How it works: Understanding Copyright Law in the New Creative Economy

Re:create
Coalition’s How It Works: Understanding Copyright Law in the New Creative
Economy
Alex Feerst,
Corporate Counsel, Medium: Medium strives to present a range of options for
community-driven and commercial and in-between writing. Porous: some writers
have found ways into pro and semi-pro careers.
Katie Oyama, Sr.
Policy Counsel, Google: Showed a video about the Missouri Star Quilting Co., whose success drives a whole town’s and
it’s all because of YouTube.  YT allows
content creators to experiment at lower costs; allows time-shifting by
comedians (e.g., John Oliver); opens global markets. Psy’s Gagnam Style was the
first billion-view video, and had enormous effect on an entire genre: looking
at metrics, K-Pop moved outside Korea in a big way; increased ability to
interact w/fans.
Becky “Boop” Prince, YouTube CeWEBrity, Internet news analyst:
Started out making gameplay videos, got interested in ©, now makes a living
creating news.  Diversity of creative
voices/creator can be central v. network TV; global audiences allow you to prove
your worth w/o a gatekeeper.
Betsy Rosenblatt,
Legal Director, Organization for Transformative Works: 700,000 registered users on AO3, 150
million page views/week, all through volunteers.  Fandom brings people together who wouldn’t
have found each other; underrepresented groups in particular. Find audience of
those who love what they love; gift economy isn’t about making a living, but
about making yourself.
Prince: She never
thought she’d have an impact like this, but found people were watching to help
themselves feel better.
Rosenblatt: Money
isn’t the whole story. Online creativity can/does lead to financial success,
but also creativity, selfhood even without commercial success—we need all the
options.
Feerst: Low-cost
production means that content can go viral; open letter to CEO on Medium went
viral and the company raised people’s salaries—the effects are unpredictable.
Oyama: secondary
markets: people can gain audience, which sometimes becomes part of the overall
business model; YouTubers getting book deals.
Rosenblatt: we collected powerful stories from around the
world
; people told us that
making transformative fanworks literally saved their lives.  People talked about depression, about not
knowing others shared their sexual identities, about how no one was
representing them in major media. One wrote stories about the X-Men and being
in a wheelchair and found others to talk about her experiences—connecting via
connection to a superhero in that situation.
Prince: discussed an
instance in which a viewer imagined having her and other vloggers as friends in
high school—he felt accepted with us.
Feerst: “Why I don’t talk to white people about
race”—
opened up a far larger
discussion online though started more personal.
Oyama: a way to make
connections to others’ humanity.
Feerst: Running your
own website is difficult.  Instead, you
can sit inside our network for distribution via Twitter etc. Value of creating
within network even fro new media launches—Bill Simmons from ESPN is building
on Grantland model—allows interaction between market sectors, finding new
voices.
Oyama: Disney used
YouTube well to reestablish Frozen, which topped box office for longer than
usual.  90% of Content ID matches now
stay up; ½ of music revenue on YT comes from UGC.
Rosenblatt: The OTW
can’t build Content ID, but fanworks often drive demand. Users are often
creators, and boost/build markets for ©. That means we need a system that
encourages people to build on what came before.
Prince: Fair use is
really important: reaction channels are a new phenomenon, polarizing—sometimes
it may be infringing but often it’s critical commentary.  She’s had a quote from Buzzfeed generate a
Content ID block even though she was talking over the clip and it was a short
clip for commentary. When your voice can be blocked, fair use is a huge issue.
Content ID is only available to those with a lot of content—it favors large
companies over small.
Oyama: On balance,
US system is remarkable in how it lets creators thrive.  New economic sectors based on fair use are
growing.  Google search snippets depend
on fair use.  Safe harbors are also core
protections for free speech; YT has 400 hours/minute uploaded and couldn’t work
otherwise.  §512 also allows small
companies to grow; this is under threat outside the US.
Feerst: We’d all
like our name attached to our modest original contributions, but anger may lead
people to use DMCA when © isn’t the problem. © is a powerful regime for
regulating all content. When people feel plagiarized, they may turn to ©.  Quotations shouldn’t lead to DMCA wars but
they do in some cases.  The DMCA helps
sites, but only by rolling back ©’s overcoverage in which everything, even
shopping lists, is covered by default. 
But the DMCA also means we’re incentivized to take things down even when
the claims are weak. Counternotice requires people to surrender personal info
and is rarely used.  A lot of folks who
don’t like a picture or think they were plagiarized use takedowns.  Copyright and 1A are fundamentally in
tension. We often see DMCA used as a frictionless means to get takedowns, as
when someone paraphrases a text exchange they had and the other person is
unhappy. That’s copyright misuse; the incentives of © are not involved.

