Inconclusive investigation isn’t enough to give knowledge for contributory TM infringement purposes

Posted on March 23, 2016 by rtushnet
Spy Phone Labs LLC v. Google Inc., No. 15-cv-03756-PSG, 2016
BL 86393 (N.D. Cal. Mar. 21, 2016)
 
SPL registered Spy Phone as a mark (for something, I presume),
and submitted its Android app, SPY PHONE Phone Tracker, to Google.  It was downloaded over a million times, and
Google took down a number of competing apps with similar names when SPL requested
that it do so via Google’s online complaint form.  Whenever Google removed an app based on a
trademark complaint, it sent the app developer a notification containing the
complainant’s name and email address.
 
According to the complaint: The app stores information on
phone locations and use on a secure server, and it periodically displays an
icon to let users know the app is running; it’s free, but SPL generates revenue
by running ads via Google on spyphone.com. 
After one developer objected in May 2013, the relationship between
Google and SPL eroded.  SPL submitted a
trademark infringement complaint about another app, “Reptilicus.net Brutal Spy
Phone,” and this time Google said it couldn’t determine the merits of the claim
and refused to act.  Then in June, the
Google Play team removed SPL’s own app, citing violations of Google’s
anti-spyware policy, allegedly despite the fact that SPL’s app complied with
the policy.  Eventually, Google explained
that although none of the functions of SPL’s app violated the anti-spyware
policy, the name itself was unacceptable because it contained the word “spy.”  Though other apps used the same word, Google
promised that it intended to prohibit all developers from doing so in the
future.
 
Thus, SPL decided to drop its lawsuit and relaunch its app
under the name “Phone Tracker.”  In October
2013, Google reinstated SPL’s developer account, but it deleted all the
consumer reviews and records of downloads for SPL’s original app, and the new
app managed only 260,000 downloads in ten months, leading to a steep reduction
in SPL’s advertising revenue.29 Meanwhile, other apps continued to use “spy”  in their names with impunity.  So SPL resumed submitting complaints about
other apps that used “spy” or “SPY PHONE” in their names, but instead of using
the trademark infringement form—which would notify developers of SPL’s identity—SPL
claimed violations of the same anti-spyware policy of which it had fallen
afoul.  In July 2014, SPL made a
complaint about another app from the Reptilicus.net developer, and Google again
suspended SPL’s account without warning, this time for purportedly violating
Google’s spam policy. SPL alleged that its app complied with that policy, but
that the other developer had submitted a false complaint.  This other developer had multiple Play Store
parental monitoring apps—which in itself violates Google’s policies—and several
of these apps contained the word “spy,” or even the phrase “Spy Phone,” in
their names.  SPL allegedly received a
letter from a “concerned” member of the Google Play team “confirming SPL’s
suspicions.”  After this second takedown,
Google searches for the phrase “spy phone” started to list competing apps
before SPL’s website, and the top-listed result is now an app that allegedly
infringes SPL’s trademark.
 
SPL sued the developer, who has not yet been served, and
Google, alleging contributory trademark infringement against Google and
tortious interference against all the defendants. The court first found that
SPL didn’t allege facts sufficient to state a claim for contributory trademark
infringement by Google. With an online marketplace, “a service provider must
have more than a general knowledge or reason to know that its service is being
used to sell counterfeit goods. Some contemporary knowledge of which particular
listings are infringing or will infringe . . . is necessary.”  SPL didn’t allege that Google had notice for
most of the apps; SPL intentionally made spyware complaints instead of
trademark complaints in order to remain anonymous.  “But spyware complaints are not the same as
trademark complaints, and Google could not be expected to respond to a
complaint about one offense by investigating another.”
 
Google also didn’t ignore the initial Reptilicus.net app; it
investigated and responded that it could not assess the merits of the claim.  The app might have used the words “Spy Phone”
simply as a descriptor, as opposed to the distinctive prefix “Reptilicus.net
Brutal,” and that fact would constitute a defense to infringement.  Uncertainty over the existence of
infringement is relevant to an alleged contributory infringer’s knowledge.  That uncertainty, combined with Google’s
investigation and response, made the allegations of knowledge implausible.
 
Nor did tortious interference work, because there was no
allegation that Google committed any act wrongful apart from the interference
itself.

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What’s in a name? A false advertising suit against a generic drug maker

Posted on March 23, 2016 by rtushnet
Endo Pharmaceuticals, Inc. v. Actavis, Inc., 2016 WL 1090356,
No. 12-cv-7591 (D.N.J. Mar. 21, 2016)
 
Endo sued Actavis under federal and state law for allegedly
falsely marketing a generic form of oxymorphone hydrochloride extended-release
tablets. The court got rid of the New Jersey consumer protection law claims
because NJ’s law doesn’t protect competitors, but did allow some claims under
the Lanham Act and the New Jersey Fair Trade Act.
 
Endo received FDA approval for an extended release
oxymorphone hydrochloride pain reliever under the brand name Opana ER in 2006;
Actavis received FDA approval for a generic form of that formulation in 2010.  Actavis’ generic is AB rated to Opana ER,
meaning that it’s therapeutically equivalent. 
“Concerned about the potential for abuse of the drug, including the
possibility that persons would crush the pills and snort or inject the powder,
Endo developed a crush-resistant version.” 
The FDA approved this version in 2011. 
Endo stopped making the old version but didn’t recall existing tablets, and
began shipping the new formulation in 2012. 
The new crush-resistant formulation was bioequivalent to the original
formulation of Opana ER and was sold under the same brand name, distinguised as
“Opana ER with Intac.”
 
Endo then filed a Citizen Petition with the FDA, seeking to
have the FDA (1) determine that the old formulation of Opana ER was
discontinued for reasons of safety, (2) refuse to approve any pending generic
approvals for the old formulation, and (3) suspend and withdraw approval for generic
versions of the old formulation. Endo also sued Actavis, arguing that Actavis’s
marketing of “Generic Oxymorphone ER Tablets” as “AB Rated to Opana® ER”’
became misleading after May 2012, once Endo had stopped selling the old
version.  The FDA denied Endo’s petition;
the old formulation wasn’t withdrawn for safety or effectiveness reasons,
because the data did not support the claim that Opana ER with Intac was superior.
 
