Another trademark claim asserted for political purposes

Paul Alan Levy responds
to a C&D against a candidate for local government who is being threatened
with claims of trademark infringement for using the city’s logo on his campaign
materials.  As always, it’s a
refreshing read
. Of particular note, Levy points out that §2(b) bars
registering the insignia of any state or municipality; the claimant’s
registration is in the name of “City of Mesa Municipal Development
Corporation,” for specialized services such as construction planning.  The registration did not claim that it was
for a  city logo, and yet the C&D
letter asserts that it is.  The PTO has
apparently been construing §2(b) narrowly to allow some government agencies to
register logos for narrow purposes, and Public Citizen questions whether this
is a permissible interpretation of the statute. 
To the extent that the registrant represents that the mark is in fact the city’s logo, Levy notes that
§2(b) invalidates any registration, whether the registrant is the city or some
other entity.  Given the claims made to
the candidate, he contends, the claimant will be estopped from arguing that it
isn’t the city’s logo.

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Who’s responsible for Amazon product detail pages for TM and (c) purposes?

Oriental Trading Company, Inc. v. Yagoozon, Inc., 2016 WL
2859603, No. 13CV351 (D. Neb. May 16, 2016)
 
This is a pretty interesting dispute because it suggests
that Amazon’s business practices may be exposing certain entities who sell
through Amazon to substantial business risks, and even discovery may leave outstanding issues unknown.
 
Yagoozon sells various novelty products through Amazon; OTC
sued it for copyright and trademark infringement, as well as deceptive trade
practices under Nebraska’s Uniform Deceptive Trade Practices Act and violations
of the Nebraska’s Consumer Protection Act. The claims are apparently based on
the fact that, for various products OTC sells, consumers can also buy from
Yagoozon on pages using OTC’s photos (and perhaps other elements).
 
The court denied OTC’s motion for summary judgment.  As to direct copyright infringement, the
parties disputed whether Yagoozon, Amazon, or another third-party seller was
responsible for displaying the copyrighted photographs. Although OTC argued
that Yagoozon was the one to select the relevant Amazon product detail pages on
which to sell its products and also used the product detail pages whenever it
sold inventory, there were genuine issues of material fact exist as to whether Yagoozon
“created the product detail pages at issue, edited the pages, and/or is
ultimately responsible for the displaying of plaintiffs’ copyrighted
photographs.”
 
“[A]ccording to Amazon’s own documents, in order to create a
product detail page, the seller/creator must be advertising a product that is
not already available on Amazon.” Once a detail page has been added, the
product becomes part of Amazon’s catalog, and other sellers can create listings
for the same product.  Amazon also allows
product detail pages to be edited after their creation.  Which sellers have control over the product
detail page when multiple sellers request edits is determined by Amazon’s
algorithm.  OTC didn’t submit evidence allowing the
court to conclude as a matter of law that Yagoozon created or was otherwise
responsible for the product detail pages at issue. Likewise, there were
disputed issues about whether Yagoozon intentionally induced or encouraged either
Amazon or any other third-party seller to directly infringe OTC’s copyrighted
photographs.
 
These same issues precluded summary judgment on direct and
contributory trademark infringement claims. 
OTC argued that Yagoozon chose to use the product detail pages at issue,
making it responsible for infringing sales of competitor products under OTC’s
marks. But there were genuine issues about whether Yagoozon intentionally
induced Amazon or any other third-party seller to infringe, or whether it continued
to supply products knowing that the recipient was using the product to engage
in trademark infringement.
 
The same reasoning applied to the state law claims.

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Second Circuit muddies nominative fair use more than 9th Circuit ever has

International Information Systems Security Certification
Consortium, Inc. v. Security University, LLC, No. 14-3456-cv (2d Cir. May 18,
2016)
 
The Second Circuit manages to make its multifactor confusion
test worse (and you thought it had already hit rock bottom by considering
quality of the goods, which hurts the defendant if there’s a quality difference
and hurts the defendant if there’s equal quality).  ISC2 sued Security University and Sondra
Schneider, alleging that SU’s use of ISC2’s certification mark constituted
trademark infringement and dilution. 
The district court’s finding of lack of fame and thus no dilution isn’t
challenged on appeal.  The court of
appeals reversed the district court’s finding of nominative fair use and
remanded both for consideration of the multifactor test, now with three new
factors added, and also for consideration of endorsement confusion as well as
source confusion.
 
ISC2 registered a certification mark, CISSP, to denote a “Certified
Information Systems Security Professional” who has met certain requirements and
standards of competency in the information security field, including passing
the CISSP certification examination that ISC2 administers.  Schneider is CISSP-certified, and offers
information security training through SU, which used the CISSP mark in
connection with certification-specific training courses.  ISC2 doesn’t object to SU using the mark to
indicate that its services attempt to prepare students for the CISSP certification
examination. SU instructors also may accurately identify themselves as being
CISSP-certified, so long as they follow ISC2’s regulations governing the use of
the mark.
 
But ISC2 objected to ads run between 2010 and 2012, which,
ISC2 argued, misleadingly suggested that SU’s instructor, Clement Dupuis, had
attained some higher level of certification as a “Master CISSP” or “CISSP
Master.” E.g., “MASTER THE CISSP DOMAINS with the Master CISSP Clement Dupuis”;
“You are
taught by CISSP Master Clement Dupuis, the father of http://www.ccure.org website.”  When ISC2 objected, Schneider responded that “SU
will continue to use the word Master. Master Clement Dupuis is a Male Teacher
[and] thus he is a Master according to the dictionary.” (I share Eric
Goldman’s distaste for this response
.)
 
The district court found that, applying nominative fair use,
there was no source confusion.  Adding “Master”
didn’t implicate source confusion or mislead anyone about who was offering the
services in question.  It reasoned that, “[b]ecause
a certification mark is intended to signal a quality-related characteristic of
the good, rather than source or origin, . . . it is hard to imagine a case in
which use of a certification mark by a person who has met the requirements for
certification would likely lead to confusion as to source or origin, or would
not be a nominative fair use.”  Though the
district court “asserted” that no reasonable juror could find sponsorship or
endorsement, “its conclusion was based entirely on the fact that the
advertisements did not ‘suggest[] that (ISC)2 itself is offering the classes.’”  The district court also pointed to
disclaimers at the bottom of some of the ads disclaiming
endorsement/sponsorship by ISC2.
 
The court of appeals began by chiding the district court for
not applying the standard multifactor test. 
“[T]he Polaroid factors are not, of course, ‘exclusive’ and should not
be applied ‘mechanically.’ No single factor is dispositive, and cases may
certainly arise where a factor is irrelevant to the facts at hand. But it is
incumbent upon the district judge to engage in a deliberate review of each
factor, and, if a factor is inapplicable to a case, to explain why.” 
 
Also, confusion over source isn’t the only actionable
confusion; confusion over affiliation or sponsorship is also actionable. Weight
Watchers International, Inc. v. Luigino’s, Inc., 423 F.3d 137 (2d Cir. 2005)
(confusion over endorsement of or other involvement in defendant’s product was
actionable); Original Appalachian Artworks, Inc. v. Granada Electronics, Inc.,
816 F.2d 68, (2d Cir. 1987) (unauthorized importation and sale of Cabbage Patch
dolls manufactured in Spain with the foreign language adoption papers and birth
certificate infringed because plaintiff’s “domestic good will is being damaged
by consumer confusion caused by the importation of the [Spanish] dolls,” which
were materially different from American dolls).
 
Further, a certification mark can be infringed in numerous
ways. A professional who uses the mark without being certified can infringe, as
can a competing certification organization, but it’s also possible to infringe
in other ways, even if the party has met all the requirements for certification.
The court of appeals pointed to a TTAB ruling that “even where a defendant’s
product contains ingredients which have been certified by the owner of a
certification mark, the defendant’s incorporation of that certification mark
into its own composite trademark might be likely to cause confusion as to
sponsorship, affiliation or connection.” Tea Bd. of India v. Republic of Tea,
Inc.,  U.S.P.Q.2d 1881 (T.T.A.B. 2006).  Thus, SU  may have infringed on ISC2’s certification
mark by identifying its certified instructor as “Master CISSP” and “CISSP
Master.”  Just to hammer the point home,
the court of appeals noted that it wasn’t necessary that the defendant’s use be
use “as a [certification] mark.” Even though neither ISC2 nor SU offers a “Master
CISSP” or “CISSP Master” certification, “customers [may] be led to believe
[ISC2] has introduced a new line” of certifications. The court could also take
into account the lack of such a certification in the proximity of the
products/bridging the gap factors.
 
So what is the
proper analysis?  “This Court has
repeatedly urged district courts to apply the Polaroid factors even ‘where a factor is irrelevant to the facts at
hand.’”  Nominative fair use is a test
that replaces the ordinary multifactor test in the Ninth Circuit and thus is
used to determine whether confusion is likely. 
It’s an affirmative defense in the Third Circuit, which “affords
defendants broader protection” because it applies even if confusion is likely. [Note
that this is a really weird reading of the defense; in practice the Ninth
Circuit version is a ton broader.]  The
court of appeals rejected both approaches; nominative fair use isn’t an
affirmative defense because it’s not in the statute, unlike descriptive fair
use.
 
And the Ninth Circuit approach is wrong because “we see no
reason to replace the Polaroid test
in this context,” even though “we also recognize that many of the Polaroid factors are a bad fit here and
that we have repeatedly emphasized that the Polaroid
factors are non-exclusive.” [This is really, really dumb lumping.  “Bad fit” and “irrelevant” aren’t reasons?  The Second Circuit has doubled down on its
initial decision, decades ago, to treat infringement of competing and
noncompeting goods with the same test.] 
 
In Tiffany v. eBay,
the Second Circuit already “recognized that a defendant may lawfully use a
plaintiff’s trademark where doing so is necessary to describe the plaintiff’s
product and does not imply a false affiliation or endorsement by the plaintiff
of the defendant.”  [Apparently the court
is not overruling its prior decision in Tiffany,
even though that decision didn’t apply the Polaroid
factors or fulfill its alleged duty to explain why the Polaroid factors didn’t apply, because reasons.  If I were a defendant, I would point to this
court’s endorsement of Tiffany to
justify sticking with the initial analysis.]
 
As a result, “district courts are to consider the Ninth
Circuit and Third Circuit’s nominative fair use factors, in addition to the Polaroid factors.”  Specifically, courts are to consider:
 
(1) whether the use of the
plaintiff’s mark is necessary to describe both the plaintiff’s product or
service and the defendant’s product or service, that is, whether the product or
service is not readily identifiable without use of the mark; (2) whether the
defendant uses only so much of the plaintiff’s mark as is necessary to identify
the product or service; and (3) whether the defendant did anything that would,
in conjunction with the mark, suggest sponsorship or endorsement by the
plaintiff holder, that is, whether the defendant’s conduct or language reflects
the true or accurate relationship between plaintiff’s and defendant’s products
or services.
 
In assessing (2), courts are to consider whether the alleged
infringer “step[ped] over the line into a likelihood of confusion by using the
senior user’s mark too prominently or too often, in terms of size, emphasis, or
repetition.”  In assessing (3), “courts
must not, as the district court did here, consider only source confusion, but
rather must consider confusion regarding affiliation, sponsorship, or
endorsement by the mark holder.”  [How
would you tell whether the defendant did “anything” other than using the mark that
would suggest sponsorship or endorsement? 
I will let the classic X-Files episode Jose Chung’s From Outer Space
answer for me:]
 
“How the hell should I know?”
[So, does comparative advertising qualify for the defense in
the Second Circuit?  It does in the Ninth
Circuit version because using the P’s mark is necessary to identify the P,
which is all that the Ninth Circuit requires. 
It does not in the Third Circuit version because using the P’s mark is
not necessary to identify the D, even if it is necessary to convey the
comparative message.  If district courts
are to consider both circuits’ factors, as suggested by the Second Circuit’s
initial language, then comparative advertising at least has a case for
nominative fair use protection, but if courts are to consider only the
restatement offered by the Second Circuit here, which tracks the Third
Circuit’s version, then comparative advertising should be excluded.]  
 
Remand “for reconsideration of the Polaroid factors in addition to the nominative fair use factors,
keeping in mind the numerous types of confusion that are relevant to an
infringement analysis other than mere source confusion and the numerous ways in
which a certification mark may be infringed.” 
That ought to be fun.

