do, and government speech is exempt from First Amendment scrutiny.” [Not sure
why the fact that the message would be government speech relates to whether the
statute is underinclusive.]  Even
assuming this exception, added to the TCPA in 2015, was unconstitutional, it
would be severable.
Underinclusivity makes a speech restriction fail strict
scrutiny “when it leaves appreciable damage to that supposedly vital interest
unprohibited.” Reed.  But
here, the exemptions left “negligible damage” to privacy to continue.
Facebook also argued that the TCPA was overinclusive because
“in purporting to target the ill of unwanted telemarketing it sweeps in speech
that facilitates social connections.” But the court disagreed, finding that the
TCPA was quite limited in what it prohibits: calls made using an ATDS without
the prior express consent of the recipient. Express consent completely removes
calls from the statute’s purview.  Thus,
it wasn’t overinclusive.
Facebook also suggested less restrictive alternatives to
show lack of narrow tailoring, but they wouldn’t be effective.  In Cahaly v. Larosa, 796 F.3d 399, 406 (4th
Cir. 2015), the court found plausible alternatives to include time-of-day
limitations, mandatory disclosure of the caller’s identity, and do-not-call
lists. Gresham v. Rutledge, No. 4:16CV00241 JLH, 2016 WL 4027901 (E.D. Ark.
July 27, 2016), recognized plausible less restrictive alternatives as including
time-of-day limitations, disconnection requirements, and prohibitions on calls
to emergency lines.  However, in those
cases, the government didn’t argue about whether those would actually work; it
did here, and the court agreed with the government’s criticisms.
“Time-of-day limitations would not achieve the same privacy
objectives because even though such a restriction may designate the span of
time in which callers can intrude on an individual’s privacy, it would also
designate a time for intrusive phone calls.” Mandatory disclosure of a caller’s
identity and disconnection requirements would also not be as effective because they
wouldn’t prevent the privacy intrusion from the phone call in the first place.
Do-not-call lists wouldn’t work as well; by requiring opt-out instead of
opt-in, they’d “obviously” not be as effective.   And the TCPA already prohibits calls to
emergency lines.
Facebook also suggested exempting noncommercial calls on
residential and fax lines, but under Facebook’s own analysis, those are
content-based and also subject to strict scrutiny, so they can’t count as less
restrictive alternatives.

Facebook’s as-applied challenge also failed, even assuming
that its texts were noncommercial speech, given the above reasons.

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Amazon escapes liability for ads & emails touting vendors’ infringing products

Posted on January 31, 2017 by rtushnet
Lasoff v. Amazon.com Inc, 2017 WL 372948, No. C16-151 (W.D.
Wash. Jan. 26, 2017)
Lasoff owns Ingrass, which sells artificial turf and related
products.  He sold through Amazon, but in
2013 his sales allegedly began to plummet, both on his own website and on
Amazon.  He alleged that third-party
sellers were offering cheaper, counterfeit “Ingrass” products for sale on
Amazon.com. When potential online consumers would click on links advertising “Ingrass”
products in Defendant’s promotional emails or in “sponsored link”
advertisements on third-party search engines, they were allegedly directed “to
competing listings which falsely advertised products as ‘Ingrass’ products at a
substantially discounted price.”
Amazon’s emails and its “sponsored link” ads on third-party
search engines are created automatically based on information retained from
that customer’s browsing sessions on Amazon; the content of the ads come from
vendors, who represent to Amazon that they have the right to license Amazon to
display that content. Likewise, Amazon automatically generates “keywords”
(words or phrases related to products or product names) based on consumer
searches on its websites, then an algorithm determines what keywords it
chooses.
Lasoff alleged that Amazon misappropriated the Ingrass trademark
and domain name by buying the keywords ‘Ingrass’ and/or ‘Ingrass.com’ on search
engines.
The CDA applied to his state-law claims, including state-law
trademark infringement.  Lasoff argued
that the emails and online ads weren’t provided by another information content
provider, because that was done by Amazon’s creation of the algorithm that
sends the emails/purchases of the keywords. 
The court disagreed; based on existing precedent, to allow this claim “would
place liability on [Defendant] for simply compiling false and/or misleading
content created by the individual defendants and other coconspirators.”  Amazon didn’t develop the underlying
information that Lasoff alleged harmed him.
The court found that “Ingrass” was suggestive (Lasoff
testified that it was short for “It’s Not Grass”) because it required
imagination to go from the product name to the product.   “While the Court cannot imagine an average
consumer instantly understanding what Plaintiff’s product is based on the name,
it is not difficult to imagine that same consumer saying something like ‘Oh, I
get it’ upon seeing the product to which the mark is attached.”  [Sigh. 
I am increasingly convinced that we need to dump suggestiveness,
especially if it’s going to be interpreted this way—consider that “Gold Medal”
and “Best” are suggestive based on this test.]
Amazon argued that it couldn’t be held directly liable for
trademark infringement. The court found the swap meet cases inapposite because,
among other things, “there is no evidence that the swap meet operators
generated promotional messages advertising the counterfeit goods.” Network Automation found use in
commerce, and the court found Amazon’s purported distinction between “the ‘deliberate’
selection of Advanced’s trademark by Network and the Amazon algorithm which
automatically selects keywords” to be meaningless for purposes of deciding
whether Amazon was “using” the mark. 
Although Network Automation
and Rescuecom, cited with approval by
the Ninth Circuit, precluded summary judgment on the use in commerce issue, the
court found “critical factual differences” here.  Unlike Network Automation, Amazon wasn’t a
competitor of the plaintiff; unlike Google, Amazon was buying, not selling, the
use of Lasoff’s mark.  Calling this a
direct infringement situation was trying to fit a square peg into a round
hole—when we have a square hole that will do just fine.
Even assuming that Amazon’s keyword buy was a use in
commerce, Tiffany v. eBay showed that
Amazon was entitled to summary judgment on direct liability.  Tiffany
held that “a defendant may lawfully use a plaintiff’s trademark where doing so
is necessary to describe the plaintiff’s product and does not imply a false
affiliation or endorsement by the plaintiff of the defendant.” eBay, and
likewise Amazon, need not be the guarantor of the genuineness of all of the
products offered on its website, given that to do so would “unduly inhibit” its
right to lawfully offer genuine goods.
The Lanham Act false advertising claim failed because of the
CDA.  “[L]iability lies with the vendors
who created the misleading content, not the service providers who transmit that
content.”

The court also dismissed a Sherman Act monopoly claim
because, among other things, search engine ads are interchangeable with the
larger market of all internet ads, so there was no monopsonized relevant market,
and there were multiple competing purchasers. 

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