Different meaning of Fizzkids and Wizkids defeats infringement claim even for similar products

Wizkids/NECA, LLC v. TIII Ventures, LLC, No. 17-CV-2400 (RA),
2019 WL 1454666 (S.D.N.Y. Mar. 31, 2019)
TIII sells “soda-can-themed toys, specifically, vinyl
characters that are sold in packaging resembling a soda can.” The “Fizzkids” are
called “Cranked Cola,” “Bone Crusher Root Beer,” “Vicious Dog Sparkling Water,”
“Rummy Cola,” “Zombie Juice,” and “Alien Limeade.” NECA “is a leading provider
of collectible figures, games and game equipment in the United States and
abroad.” It has registered “WIZKIDS” for “game equipment, namely, miniature toy
figurines and role playing equipment in the nature of game book manuals;
collectible toy figurines for role playing games; and role playing games and
game pieces and accessories therefore.” Some NECA figurines are licensed characters
from well-known brands of comic books, television shows, movies, and video
games, such as THE SIMPSONS, STARK TREK, MARVEL, DC COMICS, DUNGEONS &
DRAGONS, PATHFINDER, and PORTAL.  NECA
sued TIII, staying its opposition to TIII’s pending application to register its
mark.

TIII’s survey showed consumers who’d bought a “collectible
toy figurine” costing more than $10 in the past six months, or expecting to
purchase one in the next six months, an image of the Rummy Cola figure and can
and asked: “What company makes or puts out this collectible toy figurine that
you just saw?” Those that named a company were then asked: “Why do you say
that?”  Then: “do you believe the company
that makes or puts out this product … IS sponsored or approved by another
company, IS NOT sponsored or approved by another company, or you don’t know or
have no opinion.” The “is sponsored” respondents got a follow-up.  One of 617 respondents identified WIZKIDS as
sponsoring or approving the FIZZKIDS product. NECA’s expert criticized the
survey, mainly for not being able to detect confusion given that Wizkids isn’t
a “top of mind” trademark.
 

Wizkids package with Guardians of the Galaxy
The court found that Wizkids was, at most, moderately
strong: it was suggestive (not arbitrary or fanciful) and it had some
marketplace success, but no direct evidence of secondary meaning.
Similarity was the real hurdle.  The marks sounded similar, but gave “notably
different commercial impressions.” 
Visually, they weren’t similar, with “distinctly different fonts and
color combinations.” They were in different places on the packaging, “undercut[ting]
the similarity of the sound of the marks.”
But the real killer was the meaning/context differences.  “Fizz” evoked a beverage, and obviously connected
to the soda can theme.  “Wiz” is short
for “wizard,” and has no soda theme. Further, Wizkids had a reverse house mark
problem: that mark was “used primarily with products that bear more famous
licensed brands.” The “Second Circuit has repeatedly found … the presence of
a distinct brand name … weigh[s] against a finding of confusing similarity.”
Even if some Wizkids products are sold in cylindrical packages, that didn’t
make them soda-themed.  And even if
Wizkids has just launched two product lines without licensed characters, there
was no evidence that “products bearing only the WIZKIDS mark present a similar
commercial impression to the soda-themed products bearing the FIZZKIDS mark.”  Sound similarity was “eclipsed by the
differences in their meaning, modes of presentation, and the overall impression
they convey.” Strongly favored TIII.
There was a factual issue on product relatedness/bridging
the gap, so that factor could favor NECA.
Where a defendant submits survey evidence “tending to rebut
charges of actual consumer confusion,” plaintiff’s “failure to present its own
consumer survey weighs against a finding of consumer confusion.” NECA argued
that actual confusion evidence was understandably lacking because only a few
hundred of FIZZKIDS’ products have been sold. Moreover, the court gave the
survey little weight (though didn’t deem it inadmissible, even though it lacked
a control and didn’t leave the image in front of the consumer when asking
questions, as would have been more accurate to replicate market conditions).
But even without the survey, lack of evidence of actual confusion weighed in
TIII’s favor.
There was no evidence of bad faith. Choosing a mark because
it “reflects the product’s characteristics,” as TIII did, supported a finding
of good faith, as did the evidence that TIII chose the FIZZKIDS mark before it
was aware of the WIZKIDS mark, and that TIII previously engaged in trademark
searches and sought the advice of counsel.
Quality, that Second Circuit makeweight, managed to favor
TIII as well (though deserved little weight) because the quality differences
between the parties’ products made confusion less likely.

Consumer sophistication: NECA’s predecessor-in-interest, responding to the
PTO’s initial rejection of its application to register the WIZKIDS mark based
on the registered third-party mark “WIX-KIDS” for toy vehicles, argued that the
“consumers of the goods offered under the [WIZKIDS] mark populate a community
of gaming enthusiasts … that are thus likely to be knowledgeable about the
goods they have chosen.” But that was sixteen years ago, and NECA argued that
it had expanded the product line greatly since then. This was enough to create
a factual issue, since there’s no trademark file wrapper estoppel.
On balance, the dissimilarity of the parties’ marks and the
lack of evidence of bad faith weighed strongly in TIII’s favor. The strength of
the mark weighed moderately in NECA’s favor, but even assuming the factors that
were factually disputed were resolved on NECA’s side, no reasonable jury could
find likely confusion. “[T]he maximum weight that can reasonably be assigned to
these factors cannot overcome the finding that ‘looking at the products in
their totality,’ consumers are not likely to be confused.”  Summary judgment for TIII.

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Allegedly defamatory claims in e-recycling report weren’t commercial speech despite some economic incentive

Electronic Recycling Ass’n v. Basel Action Network, 2019 WL
1453575, No. C18-1601-MJP (W.D. Wash. Apr. 2, 2019)
Plaintiff ERA is a Canadian non-profit corporation that
specializes in recovering, refurbishing, and reusing discarded electronic
equipment or “e-waste.” When it determines that equipment is no longer
reusable, it allegedly transfers that equipment to “regulated and approved
facilities to be recycled.” These entities, not ERA, allegedly then ship
dismantled components to further destinations.
Defendant BAN is a non-profit environmental advocacy
organization based in Seattle that investigates and reports on e-waste,
including whether its exportation violates the Basel Convention governing such waste.
In October 2018, BAN published “Export of e-Waste from Canada: A Story as Told
by GPS Trackers” along with a press release titled “GPS Trackers Reveal More
Canadian e-Waste Exported to Developing Countries.” It said that BAN affixed
GPS trackers to 43 “non-functional and economically unrepairable” electronic
devices, which it then delivered to “various electronics recyclers or recycler
collection sites” in Canada, including ERA. The report said that ERA (1)
shipped three of the tracked devices to China and Pakistan, “showing
substantial evidence of likely illegal exportation”; (2) is a “repeat offender”
with “a history of making similar exports in the past”; and (3) failed to
remove “sensitive and private residual corporate data” from computers that it
allegedly refurbished and re-sold to BAN. In addition, the report said that
ERA’s founder “threatened BAN volunteers photographing his property and later
sent people to confront and intimidate the volunteers with large dogs.” The press
release said that ERA was “in likely violation of the Basel Convention.”
ERA sued for defamation and false advertising, alleging that
(1) it has “no record of ever selling BAN any electronic devices and has no
record of receiving any GPS-tracked devices from BAN or anyone else”; (2) it
has “extensive policies and procedures to ensure [residual corporate data] is
not retained on items that are reused or result”; (3) it did not export any of
the shipping containers identified in BAN’s Report’ and (4) its founder “did
not threaten BAN volunteers photographing his property and did not send anyone
to ‘confront and intimidate the volunteers with large dogs.’ ”
On defamation, BAN challenged the sufficiency of the
pleadings.  “While it is not sufficient
to plead falsity in vague, conclusory terms,” it wasn’t always necessary to plead
“specific facts proving the falsity of the statements in dispute.” Here, it was
enough to allege the facts above, and that it “does not ship hazardous e-waste
material within or outside of Canada.”  [Question
about defamatory gist/sting, though: if ERA’s contracted facilities did the shipping,
does it matter that ERA didn’t technically do the shipping? Causing them to be
shipped—or even not ensuring that its partners didn’t ship them to China and Pakistan—would
seem to be enough to blame ERA for the behavior BAN criticizes.  The court noted BAN’s point that the
allegations “artfully avoid an actual denial” of the statements in the report
and press release, but still thought that the court shouldn’t determine falsity
at this stage as long as the complaint gave rise to a plausible inference of
falsity.]
Statements about whether the founder threatened or
intimidated BAN volunteers were factual enough to be falsifiable.  Even if the size of the dogs/perceived threat
were subjective matters, on the whole the statements implied an assertion of
objective fact.
However, statements about the “likely illegal[ity]” or legal
implications of ERA’s conduct under the Basel Convention were nonactionable
opinion made by laypersons in the context of an ongoing public debate, as well
as being based entirely upon “disclosed or assumed nondefamatory facts” (i.e.,
the data set forth in the Report) and ddin’t “impl[y] that there are undisclosed
facts on which the opinion is based.” “Arguments for actionability disappear
when the audience members know the facts underlying an assertion and can judge
the truthfulness of the allegedly defamatory statement themselves.”
Tortious interference claims also survived. ERA alleged that
a specific customer ended its relationship with ERA based upon BAN’s report and
press release.
Lanham Act claims, however, failed.  ERA alleged that BAN advertised commercial
services including (1) its e-Stewards certification program and (2) its EarthEye GPS tracking technology for companies in the e-waste industry,
giving BAN an economic interest in encouraging consumers to use e-Stewards
certified companies over those not so certified.
That didn’t make the report and press release into
commercial speech, under the Bolger
factors.  The report wasn’t a typical
ad.  There was no evidence that the
editorial content was a mere sham added to advertising. Instead, references to
e-Stewards and EarthEye were minimal—in approximately 13,000 words in the
Report, “e-Stewards” appeared five times and “EarthEye” appeared twice.  As for references to specific products or
services, the reference to e-Stewards was in connection to comparing other
recycling standards, e.g.: ERA does not “operate under any certified
environmental management systems such as ISO14001, nor do they possess
recycling or data security certifications (e.g., e-Stewards, R2, NAID) – that
are expected of responsible electronics recyclers.” The report did say that
e-Stewards is comparatively “stricter with respect to exports, occupational
safety and health, and downstream due diligence” and is “the only North
American standard that audits and rewards companies for upholding the Basel
Convention and the Ban Amendment.” But it also suggested that the apparently competing
R2 standard should be amended to do the same.  Likewise, it recommended some form of GPS
tracking to enforce the Basel Convention, but didn’t suggest that EarthEye was
the only solution.  “[T]he overall
impression left by these statements is not that readers should use any specific
product or service, but rather that the e-waste industry is rife with
violations of the Basel Convention, and e-Stewards and EarthEye are but one
means of encouraging compliance.” Finally, BAN did stand to benefit economically
from convincing corporations and governments to pay for its products and
services. But “economic motive in itself is insufficient to characterize a
publication as commercial…”
Just as a matter of common sense, this was not commercial speech.  The Lanham Act didn’t apply. Still, BAN wasn’t
entitled to attorneys’ fees.  The report’s
status was “somewhat of a close question, and ERA’s false advertising claim is
not groundless or unreasonable as a matter of law,” at least on the current
record.