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Consultant’s speech to potential customers wasn’t pure scientific speech protected by First Amendment

Underground Solutions, Inc. v. Palermo, 2016 WL 2866099, No.
13 C 8407 (N.D. Ill. May 17, 2016)
 
Related decisions discussed from 2012,
2014,
and 2015.  Plaintiff UGSI sued Palermo for trade libel
and false advertising under California and federal law (having previously
dismissed a tortious interference claim). 
UGSI alleged that Palermo, as a paid spokesperson for one of UGSI’s
competitors, made false or misleading statements about UGSI’s products,
subterranean pipes used for water transmission. 
Here, the court granted partial summary judgment in favor of UGSI on the
Lanham Act claim and dismissed the trade libel claim.
 
This is what I love about Lanham Act cases: you learn about
details of how the world works.  Underground
water pipes include ductile iron pipe, high-density polyethylene (HDPE) pipe,
and polyvinyl chloride (PVC) pipe.  Rapid crack
propagation (RCP) is pretty much what it sounds and can occur up to several
hundred feet per second; it can happen in any type of pipe when the right
(wrong) event occurs, such as someone bending or pressurizing a pipe too far or
an external object hitting the pipe.  Whether
RCP happens after a break depends on many factors, including the pipe’s
diameter and wall thickness, the internal operating pressure, and the pipe’s
chemical makeup. Although RCP can’t occur in 100% water pressurized pipe,
a small amount of air in a pipe could enable RCP.
 
Municipalities typically use more than one pipe to create a
network.  HDPE pipe sections are often
‘butt fused,’ connected end-to-end by thermal fusion techniques. Ductile iron
or PVC pipe traditionally uses ‘bell-and-spigot’ joints to latch each pipe to
the next. UGSI is the only producer of Fusible PVC pipe, where thermal fusion eliminates
the need for bell-and-spigot junctures. “Some Fusible PVC pipes stretch
seamlessly for miles, which simplifies and speeds up installation, avoids the
potential for corrosion and seepage intrinsic to bell-and-spigot joints, and
eliminates associated maintenance requirements and costs.”
 
Palermo operates a consulting firm that provides litigation
consulting and failure analysis services. During the relevant period, Palermo
had a consulting agreement with Performance Pipe, which makes HDPE pipe. “Along
with two HDPE pipe interest groups (the Plastics Pipe Institute and the
Alliance for PE Pipe), Performance Pipe paid Palermo to attend trade shows and
give presentations about Fusible PVC pipe.” 
Palermo designed a PowerPoint slideshow for these presentations, and put
it on his website.  The slideshow
‘Plastic Pipe for Water Distribution – What You Need to Know About RCP and Butt
Fusion Integrity,’ was primarily focused on illustrating the high RCP risk
associated with butt-fused PVC pipe, rather than butt-fused pipe of all types.  The presentation stated that PVC pipe is more
vulnerable to RCP than HDPE and that butt-fused PVC pipe’s RCP risk is even
higher, because “without bell-and-spigot joints to relieve pressure, cracks can
spread farther and faster without meeting resistance.” 
 
Palermo began with twenty Fusible PVC RCP failures in the
field, from 43 feet to 3,300 feet long.  “He
showed pictures of massive cracks in the butt-fused PVC pipe at some failure
sites, and he provided details of the damage done and replacement requirements
for some of the RCP events described.”  He
then discussed test results from lab experiments on PVC and HDPE pipe, showing
test results that indicated that HDPE’s resistance to RCP was higher than that
of PVC for given water/air mixes.  It’s
possible for pressurized pipes to contain up to 10% air, and he showed graphs
indicating that when a PVC pipe has 10% air volume, it is vulnerable to RCP at
much lower pressures than HDPE pipe with 10% air.  Palermo claimed that modern HDPE pipes had even
higher critical pressures (the point at which the vulnerability emerges) “which
meant that ‘RCP is never an issue.’”  Further,
Palermo reported that HDPE butt-fused joints passed tests that PVC butt-fused
joints didn’t.
 
As a result, some people exposed to the slide show were
reluctant to use or recommend Fusible PVC pipe. 
For example, “Julie Morrison, a consulting engineer in Illinois,
testified that she had been open to the possibility of recommending Fusible PVC
for a project in Illinois but had changed her mind after finding and reading
Palermo’s presentation online.”  UGSI
produced a slide show of its own which it used to reassure a contractor that
expressed grave concerns based on Palermo’s slide show.  UGSI sent Palermo a C&D in March 2012,
and in July 2013, Palermo said that he would “no longer provide negative
information about butt fusion of PVC Pipe” because he felt “UGSI [had]
conducted significant testing to develop the proper butt fusion procedure for
PVC Pipe.” Nonetheless, Palermo continued to deliver his message at trade shows
and on the Internet.
 
Palermo argued that the Lanham Act claim had to fail because
he was engaged in private, noncommercial speech, trying to advance scientific
inquiry on a matter of public concern rather than advertising or promoting
HDPE.  But “an activity is promotional if
it involves dissemination to anonymous members of the purchasing public.”  Members of the polyethelene pipe industry
paid Palermo to deliver presentations to anonymous purchasers and prospective
consumers at trade shows throughout the country, converting his speech into
commercial speech for Lanham Act purposes.  Since he was paid to make his statements in a
commercial setting to potential purchasers, his statements weren’t made purely
to advance scientific discourse.  Cf.
Eastman Chem. Co. v. Plastipure, Inc., 775 F.3d 230 (5th Cir. 2014) (statements
made in a commercial setting and directed at customers “do not become immune
from Lanham Act scrutiny simply because their claims are open to scientific or
public debate. Otherwise, the Lanham Act would hardly ever be enforceable—many,
if not most, products may be tied to public concerns with the environment,
energy, economic policy, or individual health and safety.”) (internal quotation
marks omitted). Moreover, commercial speech need not directly propose a
commercial transaction.  Jordan v. Jewel
Food Stores, Inc., 743 F.3d 509 (7th Cir. 2014). 
 
UGSI argued that there were five false or misleading
statements in Palermo’s slide show: (1) Four of the crack lengths were grossly
inaccurate, overstating crack lengths by hundreds or thousands of feet
(specifically, reporting a crack as 300 feet long when it was only 3 feet long;
2200 versus 1700, 800 versus 430, and 2000 versus 200, plus stating that 13
miles of pipe needed to be replaced after one incident, where there were only 7
miles of pipe to begin with). (2) Palermo described PVC’s critical pressure at
10% air volume, as shown by the key study, as much lower than it was.  (3) Palermo used the study even though
Fusible PVC used far more advanced pipe than that tested in the study.  (4) Palermo described cracks without
disclosing the installation or maintenance errors that caused them to rupture
in the first place. (5) The joint tests Palermo used weren’t designed to test
PVC.
 
The study on which Palermo relied to report PVC’s critical
pressure at 10% air volume unambiguously said it was 2.3 bar, whereas Palermo said
it was 1.6 bar.  He argued that this
simply reflected scientific disagreement, and that he used the study’s
regression line and data generated by another lab (the one that conducted the
joint tests Palermo used):
 
Because scientific truth is
elusive, Palermo says, settling the dispute between methodologies should be
left to the scientific community. But Palermo’s slides do not indicate that he
was approximating, nor do they make reference to any other tests than those
conducted by Greenshield and Leevers. Instead, they unequivocally state that
Greenshield and Leevers found that the critical pressure at 10% air volume was
1.6 bar. In fact, they did not. Assigning a lower critical pressure than the
test actually indicated is a classic example of literal falsity.
 
The evidence would permit a jury to determine that Palermo
did not materially misrepresent the length of one crack, where the damage had
to be approximated. However, it was undisputed that Palermo falsely reported
the amount of pipe that needed to be replaced in one incident and the crack
lengths in three.  Palermo argued that he
substantially underestimated another crack length, favoring UGSI.  But for liability purposes it didn’t matter
that one of his literal falsities favored UGSI; the others didn’t.  Thus, the literally false statements about critical
pressure at 10% air volume, the three crack lengths, and the amount of pipe
that needed to be replaced in one city violated the Lanham Act, without further
need to show consumer confusion; UGSI was entitled to summary judgment on
liability for these statements.
 
UGSI asked for an injunction against these statements.  Palermo argued that Winter and eBay prevented
the court from presuming irreparable harm. 
The circuits have an inconsistent treatment: the Fourt Circuit continues
to state that false advertising is typically irreparable “because diminished goodwill
is difficult to quantify,” while the Third Circuit expressly disavowed a
presumption of irreparable harm from false advertising.  Because there were still outstanding falsity
issues on liability, the court decided to wait until after the jury trial,
which would result in further findings about the remaining statements.  This would allow the court to make a better
finding on whether a permanent injunction was appropriate.
 
As for misleadingness, UGSI argued that it showed
substantial differences between the chemical makeup of the pipes tested in the fifteen-year-old
study on which Palermo relied and its own PVC pipe.  UGSI also made other criticisms of whether
the studies on which Palermo relied reflected real conditions. The court found
that genuine factual disputes remained on these and the other remaining
falsity/misleadingness claims.  One of
the older study’s authors, for example, testified that product improvements
likely didn’t change the fundamental qualities of the pipe for the purpose of
his test results, while UGSI’s experts testified that its pipe had a
substantially different molecular weight, which the study’s author conceded was
the most relevant factor in determining fracture resistance.
 
Palermo argued that there couldn’t be any misleadingness
because UGSI didn’t provide a survey showing confusion.  But surveys aren’t always required; Mead
Johnson & Co. v. Abbott Labs., 201 F.3d 883 (7th Cir. 2000), on which
Palermo relied, actually rejected the district court’s improper reliance on a
survey. UGSI showed evidence that one consulting engineer developed concerns
after seeing a slide show, and that another feared that UGSI’s product was
dangerous. This evidence supported a reasonable inference that they were
confused.
 
Palermo then argued that UGSI wasn’t harmed by any misleadingness,
because the confused consumers testified that they didn’t end up making
decisions based on his presentation, after reassurance from UGSI.  “It cannot be the law that where a plaintiff
succeeds in retaining its customers by spending an abundance of time, energy,
and money to combat false advertising, the defendant who produced and
disseminated the false advertisement or commercial promotion escapes liability
for violating the Lanham Act.”  Because
of UGSI’s need to reassure at least one consumer, a reasonable jury could find
that Palermo’s slide show diminished UGSI’s goodwill and reputation.
 
As for the trade libel claims, they required actual trade
diversion, and UGSI didn’t provide evidence that particular purchasers
refrained from dealing with it because of Palermo.  Thus, Palermo won summary judgment.
 
Palermo argued that the same harm problems justified summary
judgment on the California false advertising claim, because of Proposition 64’s
lost money or property requirement.  UGSI’s
“significant resources” spent rebutting Palermo’s statements, however,
qualified.  Nor did the First Amendment
preclude liability, for the reasons given above.

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Court upholds SF’s required warning on sugar-sweetened beverage ads, including pure logos

American Beverage Association v. City & County of San
Francisco, No. 15-cv-03415 (N.D. Cal. May 17, 2016)
 
The court denied plaintiffs’ attempt to enjoin a
sugar-sweetened beverage warning imposed on certain soda ads by San Francisco.  The warning is: “Drinking beverages with
added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a
message from the City and County of San Francisco.” S.F. Health Code § 4203(a).
  The ordinance’s findings included that
consumption of sugar-sweetened beverages (SSBs) was associated with numerous
health problems; that obesity is a big problem in the US and SF specifically,
particularly with low-income and nonwhite populations; that SSBs contribute way
too much sugar and too many empty calories to the average American diet; that
even moderate consumption of SSBs is associated with health risks; that children
are particularly at risk (“On average, children consumed 11.96 teaspoons of
added sugars from sodas and fruit drinks per day – 47% of their total intake of
added sugars.”); that the results are costly for California; that food labels
typically don’t show whether sugar has been added; and that young adults are
targeted by SSB marketers.
 
Thus, the warning, which must occupy at least 20% of the
area of each SSB ad.  Some beverages are
specifically excluded, such as milk and milk alternatives and 100% natural
fruit or vegetable juice. Covered ads include “any logo, that identifies,
promotes, or markets a [SSB] for sale or use that is any of the following: (a)
on paper, poster, or a billboard; (b) in or on a stadium, arena, transit
shelter, or any other structure; (c) in or on a bus, car, train, pedicab, or
any other vehicle; or (d) on a wall, or any other surface or material.”  Newspaper, internet, TV and similar ads are
excluded, as are containers or packages for SSBs; vehicles used by businesses
that make, distribute, or sell SSBs; standalone logos under 36 square inches; shelf
tags/labels; and certain signs permitted before the law became effective.
 
