All in the game: misleading tennis racquet endorsements don’t support class certification

Posted on March 17, 2017 by rtushnet
Ono v. Head Racquet Sports USA, Inc., No. CV 13–4222, 2016
WL 6647949 (C.D. Cal. Mar. 8, 2016)|
Ono sued Head for deceiving the public “into believing that
top-ranked professional tennis players actually used [Tour–Line Racquets]
during competition,” bringing the usual California claims. Although  he failed, the allegations—which seem to be
substantially uncontested by Head—are of the kind that often draw FTC scrutiny,
and the FTC doesn’t have the same problems that putative class representatives
do.  The FTC does
not like misleading endorsements, and Head would be well advised to read
the extensive guidance it has offered on the topic, particularly about the
endorser’s actual use of the endorsed product.
A press release issued by Head in April 2013, for example,
stated that “[Andy] Murray was winning a thrilling match with his HEAD YouTek
IG Radical,” that Richard Gasquet was “playing with his HEAD YouTek IG
Extreme,” that Tommy Haas was using the HEAD YouTek IG Prestige, and it also
mentioned “Maria Sharapova, who swings her new HEAD YouTek Graphene
Instinct[.]”Another release from 2011 stated that Novak Djokovic “changed to
his new YouTek IG Speed MP at the start of the season” and “Maria Sharapova
showed tremendous performances with her brand-new YouTek IG Instinct MP[.]” Ono
alleged that “professional tennis players whom Head pays to endorse specific
models actually play with different tennis rackets—custom-made rackets that are
not available to the general public or older models that have been discontinued
or are sold at steep discounts—but which have been painted to look like the
latest models that Head sells to the general public[.]”
The court found commonality, but not predominance. Head
argued that most of its ads didn’t claim that an athlete used a specific
racket.  The court commented that most of
Ono’s claims about Head’s ads were supported by the record, which included more
than 60 pages of press releases claiming that various professional athletes use
specific Tour–Line Racquets in their professional matches. When the Senior
Category Manager for Head’s tennis division was asked why Head did that, he answered “it’s always been that way.” Head
provides lists to retailers that include “the player and the racquet that they
are endorsing or playing with,” even if they weren’t playing with it in professional
matches, and even without any knowledge of whether a player is or isn’t using
it. Head’s president testified that players’ custom raquets are painted to look
like standard Tour-Lines sold to the public, and,. in response to a question
about whether that was “dishonest,” he simply said, “it’s inaccurate.”
Further, there was evidence that Head decisionmakers “knew
that certain customers care a lot about what racquets their tennis idols use,
and the evidence suggests that Head intended to maintain the ‘inaccuracy’
described in the preceding paragraph.” One 2009 employee email discussed Andy
Murray’s use of a racquet with a different number of strings than the racquet
Head claimed he used: “[i]t just makes it look like he is really not using the
racquet we say he is and when this starts getting around on the message boards,
it will not help our cause…. [P]eople like to have the same racquet
(especially he [sic] techy-geeks) and we are making it impossible.” Another
employee email: “[o]ne of our concerns, of course, is that now those serious
players that want to play with what our pros play with will doubt they get the
chance to play the actual Djokovic racquet.” A manager: “I am aware that
players do not play with the retail version and I have no problem with that but
we should have tried to make this as invisible to the public as we could,
especially on a new series.”  Cf.
Endorsement Guidelines, § 255.1(c) (“When the advertisement represents that the
endorser uses the endorsed product, the endorser must have been a bona fide
user of it at the time the endorsement was given. Additionally, the advertiser
may continue to run the advertisement only so long as it has good reason to
believe that the endorser remains a bona fide user of the product.”).
Head’s target market for the Tour-Line could, in its own
words, be described as “die-hard tennis freak[s]…. They play competitively 5 to
7 times a week and follow the game religiously. They know what’s going on and
who’s who in the international Tennis scene and … are mainly influenced by
their player idols, coaches and other players at their age and level of play.”
Head’s key argument was that its ads were varied and
diverse, and “[m]ost do not include the allegedly false claim at the heart of
this dispute—that a professional athlete used a specific racket in competition
play.” Much of the advertising featuring professional endorsements “explain[s]
the type of player each racket line or model is designed for and/or encourages
consumers to visit the website to choose a racket best suited for their needs.”
E.g., “The new YouTek IG Speed is specially designed for the needs of players
like Novak Djokovic. It offers a stiffer feel for hard hitters with a long,
fast swing style.”  The ads didn’t say
which specific variant a player is using, or that they’re using a variant
available to the public.  Also, Head
argued that the reach of its marketing efforts was relatively limited. “Between
2009 and 2013, it placed print ads in two publications circulated to tennis
teaching professionals, four tennis publications circulated to consumers …, and
some tennis tournament programs; banner advertisements on tennis-focused
websites; television advertisements on the subscription-only Tennis Channel;
and press releases on its own website, the majority of which have been viewed
59 to 118 times or less in the United States.”
Even if the ads didn’t claim that an athlete used a
particular racket in competition, a jury could find that the ads were
nonetheless misleading “because reasonable consumers would understand them to
mean that professional tennis players are using racquets that Head makes available
to the general public.”  Minimal ad
exposure also didn’t defeat commonality, which was a question of whether the
advertising itself was materially misleading. 
Head’s survey witness Hal Poret also conducted a survey in which only
six percent of respondents answered “both that endorsement of a racket by a
professional tennis player would be a factor in their decision and that they
believe[d] from [a sample] ad[vertisement] that Andy Murray plays with the
identical version of the racket sold to the public.” Of those who called
endorsement an important factor, only
1.5% believed that Andy Murray used the racquet in question.  Still, variations in what class members might
have believed or desired didn’t defeat the “relatively minimal showing required
to establish commonality,” especially given that some elements of the
California claims can be satisfied “without individualized proof of deception,
reliance, and injury.”
Still, the case foundered on predominance, for the reasons
largely given above.  Likely deception
isn’t automatically a classwide question.  Ono failed to show that it was reasonable to
assume that all, or even most, of class members were exposed to the allegedly
deceptive ads, “and thus the question of exposure would have to be resolved on
an individual rather than classwide basis.”  Even if Head’s target super-fans were more
likely to be exposed than other people, the class definition wasn’t just
super-fans.
Even painting racquets used in pro tournaments didn’t
necessarily expose consumers to the deceptive practices.  There was no evidence that Tour’s customers
generally watch tennis tournaments, or that they’d notice or be able to
determine the model used by a pro on TV or even live. There was no evidence of
an extensive decades-long campaign that might be used to infer exposure.
Nor was it reasonable to find that materiality and thus
reliance could be litigated with common evidence.  While Head may have targeted its marketing at
a segment of the population, there was no evidence that the target consumers
were the actual consumers. “It would therefore be inappropriate for the court
to presume that Head’s knowing that ‘tennis freaks’ would likely regard
celebrity use of racquets as important is the same as Head’s knowing or having
reason to know that purchasers of Tour–Line Racquets are similarly influenced.”
[This strikes me as wrong: the reason that we infer deception from intent to
deceive is that the fact that the seller thinks its representation will help
sell its products is good evidence that it will do so; sellers who tout only
unappealing features rarely last.]  Ono
responded to Head’s survey evidence only by arguing that “those consumers who
have purchased or are likely to purchase a tennis racket” in the price range of
Tour–Line Racquets weren’t “representative of Head’s target Tour Consumer,” but
the court already rejected Ono’s reliance on the target consumer.

