Facebook, Twitter fans could substitute for sales to show secondary meaning, 6th Cir. rules

Posted on December 19, 2016 by rtushnet
Kibler v. Hall, No. 15-2516 (6th Cir. Dec. 13, 2016)
Lee Jason Kibler, a disc jockey, sued Robert Bryson Hall,
II, a rapper, and professional entities supporting Hall’s work for trademark
infringement and dilution.  Kibler has performed
and released several albums under the name “DJ LOGIC” since 1999 though he
currently has no record deal. Kibler registered “DJ LOGIC” as a trademark in
2000, allowed the registration to lapse in 2003, and re-registered the name in
2013. He’s also been known as just “LOGIC.”
Hall has performed under the name “LOGIC” since 2009. His
2014 album sold over 170,000 copies.
The court found that the strength of the mark favored
defendants.  DJ LOGIC was moderately
strong conceptually, but lacked commercial strength.  “A mark cannot be strong unless it is both
conceptually and commercially strong.” 
(American Airlines?  Disney?  OK, 6th Circuit, whatever.)  Conceptual strength requires inherent
distinctiveness, and courts presume that incontestable marks are conceptually
strong.  [This is one of the worst games
of telephone played in the courts in the trademark area.  (1) Incontestability goes to precluding
arguments based on mere descriptiveness, and descriptiveness (even with
secondary meaning) is conceptual weakness,
(2) no, most circuits don’t presume strength of any kind from incontestability, and the key one that did
recently expressed discomfort with doing so. 
Sovereign Military Hospitaller Order of Saint John v. Florida Priory of
the Knights Hospitallers of the Sovereign Order of Saint John, 809 F.3d 1171,
1183 (11th Cir. 2015) (“The law in this Circuit is almost certainly
incorrect. The incontestability of a mark, by itself, says nothing about its
strength.”).]
The district court found that “DJ LOGIC” is moderately
strong conceptually because “DJ” is descriptive but “LOGIC” is arbitrary.
Kibler argued that the court erred in not considering the mark’s
incontestability—wait, what?  The expired
registration lost its incontestability and the new registration is at most
three years old. The court of appeals didn’t address this argument because the
district court’s finding “renders ‘DJ LOGIC’ at least as conceptually strong as
a finding of incontestability would.”  [I
feel a little sick to my stomach.]
Anyway, “a mark can be conceptually strong without being commercially
strong, and thus weak” for the purposes of likely confusion.  Plaintiffs without survey evidence need other
evidence of “broad public recognition” to show strength, and Kibler didn’t have
it.  Kibler sold fewer than 300 albums in
the past three years and fewer than 60,000 albums in the past sixteen years; he
currently lacked a recording contract; and he’d never had a recording contract
with a major label. Third parties weakened the mark even further by marketing
music under nearly ninety variations of “logic.”
Not sufficient evidence of strength: a sworn declaration
that Kibler advertised in print and online, including on MySpace (!), Twitter,
and Facebook; a 2006 Downbeat article featuring him, a 2001 New York Times
review mentioning him, and a 1999 Gig article featuring him; and appearances on
television shows such as The Tonight Show Starring Jimmy Fallon, The Today
Show, and Good Morning America.  Kibler
failed to provide the number of his Facebook “likes” or Twitter followers, and
he testified that appeared on the television shows to support other, headlining
artists.  Kibler’s evidence of
Twitter/Facebook promotion was marketing, and magazine and TV appearances were
evidence of commercial strength, but “some proof is not enough.” Kibler didn’t
offer evidence that would permit a reasonable jury to determine that “wide
segments” of the public recognize “DJ LOGIC” as a mark. “This means ‘extensive’
marketing and ‘widespread’ publicity around the music and mark.” The number and
kind of Kibler’s Twitter followers could have provided such evidence.  “A large number of followers, or celebrities
likely to re-tweet Kibler’s messages to their large number of followers, for
example, would suggest that many types of people know his work and mark.”  Ditto with Facebook.  [The court of appeals does not say the same
for MySpace.]  Nor did Kibler provide the
circulations or target audiences of Downbeat and Gig, “which appear to be niche
publications,” and he was only a supporting musician mentioned in the NYT
review focusing on two other artists. Plus, these were over fifteen years old,
and continuing awareness is required.
The court of appeals found that it was correct that Kibler
enjoyed limited commercial success, but commented that “[a]lbum sales and even
recording contracts are less critical markers of success than before because of
widespread internet use.”  Thus, “web-based
indicators of popularity, e.g., YouTube views” could also suffice to show
commercial success, but Kibler didn’t.
The court of appeals also found that third parties hadn’t
weakened the mark, because “[d]efendants identify the parties’ marks as
trademarks in their brief, but do not show they are registered.”  [Of course, registration isn’t evidence of
commercial strength, and the PTO applies the opposite—and probably more