Rosenblatt: Fair use is designed to protect the 1A. The OTW believes we can
screen notices for legitimacy and not just automatically take stuff down. The
people who come to us often feel voiceless; they fear counternotice in a system
they already don’t trust.
Prince: Privacy is
important. Counternotice requires revealing name/location. Someone figured out
her location and sent a false takedown using a username referencing the Boston
Bombing: clearly threatening. 
Counternotice required revealing personal info.  Result: Chilling effect and
self-censorship.  Multiple strikes filed
at once can be particularly damaging, because the DMCA requires repeat
offenders to be punished; your account can be shut down before you can respond.
Josh Lamel,
Re:create director: We’ve heard that over 50% of Amazon DMCA notices are by
competitors attempting to keep competing books from being sold—being off for 48
hours can kill a book’s rankings, which are key to its ability to be noticed.
[This is important and not well understood yet in the policy space: the
profiles of DMCA notices are very different across services. YT receives
different notices from Google Web Search, which is different from Google Image
Search, which is different from Wikipedia, which is different from WordPress.]
Prince: Same thing
happens on YT for ranking.  Can be weeks
you’re gone; if you’re not growing you’re not picked up by the algorithm.
Oyama: we try to
facilitate due process. Big US © owners are generally responsible but activists
in other countries report they face abuse. In a Content ID dispute, about ½ the
time the sender will release the claim. Sometimes putting people together can
be effective.
Lamel: What would
notice and staydown mean?
Oyama: worst thing
for a startup is to change the rules. Government obligation doesn’t work in
many circumstances. It’s technically impossible, and doesn’t account for fair
use or licensing. SOPA died in part for these concerns.  There are some hosted platforms that do
functionally have staydown, with Content ID, but that doesn’t work for search
where we don’t have fingerprints, for startups, for nonprofits.
Rosenblatt: “notice
and staydown” is a hollow phrase, too broad and too narrow. They mean mandatory
monitoring and filtering. Piracy is bad, but once you require monitoring and
filtering you shut down small platforms. We couldn’t do it, especially not in a
way that accounted for fair use. 
Collateral damage is fair use—using a sledgehammer to remove a barnacle.
Prince: Staydown
doesn’t work.  I downgraded the Buzzfeed
video and messed with the audio until it went up.  Evasion means it doesn’t work, and also
chills speech; many people worry about getting blocked.
Feerst: Saying “build
a machine to figure out fair use” isn’t something you can do even with $60
million.  Staydown requirements would
skew towards established incumbents.  We
have disappointments with the DMCA but it provides a structure we can use.  The problem is how people behave when
statutory damages etc. feed up into creators’ behavior, such as fear of using a
counternotice.
Oyama: 512 is most critical
for startups that haven’t been invented yet (and aren’t here to defend
themselves).
Rosenblatt: Think
about protecting people’s ability to express themselves. Who gets to speak?
Those who already have a voice or those who don’t?
Prince: need
clarity, especially globally—creators are in different countries.
Q: How do DMCA wars
on YT start?
Prince: Revenue
comes from being recommended on related videos, etc.  DMCA claim stops competitor from appearing on
search.  Separately, Content ID means
people can claim your video and get the $ for it. Music owner may claim 100% of
revenue based on 30 seconds in hour long video. 
Rosenblatt:
Emotional incentive too, or sometimes just machines. Often our DMCA requests
(to AO3) come from matching titles.
Q: Harsher laws in
other countries. How can global companies protect creators against those
regimes?
Oyama: Other
countries do have fair dealing; we are seeing startups and entrepreneurs
explain that they need safe harbors as well. Should also be very focused on
licensing regimes. We have resources to have teams for each country, but music
and film systems are extremely fragmented. We’ve given $5 billion to music from
YT, but it has taken huge time and effort.

Feerst: We operate
in the US, though we’re online and have goals to expand. One reason platforms
largely grew up in the US is the DMCA. 
Largely we are less able to protect users overseas. Small companies with
no expansion plans overseas may roll the dice, but companies that hope to grow
have to make choices.

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False endorsement claims based on resale fail

Hart v. Amazon.com,
Inc., 2016 WL 3360639, No. 15 C 01217 (N.D. Ill. Jun. 13, 2016)
What is the
difference between a plausible and implausible allegation of likely confusion
over endorsement?  Beats me!  Here, Hart’s pro se complaint alleged that
Amazon violated the Lanham Act by allowing resales of counterfeit copies of his
books, Vagabond Natural and Vagabond Spiritual.
First, Hart didn’t
plausibly allege that the copies were counterfeit, making Amazon’s conduct
legitimate under the first sale doctrine. 
All he had was “his own conclusory say-so.”  Resales of legitimate goods don’t confuse
about source or qualities.
Even without first
sale, the confusion allegations failed. 
Hart alleged that Amazon’s sales caused endorsement confusion by falsely
suggesting that Hart was affiliated with Amazon. “Plaintiff must be able to
show that the public believe[s] that the mark’s owner sponsored or otherwise
approved of the use of the trademark.”  Because the claim relied on individual third-party
sellers reselling Hart’s book, it wasn’t plausible:
The mere fact that Amazon offers a platform to third-party sellers to
sell various products and, subsequently, those individuals sold Plaintiff’s
books, does not imply that Plaintiff has endorsed Amazon or has any specific
affiliation with Amazon. This is not the reality of commerce. As a comparison,
a shopper at a bookstore does not automatically believe that just because a
used book is appearing at the store, the author is expressly endorsing that
store. The same is true for a book that is resold on Amazon.
Note how limited
this is: the analysis would apparently need to differ if Amazon were selling
the products directly.  If taken
seriously, of course, that could destroy first sale, at least where the goods
had not actually been used before resale.
State law claims
also failed, including a promissory estoppel claim based on Amazon’s alleged
representation that it would remove Hart’s books from its website within 2-3
days of receiving his request to remove the books. Amazon wrote: “Thank you for
your message. Please be advised that we are in the process of removing [Vagabond
Natural and Vagabond Spiritual] … from Amazon.com…. It typically takes 2-3
days for a listing to disappear once it has been removed from our catalog. We
trust this will bring this matter to a close.” 
There was no unambiguous promise that the process would only take 2-3
days, and Hart acknowledged that the books were eventually removed.  “These allegations do not articulate a clear,
definite promise that would support a promissory estoppel claim.”  [Useful guidance for those worried about promissory
estoppel claims evading §230.]