Plaintiffs argued that the ordinance covered noncommercial
speech, such as Coke ads proclaiming “Love Wins” after the Supreme Court’s
marriage equality ruling, and publicity for the Pride Parade and the Chinese New
Year’s Festival on signs depicting soda products and logos. The court thought
it was debatable whether all of the examples involved inextricably intertwined
commercial and noncommercial speech, citing Jordan v. Jewel Food Stores, Inc.,
743 F.3d 509 (7th Cir. 2014).  Even if
those were examples of noncommercial speech, plaintiffs couldn’t succeed on a
facial challenge because they didn’t show that a substantial amount of noncommercial
speech would be affected in relation to the amount of commercial speech
regulated.
 
Zauderer v. Office of Disciplinary Counsel of Supreme Court,
471 U.S. 626 (1985), not strict scrutiny, applied.  In Retail Digital Network, LLC v. Appelsmith,
810 F.3d 638 (9th Cir. 2016), the Ninth Circuit held that Sorrell v. IMS
Health, Inc., 131 S. Ct. 2653 (2011), required the application of strict
scrutiny to content-or speaker-based restrictions on nonmisleading commercial
speech regarding lawful goods or services. 
But Retail Digital involved a
restriction on speech, not a disclosure requirement.  And Zauderer
applies to disclosure requirements whether or not the relevant government
interest is preventing consumer deception.
 
Compelled disclosure doesn’t violate the First Amendment so
long as the disclosure requirement is reasonably related to the state’s
interest. Plaintiffs argued that some greater scrutiny was required because the
warning was imposed only when they decided to speak in the first place, rather
than being triggered by a transaction. 
But Zauderer was the same
situation—the lawyer decided to advertise that there’d be no fees if the case
failed, without disclosing that there’d be costs.  In the court’s view, Zauderer was basically a rational basis standard; it wasn’t even
clear that “factual and uncontroversial” was required, or whether that was just
the Court’s description of the disclosure in Zauderer itself, as long as the disclosure was “reasonably related
to the State’s interest.”
 
Nonetheless, the court continued to apply the “factual and
uncontroversial” requirement, interpreting it to mean that the compelled
disclosure “must convey a fact rather than an opinion and that, generally
speaking, it must be accurate.”  “Uncontroversial”
didn’t require more than accuracy, because the requirement shouldn’t “be so
easily manipulated that it would effectively bar any compelled disclosure by
the government,” particularly “where public health and safety are at issue.” As
the court had previously held, “[a] ‘controversy’ cannot automatically be
deemed created any time there is a disagreement about the science behind a
warning because science is almost always debatable at some level.”  Here, the warning was accurate.
 
Plaintiffs argued that the warning was misleading because it
suggests that “consuming beverages with added sugar is dangerous regardless of
one’s diet or lifestyle” and that “consuming beverages with added sugar
necessarily and inevitably contributes to . . . tooth decay at any level of
consumption.”  But the warning just said
that SSBs “contribute” to tooth decay, which is true, not that they make tooth
decay inevitable.  No reasonable consumer
would interpret the warning as suggested by the plaintiffs; the Zauderer-related case law doesn’t give
an interpretive standard, but the court couldn’t see what other standard could
apply; plus, claims are often evaluated from the perspective of a reasonable
consumer, as in false advertising law.  “Contribute”
isn’t as strong as “causes,” and to hold otherwise would cast doubt on things
like tobacco warnings that say “causes” even though lung cancer isn’t
inevitable for smokers. 
 
Nor does it matter that other things cause tooth decay;
underinclusiveness is not a problem under Zauderer,
because “governments are entitled to attack problems piecemeal, save where
their policies implicate rights so fundamental that strict scrutiny must be
applied. The right of a commercial speaker not to divulge accurate information
regarding his services is not such a fundamental right.”  The court concluded that it was ok to target
a significant source of sugar per serving, particularly because it didn’t
provide healthful nutrients as milk and juice do.
 
The same basic reasoning supported the obesity/diabetes
warning.  “[N]o reasonable consumer would
likely construe the warning as specific to him or her and instead would
understand the warning is directed to the general public.”  Even if, as plaintiffs argued, SSBs represented
only 5% of total caloric intake, each serving still offered a substantial
number of calories: one serving size was more than 10% of a 2,000 calorie/day
diet.  Dietary guidelines recommend a
daily limit of 10% of total calories for added sugars, but a single 20-ounce
serving exceeds that limit, and it’s worse for kids.
 
Plaintiffs also challenged the size of the warning, but the
City had a reasonable  basis for making
it be 20% of the advertisement. It had to be “of a sufficient size to be salient
– i.e., noticed and attended to – and research on health warnings for tobacco
products has led the World Health Organization, for instance, to
recommend that tobacco product packaging and labeling bear a health warning of
50% or more, but no less than 30%, of the principal display areas. By
comparison, 20% is relatively modest.” Even if a smaller warning would still be
effective, Zauderer isn’t a least
restrictive means test.
 
Plaintiffs argued that the ordinance still had an
unconstitutional chilling effect because the large size of the warning would
deter them from advertising at all or from engaging in counterspeech, because
counterspeech would transform the ad from promotion into a scientific debate.  However, under Zauderer, as long as the disclosure requirements were “reasonably”
related to the State’s interest, the advertiser’s rights were “adequately
protected,” meaning that the degree of any chilling effect was already
accounted for.
 
Plus, the warning was not unduly large.  Because it was text-only, “the force of the
pictorial advertisement is not likely to be overcome by the text warning,” since
ads with color and pictures are more salient. 
In addition, a paper in JAMA showed that ad messages are still effective
in the presence of health warnings on ads: brand information recall remained
very high.  Though plaintiffs’ expert
noted that recall of an ad’s specific message or heading was lower than in the
presence of a warning message, the court pointed out that, “at least for the
products at issue in this case – SSBs – the advertising message is, in effect,
the brand, and brand recall is not particularly affected by a text warning
message.”
 
Moreover, 20% wasn’t unprecedented, though it was
substantial and raised serious questions. “Not only is 80% of the space
available, Plaintiffs have shown that they have employed pithy advertising on
how to achieve balanced diets and lifestyles.”  Moreover, though plaintiffs submitted
declarations from major beverage companies stating that they’d decline to run
covered ads under the ordinance, the court wasn’t persuaded by these self-serving
claims.  Other industries, including
cigarette and smokeless tobacco products, have successfully incorporated
warnings into ads.  If the medium was as
valuable to sales as plaintiffs claimed, they wouldn’t completely abandon it.  Pharmacos, too, still advertise despite
having to disclose warnings.  “[A]s
anyone who has witnessed a television advertisement for pharmaceutical products
will know, the scope of the information required about potential adverse side
effects often makes the disclosure seemingly as long as the advertising message
itself,” but they still advertise.
 
The court turned to irreparable harm: without showing likely
success on the merits, they didn’t show a First Amendment irreparable
harm.  Plaintiffs also identified harm to
their goodwill and reputation, but the court wasn’t convinced; many consumers
were likely familiar with the high sugar content of SSBs and aware of
calorie-induced weight gain. Plaintiffs could also “engage in counterspeech to
combat the asserted harm, not only in the advertisement containing the warning
itself but also through other means and media.”
 
The court did find that the size of the warning raised
serious questions going to the merits, assuming that test survives eBay and Winter, but the balance of hardships didn’t tip sharply in their
favor given the public health interests at stake.

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Notre Dame Deception Roundtable, part 4

Session 4 – Contracts and Securities
Discussion Leaders: Greg Klass, Ann Lipton, Andrea Matwyshyn
 
Matwyshyn: there’s a duty to perform in good faith in the
US, but no duty to negotiate in good faith. If you have an integration
provision, conversations leading up to the contract will be excluded from
contract interpretation. If we let people lie leading up to the contract, what
are we showing about our values and also about differences b/t our contract law
and EU, where lies in negotiations may be actionable.
 
Klass: integration clause won’t prevent a defense of
misrepresentation in negotiations, or the tort of misrepresentation.  Good faith is really interesting, but there’s
a separate issue in contract law, the economic loss rule, which will prevent a
claim for the tort of deception in the performance. So if you lie about your
performance of the contract, only breach damages are available. But a
precontractual lie isn’t covered by the economic loss rule.
 
Silbey: Tort cares more about diffuse harms, even if it’s
hard to make out a claim, than contract. 
Contract is about freedom to contract and freedom from contract, while
tort is a different species of social values law cares about.
 
Klass: you want to look at what work the doctrine of
pre-contract good faith does in EU.
 
Matwyshyn: people have sued over term sheets successfully in
the EU.
 
Klass: before contracting, your duty is not to misrepresent;
you don’t have to look out for the welfare of the other party. You can fight
for a larger share of the pie as long as you play by the rules.  Related question: can you contract out of
fraud liability and say that lying is permitted in your negotiations?  Delaware Ch. Ct. case: the court says you may
not do that.  There is an obligation not
to lie that’s fundamental; but you
can include in your contract a representation of no reliance, effectively
precluding any action for misrepresentation. 
In M&A, seller is often worried about misrepresentation claims, so
they want the buyer to sign an agreement saying it’s not relying on anything
outside the agreement. So all you need is the magic words.
 
Lipton: NY has done this w/sophisticated parties.  Mortgage-backed securities/synthetic CDOs
contracting w/German bank.  Court said
that it was misleading of the P because the P represented that it wasn’t
relying on the D’s representations in the contract. 
 
Klass: Maybe one side understands the magic words and the
other doesn’t, and instead of saying “there’s no fraud liability” which would be
very clear they allow confusion.
 
Lipton: Securities is different b/c of the multiple
disclosure obligations.  Deception rules
then implement the disclosure obligations; it’s about setting up an information
market, and thus it’s not just intentional deception that matters but the
quality of information. Capital formation/market structure as well as consumer
protection.
 
Klass: Buell comes to it as a federal prosecutor with
generic anti-fraud statutes; that’s where he starts, and maybe his approach
focusing on deception is more fit to those.
 
Lipton: there is a rather extensive system of claims that
don’t require any showing of intent—either strict liability or negligence. Puffery piece
by David Hoffman:
his framework doesn’t work for securities b/c there’s no
intention requirement so his proposal to allow Ds to rebut by showing no intent
to defraud is not helpful.
 
Goldman: why the different rules for securities?
 
Lipton: because this is about capital formation.  May have started as consumer protection, but
evolved to want a deep and effective secondary market for trading. You
therefore need a standardized info package. Lots of products can’t be
investigated and are in some ways interchangeable; there are debates about
whether/why the market wouldn’t generate the info w/o requirements. Billions of
trades a minute.
 
Matwyshyn: it’s all about trust. Risk of investing in low
credibility securities and risks of playing poker sometimes aren’t that
different in terms of the numbers.  Maybe
we are fetishizing this area of the economy in ways we don’t others.
 
McG: because for these other historical reasons and purposes
you have such an elaborate set of disclosures, changes the nature of what
deception means.  Information you’re owed
as a backdrop to define what deception is: there is rough consensus about what
has to be disclosed and how.
 
Lipton: there’s now a circuit split on what fraudulent
omission is.  The big antifraud statute,
10(b): whether it’s deceptive to fail to disclose required info under 10(b). If
you have a background expectation it will be disclosed, 2d circuit says that
yes, it’s deceptive; 9th Circuit says no, there has to be something affirmatively
said.  She doesn’t see the 9th
Circuit’s logic. SEC can definitely bring a claim in either case; the case law
is muddled by a view about how much we trust private plaintiffs to bring these
cases when no one actually read the documents b/c it’s all a fraud on the market
theory anyway.
 
McG: gets it back to who are the right parties to sue—it might
not be the people who are deceived. 
Systemic problems stemming from deceptive omissions.
 
Lipton: fraud on the market is very much an injury to the
market, not to heterogenous consumers. We are supposed to use objective
reasonable person standard, but in fraud on the market courts look through the
lens of sophisticated people and in calls to widows they look through
unsophisticated, even though that’s not the formal doctrine.
 