In addition, “[e]valuating materiality using common evidence
would be particularly challenging in this case due to the different
representations regarding different racquets by different celebrity tennis
players. While some press releases say outright that a certain professional
player plays with a particular Tour–Line Racquet model, other advertisements
merely link a player with a particular racquet silo [sub-brand], or describe a
particular player’s style of play.”  Each
would require separate deception analysis. 
Also, the extent of deceptiveness varied—some pro players used racquets
very similar to the models available at retail, and others used custom frames
that differed more significantly. 
Although Ono contested whether these sub-brands were designed for
players like the respective endorser, that was a different misleadingness
argument than the one about whether the endorser actually used the racquet.

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Slingbox’s addition of ads wasn’t deceptive

Posted on March 17, 2017 by rtushnet
In re Sling Media Slingbox Advertising Litig., 202 F. Supp. 3d
352 (S.D.N.Y. 2016)
Plaintiffs sued Sling under California law, and in the
alternative under the consumer-protection laws of forty-seven other
jurisdictions, including under New York General Business Law § 349, based on
Sling’s addition of ads to its Slingbox service allowing consumers to watch
their home TVs from internet-connected devices. In late 2014, for the first
time, Sling began adding its own ads “after product startup,” as well as
“alongside streamed … content.” Plaintiffs were unhappy and sued for
deceptive failure to disclose that ads would be added.
Although the EULA said the agreement was governed by
California law, that didn’t give Slingbox purchasers outside of California the
right to bring California consumer-protection claims. New York plaintiffs had
to proceed under GBL § 349.  This
requires the plaintiff to show a consumer-oriented act or practice that is
deceptive or materially misleading, as well as injury.  There were no affirmative misstatements
alleged. Omissions are actionable “where the business alone possesses material
information that is relevant to the consumer and fails to provide this
information.” But plaintiffs failed to plead facts sufficient to make it
plausible that Sling possessed knowledge of a plan to disseminate advertising
at the time they purchased their Slingboxes.

Nor did the complaint sufficiently allege materiality.
According to the complaint, consumers buy Slingboxes to: (1) watch live or
recorded programming that they have already purchased from a cable or satellite
provider; (2) on another device; (3) anywhere in the world.  The complaint didn’t allege facts about the
Sling ads—how often they show up, can they be skipped or otherwise avoided,
etc. The complaint didn’t even allege that, at the time of purchase, plaintiffs
knew they were getting an ad-free experience. 
Finally, there were no allegations of actual injury, and adding ads “may
be beneficial, detrimental or of no consequence based on consumers’ personal
tastes, likes, or dislikes.”  Plaintiffs
argued they wouldn’t have bought the Slingboxes or would have paid less for
them if they’d known the truth, but that isn’t enough under New York law.  Small v. Lorillard Tobacco Co., Inc., 94
N.Y.2d 43, 56, 698 N.Y.S.2d 615, 720 N.E.2d 892 (1999) (stating consumers who
buy a product that they would not have purchased absent deceptive conduct,
without more, have not suffered injury).

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failure to caption music/songs doesn’t make “close captioned” label misleading

Posted on March 16, 2017 by rtushnet
Anthony v. Buena Vista Home Entertainment Inc., 2016 WL
6836950, No. 2:15–cv–09593 (C.D. Cal. Sept. 28, 2016)
Plaintiffs, who are deaf or hard of hearing, alleged that
defendants sold (1) DVDs enclosed in packaging with language advertising the
DVDs as subtitled, (2) movies advertised as captioned, and (3) movies or TV
shows advertised as subtitled via online streaming services. However, the
movies and TV shows were in fact not fully subtitled, specifically lacking
subtitles for music and song lyrics, which are often used to explain the
premise or theme of a movie or TV show, and can sometimes be crucial to
developing a plot (e.g., musicals). They brought the usual California claims as
well as a claim for violation of California’s Unrah Civil Rights Act.  The court found that plaintiffs failed to
allege that reasonable consumers would be deceived; “whether such content
should include subtitled song lyrics is quite distinct from whether consumers
expect it to.”  Plaintiffs might have
hoped that industry practice would change, but plaintiffs even alelged that
“the practice of not subtitling song/music lyrics is frustratingly widespread,”
and they each purchased or rented “numerous DVDs” in which the content
“including music lyrics, was not subtitled or captioned.”
Plaintiffs argued that they were a particularly susceptible
audience, and therefore the ads had to be measured by the impact they’d have on
members of that audience instead of by the effect on reasonable consumers. But
such a standard applies “to audiences who are known to be particularly
susceptible to advertising, such as small children, not vulnerable audiences in
general.” Plaintiffs didn’t explain why they would be more susceptible to
persuasive advertising than any other reasonable consumers.
For the same reasons, plaintiffs failed to adequately allege
reliance.  Also, plaintiffs alleged that they
didn’t have any choices about whom to buy from, since only defendants produced
captioned versions of their movies or shows. 
“In effect, the Plaintiffs are conceding that they would buy or rent the
products even without full captioning and subtitling, as there are no better alternatives
available to them.”
Also, and worryingly in a broader sense, the court found
that plaintiffs’ warranty claims failed because they didn’t allege either a “sale”
or a “consumer good” as required by the Beverly–Song Act. The claims involved
the video content of the DVDs, streaming services, or live movies, and the
court concluded that it was this content that would have to be “sold” to be
subjected to the act. But title to the content remained in the copyright owner;
“[t]he consumer may purchase title to the physical DVD, but only purchases a
license to view the expressive content.” 
Thus, there was a sale as to the physical DVD, but not as to the DVD
content. The same analysis meant there was no “consumer good” at issue.
The Unruh Act claims failed for want of alleged intentional
discrimination.
The court also found that California’s anti-SLAPP law
applied, given that captioning of videos is protected speech.  Plaintiffs argued that they were challenging
the advertising, not the absence of captions as such. But the “principal
thrust” of the warranty and Unruh Act claims was “clearly the captions and
subtitles themselves, not the labeling on the box,” since the warranty claims
were based on allegations that the movies and shows didn’t meet the particular
needs of the deaf and hard of hearing community because they weren’t fully
subtitled. “Such claims stem from the captions themselves, as changing the
labeling would not ensure that the movies and shows met the needs of the
Plaintiffs as stated in the Complaint.”  Nor
would a labelling change provide plaintiffs with the relief they sought under
the Unruh Act.
Although the argument that the false advertising claims
involved purely commercial speech rather than protected content carried more
weight, it still failed, because the ads were acts “in furtherance of the
Defendants’ right of free speech and are in connection with a public issue.”  The commercial speech exemption to the
anti-SLAPP law doesn’t apply to actions against “any person or entity based
upon the creation, dissemination, exhibition, advertisement, or other similar
promotion of any dramatic, literary, musical, political, or artistic work,
including, but not limited to, a motion picture or television program….”  

Because plaintiffs’ claims were legally insufficient and
unsubstantiated, the court granted defendants’ motion to strike under the
anti-SLAPP law.