appropriate, for a use-based system—rule, which is that what people in the
market are doing is more important for assessing similar uses than the
existence of registrations without evidence about use.]  Anyway, the defendants didn’t show use in the
relevant market.  “Music sold in the US
on Amazon and iTunes” was too broad a market, as was hip-hop: it should have been
“DJ music.”
Product relatedness: “Products belonging to the same industry
are not necessarily related. To be related, they must be marketed and consumed
in ways that lead buyers to believe they come from the same source.”  Here, this factor was neutral because the
products were related but not directly competitive—only Hall used his vocals,
and Hall markets himself as a rapper while Kibler markets himself as a disc
jockey.
Similarity of marks: based on the anti-dissection rule, this
factor favored defendants because “DJ” changed the look and sound of the mark,
as well as its meaning.  Kibler was wrong
to argue that the court should “focus on the dominant features of each mark and
disregard the non-dominant features”; that’s precisely what the anti-dissection
rule forbids. Although Kibler argued that he’d used “LOGIC” alone as a
trademark, he hadn’t registered it (which the court of appeals thought ended
the matter).
Actual confusion: This is the strongest proof of likely
confusion, but its weight depends on the amount and type of confusion, in
context. Persistent mistakes and confusion by actual customers is really
important, but inquiries rather than purchases aren’t.  Kibler’s evidence was of at most ten
instances of actual confusion. These include tweets and webpages advertising a
performance by “DJ Logic,” but meaning Hall; an email offering to book “DJ
Logic,” but meaning Hall; and inquiries about whether Kibler would be
performing somewhere advertising “logic” and referring to Hall. But “[i]f
‘LOGIC’ really threatened to confuse consumers about the distinctions between
Hall and Kibler, one would see much more than ten incidents throughout 170,000
album sales, 1.7 million album downloads, and 58 million YouTube views.”  Plus, none of the incidents were
purchases.  Kibler failed to present the
quantity or type of proof that would tilt the actual confusion factor
substantially in his favor.
Marketing channels: Most entities advertise online today. In
determining whether that matters, the court of appeals asked: “First, do the
parties use the internet as a substantial marketing channel? Second, are the
parties’ marks used with web-based products? Third, do the parties’ marketing
channels overlap in any other way?” The court of appeals found that the
district court was right that this factor was neutral, but underestimated the
impact of the internet.  There’s overlap
in terms of Twitter and Facebook promotion, and Amazon and iTunes sales, but “the
popularity of these channels makes it that much less likely that consumers will
confuse the sources of the parties’ products. There are just too many other
contenders.”  So widespread use decreases
likely confusion—which might actually mean something about the expected
sophistication of internet users, not so much “marketing channels” per se.  Even though they performed at some of the same
venues, so did thousands of artists, making it less likely that any one
attendee encountered them both, let alone confused them.
Likely degree of consumer care: varies greatly among music
consumers; the appropriate pool was not just fans of each artists, but a wide
variety of people.  This factor was
insignificant here.
Intent: the court of appeals followed the common, but
unfortunate, rule that (1) likely confusion can be inferred from intent to
confuse, and (2) (the bad part) evidence that the defendant knew of the
plaintiff’s trademark can be sufficient circumstantial evidence of intent to
confuse.  The court explicitly rejected
defendant’s argument that intent to usurp goodwill is required for bad intent.  Lack of intent is irrelevant.  Kibler argued that a Google or YouTube search
for “logic music” or “logic musician” yielded “DJ LOGIC” and Kibler’s picture
or music before Hall adopted “LOGIC.” Hall testified that he ran Google,
Facebook, and Twitter searches for “any other rappers” using “LOGIC” before
adopting it, “[t]o see if [any rapper] with this name was already at a level
where it wouldn’t make sense for two people to coexist with the same name.”  This factor was neutral.  While evidence that defendants knew of “DJ
LOGIC” while using “LOGIC” would be sufficient circumstantial proof of intent,
there was no proof that Hall searched for “logic music” or “logic musician,” no
reason to believe he had to, and thus no evidence he knew of “DJ LOGIC” before
adopting “LOGIC.”
Likely expansion: the district court properly found this
factor neutral, concluding that it was “unlikely that the parties will expand
their markets to put them in competition.” Kibler offered no proof that the
parties would expand their businesses, which was his burden.
Balancing the factors, confusion was unlikely.  Evidence of actual confusion favored Kibler “only
marginally” and strength of plaintiff’s mark and similarity of the marks favored
defendants; these were the most important factors.