Matwyshyn: classes of trusted intermediaries have special
roles and liabilities in this regime. 
[And that interacts w/puffery and falsity, b/c things that might be
nonfalse if said by others can be false if said by them.]  Frank Pasquale: new tech means we lose some
checks on intermediation we used to have, as w/sophisticated algorithms that
engage in billions of transactions/minute. 
All it takes is one problem and no one is auditing the code.  Historical example: Brokerages lied about
completing trades in-house b/c they couldn’t keep up w/the market: ended up
w/regulatory intervention, lots of closed brokerages.
 
Eric Goldman: interested in the idea that securities market
needs all this regulatory structure to be trustworthy enough to proceed.  What distinguishes this from other markets,
like the eBays of the world where reputation is enough to build a trust
market?  They’re both pushing stuff.  Type I/Type II errors: people sue b/c stock
price went down; he thinks that’s bad. Should be concerned about both types of
errors. 
 
Lipton: Congress made it really hard to bring a securities
fraud case right now; pleading requirements, discovery bar; Type II errors are
really unlikely.
 
Goldman: shows you that a regulatory structure needs
constant tweaking to avoid the pendulum swinging too far. What about securities
led to us building that oversight?  Case
study of too much regulation.
 
Lipton: eBay as a company has the ability to stand behind
sellers. NYSE used to have ability to stand behind companies. Regulation means
it’s less necessary to be on NYSE b/c I know you have met requirements that the
SEC stands behind. If you come from another country w/lower securities laws and
you list here, that sends a signal to investors that you’re more credible and
you have lower cost of capital.
 
McKenna: it’s also systemic risk. If eBay goes down, it
doesn’t take down the entire economy. 
That’s why you care about structural features—runaway effects of a
crash. Also explains more extensive reporting requirements: thicker info
requirements.  If eBay goes away, you
just have to buy stuff in stores, but you don’t get a Great Depression (it’s
just depressing).
 
Silbey: these disclosures aren’t actually transparent.
 
Lipton: but computers can and do interpret them, and
sophisticated people can look at companies and compare them across an industry,
which helps in trading.
 
Silbey: aren’t they routinely scrubbed and managed?
 
Matwyshyn: some things you can’t scrub. You have to talk
about material litigation, for example. Bird’s eye view into how the company
sees itself.
 
Lipton: I was a plaintiff’s lawyer and I’m skeptical but
even I think there’s information there. 
Commodities disclosures are different. 
Pages of boilerplate disclosures of risks. Earthquakes could affect
Twitter. You may think this is useless, but it turns out that people do
econometric studies and those risk disclosures do affect stock prices.
Computers look for tiny changes in language, and differences are caught that
way.  You can find accounting fraud by
crunching numbers and looking at language choices. When people commit fraud,
they use different language.
 
Matwyshyn: companies in same industry were talking about
tech in very different ways. 2004: Google didn’t disclose risks of security
breaches in the same way Microsoft did. 
You can track learning in the industry. 
 
Lipton: standardized set of disclosures allow you to detect
patterns, not even as extreme as detecting fraud, through human and computer
review.  When companies have bad news,
they use bigger and vaguer words. 
 
McKenna: this is very far to the end of the structural harm
line. Also there are lots of mediating sophisticated parties, so disclosures
can be more useful here than in privacy. Also more standardized, instead of “say
whatever you want and you’re going to be held to it.”
 
McG: there is one standardized disclosure in privacy, and it’s
financial.  You don’t have to use the
standard form, but there’s a safe harbor, so everyone does. Computer scientists
at CMU did a computer analysis of them, which is routine in the securities
space, and came up w/lots of interesting observations about regional
differences, and found some companies breaking the law by their own
disclosures, etc.
 
McKenna: if disclosure is the means to regulate, then should
we require standardized disclosures?
 
Lipton: that’s good, but also need capacity to actually read
them, whether human or computer.
 
Said: so context sensitive: “promotional consideration
furnished by” is standardized but doesn’t solve problem (if problem there is).
Extent to which digital tools are worsening deception problems b/c of ability
to scrape, use hidden info, unsettle expectations; but also digital tools may
be part of solution, whether using info commons or to detect fraud.
 
Perzanowski: nothing stops requiring a disclosure to be
effective.
 
Lipton: that works unless there’s a lot of heterogeneity—experts
in securities help.
 
Klass: misrepresentation in contracts includes nondisclosure,
but it’s a vague standard: reasonable/not disclosing violate goods faith. The
only way it works is that you get repeat situations: if there’s termites in
your house you have to disclose; if you’re an oil company you don’t have to
disclose you know there’s oil on the farmer’s land.  His own take: common law of fraud/contract is
that we have clear norms about affirmative lies, and law piggybacks on those;
that handles new situations. We don’t have strong intuitions on failure to disclose.
 
McKenna: tort is riddled with uncertainties about acts v.
omissions writ large.
 
Matwyshyn: real estate contracts are a good example:
regulatory interventions to explain what you have to disclose. It’s cooperative
set of regimes working together.  Theme
of this session: the focus on methods of detecting deception and fraud when it’s
happening.  Sec reg might be better at
that than some other contexts. 
 
Lipton: clearly there’s a bunch of fraud; sometimes
computers are easier to fool than people, as when there are fake merger
announcements that computers think are real and people could easily detect as
frauds.  However, there’s a lot of money
to be made in early detection, so it also happens.
 
Said: In speech arena, we have lots of worry about chilling
through misreading/understanding whether speech is false.  We haven’t talked about listening or
interpretation here.
 
Klass: pitch for Grice and implicature. A rich theory about
how we interpret not just literal but implied meanings, including irony. Cost-benefit
analysis may be built in. That’s how a lot of the law of deception piggybacks
on extralegal interpretive norms.
 
McKenna: this all sounds like duty to me. Affirmative
misrepresentation v. failure to disclose—this is the difference b/t someone who’s
begun to act and thus has the duty to do it reasonably well, versus when I
never start and have no duty to continue. 
Regulation can also create duty.
 
McG: sometimes untidiness in law is based on different
interests being served by different silos, and we should be willing to be
comfortable w/that.
 
McKenna: but we should be clear about what we mean rather
than assuming it has a fixed meaning.
 
Klass: it’s not common purpose or justification, but that
there’s a common set of design questions that repeats across different
fields.  My way of thinking: most of
those are contained in the common law elements. 
In this area of law: what’s the deal w/scienter? What’s the deal
w/reliance? 
 
Silbey: basic things are missing from TM that could be
borrowed.
 
McG: do you want a scary regulator like the SEC?
 
McKenna: think about why features work in some areas and not
others.
 
Lipton: law keeps the corporation and the stock certificate
relatively stable in what they are, so they’re relatively interchangeable. B/c
of relatively homogeneous set of products, it’s easier to regulate them.
 
Matwyshyn: it takes a “river on fire” moment to have a
meaningful evolution.  If we look
historically at when quality control has meaningfully improved, what would it
take to create change in deception regulation? 
[FDA: it took a lot of dead kids.]
 
Gadja: news sites shifted from anonymous comments to
Facebook in part b/c of all the defamation.
 
Lipton: scandals also produce incremental responses. Bork
issue = just video rentals protected. 
Harder to get overarching response, in the US.
 
McG: though other countries have done it.
 
Silbey: dilution added to TM act as a response to market
forces.
 
McKenna: Even the SCt has no way of thinking about how to
reconcile these different fields, as 1A discussion showed.  Alvarez is totally unsatisfying about why SVA
is unconstitutional but TM is just fine. 
Modern TM law is nothing like history or tradition was, which is why
their explanation was wrong.
 
Silbey: Alvarez was not about TM.
 
McKenna: they think TM law is totally fine; they used TM to
explain why the SVA was bad.
 
McG: Alvarez pro-US briefs tried to brief TM law as “uh-oh,
be careful what you do so as not to destroy it.”  Thus the Court may have been trying to cabin
the force of the opinion.
 
McKenna: gives us reason to think harder about the kinds of
harms at issue. 

Silbey: in fundamental rights cases, the Court spends lots of time identifying
the harms in fundamental rights like marriage cases. They seem unable to do so
in these cases however.
 
McKenna: there’s so much assumption about what deception is.
 
Said: what if we looked for tolerated confusion/efficient
confusion? 
 
Silbey: they had that in the briefing in Alvarez—a lot of
discussion of the benefits of lies.   Flatness of discussion of variety of interests
in IP cases, compared to the discussions of competing values in securities law
etc.
 
Lipton: that’s a public choice issue—hasn’t been people with
lots of money/big megaphone on the other side of IP cases.

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Notre Dame Deception Roundtable, part 3

Session 3 – Defamation and Speech
Discussion Leaders: Amy Gajda, Rebecca Tushnet, Eric Goldman,
Jessica Silbey
 
Silbey: Alvarez and a theory of deception as speech. The
three opinions are helpfully, though perhaps erroneously, talking about bad
speech in three different ways.  Kennedy:
not problematic b/c it does no harm other than exist.  Idea of “pure speech,” existing in the person
and not expanding out into the world in any way we should care about. Reminds her
of his views of equal dignity/autonomy: individual and relation to their own
speech w/o more. Breyer = speech as relationship-forming, utilitarian view of
what speech does: regulating in terms of an end rather than for itself.  Alito: moral background. Speech forms society
and its values, and that informs his opinion of why the Stolen Valor Act is
good.  Three very different ways of
understanding speech’s function in our lives. Kennedy: Dignity or liberty
enhancing: I can speak b/c of who I am, like Kennedy thinks in Lawrence or
Obergefell: liberty interests have nothing to 
do w/anyone else.  Breyer:
relationships.  Alito: morals.  Contrast captures: when do we care about
particular harms; particular relationships; or background assumptions,
defaults, morals we might care about fostering.
 
RT: How should we think about empirical evidence in
assessing whether deception-based regulations survive First Amendment scrutiny?
If we took the empirical evidence seriously, courts arguably should (1) approve
more outright bans on commercial speech, and (2) strike down more of these
compromise disclosures, with the probable result of decreasing the total amount
of commercial speech regulation.  Silbey
makes the very persuasive case that the Court is blowing smoke with references
to empirics, at least in political speech cases; it just doesn’t care about the
evidence (see also the reformulation of “corruption” to mean … something that
doesn’t happen).  So instead it has a
normative view of non-deception-based harms. 
What about deception-based harms, though?  Silbey suggests that the Court might treat
them differently which is itself of interest, if deception somehow were more
empirical than other concepts in the 1A space. 
 
Silbey: as opposed to autonomy or dignity.
 
Gadja: Alvarez and a right to be forgotten in the US: this
case supports that idea, in a sense. We can in fact change our past in a way
that might be protected, if not in a tort sense we still can’t be punished for
it, especially w/r/t deception and changing the past.
 
Hartzog: a question of identity. We thought about what
information was owed to consumers; this question is what info do we owe to
those who deal with us, and to what extent does deception play a role in
that?  Goffman: we all play different
roles in our lives.
 
Gadja: then, when can other people reveal your deception?
 
Silbey: Kennedy: Sense that there’s something truly private
about certain falsity.
 
Klass: does he mean that there’s no harm?
 
Silbey: that’s not what he says, but it appears that it’s
what he means.
 
Gadja: he does mention fraud and other history/traditions of
finding causes of action.
 
McGeveran: classic problem of privacy—old law recognized
certain harms as entitlement of individual, but not the invasion feeling around
pure privacy.  Path-dependent. The plus
factor beyond the falsity is historically bound.
 
Klass: “Stolen Valor Act”—sounds in property right.  Trespassing or free riding. 
 
Matwyshyn: lying on a dating site is so common, it can’t be
wrongful?
 
Silbey: you meet people you think are exaggerating a
lot.  You generally let them pretend and
don’t counterspeak; it doesn’t get you anywhere. Alvarez and Gay Olympics cases
say things abou the quality of the thing being designated—we’re uncomfortable
with the gov’t carving out that category of things we care about. 
 
Said: compare Rachel Dolezal: passing oneself off as a
different race.  Transgender people, some
of whom will transition and some who will never present in any fixed way.
 
Silbey: Alvarez and gender performance.
 
Klass: you might be happy in a world where you can’t know
whether genetic sex and gender match. [But are those examples of falsity or
unfalsifiability?] Very different from perspective of Stolen Valor Congress:
they want to live in a differently structured world.
 
McGeveran: scarcity of the honor as the harm—fake Silver
Stars. What made the SVA different was the problem of fraud on the market—changing
understanding of scarcity of the honor. Even if we ran around debunking, we’d
still have that problem, but the Court is saying too bad. In other cases, we
look at aggregate effect of bad info.
 