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Not with a bang but with a fastener

Posted on March 15, 2017 by rtushnet
B&B Hardware, Inc. v. Hargis Indus., Inc., — F. Supp. 3d
—-, 2017 WL 957548 (E.D. Ark. Feb. 16, 2016)
I mentioned this development a while back, but it’s now
getting into the federal reporter, which is good so that people don’t
misunderstand what ultimately happened. 
As for background, “[s]uffice it to say that the twenty-plus year
dispute ended in another jury verdict and judgment for defendant Hargis
Industries,” and the court here rejected B&B’s various arguments for
extending the agony.
A jury found for B&B and against Hargis on B&B’s
claims for federal trademark infringement, false designation of origin, and
unfair competition. The jury found for Hargis on B&B’s claim of unfair
competition under California law, and for Hargis on its counterclaims for false
advertising and false designation. The jury also found that Hargis’s
infringement was not willful, and that B&B engaged in fraud on the PTO to
obtain incontestability status. The court then granted judgment for Hargis
given the fraud finding.
For the fraud on the PTO claim, the jury was required to
find (1) a material misrepresentation or the failure to disclose material
information (2) made with the intent to deceive.  The court explained:
Hargis’s position at trial was that
Larry Bogatz, B&B’s president, misled the PTO – and thus committed fraud –
by signing a declaration in support of his incontestability petition. That
declaration required Bogatz to declare that B&B had not received a final
decision on the merits adverse to its claim of ownership of the trademark that
affected its right to register that mark. Of course, B&B cannot reasonably
dispute that Bogatz’s declaration was false: the 2000 jury verdict found
B&B’s mark to be merely descriptive and devoid of secondary meaning which,
under the law, means the mark could not be registered.
B&B argued that the TTAB knew about the 2000 verdict and
thus couldn’t have been misled by Bogatz’s statement, and that Bogatz had no
intent to deceive because he was acting on counsel’s advice. True, the TTAB
referred to the 2000 verdict in its correspondence, but that’s a different
office, and the PTO doesn’t engage in substantive examination of an incontestability
affidavit.  There was no reason to think
that the PTO considered the 2000 verdict and still awarded
incontestability.  (Implicitly, since it’s
the courts that are supposed to engage in substantive review, it’s the court of
appeals that screwed this one up when it held that B&B’s incontestability
meant it was no longer bound by the 2000 verdict by failing to determine
whether B&B had actually
qualified for incontestability, rather than simply filing an affidavit correct
in form.)
As for reliance on counsel, the jury was free to reject
Bogatz’s testimony about his intent and reliance on counsel, especially given
that the jury was permitted to draw a reasonable inference of intent “considering
the timing of the declaration occurring mere weeks before filing a new lawsuit,
the witnesses’ testimony about their interactions in the past, and Bogatz’s
admitted knowledge of the 2000 jury’s findings.”
B&B also argued that the jury’s verdict was inconsistent
in finding for B&B on the trademark infringement and false designation of
origin claim, and against B&B on the unfair competition claim under
California law. But the verdict wasn’t inconsistent given the extra element of
damage to B&B under California law. Relatedly, the jury’s finding that none
of Hargis’s profits were attributable to Hargis’s infringement was fine.  Under the instructions, the jury’s starting
point was Hargis’s total profit; then, the jury could deduct all or a part of
profit “attributable to factors other than use of the trademark.” “ Hargis
presented testimony from several of its customers to explain that the
customers’ motivation for purchasing Hargis products was not connected with the
Sealtite name – thus, not connected with the allegedly infringing trademark –
but rather other characteristics such as customer service experience and
quality of product.”
B&B then argued that collateral estoppel didn’t bar the
action, as the court ruled after the jury’s fraud on the PTO finding.  In 2000, a jury found that B&B’s mark was
descriptive without secondary meaning, and there was no need to proceed to a
confusion analysis.  When B&B filed
the instant lawsuit, it alleged new circumstances—the incontestability.  “[E]ssentially, B&B is given a ‘pass’ on
the first element – the element that doomed its prior case – and allows a jury
to consider the second.” 
Incontestability was the “significant intervening factual change” that
rendered collateral estoppel inappropriate. But fraud on the PTO removed the
benefits of incontestability, downgrading the mark to “the same status it had
when the jury rendered its verdict in 2000,” meaning that there was no more
reason to give B&B its second bite at the apple.
B&B argued that the TTAB did not apply issue preclusion
in its own proceedings, so the court shouldn’t here. The court didn’t see the
point of that argument, especially since the court proceedings were about the
first element of an infringement case, protectability, whereas the TTAB rulings
were about confusion. Nor was B&B entitled to disgorgement of Hargis’s
profits, even if we assumed that it won its infringement claims.  B&B couldn’t show that the jury was wrong
to find Hargis’s infringement to be not willful—Hargis obviously had notice of
the registration, but that is not necessarily enough, especially given “the
ongoing litigation repeatedly finding no infringement and the fact that the two
companies engaged in different markets.” 
And disgorgement is discretionary, not mandatory; also, it depends on
unjust enrichment/compensation theories rather than on a penal justification,
and the evidence that B&B didn’t lose sales from infringement was therefore
relevant.

Judgment for Hargis on its counterclaims was also
appropriate.  “[I]t is clear the jury
accepted Hargis’s argument that B&B copied photos, text, or size and weight
charts from Hargis’s website and posted them to B&B’s website as B&B’s
fasteners.” Hargis then suffered injury when it had to engage experts and fight
B&B’s activity. 

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Seen around town

Posted on March 13, 2017 by rtushnet

Sufficient alteration + disclaimer to avoid trouble for this former BP franchisee?

“This is not BP Gas,” above covered-over BP star
Krackjack biscuits–any trouble from Cracker Jack if you import these from India?  Does it matter that other versions of the package present them as Krack Jack, two words?

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How green was my tractor accessory? John Deere defeats aesthetic functionality defense for color scheme

Posted on March 13, 2017 by rtushnet
Deere & Co. v. FIMCO Inc., No. 15-CV-105 (W.D. Ky. Mar.
8, 2017)      
Deere sued FIMCO for infringing on Deere’s green and yellow
color scheme on agricultural equipment. 
Deere has three green and yellow registrations: (1) the ‘103
Registration is from 1988 and covers green and yellow “agricultural tractors,
lawn and garden tractors, trailers, wagons, and carts,” specifically those with
green bodies/frames and yellow wheels; (2) the ‘576 Registration is also from
1988 and covers green and yellow “wheeled agricultural, lawn and garden, and
material handling machines”; and (3) the ‘095 Registration is from 2010 and
covers “tractor-towed agricultural implements,” including, among others,
“fertilizer spreaders” and “nutrient applicators” with green bodies and yellow
wheels. Deere also alleged common law trademark protection of its green and
yellow color combination.
FIMCO makes lawn and garden sprayers, its main source of
business, along with a smaller line of agricultural equipment, including towed
agricultural sprayers and nutrient applicators, which FIMCO offers in multiple
colors, including green and yellow. Deere sought to enjoin FIMCO’s use of green
and yellow for sprayers and wheeled agricultural equipment, and its use of
yellow tanks or wheels in connection with wheeled agricultural equipment having
green vehicle bodies. 
 