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Using generic art that may evoke plaintiff is fair

Sturgis Motorcycle
Rally, Inc. v. Rushmore Photo & Gifts, Inc, 2016 WL 3282197, No. 11-5052
(D.S.D. Jun. 10, 2016)
This case has
occasionally shown up in my Westclip, but this time I’m writing about it
because the court set forth specific designs that the defendants were allowed
to use as descriptive fair use. 
Previously, the defendants were preliminarily enjoined from using
plaintiff SMRI’s STURGIS word mark, STURGIS BIKE WEEK, BLACK HILLS MOTOR
CLASSIC STURGIS RALLY & RACES BLACK HILLS S.D., STURGIS MOTORCYCLE RALLY,
STURGIS RALLY & RACES, or any colorable imitations (also covering
dilution).  They were also enjoined from
using “Officially Licensed Sturgis,” “Authentic Sturgis,” “Legendary Sturgis,”
“Licensed Sturgis,” “Official Sturgis,” “Sturgis Central,” “Sturgis Motor
Classic,” and “Sturgis Rally” in any confusing way, and from using various
domain names such as AuthenticSturgis.com, Legendary-Sturgis.com, LicensedSturgis.com,
OfficialSturgis.com, SturgisCentral.com, SturgisMotorClassic.com, or SturgisRallyOnline.com.
 

I believe this is an example of infringing merchandise
SMRI’s registered
and common law trademarks were specifically limited to the motorcycle rally
event held annually in Sturgis, South Dakota.  Thus, defendants were allowed to use “the name
Sturgis or other phrases which contain the name Sturgis in the distribution,
marketing and sale of non-rally-related Sturgis, South Dakota, products.”  Since they were preliminarily enjoined
against infringement, the defendants had a heavier burden of showing they’d
avoided a colorable imitation or dilution than a non-enjoined party.  (How do you show non-dilution? Also, how on
earth is this a famous mark among the general consuming public?)  An adjudicated infringer must keep a safe
distance from the protected mark.
The court considered
several groups of symbols/art.  First,
“Legendary South Dakota” (versus the enjoined “Legendary Sturgis”).  The moving defendants argued that their use
now referred to the Wild West.  The court
found that Sturgis was prehistorically and historically important enough, as
indicated by numerous volumes of history “dedicated to Sturgis and its environs
having nothing to do with the Sturgis Rally,” to make Sturgis “legendary” without
reference to the Rally.  Thus, SMRI had
no right to block non-rally-related “Legendary Sturgis” or “Legendary Sturgis,
South Dakota.”
Next: “Sturgis,
South Dakota.”  SMRI argued that the
defendants shouldn’t be able to remove “Sturgis Motor Classic” and use
“Sturgis, South Dakota” on the very same, or nearly identical, designs they previously
sold as “rally merchandise,” since SMRI’s rights covered STURGIS on motorcycle
rally-related goods.  SMRI also objected
to the use of “Sturgis” in a font much larger than “South Dakota.”  SMRI wanted any “Sturgis, South Dakota”
product to “add some non-rally related indicia,” because the geographical term,
standing alone, wasn’t at a safe distance. 
Further, SMRI argued that use of “skulls, stylized eagles, [and] American
flags” on rally-related goods now made those symbols off-limits.
The court disagreed.
Though SMRI won a jury trial, SMRI’s lawyer “specifically told the jury that
plaintiff’s trademark claims were not asserted against the defendants or others
‘using Sturgis fairly to denote their geographic location. That’s a fair use.’ The
preliminary injunction was issued with that concession, the limitations of
SMRI’s trademark registrations with the United States Patent and Trademark
Office, and the jury verdict in mind.” 
SMRI’s rights didn’t cover American flags, bald eagles, gothic
artwork/fonts, the skull and crossbones, flames, pistols, or any combination
thereof.  “Whether some members of the
motorcycle community, rally attendees or SMRI may envision these symbols and
artwork as signs of the rally, that argument was not the basis of plaintiff’s
claims at trial and not the foundation for the jury’s verdict in favor of
SMRI.” 

The defendants’
proposed uses were consistent with the language and intent of the preliminary
injunction.  The symbols/art didn’t
imitate or resemble SMRI’s marks and were a “safe distance” from infringement. [Even
though they clearly are concepts that motorcycle-related art uses heavily.  Interesting limit on unfair competition—one
might see this as almost the inverse of cases like Belmora.  Having stayed away
from plaintiff’s precise mark, the defendant is entitled to use generic terms;
no more is required, and if generic terms happen to invoke associations with
the mark, that’s too bad for plaintiff.]
Here are some of the okayed designs:

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Certification nonprofit engaged in commercial speech when it badmouthed uncertified seller

Handsome Brook Farm,
LLC v. Humane Farm Animal Care, Inc., 2016 WL 3348431, No. 16-cv-592 (E.D. Va.
Jun. 15, 2016)
 
Nice thorough
opinion playing out the interaction between Lexmark
and the definition of “commercial advertising or promotion.”  The USDA has the National Organic Program, for
eggs “Certified Organic.” The American Humane Association has a standard for
pasture-raised eggs allowing those who use it to claim “American Humane
Certified™” or “Pasture Raised.”  Humane
Farm Animal Care, a nonprofit, certifies eggs as “Certified Humane®.”  Handsome Brook sells egs with the USDA organic
and AHA pasture-raised and humane labels, but not the HFAC Certified Humane
label.
 
Producers that pass
HFAC’s inspection may use the Certified Humane® logo on their eggs; the
licensing agreement is renewable annually and application/inspection fees must
be paid annually to renew, as well as $.05 per case of thirty dozen eggs.  HFAC’s largest source of revenue in 2013 and
2014 was the licensing fees paid based on the quantity of product sold with the
HFAC logo.
 
Handsome Brook doesn’t
use the HFAC logo.  Some of its eggs are
packaged in Illinois, at Phil’s Fresh Eggs, which packages eggs from three
farmers, each of which is certified organic under the USDA program and also
AHA-certified, as is Handsome Brook. 
None of Handsome Brook’s eggs are HFAC-certified, though HFAC does
certify other farmers whose eggs are packaged at Phil’s Fresh Eggs.
 
In May 2016, Phil’s
Fresh Eggs’ Vice President contacted HFAC to update its certification. During
the resulting inspection, the inspector observed that Handsome Brook’s USDA
certification was from 2013 and an annual update was not on file, and though
Handsome Brook had an AHA certification on file, the three source farms did
not. The inspector stated that she could not verify that Handsome Brook’s eggs
were “American Humane Certified” because the AHA had not inspected Phil’s Fresh
Eggs.
 