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Literal falsity about independence of tests/test results supports $18 million in disgorgement (incl. interest)

Dyson, Inc. v. SharkNinja Operating LLC, 2019 WL 1454509,
No. 14 C 9442 (N.D. Ill. Mar. 31, 2019)
Dyson sued SharkNinja in 2014 for false advertising.  SharkNinja won summary judgment except for
Dyson’s literal falsity claim for the period from August 2014 through December
2014. A jury returned a general verdict finding SharkNinja liable and that its
false advertising was willful, and awarding Dyson an accounting of SharkNinja’s
profits: $16,410,681. The court granted prejudgment interest, adding a couple
of million to the tab, and denied SharkNinja’s various motions to get out of
the verdict as well as Dyson’s motion for attorneys’ fees.

The key claims were that independent lab tests conducted under the ASTM F608
standard proved that SharkNinja’s NV650 vacuum cleaned carpets better than
Dyson’s DC65 vacuum. Dyson had two theories of literal falsity: first, that the
tests weren’t independent, and second, that part a SharkNinja infomercial was
false in that it combined a voiceover about independent tests with a bar graph displaying
data from internal tests finding that
on one type of carpet, SharkNinja’s NV650 picked up 42 grams of dirt to the
Dyson DC65’s 37 grams.
SharkNinja argued that the juxtaposition of two true claims
couldn’t be literally false, but at worst was ambiguous.  But “[w]hen two statements are presented
together, they contextualize each other and can thus communicate a different
message in combination than they might in isolation.” The grams graphic appeared
in the infomercial “at exactly the same time” that the narrator said,
“independent lab tests prove.” The court’s excellent analogy is worth quoting
at length:
[D]irect narration is not the only
way to eliminate ambiguity; context works just as well. Suppose a car is
approaching a traffic light. Viewed from the direction the car is traveling,
the light is red, but the passenger says, “The light is green.” Taken in
isolation, the statement is true: The light is green when viewed from the cross
street. In context, however, the statement is unambiguously false. Just as the
direction in which the car is traveling determines which side of the light the
driver will understand the passenger to be referencing without the passenger’s
saying so, so too does the timing of the voiceover relative to the grams
graphic communicate that the graphic displays the results of independent tests
without the narrator’s saying so—or so a reasonable jury could find.
[I might’ve gone further: it’s hard to see how a reasonable
jury could have found otherwise.]
SharkNinja argued that “a barely visible footnote to the
grams graphic attributing the data to tests performed on a ‘multi-level carpet
sample’” introduced ambiguity because it contradicted the voiceover’s reference
to independent tests conducted “on four of the most commonly owned carpet types
in America.” But even if “a barely visible footnote contradicting a voiceover”
could avoid literal falsity—about which the court was dubious—there wasn’t even
a contradiction here; a reasonable viewer could think that SharkNinja tested
four but displayed one.
SharkNinja next disputed materiality, which required a
showing of likely influence on purchasing, not actual influence. But
SharkNinja’s CEO testified that the graphic was meant to “show visually the
amount of dirt that we each pick up,” “which he thought would make an impact on
consumers.”  And  SharkNinja decided during the infomercial
editing process to stick with the multilevel carpet results used in the graphic
rather than using plush carpet results showing a slightly larger margin of
victory because of the “perception of 42g vs. 37g” for the multilevel carpet
test as opposed to 48.5 grams vs. 42.9 grams for the plush carpet test. As the
document explained: “We like us being in the 40’s and them being in the 30’s.” Since
SharkNinja thought the grams graphic would affect viewers, “the jury reasonably
could have found the same. And from that finding, it reasonably follows that
SharkNinja’s credibility-enhancing representation that the graphic reflected
independent test results was likewise material.”
SharkNinja argued that the grams graphic was immaterial
because the truth would have been just as good, as the independent testing
would have shown a four-gram difference totaled across all four carpets, which
was no different from the five-gram difference in the graphic.  The jury wasn’t required to agree, given the
evidence above and given that “[t]he graphic used in the infomercial showed
Dyson’s vacuum picking up only 88 percent (37 grams divided by 42 grams) of
what SharkNinja’s vacuum did, while a graphic constructed from Intertek’s tests
on all four carpets would have shown Dyson’s vacuum picking up 98 percent
(166.8 grams divided by 170.9 grams) of what SharkNinja’s vacuum did, making
the difference appear much less significant.” 
[It would’ve wanted to use the four carpets added together because Dyson
beat SharkNinja on at least one of the carpets.]
Next, SharkNinja argued that no reasonable jury could have
found that the independence representation was literally false. Basically, it
told the testing entity to use a particular setting when testing all four types
of carpets, in contradiction to what the user manual said and what the testers
initially did.  Though it was a closer
question, “a reasonable jury could have found that SharkNinja effectively
controlled the tests by dictating to Intertek which setting to use, thus
rendering the tests not independent and the independence representation false.”
[Later, it changed the user manual so that those settings were actually
recommended for those carpet types; a previous decision had held that this
change, once made, rendered the ad claims not literally false going forward,
which is a bit weird technically—the testing was either independent or it wasn’t—but
perhaps one could say the lack of independence was no longer material once the
tester did what users were supposed to do.]
The court rejected challenges to the disgorgement calculation.
The $16,410,681 award appears to have come from starting with SharkNinja’s
$18,138,000 in gross profits and deducting $1,727,319 in non-advertising
expenses (commissions, deliveries, customer service call centers, warehouses
and fulfillment, credit card processing fees, and bad debt) identified by
SharkNinja’s economics expert. SharkNinja argued that (1) unrefuted evidence
showed that, due to its substantial advertising expenses, it lost money on the relevant
model during the relevant period and thus had no profits to disgorge, and (2)
even if it made a profit, the jury irrationally failed to apportion the profits
to award Dyson only the share attributable to false advertising.
But the various SharkNinja financial documents shown to the
jury were created for the instant litigation because the company didn’t
ordinarily prepare product-specific financial statements. Those documents
differed from each other a bunch, including one document reporting a $30.6
million net profit versus two others reporting net losses of $14 million and
$16 million, and also contained substantial errors.  Dyson provided expert testimony challenging
their accuracy and reliability, e.g., noting that one SharkNinja
profit-and-loss statement included data for two more months than a second
document yet reflected fewer total sales. She opined that, as a result, the
documents did not provide a “sufficient [basis] to subtract any amount of media
expense” for the challenged model. “The jury thus was free to disbelieve
SharkNinja’s fuzzy and inconsistent accounting and find that it did not prove
any of its claimed advertising expenses as deductions from its gross profits,
much less that its overall profit was zero.”
SharkNinja maintained that not all of its profits from that
model resulted from false advertising, so that apportionment was required.  But that didn’t mean that, as it argued, the
proper amount was zero, and it offered no middle ground.  At trial, SharkNinja didn’t suggest any way
for the jury to apportion profits other than zero; this strategic choice couldn’t
be revisited now.
Its motion for a new trial or remittitur suffered the same
fate. Among other things, SharkNinja challenged the jury’s willfulness finding
as against the weight of the evidence, reasoning that its witnesses testified
that the grams graphic was a placeholder accidentally left in the infomercial. But
the jury reasonably could have found that “when SharkNinja decided to keep the
grams graphic in the infomercial because it ‘like[d] us [SharkNinja] being in the
40’s and them [Dyson] being in the 30’s,’ it was at least reckless as to the
truth of the voiceover’s representation that the graphic reflected independent
testing,” especially since the graphic used data from multilevel carpet, and the
independent testing showed Dyson beating SharkNinja on multilevel carpet. And
the willfulness finding could also have been based on the independence representation.
On disgorgement, SharkNinja made similar arguments to those
above.  But once disgorgement was
justified, SharkNinja had the burden to distinguish between profits
attributable to its false advertising and profits attributable to legitimate
business activities. The jury certainly could’ve concluded that SharkNinja’s
profits didn’t result entirely from false advertising, but SharkNinja only
argued that its profits were zero; even after trial, it insisted that apportionment
was required without suggesting a percentage. 
Even if that gives Dyson a windfall, “that result accords with Seventh
Circuit precedent recognizing that the proper apportionment ‘often cannot be
ascertained with any reasonable certainty’ and that the resulting windfall risk
should be borne by the defendant, not the plaintiff.”
Dyson did fail to get the case deemed exceptional. A
willfulness finding doesn’t inherently make a case exceptional. And this case involved
challenged ads some of which were exonerated. The violation here, though
willful, wasn’t “especially egregious.” The false claims “were just part of its
advertising campaign,” lending credibility to otherwise true claims about lab tests
that were onscreen for only about twenty-four seconds of a twenty-two-minute
infomercial.  The falsity was in the
details.  “This would have been a
different case had SharkNinja run its advertisements without ever testing its
vacuum’s performance, or had SharkNinja said that the tests showed that its
vacuum cleaned carpets better than Dyson’s when in fact they showed the
opposite.”
Nor did alleged litigation misconduct rise to a level
justifying a fee shift.
However, Dyson did get prejudgment interest.   The
Seventh Circuit has adopted a presumption in favor of awarding prejudgment
interest “to victims of federal law violations” because, “[w]ithout it,
compensation of the plaintiff is incomplete and the defendant has an incentive
to delay.” Prejudgment interest “is simply an ingredient of full compensation
that corrects judgments for the time value of money.” Letting SharkNinja keep
the economic return it “made (or could have made) by investing” those funds
between 2014 and the date of judgment “would leave it unjustly enriched.”
Although SharkNinja won partial summary judgment, “defended
itself in good faith,” and did not engage in “outrageous, flagrant or
malicious” conduct, none of that mattered.  There’s a presumption in favor of awarding
prejudgment interest, and that presumption can’t be overcome by showing that
this is just an ordinary case; that would be nonsensical.  The court added $2,251,202 in prejudgment
interest, making the total award $18,661,883.

