Timeshare case: proof of causation/damages is difficult especially w/o grasp of Bayesian probability

Wyndham Vacation Ownership, Inc. v. Sussman, 2021 WL 4948099,
No. 6:18-cv-2171-GAP-DCI (M.D. Fla. Sept. 20, 2021)

In this timeshare exit false advertising litigation, the
court excludes Wyndham’s expert. Timeshare exit entities like defendant TET
used “online advertising and oral sales pitches to timeshare owners to convince
them to sign up for TET’s service.” TET then contracted with Sussman, an
attorney, who would receive a timeshare owner’s documents, send letters on
behalf of that owner to timeshare businesses, and communicate with those
businesses to get the owner out of his or her obligations. Wyndham claims that
TET and Sussman falsely advertised and induced timeshare owners to breach their
contracts with Wyndham by ceasing payments. Wyndham’s expert surveyed
timeshare owners who are not related to this case to gauge their responses to
TET’s advertisements. Scene-setting:

A repeated issue in all these cases
is how the timeshare companies can prove that the timeshare exit entities
caused their damages—i.e., did the entities induce each of the timeshare owners
at issue to stop making their timeshare payments. The most obvious route to
proving these cases would be to solicit testimony from the owners as to their
reason for breaching their contracts. However, these lawsuits have involved
hundreds of timeshare owners, and obtaining testimony from every owner would be
a labor-intensive effort. Hoping to avoid such a task, the timeshare companies
have attempted, with little success, to find a shortcut.

It’s not enough to add up the total of all missed payments
without a link between the defendants and the owners’ actions. In a previous
timeshare case, the court ruled that, “absent direct testimony from the owners
regarding their missed payments, [plaintiff] would not be permitted to proceed
to trial based on the expert’s testimony.” The court then “entertained the
possibility that statistical evidence, rather than direct testimony, might
support causation.” The plaintiff thus offered a statistical expert who used a
subset of “influenced” accounts and extrapolated those to the remaining
hundreds of accounts at issue.  “This
testimony was excluded as unreliable due to the +22% margin of error the
expert’s method produced, and significant issues with the way the expert
obtained his data.”

This time, Wyndham tried a consumer survey of timeshare
owners. Respondents saw a TET webpage, a video performance of TET’s sales
presentation script, and a welcome email that TET used. Survey questions
included whether respondents believed they were being told to stop making
timeshare payments and whether they would be inclined to stop making timeshare
payments. The expert opined that, based on the survey: (1) 32.2% of the
respondents believed the statements in the emails told them to stop making
timeshare payments; (2) 18.5% of those respondents were either very likely or
somewhat likely to act on those instructions and stop making payments; and (3)
the survey results “demonstrate that [TET] customers were likely misled by
[TET’s] sales practices and believed that it was appropriate to cease making
payments to their timeshare company.”

However, the expert did not perform any statistical or other
analysis comparing the sample population to Wyndham’s owners. He didn’t explain
explain why his methodology reliably enabled the trier of fact to apply his
results on causation to the owners at issue in this case. “[T]his
case is not about the average consumer. This case is about an identified set of
timeshare owners, every one of whom acted on facts and circumstances specific
to him or her. [The expert] may have analyzed timeshare owners in general but
his failure to connect his analysis to the Wyndham owners renders his remaining
opinions irrelevant to this case.” A jury couldn’t extrapolate the results to
the 270 defaulting Wyndham owners at issue, especially since, per the survey, only
16 of those 270 would likely stop making payments as a result of TET’s ads, and
it wasn’t clear which 16 to pick for purposes of calculating damages.

[This last bit seems like an error about the nature of the universe
of Wyndham owners at issue—as I understand it, the 270 did stop, one way or
another, so rather than the probability of whether someone who saw the ads would
rely on the ads to stop making payments, P[A|B], we really need to know whether
someone who stopped making payments did so because they saw the ads, P[B|A],
something that needs more information to be calculated even if we know P[A|B].
The survey is relevant to show P[A|B], which itself is relevant to the overall
question though insufficient on its own.] 

Wyndham Vacation Ownership, Inc. v. Sussman, 2021 WL 4949162,
No. 6:18-cv-2171-GAP-DCI (M.D. Fla. Sept. 27, 2021)

With the expert out, Sussman did much better on the
substantive causes of action. The remaining claims against him were for
contributory false advertising in violation of the Lanham Act; tortious
interference with existing contracts under Florida law; civil conspiracy to
commit tortious interference; and violations of Florida’s Deceptive and Unfair
Trade Practices Act.

The Lanham Act false advertising claim was based solely on
TET’s oral sales presentations (OSPs).  Such oral statements, if widely disseminated,
can be commercial advertising.  But there
wasn’t sufficient evidence that TET “routinely” told Wyndham’s timeshare owners
to stop making timeshare payments in the OSPs. TET’s script for the OSPs didn’t
contain an instruction to cease making timeshare payments. The owner testimony
wasn’t consistent—only one said she was told to stop making timeshare payments
during a sales presentation. TET officers’ testimony didn’t specify that any
instructions to stop payments were disseminated during a sales presentation. Thus,
Sussman got summary judgment.

Tortious interference: There was no testimony that Sussman
ever told a TET-referred client to stop paying. “In every owner deposition that
Wyndham submitted, the owner states they stopped paying because of TET, not
Sussman. In fact, when asked about Sussman, the owners stated that they had no
recollection of speaking with him or who he even was.” No tortious
interference.

Conspiracy to commit tortious interference: Was there an
agreement with TET? Not a written one, but “Sussman told TET that he would not accept any owner who had
not stopped or did not intend to stop making payments to his or her timeshare
company. Sussman explained that this was because he could not successfully
negotiate a release for any owner who continued to make payments on their
timeshare—i.e., carry out the service he was being paid to do.” Thus, a jury
could reasonably find an agreement that TET would interfere with Wyndham’s
contracts.