Federal dilution: a famous mark is a “household name.” That
is, “when the general public encounters the mark in almost any context, it
associates the term, at least initially, with the mark’s owner.” “It is
difficult to establish fame under the Act sufficient to show trademark
dilution.” No reasonable jury could find “DJ LOGIC” famous.

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Can bait & switch cause actionable harm even though the consumer knows the price at checkout?

Posted on December 19, 2016 by rtushnet
Veera v. Banana Republic, LLC, — Cal.Rptr.3d —-, 2016 WL
7242539, No. B270796 (Ct. App. Dec. 15, 2016)
This decision, over a dissent, finds standing under the
usual California statutory claims to challenge an alleged bait-and-switch
scheme by Banana Republic, even though the plaintiffs knew the non-discounted
prices of the items when they bought them. Cherilyn DeAguero, Sean Bose, and
Rakhee Bose alleged that signs in Banana Republic store windows advertising a
40 percent off sale were false or misleading because they did not disclose that
the discount applied only to certain items. “Having waited in line to purchase
the selected items, and out of frustration and embarrassment, they ultimately
bought some (but not all) of the items they chose even though the discount did
not apply.” The trial court found that they hadn’t suffered injury in fact and
lost money or property.  The court of
appeals majority found that there was a triable issue of whether they suffered
economic injury caused by the false advertising.  I agree—the dissent’s idea of what
constitutes bait and switch is far too limited, ignoring the sunk costs problem
that includes time and embarrassment (or other social pressures).
For example,  DeAguero
recounted that when she got to the front of the line, the clerk told her that
her items weren’t discounted.  When she replied
that the sign indicated everything was 40 percent off, the clerk said the
discount did not apply to the items she chose. 
She “became embarrassed, noticing that the line behind her was getting
long…. [S]he was trying to remain in a budget but did not want to make her
daughter return to the dressing room to remove the outfit she was wearing.”  Her daughter was embarrassed and asking her
to stop complaining, and she ultimately bought the items her daughter was
wearing to avoid further embarrassment, but left behind other non-discounted
items.
Likewise, Sean and Rakhee found out that the discount didn’t
apply to their items only at the register. 
“According to Sean, there were at least 15 people in line and he was
annoyed and very embarrassed. He ultimately purchased one item (a sweater)
because ‘we had invested all that time and effort, and just to leave with
nothing would be a complete and utter waste of energy and time.’”
Medrazo v. Honda of North Hollywood (2012) 205 Cal.App.4th 1,
involved a case in which the defendant dealership offered motorcycles for sale
without complying with certain sections of the Vehicle Code that require a
motorcycle dealer to disclose dealer-added costs on tags hung on motorcycles
available for purchase.  The court of
appeals found a triable issue on injury in fact because she wasn’t informed of
the dealer-added charges or the total price of the motorcycle until she was
presented with the sales contract, after the decision to purchase had been
made.  The UCL and FAL prevent misleading
advertising; the CLRA specifically bars “[m]aking false or misleading
statements of fact concerning reasons for, existence of, or amounts of price
reductions”:
These provisions are designed in
part to protect consumers such as plaintiffs by requiring businesses to
disclose the actual prices of items offered for sale, and prohibiting
businesses from using false and deceptive advertising to lure consumers to
shop. In short, plaintiffs had a legally protected interest in knowing from the
outset, when they started to shop, the true prices of the items they chose to
buy. Assuming plaintiffs’ version of Banana Republic’s advertising occurred,
there is a triable issue whether that legally protected interest was violated
in the same way as the legally protected interest of the plaintiff in Medrazo,
who had a right to know dealer-added charges as stated on a required hanger tag
when deciding to buy a motorcycle.
Medrazo also
indicated that the plaintiffs suffered economic harm because that case found
economic injury in that plaintiff bought a motorcycle the defendant wasn’t
legally allowed to sell. The economic harm here was the difference between the
advertised 40% off price plaintiffs should have been charged, and the full
price plaintiffs actually paid.  It’s
true that plaintiffs need to show reliance, but there was a triable issue of
whether plaintiffs’ reliance resulted in their economic loss—misrepresentation
need not be the only or even the
predominant cause of the injury-producing conduct.  It is enough if a plaintiff shows that “in
[the] absence [of the misrepresentation] the plaintiff ‘in all reasonable
probability’ would not have engaged in the injury-producing conduct.”
Isolating the moment of purchase isn’t determinative of
reliance and causation:
Their reliance on the advertising
informed their decision to buy, which culminated in the embarrassment and
frustration they felt when, as the items were being rung up, they learned that