However, Handsome
Brook and its three suppliers were in fact all appropriately certified  under the USDA and AHA programs; Handsome
Brook emailed the suppliers’ USDA certifications to Phil’s Fresh Eggs five
months before the audit, and the AHA’s publicly viewable website listed
Handsome Brook’s three suppliers as “currently considered certified under the
umbrella of Handsome Brook Farm, LLC.”   HFAC’s VP believed that the audit report confirmed
a complaint she received about a month earlier about Handsome Brook mislabeling
its eggs, so she drafted an email titled “Unverified Pasture Raised Label
Claims”:
 
I am writing you to share some potentially troubling news about one of
your egg suppliers, Handsome Brook Farms. Based upon a whistleblower complaint
we recently conducted a traceability inspection of a packaging plant that packs
Certified Humane® eggs and also packs Handsome Brook Farm’s (HBF) eggs. It came
to our attention that the “Pasture Raised” claims on the Handsome Brook cartons
could not be verified. In fact, of the three producers whose eggs were being
packed into HBF cartons, none were pasture raised. These eggs had tags that
stated, “Certified Organic” but our auditors found that the organic
certification was not current.
 
The email continued
that the auditor found “there was no validation that the eggs going into HBF
cartons were from [AHA] certified farms,” that there was no update of Handsome
Brook’s USDA certification on file at Phil’s Fresh Eggs, and that the
“veracity” of Handsome Brook’s American Humane Certified labeling claim “could
not be substantiated.”  It ended:
 
I hope you will reconsider changing suppliers. Producers who are
Certified Humane® undergo traceability audits to verify that every egg that
goes in every carton that has claims such as “free range” or “pasture raised”
are verified by our inspectors to be exactly that. This in turn protects you.
 
She sent the email
to 69 people at 39 companies, including the top 10 conventional grocery chains
in the United States. She chose them because they were all “retailers who were
thinking of switching from actual pasture-raised laying hens to the Handsome
Brook eggs.”  “The email had the intended
effect,” causing Handsome Brook to lose customers; Whole Foods temporarily
pulled Handsome Brook’s eggs from its shelves, while a large group of retailers
indefinitely pulled the eggs, and a prospective customer indefinitely delayed
plans to launch HB’s eggs in its stores.
 
Handsome Brook sued
for false advertising, tortious interference, and trade libel.  Previously, the court granted a TRO against
further dissemination of the email; in this opinion, it granted a preliminary
injunction.
 
The court used the Gordon & Breach test to determine
whether this was “advertising or promotion.” 
HFAC argued that the email did more than propose a commercial
transaction, because its primary purpose was to support humane animal
treatment.  It also argued that its
certification fees didn’t provide a sufficient economic incentive for the email
to be commercial in nature.
 
The court
disagreed.  HFAC pursued its anmal
welfare objective through “distinctly commercial means.”  It sought to leverage consumer demand for
humane treatment to encourage producers to adhere to its standards.  “Thus both the achievement of HFAC’s public
interest objective and its economic survival critically depend upon its
licensing agreements with producers.”  In
light of that economic reality, the email was primarily commercial in
nature.  In the VP’s own words, she sent
the email to protect the interests of her own licensees. The context
additionally supported calling the email commercial, since the VP intentionally
sent it “to retailers who were thinking of switching from actual pasture-raised
laying hens to the Handsome Brook eggs.”  
 
Gordon & Breach also asks whether the parties are in
commercial competition.  The court,
citing Lexmark, rejected the idea
that the parties have to compete at the same level of the distribution chain.  Although Lexmark
expressly disclaimed any comment on whether the communications before it
constituted “commercial advertising or promotion,” the court here sensibly
pointed out that
 
it would be a perplexing decision by the Supreme Court to conclude that
indirect competitors had standing to bring a Lanham Act claim, but those same
plaintiffs’ claims would necessarily fail on the merits due to lack of direct
competition. Many post-Lexmark cases
have seized on that intuitive conclusion and the absence of a direct-competitor
requirement in the plain language of § 1125(a)(1)(B) to conclude that such a
relationship is not necessary to show commercial advertising or promotion.
 
Indeed, the court
noted, no post-Lexmark case finds the
absence of a direct-competitor relationship to be dispositive in a Lanham Act
claim. The competitive relationship in this case was sufficient: HFAC-certified
eggs compete directly with Handsome Brook’s eggs.
 
HFAC argued that its
speech wasn’t made “for the purpose of influencing consumers to buy defendant’s
goods or services,” as required by Gordon
& Breach
, because it only promoted a class of goods and would only
tangentially raise revenue for HFAC.  But
this wasn’t a nonprofit fundraising letter to prospective donors.  Further, the email promoted HFAC’s product:
the license it offered licensees.  “It is
true that the license promotes a public interest, but it is commercial
nonetheless.” s
 
And the email was
disseminated sufficiently to constitute advertising and promotion within the
relevant industry, even if “many national and countless regional and local
retailers” weren’t included: the top ten conventional grocery chains, over
16,000 stores nationwide, were included. 
HFAC argued that it only targeted retailers that already carried Humane
Certified eggs, but a targeted ad is still an ad.  HFAC specifically chose retailers that were
considering switching to Handsome Brooks eggs, which “clearly demonstrates an
attempt to penetrate the relevant market.”
 