screenshot from complaint
Here, the court rejected FIMCO’s functionality argument and
several others, but allowed some elements of FIMCO’s defenses to proceed.
First, the court declined to exclude testimony from Deere’s
expert, William Shanks, an investigator at Marksmen, “a private investigation
firm that focuses on intellectual property investigations.”  Shanks summarized his investigation as
follows:
Over several weeks in June 2016, I
spoke with a total of 20 salespeople at different dealership locations, and
with 18 of those 20 salespeople, I said something very close to the following:
“I always thought [or assumed] that yellow/green farm equipment was made by . .
. .” or “I always thought [or assumed] that the yellow/green coloring looked
like . . . .” I would not finish the sentence, but would pause, to see if the
sales personnel would finish the sentence. Each time I raised this unfinished
sentence (18 of 18 times) the salesperson responded to my partial sentence and
pause by stating promptly either “John Deere” or “Deere.”
He thus opined “that salespeople at dealerships that sell
FIMCO’s agricultural equipment perceive the green and yellow colors on
agricultural equipment as associated with Deere, or at a minimum, recognize or
believe that people generally associate such colors with Deere.” Shanks
presented himself in the role of “an employee of a film production company that
wanted to rent or purchase agricultural equipment for a movie” so that dealers
would “perceive[] [him] as someone not well- versed in that equipment, so the
salespeople would be more inclined to educate [him] about the equipment than to
assume [he] knew about it already.” He used “candid conversations” instead of
“an interrogation or formal survey” in an effort to “ensure that the
respondents felt comfortable enough with me to use their own words and give me
their truthful, candid opinions.” He “offered an open- ended statement so
people would feel free to fill in the gap however they wanted, instead of acting
on a prompt or specific question from me.”
The court found that FIMCO’s criticisms went  to weight, not admissibility.  Shanks’ “twenty years of experience as a
private investigator for an intellectual property investigation firm, which has
often involved developing personas, conducting investigations, eliciting candid
responses, and evaluating the results of such investigations, qualifies him to
testify as to his opinions in this case.” 
Would his testimony be “based on sufficient facts or data” and “the
product of reliable principles and methods,” as the FRE require?  FIMCO argued that dealers would give
different, less specific answers to a “random layman” than they would to a
“true purchaser or shopper” and that it was likely that respondents were making
“guesses . . . as to what they thought Shanks’ film producer character, as a
completely uninformed, uneducated consumer, would think Shanks meant to finish
the statement with. . . . Shanks’ [u]nfinished [s]tatements clearly lobbed for
the respondents an answer going to what company most prominently features green
and yellow on its agricultural equipment.”  But “errors in survey methodology are more
properly directed against the weight a jury should give the survey, rather than
overall admissibility,” and these problems were mere “technical inadequacies.”  
Nor would his testimony be inadmissible hearsay: “evidence
of the state of mind of persons surveyed is not inadmissible as hearsay.” “Here,
Shanks phrased his questions to dealers as inquiring into what they always ‘thought [or assumed]’ about
the colors green and yellow on agricultural equipment” (emphasis added because
of factual mistake).  The Court was
satisfied that “experts in Shanks’ field would reasonably rely on this kind of
data in forming opinions.”
Comment: When I think about how hard real surveys struggle
to get attention paid to them, this result makes me sad.  Shanks explicitly induced salespeople to read
his mind and complete his sentence
with what they thought he thought.  The problem isn’t that Shanks is in the
courtroom instead of the salespeople—he can testify to their present mental
impressions—it’s that he isn’t testifying to the salespeople’s present mental
impressions of what they thought, but rather what they thought he, as a novice,
would be thinking.  After [gulp] years of
teaching, even I can anticipate a number of standard student responses, and
fill them in once a student starts down some particular path.  That doesn’t mean that the student is correct
or that I think the way the student thinks; it means I’ve seen the argument
before and I know what it sounds like. 
Nothing in his report is evidence of what dealers or ordinary customers
think.
Deere also failed to exclude five FIMCO expert witnesses
qualified by their years of experience in the industry.  However, they lacked the expertise to testify
about likely confusion as an ultimate issue, rather than about their own
experience, because surveys are what proves likely
confusion.  [And Shanks apparently did a
“survey,” albeit one without controls, which alone would ordinarily have been
enough to exclude a real survey in the modern era.] As McCarthy says, “A survey
expert has conducted a scientific test and asked questions of potential buyers:
other experts have not,” and thus “expert who has not conducted such a survey
must articulate and describe some other reliable methodology that forms the
basis for the conclusion that confusion is or is not likely in this case.”
FIMCO’s witnesses didn’t offer reliable methodologies sufficient to offer the
blanket opinions that “[t]here is no actual or likely confusion by U.S.
consumers.”
However, FIMCO’s witnesses could testify about their own
experiences with their customers throughout their careers, as well as “subsidiary
factual questions, such as … the sophistication of buyers and the degree of
care buyers typically exercise when making a purchasing decision of these kinds
of goods or services.” For example, one witness testified, “reliably in the
Court’s view, that he based [his] opinion on ‘[t]he price difference. The
farmer is either looking for self-propelled that doesn’t compete because it’s a
300, $400,000 sprayer self-propelled sprayer versus a $50,000 or less sprayer.’”  Even though they did no separate research before
forming their opinions, that went only to weight.
On to substance: in terms of fame, Deere claimed fame since
1923, or at the latest 1950.  Deere’s
advertising expenditures were $34,000 in 1903 (roughly 1.1% of total company
expenditures), $1.59 million in 1948, $5.4 million in 1957 (roughly $46.3
million today), and $75.3 million in 2015. Since the 1920s, it has advertised
in color, clearly depicting its yellow and green color scheme, and often
referred to this color scheme as the “John Deere Colors.” Its US sales have
been extensive throughout its history, beginning in 1905, reaching $299.7
million in 1950 (roughly $3 billion today) and $29 billion today, and many of
those sales were of products using the color scheme.  Deere’s archivist cited a 1923 article
published in Implement & Tractor Trade Journal, discussing an upcoming
convention at which a “Model Store” would be featured for agricultural dealers
to see, which said that “[t]he glassed-in front is painted in the Deere colors,
green and yellow.”  A novel, originally
published in 1950 as Reluctant Farmer, also discusses a new wagon “painted the
bright John Deere green and yellow” and a “side-delivery rake” painted “the
usual bright John Deere green and yellow.” A Smithsonian.com article from 2011
called “Happy Birthday, John Deere!” begins with the following statement:
Unless, like my husband, you hail
from a place like Nebraska, where it is 
common knowledge that Farmall tractors are candy apple red, New
Hollands’ are royal blue and Allis Chalmers are orange, I suspect that John
Deere tractors, with their kelly green bodies and bright yellow hubcaps, are
the only ones that are instantly recognizable.
Deere also surveyed members of the general public, 153 out
of 156 of which identified a tractor bearing the yellow and green colors as
being a Deere brand. Deere also has registrations for its color scheme, but
those were not obtained until 1988 and 2010, long after the years in which
Deere alleges its mark became famous—and long after FIMCO began using the
colors.  The court found that the issue
of when Deere’s colors became famous was a genuine issue of material fact.  “[T]he mere fact that Deere’s use of yellow
and green were referenced in 1923 and 1950 is insufficient, at this stage, to
say that 1923 or 1950 are the years Deere’s mark became so ‘widely recognized’
so as to make it famous for dilution purposes. Indeed, our sister courts have
stated that ‘general media assertions and acclamations of fame are not strong
evidence’ of fame because fame for trademark dilution purposes ‘is not proven
through the words of trade publication articles declaring it so.’”
FIMCO alleges that, through its alleged predecessor in
interest, JDD, it used green and yellow on its agricultural equipment from
“either [19]32 or [19]38 forward.” The problem was that FIMCO couldn’t prove
that JDD was its predecessor in interest, since the only evidence was from the
current owner, Kevin Vaughn, who testified to his childhood memories from 1966
when, in his understanding, his father took over JDD’s assets out of
bankruptcy.  [One might think that this
is one reason we have laches, but the courts have been very hesitant to find
laches in trademark cases, though perhaps once the court gets around to likely
confusion Deere’s apparent inability to find real confused consumers over the
past half century might matter.]  This
evidence couldn’t be presented in admissible form, so FIMCO was left to its own
start date in 1966, when it started to use the green and yellow colors.
Functionality: basically, FIMCO couldn’t prove that, even
assuming that a desire to match equated to competitive necessity, the desire to
match couldn’t be satisfied with either
yellow or green, perhaps with black or gray; Deere limited its claims to the
yellow and green combo.  Deere & Co.
v. Farmhand, Inc., 560 F. Supp. 85 (S.D. Iowa 1982), aff’d, 721 F.2d 253 (8th
Cir. 1983), found aesthetic functionality in the color green in similar
circumstances, but (1) Deere clearly claimed only the combo this time, (2) the
case predated Qualitex and Traffix (which I think is a bad argument
because Breyer cited the case specifically in his discussion of aesthetic
functionality in Qualitex) and didn’t
apply the modern test.  “It may present a
different question if Deere sought to completely prohibit all use of the color
green or all use of the color yellow, as was the case in Farmhand.”   Trademark rights
in one color “may differ from trademark rights in a combination of
colors.”  [See also Louboutin.] 
Anyway, since Farmhand,
courts have rejected claims based on a mere desire to match, because that’s not
an aesthetic purpose “wholly independent of any source-identifying function.”  [I think that interpretation equivocates about
independence. The desire to match, given a previous purchase of durable equipment,
is independent of source-identifying function; it would apply no matter which
brand of tractor the buyer had.  The
matching color is related in a but-for sense to the choice of Deere, but I
don’t think that source-identifying function should be deemed a proximate cause
of the choice of matching equipment.] 
Testimony that half of customers wanted their equipment to match, and
half of those would change a purchase over that requirement, wasn’t convincing
to the court—which I find a bit perplexing, since functionality has never
required a showing that every single
customer thinks there’s no alternative; 25% is a pretty significant chunk
of a market.  But the broader point that
the color combo wasn’t shown to be necessary to match is still a good one.
FIMCO’s laches defense failed because it couldn’t prove
privity with JDD, which had received C&Ds in 1944 and 1963, as did its
implied license defense. However, there was a genuine dispute of material fact
as to acquiescence and estoppel. FIMCO put in a lot of evidence that its
products would have been visible to Deere representatives at farm shows for
years before 2011, when Deere allegedly discovered them.