discount did not apply. And it was the temporal proximity of that chain of
events, and the pressure the events brought to bear on plaintiffs’ judgment,
that played a substantial role in leading them to purchase the items they did,
even though they knew the discount did not apply.
This reasoning was especially important given the
implications of a contrary result, which would be to legalize bait and switch
advertising: “when the deception is revealed, the consumer, now invested in the
decision to buy and swept up in the momentum of events, nonetheless buys at the
inflated price, despite his or her better judgment.”  If the consumer is able to resist, she has no
cause of action because she’s suffered no economic injury, as required by Proposition
64.  But Banana Republic’s argument would
mean that, if the scheme is successful, she’d also have no standing unless the
inflated price was surreptitious.  That
can’t be what Proposition 64 intended.
The evidence also suggested that at least some of the Banana
Republic signs lacked asterisks or any other indications of exclusions.
Bigelow, P.J., dissented. 
The basic argument:
Whether or not the store window
signs were ambiguous or misleading, it is undisputed that before the plaintiffs
incurred any economic injury, they learned the clothes they had selected were
not 40 percent off. They then changed their purchase decisions, choosing to buy
only some of the items they had selected, fully aware they were not discounted.
Thus, plaintiffs couldn’t show that they relied even in part
on the truth of the misrepresentation in consummating the sale.  [I agree with the majority that this slices
the transaction too finely.  The
misrepresentation can be a substantial cause of the transaction in the first
place, because they relied on it to take key initial steps representing
significant sunk costs, without that reliance extending to the actual
purchase—that’s the whole point of bait and switch.]  The dissent would find the long-standing
principle of fraud cases that reliance isn’t reasonable if the recipient learns
the real facts before purchase. 
Embarrassment or frustration isn’t relevant to reliance as long as the
plaintiff learns the true facts “before consummating the transaction that
causes the injury.” [There is a reason that state consumer protection laws, and
not just California’s, depart from traditional fraud principles, which are
mainly caveat emptor.]
The dissent worried that the “momentum to buy” analysis
couldn’t be applied consistently. 
Suppose the consumer was drawn into the store by a misleading discount
advertisement and  was told as soon as he
picks up an item in the store that it wasn’t in fact discounted. If he bought
anyway, would he be covered?  What if he
learned in line, but not yet at the front of the line? What if the consumer was
shopping on the internet from home and learned that the discount wouldn’t apply
before she buys the items in her virtual “shopping cart”?  [Substantial cause analysis seems relevant
here; once you leave predominant cause behind, these inquiries are necessary,
but not fatal.  Also, why is the store
running misleading discount ads, and shouldn’t it bear the risk that these will
lure consumers in if they don’t say “select” items?]  This decision, the dissent feared, would
invite exhaustive litigation.  [It seems
to me that the legislative choice to ban bait and switch has largely answered
these questions: don’t engage in that practice. 
There’s no efficiency payoff/consumer benefit to telling consumers that
there will be a discount and then not giving it to them.  This conclusion does, of course, mean that
advertisers’ clear signals that not all items will be discounted should also be
taken into account.]
The dissent said this wasn’t classic bait and switch, when
the seller had no intention of delivering the product advertised.  [What about lacking intention to deliver the price advertised?]  “In a classic bait and switch, the merchant
actively conceals the fact of the misrepresentation from the consumer,
resulting in the consumer buying an item he did not enter the store to
purchase.” And the consumer continues to rely on misrepresentations because he
believes that “the advertised item is not actually available, or that it is
inferior in a meaningful way to the item the merchant actually wants to sell to
reap greater profit margins.”  In such
situations, the consumer’s understanding that she [now the consumer is she] is
buying a different product doesn’t necessarily mean that her reliance on the
deception has ended.  [This is
equivocation about which representations must trigger reliance. What brought
the consumer in was the offer of X item at Y price, which includes the
necessarily implied claim that X item is available for purchase.  If she’s not buying X item, then she has
ceased “relying” on the availability of X item, and her continued presence is
either from sunk cost reasons, same as the theory here, or because she’s been
persuaded to buy Z item instead.]  “[H]ere,
there was no evidence any salesperson attempted to convince the plaintiffs to
purchase items they did not want.” 
[Again, equivocation about the “convincing.”  Salespeople need not be involved—the pressure
of the line here does the same work of social pressure to leave off one’s
initial preference.]