McKenna: there’s scarcity and there’s the reliability of
anyone’s particular claim to have this thing. 
While the former is a general harm, the latter is very particularized:
it hurts the actual honor holders in very specific circumstances, like job
applications.
 
Hartzog: also, scarcity gives you an incentive to lie: you
can avail yourself of that scarcity to benefit yourself [free riding].  Look for incentives to lie, and cost of
challenging the lie which may be socially costly.  Calling someone a liar is uncomfortable!  Should that matter in a more formal way than
it does.
 
Citron: giving people 5th Amendment immunity is a
nudge allowing/perhaps encouraging lying.
 
Hartzog: Dan Ariely says we lie all the time.
 
Matwyshyn: we do seem to value impeachment, allowing
evidence otherwise inadmissible for the purpose of impeachment.
 
Silbey: Kennedy’s thumb on the scale of liberty makes sense
if we lie all the time.
 
McKenna: but contrast it with the parts of the decision
where they talk about TM law. [ughs from all around.] They’re more persuaded
that the harms TM is trying to police, so even on the same balance the harms
win.
 
Klass: this punishment is just too much: a year in
jail.  Our 1A doctrine doesn’t allow us
to distinguish between levels of punishment; wonders whether the case would
have come out the same way if it had been a $50 fine.
 
Citron: NYT v. Sullivan says that civil penalties can be
more coercive; also true in overbreadth cases. 
 
Silbey: Kennedy says truth doesn’t need handcuffs or a badge
for vindication.  He’s not talking about
truth for TM.
 
Matwyshyn: Impersonating a recipient of a public award v.
impersonating a product in TM law.
 
Hartzog: Sullivan’s breathing room: we need tolerance for
false speech to protect true speech. 
[Not applicable to commercial speech, which explains something about TM,
but not why TM extends to noncommercial speech like movies.]
 
McKenna: could you say it’s illegal to lie for “personal
benefit” instead of “material gain”?
 
Silbey: Kennedy’s distinction between Gay Olympics is SVA is
incoherent.  False statements in any
setting, w/o regard for whether lie was for purpose of material gain—he sees TM
as different b/c commercial, even though that’s not accurate about the scope of
the Olympics law or of TM law.
 
RT: same move is made in In re Tam: §2(a) disparagement is
subject to strict scrutiny b/c it’s not commercial speech, but the deception
bars in §2 are totally ok because Central
Hudson
.  [Cue my head spinning
around]
 
McGeveran: invaded interest in SVA is totally diffuse and
generalized, aggregate v. individual, as opposed to the person whose TM
interest looks like it’s been invaded [though as McG would agree, I think, it’s
the law that has decided that there’s been a harm rather than the TM owner
having to show a harm].
 
Silbey: There is an allergy to identifying diffuse harms;
think also about campaign finance.
 
Klass: but the owners of these medals are a discrete group.
 
Silbey: but they’re not the owners of the honor. 
 
McG: we could call that property.
 
RT: property, a question of law, is distinct from value, a
question of fact.  What about Spokeo? 
General SCt hostility to derogation from the common law, not just in 1A
but also Article III standings.
 
McG: the case is a complete hash; says sometimes Congress
can create new causes of action and sometimes it can’t. The problem here was
that the error was procedural; Spokeo didn’t do all the things it was supposed
to do in creating his profile.  Court
punts on when Congress can define an injury that gives standing.
 
Silbey: In re Tam might turn on registrability v. right to exclusive
use.  Is the lack of registration an
injury that Congress has created different from nonregistration?
 
McG: In Spokeo, they saw enough bad consequences if they
ruled broadly that they punted.  Either
history or Congress could be enough; in TM, history alone will probably be
enough to find a harm worth legislating over. 
[Though query why that would extend to substantive registration, to
dilution, or sponsorship/affiliation confusion, none of which predate the
1920s.]
 
McKenna: Alvarez says some forms of lying unattached to harm
that you can’t remedy; defamation is on the other end of the spectrum. Where do
other things fall? Is it about diffuse v. concentrated harm? Is it about kind
of harm—economic, emotional?  Is it about
historical pedigree?  Is it about
empirical evidence?
 
Klass: Value of speech and degree of harm are both
dimensions.  Public concern/private
concern.  Commercial speech, defamation
of public figures, defamation of nonpublic figures.
 
[RT: I’d add retail v. wholesale, which may be a component
of empirical evidence. Can you presume from circumstances that harm is so
likely that individual harm need not be shown?]
 
Silbey: Lying as self-definition; disparaging mark as
self-definition—changes the value of the speech from commercial to self and
self-actualization rather than material gain. 
[But then why do the Slants want a TM registration?]
 
RT: it may be true that my self-actualization requires me to
suppress your speech, but it’s very hard to characterize a right to suppress
someone else’s use of a mark as self-actualization with no impact on other
specific people. Which is not to say the SCt won’t do it.
 
Said: takeaway: notion of harm can shift based on interests
balanced against it.  If you have
intent/actual malice requirement, your harm showing will have to be much lower. 
 
[discussions about disclosure requirements.]
 
Matwyshyn: disclosures can be lead-ins to future
regulations.  FTC does studies on whether
more aggressive regulation is necessary. 
 
Said: that seems different, if you use disclosure to signal
the problems [to whom?].
 
Matwyshyn: to study the industry to understand the market
dynamics. Disclosure to the regulator may then turn into public-facing
disclosure.  [I think that has nothing to
do w/deception, though.]
 
Hartzog: disclaimers that try to inform you about what’s
actually going on v. disclaimers that try to make you skeptical.  Privacy: “these are what we collect and these
are who we share it with.”  That could be
meaningless to consumers/too complex. Or “there’s a good chance this info could
be used next time you apply for a job.” 
People would be in the dark, but might know enough to avoid harm.
 
Klass: big literature on what’s an effective compelled
disclosure.
 
Lipton: some disclosures may be so onerous or awful that the
company will stop doing the thing in order to not need to make the
disclosure.  SEC does that a lot.

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Notre Dame Deception Roundtable, part 2

Session 2 – Privacy and Technology
Discussion Leaders: Ryan Calo, Aaron Perzanowski, Woody Hartzog,
Danielle Citron
 
Matwyshyn: attempts to create commonality/familiarity
w/consumer—good feeling.  Can also be a
part of having ads be artistic expression.
 
Ryan Calo: important role of information in figuring out how
to deceive well. Deception is a goal that someone might have, but it often
fails. The more you know about a person, the better you are able to lie to
them.  That’s an important reason to
guard information about yourself. If you can monitor a person very closely,
including their “honest signals,” you can tell when a person is being deceptive
even in the absence of being able to check independently. Increasingly ways to
determine deception, some of which feel awfully invasive.  [Here his definition of deception requires
belief.]
 
Said: differences b/t influencing, persuading, deceiving
someone.  Manipulation might be in
between persuading and deceiving. 
Puffery: when does info take advantage of foibles like wanting to believe we’re enjoying NY’s
best coffee.  When is something just vague
and unverifiable and what happens when an advertiser knows we will fall for a
puff?
 
Klass: do you mean believe or do you mean change your choice
when you say “fall for”?
 
McGeveran: point out the small-l liberal supposition that there
is a true self making pure choices. If that’s not true then we have a problem.
 
Klass: if the law feels comfortable marking out statements
that cause false beliefs as illegal, that presupposes a highly cognitive
liberal subject. That’s not necessarily bad but it has a lot of assumptions
baked in. 
 
Citron: if you don’t know the info the salesperson has about
you, you may be deceived into thinking that you’re dealing on more equal terms
w/her than you are.  Adding privacy to
deception gives us greater purchase on what’s troubling/deceptive.  The disguised expert who knows how to
schmooze you. [But would disclosure fix anything?]
 
Lipton: Someone who pretends to like the same movies &
sports you do is setting up an affinity fraud. [Hee!]  At least I understand that Amazon is tracking
my search history.
 
McGeveran: good salespeople create affinity in the store w/o
prior information; they just chat you up. The background information doesn’t
make it any more deceptive, if it’s deceptive.
 
Calo: machine learning is more powerful; can leverage social
cues with bots.  There are limits on what
people can do in the moment; designing the interaction is more powerful and you
can compare it to what other people are doing.
 
McKenna: if what you’re talking about works, then it can be
people giving you information consistent w/what your true self wants. And yet
it feels yucky: the manipulation isn’t tied to changing your decision from what
you’d otherwise make, it’s something else.
 
Hartzog: authenticity fraud: you don’t understand that there’s
a mechanism hidden behind the interaction by which this stuff is delivered to
you.
 
Calo: the Truman Show: if you didn’t know you were on a reality
show, you’d be under a deep deception about what was happening and who was
watching even if you weren’t manipulated or making decisions you wouldn’t
otherwise make. 
 
McKenna: that’s a different understanding of deception/a different
set of harms.
 
Silbey: social trust: salesperson is talking to you under background
assumptions.
 
Citron: is this more dignitary?
 
McGeveran: if the interaction w/the digital all-knowing
salesperson is wrongful, is it still wrongful if you don’t ultimately buy
anything?
 
[from several] Depends on what the harm you fear is.
 
Klass: Salesperson treats us as means not ends, but we have
a background understanding about that. 
Violating the background: whenever you cheat/don’t play by the rules,
there’s deception. The wrong is not the deception that comes w/cheating, but
rather that you’re not playing by the rules you’ve agreed on; the deception is
only needed so you get away with it. The wrong is that others think you’re
playing by the same rules.  This is Sam
Buell’s Badges of Guilt
: how can we tell whether someone’s violating social
norms? When they have to hide what they’re doing.
 
Silbey: but when doctors hide information from you, is that
a violation of social norms?
 
Klass: not all hiding is violation, but when you’re
cheating, you will have to hide.  So if
they know you’re a Cubs fan and send a real Cubs fan out to work with you, that
is manipulative; the role that deception plays here is that the concealment of
why they chose her is a signal that they’re violating the rules of the game.  [But is it?]
 
McKenna: suppose the salesperson isn’t really a Cubs fan but
pretends to be. Where’s the harm?
 
Matwyshyn: phatic communication—communication is substantive
info transfer + phatic communication, which is relationship-building; creates friends
and colleagues. Cubs fan matching may not be bad, just a communication building
measure.  The not apparent assistance
from tech is where the problem arises for privacy.  When you walk in with a Cubs shirt, you’re
projecting your poor taste in baseball teams. But if you walk in w/your
cellphone and they mined your fandom from your phone, the loss of info control
going into creation of phatic bond is jarring.
 
McGeveran: Calo’s
article is about power imbalances
; deception is subsidiary if even
important at all. Whether people know that this info is held by other party or
not; how much detail they have; all is subsidiary to the main problem of extra
leverage given to people who already have too much power.  Deception is far down the list of problems,
and not very persuasive.
 
Gadja: how about dignity? 
 
Said: Quiz Show scandal: game shows rigged by sponsors so
winners favor sponsors in particular ways. American Idol: judges drink drinks
provided by sponsors; waiting room is painted Coca-Cola red to create positive
associations. That seems to be different from Quiz Show, but it’s also phatic,
and also disturbing to many people, even though it may not be a cognizable
harm. Is that parallel to privacy, where hidden decisions are being made? 
 
McKenna: privacy’s concern is w/interpersonal harm from the
deception/interaction, not from subsequent actions/harms. More dignitary than
consequential.
 
Silbey: but background assumptions about rules of game may
also break down. So that’s about consequences.
 
Klass: in Minority Report,
when the Gap ad scans the eyeball, there’s no deception, just information
collection and use.
 
RT: there is deception! Tom Cruise isn’t Mr. Hashimoto!  And that’s not just a joke—it’s important
that deception here appears as a privacy strategy.
 
Hartzog: Deception as weapon of the weak. A certain amount
of power you have about your personal info: other people want it b/c they don’t
have it, and you can use that as a weapon.
 
Klass: it’s great if you enter into an illegal contract you
don’t intend to perform—disrupting trust among thieves is a good, not a bad.
 
Hartzog: delay, disrupt, disperse.
 
Matwyshyn: Surveillance by city: used Google Maps logo to
create a false sense of security about who’s doing the surveillance.  Goes to double-edged sword of deception;
police can lie all the time. What’s permissible deception? Does interference
w/TM interests matter any more than other deception?  Political activists use deception all the
time to disrupt control over information.
 