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burger case involves unclean hands (ew) and literal falsity about beef amounts

In-N-Out Burgers v. Smashburger IP Holder LLC, 2018 WL
7891028, No. SACV 17-1474 JVS(DFMx)
(C.D. Cal. Dec. 21, 2018)
As relevant here, In-N-Out alleged that Smashburger falsely
advertised its Triple Double hamburger as containing “Double the Beef” because
the burger’s two patties together contain the same amount of beef as the single
patty in Smashburger’s regular burgers. The court here addressed Smashburger’s
unclean hands defense based on INO’s claims that its meat has “No Additives,
Fillers or Preservatives,” even though its meat contains antibiotics. INO’s
claims regarding its meat, as well as its claims regarding “freshness,” also
allegedly falsely suggested to prospective customers that its food was healthy,
or at least a healthier alternative to other fast food restaurants. 
Does Twiqbal apply to affirmative defenses? The court here
thought no: under Rule 8(a), factual plausibility is necessary to state a claim
because the pleader must “show” entitlement to relief, but under Rule 8(c), a
party pleading an affirmative defense only needs to “state” — not show
entitlement to — its defense. Also, “strong policy reasons exist for a
different standard. A plaintiff has unlimited time to compose a complaint, but
a defendant only has 21 days to respond and assert affirmative defenses.”  Thus, the court applied the fair notice
standard instead, and under that standard, the affirmative defense of unclean
hands was sufficiently pled in part and deficiently pled in part.
First, even if it was literally true that In-N-Out’s meat is
free from “additives, fillers, or preservatives,” “such a claim could be misleading
to consumers who treat is as a claim that the meat is free from any added
substances (such as antibiotics) or byproducts of those substances.”  The identification of specific statements in
INO advertising, and of reasons that was allegedly misleading, satisfied Rule
9(b).
“Freshness” challenges were insufficiently pled because consumers
couldn’t plausibly equate “freshness” with “healthfulness” “in the context of a
quick-service restaurant serving burgers and fries.”
Unclean hands requires clear and convincing evidence (1)
“that the [non-asserting party’s] conduct is inequitable;” and (2) “that the
conduct relates to the subject matter of [the non-asserting party’s] claims.” On
relatedness, the court found that the defense was “premised on allegations that
In-N-Out misrepresents the nutritional characteristics and composition of its
burgers, while In-N-Out’s false advertising claim is premised on allegations
that Smashburger misrepresents the quantity of beef in its burgers. Therefore,
the unclean hands defense pertains to the same conduct, false advertising, as
related to the same competing products, the parties’ burgers.”   In addition, it was wrongful enough to
qualify for unclean hands. “Neither Supreme Court nor Ninth Circuit precedent
requires that defendants prove that a plaintiff’s conduct was ‘egregious,’ ”
and “a defendant can succeed on an unclean hands defense if it proves that a
plaintiff engaged in a ‘willful act concerning the cause of action which
rightfully can be said to transgress equitable standards of conduct.’ ”
In-N-Out Burgers v. Smashburger IP Holder LLC, 2019 WL
1431904, No. SACV 17-1474 JVS(DFMx) (C.D. Cal. Feb. 6, 2019)
Smashburger added the “Triple Double” burger to its national
menu. Its Triple Double, Bacon Triple Double, and Pub Triple Double each have
two beef patties that are supposed to weigh 2.5-ounces each prior to cooking,
using the patties also used for the “Kid Burger” and “Small Burger.”
Smashburger’s Classic Smash burger is made with a single patty that is supposed
to weighs 5.0 ounces prior to cooking. The Triple Double burger costs $0.30
more than the Classic Smash. INO’s counsel bought a Triple Double and a Classic
Smash in Culver City; the Triple Double’s two cooked patties weighed 1.5 ounces
each, while the Classic Smash had a single cooked patty weighing 2.8 ounces.
Smashburger used a number of slogans, including, but not
limited to: “Double the Beef,” “Triple the Cheese, Double the Beef,” “Triple
the Cheese, Double the Beef in Every Bite,” “Triple the Cheese, Double the
Beef, Triple the Options,” and “Classic Smash™ Beef Build with triple the
cheese & double the beef in every bite,” along with slogans that denote two
times the beef, including “2x Fresh Never-Frozen Beef.”  (Some locations seem to have changed
sizing—and increased pricing for the Triple Double—so that the Triple Double
Smashburger has twice the quantity of beef as the regular Classic Smash, and
INO didn’t argue falsity as to those locations with changed serving sizes.)
The court found that “Classic Smash™ Beef build with triple
the cheese & double the beef in every bite” was literally false.  Smashburger made some bad arguments about why
it wasn’t: double the beef in every bite doesn’t mean “two layers of beef in
every bite” but rather “unambiguously refers to the amount of beef in the
burger.” And it’s a direct reference to the Classic Smash, so Smashburger’s
attempt to create FUD using survey data regarding industry standards or
consumer expectations, such data was insufficient to create a genuine dispute
of fact as to literal falsity. Nor was it literally true because the Triple
Double had two times the amount of beef contained in a Classic Small
Smashburger, an option that was removed six months before the Triple Double
launched; the only single 2.5-ounce patty on the menu was the Kids Smash, which
the slogan at issue didn’t reference.
Similarly, Smashburger’s argument that its “double the beef”
claim was literally true because the Triple Double contains double, or more
than double, the beef of many other competing fast food single burgers,
including INO’s, failed because the slogan had no reference to competitors’
burgers, but unambiguously a comparison to Smashburger’s own. And its argument
that the Triple Double was smaller in diameter and taller than the Classic
Smash, making it possible that it would contain more beef per bite even with an
equal beef content, was “unpersuasive” in context. 
There was a genuine dispute of fact as to the falsity of the
other slogans that didn’t explicitly refer to the Classic Smash: “the remaining
slogans could plausibly be interpreted by consumers as a reference to products
offered by Smashburger’s competitors.” INO didn’t submit evidence on implicit
falsity at this stage.
“Statements that are literally or deliberately false create
a presumption of deception and reliance.”
Smashburger argued that it rebutted the presumption of
deception because the Triple Double and the Classic Smash were close in price,
and therefore no reasonable consumer could be deceived into believing they were
getting twice the amount of beef. The court didn’t agree that “a defendant can
rebut the presumption of deception by arguing that its false advertising is too
egregious to be believed.”
Materiality was also shown as a matter of law. Smashburger’s
false advertising pertained “to the very nature” of its product. “Consumers
rely on perceived value in deciding which products to purchase; therefore,
consumers are more likely to buy a product if they believe they are getting
twice as much of that product than they actually receive.”  No consumer surveys or testimonials were
required to find materiality as a matter of law.  Nor did it matter that “millions of people” bought
the Triple Double: “Smashburger does not present any evidence that there were
no returns or customer complaints regarding the Triple Double, and the fact
that millions of people purchased the Triple Double does not in and of itself
create a genuine dispute of fact for the jury.”
INO also moved for summary judgment on injury, but the court
found a genuine issue of material fact because of a dispute about how
competitive the parties were. A 2014 customer survey conducted by Smashburger showed
that 48% of Smashburger customers were extremely or very likely to go to
In-N-Out in the next month, and that 72% of Smashburger customers had visited
In-N-Out within the past three months. There was also evidence of geographic
overlap and a 2017 Marketing Update identifying In-N-Out as one of
Smashburger’s six competitors in the “U.S. Better Burger Landscape.”
But depositions from INO marketing folks suggested that INO
didn’t consider Smashburger a direct competitor or think its marketing mattered
to INO. And there were “significant” differences between the parties’
offerings. For example, INO only offers beef, while Smashburger offers four
types of protein; Smashburger offers varying patty sizes, while INO doesn’t;
Smashburger offers build-your-own burgers, pre-set burgers, and regional
“special” burgers, while INO only offers a hamburger and a cheeseburger.  (Hey, wasn’t there a whole thing about the secret
menu?)  And over four years elapsed since
Smashburger’s customer survey, weakening its evidentiary weight.