Actavis argued that Endo was trying an end run around the
FDA’s ruling that approvals of generics AB rated to old Opana ER were okay.  Under Pom
Wonderful, there is some wiggle room for a false advertising claim not
reliant on interference with FDA decisionmaking.  Endo’s basic argument: “the consumer could
now mistakenly infer (as the consumer could not have before) that Actavis’s
drug is AB rated to Opana® ER with Intac.” 
Can a brand name manufacturer “render the generic manufacturer’s true
advertising misleading and then sue on that basis”?
 
Casting some shade on Endo’s arguments, the court noted that
“Endo itself simultaneously marketed the two versions of the drug for some
months, but of course does not accuse itself of confusing physicians.”  Endo’s scrupulousness in distinguishing
between the two versions, however, posed factual issues not suitable for a
motion to dismiss.
 
On its face, Actavis’s ad said it was AB rated to Opana ER,
which seemed unambiguous and true.  But
since then, Endo argued, there was another formulation of Opana ER, with the
same name, “sort of.”  Thus, Opana ER
might mean two different things, though not too different; because Endo only
makes Opana ER with Intac, consumers might now take Actavis’s claim to be one of
equivalence to Opana ER with Intac.  A doctor
might be misled into thinking there’s just one version of the drug on the
market, but actually there are two. 
 
The court noted that Endo didn’t recall its old Opana ER and
let two versions exist on the market for a while, selling off the old while it ramped
up production of the new.  It took from
February 2012 to after the end of May 2012 for the old inventory to clear the
pipeline and for Endo to stop marketing old Opana ER.  “The FDA apparently found this highly
significant in rejecting Endo’s petition. And Endo in this action will face the
question of how it could keep the two drugs straight in physicians’ minds then,
but can no longer do so now.”
 
The FDA’s rulings about safety tended to undercut the
materiality of the allegedly misleading statements. “Endo’s safety concerns
about Old Opana® ER (which seemed to have crested shortly after it sold off the
last of its inventory) have not been borne out.” And whether doctors ought to
be prescribing one version or another was not a Lanham Act issue, but an FDA
issue.
 
Actavis also argued that it no longer advertised that its
product was AB rated to Opana ER; the complaint’s ads dated from 2011.  This created a factual issue that would also
need to be explored, as did whether Actavis was seeking approval for a crush-resistant
version of its own.  Still, on the
pleadings, this was not a claim ruled out as a matter of law: Endo pled “false
statements about matters the consumer is likely to care about in making a
purchasing choice.”  The court noted that
targeted discovery and an early motion for summary judgment might well be
appropriate.

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Another poster child for a national anti-SLAPP law: dilution claims against a critic

Posted on March 23, 2016 by rtushnet
Doctor’s Data, Inc. v. Barrett, 2016 WL 1086510, No. 10 C
03795 (N.D. Ill. Mar. 21, 2016)
 
Plaintiff DDI sued Dr. Stephen J. Barrett, M.D., the
National Council Against Health Fraud, and Quackwatch for violating §43, as
well as state law claims for defamation and related torts.  Here, the defendants get rid of a number of
claims on summary judgment. DDI is a clinical lab that analyzes urine, blood,
and other samples for health care practitioners; one of its tests is designed
to assess the levels of heavy metals present in a patient’s urine.  Samples are either “provoked” or
“non-provoked”; a provoked sample is one the physician collects after
administering a “chelating agent,” which temporarily increases the patient’s
excretion of heavy metals. DDI uses the same form to report the test results
for both provoked and non-provoked samples. The form reports the heavy metal
levels in the patient’s urine, lists “reference ranges” of typical heavy metal
levels in non-provoked samples, and graphically classifies each of the
patient’s levels as “within reference range,” “elevated,” or “very elevated”
based on those non-provoked reference ranges.
 
Barrett, a retired psychiatrist and consumer advocate,
criticized heavy metal urine testing and DDI’s report form on his websites and
related email listservs. NCAHF and Quackwatch were not-for-profit corporations
that focused on health care consumer advocacy, though they were dissolved by
the time of this opinion.
 
Previously, the court dismissed the Lanham Act claim to the
extent it covered false advertising because DDI lacked standing, but allowed a
claim under §43(c) dilution (!) to proceed. 
(After Lexmark, the standing
argument is probably wrong, but given the context I doubt the defendants’
statements count as commercial speech/commercial advertising or
promotion.)  DDI, however, continued to
press §43(a) false advertising claims, despite the court’s clear earlier
statements; the court construed it as abandoning a federal dilution claim and
the §43 claim was dismissed in its entirety with prejudice.
 
DDI did continue with its claim for trademark dilution under
ITRPA, which provides that the owner of a mark which is famous in Illinois is
entitled to relief “against another person’s commercial use of a mark or
tradename, if the use…causes dilution of the distinctive quality of the
mark.”  This law requires actual
dilution, not merely likely dilution. 
DDI argued that Barrett’s websites were commercial and that defendants
caused dilution by referencing “Doctor’s Data” in the challenged publications
and including DDI’s logo on the first page of one of the publications. But
there was no evidence of dilution of distinctiveness of DDI’s marks.
DDI provided evidence that defendants used its marks, and possibly that DDI’s reputation was damaged by
defendants’ statements using its marks. 
“But causing consumers to think less highly of a trademarked product or
service—even if accomplished through false or misleading statements—is not
equivalent to diluting the distinctiveness of that product or service.
Allegations solely of the former nature point not to trademark dilution but to
defamation and other similar claims.” 
(Something we all knew should be true, but it’s nice to have such a
clear statement in a case.)  Summary
judgment for defendants.
 