Lipton: if army pretends to be journalists, journalists aren’t
safe; military can’t use red crosses on military vehicles—it’s destructive to
the larger enterprise.
 
McKenna: in a perfect world your lie would go
undetected.  [Though the market for
lemons means that even if undetected it might fail, along with the truth.]
 
Said: whose perspective are we adopting when talking about
consumer/subject interests?  If we take
individual preferences, we need to know something about those, but from a more
paternalistic/value-driven view we might not.
 
Silbey: one of the productive comparisons b/t Anita Allen’s
and other work was that Allen discussed harm to individuals v. harm to systems
or organizations. Privacy harms need to be identified as structural/social v.
individual.
 
Citron: of course it’s both.
 
Klass: more one than the other.
 
Lipton: Disclosing an invasion may mitigate the harm to the
individual but creates the harm of people feeling invaded.
 
McGeveran: deception as interface presenting itself as
neutral when it’s really not neutral—google search results, FB news feed, etc.
etc.  That sharpens the problem of
backdrop assumptions and what they communicate to you. To what extent do people
approach tech interactions differently from interpersonal, and which assumptions
are we willing to honor? Intuitions will differ in new spaces.  McGeveran doesn’t mind the FB emotions
experiment b/c he has a set of assumptions about the news feed (it’s always
already curated). 
 
Lipton: Craswell’s
cost-benefit analysis
is what tells you what’s deceptive in the first
place. Show the alternative disclosure that would have made it less
deceptive. 
 
[RT: Lipton’s point v. McGeveran & Hartzog’s: what is the
alternative to having FB control? Very hard to think through what the
difference might be if users had “more control.” Evgeny Morozov might have some
ideas.]
 
Hartzog: in mediated environments online, there’s one entity
in charge of the experience, so there’s more opportunity for wrongful control.  Images of little padlocks are everywhere—what
does that mean?  It signals and
imposes/relieves transaction costs, whether through symbols or sign.
 
Lipton: you think it’s a sign but it’s not, is the problem.
 
Hartzog: sometimes the lock signals safety (https) and
sometimes it’s privacy settings (notoriously bad).  It’s a bait/invitation. Ambiguity in design:
designers can use that to their benefit, and they know people won’t investigate
even if there is a full explanation somewhere.
 
Said: could trustmarks do work online?  These things do catch consumers’ eyes.
 
Klass: formal definitions from government, like “organic.”  We do give certain signals fixed legal
meaning. 
 
Lipton: then companies lobby to change it, and also people
evade it.
 
Klass: nonsophisticates don’t understand the law.
 
Lipton: what happens when everything is disclosed?  The person being watched now wants to create
defensive deception. Teenagers and people in China use codes to talk in front
of other people. Disclosure of one inspires deception on another side.
 
Matwyshyn: one person’s deception is another person’s
safety.
 
McGeveran: privacy as set of norms eventually legally
enforced. You have to have a policy; the next step is to hold you to the
statements you make in your privacy policy and then say any departure from the policy
is deceptive. Yet we know that end users do not read such policies.
 
McKenna: just a baseline-setting exercise.  The FTC becoming the regulator in privacy,
using deceptiveness to do it, was our starting point. But is there any real
deceptiveness there?
 
Hartzog: FTC is trying to have it both ways.  Fissure that must ultimately come out. A line
of FTC cases say that consumer expectations are the key; it doesn’t matter what
you disclose in the fine print.  Sears
case: can’t disclose spyware in fine print. On the other hand, FTC says that if
you lie in the privacy policy you are deceiving people. 
 
Silbey: two different values: protecting consumer
expectations, and then the benchmark thing is different—we care about you
standing by your words.
 
RT: and if the FTC had statutory authority to set benchmarks
that would be ok.
 
Hartzog: the fine print stuff is also unfairness, which they
do have statutory authority.
 
Klass: two audiences: many people don’t read, but a few
people do and will be norm entrepreneurs.
 
RT: but then that argument should apply to all ToS/fine
print issues; those silly FB memes about “giving up your ©” show that.
 
Hartzog: David Hoffman just
published a paper w/empirical work on what people think aboiut enforceability
—generational
divide; older people assume ToS don’t apply, but younger people think it is
enforceable but will never be applied to me.
 
Klass: 10 years ago the shrinkwrap cases, pay now/terms
later, were very offensive to my students and now they’re totally ok. 
 
McGeveran: regulatory shift to looking at interface issues
that deal w/implications about security, e.g., Snapchat. FTC is consciously
picking cases and moving internal jurisprudence away from boilerplate.
 
 
Citron: Google spoofed browsers to turn off no-tracking
settings.  FTC brought a case against
Google w/thin theory: you promised not to track cookies when they had no track enabled.  State AGs said this was inherently deceptive
even w/o a promise to respect people’s privacy.
 
McGeveran: that’s unfair not deceptive.
 
Eric Goldman: Audience heterogeneity means a lot—privacy discussion
turns on consumer expectations, but they don’t mean a single thing to the wide
range of consumers, based on their particular community/background. Information
truthful to some may be not heard by some and deceptive as to others.  When we shift from face to face to mass audiences
we have to account for heterogeneity.
 
Klass: but law is not exogenous.  False advertising law: FTC’s reasonable
basis/substantiation rule. Per se implied representation that you have a
reasonable basis for your factual claims. That’s not based on empirical
evidence of how consumers read ads, but saying we want a marketplace where, if
you make those claims, you have evidence for them.  Maybe state AGs are making the same move
w/r/t certain kinds of privacy activities. 
Advertisers impliedly represent that they aren’t changing your privacy
settings unless they say explicitly that they are.
 
Matwyshyn: Design flaw that happens all the time in products:
Sears: though there was language about spyware buried in the terms, there wasn’t
even an opportunity to read the terms until the end of signup.
 
Goldman: probably some consumers did read to the end and
weren’t deceived.  [In this particular
case, I’m not sure that’s true.] You have to decide whether you’re going to
protect the subset of deceived consumers.
 
McKenna: how is the default rule about deception?  It doesn’t have a meaningful existence
outside the rule.
 
Klass: Disagree. First question is: what was said. Second:
is it true or false? We typically answer the first question by asking what a
reasonable person would have understood. 
We could say, as a matter of law, that the default representation is X,
allowing people to opt out if it’s not true.
 
McKenna: if not based on what people actually receive, you
can’t show reliance and harm.  The Sears
case proceeded from the assumption that people don’t know or read the privacy
policies.
 
Perzanowski: but we might be so confident about the answer
to the empirical Q through repeated experience that we can define the default,
just like some matters are per se material.
 
McKenna: that’s different from what Klass was saying.  That’s a good justification for the
reasonable basis substantiation requirement. 
Klass was saying something different.
 
RT: quite often consumers may have not formed assumption at
all about the privacy policy.  One way to
cash that out is that they haven’t thought about it because they presume that
the policy is acceptable.  And if they
knew that the program would turn their camera on surreptitiously they’d
definitely care, so there is a material omission.
 
Lipton: if you spoof the computer (as Google did) have you deceived?  Have I engaged in insider trading if I broke
in?  If I fooled the computer into giving
access, then yes, the Second Circuit said, there’s deception.  But if I just broke it open w/a hammer, no.
 
McGeveran: you can only find omission by having an
understanding about what information you were owed. Are these empirical
definitions or information-forcing legal rules as Klass would say?  Moreover, dynamic changes in the situation—extremely
difficult to have stable understanding of stable assumptions are; dangerous to
use deception reasoning to get to them.
 
Said: zoom out to larger q: aims of deception law.  Market governance, shaping corporate
behavior? 
 
McKenna: you could start from consumer protection and seek
information forcing measures out of a broader consumer protection goal to
improve the environment in the long role.
 
Klass: formal rules in securities law: structured to create
certain info enviro; individual harms are much less important, unlike
corrective justice/common law tradition.
 
RT: you can’t really tell the difference b/t empirical
definitions and information forcing legal rules, in part b/c of the issue
w/things like “organic.” I don’t fully understand the definition, but I know
there is one, so I can act w/relative confidence in the market and deception is
possible w/r/t “organic.”
 
Said: we ought to disagreggate b/c of the heterogeneity
problem, which we take more seriously if we start w/the consumer.  Sophisticated investors v. nonsophisticated
investors.

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Notre Dame Deception Roundtable, part 1

Deception Roundtable
Notre Dame Law School, Chicago
 
Session 1 – Advertising and Trademark
Discussion Leaders: Bill McGeveran, Mark McKenna, Zahr Said
 
Mark McKenna: deception comes up in many fields, but people
aren’t talking to each other/citing each other across legal fields. So we
wanted to put together a group thinking about similar ideas in other
areas. 
 
Woody Hartzog: General questions, such as role of hearer’s
skepticism.
 
McKenna: articles often take for granted that there is a
thing called deception and then there are legal questions to be worked
out.  Very few ask: how does deception
differ from confusion, from lying, etc. 
I too have taken for granted that we can ID the thing called deception.
 
Danielle Citron: convergences—notions of harm—manipulating someone,
altering their situation b/c of deceiver’s intent. Corruption as deception?
Secrecy?  The harms seemed to resonate
throughout—undermine person’s autonomy, trust.
 
Andrea Matwyshyn: “situation-altering utterances” doesn’t
presume an understanding of what’s going on either on the part of the  speaker or the perceiver.
 
Greg Klass: I’d put in act or omission.  Most general: an act or omission that
wrongfully causes a false belief in another. 
Then we have to figure out duty and causation—what kind of causal
relationships matter.
 
Matwyshyn: you could dodge causality by saying it’s
contextually determined.
 
Klass: when you paint the ceiling to hide water damage in
your house, I don’t think that’s a “representation” though it is deceptive.
 
Zahr Said: thinks that is a representation: an implicit
warrant.  Way that deception attends to
different understandings of harm through frameworks of contracts, torts, and
property.  Seana Shiffrin’s writings:
contracts perspective, not torts.  Harms
might be the same but remedies differ.
 
McKenna: doctrinal buckets v. concepts that span buckets—is this
the law of deception, or rather privacy and torts and contracts with deception
doing different work in each situation? 
If there’s some coherence to the idea of what deception is, then it’s
more transubstantive.
 
Bill McGeveran: middle ground—a word attached to concepts
that play out differently in different buckets, and we learn about each by
consulting the others.  Not a grand
theory but not independent terms of art in each field.
 
Ann Lipton: communicative acts v. signs that communicate.  See umbrellas: you infer that it’s raining,
but no one intended to communicate to 
you that it was raining by raising the umbrella. In the case of painting
over the damage, that’s something where you don’t recognize there’s a
communication (I’m not sure I’d draw that conclusion—the reason for painting
over it is to hide the damage and the effect the damage has on observers,
whether or not it’s merely aesthetic).  Contractual
view  of speech: we have an agreement
about how to interpret words.
 
Matwyshyn: In a different culture, umbrellas would mean that
it’s really sunny outside/people are promenading.
 
Danielle Citron: who do we care about?  Threats doctrine—is it that we care about the
recipients and their reaction, or do we care about the bad intent of the person
uttering the statement? 
 
McKenna: regulating deception for the sake of deception, or regulating
advertising and deception happens to play in?
 
Klass: Shiffrin would say deception is a moral issue.
 
McKenna: but then why would we split it into different
areas? Is it policy purposes, or a sense of what’s wrong about deception and no
reason for it not to exist in its own coherent form.
 
Said: Assault is regulated under two different regimes.  There was a time when deception was thought
of as more of a coherent concept. 
Advertising scholars like Lilian BeVier had a discussion about
deception, probably b/c of FTC’s actions at the time.  So do we need something trans-disciplinary or
not?  Many other things cross substantive
areas of law.
 
Woody Hartzog: similar to discussions in privacy law about
what privacy is.  Solove’s taxonomy: is
it a family of resemblances, as Solove says of privacy?
 
Amy Gadza: would advertisers themselves agree that deception
was the evil that they are supposed to be avoiding? 
 
Matwyshyn: may have different view about appropriateness, such
as remotely turning on the mike on your phone when you’re using an app—they think
you’re engaging w/them and have consented to use the app, and it’s just another
data stream.  Other people say: that’s
totally awful and illegal (even if it was in the EULA).
 