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statements about patent license status can violate Lanham Act’s false advertising provisions

Au New Haven, LLC v. YKK Corp., No. 15-cv-3411-GHW-SN, 2019
WL 1437516 (S.D.N.Y. Mar. 31, 2019)
Au holds the patent to a water-resistant zipper, and YKK had
an exclusive “field of use” license that it allegedly exceeded, resulting in
this lawsuit for patent infringement, breach of the license agreement, deceptive
marketing under the Lanham Act, and deceptive practices under the Connecticut
Unfair Trade Practices Act.
In this summary judgment ruling, the court found that patent
invalidity was subject to disputes of material fact, as did infringement.
Breach of contract failed because the “the license only gives permission to
sell into the non-excluded markets and does not contain a corollary prohibition
of sale into the excluded markets,” though it would hold oral argument on the
question of whether the implied covenant of good faith and fair dealing implies
a covenant not to compete in a patent license. Au had the burden to “prove not
merely that it would have been better or more sensible to include such a
covenant, but rather that the particular unexpressed promise sought to be
enforced is in fact implicit in the agreement viewed as a whole.” “Given the
absence of an express promise by the licensee, and the protections otherwise
afforded to Plaintiffs by patent law in the United States and abroad, the Court
harbors serious doubts that Plaintiffs can meet that burden,” but the court
didn’t make a final ruling.
Lanham Act claims: There were triable issues on laches, a
fact-intensive issue. Au delayed filing suit for many years, but the parties also
made years-long efforts to come to agreement on a new license.
YKK argued that the challenged statements weren’t commercial
advertising. Though the challenged statements weren’t pure commercial speech,
that meant that a jury would have to address “factors such as whether the
communication is an advertisement, whether the communication makes reference to
a specific product, and whether the speaker has an economic motivation for the
communication.” The motivation in particular was a disputed material fact.  [I think the real issue is whether the
challenged statements were “commercial advertising or promotion,” a subset of
commercial speech.]
“The challenged statements, while not literally false, do
falsely imply that YKK had an unlimited license.”  YKK argued that implied falsity requires a
consumer survey, but intentional misleadingness can substitute for survey
evidence. A statement about YKK’s right to sell the zippers also  involved “an inherent or material quality of
the product.”
Connecticut Unfair Trade Practices Act: Not time-barred;
CUTPA has a three-year statute of limitations. The first allegedly misleading
statement was made in 2003, but Connecticut doesn’t “insulate standardized or
repeated unfair trade practices from challenge once they had been instituted for
three years.” So Au could reach back three years from before it sued, and some
of the statements were re-made within that period.

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Section 512 roundtable, open mic