Then there is a long, long slog through 85 allegedly
defamatory statements, which I will not inflict on readers who aren’t, like the
court, required to wade through them. 
Basically, Barrett said that “referring patients who have provided
provoked samples to standards applicable to non-provoked tests is highly
misleading and permits unscrupulous physicians and other purported health care
practitioners to convince patients to undergo expensive, but unnecessary,
detoxification treatments,” and the disputes in the case “center primarily on
the extent to which the defendants’ statements assert that Doctor’s Data is a
witting participant in these schemes.” 
The court concluded that, for the most part, the statements that were
most likely to cause reputational harm were about the allegedly scummy doctors
rather than DDI, or appeared in reports protected by the fair report privilege
(e.g., reports of lawsuits filed against DDI and others). Most of the remaining
statements were either true descriptions of the report form or expressions of opinion
about the form. Thus, most of the statements weren’t actionable, though the
court denied summary judgment on a few that might have implicated DDI.
 
For example, Barrett’s description of the DDI report
classifications as misleading (that is, the fact that the form reported the
patient’s provoked levels but only provided unprovoked reference levels for
comparison, and those lower than other labs’) was nonactionable opinion.  The description of the report classification
as misleading was immediately followed by the factual basis for that
evaluation, and Barrett even reproduced a report.  “Misleading” was clearly his opinion.  There is qualifying language at the bottom of
the DDI report that says “[r]eference ranges are representative of a healthy
population under non-challenge or non-provoked conditions.”  While a reasonable jury could find that this
put patients adequately on notice that the reference ranges shown next to the
test results “should be given less weight, or possibly even no weight, if the urine
sample at issue was provoked,” no reasonable jury could find that the report
didn’t make a comparison between provoked results and non-provoked reference
ranges, which was the practice Barrett criticized.
 
Also, here’s a fun discussion:
 
[T]he statement “The provoked urine
toxic metals test is a fraud” does not have a precise and readily apparent
meaning. As an initial matter, the term “fraud” has a broad scope; to speak of
something as a “fraud” may mean it is criminally deceptive, but it may also mean
simply that it is not what it purports to be. When H. L. Mencken famously
opined that “All men are frauds,” he did not incur universal liability for
defamation.  As well, “fraud” is a term
often used as hyperbole, trotted out in even the most inconsequential contexts
…. That the term expressly refers here not to a person, or a knock-off designer
purse, but to a test does nothing to make its meaning more clear; what does it
mean for a test to be a fraud? … [I]f anything, the context here points not to
DDI as the party responsible for “fraud” but to those who use DDI’s test to
deceive the public—that is to say, the physicians who buy DDI’s testing
services.
 
Also, while “shady” is not a factual claim capable of
verification or disproof, describing DDI as a “nonstandard” laboratory might be
defamatory, and the court denied summary judgment on the following statement,
since given more context it might contain some factual claims:  
 
The sample report on DDI’s Web site
includes three pages of measurements and three pages of clinically useless
biochemical tidbits, diagnostic speculations, pseudoscientific blather, and
recommendations for further testing. Unfortunately for patients, amino acid
analysis of urine does not provide basic information about the individual’s
general health, metabolism, nutrient status, or dietary adequacy, and the
supplement recommendations lack a rational basis. It is not possible, for
example, to figure out what people eat by looking at what they excrete. And
finding a substance does not mean that it came from a single source or
metabolic pathway.
 
Tortious interference with prospective economic advantage
claims failed because DDI couldn’t prove a specific enough expectancy of future
business that was disrupted by Barrett’s claims. And tortious interference with
existing contractual relations failed because DDI couldn’t show that a breached
contract resulted from Barrett’s claims, much less that defendants
intentionally induced the breach.  DDI
believed that the relevant doctor’s business collapsed because of Barrett’s
complaints to the Texas medical board and to insurance companies, rendering her
incapable of paying DDI’s bills.  But DDI
didn’t show that Barrett’s complaint caused the doctor’s financial problems or
her failure to pay DDI, or that Barrett complained with the intent to cause a
breach of contract.

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One Haas impersonating another is TM infringement, false advertising

Posted on March 21, 2016 by rtushnet
Haas Door Co. v. Haas Garage Door Co., No. 3:13 CV 2507, 2016
WL 1047242 (N.D. Ohio Mar. 16, 2016)
 
A family-owned business split, and split a trademark, and
then things went bad.
 
Founded in 1953, Haas Door Sales eventually became Haas Door
Company and Haas Garage Door Company. Haas Door Sales focused exclusively on
retail sales and installation of garage doors; Haas Door Company was incorporated
for the purpose of manufacturing garage doors. 
Haas Garage Door Company took over retail sales; both Haas Door
(manufacturing) and Haas Garage Door (retail sales, installation, and repair)
used the HAAS mark.  In 1989, the owners
sold Haas Door, leaving them with no right to make garage doors, under the HAAS
mark or otherwise, pursuant to a noncompete agreement—though those owners
subsequently retired.  Haas Garage Door
was an authorized dealer of Haas Door, but a dispute arose between the companies
and Haas Door terminated Haas Garage Door’s authorized dealership.  Haas Door has a registration for HAAS for
garage doors and hardware.
 
The court found that the parties each had separate and
distinct rights in the HAAS mark. “The HAAS mark is connected to two
distinctively different goods and services.”  (That strikes me as a bit of an overstatement,
from a consumer perspective—it was not the greatest idea to split them like
that.)
 
While not resolving the core trademark infringement claims
based on HAAS, the court granted partial summary judgment to Haas Door based on
Haas Garage Door’s use of the AMERICAN TRADITIONS SERIES mark, which Haas Door
had used for high end garage doors since 2005. 
Haas Garage Door assembled doors and sold them under the name AMERICAN
TRADITIONS SERIES, using the HAAS mark. 
The court found likely confusion, as well as actual confusion.  An architect was deceived into buying from
Haas Garage Door, “[d]espite doing due diligence and meeting with [Haas Garage
Door] on multiple occasions.”  He was
misled into believing that both Haas Door and Haas Garage Door produced the
same product, but at different locations, and then noticed quality differences
in the door he bought.  Likewise, the
owner of a retail garage door sales, installation, and repair business
mistakenly contacted Haas Garage Door and “was misled into believing he was
engaging in a business relationship where he was obtaining doors directly from
the manufacturer, i.e. Haas Door.”  When
he found out the truth, he ended his relationship with Haas Garage Door.  These events showed likely confusion even
among sophisticated purchasers.
 