What about damage causation? Three relevant owners testified
that they stopped paying because of TET, so that created an issue of fact on
whether TET caused the breach for those three. But what about the other 247
relevant owners? There was only testimony about TET’s general practices in
communicating with clients, and the fact that 208 of the 250 relevant owners
stopped making their timeshare payments after hiring TET. “Wyndham’s
circumstantial evidence may permit a juror to infer that TET interfered with
some contracts, but no juror could reasonably infer from this evidence that TET
proximately caused Wyndham’s damages…. Without some form of direct testimony
from these owners or expert testimony to fill in the gaps between TET’s general
practices and the decisions of the individual owners, Wyndham cannot prove
causation.” TET’s CEO stated by affidavit that,while some company
representatives advised clients to stop making payments, TET did not have a
companywide policy of doing so,” and that “clients had varying reasons for not
wanting to pay; some had already planned to stop making payments and others
could not afford to pay anymore.” Without the owners’ testimony, a factfinder couldn’t
determine which owners would have stopped paying regardless of TET’s
involvement.

FDUTPA: Sending letters about the timeshares fell within
FDUTPA’s definition of trade or commerce. However, as to loss causation,
Sussman was entitled to summary judgment on the damages claim with respect to
any owner who didn’t testify about causation, though injunctive relief was
still possible. 

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Court rejects “buy button” false advertising claim because consumer hasn’t yet lost access to “purchased” content

Caudel v. Amazon.com, 2021 WL 4819602, No.
20-cv-00848-KJM-KJN (E.D. Cal. Oct. 15, 2021)

Disagreeing with
a case against Apple
, the court here concludes that Amazon’s “buy” option
that doesn’t give consumers ownership does not harm consumers who haven’t (yet)
lost access to the content, rejecting the price premium theory for reasons that
don’t make much sense to me.

The complaint alleges that Amazon charges around $10 less
for renting electronic video content rather than purchasing it, but that the
“buy” button doesn’t actually give consumers ownership, and that reasonable
consumers would not agree to the higher fee if they understood that purchased
video content might disappear from their digital libraries at some point in the
future.

“[T]he majority of courts have consistently found economic
injury when the products contain an actual defect and are allegedly worth less
than what the consumer paid. But see Andino v. Apple, Inc., No. 20-01628, 2021
WL 1549667, at *2 (E.D. Cal. Apr. 20, 2021).” [No discussion; just a “but see”
and a summary of the result.]  Although
Caudel alleged that she “receive[d] a product worth less than [its actual]
value,” there was just “a potential risk” of losing video content, which is
“not concrete and particularized” as to her.

Me: But what about the price premium she alleged she
personally paid? Why is that not concrete and particularized as to her, not to
mention not just “imminent” but materialized in the money gone from her pocket?
The implicit claim is that if there wasn’t an “actual defect,” then there can’t
have been a price premium, but plenty of things can be worth less than you paid
for them without an “actual defect.” That’s kind of the point of false
advertising law generally, and certainly the “Made in the USA” cases make clear
that deviation from what you were promised as part of the bargain is a
potential cause of economic loss.

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Puzzlingly calling a venue name a “title,” court nonetheless rejects claim against MTV show

MGFB Properties, Inc. v. ViacomCBS INC., 2021 WL 4843905, NO.
5:19cv257-RH-MJF (N.D. Fla. Sept. 22, 2021)

The Flora-Bama lounge and entertainment complext is
“regionally famous,” and MTV created a national TV series, MTV Floribama Shore.
The district court granted summary judgment on the resulting trademark claims,
reasoning that plaintiffs’ likelihood of confusion showing was “not strong
enough to meet the standard that applies to artistic works. This is so in part
because the plaintiffs and defendants use the competing marks in substantially
different settings.” From the fact section:

The record gives no reason to
believe that, had there been no Flora-Bama, the defendants would have come up
with the name Floribama Shore on their own.

This does not mean, however, that
the defendants intended to benefit from the plaintiffs’ goodwill. The
defendants believed the name Floribama Shore was superior on its own merit to
such alternatives as “Florida Shore” or “Gulf Shore.” The show, after all, would
feature the perceived culture on a Florida panhandle beach—a culture that was a
closer match to Alabama than to many places on the Florida coast or Gulf of
Mexico, including, for example, those in south Florida. “Floribama” fit.

The plaintiffs’ evidence of likely confusion, “while not
strong,” would have withstood summary judgment in a commercial use case. “But
the standard is more exacting when a junior user’s artistic expression is in
the mix.” The court applied Rogers v. Grimaldi with the original title-v-title
exception, not the Ninth Circuit version that first rejected the exception but
later reincorporated title-v-title into the broader Gordon v. Drape Creative
epicycle. The Eleventh
Circuit adopted Rogers, but did not specify whether it was adopting the Rogers
title-v-title footnote, so the court here turned to subsequent Second Circuit
precedent, specifically Cliffs Notes, Inc. v. Bantam Doubleday Dell Publishing
Group, Inc., 886 F.2d 490 (2d Cir. 1989). This was a title-v-title case in
which Rogers did not strictly apply, but the First Amendment concerns
for protecting the defendant’s noncommercial speech warranted applying the
likely confusion factors with special care. In Twin Peaks Productions, Inc. v.
Publications International, Ltd., 996 F.2d 1366 (2d. Cir. 1993), another
title-v-title case, the court emphasized: “the finding of likelihood of
confusion must be particularly compelling to outweigh the First Amendment
interest recognized in Rogers.” The Eleventh Circuit subsequently cited Cliffs
Notes
with approval for the propositions that Rogers is generally
applicable to works of artistic expression and that, “when deciding whether an
artistically expressive work infringes a trademark,” a court must “carefully
‘weigh the public interest in free expression against the public interest in
avoiding consumer confusion.’ ”

The court rejected defendants’ argument that, under the
Ninth Circuit Empire test, an artistically relevant title can violate
the Lanham Act only if it explicitly misleads as to the source or content of
the work. “If that were indeed the law, and if ‘explicitly’ were construed as
strictly as the defendants say it should be, then the defendants would easily
prevail on the Lanham Act claims in the case at bar.” But it isn’t clear
that’s what the Ninth Circuit thinks, after Gordon, and anyway the
title-v-title exception plus First Amendment-flavored balancing to favor
artistic works is superior (apparently because it gives more weight to “the
interest in trademark protection,” though why that should ever override First
Amendment rights to engage in noncommercial speech in cases of nonexplicit
misleadingness—that is, why liability for implied endorsement would satisfy
strict scrutiny—is left as an exercise for the reader).