As for falsity, the
email falsely stated that (1) “of the three producers whose eggs were being
packed into HBF cartons, none were pasture raised,” (2) “[b]ased upon a whistleblower complaint we recently conducted a
traceability inspection of a packing plant that packs Certified Humane® eggs
and also packs Handsome Brook Farm’s (HBF) eggs,” and (3) Handsome Brook eggs
inspected at Phil’s Fresh Eggs were being mislabeled as certified organic. This
last was stated by necessary implication: the email said that Handsome Brook’s
organic certification documentation was issued in 2013 and “no annual update
was on file” and also that “our auditors found that the organic certification
was not current.” In fact, Handsome Brook sent its suppliers’ current
certificates several months before the inspection, and even if the auditor
didn’t find them in the file, the statements created the impression that
Handsome Brook was mislabeling its eggs.
 
There was no dispute
about materiality, which was supported by intuition, HFAC’s own business model,
and HFAC’s own statements about the importance of reputation “[i]n the
ethically-sourced products space.” 
HFAC’s VP testified that she sent the email, in the court’s words, “hoping
retailers would find the allegations of mislabeling relevant in their
purchasing decision.”  There was also no
dispute about actual deception and injury.
 
Handsome Brook also
showed irreparable injury:
 
Plaintiff is a young, but quickly growing company. The email had a
clear effect on that growth and Handsome Brook’s goodwill, causing Handsome
Brook to lose one customer temporarily and two large customers indefinitely.
Those injuries are irreparable and would likely compound if the email is
disseminated further.
 
Nor was prohibiting
further dissemination enough.  Handsome
Brook offered evidence that the information in the email “has now seeped even
beyond the initial recipients,” having been forwarded among its
competitors.  A broker reported that
rumors have been repeated at an industry trade show that “Handsome Brook Farm
had failed a Certified Humane audit.” Each forward or word-of-mouth
communication threatened “additional loss of goodwill, customers, and growth
opportunities,” which were irreparable injuries. Handsome Brook estimated that
the monthly loss of revenue from even one grocer pulling Handsome Brook eggs was
in the hundreds of thousands of dollars. “Even if this number could be
sufficiently estimated so as to be recoverable at trial, there is a very small
likelihood that HFAC could satisfy such a judgment if the injuries continue to
swell, as HFAC is a nonprofit operating at a [deficit].”
 
Handsome Brook’s own
defense of itself wasn’t sufficient.  “HFAC’s
email directly impugns Handsome Brook’s credibility, such that an email from
Handsome Brook is not likely to have the intended palliative effect.”  HFAC’s accusation gave the claim credibility;
the same credible source was required to halt the harm.
 
Thus, the balance of
the equities favored ordering HFAC to issue a corrective email.  Though that might harm its reputation, that
was HFAC’s self-inflicted injury, by sending the email after performing only a
cursory investigation.  The auditor or
the VP “could have made some effort to contact Handsome Brook, Handsome Brook’s
suppliers, AHA, the USDA, regional certifying organizations, or publicly
available information to verify the conclusions reached in the audit.” However,
an order requiring HFAC to post a corrective statement on its website was too
much; it would just be public shaming. 
The corrective email would also further the public interest in avoiding
false advertising.

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Fellowship opportunity: Science, tech, and law

For people with PhDs and an interest: the American Association for the Advancement of Science Science & Technology Policy Fellowships
(STPF) is committed to actively recruiting competitive applicants to the
Judicial Fellowship.

An August 29 webinar will
focus specifically on the Judicial fellowship.  Details and to RSVP here:
http://ift.tt/1YydzFt

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Functionality: it’s in the bag

Schutte Bagclosures
Inc. v. Kwik Lok Corp., No. 12-cv-5541 (S.D.N.Y. Jun. 14, 2016)
 
Following up from previous post on an earlier
ruling.
(Thanks to an
eagle-eyed correspondent who probably knows way more than anyone else wants to
know about plastic bag closures.)  There’s
a bit of tacking here—the court finds that Kwik-Lok’s registrations for bag
closure designs cover current versions, despite some changes, forcing Schutte
to bear the burden of proof on functionality. 
That’s Kwik-Lox’s last victory, though. 
 
The court finds the
Kwik-Lok registered bag closures to be functional under Traffix, and just in case under Morton-Norwich
too, rejecting the proffered alternative designs (which were produced using 3-D
printers, for those of you tracking clever litigation innovations at home) as
unproven in their ability to hold up to the kind of rapid automated application
required for large-scale production of closed bags.  Apparently these things come in reels, like
ticket reels, and work in machines specifically designed to fit the closures.
 

Schutte on L; Kwik-Lok
on R.
 
Then, to be extra
extra sure, the court continued on to find that confusion was unlikely—these
are only sold in batches of at least 4000 to sophisticated consumers, in
clearly marked packages.  And, as I commented
in my initial post, the federal dilution claim failed for want of fame among
the general consuming public. 
Interestingly, the court then dismissed the state dilution claim as
preempted by patent law under Bonito
Boats
, since the claim was one regarding product configuration trade dress.
While states can require labeling for trade dress to avoid confusion, NY
dilution law contemplated a flat ban on potentially patentable “publicly known
design and utilitarian ideas which were unprotected by the patent laws,” and
that’s a no-no.
 
I don’t recall
seeing this reasoning before, but the court cites a few similar cases: Luv N’
Care, Ltd. v. Regent Baby Prods. Corp., 841 F. Supp. 2d 753 (S.D.N.Y. 2012); E.
Am. Trio Prods., Inc. v. Tang Elec. Corp., 97 F. Supp. 2d 395 (S.D.N.Y. 2000); Escada
AG v. The Limited, Inc., 810 F. Supp. 571 (S.D.N.Y. 1993). 

Query: why not reason similarly about copyright, per Sears/Compco, and invalidate state dilution laws at least as based on copyrightable designs?

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A dog’s breakfast of false advertising counterclaims

Blue Buffalo Co. v.
Nestlé Purina Petcare Co., No. 4:15 CV 384, 2016 WL 3227676 (E.D. Mo. Jun. 13,
2016)
 
Blue Buffalo sued
Purina for false advertising; Purina counterclaimed.  On a motion to dismiss the counterclaims, the
court got rid of most and kept a few. 
 