The court also rejected FIMCO’s arguments about the scope of
Deere’s registrations as covering yellow tanks/other aspects of FIMCO’s
products; the question was not what the registrations covered but whether
confusion was likely.  There were also
some issues with incontestability—whether Deere made/sold all the items listed
in the registrations continuously. 
(Among other things, the ‘576 Registration includes “sprayers”; the
court wasn’t persuaded by FIMCO’s argument that Deere didn’t sell trailed
sprayers because it did sell self-propelled sprayers.)  Mostly there were genuine disputes of fact.

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Conference announcement from the ABA

Posted on March 13, 2017 by rtushnet

ABA’s 32nd Annual Intellectual Property Law Conference
April 4-6, 2017
Crystal Gateway Marriott, Arlington, VA

Learn more here.

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GW/Harvard conference: licensing and exhaustion

Posted on March 10, 2017 by rtushnet
Licensing and Exhaustion
Moderator:  Prof.
Robert Brauneis, George Washington University Law School
Eric M. Reifschneider, The Marconi Group: There are deals
that have died just b/c of exhaustion uncertainty.  What triggers exhaustion?  At one time, many practitioners thought that
a covenant not to sue wouldn’t trigger exhaustion; in 2009, Fed. Cir. said that’s
not the case. There was a point when people thought that if you withheld the
right to use from a license grant, that would avoid exhaustion b/c a right
couldn’t be conveyed broader than the license itself. That’s not correct
either: exhaustion comes from sale, not the right to use. There’s no way to
stop companies trying to do business from attempting to structure contracts in
a way to achieve business objectives—avoidance, not evasion. These days,
covenant to sue last/covenant to exhaust remedies: before I sue you, I will sue
your customer.  But if I can’t, I reserve
the right to come back and assert patents against you. That doesn’t authorize
sale or grant license.  You’d think that
would work, but we don’t know b/c there’s no court that’s decided the issue.  Enough language out there makes it sound like
avoidance is a bad thing.
Aaron M. Panner, Kellogg, Huber, Hansen, Todd, Evans &
Figel, PLLC: more ready finding of exhaustion than in pre-Quanta law. Substantial
embodiment now gets litigated: when does the product sold substantially embody
the patent, critical for method patents as well as compounds. Real hostility to
slicing and dicing rights in any way you want; transactions should be chunked
to avoid worries about separate IP rights. 
[That is a very Henry Smith-/numerus clausus-sounding justification.]
That’s why the SCt got Kirtsaeng
wrong.  The whole idea of “made under
this title” was understood by the Second Circuit to be “made in the US,” and
that can’t be right.  But “made under
this title” as “made under some authorization under the law” makes more
sense.  If I authorize printing a book in
England for sale worldwide, that’s made under this title b/c a right under US ©
law has been conferred on the printer, whereas if I authorize English sale only
I’ve done nothing that implicates my rights under US law.  Lexmark
will raise this same Q under a statute with no such language; we need to figure
out when you’re exercising your rights and when not.
Prof. John F. Duffy, University of Virginia School of Law:
First authorized sale could mean you lose all your rights worldwide; or you
could lose nothing as long as you specify it clearly enough in your
license.  That’s about as big a range of
possibilities as one can imagine.  Does
the statute help? 
           
Sarang V. Damle, U.S. Copyright Office: Kirtsaeng leaves not so much left under §109. What we’ve been
thinking about in post-sale restrictions: software-enabled consumer
products.  Suppose you want to patch your
own toaster’s vulnerability. You may have to reproduce software to examine it;
maybe you create a derivative work. Those aren’t exhausted rights.  Do we characterize books and movies as
licensed when they’re digital, as we’ve done w/software? Think about basic
commercial law principles. There are still exhaustion-related Qs to be examined
in ©.
Duffy: commercial law/Title 9 deals with encumbering
property after it’s sold/transferred. You can say “you can’t use a research
laser for a commercial purpose” and put a security interest on it and the
interest follow the good. There are some limits; there are notice rules. What
exhaustion is trying to do is not make patentable goods an encumbrance-free zone;
conditional sales are possible, but you need to use this other area of law, and
there’s a reason behind that—this is what courts were saying when they created
this doctrine. The debate in IP is about conditional sales—that was a term in
the 19th C. in commercial law, a forerunner of the security
interest. But the UCC now just expressly incorporates that into the concept of
security interests; UCC abolished conditional sales.

Why is exhaustion so inflexible when even tying is now
flexible? It’s just a domain limitation. Just like the line b/t Virginia and
North Carolina is very formalistic.  That
makes sense because of what the line is there to do.  For a security interest, there’s a stronger
notice requirement: the consumer has to affirm it actively, not just click yes
on a contract of adhesion.