Open mic
Janis Pilch, Rutgers U: domestically it seems obvious that
litigation on 512 can’t change the systemic problem of infringement and the
impossibility for most rightsholders to litigate. 512 sets up a permanent
conflict b/t service providers and rightsholders.  Illusion of balance. Need to amend to create
a balance that favors rightsowners. 
Second, internationally, the same conflict plays out.  EU Directive makes platforms more responsible
versus rich tech companies fighting laws constraining their profits.  Those companies are using dominant economic
position, made possible in part by 512, to distort public perception of law through
misinformation and through academics & civil society organizations, paid or
otherwise motivated.  Also those groups
hacked … somebody?  USCO site was
compromised in 2016 when written comments on 512 were due.
Q: do you contend that anyone was precluded from filing
comments?
Pilch: no. But 92,000 comments were bots.  We see South African reform heavily influenced
by US tech interests but presented as creator focused.  
Kupferschmidt: The problem isn’t that © owners shoulder most
of the burden, it’s that they have very little to show for doing so, b/c the
material goes back up online. Whackamole. 
The result of the burden placed on the creative community is that we
aren’t achieving the balance Congress intended. 
On fraudulent notices: what we are doing to educate creators—Copyright Alliance
website has FAQs and does presentations across the country.  [Unfortunately, and this really applies to
all parts of this problem as well as many others, it’s really hard to deal with
bad faith uses by trying to educate the ignorant; it tends to misdiagnose the
problem.]  If you’re worried about
paucity of challenges, support the small claims copyright act—it would be a lot
less expensive in that context.  On red
flag knowledge: no ISP could come up with one example that was red flag knowledge
that wasn’t actual knowledge.  Proves our
point.  Not sure it was intended to be
narrow.  [Obviously I think that’s wrong—among
other things, I think my example of getting told about a full copy creates a
reason to investigate, but it’s not actual knowledge until I check and see if
the report is accurate.]  Small
businesses can’t afford to do this, Fourth Estate requires registration.
Q: opinion doesn’t mention 512. [And you don’t need a
registration to send a notice!]
Rasenberger: one writer spends 50% of her time dealing with
piracy; most give up. Mean author income is $20,000/year for fulltime authors;
they don’t have the resources to fight.  There’s an absence of creators here b/c this
was billed as an update on the case law and most creators don’t know the law
well.  Step back and decide whether we
want to protect © as a country; if we do, we need to amend 512. This is about
who bears responsibility and risk; big ISPs have drained money out of the
content industries.  The balance isn’t
working.  We need no other proof than the
transfer of wealth that’s already happened. The EU has the courage to take it
on; we can too.  512(j) isn’t used b/c
the relief is so narrow and b/c of the uncertainty over its application given
what courts have done with other sections.
Google’s site demotion has been helpful to authors to do
massive takedowns, but it doesn’t address the problem when the users know the
name of the site and can just type it in.
Pariser: we may never get to STMs, but we should know
factually what’s out there—that could help move the conversation so we won’t be
discussing whether filtering tech exists in the abstract.  In the reply comment notice, CO asked are
there any neutral principles? Our answer 2 ½ years ago was: look to notices.
There’s a huge amount of notices, not dropping, and it can’t possibly be the
case that the system is working, because if it were, piracy would be dropping,
which would lead to fewer notices. Now notices are dropping, and we have changed our minds about what counts as
evidence.  Notices are dropping not
because piracy is dropping but because © owners have notice sending fatigue,
and b/c Google’s demotion system has led © owners to focus on sending notices
for top of search.  Piracy landscape is
shifting from p2p to streaming and other forms of piracy, resulting in fewer
notices. Torrents can generate 10s of 10,000s of noticeable links for a particular
work, and you can send those notices if you have the resources. As piracy
shifts to streaming, that will be 10, 20, 30 links b/c a site is doing all the
aggregating for you. 
Q: does that make the notice system easier to enforce
against streams?
A: of course not!  Titles
still repopulate instantaneously. There are more streaming services and they
proliferate easily. Finally, look at money: tech services are paying billions,
and a rising tide is lifting all boats. 
But the fact is that’s not true. Tech companies are making vast amounts
of money, and becoming most profitable businesses, while content is shrinking
relative to what it has been. The industry is worth $1 billion on an adjusted
basis and it would have been worth $21 billion [if nothing else had changed but
we extrapolated growth from the highest-growth period of the industry and
people still bought records and didn’t play video games]. Without piracy, it would
be different.  ISPs are spending a tiny
fraction of revenue on takedowns, response to notices, etc. 
RIAA, Vicki Schekler [sp?]: Counternotices/notices to search
engines—our experience is quite different as shown in comments submitted in the
past.  96% takedown rate with Google, and
4% are those weren’t ever indexed. We send millions of notices annually.  Pariser mentioned the evolving nature of piracy,
and our members experience streamripping. 
Pirate sites circumvent DRM and then distribute the audio. Some of these
sites don’t have a static URL so there’s no deeplink notice to send.  We’re happy to see recording revenues
starting to rise again, but they’re nowhere near their peak in inflation
adjusted dollars.  [I wish Glynn Lunney
were here.]
Hatfield: Downward economic pressure that free access places
on the entire ecosystem for creating music. No one can compete with free,
especially not with our own music.  Eric
Priest: what happens when © owners can’t monetize works at consumer value
points—example of the music/movie industries in China—inability to monetize
copies of works harmed monetization opportunities for smaller producers; market
signals sent to producers are distorted; producers are disproportionately
exposed to peculiarities of markets/exploitation by intermediaries.  The dystopian future is unchecked piracy +
consolidated platforms, despite crocodile tears about startups. If & when a
winning platform reaches monopsony standards, it will have little reason to
maximize royalty payments.  If music is
devalued anywhere, it’s devalued everywhere. 
No musician now has more live gigs than they used to have. Famous acts
now charge opening acts for exposure rather than paying them. We thought we
were replacing greedy record company executives with the internet, but at least
they invested in us.  [Where is that $6
billion Google pays going?]  Now they
want to take a percentage of our tour money instead of giving us tour support.  Who wants a device devoid of access to interesting
content?  We want a fair percentage of
the revenues our works generate. 1998: music business was $15 billion; last
year it’s $9.8. Now the internet is a trillion dollar industry.  Pay us less than 6/1000 of a cent per spin,
and it’s less on YouTube.  [Really, read
Glynn Lunney on this issue.]
Goldman: statement that no one can compete with free was
contradicted by Polis who told us exactly what he does.  Has been confused about red flag discussion:
9th Circ. has cleanly held that third party notices can constitute
red flag knowledge: Shelter Capital, etc. 
There’s been a lot of FUD today about red flag knowledge.  Google and FB are not the internet! There’s a
whole lot of internet—the regulatory temptation is to think Google and FB need
correction so we should regulate the whole internet. Please don’t do that.  Finally, 230 relationship: 230 excludes IP,
but important to remember that it protects all kinds of curation and steps
about what to publish, what to prioritize, what metadata to show. That’s helped
sites understand what they can and can’t do. 
512: if it starts as third party content, it should stay as third party
content unless there’s evidence that the user no longer wants it up.  If the site makes the publication decision,
not the user, then the site should be responsible—Batzel—but 230 is a good model
for understanding what makes the transition from content submitted at the
direction of the user to content not being at the direction of the user.
Levy: Representative list/red flag precedents may mean that notice
has to ID the location. Lenz may also prevent the use of automated systems.
This means publishers and songwriters are effectively prevented from protecting
their works and many have given up. [Why hasn’t the Lenz liability risk
deterred all those millions of automated notices to Google, including the 4%
that weren’t ever on Google?  Interesting
to hear from RIAA about what gives them such confidence to send so many notices
that don’t identify an infringing link on Google even after Lenz.] We’ve heard
that filtering works [and that it doesn’t]. We have a problem and the tools to
fix it, and we need to rebalance the DMCA with the EU Directive as a positive
roadmap to shift the burden of policing the internet from the © owner to the
user.
Lavizzari: European countries don’t have anything to learn
from the US on human rights, especially economic/social rights and healthcare. [I
disagree in relevant part but appreciate his clear moral stance.] Our European
report: what has been done in the Directive is relatively little. What’s not
been done yet is implementation into national systems we’re trying to
harmonize.  New art. 17: understands the
concerns of tech companies & civil society organizations, but it’s also an
issue of harmonizing secondary liability law, which we don’t have b/c we don’t
have a common tort law. These are not perfect provisions, the result of very
complex lawmaking. Harmonization is driven by cultural politics—France, which
is not the most conservative gov’t in the union, negotiated the Directive
through its Ministry of Culture, not Economic Growth or Development.  That’s a significant difference from the US.
What motivated the Parliament majority was not the former art. 11/13 but the
new exceptions, which get significant play in the new Directive—educational exceptions
and text/data mining exceptions.  Read
the final Directive—what motivated Parliament in the overall approval was the
new rights that are being granted to authors and performers—the idea that the
Parliament is run by socialists/democrats and it’s suspected that the majority
will not be there at the next election. Platform regulation, data transparency,
etc. are coming in the next iteration. 
Wolff: Notice & takedown isn’t adequate; professionals
can’t spend their lives doing it. Need to stop infringement and encourage
licensing that works.  Discourages real
activity between content creators and ISPs. [Again, note who counts as “content
creators”—in this version, not the people using the sites!] Filtering works;
image recognition works. ISPs worry that they will lose protection if they do
too much—perhaps should clarify that they won’t.  And should define STMs better b/c TMs aren’t
done by broad consensus; they come out of different sectors that are familiar
with their own type of content. What works for music might not work for visual
arts.
Greenberg: does the statute allow industry specific STMs?
Wolff: unclear. Developed by broad consensus in multi-industry
standard process. That’s not how it has worked.
Q: couldn’t multi-industry just mean ISPs + visual artists
etc.?
Wolff: possible but it hasn’t happened in 21 years.  DMCA has discouraged platforms. There could
be better content if there was more curation/working with content
creators.  [Also I would like Google to
give me a pony.]
Gellis: Q about the data from Sky is Rising: industry data; sources listed
in report.  These aren’t hypothetical,
idealized citizen creators; these are real people who need access to these
platforms.  Mavrix: she thinks this was a
wrong turn, given that the follow up decision moved away from it. Error was “at
the direction of” the users. That’s creating the universe. The platform may
then shrink the universe of what content is stored, but that doesn’t change
whether what remains was “at the direction” of the user.  What we see is a conflict developed b/t 230
and 512: fear of liability leads platforms to crack down on speech—widespread damage
from FOSTA/SESTA where large swathes of legal, lawful content were taken down.
Isbell: didn’t 230 already exempt criminal activity?
Gellis: why did they bother w/FOSTA when 230 already did the
job? Good question!  Some ISPs thought
that the unnecessary statutory change created enough uncertainty about the
immunity that platforms reacted by sealing off areas, e.g., Craigslists adult personals.  We should be very reluctant: small changes
have huge impacts on speech.  Finally, on
Mavrix: moderation in general shouldn’t disable 512. The idea seems to be ‘you’ve
seen the infringement’ but the same challenges that happen with any takedown
notice appear—was there ownership, was there fair use, was there authorization—LJ
moderators don’t have access to that information. For these protections to be
useful & valid they have to be robust & reliable.
Band: agree w/ EU colleague: he supports Medicare for
all.  (1) Don’t ignore the societal
context of access to the internet. (2) note that we are living through an
explosion of great content.  Netflix
& Amazon & podcasts—we’re overwhelmed with content.  Rightsholders complain about piracy, but they
also complain about how much competition there is from other musicians, photographers,
etc. The barriers to entry have lowered, and that’s not a bad thing, especially
from the CO’s perspective.  (3) Publisher’s
right: they claimed not to want to regulate facts, free expression, quotation
right, access to news. They did say that 4 words from a headline would be an
infringement. That’s terrible.  [Note that
they tried and failed on the same thing with databases; let’s not take our cues
from that—or let’s take our cues from the US treatment of the sui generis database
right, which is to say ignoring it out of embarrassment.]  EU Directive does have a couple of good
things: preservation right for cultural heritage organizations, and contract
overrides protecting exceptions from being removed by contract.
Gratz: (1) MP3tunes case: a Q about what a real world
example of red flag knowledge; that case gives us one.  They knew that Beatles songs weren’t licensed
anywhere; that was red flag.  (2) Long v.
Facebook, a month ago: reflects the flexibility of courts taking into account the
different facts. 
Greenberg: how unique was that case to the facts? They said
5 days was expeditious, but FB was receiving over 100 notices from one user.
Gratz: FB was receiving a lot of different communications
from this user, and asked him which he wanted to deal w/first. That’s specific
but there may be other situations, including ones where 5 days is too long and
where that’s way too short, for example when there are layers of service providers. 
Castillo: definition of ISP is too broad.  It’s difficult to imagine any online service
the definition wouldn’t encompass, per one court. AAP has proposed including an
element of good faith into the definition of service provider for eligibility for
the safe harbor.  [Yay litigation costs!]
Carver: Snoop Dogg says 360 deals involve the labels taking
360% of everything!  He works w/Google’s Content
ID team & wants to give his experience. Across all Google products, we probably
receive more abusive notices in a week than everybody else in a year. If we
didn’t screen, Justin Bieber would be off YouTube.  One example from very recent history: Feb. 11
with “YouTube
Extortion
”—small game creators got fraudulent takedowns. We were fooled
initially; we removed the videos/applied strikes. But once there was publicity
we saw the fraud. When one provider decided to automate its process, over ½ of its
notices were abusive.
Q: do you abide by them?
Carver: we try to detect and prevent them.  Another point about counternotices: 2% on YT
is copyright removal request instead of Content ID—between 1-2% of removal
requests get a counternotice. Small creators really are scared to counternotify
even when they think they’re in the right. Polis is not particularly common
among small creators in willingness to counternotify. But we also see some
counternotification problems; we review them even though the law doesn’t
require it.  If a takedown is from a
composition copyright owner, then your objection that you sang the song
yourself won’t work—we refuse to forward that counternotification, which is now
more than half of the counternotifications we receive. To spare rightsholders
from obvious misunderstandings of the process.