Super 7 Lifesource
Bits: Purina alleged that Blue Buffalo’s use of the term “Super 7 Lifesource
Bits” and associated graphics suggested that they were superior in nutrition to
other pet foods and that the products contained a significant amount of the
ingredients found in the Lifesource Bits, when the depicted fruits and
vegetables likely only made up .25% of the product overall. The challenged ads,
packaging, and website statements, taken as a whole, supported a plausible
claim for false advertising, though Purina’s claims were weak. Consumer
reaction evidence could prove them.
 

Website image touting “exclusive LifeSource Bits”

Savory Sizzlers: Purina
alleged that Blue Buffalo falsely advertised its Kitchen Cravings Savory
Sizzlers Homestyle Dog Treats as containing bacon as a main ingredient when in
fact the product contained no bacon. The front of the pork-based product
packaging states in prominent lettering that it features “USA PORK FIRST
INGREDIENT.” Likewise, the chicken-based version states “USA CHICKEN FIRST
INGREDIENT” prominently on the front of the package. “The only mention of bacon
is on the back of the package, which states in small lettering ‘If there’s one
thing that will bring dogs running, it’s the smell of bacon sizzling in the
pan. Tasty BLUE Sizzlers are the naturally healthy alternative to the real
thing, so you can feel good about rewarding your canine companion with the
bacon flavor he craves.’”  Purina
challenged this language, plus the clear window on the package showing that it
was shaped like bacon strips.
 
The court concluded
that “no reasonable consumer could believe that Savory Sizzlers contain bacon
as a main ingredient,” because the package clearly stated that pork or chicken
was the first ingredient [ed. note: I’m a vegetarian, but isn’t bacon made of
pork?], and “the only mention of bacon is in the context of a statement about
how Savory Sizzlers are not bacon, but rather, are an alternative to bacon.” Dismissal
on the pleadings was appropriate because  “the claim alleges that a consumer will read a
true statement on a package and will then disregard ‘well-known facts of life’
and assume things about the products other than what the statement actually
says.”
 
Health Bars: Purina
challenged the names and packaging of two BLUE Health Bars, alleging that they
indicated that certain ingredients were primary: Health Bars Baked with Banana
and Yogurt (with yellow and cream packaging; bananas and yogurt are ingredients
four and five) and Health Bars Baked with Bacon, Egg & Cheese (red
packaging; bacon is the fifth ingredient and dried egg and cheese powder are
seventh and eighth).  But this didn’t
plausibly allege misleadingness. These were dog biscuits; “reasonable consumers
know as a fact of life that biscuits are not composed primarily of fruit and
yogurt, but rather, like all baked goods, are primarily composed of grains and
flours…. While color schemes are often used to connote flavor, they do not
necessarily imply ingredient primacy.”
 
Family Favorite
Recipes: Mom’s Chicken Pie, Shepherd’s Pie, Backyard BBQ, Turkey Day Feast, and
Turducken flavors have photos on the product labels depicting the traditional
title dish, allegedly misleading consumers into thinking that the can contains
human-grade meals comprised of identical ingredients and ratios of ingredients
as those in the traditional dish, in combination with the “family favorite recipes”
tagline.  Specifically, Mom’s Chicken Pie
flavor doesn’t contain any pie crust or wheat; Shepherd’s Pie doesn’t contain
equal parts of meat mixture and potatoes [and no actual
shepherd
either]; and the rest aren’t comprised of high-quality, whole
ingredients, nor are some of the ingredients depicted primary ingredients.  The court found these allegations to “defy
credulity. No reasonable consumer would expect these cans of dog food to
contain whole turkeys, turduckens, or pies. Nor would any reasonable consumer
believe that the Family Favorite Recipes’ references to traditional American
meals mean that the same, human grade ingredients are in the cans of dog food.”  [But see
the experience of Serena Williams
.]
 
Wild Bones Dental Chews:
Purina alleged that the packaging misled consumers into thinking the product
contains actual bone. Membership in the Wilderness product line allegedly
implied “a link to nature and containing ingredients one would find in the
wild,” and other products in the Wilderness line contained real elk antlers and
beef bones, strengthening the impression. 
Also, the bones were in the shape and color of “true bones,” visible
through a clear window in the packaging. 
Again, the court was distinctly unimpressed.  The “bone” shape was “the shape of a cartoon
bone, sized just like a dog biscuit, and is embossed with the word ‘WILDNERNESS.’
The Wild Bones do not even remotely resemble real bones.”
 
Healthy Gourmet
Flaked Fish & Shrimp Entrée: the product name allegedly consumers into
believing that the product was “comprised primarily of wholesome seafood and
shrimp,” while shrimp was only the eighth ingredient, though “ocean fish” was
the first ingredient, and “fish broth” was the second. While the allegation
that the product was not “comprised primarily of wholesome seafood” was
therefore self-defeating, it was tenuously plausible that consumers would
believe that shrimp comprised more of the product than it actually does.  The claim “is not so incredible that a
reasonable consumer would have to disregard well-known facts of life to believe
it.”

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Best title of the year candidate

Questions about Google autocompl, via Siva Vaidhyanathan.

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Political party bars use of name and logo by dissidents

HT Eric Goldman.
This is one of those cases that seems to be an extreme outlier, but then again
see United We Stand America v. United We Stand
America, New York
, applying
the Lanham Act to similar but perhaps more limited effect.