[FWIW, in my view Cliffs Notes is better than Gordon
because Gordon inappropriately generalized the very particular
circumstance of the title of a conventional expressive work to create a
rule that allows the plaintiff to prevail even when the putative infringement
stemmed from use in content, e.g., the punchline of a joke. Stated that
way, it is a much broader exception to Rogers and a much less justified
one. For one thing, the only reason the Rogers court even contemplated
liability for noncommercial speech was the special marketing role played by
titles in particular. For another, the followup Second Circuit case, Cliffs
Notes
—unlike Gordon—says you have to remember the important First
Amendment interests at stake even when you’re back in multifactor test land.]

Why is this even relevant, anyway? As the court notes, “[t]he
plaintiffs’ use of its mark Flora-Bama relates primarily to its facility, not
to the title of an artistic work.” Unconvincingly, the court says,

But the mark has occasionally been
used in the title to artistic works, and in any event, artistic works are
performed at the Flora-Bama. So the exception applies to the plaintiffs’
claims, at least to the extent the defendants’ title MTV Floribama Shore could
be found misleading and confusingly similar to the plaintiffs’ titles.

This part is not persuasive. “Occasionally been used in the
title to artistic works” is a red herring. It does not appear that any trademark
rights
stem from such uses—they seem to have been referential—or that
plaintiffs own any valid trademark rights for artistic works (the ones mentioned in the
opinion are CMT’s broadcast of a show, Kenny Chesney: Live from the Flora-Bama
and Chesney’s song Flora-Bama). [I’m sure they have contracts saying
that they permitted these uses, but so what? That doesn’t give them affirmative
trademark rights for songs or TV shows.] Likewise, the idea that because songs are
performed at a venue, then the venue is an “artistic work” with a “title”
doesn’t make sense. That’s like saying that, because Ford Motor Co. has
published corporate histories in its name, sponsors Masterpiece Theater, and
creates extensive social media content, “Ford Motor Company” is now a title for
Rogers purposes, or that the existence of The
Texas Rangers: The Authorized History
or The
Code: An Authorized History of the ASME Boiler and Pressure Vessel Code

makes those entities into titles for Rogers purposes.

Nonetheless, defendants still win.

Strength: Incontestability “counts for more in the Eleventh
Circuit than in most others.” But the “nature of the mark” was more important.
It was “geographically descriptive—a portmanteau of the names of the two states
on whose border the plaintiffs’ establishment sits,” but also commercially
strong in pointing specifically to plaintiffs, at least before the MTV show.
Similarity: Pronunciation was identical, spelling slightly different, MTV
always used “Shore” after “Floribama,” and they usually insert “MTV” before “Floribama.”
Also, “[t]he graphics are wholly distinct.” Overall cuts both ways.

And here is where the weirdness of calling the name of a
venue a “title” kicks in. On the similarity of goods and services, the court
appropriately focused on the things in which plaintiffs had rights—bar/lounge/concert
services. Thus, the parties’ goods and services were highly dissimilar, as were
the trade channels/customers.

Intent was neutral: Defendants copied the name, but there
was

a convincing explanation for
choosing the name on the merits, unrelated to the plaintiffs’ goodwill. While
not previously used for the purpose, the term “Floribama” well describes the
geographic area hosting the culture depicted on the defendants’ show. And
Floribama Shore follows the pattern set by Jersey Shore, the first show in the
series. The defendants’ target market—a national television audience—far
exceeds the reach of the plaintiffs’ goodwill. There is no reason to believe
the defendants adopted Floribama Shore for their national television series
based not on the title’s own merit but to trade on the Flora-Bama’s regional
popularity.

Actual confusion: also neutral, despite “the plaintiffs’
poorly constructed surveys and some evidence of confusion, primarily in social
media.” This evidence was “scant” and mostly “ambiguous,” e.g., “a social-media
user’s misspelling of ‘Floribama’ in a post about the defendants’ show hardly
indicates confusion with the Flora-Bama. Social media abound with misspellings
and grammatical errors, and it is unlikely many English majors post comments
about the defendants’ show.”  So too with
casual inquiries by Flora-Bama customers—such customers “may suspect there is a
connection, or may suspect there is none, or may simply be making small talk.”
There was no evidence of material confusion:

The record includes no evidence
that any individual ever decided to watch—or not to watch—Floribama Shore
because the individual believed the show was related to or endorsed by the
Flora-Bama. And the record includes no evidence that any individual ever
decided to go—or not to go—to the Flora-Bama because the individual believed it
was related to or endorsed by Floribama Shore. The same is true of the parties’
collateral products, including the plaintiffs’ shows and licensed song.

Given the First Amendment interests at stake, this wasn’t
enough. “Here the defendants’ primary intent was expression—conveying to the
audience the subject of the television series—not exploiting the plaintiffs’
mark,” and the court emphasized “the substantial disparity in how the
plaintiffs and defendants use their marks.” This result also protected “the
small amount of consumer products Viacom CBS has sold using the Floribama Shore
name,” which generated $99 in revenue. [Citing Empire:] “When Rogers
and its progeny protect use of a mark in the title of an artistic work, the
same ordinarily is true for the sale of consumer products that display the
title and are otherwise noninfringing.”

The court would also construe state law to avoid a conflict
with the First Amendment (and apply the rule that state and federal trademark
principles are generally the same), including state dilution law.