The dissent was sympathetic to the similarity to traditional
bait and switch, but thought that the law here just didn’t cover the
situation.  The plaintiff must consummate the relevant transaction
relying on the mistaken belief that a misrepresentation was true, absent
legislative change to the contrary. 
Because of the congruence between consumer protection law and
traditional fraud claims, “[w]e must ‘isolate’ the point in time at which money
was exchanged because that is the moment at which the plaintiffs were injured
in a legally cognizable way under the consumer protection laws.”

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Trademark/(c)/ROP question of the day, Stephen King edition

Posted on December 16, 2016 by rtushnet

This is a book bag.  Get it?  I wish it were a little bigger, but boy does it look nice.  What’s the appropriate rights analysis?

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Falsely claiming TM ownership isn’t false advertising, court rules

Posted on December 16, 2016 by rtushnet
Dille Family Trust v. Nowlan Family Trust, No. 15-6231, 2016
WL 7202073 (E.D. Pa. Apr. 21, 2016)
There’s a pattern in the ED Pa where they put all the legal
analysis in a big footnote in the order granting a motion to dismiss.  I don’t know why.
Anyhow, Dille alleged Lanham Act violations including false
designation of origin and false advertising, relating to claims over who owned
the “Buck Rogers” trademark.  Intangible
property rights, such as trademark rights, are not “goods or services” for
Lanham Act purposes, and this is consistent with Dastar. 
Nowlan made allegedly false statements about the ownership
of the Buck Rogers mark, but never produced any products or granted any
licenses.  Thus, there was no false
designation of origin claim or false advertising claim.  Note: the latter conclusion ignores the quite
relevant phrase “commercial activities” in §43(a)(1)(B), as well as Dastar’s explicit reservation of false
advertising claims, though there’s nothing new about the latter.  Anyway, the court found that Nowlan’s letters
contained “nothing more than statements asserting Defendant’s legal rights,” and
thus couldn’t be commercial advertising or promotion.

Also, the claim for trademark cancellation for lack of bona
fide intent to use wasn’t sufficiently fleshed out, and appeared contradicted
by the allegations of the complaint that Nowlan was offering to license other
parties.  [Would that be a naked
license?]

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Second Circuit will trust FDA on drug facts, not on misleadingness

Posted on December 16, 2016 by rtushnet
Church & Dwight Co., Inc. v. SPD Swiss Precision
Diagnostics, GmBH, 2016 WL 7131177, No. 15-2411, — F.3d – (2d Cir. 2016) (as
amended on denial of reh’g Dec. 5, 2016)
Original
opinion discussed here; the court amended the opinion to deal more
explicitly with a couple of issues.  In
particular, the original opinion said that the Second Circuit hadn’t settled on
a definition of materiality, but presumed that materiality required that the
deception be “likely to influence [consumer] purchasing decisions.” Apotex
Inc. v. Acorda Therapeutics, Inc., 823 F.3d 51 (2d Cir. 2016), recently adopted
that very standard, so there was no need to grant rehearing on this issue.
SPD argued that Apotex
couldn’t be reconciled with the opinion here, but the panel found that any “tension”
was “only a tension of emphasis, not content.” 
First, while Apotex said that
“representations commensurate with information in an FDA label generally” (emphasis added) wouldn’t be
actionable under the Lanham Act, it went on to acknowledge (in a footnote) that
“Lanham Act liability might arise if an advertisement us[ing] information
contained in an FDA-approved label… [is] literally or implicitly false.” Such
was the case here.
Second, this case involved a different question of law.  Apotex
presumed that the court could consider the claim, and the issue was “whether
aspects of the defendant’s advertising incorporating FDA-approved factual
assertions about pharmacological effects of its product were nonetheless false.”  But here, SPD was arguing that the court
couldn’t even entertain a claim of falsity relating to FDA-approved messaging,
without consideration of whether the advertising or labeling was in fact
misleading, and that argument was rejected by Pom Wonderful.  [This
distinction makes my head hurt, especially as to whether it can be
distinguished from the first reason given by the court.]

Third, “the Lanham Act claims in the two cases relate to
significantly different aspects of the FDA’s competence.”  And here we have one of my main
questions/concerns about Pom Wonderful
coming to the fore, perhaps unsurprisingly in the Second Circuit that also
decided Caronia.  “The inquiry here does not relate to the
truth or falsity of an FDA-approved factual assertion about the effects of a
medical product, but rather to the question of whether the phrasing of
advertising messages might be misunderstood by consumers.”  Apotex
involved whether “a fact about the pharmacological effects of a drug, which the
FDA had determined to be true, should nonetheless be found by the court to be
false.”  The FDA’s job is to figure that
out, and the court wouldn’t second-guess it “on matters as to which its
competence vastly exceeds that of courts.” 
Misleadingness was another matter. 