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GW/Harvard conference: Infringement and Defenses

Posted on March 10, 2017 by rtushnet
Infringement and Defenses
Moderator: Prof. Michael B. Abramowicz, George Washington
University Law School
William F. Lee, WilmerHale LLP: Literal infringement/each
and every element of the claim—useful for laypeople to think about the claim.
In many jurisdictions (Germany, Netherlands, Japan) around the world, focus is
less specific terms of the claim and more the essence of the invention. Having
seen both regimes, essence approach is more flexible but less predictable—depends
on what adjudicator thinks the essence of the invention is. One thing juries do understand, whether they understand
the claim in its entirety, they understand that each and every thing described
in the claim needs to be there. Useful framework for trial, appellate, and
beyond.
As we think about things like “should we have all elements
or essence system,” any changes have to be viewed from global, not US property
right, perspective.  eBay: from his
perspective, the biggest effect of eBay has been to move IP litigation outside
the US; Germany, Netherlands, Japan, Korea have become more important b/c
injunctions follow as night does day there, and they are not stayed pending
appeal.  59 Apple/Samsung cases outside
the US w/injunction regimes that were much more patentee-friendly.
Prof. Dmitry Karshtedt, George Washington University Law
School: Interesting tensions in this area. At claim construction stage, judges
may look at essence, even if not always. Biggest concern is symmetry b/t
infringement and defenses. Claims drafted by patentee, but odd to say that SCt
is concerned about claim limitations but in Mayo the Ct was dismissive of the
draftsman’s art.  Exhaustion: look at LG,
court says it doesn’t have to be every element if it’s substantially embodied,
it may exhaust. But that moves away from the primacy of the claim. Tensions
worth noting; some can be explained by construing against the drafter, but the
essence can affect claim construction, and that hasn’t been flagged
sufficiently.
Abramowicz: Formalism v. purposivism is an issue across
bodies of law.  Attention to
economic/policy issues. Should this be the same in IP versus outside?  Same in © as in patent?
RT: Fromer has written about peripheral v. core claiming in ©
v. patent: derivative works right differs, and the court may be the first time
you get an interpretation of the meaning v. more substantive examination for
patent.
Malcolm L. Stewart, Deputy Solicitor General of the United
States: Techniques of statutory construction. 
Tax code has industry-specific provisions, parsing fine details/drawing
inferences from use of term in different provisions. You can’t do that
w/infringement provisions b/c they’re not written at that level of detail,
intended to cover all the industries that might be covered by patent and ©. But
the concepts of infringement have been around for 100s of years, differing from
modern regulatory statutes; there’s a wealth of material about patent & ©
infringement as traditionally understood. What drives courts is unavailability
of one method of statutory construction, plus historical rich background, e.g.
on inducement.
Abramowicz: Karshtedt has argued for more flexible liability
for person A for person B’s acts.
Karshtedt: tort & criminal law concepts of aiding and
abetting. One intuition is: if you commit a crime/tort w/physical instrument,
we treat it as direct liability not inducement or secondary liability. Sometimes
another human being can be such an instrument—a completely passive human user
who doesn’t know about the tech and who is just executing steps in a method
claim. That’s direct and not indirect liability; the real responsibility lies
w/the manufacturer. Inducement was really encouraging/giving someone a weapon
where the other person was central in committing the crime.  The differences in the facts inform these
questions.  The courts have been very
formal in direct/indirect boxes; the line is not so sharp.  See this in Aereo too, where the issue is
direct/indirect. See that in patent too; don’t have to be physically carrying
out the act, and use in patent doesn’t have to be physical use—just take
advantage of.
Lee: We’ve had a number of cases w/attempts to apply traditional
causation concepts to 300-year-old patent concepts; people struggle
w/proximate, but-for causation.  If we
changed, what would the standard be? How would that change the evidence that
fact finders hear?  If it was cause in
fact v. inducement—the evidence might not change a bunch; would it have much
effect? Not clear.  Another point:
300-year-old principles, the history has been that they exist and modified,
amended, over time but there in some form. The process has always been that development
a new tech, or convergence of tech, are seen in light of old principles. As you
think about changes, it’s a system that’s there to accommodate unimagined tech,
and thus must be flexible.
Prof. Rebecca Tushnet, Georgetown University Law Center: Formalism
as transaction and error-cost lowering: Type I and Type II errors, but lower
systemic costs.  Lack of formalism doesn’t
work very well in TM—Google as potentially directly liable for KW advertising
carried out by advertisers.  But Google
won all those cases at the end, as it should; the direct liability mirage just
was very very costly for the system.
Infringement in context, not just global but remedies:
statutory damages. That affects direct/indirect liability too b/c of lack of
any knowledge/intent if we call an ISP directly liable it’s quickly in
billions.
Designated skeptic about private law as a distinctive set of
tools.  [Whether you engaged in a public
performance is not so much a matter of good faith in the ordinary sense.  Consider regulatory analogies instead of
private law analogies: Tax evasion/tax avoidance distinction that arguably
mapped better onto Aereo than other analogies. Evasion is a wrong; avoidance is
not.  Likewise, creating a nonprofit
archive or museum in order to take advantage of the various limitations
copyright law provides for such archives: that’s not wrongful if you really
create a nonprofit. Nor is structuring a business around fair use. Interesting
to talk about corporate law analogy: the whole point of the corporate structure
is to cut off individual liability, which is why people were really dubious
about that enterprise at its historical beginning, but if you do it correctly
we make it almost impossible to pierce the corporate veil.]