In addition, the court found Haas Garage Door liable for
false advertising for using a label on the garage doors that said HAAS GARAGE
DOOR COMPANY [contact info] MANUFACTURERS OF: RESIDENTIAL, COMMERCIAL &
INDUSTRIAL OVERHEAD DOORS & ELECTRIC OPENERS.  Haas Garage Door isn’t a manufacturer, but it
used the label on every door it installed or serviced for years. This was a
literally false claim, so the court presumed actual deception and
materiality.  There was also a causal
link to harm to Haas Door. “This misrepresentation harms Haas Door by depriving
the company of the opportunity to offer customers its products, made to its
standards, policies, and warranties.”

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Porn site’s use of TMs in metatags not confusing

Posted on March 21, 2016 by rtushnet
Multifab, Inc. v. ArlanaGreen.com, 122 F. Supp. 3d 1055
(E.D. Wash. 2015)
 
Plaintiff made commercial industrial components and
equipment, and used the name “Multifab” for at least 25 years.  It has the multifabinc.com domain name.
ArlanaGreen.com features pornographic images and videos, and allegedly caused
confusion by using Multifab’s name to promote its services.  Defendants defaulted.  Nonetheless, the court concluded that
Multifab failed to show trademark infringement or false advertising under the
Lanham Act, cyberpiracy under the Anti–Cybersquatting Consumer Protection Act,
or a violation of Washington’s Consumer Protection Act.
 
Infringement: lack of proximity of the goods weighed heavily
against a finding of confusion, as did the degree of consumer care and the
unlikelihood of any expansion into competing territory. “Sales of pornography
and industrial equipment do not target the same class of purchasers in any
discernable way, the products are not similar in use or function, nor are they
complementary in any sense.”  (Insert
your own dirty joke.)  Internet shoppers
are accustomed to trial and error, and Multifab’s goods would be bought by buyers
likely to be familiar with the commercial industrial equipment market, using a high
degree of care. See M2 Software, Inc. v. Madacy Entm’t, 421 F.3d 1073, 1084
(9th Cir. 2005) (because purchasers of music management databases are highly
sophisticated members of the music industry, the possibility that they could be
confused about music management products and services “is almost nil”
regardless of any trademark).  So the
strength of Multifab’s mark (suggestive), the similarity of the parties’ marks
(identical), and defendants’ apparent bad intent favored Multifab, but that
just wasn’t enough given the factors making confusion unlikely.  There was no evidence of actual confusion.
 
False advertising claims failed for the same reasons, as did
state consumer protection law claims.
 
ACPA claims failed because the conduct here didn’t involve
use of a domain name, whether at the top or second level.  Instead, defendants were using metatags and
website content.

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A generic post about trademark overclaiming

Posted on March 17, 2016 by rtushnet
Miller’s Ale House, Inc. v. DCCM Restaurant Group, LLC, 2016
WL 1040005, No: 6:15-cv-1109-Orl-22TBS (M.D. Fla. Mar. 16, 2016)
 
Miller sued DCCM for false designation of origin/unfair
competition under state and federal law. Miller’s operates approximately
seventy sports bar restaurants throughout Florida and the United States, using
a similar, but not always identical, sign on each. “Sometimes the sign appears
with the name Miller’s in italics preceding a geographical prefix and followed
by the phrase ‘ale house;’ and other times the sign omits “Miller’s” and
contains only a geographical prefix and ‘ale house.’” Thus: “Miller’s ORLANDO
ALE HOUSE,” or “ORLANDO ALE HOUSE,” generally but not always in red letters and
not always in italics.
 
DCCM’s sports bar restaurant, located in Davenport, Florida,
is called Davenport’s Ale House, with a sign comprised of Davenport’s in
italics preceding the phrase “ale house.” Miller’s argued that the relevant public,
central Florida, associated an italicized word followed by ALE HOUSE with
Miller’s restaurants, regardless of the nature of the italicized word.
 
In  Ale House Mgmt,
Inc. v. Raleigh Ale House, Inc., 205 F.3d 137 (4th Cir. 2000), the Fourth
Circuit concluded that Miller’s predecessor had no protectable interest in the
phrase “ale house” because they are generic words. In Miller’s Ale House, Inc.
v. Boynton Carolina Ale House, LLC, 745 F. Supp. 2d 1359 (S.D. Fla. 2010), the
court found that issue preclusion barred Miller’s claim based on “[geographic
prefix] ALE HOUSE” because the Fourth Circuit had already determined that “ale
house” is generic, and Miller’s had failed to present evidence showing that it
had “recaptured” the generic term “ale house.” The Eleventh Circuit affirmed,
emphasizing that “Miller’s still has no protectable interest in the words ‘ale
house,’ ” nor any protectable trade dress in red letters on an outside
sign.  Miller’s Ale House, Inc. v.
Boynton Carolina Ale House, LLC, 702 F.3d 1312 (11th Cir. 2012).
 
Here, Miller argued that it wasn’t relitigating its
trademark claims, but rather seeking protection against misuse of a generic
term under the head of unfair competition. 
(Now-Justice Ginsburg said this kind of claim was ok in Blinded American Veterans, but the judge
here pointed out that Eleventh Circuit precedent controls.)  DCCM pointed out that this looked a lot like
the prior litigation, and noted that Miller’s does not use italics consistently
on its buildings, nor do any of its signs italicize the geographical prefix.
 
Font style wasn’t raised in previous litigation and wasn’t
directly precluded, but summary judgment was warranted because of a lack of a
genuine issue of material fact. The magistrate judge reasoned that Miller’s
evidence, at most, could show confusion among consumers in central Florida, but
didn’t show that the general public, outside of just central Florida,
associated the font and style of the sign with Miller’s.
 
