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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Unrelated cy pres recipient and disfavored coupon offer doom settlement approval

Posted on March 9, 2017 by rtushnet
Hofmann v.
Dutch LLC, No. 14-cv-02418, 2017 WL 840646 (S.D. Cal. Mar. 2, 2017)
The court
rejected plaintiff’s unopposed third motion for preliminary approval of the
proposed class settlement in this case involving allegedly false “Made in the
USA” claims for jeans.  The initial proposed
settlement provided for: (1) $20 worth of e-gift certificates for each of the
class members; (2) $250,000 in cy pres awards; and (3) up to $175,000 in
plaintiff’s attorney’s fees with a “clear sailing” provision attached.  The court didn’t like (1) that the e-gift certificates
effectively constituted coupons because they required class members to pay out
of their own pocket before they could redeem them; (2) that the cy pres award
failed to meet the objectives of the underlying consumer protection statutes;
and (3) that, when considered in conjunction with the other provisions of the
proposed settlement, the “clear sailing” provision “created at least a danger
of collusion during the settlement negotiations which is not refuted by the
record.”
For the second
attempt to propose a settlement, Hofmann proposed to add one denim tote bag
($128 retail value) to the initial settlement, but the court found that the
problems remained.  This third attempt
added “multiples of $20.00 corresponding to the number of units of Class
Products purchased during the Class Period” to individual e-gift certificates and
injunctive relief.
The court
was not impressed.  Under California
statutes, a product may not be represented as “Made in U.S.A.” if the product
itself “or any article, unit, or part thereof, has been entirely or
substantially made outside the United States,” or if the product or its
components were “entirely or substantially made, manufactured, or produced
outside the United States.” That a product is designed, engineered, finished,
or otherwise processed in the United States does not make “the foreign work
performed on the part unsubstantial.”  Hofmann alleged that the “made in USA”-labeled
jeans she bought contained foreign-made buttons, rivets, zipper assembly,
thread, and/or fabric; the defendant voluntarily revised its label.
“Given
these relevant legal standards and the record available to the Court, the Court
observes that Plaintiff’s case is relatively strong,” though there had been no
rulings on dispositive motions or factual disputes, and the risk, expense,
complexity, and duration of any litigation, in addition to the risk of
maintaining class certification throughout the suit, weighed heavily in favor
of settlement. In particular, it’s difficult for plaintiffs in false
advertising cases to calculate and prove damages for the entire class. Questions
about how to quantify the consumer impact of a “Made in the U.S.A.” would pose “a
formidable challenge” to Hofmann’s case.  Other factors also pointed in favor of
settlement, given counsel’s experience in consumer class actions.
Nonetheless,
the problems remained, chief among them the cy pres award.  “An award that does not target the plaintiff
class or that fails to provide reasonable certainty that any member will be
benefitted by the award, will not satisfy the fairness inquiry.”  The current proposal was that defendant would
donate $200,000, over four years, to a scholarship endowment at the consumer
science department of a not-for-profit institution of higher education and an
additional $50,000 to Step Up Women’s Network.   But these targets didn’t have a sufficient
nexus to objects of the underlying statutes allegedly violated in this case.  “The chosen charities do not promote consumer
protection. Rather the chosen charities’ missions are: offering mentorship
programs to at risk teenage girls [Step Up]….” “Continuing to repeat the fact
that Defendant’s clientele is mostly women does not somehow make Defendant’s
charitable donation to Step Up legally sufficient. The Ninth Circuit’s
jurisprudence on cy pres awards is not optional or vague, but binding and
unequivocal.”  An “unnamed, unidentified
scholarship endowment at a consumer science department like the one at California
State University, Northridge” was also deficient, because “making a scholarship
to one or two individuals who intend to study consumer science, does not target
the plaintiff class and fails to provide reasonable certainty that any class
member will be benefitted by the award” and they didn’t identify a specific cy
pres beneficiary whose qualifications might be evaluated.
The gift
codes were also a problem, as coupons that would require class members to pay
their own money before they can take advantage of the coupon. “Both the courts
and Congress generally disfavor coupon settlements.” Even in multiples, the gift
cards were worth significantly less than their face value, as compared to the
non-frivolous claims they were settling. 
Even with the tote bag added, “Plaintiff’s repeated failure to fashion a
settlement that comports with its concerns, only gives the Court more reason to
be suspicious of whether Plaintiff’s counsel are acting in the interest of the
class members.”
The tote
bag does have transferable value (retail value $128), and plaintiff’s counsel  argued that the tote bag was is worth the
eight to ten cents that arguably represented the difference between the
American-made parts and the foreign-made parts in the jeans.  But, of course, that amount wasn’t the
essence of the lawsuit; it was the allegedly false labeling. The court was
skeptical that the tote bag providesd value to the class members, who bought
jeans, not a tote bag. “And there is no evidence in the record explaining the
real economic value of the tote bag, the likely resale value of the tote bag,
or whether the class members are likely to find value in the tote bag.”  There was just too little information before
the court, though plaintiff would be given another chance to prove that the
settlement was in absent class members’ interests.