Then some more sigh-worthy dicta: Although the Florida
dilution statute has an explicit exclusion for “[n]oncommercial use of the mark,”
the court wasn’t convinced that “use of a mark in an artistic work is always
noncommercial,” because previous cases finding that noncommercial speech was
noncommercial involved lampoons, documentaries, or “speech intended primarily
to express a viewpoint,” Smith v. Wal-Mart Stores, Inc., 537 F. Supp. 2d 1302
(N.D. Ga. 2008), so the court declined to settle the issue. [Mattel, Inc. v.
MCA Records, Inc., 296 F.3d 894 (9th Cir. 2002), cited as the “lampoon,” was
super super clear that its result did not depend on the nature of the
commentary but on the characterization of the song as noncommercial speech, but
I suppose the court here thought the facts overrode the stated reasoning.]

Separately, plaintiffs failed to show the requisite Florida
fame, rather than fame in the Flora-Bama’s geographic area.

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“virologist developed” etc. plausibly implies disease prevention

Corbett v. PharmaCare U.S., Inc., 2021 WL 4866124, No.
21cv137-GPC(AGS) (S.D. Cal. Oct. 19, 2021)

This is a putative class action for violations of consumer
fraud statutes in the sale of Sambucol, a dietary supplement that contains a “proprietary
extract” of black elderberry. Plaintiffs brought the usual California claims;
warranty claims; and Massachusetts and Missouri consumer protection claims.

“In March 2020, sales of the elderberry supplements
increased by 415% over prior years as consumers sought to buy products that
would offer ‘immune support’ from the coronavirus.” Plaintiffs had two
theories: (1) the products were illegal to sell under the FDCA/DSHEA and
California’s Sherman Law; and (2) false advertising by affirmative statements
and omissions:

Under the DSHEA, a “new” dietary
ingredient (those not used in the United States before 1994), may be used in
dietary supplements but must first be submitted to the FDA prior to sale unless
the ingredient has been “present in the food supply as an article used for food
without being chemically altered.” … Dietary supplements that contain
undisclosed NDIs are “adulterated” for purposes of the FDCA. Because the
elderberry extract was not marketed as a dietary ingredient in the U.S. before
1994, and is an NDI, the FAC maintains that Defendant did not notify the FDA
with the required NDI notification for its elderberry extract. As such,
Plaintiffs allege that Defendant’s Products are illegal to sell because the
elderberry extract is adulterated and misbranded under the FDCA and
California’s Sherman.

In addition, defendant allegedly made prohibited implied
disease claims, not merely structure/function claims, by marketing the products
as “scientifically tested”, “virologist developed”, “developed by a world
renowned virologist”, along with advertising that the products “support[ ]
immunity” or claim “immunity support.” “Scientifically tested” was allegedly
misleading because no published studies of the products exist, and the existing
studies test a different elderberry extract, and because it improperly
suggested that the products were effective against disease. And the products
were allegedly misbranded because the labeling fails to include adequate
directions for use and because they claimed “high antioxidant levels” in
violation of regulations.

The named plaintiffs allegedly saw and relied on the
misleading representations, and believed that the products were legally sold
supplements.

PharmaCare argued that plaintiffs lacked California
statutory standing because the alleged fact that the products were illegal
didn’t establish standing. However, plaintiffs alleged material
misrepresentations and reliance. The Ninth Circuit has explained that the
“misrepresentation of prescription pet food as medicine or FDA-controlled can
be a material fact for a reasonable consumer—particularly for a pet owner who
is dealing with possibly a sick or unhealthy pet,” and so too for humans. “They
do not merely allege a regulatory violation but base their claims on
misrepresentations arising from regulatory violations.”  The same analysis applied to Missouri’s
consumer protection law, which requires “a causal connection between the
ascertainable loss and the unfair or deceptive merchandising practice” but not
reliance. And to Massachusetts law, which does require reliance.

NLEA preemption:  The
NLEA expressly preempts any state law that establishes “any requirement
respecting any claim of the type described in section 343(r)(1) of this title
made in the label or labeling of food that is not identical to the requirement
of section 343(r) of this title.”  PharmaCare argued that its use of the phrase
“supports the immune system” was an acceptable structure/function claim and
thus allegations of an implied disease claim were preempted.

 As FDA regulations
state, “[i]mplied disease claims do not mention the name of a specific disease,
but refer to identifiable characteristics of a disease from which the disease
itself may be inferred.” Courts may consider extra-label materials when determining
whether certain advertising is an implied disease claim. The FDA warned that
its general rule wasn’t “intended to establish whether any particular
structure/function claim is appropriate for any specific product,” and that “an
otherwise acceptable structure/function claim might nevertheless be false or
misleading for other reasons.” But, as an example, “supports the body’s
antiviral capabilities” or “supports the body’s ability to resist infection”
would be a disease claim, in contrast to “supports the immune system,” “[a]
more general reference to an effect on a body system that did not imply
prevention or treatment of a disease state…” Id. The FDA explained that the
distinction “is one of specificity.”

PharmCare argued that “supports the immune system” “helps
you…stay healthy” and “arms you with the best protection nature has to offer”
were acceptable structure/function claims. By themselves, that would be true,
but plaintiffs also alleged label and extra-label statements and alleged that, “viewed
in their totality, they are either explicitly or implicitly claiming to
mitigate or prevent disease.” In particular, “scientifically tested”,
“[v]irologist [d]eveloped”, contain “the most extensively researched” extract
“in the world” and “[d]eveloped by a world renowned Virologist,” allegedly
necessarily implied disease prevention “because a virologist is an expert that
deals with viruses and the disease they cause.” So to with other claims like “stay
healthy through the toughest season” which allegedly implied cold/flu
protection, and a FAQ entry answering  “What are the traditional uses of black
elderberry?” with the statement that it is “used in traditional remedies for
colds, coughs, and upper respiratory infections.” PharmaCare’s homepage website
states, “Get that NOT WORRIED ABOUT A 5 HOUR FLIGHT IN THE MIDDLE SEAT kinda
feeling”: a reasonable consumer could understand this statement as promising
protection from the COVID virus or other transmissible diseases. 

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Tiffany blues

 Today’s swag for use in class, Stuart Semple’s Tiff (or is it Tiff—?):

packaging

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Trump loses motion to dismiss Electric Avenue case on fair use grounds

Grant v. Trump, No. 20-cv-7103 (JGK) (S.D.N.Y. Sept. 28,
2021)

Eddy Grant sued Trump and his campaign for retweeting a
pro-Trump video that used Grant’s famous “Electric Avenue” without authorization.
Although the motion to dismiss was far better argued than the average Trump filing,
it still failed—in the process signaling that the effects of Warhol may
not be limited to visual art, as many had hoped.