 

Canegata v. Schoenbaum, 2016 WL 3212270, SX-16-CV-324 (V.I. Super. Ct. May 27, 2016)

In early May, the
Territorial Committee of the Republican Party of the U.S. Virgin Islands held a
special meeting setting a date for the territorial convention; adopting rules
for selection of nominees and party officers at that convention; and amending
the Party’s rules. A few days later, John Canageta, the State Chairman of the
Republican Party of the U.S. Virgin Islands, and Robert Schanfarber, the
Secretary, issued a “Call of the 2016 Republican Territorial Convention” to Republican
voters telling them about the territorial convention.
Then, an alleged
majority of the Territorial Committee demanding that Canegata issue a call for
the territorial convention to take place on a different day. This group then
appointed some individual defendants as the Territorial Convention Subcommittee.
Herbert Schoenbaum, the First Vice-Chairman, then issued a call consistent with
the Committee’s demand, based on the written refusal of Canageta to abide by
the Committee’s demand. The Territorial Convention Subcommittee set up a
Facebook page “to communicate with registered Republicans who want to
participate in the [May 28, 2016] Territorial Convention.” The title of the
page was “Territorial Convention of the Republican Party of the USVI” and
identified the date of the convention as May 28. The profile picture contained
“an image commonly associated with the Republican Party of the U.S. Virgin
Islands,” a variation on the USVI flag, with a red, white and blue elephant
logo, with three stars across its back, in the center of an eagle and “GOP” underneath the eagle.

 

Plaintiffs sought a
TRO enjoining defendants’ use of (1) any symbol, emblem and insignia of the Republican
National Committee, namely the Elephant; and (2) the “Republican Party of the
U.S. Virgin Islands” name. Defendants voluntarily took down the logo, replacing
it with a red, white and blue elephant logo upholding five stars across its
back, and left the title and description of the Facebook page the same.
The court stated the
issue clearly: “the extent to which a political party may prevent a dissident
group from using the descriptive name and the symbol, emblem, or insignia of
said political party.”  Plaintiffs and
defendants were all members of the Republican party, rivals for control of the
Territorial Committee.  But defendants
were in violation of V.I. law because they didn’t have plaintiffs’ consent to
use the name, symbol, emblem, or insignia of the Republican party.
Title 18 V.I.C. §
301(c) provides that:
Whenever a political party in the Virgin Islands affiliates with a national
political party, committee, convention or organization, regardless of when such
affiliation took place, no association, group, club, organization or
instrumentality shall use the symbol, emblem, or insignia, of the national
political party, convention, committee or organization which has affiliated
with a Virgin Islands political party, without the express consent in writing
from the chairman and secretary of the Virgin Islands political party filed with
the Supervisor of Elections.
Without a word about
the obvious constitutional questions here (for a start, unless “use” means
“confusing trademark use,” there’s no way this can survive even gentle
scrutiny), the court tried to figure out what constituted “a symbol, emblem, or
insignia of the Republican National Committee.”
Given the replacement image’s similarity to the GOP elephant—both are
red, white, and blue, with stars across their backs—“the average layman could
very well interpret this image as a symbol, emblem, or insignia of the
Republican National Committee, especially when used in the context to call a
territorial convention of the Republican Party of the Virgin Islands.”  Thus, plaintiffs showed a reasonable
probability of success on the merits.
But the law didn’t
cover the party’s “name.”  (Cf. Qualitex, holding that “symbol” covers
everything that can hold meaning to consumers.)
But, wait for it, because defendants aren’t the Republican Party of the
VI, plaintiffs can also prevent the [trademark] use of the Party’s name via a
misappropriation theory.  “Those in
control of the Republican Party of the U.S. Virgin Islands may lawfully prevent
the appropriation of their name by organizations not functioning under the
aegis of the Republican Party of the U.S. Virgin Islands.”
Irreparable harm:
Plaintiffs pointed to the confusion “that will certainly ensue with regard to
the actual date of the territorial convention.”
This would harm the Party’s reputation and credibility, including with
the RNC.  “Loss of control of reputation
and loss of good will are established grounds for irreparable injury.” As for
harm to defendants, they wouldn’t be harmed by being enjoined from using a name
and a symbol they’re not entitled to use, though they could continue their
vigorous opposition to the present party leadership:
Defendants can continue to operate their Facebook Page. The relief
would be limited to enjoining Defendants from the use of the symbol, emblem, or
insignia of the Republican National Committee, namely the image of a red, white
and blue elephant logo upholding stars across its back and the use of the
“Republican Party of the U.S. Virgin Islands” name to avoid potential confusions
among citizens. The injunction need not extend to the point of excluding
entirely the use of the descriptive word “Republican”, so long as Defendants
make it clear that the named group is in opposition to those currently in
control of the Republican Party of the U.S. Virgin Islands. [ed. note: whose
full name they can’t use, by those terms.] The purpose here is to avoid
potential confusion.

 

The public interest
also favored prevention of confusion about the Republican Party, which would
also protect voters’ rights. TRO granted.

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Commercial speech: strategic issues

Strategic
Issues:  What questions are we asking
now? Where is the law going?
 
Moderator:  Timothy L. Alger, Greenberg Traurig LLP: In
today’s economy, what isn’t an ad?  Is
the death of the commercial/noncommercial distinction inevitable?
 
A: depends on
whether publication values integrity and editorial independence.  If it does, they’ll keep editorial separate.
Other risk: if this kind of advertising becomes conventional, it will be
accepted and lead to greater mistrust.
 
Piety: Why are ads
skull and crossbones? Implicates expertise, and whether everyone’s ideas are
equally valuable in all contexts. It’s suicidal: if editorial becomes
distrusted as advertising, then looking like editorial won’t provide any
competitive advantage. We have historical experience of more Darwinistic
selling environment, and it resulted in the Progressive era.
 
Q: does the category
commercial speech have any value?  What
would happen under strict scrutiny?
 
A: I would fear that
courts will feel the need to uphold various regulatory regimes, and do it in
ways that weaken strict scrutiny if they can’t distinguish different types of
speech.  
 
A: what most clients
and lawyers are looking for is predictability. One strict scrutiny test +
$100,000 later you know the answer is no good to anyone/hurts the rule of
law.  There is an awful lot to the
problem of drawing arbitrary distinctions, but it’s difficult to advise clients
right now and that’s not good.
 