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Exposure to false advertising doesn’t create Article III standing

Posted on December 16, 2016 by rtushnet
Truthinadvertisingenforcers.com v. Dish Network, LLC, No.
8:16–cv–2366, 2016 WL 7230955 (M.D. Fla. Dec. 14, 2016)
Pro se plaintiff TruthInAdvertisingEnforcers.com is a
website solely owned by Gerald Collette, who received the advertisements at
issue at his residence. Defendants include five internet service providers and
two sales agents for those service providers. 
Truth alleged that defendants’ ads claimed that high-speed internet services
were available at lower prices than were actually available to consumers in
Collette’s county.  E.g., “HIGH SPEED
INTERNET Starting at $19.99 month No Matter Where You Live! No TV Service
Required!”

The court found that Truth lacked Article III standing
because there was no injury in fact. 
Truth didn’t allege that it bought more expensive services because of
defendants’ bait-and-switch.  The injury
was merely that the advertised prices weren’t available.  Bare violations of false advertising laws don’t
create Article III standing.  That’s not
a concrete injury, just a personal disappointment.  (Wonder whether the Florida AG agrees?)  Thus, the court lacked subject matter
jurisdiction and remanded to state court.

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When does a false advertising case create a right to a jury trial?

Posted on December 15, 2016 by rtushnet
Ferring Pharmaceuticals, Inc. v. Braintree Laboratories,
Inc., — F.Supp.3d —-, 2016 WL 7223279, No. 13–12553 (D. Mass. Dec. 13,
2016)
The parties compete for the market in products used for
bowel preparation before colonoscopies, and each alleged that the other had
engaged in false advertising. Braintree’s moved to strike Ferring’s demand for
a jury trial.  “Parties have the right to
a jury trial when a statute or the Seventh Amendment so requires.” The Lanham
Act does not create such a right if a plaintiff seeks “the remedy of an accounting
of defendant’s profits,” nor does Massachusetts Chapter 93A, the coordinate
state false advertsing law.
The key to the Seventh Amendment analysis here was whether the
remedy sought was legal or equitable in nature.  If legal, then there would be a right to a
jury trial; an equitable remedy can also be “of a legal nature” sufficient to
entitle a party to a jury trial.  “For
instance, an accounting of profits can act as a proxy for a legal claim in some
circumstances.” The court determined that it would apply the proxy rationale “if
1) the case involves similar products, 2) there is no adequate remedy at law
and 3) the products compete directly.”
Braintree argued that its requested disgorgement remedy was
equitable. Ferring was entitled to a jury trial with respect to its defenses to
Braintree’s counterclaims, which the parties agreed were legal in nature. But
the proxy argument was closer—the first two factors weighed in favor of finding
that Ferring’s claim was a proxy for legal damages. The competing treatments were
very similar, and there was no alternative legal remedy, because Braintree’s
purported false advertising began as soon as Ferring’s treatment entered the
market, “making it impossible for Ferring to measure its alleged losses by
decreased sales.”
However, it wasn’t clear if there was direct
competition.  Though the two products
perform the same function and were prescribed by the same doctors, and though Braintree’s
advertising directly targeted Fering’s product, there were other colonoscopy
preparation drugs on the market during the time period at issue.  [They’re direct substitutes.  They may be in head-to-head-to-head
competition, but reading an extra requirement of being the only two competitors
on the market into the standard for “direct competition” seems to need more
justification.  I guess the justification
would have to be that “direct competition” is a poor shorthand for the actual
standard: you have to be relatively sure that any of defendant’s sales were
taken from plaintiff’s hands, and that isn’t as clear when there are other
competitors in the market.  But then, if
there might well have been other victims, is disgorgement likely to be
appropriate?  I’m not sure how the
underlying standard for recovery interacts with the Seventh Amendment
argument.]

The court decided to go ahead and have the jury trial first,
as required no matter what.  “If Ferring
has failed to show that it is entitled to a jury trial at that time, the Court
will treat the jury’s verdict as advisory.”