The animated video was 55 seconds long. It begins with a
depiction of a high-speed red train that displays “Trump Pence KAG [Keep
America Great] 2020.”

After the red train passes, the
beginning of Electric Avenue can be heard clearly, along with an excerpt of a
speech by President Biden. Around the same time, a slow-moving handcar,
operated by an animated likeness of President Biden, comes into view bearing
the words “Biden President: Your Hair Smells Terrific.” The video—in
particular the contrast between the trains and the unflattering nature of the
excerpted language from President Biden—appears intended to criticize President
Biden and depict the strength of former President Trump’s campaign.

Grant’s song appears throughout the last 40 seconds of the
video.

Fair use can rarely be decided on a motion to dismiss, the
court said, and this wasn’t one of those cases.

Transformativeness: Just because the video and song served
different purposes didn’t make the video transformative. “While it is true that
the animation is partisan political commentary and the song apparently is not,
the inquiry does not focus exclusively on the character of the animation;
rather, it focuses on the character of the animation’s use of Grant’s song.”
Under Warhol, when there isn’t “obvious[]” comment or relation back, or
use of the original “for a purpose other than that for which it was created,”
then “the bare assertion of a ‘higher or different artistic use[]’ is
insufficient to render a work transformative.” Here, “the video’s overarching
political purpose does not automatically render its use of any non-political
work transformative.”

The use of the song itself in the video was “best described
as a wholesale copying of music to accompany a political campaign ad.” Compared
to other political cases like the Don Henley/Running on Empty case, “the use here
does far less—if anything—to modify the song or to comment on the song or its
author,” whereas in Henley defendants changed lyrics and provided their
own vocals, and supposedly poked fun at Henley’s own liberalism, and
still that wasn’t transformative because the ad took too much in relation to
any legitimate parodic purpose. Here, there was no editing of the “lyrics,
vocals, or instrumentals at all.” Further, “the animation does not use Electric
Avenue as a vehicle to deliver its satirical message, and it makes no effort to
poke fun at the song or Grant.” This was less-favored satire rather than
parody, and “defendants have offered no justification for their extensive
borrowing.”

Cariou, by contrast, involved fair uses where works were
“obscured and altered to the point that [they were] barely recognizable.” The
non-fair-use-as-a-matter-of-law works in Cariou “superimposed other
elements that did not obscure the original [work,] and … the original [work]
remained …     a major if not dominant
component of the impression created by the allegedly infringing work.” Likewise,
in Warhol, there was no fair use because the secondary work “retain[ed]
the essential elements of the [original work] without significantly adding to
or altering those elements.”

So too here. Electric Avenue wasn’t edited at all and was “instantly
recognizable”; the additional audio of President Biden’s speech did nothing to
obscure the song; and the song, which lasted over 2/3 of the video was, “a
major component of the impression created by the animation, even though it
appears that the video’s creator could have chosen nearly any other music to
serve the same entertaining purpose.”

Brown v. Netflix, Inc., 462 F. Supp. 3d 453 (S.D.N.Y. 2020),
aff’d, 855 F. App’x 61 (2d Cir. 2021), found a documentary’s unauthorized use
of a song to be transformative and fair, but that case was readily
distinguishable. That film used 8 seconds of a song as part of the film’s “commentary
on the burlesque art form and its resurgence in Portland, Oregon.” The film
combined the burlesque performances “with cultural commentary on topics such as
gender, sexuality, and the artistic process,” and incidentally captured a dancer’s
use of the song as background for her performance. “The use here is different
in magnitude and kind: the song plays for more than two-thirds of the animation
and plays no discernible role in communicating the video’s overarching
political commentary.” Brown, by contrast, used the brief excerpt as
part of a performance about which the documentary was commenting, and the
content of the song “substantively contributed to the burlesque act.”

Also, the use here was commercial because “commercial” in
§107 doesn’t mean commercial, but “whether the user stands to profit from
exploitation of the copyrighted material without paying the customary price.”
[Really sad that GvO didn’t address this—there seems to me no chance
that the current textualist Court would accept this conflation of a factor one consideration
with factor four’s market inquiry.] The use in Henley was commercial because
defendants “stood to gain publicity and campaign donations from their use of
Henley’s music.” Here, “the possibility of commercial advantage cannot be
excluded at this point, especially in light of the instruction from the Second
Circuit Court of Appeals that ‘the profit/non-profit distinction is context
specific, not dollar dominated.’”

Another SDNY case, MasterCard Int’l Inc. v. Nader 2000 Primary
Comm., Inc., No. 00-cv-6068, 2004 WL 434404 (S.D.N.Y. Mar. 8, 2004), held that
a political advertisement’s parody of a popular MasterCard commercial was a
noncommercial use because the candidate used the original work “as part of his
communicative message, in the context of expressing political speech.” But that
wasn’t the same as the use here. “Nothing about the song was integral to the
video’s political message,” and in their arguments, “the defendants explicitly
disclaim any overlap between the purposes of the song and the video.” [Note the
move here from whether the defendant’s overall product was commercial to whether
the use of the plaintiff’s work was commercial—I am not sure that’s supported
by the statute; I am sure that carving works up this way is going to make fair
use harder to litigate and resolve, and will require inquiry into meaning that
contrasts sharply with Warhol’s disavowal of any such inquiry—a sort of
heads I win, tails you lose effect. FWIW, I think the use here is plausibly
nontransformative but noncommercial, and that market effect can make
noncommercial uses unfair.] Confirming that the court is making its commerciality
finding dependent on its transformativeness finding, the court reiterates that
the video wasn’t parodying the song or using it for commentary, unlike the Nader
ad. “Moreover, there is a well-established market for music licensing, but the
defendants sought to gain an advantage by using Grant’s popular song without
paying Grant the customary licensing fee.”