Adopting the magistrate’s recommendation, the district judge
reasoned that courts in the Eleventh Circuit treat trademark infringement and
false designation of origin identically, other than the presumptions afforded
by registration.  Knights Armament Co. v.
Optical Sys. Tech. Inc., 654 F.3d 1179 (11th Cir. 2011) (declining to consider
claims for unfair competition and false designation of origin under §43(a)(1)(A)
because the defendant did not have enforceable rights in a mark). Miller failed
to distinguish its claims from trademark infringement claims; the only
difference here from the previous Miller case was DCCM’s use of italics, but
Miller conceded that it only occasionally used italics in its signage and didn’t
do so for the geographical prefix. Thus, the false designation of origin claim
was premised on nearly identical allegations as the trademark infringement
claim, and Miller’s didn’t have enforceable rights in the relevant symbol.
 
Miller objected to the magistrate’s recommendation, arguing
that the appropriate geographical area for the likelihood of consumer confusion
element was central Florida, not nationwide. But without a mark in which there
were rights, that issue was irrelevant. 
The state law claims suffered the same fate.
 
Comment: I hope the court awards defendant its fees.  “Ale house” was born generic and there’s no
good reason to allow claims over it to persist, even if there is some policy
reason for holding out hope for formerly non-generic terms like SINGER for
sewing machines.  Right now, Miller seems
to believe that it’s worth harassing competing ale houses in the hope that it
can deter enough of them to make a better case for having claimed the
term.  The next suit will presumably be
over the size and shape of the outside sign, also not previously
litigated.  Miller would be better served
by focusing on building up a brand in MILLER’S ALE HOUSE, if it can.

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Checkered result for Uber: some false advertising claims survive

Posted on March 16, 2016 by rtushnet
Checker CAB Philadelphia, Inc. v. Uber Technologies, Inc., 2016
WL 950934, NO. 14-7265 (E.D. Pa. Mar. 7, 2016)
 
Checker sued Uber and Google for Lanham Act and RICO
violations.  Unsurprisingly, this opinion
kicks out Google and RICO, leaving Uber to face some but not all of the
remaining false advertising claims. 
(Google was sued in its role as an investor in Uber.)
 
In October 2014, Uber, through Jon Feldman, posted an ad on
Uber’s website and sent a blast email to its account holders in the
Philadelphia Metropolitan Area about the launch of UberX service in
Philadelphia. The ad included the claim: “This week the largest taxi insurer
went bankrupt, which means that as of 5:00 p.m. today, there is no guarantee
that your taxicab will be insured.” Uber and Feldman “tweeted” a similar ad on
social media with a link to a post on its blog that said: “In October the
largest taxi insurer in Pennsylvania went bankrupt. Many uninsured taxis are
still on the road; though some may have new policies, there’s no guarantee that
your taxi ride will be insured.”
 
The reference was to First Keyston, which provided insurance
to many of the taxi plaintiffs and was going through bankruptcy.  Pursuant to an order of the bankruptcy court,
all existing insurance policies issued by First Keystone were cancelled as of
November 20, 2014.  The taxi authority
told First Keystone policyholders whose proof of insurance was on file with the
authority to get replacement coverage within two days, or risk being put out of
service.  According to plaintiffs, by
that time “almost all” of the First Keystone policyholders contacted by the authority
had obtained replacement insurance coverage, and “the rest were awaiting
underwriting approval.” The authority then extended its deadline three days,
leaving “only a handful” without replacement insurance.  Plaintiffs alleged that no First Keystone
policyholders was ever placed out-of-service and no medallion taxicabs
operating in Philadelphia were ever uninsured, because the First Keystone
policies remained effective until November 20, 2014, or an earlier date when
replacement coverage was secured.
 
The ads also claimed that Uber’s UberX fares were 20%
cheaper than a taxi’s fare, using three sample comparisons of Uber’s fares with
those of a non-Uber affiliated taxi.
 
The court first dismissed claims based on Uber’s alleged
provision of taxicab services in violation of local and state regulations,
which themselves didn’t provide for private causes of action. in Sandoz
Pharmaceuticals Corp. v. Richardson-Vicks, Inc., 902 F.2d 222 (3d Cir. 1990),
the Third Circuit held that “what the FD&C Act and the FTC Act did not
create directly, the Lanham Act does not create indirectly, at least not in
cases requiring original interpretation of these Acts or their accompanying
regulations,” and affirmed the district court’s denial of a preliminary
injunction. The same was true here. “For example, in Dial A Car, Inc. v.
Transportation, Inc., 82 F.3d 484 (D.C. Cir. 1996), the D.C. Circuit Court of
Appeals relied on Sandoz to hold that private parties may not invoke the Lanham
Act to create a private cause of action for enforcement of local taxi
regulations.”
 
Statements based on fare comparisons: Plaintiffs alleged
that the 20% cheaper claim was literally false, but the fare samples used in
the blog posts “show the literal truth of the challenged statement, i.e., the
sample UberX rates are at least 20% lower than the sample non-Uber taxicab
fares.”  Plaintiffs didn’t allege that
any of these samples were false.
 
Statements based on claims about plaintiffs’ insured status:
Here Uber fell down.  Uber argued that,
in light of the facts, Uber’s statement that there was “no guarantee” that a
consumer’s cab was insured was literally true since, when Uber disseminated the
ads, some Philadelphia taxicab drivers had not obtained replacement insurance
coverage.  Uber failed to grapple with
the allegation that the Keystone insurance policies were in fact valid until
November 20, more than three weeks after the “no guarantee” statements.  The express claim that the insurance policies
were terminated/cancelled in October was literally false.
 
Proximate cause under Lexmark:
Plaintiffs alleged that Uber was “willfully, knowingly and intentionally making
false claims and descriptions in their advertising and, unless immediately
enjoined by this Court, will continue to deceive, mislead, and confuse the
riding public into believing that, among other things, Plaintiffs’ taxicab
service is inferior, less safe, risky, more expensive, and unsuitable for its
intended purpose.”  That was enough, in
conjunction with the other factual allegations in the complaint.  (I understand that Lexmark could in theory be used to contract standing.  But not when the ads at issue are comparative
ads targeting the plaintiff/s!)
 