McGeveran: lumping TM and advertising together is itself a
very interesting and meaningful choice. Even in these two cognate fields, materiality
and therefore what counts as deception (the harm that matters) differs.  Information costs: it would waste everyone’s
time and energy if all info were disclosed; TMs are info about source of goods
[and perhaps other things]; Shiffrin
presumptively talks about advertising and McKenna
talks about TM, but both have concerns about how to efficiently arrange the
duties to get the right amount of info disclosed.   Also leads to Qs of consumers’ duties to pay
attn to the info in advertising. Minimal duties here, and that connects to the
efficiency issue: we don’t necessarily want to have high expectations of
listeners/the law generally doesn’t.
 
Aaron Perzanowski: are we training consumers to be ignorant?
Closer to getting that right on false advertising side than on trademark.
 
McKenna: Modern TM law has abandoned deception for
confusion; advertising, more concerned about harm, is working out more
questions about how much we should expect from consumers.  That’s b/c modern TM law is to protect TM owners,
with consumers just used as a mechanism.
 
Klass: like trespass, not requiring harm.
 
Said: suggests existence of dignitary interest, as
w/trespass.
 
Klass: or a mistake about scope of law!
 
Said: we’re not all on the same page on harm. Little FTC Acts
don’t require harm.
 
Citron: but they do in practice, according to state AGs.  Aggregate understanding of harm.
 
Said: class actions happen all the time.
 
Citron: no, they don’t.
 
Matwyshyn: we haven’t chosen the lowest possible
denominator. We’ve eliminated that subjective standard.
 
McGeveran: true, there’s a range, and of course a range b/t
judges applying the doctrine.  There’s an
understanding baked into McKenna’s statement that there is a difference b/t
confusion and deception.  One could say,
using a mark in a way that creates confusion among consumers is deceptive.   
 
McKenna: it’s no accident that when TM was focusing on
passing off it used “deception” all the time. Courts deliberately moved away
from that word when they wanted to expand the law. Significant semantic shift,
meant to be a broadening.
 
McGeveran: also takes away judgment of bad intent—it’s
merely causing a result.
 
Klass: on its face, confusion would be a false belief.
 
McKenna: sometimes it’s just a state of uncertainty
(difficulty in understanding) v. false actual belief.
 
Klass: confusion is less harmful by nature than harm.  Confused = don’t know what to do, can’t rely
on your confusion; you know you don’t know.
 
McKenna: classic passing off: I sell you falsely labeled
Coca-Cola, to trick you into thinking it’s the familiar beverage. [The
horror!]  Instead, if you have a picture
of a Coca-Cola can in your movie and people wonder/think that Coca-Cola
sponsored the movie, that’s confusion. The core isn’t gone from TM.
 
Lipton: some confusion can cause harm: if you can’t rely on
a label, you can have a market for lemons problem.
 
Said: scienter, reliance, etc.—things that are usually very
hard for consumers to prove in common law fraud, also including intent and
materiality. On the other side of the spectrum: ambiguity.  Confusion? 
 
McKenna: as compared to modern TM law, advertising law does
concern itself w/harm. P must show some harm to itself. Courts just assume the
TM owner can sue, except in some remedies contexts.  Fanciful theories of harm, and courts just
say, yeah, it’s your TM.
 
Said: sponsorship is a big red herring, not the real
confusion issue.
 
McKenna: what’s the harm of people thinking that two
products are produced by the same entity? Very little evidence that one will be
punished for low quality of other.  TM
law doesn’t care; advertising law does.
 
McGeveran: there’s a difference b/t counterfeiting and using
a similar shape/name—not passing off, but free riding on general confusion a
consumer will feel about being drawn to my product—TM has found that wrongful
even though that wouldn’t qualify for a rigorous definition of deception.  Person thinks it looks familiar, but doesn’t
necessarily have a crisp mistaken belief.
 
Citron: so the harm there is a kind of dignitary harm to the
TM owner?
 
Said: that may be how we understand dilution; brands get to
assert certain things.
 
Lipton: repeated distinction in law b/t false and misleading—securities
has that too.
 
Perzanowski: misleading is about where you direct someone’s
attention.  Water bottle (or other) copying
is about capturing someone’s attention. Maybe sometimes that causes harm.  Disclosures on TV ads that coordinate
w/eyecatching events in video—you’ve captured and focused attention in a way
that might lead them to a false conclusion about a product.  Can also be done by limited ability to
understand statistics.
 
McKenna: manipulating—what does that mean?  All our certainty goes away—what is truth,
what is falsity?
 
Lipton: the issue w/ the similar water bottle shape &
name is that maybe it’s confusing, but maybe it’s just indicating that the
water is in competition w/the market leader. 
If you like X, you will like Y.
 
Said: people don’t have the same starting points on how much
influence is ok, and on what counts as influence—malls are designed in
particular ways to encourage shopping/spending.  Influence and deception are not the same
thing.
 
Hartzog: are we really asking about what false beliefs count?
 
RT: That’s why I don’t agree that misleading is about
attention; it’s about increasing the likelihood that you will act in a way that
you wouldn’t want to act if you knew the true state of affairs.
 
Klass: you can have undue influence w/o a misrepresentation.
It’s important, but outside the law of deception.
 
Matwyshyn: in contracts, you’re out of the box if you’re a
minor. You can’t make an agreement.  Is
that saying that we assume you’re going to be deceived?
 
Lipton: it’s not just about deception: judgment about making
trades, even if you completely understand them. 
[it’s about understanding one’s own best interests, which does connect
up to deception: the theory is that if you truly understood what you were
giving away you would not give it away.]
 
Jessica Silbey: how do we define manipulation v. influence?
Purpose to induce reliance, and does induce reliance?
 
McGeveran: scienter to trick the person, or scienter to
influence the person—might differ.
 
McKenna: all advertising is purposeful attempts to influence
behavior; most advertising (by hypothesis) isn’t unlawfully manipulative, so
the question is when the line should be crossed.
 
Silbey: what does the normative moral policing is
falseness/misrepresentation. 
Misrepresentation is defined through falseness and materiality. 
 
Said: can be an omission, though.  Fraudulent concealment, failure to disclose.
 
Silbey: so if we fit manipulative advertising into the tort
of deceit, how would we do it?  Could we
do that?
 
Klass: manipulation only sometimes involves
misrepresentation.
 
Said: need a framework more based on empirical evidence
about consumer behavior, or folk psychology, as suggested by Greg Klass.
 
Amy Gadja: PR firms now post online with positive rules.
 
Said: FTC does have disclosure rules about this.
 
McGeveran: FTC says the company has an affirmative obligation
to tell the reviewer to disclose the free sample.  Says that it’s deceptive not to do that.
 
McKenna: what are the background things that shape our
expectations and are by default ok.
 
Silbey: differences between contexts—manipulativeness depends
on the market sector.  [What is putting
cereal on a low shelf for kids to look at the mascots?] 
 
McKenna: have generally decided to draw the line at
deception, not persuasion, when it comes to advertising. TM has gone much
further, and so if we can give more concrete meaning to deception, that would be
a sensible line but it should be noted that’s not the line in all areas and the
question here is why.
 
Lipton: manipulations are not necessarily deceptive but can
still cause me harm—I see it, but now I have to spend mental attention figuring
out what I should do in response.  E.g.,
companies that change women’s clothing sizes to make us feel better (or worse).
 
Klass: Shiffrin maps law onto morality in a lot of her work;
annoying things don’t necessarily deserve legal regulation.
 
Lipton: Reads Shiffrin as saying that consumers shouldn’t
have the burden of figuring that out.
 
McGeveran: But McKenna makes the point that this solicitude
for consumers doesn’t work so well in TM.

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1201 roundtable, renewal of previously granted exemptions

SESSION 3
Rulemaking Process – Renewal of Previously Granted
Exemptions
This session will explore the process for renewal of
exemptions granted under a prior rulemaking, including consideration of
proposals for presumptive renewal when there is no meaningful opposition.
 
Andrew Moore, Kevin Amer, Regan Smith, Jason Sloan
 
Ben Sheffner, Motion Picture Association of America:
Consensus that there should be some sort of streamlined process as to
previously granted exemption: waste of time for proponents and CO staff to go
through full process w/no meaningful opposition. Even w/in details, there aren’t
dramatic differences.  How we think this
should work: proponents of previously granted exemption should make a very
simple filing stating they’d like the exemption to be renewed and why they
think it should be renewed, 1-2 pages. If an opponent wants to come forward and
wishes to oppose, it can briefly give the reasons, then it would go into
regular process.  Under existing statute,
CO could do this and allow the exemption. 
Should be limited to renewal of particular exemption granted; it’s been
the exceptional case where there have been opponents to previously granted
exemptions—we’d opposed some in the past, but if people came back and asked for
a renewal, we didn’t oppose extensions. 
We wouldn’t want to cover expansions; burden should be on proponent to
make their case.
 
Andrew Goldman, Knowledge Ecology International: should be
presumptive renewal of previously granted exemptions. Burden should shift to ©
owner.  Waste of time, difficulty,
especially when exemptions unopposed as for literary works for blind/print
disabled.  Exemptions have gotten
increasingly complex/lengthy over time. 2010: 100 word exemption became 750
words in 2015; this shouldn’t be so complicated and burdensome for people
trying to make noninfringing use.
 
Jonathan Band, Library Copyright Alliance: Sheffner’s
proposal is a good start.  CO can do a
lot right now, without any amendment. 
Way too much deference to one sentence in one committee report directed
to a different rulemaking, one to be conducted by NTIA.  No need for any deference, but even if you
did want deference, de novo determination doesn’t mean de novo evidentiary
submissions.  Even if there is
opposition, should still be truncated so that new evidence doesn’t need to be
submitted. If we want additional info, we can, and so can opponents, but the
whole record should be included and considered.
 
Q: we’d be interested if you agree that under current law
there is flexibility.
 
Decherney: Time doesn’t stand still, so it’s unusual to have
a renewal that would look exactly the same. 
Should start where we left off, not necessarily w/expansions but just
accounting for current state of tech. 
 
Q: consensus about short form filing prior to
rulemaking.  Would that work?
 
Gabe Cazares, National Federation of the Blind: Need to be
fleshed out, b/c current procedures are too burdensome.  Look at how many disability organizations
participated—demonstrably lower than other groups b/c of burdensome evidentiary
requirements, inconsistencies in triennial cycles; coming up with a sensible
proposal would be an interesting conversation.
 
RT: Goldman and Band are right about current law: of course
there’s flexibility, not just from legislative history. That’s what de novo
means for courts! It doesn’t mean new factfinding.  Incorporating by reference: we do that
already; why isn’t that a way to put in all the previous analysis?  Interacts w/proper definition of classes.
 
Q: do you think that you have to make a new showing? You did
submit new evidence.
 
RT: We didn’t think so, but the CO’s current position made
it uncertain.
 
Sam McClure, Institute of Scrap Recycling Industries, Inc.:
should be purely presumptive renewal without even the initial filing.  Then we can give notice. W/r/t meaningful
opposition—just a filing of an opposition shouldn’t immediately kick people
back into the regular process.  Opponents
of old exemption should have to show that the facts have changed.
 
Turnbull: agree w/Sheffner. 
Bringing forward the evidence from the record—you can see previous
comments and hearings.  The notion would be
that w/r/t exactly what was done before, if there’s no meaningful opposition,
that goes forward, and the argument becomes about the difference, not the whole
overall issue.  Would help streamline and
minimize burden on either party.
 
Q: statute requires determination in rulemaking proceeding
that persons who are users are / are likely to be adversely affected.  Can you really say enough in one
sentence? 
 
Brandon Butler, University of Virginia Library: Be cognizant
of who the participants are and how they’re represented.  Big collective action problems; a different
student team every 2 years; our representation ends after the process ends, so
it’s not one responsible atty.  Trap for
unwary problem of having to file a one-pager, if you had the help of a clinic
three years ago.  One option is the TM
registration practice—have an institutional email address, and when relevant
events happen, there could be a notification system.  Let past proponents know. That would be
fairly simple.  There is substantial
reliance on these exemptions in big institutions—educational exemption has been
granted/renewed for long enough that they buy DVDs in part based on the value
proposition of being able to make clips: $30,000/year for UVa.
 
Q: is that a reason to do the renewal, or to have a
permanent exemption?  Supposed to be a
fail-safe; exemption might become ossified.
 
Butler: absolutely permanent! Third best is renewal, after
permanence and legislation supporting fair use. 
VHS tapes that have never been put into subsequent format; those tapes
are still being used and digitized. The same thing will happen w/DVDs.  We (libraries) will always need to decrypt
DVDs. That’s in the nature of the way tech works.
 