Nature of the work: creative and published, but “the fact
that a work is published does not mean that the scope of fair use is per se
broader.” But factor two has limited weight.

Amount/substantiality: Quantity and quality favored
plaintiffs. “The introductory portion of the song that is used in the animation
is immediately recognizable. The excerpted portion of the song also includes
the chorus, which … is of central importance to the original work.” While the
excerpt was only 17.5% of the song’s total length, it played for 72.7% of the ad’s
duration. The quantity and value were plainly not reasonable in relation to the
purpose of the copying. “

Market effect: Market analysis “embraces both the primary
market for the work and any derivative markets that exist or that its author
might reasonably license others to develop, regardless of whether the
particular author claiming infringement has elected to develop such markets.”
And it was “plain that widespread, uncompensated use of Grant’s music in
promotional videos—political or otherwise—would embolden would­be infringers
and undermine Grant’s ability to obtain compensation in exchange for licensing
his music.” Grant didn’t need to show that he intended to enter the market for
licensing music to promotional videos, especially on a motion to dismiss, given
the defendants’ burden to show lack of market harm.

The fourth factor also, per GvO, “take[s] into
account the public benefits the copying will likely produce.” Though political
speech, and in particular “[t]he act of ridiculing and lampooning public
figures[,] is a rich part of our First Amendment tradition,” denying fair use—especially
denying a motion to dismiss on fair use—won’t chill “legitimate political
satire. Creators of satirical videos like the one at issue here must simply
conform any use of copyrighted music with copyright law by, for example: paying
for a license; obtaining the copyright owner’s permission; or ‘transforming’
the chosen song by altering it with new expression, meaning, or message.” Defendants
could reassert fair use at the summary judgment stage on a more developed
factual record.

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over dissent, 9th Cir. denies injury presumption to false advertising claimant

Quidel Corp. v. Siemens Medical Solutions USA, Inc., 2021 WL
4622504, No. 20-55933, No. 3:16-cv-03059-BAS-AGS (9th Cir. Oct. 7,
2021)

Quidel appealed the
grant of summary judgment to Siemens
on Quidel’s Lanham Act false
advertising claims and related state claims. The case is about tests that
detect thyroid stimulating immunoglobulins for management of Graves’ disease. There
are two kinds of assays: (1) TSH receptor antibody (TRAb) assays, which detect
both stimulating and blocking thyroid immunoglobins (TSI and TBI) and which are
therefore apparently less useful and (2) TSI only assays. Quidel alleged that
Siemens advertised (1) but provided (2).

First, the majority found that even if Siemens falsely
advertised its assay, that wasn’t material to labs’ decision to purchase
Siemens’ product over Quidel’s. Testimony from the relevant labs showed they
didn’t rely on the relevant advertising materials, e.g., testimony that a lab engaged
in its own internal validation process. Inferences to the contrary would be
unreasonable under the circumstances:

At most, statements reflecting the
lab representatives’ reliance on information in the package insert and internal
debate by the laboratories’ decision-makers pertain to the required element of
deception, not materiality. The extensive vetting completed by these
sophisticated experts leading to their eventual purchase of Siemens’ assay
overcomes Quidel’s position that the challenged statements amount to
conflicting evidence on materiality. In other words, the nature of the
audience—highly-skilled and credentialed professionals—is such that
representations about the type and quality of an assay are not reasonably likely
to influence their purchasing decisions even if it attracted the labs’ primary
interest.

And there was no triable issue on actual injury based on
allegedly false advertising to the physicians. Quoting the district court:
“Quidel cannot claim that its damages are caused by the lab carrying the
product which in turn leads to the physicians ordering the product from the
lab,” because it is “the labs [that] decided which product to carry on their
own, not as a result of Siemens.” And Quidel didn’t follow the FRCP in trying
to present an alternative damages theory.

Disgorgement without proof of harm is appropriate in false
comparative advertising cases, but any such presumption of harm was inapplicable
when, as here, the “advertising does not directly compare defendant’s and
plaintiff’s products.”

Also, and weird to present it this way, Siemens didn’t
engage in false advertising to doctors. It said that its Immulite assay detects
stimulating antibody “preferentially” —i.e., with bias—in favor of stimulating
over blocking antibodies. “Had Siemens informed the physicians that Immulite
detects stimulating antibody ‘only,’ as it represented elsewhere, then the
statement would be false.” And although the ad specifically referenced Quidel’s
product, the ad wasn’t comparative as to the challenged element.  Quidel didn’t dispute the actual comparative
statement about the assays’ performance data—on clinical sensitivity and
specificity—which was FDA-approved. In context, there wasn’t a false
comparative ad.

Footnote: To be sure, “a competitor need not prove injury
when suing to enjoin conduct that violates section 43(a). But Quidel has not
met the elements for a permanent injunction. See eBay, Inc. v. MercExchange,
L.L.C., 547 U.S. 388, 391 (2006).” [Not in the majority opinion: Overruled as applied to
§43(a) by the TMA. So does false advertising have an injury requirement or not?]

Judge Bennett dissented, noting among other things that the
TMA brought in a presumption of irreparable injury. The dissent would find
triable issues on materiality and injury for both labs and doctors.

Materiality is about significance to the consumer’s decision.
“Drawing all reasonable inferences in Quidel’s favor, Siemens’s statements that
expressly or impliedly communicated that Immulite is a TSI assay and not a TRAb
assay were material to the laboratories’ decision to switch from Thyretain to
Immulite.” One lab’s representative testified that whether Immulite was a TSI
assay was an important factor to the lab and that the lab wanted to replace
Thyretain with another TSI assay, not with a TRAb assay. The other lab’s representative
testified that it wanted a TSI assay and would not have been interested in
Immulite if it were a TRAb assay. “Quidel also submitted evidence that
scientists within LabCorp did not want to switch to Immulite because it
appeared to be a TRAb assay. And in advertising Immulite, Siemens repeatedly
highlighted the distinction between TSI and TRAb.”