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Business betrayal isn’t false advertising, could be TM infringement

Posted on December 15, 2016 by rtushnet
Kische USA LLC v. Simsek, 2016 WL 7212534, No. C16-0168JLR
(W.D. Wash. Dec. 13, 2016)
Kische alleged that former employees—Mr. Simsek and Ms.
Walker—abused their positions to misappropriate Kische’s assets and found JD
Stellar, a competing business. Kische accused Costanza, its former attorney, of
participating in this misconduct, though he gets out of the case because Kische’s
allegations did not dispel the reasonable inference that the ex-employees had
apparent agency to do what they allegedly did.
Kische “design[s] and import[s] fashionable clothing from
manufacturers in Turkey and [sells] them under the mark ‘KISCHE’ to prominent
retailers in the U.S., including Nordstrom, T.J. Maxx, Marshalls, Ross[,] and
others.” Mehmet Uysal is the owner and sole member of Kische. Simsek and Walker
“served as managers and employees of [Kische] for over six years.”  While still employed by Kische, they allegedly
(1) formed JD Stellar, a competing company; (2) assigned one of Kische’s
registered trademarks—“Marseille”—to JD Stellar without Uysal’s approval; (3)
registered the trademark “Dantelle,” which Kische alleges directly competed
with Kische, on behalf of JD Stellar; (4) dissuaded Kische’s customers from
doing business with Kische; (5) purposefully delayed Kische’s payments to
manufacturers and vendors; (6) stole furniture, equipment, and clothing from
Kische; (7) made payments from Kische to JD Stellar without authorization; and
(8) otherwise improperly utilized Kische’s resources. Kische alleged that its
annual revenue of $13 million from the “Kische” mark dropped to zero as a
result.
The court found that Kische sufficiently pleaded infringement
of the Kische mark, but not the Marseille or Dantelle marks. Even if Marseille
was fraudulently transferred, Kische didn’t allege that it still owned the
mark, and though Kische alleged ownership of Dantelle, it didn’t allege
infringement.  As for Kische the mark,
Kische properly alleged that the Stellar defendants sold identical products
with an identical mark, supporting the claim of likely confusion.
False advertising claims did not fare so well. First, they’re
subject to Rule 9(b), unlike trademark claims subject to Rule 8, because courts
have said so.  The court found that Kische’s
allegations, including use of the Kische mark as a keyword, use of the Kische
address as JD Stellar’s address, and use of Kische’s clothing designs as JD
Stellar’s, were not statements of “fact.” 
There were no allegations of specific assertions that describe testable,
“absolute characteristics” of the products. 
[Stellar’s address is certainly a verifiable fact about Stellar’s
services, though perhaps at some point it wasn’t false as to customers even if
it represented a betrayal of Kische.]  At
most, Kische was recycling its Dastar-barred
reverse passing off claim, alleging that Stellar sold clothing embodying Kische
designs under a different mark.
Kische also alleges that the Stellar defendants made false
statements to Kische’s clients and cited the declaration of Lorraine Hooshyar,
“[s]ales representative for specialty stores.” But the declaration stated only
what buyers—not the defendants—told her: that Uysal “had shipped substandard
product,” that Uysal and Kische “were closing their business,” and that a buyer
had to “cancel [an order] because [Uysal and Kische] couldn’t meet the delivery
or produce the garments.” Hooshyar’s statement “[e]ach and every buyer that I
have reached out to has had a bad taste due to the ending and the untruths that
have been spoken by [Walker and Simsek]” was about the, but was too conclusory
to plead false statements of fact.  Also,
the facts as pleaded didn’t justify the inference that the statements
constituted advertising or promotion.
Trademark dilution: allegations that Kische’s marks were
famous  “due to [Kische’s] reputation for
high quality women’s fashion” were insufficient. These included allegations
about a video in which a commentator calls Kische a “luxurious line,” customer
ratings, purchase orders to “major women’s fashion retailers,” and an email in
which “Taste of Eden show[ed that] it thought that [the] Kische cardigan was
famous.” That wasn’t enough to show wide recognition by the general consuming
public. 
The evidence on which Kische bases
its factual allegations shows at most that fashion purchasers recognized
Kische’s marks—not that the general consuming public widely recognized the
marks. Similarly, the fact that a commentator called the Kische brand a
“luxurious line” or that a few customers gave high ratings to Kische’s clothing
do not lead to the reasonable inference that the marks are widely recognized by
the consuming public.
As for the Washington Consumer Protection Act, Kische insufficiently
alleged an unfair or deceptive practice, and separately failed to allege an
impact on the public interest. There was no reason to think that the defendants
deceived “a substantial portion of the public,” or that additional persons in
the same situation would be injured in the same way.  Likewise, fraud claims failed because the
relevant misrepresentations were made to the PTO and to Kische’s suppliers,
retailers and customers, not to Kische—thus Stellar couldn’t have intended
Kische to rely on them, and Kische would have known that the statements were
false and couldn’t have relied on them. 
As to allegations that the defendants made false representations to
Kische about Kische’s financial status, Kische also failed to state a claim.