Vast majority of YT users never get a strike; the vast majority who get a
strike only get one strike. Of those who do go on to have 3 strikes, the vast
majority reach that point w/in 90 days of account creation. Two very different
groups: people who don’t understand much but want to do the right thing v.
those who are dedicated. Having one policy on repeat infringers doesn’t address
that separating equilibrium.  Reasonable in
the DMCA allows us flexibility.
Willen: The idea that we should redefine ISP to add good
faith is inconsistent w/ the law—Shelter Capital, Fung etc already disable
services that induce infringement from access to the safe harbor. 
Q: why not exclude all bad faith actors?
Willen: need to know what good faith is; opens the door to
something impossible to implement. The Q of whether a service acts in good or
bad faith can be answered through the way the courts are already applying the
standards.
Troncoso: adversarial content v. tech tone is bad—not a zero
sum game.  There’s a tremendous range of
diversity on the 512(c) side alone. We’ve heard about a few providers, but a
huge range of others could be threatened by sweeping changes. On the users: for
particular users the DMCA works/doesn’t work for particular reasons.  Prof. Tushnet has talked a lot about the fan
fiction community and how filters could be problematic for them; the same from
open source software developers.  Bear in
mind stakeholder diversity w/in categories.
RT: what counts as content stored at the direction of the user?
When I’m on the bus home and I pull the cord, the bus driver stops at my
direction even though she is the one hitting the brake and opening the door,
and she may even decide not to stop immediately depending on the conditions;
it’s still at the user’s direction when she does. 

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Section 512 roundtable, part 4: International