Relation of false advertising to RICO: the false advertising
allegations couldn’t support a RICO claim “because the three alleged instances
of false advertising (even if deemed to be racketeering activity) do not form
the requisite continuous pattern of racketeering activity. The advertisements
occurred within a three-day period in October 2014.”  Also, no facts were alleged that could
establish that these misrepresentations were part of Uber’s “regular way of
doing business.”

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I don’t go into yours, you don’t go into mine: copyright preempts Dirty Dancing trademark claim

Posted on March 15, 2016 by rtushnet
I don’t go into yours, you don’t go into mine: copyright
preempts Dirty Dancing trademark claim
 
Lions Gate Ent. Inc. v. TD Ameritrade Servs. Co., No. cv
15-05024  (C.D. Cal. Mar. 14, 2016)
 
Lions Gate sued TD for infringing its rights in Dirty Dancing, specifically the
well-known line “Nobody puts Baby in a corner,” which Lions Gate claimed as a
mark for various goods and services and alleged that it had licensed for “a
variety of merchandise.”  TD ran a series
of ads, including video, online, and print versions with the theme “Nobody puts
your old 401k in a corner,” with an encouragement to enroll in the TD IRA plans.
The ads often included images to conjure up Dirty Dancing, such as “a still
and/or moving image of a man lifting a piggy bank over his head after the piggy
bank ran into the man’s arms.”
 
Some versions of the ads “invoked” the song,
“(I’ve Had) the Time of My Life,” which played during the final dance scene in
the movie, with lines like “[b]ecause retirement should be the time of your
life.”
 

Start of TV ad
Middle of TV ad
Big finish of TV ad
 
 
After finding specific personal jurisdiction in California,
the court turned to Dastar.  For underexplained reasons, the court decided
to apply §301 preemption doctrine to see whether the trademark claims were
precluded, when it probably ought to be conflict preemption.  (1) Were the claims within the subject matter
of copyright? Yes, they were based on the motion picture Dirty Dancing and associated literary/musical works.
 

(2) Was there an extra element?  This is important because Dastar said that federal trademark law can’t
be used to extend copyright or patent rights. “Origin of goods” refers “to the producer
of the tangible goods that are offered for sale, and not to the author of any
idea, concept, or communication embodied in those goods.” TD argued that the
claims were Dastar-barred, and that,
to the extent the elements claimed were famous, they weren’t famous as marks but rather as part of a
copyrighted film.
 
Lions Gate responded that it made separate copyright
infringement claims, and that “a single work may be protected as an original
work of authorship under copyright law and as a trademark.”

The court found that the complaint bled together its copyright, trademark, and
unfair competition claims “making it challenging for the Court, much less
Defendants, to determine the allegedly separate theories underlying the
different rights.”  Lions Gate was using
copyright “either as a bolster for its trademark and unfair competition claims,
or as the real basis of the claims — the latter of which is certainly not permissible.”  It was even unclear what NOBODY PUTS BABY IN
A CORNER was used for—Lions Gate said at oral argument that it was on goods
such as posters, journals, and clothing (which sound awfully
ornamental/expressive to me). 
 
The court found the claim barred by Dastar.  Unfair competition
and trademark infringement claims also failed as preempted.  “These causes of action are based on
Defendants essentially copying Plaintiff’s intellectual property and slightly
changing the words — creating a derivative work, perhaps — and using the
changed sentence in advertising its own products.”  (A little worrisome that a sentence fragment
might be enough for copyright infringement, but I hope substantial similarity
analysis will ultimately be sensible. 
The fact that there might be a gap between copyright and trademark
rights isn’t a problem; it’s a function of the system!)  State and common-law claims were also preempted
by copyright law “because the same rights are asserted in these causes of
action as are asserted in the copyright infringement cause of action, namely reproduction
and distribution of the copyrighted work and preparation of a derivative work.”
 
The court distinguished Dastar-barred
claims from acceptable passing off claims:
 
[I]f the TD Defendants were to sell
posters, journals, and clothing with NOBODY PUTS BABY IN A CORNER on them, or
take the goods Lions Gate alleges it produces or licenses and put TD’s own mark
on it, then there would be a solid origin claim under the Lanham Act, and
surely any state and common-law equivalent. Dastar explicitly provided for that
— the distinction it drew for origin claims was between “the producer of the
tangible goods that are offered for sale” (allowable) and “the author of any
idea, concept, or communication embodied in those goods” (preempted). The
problem is that nothing like that has occurred here.
 
Instead, Lions Gate argued that TD’s use of “a slightly
altered version” of its marks would cause consumer confusion as to Lions Gate’s
endorsement or association with those services, “even though the advertisements
clearly promote TD’s financial services and do not mention Lions Gate or Dirty Dancing, or attempt to pass off
products of TD as from Lions Gate or vice versa.”  Lions Gate argued that this confusion flowed
from the use of NOBODY PUTS BABY IN A CORNER, but the court couldn’t see how
that differed from a copyright infringement claim, “or a claim that Defendants
have failed to obtain the permission of the author of the ‘idea, concept, or communication
embodied in those goods.’”  TD made a new
tag line, “Nobody puts your old 401k in a corner”; it “played on the famous
concluding dance scene”; and it “referenced” the famous song playing during
that dance with another tag line, “Because retirement should be the time of
your life.” That might be copyright infringement, but not trademark
infringement.
 
A communicative good can be protected under both copyright
and trademark, but not here.  The alleged
wrongful conduct is just unauthorized use of the protected elements of Dirty Dancing; though Lions Gate added
the allegation that consumers would be confused about association, the right
alleged was exactly the same: “the right to be the exclusive licensor and user
of the sentence ‘Nobody puts Baby in a corner.’”
 