A rational juror could easily infer
from this evidence that whether Immulite was a TSI assay was an important
factor to the laboratories—one likely to influence their decisions—and that
Siemens made the representations it did because it knew the distinction between
TSI and TRAb was important to the purchasers. Indeed, that the laboratories
were only interested in a TSI assay to replace Thyretain supports that the
laboratories would not have even considered Immulite had Siemens advertised it
as a TRAb assay. Put another way, a juror could easily find that Siemens’s
statements were likely to influence the laboratories’ purchasing decision
because its statements attracted the laboratories and prompted them to conduct
their own tests before ultimately purchasing Immulite.Siemens’s alleged false
statements were the catalyst that led to the purchasing decision and therefore
likely influenced the purchasing decision. Thus, I would find a triable issue
on materiality.

This relates to a key but underlitigated issue: since
materiality is often supposed to be an objective test, in theory you can infer
that the element was satisfied without even hearing from the consumers. As the
dissent puts it:

Even if a jury were to determine
(were the question relevant) that the laboratories ultimately purchased based
on their own tests, that doesn’t matter to whether the representations were
likely to influence the purchasing decisions. Indeed, even in the light most
favorable to the moving party, it would be difficult for anyone to seriously
claim that the purchasing decisions would have been the same had Siemens
represented what Quidel claims is the truth (even with puffery): “Immulite—An
exceptional TRAb assay!”

This is a more sensible approach given the fact that people
who have already made a purchase are particularly likely to insist that they
would have made it anyway (so as not to feel like suckers) and in general
people aren’t great at telling you why they did things. Here there’s more of a
paper trail than there usually is, but (as the dissent notes) that doesn’t
defeat these dynamics. The dissent would have held that “even if the
laboratories’ purchasing decision may have been partly influenced by their own
testing, that fact would not preclude a juror from concluding that Siemens’s
statements were likely to (and did, at least in part) influence their
purchasing decision.”

The dissent would not have fully credited the testimony that
internal testing was the driver of the decision for purposes of summary
judgment:

[A] reasonable juror could reject
this testimony given that the laboratories’ witnesses had strong incentives to
give testimony validating their prior decisions. The laboratories’
sophisticated experts would be reluctant to admit that they had been deceived
and had incorrectly recommended switching to Immulite.

What about injury? A presumption of injury could apply
either if (1) Quidel and Siemens operate in a two-player market, or (2) Siemens
engaged in false comparative advertising. But the majority neglected to address
the two-player market scenario, and the evidence supported that
characterization of the market. The labs wanted to replace Thyretain with Immulate,
not a TRAb assay. “Because the laboratories considered only Immulite and not
TRAb assays, a factfinder could reasonably infer that Quidel and Siemens
operate in a two-player market—the TSI player market.” Quidel’s survey evidence
supported that inference by showing that a majority of the physicians surveyed
are likely to order both a TSI assay and a TRAb assay for a patient, indicating
that they aren’t competitors.  

The dissent would also have found a triable issue on whether
the advertising to doctors was false comparative advertisement. The advertising
contained statements that allegedly communicated that Immulite was a TSI assay
and not a TRAb assay: “TRAb tests are not designed to discriminate stimulating,
blocking, and neutral antibodies often present in [Graves’ disease] patients.
The Immulite … assay is specifically engineered to preferentially detect
stimulating antibody.” And it expressly compared Immulite to Thyretain:
“[Immulite’s] [s]uperior clinical sensitivity for diagnosis of Graves’ disease
(98.6%) vs. Thyretain bioassay (92%).” “[A] factfinder could conclude that it
was a false comparative advertisement because it falsely communicated that
Immulite, like Thyretain, is a TSI assay (not a TRAb assay), and Immulite is
better than Thyretain. The majority errs by failing to construe the DocAlert as
a whole and in favor of Quidel.” [I’m more sympathetic to the dissent’s
argument here: if you make a claim that you are in a particular class of tests—“not
TRAb,” here—and then compare yourself to the other member of that class, that’s
a comparison about membership in the class.]

Also, because a presumption of injury could apply, Quidel
could establish harm sufficient for a permanent injunction. Cite to TMA: “Quidel,
if successful on its Lanham Act claims, might obtain permanent injunctive
relief without affirmative proof that it suffered irreparable harm.” [But,
unlike a TM plaintiff, it does still need to provide reson to believe that it
suffered some kind of harm in its prima facie case; here that role would
be played by the two-player market/false comparative advertising presumption of
harm.]

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if it’s on the label, courts can presume consumers saw it

Bailey v. Rite Aid Corp., 2021 WL 4469638, No. 4:18-cv-06926
YGR (N.D. Cal. May 26, 2021)

Rite Aid moved to reconsider a previous ruling denying a
motion to dismiss Bailey’s claim against Rite Aid’s marketing of its
over-the-counter acetaminophen gelcaps as “rapid release.” The court declined. “According
to Rite Aid, Bailey failed to show that the members of the proposed class were
exposed to Rite Aid’s allegedly deceptive conduct.” That exposure was dependent
on class members seeing both gelcaps and tablet/caplet forms and comparing them,
Rite Aid argued, but Bailey didn’t show that consumers did compare them. Rite Aid
also argued that it survey showed that “there is a high likelihood that
significant numbers of consumers do not make the product comparison on which
Plaintiff’s deception theory is predicated and upon which the Court granted
certification.”

But there was no meaningful dispute that the members of the
proposed class were exposed to the labels and prices of Rite Aid gelcaps and
tablets “because such prices and labels were placed within eye-view of
consumers as a result of Rite Aid’s product-placement policies.” Bailey wasn’t
required to show that the proposed class members who were exposed to these
prices and labels were likely to have compared them. “Courts find that exposure
exists where a court reasonably can infer that the class members would be able
to see the misrepresentation at issue.” Being on the label routinely satisfies
that standard.

The court also found Bailey’s advertising expert’s evidence
to be persuasive; that went to whether consumers were deceived into thinking
that Rite Aid gelcaps are faster acting than Rite Aid tablets after comparing them
and relied on that. And Rite Aid’s survey wasn’t enough to avert any factual
issues given its own flaws, which included limited images.