Sofia Castillo, Association of American Publishers: AAP open
to some sort of streamlined proceeding. 
Not a presumption, but some form of improving the renewal process. But
might be problematic to have complete burden shifting so opponent has to oppose
an exemption that has already been granted. 
Opponent doesn’t have all the evidence necessary to show it’s no longer
necessary or has been used in the past three years or is likely to have adverse
impact.  Automatic renewal presumption
would be similar to permanent exemptions, and for purposes of renewal it’s
important to take into account that having it every three years helps account
for changes in the marketplace.  [Though the
only time they rejected a previously granted exemption due to market changes,
Congress didn’t like that much.]
 
Harley Geiger, Rapid7: we hire lots of white hat hackers,
without legal assistance/knowledge; they get threat letters with vague DMCA
threats.  Burden of initial filing: we
support automatic renewal.  1-page wouldn’t
hold for very long, so the opponents ought to make the filing.  If restricted to single page, once again you’ll
need legal expertise.  “Meaningful”
opposition—not the right standard.  If anybody
objects, then we go back to the initial process, but we’ve seen in previous
rulemakings that the same arguments are trotted out again and again, and there’s
no reason to think that wouldn’t happen here. 
Instead of “meaningful” opposition, material change in circumstances—changes
in marketplace, tech.
 
Q: so burden would be on opponents.
 
Geiger: yes!  If we’re
talking about an expansion, we think that the process ought to be about that
expansion, not expansion + original. We don’t think that non-© interests ought
to figure into the denial of the exemption, including rebutting presumption.
 
Q: lack of meaningful opposition.  Is there an alternative?  Presumption automatic?  If standard is meaningful opposition, would
the © Office have discretion to determine how meaningful an opposition is?
 
Sheffner: we do oppose presumption of renewal. CO’s own
reasoning in 2000.  Statute with
exemptions—those rules of statutory construction and admin law say the
exemptions should be construed narrowly and that the burden should be on the
proponent of the exemption.  No change in
general principles of statutory construction or admin law.  This is anyway largely academic: (1) at least
in the last round, there is virtually no opposition to previously granted
exemptions. (2) burden should remain on proponents; if there is a presumption
of nonrenewal, the proponents start at 49% and opponents at 51%. But minimal
evidentiary showing will overcome that.
 
Turnbull: Burden on making an initial statement, yes we want
to review, could be a check box on a form. CO could email that to prior
proponent.  Shouldn’t be a burden.  But under the statute, CO needs to go through
the process of actually getting a request, using the prior evidentiary record
as the basis.  The opposition issue: it’s
true that making the same argument over again is a waste of time, but some kind
of changed circumstances—change in law, abuse of the exemption, or a
circumvention tool that turned out to be a huge marketplace problem–can
justify looking at this again.
 
Band: changed circumstances—to some extent this whole
discussion of presumptions and burden shifting isn’t appropriate to a
rulemaking. Those are adjudicatory terms. 
This rulemaking has over time taken on more of an adjudicatory quality,
but that’s not necessary.  If we want an
expansion, that’s on us, but just a renewal. Evidentiary burdens could be
considered in the course of a rulemaking context as opposed to an adjudicatory
proceeding.
 
Q: from a rulemaking perspective, can we speak more about
building upon a declaration
 
RT: Can a one-page statement meet the statutory burden as
the CO has interpreted it?  Yes, if it
says “nothing has changed.”  Other administrative
proceedings: facts that aren’t contested are routinely accepted, even without
going back to the bedrock.  PTO works
that way.  PTO is allowed to treat an
uncontested claim of 5 years of exclusive use not just as true, but also as
having legal consequence (making a descriptive term registrable, in that
case).  Meaningful opposition: “our
arguments apply to both existing and proposed exemptions, but we do not oppose
renewal”—that’s what we hear. How is that to be interpreted?  Does that represent meaningful opposition to
the existing exemption?  Law prof hat: If
that evidence is relevant to both existing and proposed exemptions, then
adjudicatory model allows you to ignore that fact because parties are allowed
to make strategic concessions, but a rulemaking model might not.  (Statement somewhat against interest, I know.)
Decide what this proceeding will be and then some of the answers will follow.  Quality: as a practical matter, they keep
coming up with new screencapture programs. 
So we’d always be fighting anew again.
 
McClure: if you don’t presumptively renew, you get one
organization tied to the exemption. But it’s something that benefits the public
at large; shouldn’t have to depend on whether they come back year after year.
 
Peter Decherney, University of Pennsylvania: comments we always
get are: we are not opposed in general, but we propose these 10 limits.  Even though it says it’s not an opposition,
it is in fact an opposition.  Another
structural issue: if you draft the exemption well, you stop the harm from
occurring, so you can’t show that harm will continue.
 
Turnbull: The CO has appropriately taken our concessions as
concessions, but that wouldn’t be possible in a renewal model. The procedure
would naturally eliminate the problem and identify whether there was a change
we wanted to argue w/r/t the old exemption, or whether we only want to argue
w/change. Should be renewable by anyone taking advantage of the exemption.
 
Cazares: NFB fully supports presumptive automatic
renewal.  2010 cycle: another
organization, AFB, came very close to losing the exemption it had secured b/c
of evidentiary requirements. There’s something to be said about the statute and
its limitations, but it’s also safe to say particularly the blind/print
disabled, our status isn’t going to change and it can be argued that we’d be
adversely affected by not having an exemption.
 
Geiger: more consensus on what meaningful opposition ought
to look like: change in circumstances. Relates also to evidentiary
standard.  In thinking about renewing,
interests that don’t have to do w/copyright rights, including access, shouldn’t
be weighed.  Most of the opposition w/r/t
security research has no relation to ©. It’s about safety.  Hacking cars and nuclear power plants are
already illegal. By and large, the DMCA issues for us are about computers the
researcher already owns.  © and 1201 are
not the right tools to protect the asserted interests. 
 
Q: 1201(j): should it be updated for permanence? 
 
Geiger: 100% yes. 
Less preferable than updating permanent. Tech evolves; so will security
research; probably not new circumstances relating to copyright, though, so they should be dealt with by other agencies
with expertise.
 
Q: relying on prior record. 
Is there some point in time at which that old record would get
stale?  What about 10 years? 20
years?  Determination is whether users are or are likely to be adversely
affected, says statute.
 
Band: I would imagine that, even after we check the box,
someone will show up at the hearing. Don’t make it more complicated than it
needs to be.  Are people still making
remixes?  Yes, they are.  The question is whether we need a zillion new
examples from the past three years.
 
Q: triennial: short, medium, long could get complicated
quickly.  Don’t increase the complexity
of an already complex rule.
 
Band: reduce number of classes: we’ve gone from educational
and noncommercial to 8-9 in the same category. We don’t need 11-12 exemptions
on embedded software; we need one and you wouldn’t have to worry about the auto
industry. These things can work in tandem to streamline.
 
RT: Mr. Cazares’ point interacts w/Band’s: patterns of
protected uses and users persist over time.
 
Q: how should we separate statutory or admin change for new
exemptions/tech v. renewal of previously granted exemptions?  Accommodate evolution.
 
Sheffner: Stale, old evidence. We wouldn’t not oppose
incorporation by reference of evidence submitted in previous rulemaking.  Self-correcting in revised system. If proponent
files one-page, potential opponents can look at that and consider whether the
evidence has gone stale b/c the situation has changed in case law or business
model or new tech. This would be rare, but the opportunity to oppose would
exist.
 
Q: what about 4K instead of Blu-Ray—how do we deal with
renewal + new issues?
 
Sheffner: we would support a streamlined process for dealing
with renewal of exact same exemption. If people want an expansion, in practice
it may be streamlined, but burden should remain on proponents. Smaller fight
than fighting over whole thing.
 
Butler: largely true that it wouldn’t apply to increase from
Blu-Ray to 4K, but the logic underwriting the presumption should also mean that
arguments could be shorter, b/c we’d agree that the planned use was lawful—if it’s
fair use of a Blu-Ray, it’s fair use of 4K, and the adverse effect/pedagogical
need for using in classroom would already be in the record.
 
Turnbull: there is a difference b/t a new tech and one that’s
10 years old in terms of harm to development of the market. [Does this mean
that all the stuff in the morning about enabling the new markets is now
obsolete?] Blu-Ray is now 10 years old, and enabling market matters.  [I thought last year he was telling us that
granting a Blu-Ray exemption would destroy the market.]
 
Band: [expresses unease about great agreement w/Turnbull and
Sheffner] Building on identified issues, the CO can help manage, w/aim of
reducing workload: you know by now what the issues are in general terms w/DVDs,
educational use, remix use.  One can
easily imagine there’s a way to treat renew + expand with something like a
prehearing conference where you can figure out what you need to know from us. That
could reduce our burden as well as yours. 
We’re talking about a relatively small universe of clusters—motion-picture-related;
screen readers; a couple of others. 
 
Q: So if the CO provided guidance about what evidence they
wanted, could avoid some of the burden?
 
Band: yes.  Be a
little more informal; that could make it work better.
 
Butler: flip side of what Turnbull is saying about a young
format’s market realities—there will be a mirror image on the side of
proponents. When a format is young, we’ve typically shown that there are one or
two titles with unique content—but then the answer is that that’s one or two,
which is because they’re young formats. 
So recognize how that plays out on both sides.
 
Turnbull: agrees w/Band. 
Always a hybrid b/t adjudication and notice and comment, which is
inevitable in the process. Unrealistic that CO would go out and know what
people were doing w/any given © work. People who have the need to use something
have the info to come forward. End of day, CO has obligation to have a rule
reflecting the evidence.  Proposed rule
process would be more like notice and comment, but leading up to it would be
factfinding [driven by parties, I think he means].
 
Q: streamlined rejections—how about that? 
 
RT: No: structurally unequal; if the proponent wins, © owner
can still go to court on infringement/secondary infringement, but if the
proponent loses, they can’t even try that. So mirror image treatment is
inappropriate. Also, such a rule would have to deal with situations like
exemptions that have changed over time. Could you not go back to the original
44-word educational exemption because in some sense it’s been “rejected” by the
additional restrictions added over time? 
That would be inappropriate.
 
Band: no, circumstances change and rightsholders get more
comfortable w/certain activities. If proponent will work to amass new evidence.
If rightsholder was confident before, they can stay confident of past arguments
incorporated by reference.
 
Butler: right, it’s enough work that people who don’t have a
real interest will be deterred.
 
Q: we get a lot of repeat players.

Q: meaningful opposition: we talked about showing that the exemption wasn’t
used, or there’d been changed circumstances/harm.  How much opposition would be needed?  If proponent is just checking a box, it could
be a minimal showing to oppose that. Where should the line be?
 
McClure: need to know how much of the new record is pulled
in.
 
Band: Not sure you need to specify the precise level of how
material the opposition is.  If
Turnbull/Sheffner’s clients make submissions, you’ll look at them and decide
whether to kick it over.  Hard to
challenge that decision in court; you’ll have a lot of discretion one way or
the other.
 
Sheffner: we weren’t terribly specific but I envision it: a
prescreening process that the CO would employ before the regular process.  See if there’s a real fight in the rare case
of opposition to a previously granted exemption.  Identify why there’s meaningful opposition:
they’ve discovered great harm.
 
Q: if prescreening determined it insufficient, could we ask
for more?
 
Sheffner: sure: wouldn’t want to make it too
complicated.  Screen out fake fights.
 
Turnbull: Add that the nature and quantum of
evidence/argument will depend on the previous grant. If it was a close case
might be different v. if previous was 3 times granted.  Might need to describe the new tech in order
to reopen evidentiary hearing.  Would
have discretion to prompt opponent for more info.
 
RT: Not “just” checking a box any more than checking a box saying
you’ve submitted truthful information your tax return is a meaningless or
trivial act, it is an affirmation that the conditions underlying continue to
exist—an opponent of renewal should have to show that those conditions and laws
have changed.  If you want me to, I will
submit the entire record from the last three rulemakings as attachments so that
you can consider them submitted but that seems trivial—I would be happier if
you considered the checkmark to be me making that submission.
 
Geiger: Also would be good to let proponent show the
opposition isn’t meaningful, which could inform CO’s discretion before the
whole process starts again.
 
Butler: getting complicated! 
We need to know what the reasons are; opponents should disclose that, or
sometimes that one page will be on its face rejectable.  As long as everyone’s ok with being killed at
that stage and not going forward.

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