The
permanent injunction didn’t add anything because of defendant’s voluntary
discontinuance.  Also, the “clear
sailing” provision stating, in relevant part, that plaintiff’s attorneys would
seek no more than $175,000 in fees and the defense would not oppose the fee
petition was not a bar to settlement, but it was a sign of some collusion/a red
flag. The settlement as a whole had to stand or fall together; for now, it fell.

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“imported” Sapporo isn’t confusing as a matter of law given clear disclosure of Canadian origin

Posted on March 9, 2017 by rtushnet
Bowring v. Sapporo
U.S.A., Inc., 2017 WL 902151, — F.Supp.3d —-, No. 16-CV-1858 (E.D.N.Y. Feb.
10, 2017)
Bowring sued
Sapporo under the GBL and similar state law claims, alleging that it created a
misleading impression that Sapporo beer is a Japanese import, when in fact, it
is produced in the United States and Canada. While Sapporo beer was originally
brewed in Japan in 1877, all Sapporo now sold in the United States is brewed in
La Cross, Wisconsin, or Guelph, Ontario, Canada.  Bowring pointed to Sapporo’s TV ad with
imagery of a “Japanese landscape being traveled into American landscape,”
ending with the slogan “The Original Japanese Beer;” its slogans “Sapporo – the
Original Japanese Beer” and “Japan’s Oldest Brand;” and an image of the North
Star, a “symbol of pioneers in the area of Sapporo” on labels. Canada-produced
beers also include the word “Imported” on the front label.

Each imported can
or bottle also adds: “Imported by Sapporo U.S.A. Inc., New York, NY” followed
by “Brewed and canned [or bottled] by Sapporo Brewing Company, Guelph, Ontario,
Canada” in darker contrasting font on the front label for bottles and on the
side or back of cans. The labels for beers brewed in Wisconsin don’t use the
word “Imported,” and include the following statement on the front, back, or
side of the container: “Brewed and Bottled [or Canned] by Sapporo Brewing
Company, La Cross, WI for Sapporo U.S.A., New York NY” in visible, contrasting
print.  Bowring alleged that independent
stores and restaurants display Sapporo in the “imported beer section” and on
“imported beer lists.” The complaint showed several menus listing the beer as,
for example, “Sapporo Japanese Rice Lager 5%,” and “Sapporo (Japan).”  Surdyk’s Liquor and Cheese Shop in
Minneapolis, Minnesota used the text: “Sapporo Draft 6pk bottles from Japan.”
Usually, whether a
reasonable consumer would be confused is a factual question unsuitable for the
motion to dismiss stage. Here, however, the court found the claims not
misleading as a matter of law.  “In
evaluating the efficacy of .. a disclaimer, courts consider factors such as the
font size, placement, and emphasis. Courts routinely conclude that the presence
of a disclaimer, considered in context, precludes the finding that a reasonable
consumer would be deceived by the defendant’s conduct.”  As applied to this case, “Sapporo accurately
and clearly discloses the product origin in either Wisconsin, USA or Ontario,
Canada on its labels; those products labeled ‘Imported’ are in fact imported
from Canada; use of alleged Japanese imagery and the trademarked North Star
symbol are not misrepresentations, but a tribute to the history and heritage of
the company; and Sapporo labels do not include the word ‘Japan.’”