Stewart: Aereo: We know from precedent that a cable system was supposed to be
covered by public performance, but not a seller of rooftop antennas.  Wanted to know which this was more like.  People had different answers; we had our
brief about our reasons, but it came down to gut instinct.  We filed the brief we did b/c gov’t
decisionmakers felt it was more like cable, and the Court majority agreed.
There was no complex statutory language you could turn to in order to make the
choice b/t competing paradigms.  Not fascinating
as a legal puzzle, but as factual one.
The dissenters in Aereo:
this might be prohibited by some other aspect of the © law, and if not probably
should be, but if they found a loophole so be it, that’s for Congress to
fix.  Court majority’s reaction: it sure
looked like a public performance in every respect.  This wasn’t a loophole but in fact the very
thing Congress sought to cover.
Abramowicz: we didn’t see patent analogies. To what extent should
areas of IP look at one another?  To what
extent should IP look to contract law, tort law?  Is there a special relationship b/t © and
patent?  Or is the first step to think
about contract and tort b/c all new problems are old.
Stewart: depends on the type of problem you’re dealing
with.  Inducement liability: if Congress
had codified it differently, that’d be good evidence of a difference, but
without that borrowing seems plausible.
Lee: Where the statutes differ on their face, that’s easy;
where they share language, that’s easy; the harder ones are specific provisions
that might, if stretched, have some analogous meaning—harder to do and more
dangerous.
Abramowicz: Akamai: no inducement w/o primary
infringement. 
Karshtedt: There are other ways to infringe besides
physically doing things. Mental state isn’t even mentioned in inducement,
though it’s correctly read in due to background common law.  Just b/c patent act doesn’t mention
respondeat superior doesn’t mean that respondeat superior doesn’t apply, etc.
Inducement can mean many different things—e.g., aiding and abetting.  We should impose higher mental states for
making food for an infringer/providing a platform that can be used for an
infringer v. making a device that can only be used to perform steps of a method
claim.  Akamai was unanimous, unusually,
in Fed. Cir. even though vicarious liability may not be the best fit. Take
common sense intuitions about holding Akamai liable b/c it’s providing a
service that can only be used to infringe. 
RT: you get some weird results that are path-dependent: TM
and © vicarious liability differ, but why?
Stewart: Grokster
considered two historical analogies: seller of equipment useful for almost nothing
but infringement, and that = liability; or product suitable for both uses, but
manufacturer specifically encouraged use for infringement, and that = liability.
The Court really paid no attention to the fact that concepts of secondary
liability have been codified in Patent Act as provision covering components
specifically made for use in patented invention and as provision covering active
inducement—striking that there was no attempt to get lessons from that.
Another thing—Court has a very strong recognition of the
fact that a lot of tech can be used in infringing or noninfringing ways; in
many instances vendor can confidently predict infringing and lawful use. Court
leery of infringement liability in those circumstances.
RT: responses of litigants: Scale/ inability to control
design through traditional law (e.g., creator of Bittorrent, which nobody
thinks is liable for inducement, but nonetheless enables a lot of infringement);
related move to admin/new forms of lawmaking/non-law making w/ICANN, copyright
strike system, etc.; other attempts to police design or behavior on platforms;
moves in Europe where they don’t care about the common law.  Consider hydraulic effects of making rules in
common law reasoning manner.
Lee: inducement claims in patent have proliferated v. 15
years ago.  Why?  Claims litigated today were drafted 15 years
ago; struggling to address new inventions. 
But also particularly in the US, litigating an inducement claim, even
w/additional burden of showing some level of culpability, is simpler and
potentially more lucrative, b/c you’re going after one defendant but the acts
of direct infringement are those of other parties w/a larger revenue base than
the actor you focus on.
Jonathan Band: Scalia’s Aereo
dissent spent a lot of time criticizing the majority for not identifying a
volitional actor—the individual or Aereo. 
Majority was very cagey; assumed that Aereo was a volitional actor but
didn’t use the word. That’s led some litigants to say that Aereo got rid of the volition requirement.  Perfect
10 said volition still exists.  Why was
the SCt so averse to using the word, and is it significant?
Stewart: Can’t remember ever hearing volitional as a magic
word that would help you to determine whether a particular entity was subject
to infringement liability. We didn’t frame the issue that way, but not from
conscious shying away; that just wasn’t the most natural way of describing what
was going on.  In the context of a cable
operator, there are two volitional actors: the cable operator itself making
certain choices about how machinery will work and what channels will be
available, and then to get a program transmitted the person in the house has to
adjust the channel; both are volitional. The initial determination about lack
of liability for cable/Congressional override—not naturally explained as a
disagreement about volition, but rather as what kind of volition counts. Same
is true in Aereo: both are making
volitional choices.  Dispute b/t majority
and dissent was whether Aereo did enough to make it the public performer.
RT: my realist answer is Dropbox.  If you don’t say volition, you don’t have to
explain why Dropbox isn’t exactly the same as Aereo.
Karshtedt: Sleepwalking as question of volition, or being
dropped off drunk in a public square and then getting arrested for public
intoxication; to say that Aereo didn’t engage in volitional conduct is weird.
The question is whether your conduct is sufficient for direct or indirect
liability and that’s a judgment call. It’s volitional to make a product, but is
that enough? 
Lee: if you’re a patent owner today, filing in Germany will
get you a decision in 9 months; filing in Germany, Netherlands, and ITC is the
strategically optimal choice. It’s a commercial question b/c these tend to be
big markets; you have to enforce your rights in each market.
Many companies move all their products through the
Netherlands for tax reasons; that is what makes the Netherlands a key jurisdiction.  German courts think they’ve done a good thing
by attracting IP litigation.  In China,
now seeing a switch in enforcement as well.
Q: is state of mind evidence for inducement available? [May
differ as between © and patent, given DMCA for © and lack of registration
requirement.]
Lee: clearly a heightened standard, useful at JMOL and on
appeal; courts looking at jury verdict are thus more willing to look at the
evidence.
Q: does claiming actually provide more certainty or just
supposed certainty?  The original idea of
peripheral claiming would be requiring all elements + that the accused
device/etc. do what the invention does; Fed. Cir. has abandoned the second part
as the disfavored reverse doctrine of equivalents. Would that be better?
Lee: compared to other jurisdictions, our juries and judges,
even at the Fed. Cir., are just bright people hearing about the claims. They
get inventions in two ways: claims in literalistic fashion where judge tells
them what the claims mean, but they also always get the narrative of how the invention
was made, the problem to be solved, how the inventor did it, as well as the
narrative of how the infringing product was developed. Element by element
infringement analysis is more predictable/precise than other systems, but it’s
important to remember that juries/judges get all that in a narrative context
communicating much of the essence of the invention as well.
Karshtedt: so is Germany central claiming?
Lee: (1) yes; (2) litigating to a court appointed expert selected
by the judge; (3) most important thing about Germany is that it’s a little bit
East Texas/Delaware—on the margin, it’s better to be the patentee than not.
Q: Avoidance/evasion for patent inducement: can there be
inducement when you believe you’re engaging in legal conduct b/c the patent is
invalid?  Opportunism goes to intent. But
intent to do what?
Stewart: another area in which language of the statute didn’t
solve the problem. Court could have drawn the line in various places.  Could mean “actively/deliberately brings
about conduct that turns out to be infringing” v. “intended to infringe/knew
about the patent.”  Court rejected the
former.  We unsuccessfully advocated to
draw the line b/t knowledge of the patent v. knowledge of infringement; Court
requires knowledge that the conduct itself was infringing.  Dissent’s argument: if you go this far, you
should require knowledge that what you’re inducing is illegal, and if you think
the patent is invalid you don’t know it’s illegal. Court thought that tilted
too far b/c illicit intent is too difficult to prove; court also referenced
general principal that ignorance of the law is no defense.
Karshtedt: Some problems in PSM debate may have come from Fed.
Cir.’s narrowing of experimental use defense. 
Still, damages would be pretty low in such cases; nonetheless it
increases pressure to invalidate research based patents.  Maybe revisit that.

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Harvard & GW Law Conference, Intellectual Property, Private Law, and the Supreme Court: panel 1