SESSION 4: International Developments     
Carlo Scollo Lavizzari International STM Association: (Scientific
Technical Medical publishers, also arts & humanities publications.) Internet
hasn’t been static. Dynamic developments in Europe from platform liability and
safe harbor to one of responsibility, not just from legislation but case law in
cases from Germany, Italy, France, Spain, Britain, ECJ. The Q is not how to fix
a broken whackamole system but how do platforms discharge their duties based on
the risk they introduce, not one size fits all [just two sizes, I guess].
Stan Adams Center for Democracy & Technology: Directive
provisions are fundamentally problematic and unbalanced v. 512. The internet is
an incredible tool to market content, but it’s also the default option for
sharing and expressing between people. 512 is foundational; the EU removed that
foundational stability.
Eric Cady Independent Film & Television Alliance: Global
problem, massive online infringement w/no way to stop the proliferation of illegal
copies.  Encouraged by the new Directive:
need to rebalance framework for sharing service providers, which haven’t had
incentive to discourage users from uploading infringing content.
Danielle Coffey News Media Alliance: Yay Directive.
Alec French Thorsen French Advocacy: 512 was the price we
paid for the rest of the DMCA [which we would now like to not pay any more, though
we’d definitely like to keep 1201, thanks!] 
Directive distinguishes small and big UGC sites; innovation by startups
wouldn’t be impacted by requiring companies w/over $500 million in market cap
to secure licenses.  Limiting 512 to
startups would not prevent innovation but would stop allowing multibilliondollar
companies to ignore and profit from infringement w/impunity. 
Ashley Friedman Information Technology Industry Council: innovation.
Joshua Lamel Re:Create: Coalition members are very
concerned: impacts not just on European consumers & innovators but American
investment. Many smaller startups can’t meet the startup test; US creators will
have a lot more trouble reaching the American market. Two things have changed:
(1) profits are up in the creative industries, and (2) piracy is down—those are
worth noting. Exponential increase in creators foregoing traditional intermediaries
and choosing Amazon, YouTube, TikTok, etc. Approx. 17 million Americans are
creating & distributing content online w/o traditional intermediaries, some
of which are small businesses; Europe threatens them all.
Stan McCoy Motion Picture Association EMEA: Supports the EU
approach to no fault injunctive relief from the 2001 directive. Liability: look
to ECJ case law, not new EU directive as the model. The original clarification
of communication to the public was good, but we dislike the emphasis on licensing
over enforcement and dislike the UGC language contradicting the Commission’s own
language.
Corynne McSherry Electronic Frontier Foundation: © policy is
speech policy and innovation policy. If we see upload filters across Europe,
they’re inevitably going to flag lawful content—we have a decade of experience
w/Content ID, in which YT has invested millions of dollars. Still routinely
misidentifies birdsong, public domain works, and other types of content. At
300,000 videos a day, 1/10 of a percent is 300 lawful posts blocked per
day. 
Katherine Oyama Google: We do agree that the DMCA has allowed
an explosion of creativity and economic growth. Enables more than 27.7 trillion
in global ecommerce. Balanced US legal approach has driven billions to the entertainment
industries that could have been lost to piracy. Global music revenue and box
office revenue is up.  Directive will set
Europe backwards.  Unlike recently passed
Music Modernization Act, which was win-win-win, the Directive poses the
potential for massive and dramatic overblocking of content. Details will matter
as will implementation. Will work with Member States.
[I really want to hear more about who gets this
Directive-mandated license money. It sounds a lot like French photographers are
going to get money from online use of photography in France, but won’t have to
distribute it outside Europe and in particular won’t have to send it to US photographers
whose works might well make up a big chunk of the works used under “license,”
if the collective licensing works the way it has to date.]
Christopher Randle Facebook: Reiterate strong support for
the US framework. Our measures are enabled by the strong & balanced US
approach.  We’re excited by our new
tools/partnerships, such as video matching/Rights Manager, alongside with use
of Audible Magic.  Important
illustrations of how collaboration can work, but only if it’s voluntary,
adaptable and flexible. Developing strong partnerships with rightsholders in
all segments. 
Steven Rosenthal McGraw-Hill Education: WHOIS has conflicted
with GDPR restrictions on access to information.  We’ve seen a number of instances where
identifying data previously available was suddenly redacted. We’ve seen a
proliferation of content delivery networks like Cloudflare anonymizing
providers under the pretense of security. DMCA subpoena provides no alternative
solution b/c they lead to useless, inaccurate ID info self-reported by the
infringer. Negatively affect rightsowners’ ability to enforce rights.
Matthew Schruers Computer and Communications Industry
Association: EU and US approaches starting to diverge.  Sky is Rising shows numerous 3d party industry
organizations reporting growth across sectors, showing that notice &
takedown is working. The new Directive provisions, by contrast, are out of step
with the US/increasing international norm, creating great uncertainty, which we
should regard w/skepticism.  Deters
investment/creates risks to free speech.
Lui Simpson Association of American Publishers: Encourages
CO to take into account effects of website blocking on pirate sites. In Europe
alone, 1800 sites have been blocked and the internet hasn’t been broken.  US should have additional meaningful tools to
block piracy as a mere takedown is not enough.
Sherwin Siy Wikimedia Foundation: Lots of uncertainty about
the new Directive both in its provisions and in its implementations in Member
states. There’s tension b/t the recitations and provisions, and tensions w/in
the provisions themselves that recapitulate what we’ve been discussing
today.  Wikipedia/Wikimedia commons
occupy an interesting space in this discussion: large, prominent websites with
a small staff and a large userbase/contributor base; exists for specific
purposes that aren’t often discussed. Need to talk about sites that don’t fit
the model of a general purpose sharing sites.
Abby Vollmer GitHub: Puts the internet at risk; we were able
to secure a carveout for open source, but people are building a lot of stuff
w/open source that isn’t exempt.  This
demonstrates the difficulty and ham handedness of what they’re trying.
Rachel Wolbers          Engine:
Startup exemption isn’t workable. Will have to rethink startups worldwide/
restrict UGC.
Strong: how will this affect doing business in Europe, and
then how will it affect doing business here?
Lavizzari: (1) to what extent will it codify the ECJ case
law on active platforms/structurally infringing platforms that can’t hide behind
the user and are carrying out communication to the public. YouTube and Elsevier
cases are pending before the ECJ.  (2)
different standards for platforms’ responsibilities: will that change?  ECJ has different standards depending on
whether you choose to have unidentified/anonymous users—higher standard.  We hope that case law isn’t impaired by the
promises of licensing that Article 17 also created.
Simpson: we don’t think Art. 17 is a problem b/c it’s
intended to clarify existing EU law. German cases: Rapidshare case was a clear
enunciation of the principle that if you’ve set up a platform to facilitate
infringement, you have responsibilities. Implementation uncertainties, but fundamentally
EU caselaw is sound on platform responsibility and not just mere liability.
Vollmer: Number one problem from our perspective is
filtering.  Our carveout for github
itself is not enough for software development/innovation. Reality is that the
requirements will make platforms filter to avoid crushing liability. Why is
filtering bad?  Github is the home of
open source software. Software developers who use © by using open source
licenses embrace four freedoms: to study, use, modify, and redistribute.
Rightsholders sharing code want it to be shared. If you’re going to legislate
on this level, think about how content varies and whether your requirements
help all rightsholders. If open source software disappears, that harms rightsholders.  And code has dependencies.  If a filter mistakenly detects a block of
code, a whole set of programs/functions can collapse.
Siy: Online encyclopedias are only parts of our projects; we’d
want to argue that our other projects should also be excluded, but we are
concerned about whether that’s a risk. There’s an unresolved tension b/t what
it means to make best efforts to obtain authorization for media we don’t intend to have on our platform.
Wikimedia commons is devoted to hosting content that is public domain or licensed
for free use (not even all forms of CC license qualify). We have no intention
of hosting even fair use works.  The Q of
what it thus means to seek permission for those uses is an open question—and to
make best efforts to ensure their unavailability while also not resulting in
prevention of lawful uses.
Cady: Art. 17 isn’t perfect, but it’s good b/c it’s premised
on getting authorization, and b/c larger platforms have to prevent future uploads
of notified works. 
Q: given worldwide nature of your members, say a little more
about what “shall obtain” a license means?
Cady: we license exclusively, so the premise of these
platforms obtaining authorization may not work out.  It does have the potential to impact the way
members finance their productions.
Lavizzari: one of the beauties of the emerging case law and
art. 17 is creates an incentive for rightsholders and platforms to cooperate
lacking in 512. Rightsholders do want works to be available [not Cady’s
members, he just said], so there are policies that won’t stifle free expression
or make works unavailable. We use artificial intelligence to deal w/plagiarism,
but there are more sophisticated options/identifiers and we’re eager to work
w/incentivized platforms to devise a system that will work for everyone.
McCoy: Berne-inconsistent notification requirements:
structure says that OSPs shall be liable unless … they act expeditiously upon
receiving sufficiently substantiated notice. 
That requirement is a formality under Berne. [Wow.]  We would have preferred to wait until the ECJ
ruled.  Second, emphasis on licensing
over enforcement: for many rightsholders, the idea of licensing UGC platforms isn’t
something they’re interested in b/c they have exclusive distribution models.
Enforcement is the key for them. Licensing leaves us concerned about how it’s
going to be implemented for the benefit of those rightsholders who want
enforcement, though filtering along the lines of Content ID is one promising
step [except for all the shit rightsowners shovel on Content ID for not being
good enough].
Oyama: Our primary concern is conflict b/t the two frameworks,
EU and US. Direct liability for any type of conduct uploaded by anyone imposes
lots of fear and risk. One place we’d like to focus on in implementation is
making more clear what is sufficient notice for platforms.  Final version had some positive steps beyond
Parliament—platforms making a good faith effort shouldn’t face direct liability
based on best efforts, but there’s a need for clarity about what that would
be.  UGC is hugely beneficial. Even 5
years ago, the concept of beneficial UGC was more controversial; on YT, the
vast majority now choose to monetize instead of block, and more than 50% of the
revenue we send to the music industry comes from claims against UGC. The risk
is harm to US creators as well—68% of US users’ views come from outside of the
US. Significant risk of overblocking.
Schruers: Obligations in Directive conflict—ensure the
availability of parody (but not satire) and ensure the unavailability of infringing
conduct. Unmanageable filtering obligation, as well as an obligation to prevent
upload of future infringing works, when the only technologies that even imperfectly
do that deal with AV works, but the Directive is a mandate for all works.  Tech that doesn’t exist.
Simpson: The EU is already about proportionality and
reasonableness. There’s no general obligation to filter in Germany, but once
you’re notified about specific works you have to take measures to prevent reupload
of infringing content. There isn’t yet an effective filter for all types, but
surely legislation can get us to that point. [!]  We have a framework to move us to find a
workable, reasonable, and proportionate solution.  Let’s not yet look to the Directive as a
problem; we have 24 months to see if they’ll get it right or mess it up. The
case law is already there; this clarifies/codifies it. Extremely problematic,