The court then discussed Lions Gate’s strongest cases, Bach
v. Forever Living Products U.S., Inc., 473 F. Supp. 2d 1110 (W.D. Wash. 2007),
and Butler v. Target Corp., 323 F. Supp. 2d 1052 (C.D. Cal. 2004). Bach
involved the defendants’ use of the title, character, name, text, and
photographs from the book Jonathan
Livingston Seagull. “The defendants not only used the intellectual property
associated with the book in their own materials, but they also stated in
advertising their products that the brand ‘is the Jonathan brand’ and that ‘Jonathan
is really the basis of what Forever is about.’” The court found that the name,
title, and trade dress of the book cover were protected under trademark, not
copyright, because those were source-identifying marks.  By contrast, NOBODY PUTS BABY IN A CORNER was
part of the text of the copyrighted work Dirty
Dancing, especially given that Lions Gate relied on other elements from the
film to bolster its claim.
 
Butler involved
the defendant’s use of plaintiffs’ copyrighted musical work and sound
recording, Rebirth of Slick (Cool like Dat). The defendant played the sound
recording as the soundtrack to its national advertising campaign, and also had
ads and signs at stores stating, “Jeans Like That,” “Denim Like That,” “Shoes
Like That,” and so on. The plaintiffs sued for infringement of the right to
publicity, unfair business practices, and Lanham Act claims. The court found
claims based on the use of the sound recording to be preempted, but not right of
publicity/unfair business practices based on the use of the plaintiffs’
identity/false endorsement claims. Butler
never mentioned Dastar; the
plaintiffs weren’t claiming solely that a modified use of a famous line
violated their trademark rights. 
Instead, they claimed that “the use of something so closely associated
to their famous persona was a misappropriation of their publicity and a false
endorsement where the ‘mark’ for Lanham Act purposes is their celebrity
identity.”  This wasn’t similar to Lions
Gate’s theory, and it wasn’t necessarily covered by Dastar.  (Ugh.  See also: why we need the Supreme Court to
fix the right of publicity.)
 
Dilution claims led to a beautiful ruling on “use as a mark,”
even in the possible absence of preemption:
 
Plaintiff claims that Defendants have
used the mark in Defendants’ ads, but that is not the same as alleging that
Defendants use Plaintiff’s mark, or a mark nearly identical to it, as the mark
for Defendants’ own goods — which would be an allegation that appears clearly
contradicted by the facts of this case. Thus, it does not appear that as pled, Defendants
have used the mark in commerce in the sense that the law requires. There does
not appear to be any dispute or contrary facts that Plaintiff could plead to
show that Defendants used the allegedly famous mark as Defendants’ own mark or
to identify Defendants’ services.
 
Last comment: The best way to understand this result may be plaintiffs
are actually attempting to use the whole film as the trademark/the film as a trademark
for itself, which is what a pure licensing model means in this context, and
that can’t work without conflicting with Dastar.

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Reading list: dilution fails an empirical test

Posted on March 14, 2016 by rtushnet
Christo Boshoff , The lady doth protest too much: a
neurophysiological perspective on brand tarnishment, 25 J. Product & Brand
Management (2016):
 
[C]onsumers’ emotional responses to
a series of brand tarnishment advertisements are investigated in this study.
The purpose is to assess whether attempts to harm a trademark by tarnishment
lead to negative emotional responses and eventual economic harm, as suggested
by many plaintiffs in trademark dilution legal disputes….
 
Twelve brands were investigated
[using EEG and EMG]. The brands were selected because they were ‘well-known’
but not overly famous brands…. Participating subjects were exposed to a static,
on-screen print advertisement of the senior brand (untarnished) and of the
tarnished brand [tarnished using humor]…
 
In the case of exposure to the
tarnished brands, all but two (the clothing retailer Cropp Village (EEG = 0.394;
p < 0.05) and Sony Ericsson (0.4067; p < 0.05) of the EEG responses were
neutral. However, contrary to expectations, these responses were also positive.
This result implies that these three [two?] brands will most probably not be
harmed if the ‘tarnishment’ consists of social commentary. It could also
suggest that consumers can differentiate between different forms of
tarnishment, and that tarnishment involving social commentary is not frowned
upon. This may be because the consumer agrees with the social commentary, or
finds it amusing.
 
… Based on the results of this
study, it appears as if the tarnishment of relatively strong brands does not
elicit much emotional response among consumers. Most neurophysiological
responses to the brand tarnishment were neither negative nor positive.
 
This conclusion about neutral
emotional responses holds, regardless of the temporal order of the exposure. In
other words, regardless of whether the respondents were exposed to the
tarnished brand first or to the untarnished brand first, the emotional responses
were the same. The conclusion also holds for different product categories. In
other words, the same empirical results emerged, irrespective of whether respondents
were exposed to ‘rational/thinking’ brands or ‘emotional/feeling’ brands. These
results seem to provide some support for the view that well-known trademarks/brands
are practically immune to dilution. But it also shows that tarnishment cases
should each be considered on their own merit….
 
The primary contribution of this
study is that, for the first time, some light is shed on consumers’ emotional
responses to brand tarnishment. Regardless of the neurophysiological measure
used, the results demonstrate that the responses to brand tarnishment are
generally neutral. The results thus do not suggest a strong likelihood of
severe economic harm due to negative emotional responses to brand tarnishment among
consumers.
 
On the title, see Christine Haight Farley, The Feminine
Mystique of the Brand in Trademark Law Today.

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Private Law & IP, Remedies and Prizes

Posted on March 12, 2016 by rtushnet
Session 7: Remedies and Prizes
Moderator: Chief Judge Patti B. Saris (D. Mass.): 50% of all
claim constructions are reversed, and 80% of all damages.  So judges are interested in improvements.
 
John M. Golden, “Reasonable Certainty in Contract and Patent
Damages”: Damages controversy and uncertainty about reasonable royalties. There’s
eBay, then sometimes huge amounts,
and apportionment—not a new issue, but reappeared under reasonable royalty
analysis. Not clear there ever will be a great methodology, and there certainly
isn’t now.  Only easily done with a
limited subset, as when a new process lowers costs by $1.  Was a court appointed expert in Motorola case
w/Posner presiding by designation: trying to figure out value of particular
gestures for a tablet/cellphone.  Posner
threw out basically all the party experts; almost his only materials were reports
produced by the experts who’d been thrown out on Daubert grounds; Posner then decided there were no damages that
could be proven, and no need for an injunction, so he threw out the case.  That was reversed, but it did solve Golden’s
immediate problem.
 