Ackerman v.
Coca-Cola Co., No. 09 CV 395 DLI RML, 2013 WL 7044866, at *4 (E.D.N.Y. July 18,
2013), involved a challenge to “vitaminwater” product, alleging that it misled
consumers to believe the beverage was comprised of vitamins and water,
obscuring its significant sugar content. The court refused to dismiss, considering
slogans such as “vitamins + water = what’s in your hand,” as well as the name
of the product itself. The sugar content disclosure on the nutrition label
“[did] not eliminate the possibility that reasonable consumers may be misled”
regarding the contents. But here, Sapporo disclosed its product origin in a
standalone statement, unlike the line listing the sugar content on the
vitaminwater nutrition label. “Imported” was a truthful statement, unlike “vitamins
+ water = what’s in your hand,” and it was qualified by the “visible disclosure
statement specifying the beer’s origin.”   The court also distinguished Marty v.
Anheuser-Busch Companies, LLC, 43 F. Supp. 3d 1333 (S.D. Fla. 2014), where
Beck’s beer, once from Germany but produced in Missouri, used slogans including
“Brewed under the Germany Purity Law of 1516” coupled with a vague disclaimer
in white font on a silver background making it physically “difficult to read.”  “Unlike the cases cited by Plaintiff, the
disclosure statement on Sapporo appears in contrasting, visible font, and
states in clear language where the product is produced.” This defeated all
plaintiff’s common-law and statutory claims. 

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Court trebles damage award based on willful false advertising, over advisory jury verdict