though, is that it seems to say that rightsholders have to put up with whatever
is being done w/their content; contrary to the fundamental right to control.
When you have no choice but to monetize or take it down, that’s not what © is
for. But given that’s our world, we need the tools.
McSherry: copyright owners have the right in many instances
to control how their works are used, but those rights aren’t unlimited—subject to
limitations and exceptions.  Moving to a licensing
regime ignores the lots of uses that don’t need permission. Robots are very bad
at telling the difference.  May work for
some kinds of content, but it’s not a good answer overall. Art. 13’s
negotiation involved a lot of uncertainty about whether filters were required;
lack of clarity is a feature though now we are hearing filters were definitely
going to be required.  Third, we have a
competition problem.  Google and FB will
be fine. But the platforms that could emerge & compete in the social media
space are not protected by the size exemptions. 
An investor will ask how they plan to comply w/Art. 13: the business
plan will always have to include the ability to filter, and that’s expensive
and unaffordable for many [and again may be completely irrelevant to what the
service actually does!].
Wolbers: the concept of having to build different platforms
for each country isn’t feasible, plus the cost of implementing filters. We’ve
seen in Art. 17 a number of exceptions, and it’s politically popular to say we’ll
carveout the small guys, but that actually doesn’t help startups.  3 years, $10 million in turnover, 5 million
users—those are tiny & create perverse incentives to stay under the
threshold. And when you create carveouts like this for open source/wikis, you
are not futureproofing the legislation but are instead creating anticompetitive
situations—the legislation now protects incumbents like Google and FB against
new entrants. 
Isbell: the purpose of the Digital Single Market was to
create a single platform, not 27 different platforms. But don’t we already have
that issue? Germany requires you to monitor hate speech. Thailand requires
anything derogatory to the king to be taken down. Isn’t that just the cost of
doing business? In the analog world, you have to comply w/each country’s safety
laws.  [We have a whole lot of law of
jurisdiction governing this; unless you actively screen, you can’t stay out of
Germany with your website the way you can decide not to sell your widget to a German
address.]
Wolbers: we’ve worked with Kickstarter, and Bandcamp, and
Soundcloud: a lot of the content doesn’t involve the German hate speech law. It’s
not a fundamental shift in the way UGC is uploaded in the same way as Article
17.
Lamel: Not all creators are the same or want the same
things.  EU didn’t hear enough from
actual creators, and we haven’t heard from enough creators here today.  Europe has very different view of issues like
fair use than the US. In over 50% of European countries, there is no
educational exception so that showing a YouTube video to the class is
technically infringing. Thai king mention: the US should stand up for free
speech around the world, not assist in that suppression.
Coffey: Springer, one of their members, gets a © over its
news that create efficiencies similar to music. More complicated w/US publishers—will
they be able to assert the right in the EU? 
They want to!
Adams: This will cause harm in the US. For some subset of
startups, the decision will be if I stay in business I build to the most
stringent standard, with filtering and licensing, both of which conflict with
fair use here.
Lavizzari: you shouldn’t build a startup that will be a victim
of its own success. If your business is from works being shared on your
platform then you should build compliance in early on. If you have a bakery
that doesn’t principally attract users from works of others, you’ll be safe.
[This point deserves more emphasis: these descriptions of
social media/similar sites are quite elitist, despite the rhetoric.  Almost every post on my FB feed is a “work,”
and those that aren’t, aren’t because they’re too small; every picture on
Instagram is a “work.”  He equivocates on
“works shared on your platform,” because there are lots of sites that involve lots
of “works shared on the platform” of which very few are unauthorized, much less
infringing.  So it is probably right to
say a bakery that doesn’t allow public comments probably doesn’t have too much
to worry about, but that is very much not the point about the burdens on sites
that aren’t even causing problems by the copyright industries’ own lights.]
Siy: wikipedias of all languages are blocked in Turkey b/c
of a dispute over government’s characterizations. Sometimes we make that call.
Distinction b/t © and these discussion of lese-majeste, hate speech, etc. is
that those aren’t ex ante.  Anonymity/privacy:
wikis are available all through the world and we take privacy very seriously,
including in restrictive regimes. The considerations today do exist in a larger
sphere in which privacy is relevant.
Schruers: there are sites where content that might violate
lese-majeste laws appears even in nations that have such laws. There’s a huge
difference b/t that and having to install filters in year 3.
Oyama: we are interested in giving publishers maximum
control. Where rights are not waivable, that leads to unintended, regrettable
consequences across the board.
Q: injunctions?
McCoy: we support the EU model.  [site blocking] Injunctions plus takedowns can
give you flexible tools to address piracy. Not sufficiently implemented in some
countries, but still good. By no means cutting off access to legitimate sources
of film & TV.
Q: have you noticed a difference in use of injunctions
across systems?
Simpson: publishers have taken advantage of European remedy
in 6 countries. Main goal is to disrupt the availability of that service in
that country. There are limits to the effectiveness of this remedy. Sometimes
the operator moves to a different server, but now we don’t have to redo the
entire process; can just amend the order to cover the masking sites as
well.  Notice and takedown doesn’t need
to be accounted for.
Oyama: hard to say we never encounter instances of abuse,
where legit sites are targeted. Australian implementation is recently passed;
not aware of any orders actually issued. One approach we’ve taken in search: if
there is a site blocking order that an ISP receives, even if a link showed up
in search they couldn’t access the site, but we also have search ranking demotion
that works with the DMCA.
McCoy: MPAA likes the Google demotions. Doesn’t know if
there’s any correlation b/t site blocking and take downs. Panels this morning
drew out experience on expense of notice & takedown, so rightsholders are
selective about what they target. In some cases availability of injunctive relief
might provide a way of addressing worst of the worst in markets that aren’t a
high priority for notice and takedown.
Q: has heard that Mexico without legally required notice
& takedown still sees informal use of that practice.
Schwartz: for a long time, before the Canadian system was implemented,
an informal industry agreement enabled informal notice forwarding. We’ve seen
that in other markets, where intermediaries don’t want their services to be
perceived as places for misuse. Allows more capable services to invest more.
Important takeaway: absence of statutory mandate doesn’t mean that services
aren’t implementing misuse and misconduct policies.
Simpson: when we were successful in enjoining SciHub in SDNY,
Chinese operator actually recognized the judgment and did block the site in
China for its subscribers. If no mandate is in place, though, an ISP will
choose not to act if there’s no obligation. 
[Which is contradicted by …] We sent the copy of the judgment to the Chinese
operator, and it was unavailable w/in 2 days. Totally informal—just sent notice. 
Lanza: CRTC denied website blocking and said there were alternatives.
Agree/disagree? 
Strong: or thoughts about Canada’s notice and notice regime
from 2015?
Simpson: We obviously think that’s notice and nothing. In
the past there were some private cooperation agreements that were favorable,
but notice and notice alone won’t do anything. 
[Stats?]
[I got distracted by a side issue.  I missed some discussion of various countries’
systems.]  McCoy: Belgium ISPs will do
voluntary takedowns. 
Lamel: US ISPs are less competitive than other countries’ broadband
service providers.
Simpson: One size solutions don’t fit all. We don’t have an
adequate definition of an OSP or an ISP. If you just manage the pipes your
responsibilities will be very different from an online service provider. Need
to be a parsing out of what these types of intermediaries are.
Q: for those of you who want 512 outside the US, do you
support an obligation to have a repeat infringer policy? In some countries,
they tend to take it to mean adjudicated infringer.
Simpson: Adjudication can take years—strips out what makes
notice & takedown workable (though it’s not workable now) [the food is so
bad and the portions so small].
Isbell: couldn’t you do both, go to court and notify?
Simpson: yeah but why.
Schruers: statute says repeat infringer, not repeat alleged
infringer. That being said, has seen many online services operate a far more
strict process that functionally encompasses accusations. That’s reasonable in
an arms length relationship in the private sector, a user who causes a lot of
problems might lead the intermediary to discontinue services. Many online TOS
terminate users long before the statutory definition comes into play. But that doesn’t
change the words of the statute.
McSherry: world has changed; people are reliant on internet
service in the way they weren’t 2 decades ago. A household can rely on the internet;
cutting it off b/c of one person’s behavior has serious consequences that have
to change how we think about this. And in the US we don’t have a lot of
choices, particularly for high speed services. Our approach to repeat
infringers needs a rethink. Bad idea to go in the direction of making it easier to cut people off—far beyond
speech, to work and education and other interests.
French: strongest justifications for safe harbor involve
need for access to the internet. Promoting startup innovation. But those two justifications
apply to online access providers, not to UGC sites, not to digital media
services, not to anyone who doesn’t get you online. And once a provider has
$500 million market cap and $100 million in the bank, they don’t deserve that
protection any more.  [Interesting
variation on what the actual carveout in the new Directive is; really makes the
point that we should be talking about antitrust law, not copyright law.]
Directive is really narrow: only applies to UGC sites that are
consumer-oriented.  That would be useful
to US law. 
Lamel: these © policy conversations are happening around a
larger conversation about internet policy generally. Just as disconnection
destroys your ability to participate in the economy/politics, far beyond the
jurisdiction of the CO—also privacy and cybersecurity policy. There are other
important issues in play. 
Vollmer: it’s really hard to find a working example of a
startup that would actually be protected, so be careful when you talk about
those carveouts being real.
Amer: do you see internet access concern mitigated by voluntariness
of the system?  ISPs have the choice
whether or not to participate, but if they do participate they get a limitation
against monetary liability. In exchange for that benefit, we ask them to do
something otherwise against their economic interest: terminate repeat
infringers.
Vollmer: access is not fair collateral damage. The goal of
notice & takedown is to prevent infringement. We’ll voluntarily take steps
but the cost is great.  Counternotice
exists, but it’s such a small fraction for a lot of reasons; accept the cost of
things coming down/becoming inaccessible.
Siy: the idea that it’s a voluntary system isn’t practically
true, if the alternative is strict liability/statutory damages.  ISP v. OSP: we don’t think that distinction
is good. Access to knowledge is important even though we aren’t a conduit.
Schruers: need to distinguish b/t (a) and (b)-(d) services—the
calculus for those constituencies is different. We shouldn’t necessarily ask
(b)-(d) businesses about the incentives for (a) businesses, who aren’t
represented on this panel.
Lamel: Consumers also need to be part of the conversation.
Second, we’re seeing integration b/t ISP and content providers, and that has to
be taken into account.  Comcast & AT&T
have huge shareholders that are content providers. This integration changes the
economic incentives.
McCoy: the whole point about not taking away access speaks
to the larger balancing of interests that has to take place. Jurisprudence in
Europe/ECJ have taken very seriously the obligation to weigh the different
rights at stake [though not fair use] and concluding that site blocking that
meets certain basic criteria is consistent w/fundamental rights.

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