What could we do to reach an acceptable result?  Reasonable certainty standard in contract law
might be used to address situations in which damages were difficult to
assess.  Statute here says that damages
shall be awarded adequate to compensate for the infringement, and in no event
less than a reasonable royalty.  Learned
Hand: reasonable royalty is really “a device in aid of justice, by which that
which is really incalculable shall be approximated, rather than that the
patentee, who has suffered an indubitable wrong, shall be dismissed with empty
hands.” Admission that it’s a replacement for disgorgement, also equitable.
 
Georgia-Pacific multifactor test: courts look to it, more
than a dozen factors; not clear that many of them are useful in particular
cases. The framework factor is “hypothetical negotiation approach.”  What a willing licensor and licensee would’ve
agreed to as a royalty if they’d successfully negotiated before infringement began,
w/assumption that relevant claims were valid and would be infringed by d’s
activity.  At least if injunction is off
the table, we get a circularity problem out of this approach.  Cross-licensing and other terms such as
benchmarks/milestones are common in real agreements.  Difficult counterfactual!  Uncertainty is not surprising/susceptible to
elimination.  So we need to work with
uncertainty.

Reasonable certainty doctrine in contract arose in the 19th c.
relaxing the requirements for showing damages, while still putting some limits
on what a jury could do.  Certainty
doctrine: consequential damages allowed if provable with certaintyàover
time became reasonable certainty.  Rise
of expert testimony; decline of rule against allowing a new business that
failed because of the breach to recover lost profits.
 
Potential factors in intensity of demand for proof:
blameworthiness or egregiousness of conduct; state of art/availability of evidence;
magnitude of damages alleged—if $400,000 claimed, then shouldn’t require $1
million to prove it.
 
Commentator: Keith N. Hylton: Note that standard for
reviewing contract damages is abuse of discretion—much more generous to lower
court.  Don’t want to have damages so
variable that certain activities become unpredictably risky.  Need to police courts/juries’ damage awards
may differ as between contracts and torts in terms of private
expectations/managing liability (replicating different methods of private
interactions)—so which should be the model for patent?  Tort law is more a mix of public-private than
contract is.  There is no pure private
law (though criminal law may be as close to pure public law as you can get).
 
Ted Sichelman, “Patents, Prizes, and Property Rules”: recent
scholarship questions sharp distinctions between patents and prizes. Taxes,
subsidies, price controls can make the two look quite similar.  E.g., gov’t prize funded by sales tax on product,
rather than general tax, creates deadweight losses that mirror those of
patents.  Patents w/subsidies from the
general fisc for consumers priced out of the market resembles the zero
deadweight loss of a prize, cf. pharma.
 
Fungibility blurs distinction b/t patents and prizes, public
and private. Ben Roin says patents are still different (as do Hemill &
Willete (sp?)).  Fungibility implies the
key concerns are less about deadweight losses than transaction and error costs.  Roin says property rules allow patentees to
fully exclude third parties, esp. competitors; prizes provide no such absolute
property right.  In dynamic setting,
property rights may result in substantially lower transaction costs in
important circumstances, providing more innovation incentives (in other
circumstances property rights may make transaction costs substantially higher);
there can also be endogenous effects on transaction costs.  Why are there patents even when gov’ts fully
set drug prices?   Roin says: allows pharma co to credibly
threaten not to provide the product at all to the country.  Why is that rational/credible? It’s a dynamic
repeat game among many countries.  Forces
the next gov’t to negotiate in good faith, lowering transaction costs of
innovating and disseminating over the long run.
 
More important role for property rules in patent:
commercialization/coordination, from Kitch. 
Lowers the cost of coordination in the post-invention phase.  Central to patent/prize distinction—follow-on
invention is not key as Merges & Nelson say; Kitch also includes
commercialization such as testing, marketing, pricing, not just follow-on
invention.  The role of property rules in
pharma commercialization may thus yield greater benefits than narrower power of
renegotiation w/gov’t actors, even if gov’t is setting drug prices—can still
exclude others from follow-on activities for commercially viable drug.
 
What does this say about regulatory model of patents?  I have paper on purging patent of private law
remedies; aren’t I contradicting myself like a political candidate?  One must distinguish between goals and
means.  Purging patent law of private law
goals was my aim; patent’s goals are primarily public in nature.  Innovation is a public oriented goal; at the
same time, we may want to achieve them through private oriented means like
property rights.
 
But it’s important not to forget about the aims.  Compare tort law, where individual interests
play an important role—the bilateral right-duty relationship—then a private law
baseline for remedies is essentially mandated: a wrong has occurred and we want
to return the victim to the status quo ante. Patent is not like that.  One can unite public and private aspects of
patent through functionally inclusive approach: private oriented legal rights,
duties, powers, and concepts (Cohen’s transcendental nonsense) can serve public
oriented functional aims.
 
Commentator: John F. Duffy: Patent racing self adjusts the
patent prize. It doesn’t dissipate rents. 
It dissipates private rents.  Even
if we had a prize system, we might have patent-like litigation from
competitors.  Patent damages again
harness private parties to define the appropriate scope of the right—both plaintiffs’
and defendants’ attorneys work to define the scope of the right through
assertion and challenge.
 
Tort law is often public too: punitive damages aren’t about
corrective justice; class actions aren’t really either.  Qui tam action; citizen suits to enforce anti
pollution statutes—tort or tort-like things that do what patent tries to do;
don’t give so much to people who claim that tort is about corrective
justice. 
 
Q: different conceptions of IP–are we arming a private actor with the right to sue in order to achieve a public good, as in qui tam/punitive damages, or with a right to corrective justice (recognizing that it might be both).

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