Posted on March 9, 2017 by rtushnet
Concordia
Pharmaceuticals, Inc. v. Method Pharmaceuticals, LLC, No. 3:14CV00016, 2017 WL
837688 (W.D. Va. Mar. 2, 2017)
A jury found that Method engaged in false
advertising; that Concordia was entitled to $733,200.00 in actual or compensatory
damages; and that the false advertising wasn’t willful. Concordia subsequently
filed a motion for JMOL or a new trial on willfulness, a motion for enhanced
damages and prejudgment interest, and a motion for attorneys’ fees and costs.
Concordia
acquired the Donnatal line of products from PBM Pharmaceuticals, Inc.  Donnatal is a line of prescription combination
phenobarbital and belladonna alkaloid (“PBA”) products used in the treatment of
irritable bowel syndrome and acute enterocolitis. (Side note: wow, that is
quite a combination.  Who knew it
(allegedly) had therapeutic properties?) 
Donnatal was first introduced in the 1930s, before safety and efficacy
showings were required; its safety has now been FDA-approved but not its
effectiveness.  In 2011, generic
manufacturers began to leave the market, leaving Donnatal as the only line of
PBA products available.  Method wanted to
change that.
Method is
a wholesale drug distribution company owned by defendant Tucker, and Christopher
Boone served as the company’s VP of operations during the relevant period.  Instead of a sales force, Method uses pharmaceutical
databases to promote its products. Its business strategy is to ensure that its
products are “linked” to existing drugs in the databases, which are used to
determine whether generic substitutes are available for brand name products.
In 2013,
Method began making plans to market a new PBA product that would be
pharmaceutically equivalent to Donnatal, named Me-PB-Hyos. However, the company
Method approached to make it never performed the stability testing necessary to
develop Me-PB-Hyos, and no finished product was made.   Still, in March of 2014, Method moved
forward by using the product labels and package inserts for Donnatal tablets
and elixir to create labels and inserts for Me-PB-Hyos tablets and elixir.
“Method
then proceeded to list the nonexistent Me-PB-Hyos products with two of the
major pharmaceutical databases, Medi-Span and First Databank,” taking pains to
have them liked to Donnatal at lower listed prices, which prices were supposedly
effective as of April 2014.  (Later, the
Medi-Span listing showed a marketing start date of June 2014, which Method knew.)  Medi-Span duly linked the products, though
First Databank refused without validation from DailyMed, a website operated by
the National Library of Medicine. Method therefore sent DailyMed the product
labels for the nonexistent Me-PB-Hyos products. 
After successfully listing Me-PB-Hyos with DailyMed, Method resubmitted
the product labels to First Databank, indicating that its planned launch date was
June 1, 2014, a day that had already passed, although it knew that it didn’t
have any products ready and that its information would be relied on by members
of the pharmaceutical industry. The products were listed in First Databank’s
pharmaceutical database in early June 2014.
After
this lawsuit was filed, Method contacted the manufacturer to whom it had
initially reached out and indicated that it knew that the manufacturer had not
started anything on the project, and that Method had decided that it “might be
best to bail on [the] project.” But that same day, in response to an inquiry
from Medi-Span, Method advised Medi-Span that “Me-PB-Hyos is an active product
and will be available to ship by November 15, 2014.” Method also confirmed that
“[t]he pricing and label … are current and correct.”   The products never launched, and a bit later,
Medi-Span removed the listings for the Me-PB-Hyos products, while First
Databank moved its listings from active listings to archived listings.
After the
listings, Donnatal prescriptions and unit sales decreased. The parties disputed
the cause; Method presented evidence indicating that a number of other factors
contributed to the reduction in Donnatal unit sales, including significant
increases in the prices of Donnatal products. Concordia spent $885,015.00 on a
coupon buy-down program to combat the negative effects of the listings for
Me-PB-Hyos; it also revamped its marketing strategy and engaged in increased
promotional efforts targeting pharmacies and prescribers.  The court excluded Concordia’s expert witness
Hofmann’s lost profits calculations, which attributed all of the measured lost
profits to the database listings for Me-PB-Hyos.
The court
first concluded that the jury’s verdict on willfulness was advisory, not
binding, making Concordia’s motion for JMOL or a new trial moot.  Instead, the court found that Concordia
should recover enhanced damages, which are allowed, “according to the
circumstances of the case, for any sum above the amount found as actual
damages, not exceeding three times such amount.”  Such damages must be compensatory, not
punitive, even though willfulness is a consideration in whether to award
them.  [Weird, statute. Very weird.]  The Fourth Circuit considers: “(1) whether
the defendant had the intent to confuse or deceive, (2) whether sales have been
diverted, (3) the adequacy of other remedies, (4) any unreasonable delay by the
plaintiff in asserting his rights, (5) the public interest in making the
misconduct unprofitable, and (6) whether it is a case of palming off.”
The court
found that defendants acted willfully, or at a minimum with indifference to the
truth or falsity of their statements, but said that even if it found otherwise
it would enhance damages.  In particular,
sales diversion was shown by the decline in Donnatal sales and Concordia’s
expenses mitigating the impact of the Me-PB-Hyos listings. Thus, the court was
convinced that the jury award didn’t provide adequate compensation.  Nor would an injunction adequately remedy
Concordia’s lost sales.  Concordia didn’t
unreasonably delay, and there was a public interest in making the misconduct
unprofitable, despite the defendant’s statutory right not to be assessed a
penalty. Thus, the court trebled the actual damages to nearly $2.2 million.  The court declined to award prejudgment
interest, given the trebling of damages. 

However,
the court—applying the Octane Fitness
standard—found that this case wasn’t “exceptional” for the purpose of granting
fees.  The defendants’ position on
liability wasn’t frivolous or objectively unreasonable; before trial, the court
denied Concordia’s dispositive motions on the issue of liability, both at the
summary judgment stage and at the close of the defendants’ evidence. Nor was
the case litigated unreasonably. Willfulness, standing alone, “is no longer
sufficient to show that a case is ‘exceptional.’ ”  Nor did deterrence or compensation concerns merit
a fee award, given the trebling of damages.