Allegations for breach of fiduciary duty and conversion of
Kische’s assets, including “trademarks, money, and equipment,” did survive, and
Kische was allowed leave to amend against the Stellar defendants.

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Announcing the Open Source Property Casebook

Posted on December 15, 2016 by rtushnet
Straight from Jeremy Sheff:
On behalf of myself and my co-authors (Steve Clowney, James Grimmelmann, Mike Grynberg, and Rebecca Tushnet), I am pleased to announce the immediate availability of Open-Source Property, a completely free casebook for the 1L Property Law course. We would like to ask you to share this announcement with readers of the PropertyProf Blog, and spread the word among your colleagues who teach Property Law.

Open-Source Property is a comprehensive, high-quality teaching resource with substantial advantages over commercial casebooks:
– It’s Free. Open-Source Property is distributed completely free online, in multiple formats.
– It’s Easy to Use. Open-Source Property comes with teacher’s manuals and slides. We also encourage adopters to submit their own teaching materials to be shared on the instructors page of our website. (The instructors page is password protected; please email me  from your institutional email account to request a password).
– It’s Flexible. You can choose to download a complete casebook that has already been tested in the field by the authors. Or you can mix, match, and edit chapters, right in Microsoft Word, to achieve your preferred coverage profile. Our individual chapters cover all the basics, from Finders to Future Interests to Takings, as well as more specialized topics such as Intellectual Property and Property Rights in Human Beings.
– It’s Open-Source. Open-Source Property is licensed under a CC-BY-NC 4.0 license. You are free to copy it, use it, redistribute it, and edit it under the terms of the non-commercial license. In fact, we encourage adopters to submit their own contributions and their own builds of the casebook to be posted on the casebook website.
We hope you will visit us at http://ift.tt/2gP9VIg to check out Open-Source Property and consider adopting it as your casebook. If you do, please let us know! And if you have any questions or comments regarding the casebook, or if you just need some encouragement and support to make the switch, feel free to email us at feedback@opensourceproperty.org, or to find me at the AALS Annual Meeting in San Francisco next month. We are here to make it easy for you to do your students and yourself a favor by moving to a free, open-source course text.
In the meantime, you can watch for updates by following us on Twitter  or liking us on Facebook.
As a personal note, I enjoyed writing the zoning chapter a lot.  It’s a bit unusual–it focuses on the history of St. Louis and its suburbs as a way of telling the story of zoning; it includes several actual zoning codes and plans of various types, to give students a sense of what they’re like; and it is deeply concerned with explaining how, in America, property law is racially inflected.  Feedback is welcome, on this or any other part of the casebook.

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Reading list: why search engines shouldn’t implement the right to be forgotten

Posted on December 14, 2016 by rtushnet

Note structural similarity to arguments about copyright takedown notices.

Stuart Hargreaves, The Trouble
with Using Search Engines as the Primary Vector of Exercising the Right to Be
Forgotten, [2016] 19 Pandora’s Box 83-106
Abstract:     

European privacy law currently
implements the ‘right to be forgotten’ by positioning commercial search engine
operators as the initial site of decision-making regarding its exercise. This
is problematic for a number of reasons. First, there are a number of structural
flaws in the mode of this decision-making that make it unclear that search
engines are capable of (or interested in) incorporating a robust account of
competing interests. Second, right to be forgotten requests are not susceptible
to the same kind of algorithmic techniques search engines use to deal with
other kinds of removal requests, meaning large numbers of decisions must be
made rapidly and primarily by staff lacking formal legal qualifications. When
compounded with the possibility of heavy penalties for failure to comply with
the right under European law, these two issues suggest there is a significant
potential for bias toward deletion rather than preservation of borderline
links. A third problem is that the simple online forms provided by search
engines for European data users making a deletion request mask a complicated
legal analysis, meaning those who properly structure their requests in an
appropriately technical and legal manner may have a higher chance of success in
their claims. This threatens to open up a new digital divide along the axis of
reputation. Finally, the massive compliance costs associated with this new
right may serve as a form of anti-competitive lock-in, preventing the emergence
of innovative new companies in ‘search’. In sum, if the right to be forgotten
is to have real meaning in European law, search engines are not the correct
vector for its implementation.

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