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defendant moots claim by ending activity in a way that would require gov’t consent to restart

Snarr v. HRB Tax Gp., Inc., 2021 WL 4499416, No.
19-cv-03610-SK (N.D. Cal. Aug. 24, 2021)

Snarr alleged that HRB violated the usual California
statutes by creating a “bait and switch” program to lure customers into paying
for defendants’ services to file tax returns. Unfortunately, instead of
creating its own free file system, the IRS engaged with private, for-profit
companies to develop online tax services and to make them available for free to
certain taxpayers. Defendants are part of Free File, Inc., a company formed to
offer those services; FFI entered into agreements with the IRS about the
services.  The then-current agreement
(just expired) provided specific guidelines for members’ services.

Defendants allegedly advertised Free File widely “but then
used a variety of methods to divert potential customers into Defendants’ own
programs, which charged a fee.” For example, “Defendants purposely made it
difficult to find” the free part of the system “by placing a ‘noindex’ tag on
the webpage for the free part of the system, with the result that the search
engines did not go to that page but instead to Defendants’ system which
required payment of fees”—allegedly a classic bait and switch.

Defendants mooted the case—which requested public injunctive
relief to get around an arbitration agreement—because the allegedly violative
conduct “ceased and cannot reasonably be expected to recur.” Defendants terminated
their membership in the IRS’s Free File Program. They purportedly had no
intention of seeking readmission to the Free File Program or participating in
the Free File Program in the future. To restart, they’d be required to petition
the IRS to reapply for admission and would have to agree to the IRS
requirements (though those requirements only vaguely refer to usability and not
to deceptive marketing). Because defendants couldn’t by their own choice simply
resume the complained-of conduct, the voluntary cessation exception to mootness
didn’t apply.

Although defendants allegedly continued to market other
“free” services of their own, outside the formal Free File Program with the
IRS, and would use the same bait and switch approach, the claim for public
injunctive relief was limited to the confusion that defendants created between
the Free File Program with the IRS and their own paid programs. They no longer
possessed the bait. “To the extent that Defendants now market other ‘free’
services in a misleading way, another lawsuit against them may be possible. But
the case currently before the Court is moot.”

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challenging defendant’s clinical proof claim is falsity, not lack of substantiation

Woodard v. Labrada, 2021 WL 4499184, No. EDCV 16-189 JGB
(SPx) (C.D. Cal. Aug. 31, 2021)

Woodard brought the usual California claims and some others,
including NY claims, against Labrada for its weight loss products. Some tidbits:

Labrada argues that Woodard was bringing a prohibited “lack
of substantiation” claim. “In the false advertising context, a claim lacks
substantiation when it is premised on the absence of evidence or inconclusive
evidence; a claim is provably false when evidence contradicts or conflicts with
the claim.” This was the latter.

Each Labrada label claim had asterisks leading to “references”
purporting to establish the validity of each claim.

When a defendant “puts the clinical
proof for its product at issue,” and the clinical proof does not support the
claims about the product, the claims are best characterized as false rather
than unsubstantiated. In other words, a defendant’s scientifically unsupported
representation is false if the defendant asserts it is supported by scientific
proof.

That was the situation here for Labrada’s claims: “increases
fat burning,” “curb[s] appetite and food intake,” “reduce[s] body weight,”
“helps support significant fat loss,” and serves as a “fat loss aid.” Yet one
of the studies cited by the label has been disproven and retracted. Plaintiff’s
expert further opined that many of the referenced studies were methodologically
flawed and didn’t produce results consistent with the claims on the labels. One
label recommended a smaller dosage than the dosage utilized in the referenced
studies. He concluded that “any statements that the specific papers cited on
the product labels support the efficacy statements made are, in my opinion,
false and misleading.” This created a triable issue on falsity.

In addition, plaintiff’s expert identified studies “that
could lead a reasonable trier of fact to find that the weight loss claims on
the labels are false,” such as a study that concluded that one ingredient
“failed to produce significant weight loss and fat mass loss beyond that
observed with [a] placebo.” Another recent study similarly concluded that “the
current evidence is insufficient to recommend green coffee as an adjuvant
within weight management therapy.” Although other studies had conclusions that
arguably supported the ingredients’ efficacy for weight loss, plaintiff’s
expert distinguished those studies throughout his report for failing to include
placebo groups, utilizing small sample sizes, and suffering from other
methodological issues that biased the results. Anyway, the conflict meant there
was a triable issue of falsity.

Labrada argued that the plaintiffs needed scientific studies
that its product specifically, and not the purported active ingredient, lacked
efficacy to show falsity. That’s a no. Defendants admitted that the sole active
ingredient was a proprietary version of the tested green coffee ingredients.
Scientific studies demonstrating their lack of efficacy were therefore
sufficient to create a triable issue.

What about individual defendant Mr. Labrada? In California,
“[d]irectors or officers of a corporation do not incur personal liability for
torts of the corporation merely by reason of their official position, unless
they participate in the wrong or authorize or direct that it be done.” Plaintiffs
failed to raise a triable issue as to Mr. Labrada’s personal liability for the
company’s alleged tortious conduct. Though there was evidence of Mr. Labrada’s
personal participation in the marketing, sale, and advertisement of the Labrada
Products, there was no evidence that Woodard suffered personal harm or property
damage as a result of the allegedly false label claims, as required by
California law.

However, as to Mr. Labrada’s personal liability for
Woodard’s false advertising claims under the FAL, CLRA, and UCL, summary
judgment wasn’t warranted. Personal liability could apply “based on [a
defendant’s] personal participation in the unlawful practices and unbridled
control over the practices[.]” Plaintiffs showed a triable issue of
prarticipation and control. The company’s COO testified that Mr. Labrada was
“responsible for the marketing and advertising”; he changed promotional
language on both product labels and was one of several people responsible for
the inclusion of the referenced studies on the labels. Mr. Labrada confirmed
that he “oversaw the marketing and advertising” at the company and had final
review of advertising materials. This was sufficient, though a joint venture
theory of liability failed because an employee isn’t in a joint venture with
the employer.

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