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“same quality as Made in USA” is not puffery, says magistrate

Posted on March 9, 2017 by rtushnet
University Loft Co. v.
Blue Furniture Solutions, LLC, 2017 WL 876312, NO. A–15–CV–826 (W.D. Tex. Mar.
3, 2017) (report and recommendation of magistrate judge)
University sued Blue
alleging false advertising and trademark infringement
under the Lanham Act, unfair competition under Texas and Florida common law and
the Florida Deceptive and Unfair Trade Practices Act, and tortious interference
with prospective business relationships. Blue allegedly falsely claimed that
that: (1) it offers Chinese “high quality products made exactly as ‘Made in
USA’ products”; and (2) it “is able to achieve low prices and fast delivery on
such high quality products, because of the intimate relationship between the
manufacturer and Blue’s president Jeff Zeng, and Blue’s understanding of how
the local government in China operates.”  University alleged that the quality was not
equivalent to “Made in the USA” products, and that the lower prices were due to
evasion of customs duties, because Blue mislabeled its products as “steel” to
avoid additional anti-dumping duties that are required for “Wooden Bedroom
Furniture” imported from China. Finally, University alleged that Blue’s use of
the mark “LOFT” for one of its furniture lines infringes on University’s
registered and common law word and design trademarks.
The magistrate rejected Blue’s puffery argument.  As to the first statement, Blue argued that
the statement was non-actionable in the context of other claims in the
challenged article that Blue provided
either “high quality, high price,” or “low quality, low price” products. But
this explanation appeared pages before the allegedly misleading statement.  The relevant paragraph read:
The ability of my company to not ever have to
worry about these issues and properly provide exactly what we had indicated we
will, when we will, is amazing. Our process is very smooth and we continue to
make our clients happy with the quality of our product. The price is always
lower than the amount the client has to spend and they receive exactly what
they ask for. When working with my owner, understanding that China has many
amazing, high quality products made exactly as “Made in the USA” products is
important. The only difference is that China offers these products for a
much lower price.
The judge found that
this statement “goes beyond mere puffery.”
Likewise, the statement that Blue’s low prices
were based on a special relationship with the Chinese government was factual,
and thus falsifiable.  Nor did the claim rely on an illegitimate
attempt to bring a private claim based on evasion of the Tariff Act; University
wouldn’t have to prove anything about dumping to prove  its claim, only that Blue’s manufacturer didn’t have a special relationship with
the Chinese government; the assertion that the prices were lower because of
tariff evasion could bolster the claim, but the claim itself wasn’t based on
tariff evasion.  This reasoning also
allowed the state law unfair competition claim to survive, and the magistrate
recommended not deciding the choice of law issues as to whether Florida or
Texas deceptive trade practice statutes applied.

Trademark infringement: Blue argued that University’s
registration explicitly excluded the furniture that Blue Furniture sells under
the allegedly infringing mark. University’s registration for LOFT explicitly
excluded loft beds and furniture used with loft beds. (Imagine that.) Blue
argued that all its furniture could be classified as furniture “used with” loft
beds, because “loft furniture could include any furniture found or used in an upper
room or floor.” The magistrate understandably termed this argument “nonsensical,”
given that any type of furniture could potentially be placed in a “loft.” Plus,
the scope of the registration didn’t go to protectability but rather to
infringement.

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Reading list: IP in the criminal justice system

Posted on March 9, 2017 by rtushnet
Rebecca Wexler, Life,
Liberty, and Trade Secrets: Intellectual Property in the Criminal Justice
System
Abstract
From policing to evidence to parole, data-driven algorithmic systems
and other automated software programs are being adopted throughout the criminal
justice system. The developers of these technologies often claim that the
details about how the programs work are trade secrets and, as a result, cannot
be disclosed in criminal cases. This Article turns to evidence law to examine
the conflict between transparency and trade secrecy in the criminal justice
system. It is the first comprehensive account of trade secret evidence in
criminal cases. I argue that recognizing a trade secrets evidentiary privilege
in criminal proceedings is harmful, ahistorical, and unnecessary. Withholding
information from the accused because it is a trade secret mischaracterizes due
process as a business competition.