Posted on March 10, 2017 by rtushnet
Opening Remarks
Hon. F. Scott Kieff, U.S. International Trade Commission
Grokster required
a heavy lift for those heavily oriented to positive law, b/c SCt took
inducement—a doctrine in the patent statute, but absent from the otherwise very
detailed © statute, and root and branch bring it over, but what drove that was
the straightforward business appeal to Grokster’s investors acknowledging the appeal
of infringement to its customers.  Private
law is designed to be responsive to business results. Limelight is the same doctrine in patent; the key question was
divided/joint infringement and SCt again acted unanimously.  One private law theme for Limelight: defective formation corporate
law Q: group of folks get together to form a corporation but somehow overlook
the corporate formalities. The result is, they’ve probably created a headache
under state law—joint and several liability for torts and contracts of the
partnership.  Straightforward business
approach.  [I think I missed his point
b/c I don’t speak patent.]  ITC Clear
Correct case about 3D designs.  A
business approach would have gone a very long way.  Try to make a private law oriented argument:
a straightforward anticircumvention argument. The only reason this business
model was bifurcated to run over the internet is that it started w/infringement
that got enjoined; then the business split itself to import the models and have
3D printers.
You can respond w/parade of horribles about cosmetics,
pharmaceuticals, orthotics, taillights for automobiles—entire market would change.
On the flip side, you won’t trap innocent infringers b/c none will be
infringers. You’re just updating for new tech, but these techs existed 100
years ago.  INS v. AP: electronic
transmission in US is unfair competition. 
Ben Hur: taking a physical book and turning it into a new medium,
movies.  Remind us: each case allows us
to think about private law approaches’ interaction w/IP.
The Nature of IP
Moderator: Prof. Ruth Okediji, University of Minnesota Law School
Prof. Henry E. Smith, Harvard Law School: Why private
law/IP?  Concrete cases, historical and
current through private law lens, they’re better as IP cases then
conventionally thought to be.  People
think private law = property all the time, and that’s not the case.
INS v. AP, eBay v. Mercexchange, and patent v.
copyright.  INS v. AP: Held up as a
Frankenstein’s monster of potential property rights generated in a
free-floating way.  But if you read it
all the way through, there’s material for thinking that but also a lot else
going on. It’s a classic equity case. 
Court says over and over it’s quasi-property, doesn’t bind the world.
Let’s take that seriously.  Antecedently
we have to take equity as a concept seriously. 
Does that make it even worse?  No:
equity cases in that period featured presumptions, constraints, rules of thumb,
intersection w/commercial morality that didn’t make it free-floating exercise
in Lockean fairness or unconstrained policy analysis.  As an equity case, it makes more sense,
though you can still disagree; it’s really an unfair competition case.
eBay: Another equity case; cobbled together a test that was
different from traditional test that emphasized more presumptions, good faith, and
undue hardship.  The traditional approach
based on the idea that there were situations of repeated violations/irreparable
harm that got us most of the way to injunction but then we’d pull back if there
was good faith + disproportionate hardship. Tailored to the idea of
opportunism. If the motivation was trolls, makes sense to focus on
opportunism/unfair surprise.  Fewer
injunctions may be good, but a test that doesn’t turn on good faith/undue
hardship will have a lot of mischief—the truly traditional test would do better
if the problem is really trolls.  [I want
to hear him talk about the tax evasion/tax avoidance distinction that arguably
mapped better onto Aereo than other
analogies. Or Kozinski on how IP rights emit no penumbras.]
IP regimes are not all equally property like.  Patent law is more property like; Patrick
Goold has been writing about how copyright is more tort-like. Patent—abstracted
from use, more like trespass. Idea of differing property-ness is important.
These issues are still relevant: hot news and misappropriation claims now more
than ever. eBay is wreaking havoc in the federal courts.  Private law lens can add a lot to the mix.
Aaron Cooper, Business Software Alliance (former Counsel to
the Senate Judiciary Committee): Incentives and fundamental fairness—instinctively
we feel that if we create something, others shouldn’t be able to take it.  AIA: shift in review of patents post-grant.  New system is more adversarial for post-grant
review after issuance; after 9 months, you can only challenge on limited set of
grounds.  Certainty for patent owners,
business owners, users.  Certainty works
well for everyone (but bad actors)—patent w/50% chance of invalidity is not
good for anyone.
Patents and © are the only rights mentioned in the original
Constitution.  [OK, if you say so, though
I kind of thought the restraints on states’ abrogation of contracts, ex post
facto laws, etc. were mandatory and ©/patent were optional.]  That has real ramifications in what congress
does, v. trade secret/TM b/c those rely on Commerce Clause.  Many members of Congress view Commerce Clause
scope as having gone too far. New trade secret law has interstate nexus
requirement that is narrower than SCt would allow.
Donald B. Verrilli, Jr., Munger Tolles & Olsen LLP
(former Solicitor General of the United States):
Once it had been determined that an invention qualified as
IP, SCt will refer to private law notions and talk about the issues before the
Court in property terms, as in Festo or
Nautilus—use language of property
right, drawing on private law concepts/analogy to the deed. We want to get the
incentives right by creating enough of a property interest but not so much that
we stifle innovation.
In whether patentability exists: No Lockean notion of
entitlement to fruits of labor.  May take
a lot of work to identify/isolate plant, but that doesn’t entitle you to a
property right in Myriad.  Gov’t isn’t asserting its own interest over a
thing, but rather leaving it open and uncontrolled.  Private law concepts of defining property don’t
seem to be much use b/c courts are worried about tilting in Lockean direction
rather than striking the right policy balance. 
Seems like an interesting contrast to him.
Prof. Robert P. Merges, University of California, Berkeley
School of Law: IP is property, but property-ism isn’t property absolutism.  Institution of property is much more flexible
and nuanced than a lot of the critics of IP would say. Does eBay make patents “less
than property”?  No. Analogies:
encroachment/forced sale/conversion where lots of value has been added.  We have now over-solved the problem of
trolls, as if we treated a headache with ibuprofen and aspirin and scotch. That’s
led to the §101 cases that are fundamentally off track. The reason you can’t
locate good property reasoning in those cases is that they’re sui generis. The
remedy driven view of property is too limited. 
The real action in eBay is old
equitable concepts of hardship, good faith, etc.
Usual role of the state: passive enforcement of private
bargains; role of state is always to grant the rights but w/patents that’s more
visible b/c the right is more complicated. 
Basic aim: identify rights, then let owners loose on the
marketplace.  Occasional rule: insure
legitimacy of market transactions; prevent undue leverage/undue hardship in the
market.  
eBay within patent law: 75% of cases still get injunctions;
where you don’t, tend to have the eBay
concurrence factors indicating that there’s undue leverage.
[I took a phone call]
Verilli: Aereo has a tentative quality: we aren’t saying
anything else is public performance etc. 
Lacks same confidence w/IP as w/other areas it has handled.
Cooper: Figuring out the contours of the property right v.
figuring out level of enforcement. Aereo, more than patent cases, looks like I
know it when I see it, and so does INS v. AP. 
There are words around it to try to provide some structure for lower
courts, but it’s still Stewart’s obscenity.
Okediji: Private law as a basket of tools. Courts are more
confident when they think they’re targeting bad actors.  Has the IPR system actually provided
certainty for property owners? The investment in innovation took place long
before the IPR stage.  AIA changes may
give us better stronger patents, but would that really help the property
interests of those investing in innovation in the first place.
Cooper: ideally, we’d make sure that the terms were as clear
as possible when granted.   
Okediji: we’ve gotten rid of formalities in ©; Rebecca
Tushnet argues that the TM registration system isn’t very useful; do we need
more formalities or fewer?
Merges: it was a bad time to do away with formalities, given
the rise of the internet and the need to track rights.  When we have a way to track individual
property rights that’s relatively costless, it’s good.  TM, patents: I disagree that IP is
regulation, but the differences b/t IP and real property is more complex system
of registering, maintaining, and contesting rights, b/c mapping contours of
idea is inherently more complex and overlapping than w/real property. Ideal
division of labor b/t initial examination and post-grant review for all 3 (not
trade secret? RoP).  PTAB/high volume of
IPRs shows that AIA was right that people wanted a cheaper way to quiet title.
We may need corrections in IPR review, but it’s cheaper than district courts,
which gets rid of more nuisance suits/weeds out patents.
Prof. Lemley’s idea of no examination: that’s one of the
bigger failures b/c people want more clarity, fewer cases in district court.
But ½ of Fed. Cir. caseload is reviewing PTAB decisions, a big change in 5-8
years.  Optimal division b/t
registration, post-grant review, and rare district court determination of
validity. We should think about that as system design. Once you have that right
out there, it becomes a private law system.

Smith: registries are insufficiently appreciated across the
board in ©.  Registries are particularly
important in areas where there are a lot of subsequent transactions—how central
registration is in certain areas of property—land and company registries are
important.  Including how registries
should be organized, public and private. 
Recommends book
by Benito Arruñada,
which I have just ordered.

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