Kurnit: you could
have a different regime w/categories of speech, notwithstanding Reed. 
Attempt to avoid SEC: the Court is likely to say that the SEC and
perhaps the FDA can use the police power to protect consumers.  But it’s not definable as a practical matter
through who created it, what their motive was, etc.; these rules have been
displaced.  The impact is to chill the 1A
for the NYT/legacy media that value their curation, where there is an economic
value for trusted sources. But the WSJ has a wine club and the NYT sells
memorabilia, so effort to suggest that we can divide the world into
advertising/editorial is gone. The marketplace will reward integrity; bring
false advertising claims against those who lie to consumers in their
advertising of their own media.
 
Q: concept of
commercial speech isn’t just about ads and product labeling.  Many professions are constituted by
communication.  You have to be a member
of the bar to practice law—does that requirement pass strict scrutiny? 
 
Alger: if it’s a
good regulation shouldn’t it pass strict scrutiny?
 
Q: is it the least
restrictive means? Does that require CLE?
 
Alger: or we could
turn to the Commerce Clause.
 
Piety: that’s just
another way of restating carveouts, like commercial speech.  If strict scrutiny were really strict,
instead of “most everything fails,” it would be different.  Sullivan
produced Anderson v. Liberty Lobby—motion
to dismiss. As a practical matter, strict scrutiny means a lot of things will
fail, and lots of false/misleading speech will be allowed, as w/libel.
 
Alger: Reed says content discrimination is bad
but commercial speech is content based. 
Off-site and on-site distinctions are common, and those seem to be
content based.  Reed: some justices say that’s unaffected, but it is obviously a
content-based distinction. How do we fathom this?
 
Kurnit: False and
misleading is content-based; you’ll never have a 1A regime that protects fraud,
deception, securities violation—at some point, the gov’t must protect the
public weal through content-based carveouts. 
Stevens’ notion in Central Hudson:
you can do away w/the frivolous stuff, and have a category for that which is
false/deceptive and likely to influence a consumer’s purchasing decision.  Must structure analysis for that core.  Can’t imagine abolishing the SEC.  [Others in this room can imagine more than
that, which is an issue; also, that standard w/o more won’t distinguish the
non-seller’s false speech from the seller’s false speech, both of which are
likely to influence purchase.]  Looking
at who the speaker is, and whether it’s an ad, has to go.  It’s the content and whether it’s fraudulent,
not the speaker. [I don’t really understand how he can say this.  If his standard is fraud, then the speaker is
very important.]  In the 1900s when the
NY courts said that using a person’s image in advertising was a crime, no one
had any doubt what an ad was. 
 
Q: Alvarez: 1A will
protect lies unless there’s a pecuniary motive.
 
Piety: Why is
advertising to children ok? Adults can protect themselves, but can kids?
 
Kurnit: yes, though
it’s a Q of what they can perceive. They’re savvier consumers than most adults.
You can’t regulate the 1A down to what children can comprehend.  Favorite example: TV ad for doll: “doll doesn’t
walk” disclaimer while showing the doll walking; directed at 2-3 year olds and
thus disclaimer not effective.
 
Q: ROP statute was
enacted 115 years ago b/c a young woman’s picture was put on a flour bag. The
NYT led the push to get the statute enacted. Maybe that statute is unconstitutional
on its face, and certainly as applied. 
There have been about 70 lower court cases applying Reed, and only one involved a private civil law suit, and that’s
the Hurt Locker case. Jordan v. Jewel: jury was outraged and
gave Jordan $8.9 million, but Ed O’Bannon sought damages for a video game.  Q is whether ROP could form the basis for
antitrust injury; this mess that is the ROP is something we need to talk about.  Reed
doesn’t add a lot to the mix; also doesn’t know how that applies to fair use in
©.
 
Kurnit: for ROP, you
must also require falsity to make it constitutional.  The notion that the little girl’s image on
the flour is important enough to do violence to the 1A in the greater scheme of
things is not sufficient.  §43(a)(1)(A) provides
a very solid ROP claim when there’s falsity about endorsement, participation,
etc.; that will work under the 1A b/c that’s false speech for commercial
purposes designed to influence purchasing decision.  [But that presupposes a
commercial/noncommercial distinction which he opposes, not to mention I wonder
about materiality v. puffery status of picture of girl w/r/t consumer decisionmaking.]
There is no longer emotional anguish connected w/being related to commerce.
[Nice to know that’s universally true.]
 
Alger: Sarver case
from 9th Cir. applied strict scrutiny in ROP case; made it easier
that it was a movie, noncommercial speech. But where do we draw those lines,
and what about mixed/hybrid situations that come up online all the time. DCt
cases have held, incorrectly, that advertising driven by content makes the
content commercial as well. 
 
So what’s the next
step, litigation-wise?
 
Q: Something so
egregious that the Ct will have to take a look, particularly w/8 Justices on
the Court.
 
Alger: perhaps cert
in Sarver, explaining why Sarver is different from NFL game cases.
 
Q: O’Bannon is
selling cars; justice to him requires a hard look.
 
Q: so he’s owed money
because he’s not making any of his own? 
Is your case against the networks, the NCAA, etc.?
 
Q: is a video game
the same as a newspaper?
 
Q: The cases that
come will be Ps’ attys who use FTC guidelines as a template to bring claims
over whether or not there was sufficient disclosure of the sponsorship of
content. Those are easy cases for Ps’ lawyers to construct.  [Given that most people in this space aren’t
following the FTC guidelines, as we’ve heard, I wonder whether that’s actually
true.]
 
Q: TOS might require
arbitration.
 
Q: Ps’ attys will
say they’re not binding.
 
Q: Cases like Sarver
implicate matters of public concern/public figure—status of particular person.
Can see SCt dodging the commercial speech issue and focusing on something they’re
more comfortable with, like 9th Circuit did.

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