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Reading List: Brian Frye, Invention of a Slave

Posted on March 7, 2017 by rtushnet
Reading list: Brian L. Frye, Invention of
a Slave
Abstract:

On June 10, 1858, the Attorney General of the United States
issued an opinion concluding that a machine invented by a slave could not be
patented, because neither the slave nor the slave owner could make an oath or
affirmation that they were the inventor of the machine, as required by the
Patent Act of 1836. The Attorney General’s opinion caused the Patent Office to
deny at least two patent applications, one of which was filed by Senator
Jefferson Davis of Mississippi, who later became the President of the Confederate
States of America. Notably, the Confederate States Patent Act of 1861 provided,
inter alia, that slave owners could patent inventions and discoveries made by
their slaves.
 The Attorney General’s opinion seems to have relied on the
fact that a slave was not a legal person and therefore could not make an oath
or affirmation. But it may also have reflected an ideological dispute over
whether slave owners should be entitled to benefit from the intellectual labor
of their slaves. Ironically, the Attorney General and the Commissioner of
Patents used the ideology of slavery to prevent slave owners from patenting the
inventions of their slaves, and the Confederate States of America ignored the
ideology of slavery in order to enable slave owners to patent the inventions of
their slaves. In this way, a largely forgotten patent claim may offer a unique
perspective on the politics and ideology of slavery in the antebellum United
States.

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Terms and Conditions

Posted on March 7, 2017 by rtushnet
Reading list: new comic book, Terms
and Conditions: transformative work of the day, using iTunes’ terms and
conditions combined with illustrations in the style of various comic artists.
Steve Jobs as Joe Cool
Tumblr here.

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Clearblue’s corrective advertising not so clear

Posted on March 6, 2017 by rtushnet

Via Alex Roberts:

As she said, only a lawyer could love it–also that URL; who’d type that in?

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Another fake discount allegation survives challenge to plaintiff’s theory of harm

Posted on March 4, 2017 by rtushnet
Munning v. The Gap, Inc., 2017 WL 733104, No.16-cv-03804
(N.D. Cal. Feb. 24, 2017)
Munning bought a pair of swim trunks from the Gap Factory
retail website, and one dress and one sweater from the Banana Republic Factory
website, each advertised as being on sale, e.g. “$24.99 32% off/Now $16.99.”   Munning alleged that the prices she paid
were unchanged for the entire week following her purchase; one month later, the
price of the swim trunks increased by a dollar, while the price of the dress
remained unchanged. Thus, she alleged, the three items she purchased “were
never sold or offered for sale at the non-discounted, base prices listed on
Defendants’ websites” as part of a uniform scheme. She brought claims under
California and New Jersey law.
The court found that Munning stated a valid NJCFA claim. “By
alleging that products on Defendants’ websites listed crossed-out prices
followed by a percentage discount and a new price, Plaintiff has provided
enough facts such that it is plausible a reasonable consumer could view the
prices as being deceptive.”  She also
needed to show an ascertainable loss, though that loss need not be monetary nor
pled beyond a reasonable degree of certainty. 
There are generally two ways to show ascertainable loss: (1) the
benefit-of-the-bargain rule, or (2) the out-of-pocket rule.  Munning sufficiently alleged an out-of-pocket
loss by alleging that she wouldn’t have bought anything if she hadn’t believed
in the discount.  This was acceptable,
even if what she got wasn’t worthless.
Because of that predicate violation, Munning also
successfully alleged a violation of the New Jersey TCCWNA, which requires a
plaintiff to show that: (1) the plaintiff is a consumer; (2) the defendant is a
seller; (3) the defendant gives or displays any written consumer notice or
sign; and (4) the notice or sign includes a provision that violates any clearly
established legal right of a consumer or responsibility of a seller.

However, Munning’s California UCL and FAL claims were
dismissed because those laws provide only for equitable relief (injunctive
relief or restitution), and Munning wasn’t entitled to equitable relief because
she had an adequate legal remedy, having sufficiently pleaded claims for breach
of contract and breach of express warranty, which would allow her to recover
damages.

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