Going to the mattresses without initial interest confusion

Posted on January 15, 2016 by rtushnet
Select Comfort Corporation v. Baxter, No. 12-2899, 2016 WL
158516 (D. Minn. Jan. 13, 2016)
 
A lot of stuff going on here. The parties compete in the
market for adjustable air beds and related products. Select Comfort has a
market share of over 90% in the adjustable air bed market.  It has registrations for “Sleep Number,”
“Select Comfort,” and “What’s Your Sleep Number.”  Defendant Comfortaire is the second largest
market participant; Baxter developed its online advertising.  It used Select Comfort’s marks as search
terms in AdWords, as did defendant Personal Comfort.
 
A consumer who clicked on a Personal Comfort link would see
this comparative ad:
 

Personal Comfort’s logo is at the top of the page, beneath
which smaller text reads “Compare Us to Sleep Number Bed®,” then “PREFERRED
OVER SLEEP NUMBER® BED.” On the left side under the bold “Compare” heading, it
reads “vs. Sleep Number’s®.” Another bold heading: “The Sleep Number® Bed
versus Personal Comfort® Bed Comparison.” Lower on the page (not shown in the
screenshot), there is another link to “Compare to Sleep Number®,” and the
following: “We invite you to do your homework and check out the competition.” At
the very bottom of the webpage, there’s also a disclaimer of any affiliation
and a link: “No affiliation exists between Personal Comfort® or Sleep Number
Bed®. No product belonging to Select Comfort® or Sleep Number Bed® is sold on
this site and any reference is for comparison purposes only. Select Comfort®
and Sleep Number Bed® are registered trademarks of Select Comfort® Corporation
you can visit them at http://ift.tt/1ZpZrLS.”
 
Select Comfort objected to ads displayed in pay-per-click
ads, such as the following: “Sleep 55% Off Number Beds”; “Number Bed Sleep Sale
60% -Closeout Sale”; “Comfort Air Beds On Sale”; “50% Off Sleep Number Beds”;
“50ff Queen Number Beds … http://ift.tt/1JP9t7o”; “Select 55ff
Comfort Bed http://ift.tt/1ZpZqrg.”  Select Comfort also objected to banner ads on
third-party websites, such as:
 

In addition, Select Comfort argued that defendants used its
marks in phrases such as “Sleep Number bed” and “Sleep Number Beds on sale” in
hyperlinks on third-party sites leading to Personal Comfort’s website.  Further, Select Comfort objected to various
uses on the Personal Comfort site, including, for example, the use of “Sleep
Number Bed” in the title tag of the Internet Explorer tab; the use of meta-tags
on Defendants’ websites; and the use of “WHAT’S YOUR NUMBER?” “Number Bed” also
appears in the Personal Comfort logo:
 

Somewhat differently, Select Comfort objected to defendants’
use of a “lead generating” website, Mattress Quote. The Mattress Quote website
was created by defendants Baxter and Stenzel, and it allowed consumers to
obtain quotes on a number of brands, including Sleep Number and Comfortaire
products.  Though it was billed as an
independent website, Select Comfort submitted evidence that when consumers
selected either Sleep Number or Comfortaire, they received a quote from defendants.
Select Comfort also submitted evidence that, in responding to a direct inquiry
from the Mattress Quote website, defendants responded purporting to be “Sleep
Number.”  Select Comfort also submitted
evidence that defendants made allegedly false statements to consumers who
visited defendants’ website, called, or participated in a live chat.
 
The court found issues of material fact as to whether “Sleep
Number” and “Number Bed” were protectable marks, descriptive, descriptive with
secondary meaning, generic, or even suggestive (Sleep Number seems
non-suggestive for beds that are adjustable—I may not know exactly what it is,
but I immediately know there’s a range). 
Similarly, there were fact issues as to whether defendants engaged in
descriptive or nominative fair use.  And
there were fact issues on likely confusion, with some factors favoring each
side and some contested.
 
Notably, the court held that it was inappropriate to use
initial interest confusion in this circumstance, where the products are
expensive (the average Select Comfort bed costs between $1,600 and $2,300) specialty
products purchased online. “These factors lead to the conclusion that consumers
would exercise a high degree of care in purchasing such a mattress. Therefore,
Plaintiffs’ trademark infringement claim will require Plaintiffs to establish a
likelihood of actual confusion at the time of purchase.”  This mattered in part because most of Select
Comfort’s confusion evidence, according to defendants, involved only post-sale
mistakes/confusion, and because the key question in Select Comfort’s survey
didn’t test for source confusion (again, according to defendants).  Defendants’ own survey showed only 1.5%
confusion regarding the source or affiliation of their ads.
 
On the false advertising claims, defendants argued that
Select Comfort lacked standing.  It didn’t,
because it had a sufficiently close connection to the asserted false
advertising under Lexmark, so this
serves mainly as a reminder that Justice Scalia has lost the war on calling
this inquiry “standing.”  The other
aspects of the falsity claim were contested and had to go to a finder of fact.
 
The court likewise found that a jury would have to decide
whether “Sleep Number” and “What’s Your Sleep Number?” were famous under the
rigorous federal dilution standard. 
Select Comfort submitted that they had spent over $150 million in 2014
and over $1 billion since 2010 in marketing, advertising, and promoting their
Sleep Number products across many media. Publicity included “rankings in
industry magazines, positive reviews in Consumer Reports, celebrity
endorsements, and numerous mentions in magazines, newspapers, online,
television programs, and comics,” as well as other pop culture references. It
claimed over $10 billion in sales since 2010, and that in 2012, “Sleep Number”
achieved 21% unaided brand awareness and 75% total awareness.
 
Defendants disagreed, arguing that this wasn’t enough for
fame, since unaided brand awareness for the “Sleep Number” mark achieved under
20% awareness from 2001 to 2011, reached a high point of 21% in 2012, and
hovered around 12-13% from 2007-2009. The court declined to resolve the battle
and would let the jury decide.
 
Unjust enrichment went away as a separate claim because Select
Comfort had an adequate remedy at law. 
The Minnesota Deceptive Trade Practices Act claim survived, however,
because it might provide a separate basis to calculate damages.
 
Finally, the court dismissed a counterclaim based on Select
Comfort’s purchase of competitive trademarks as keywords.  Select Comfort acknowledged that the keyword
purchase alone wasn’t infringing or unfair competition.  “What Plaintiffs do contend is that
Defendants’ purchase of the keywords in conjunction with the resulting
advertisements is wrongful.”  This is an
excellent limitation and I hope more potential plaintiffs pay heed.

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Wear and tear: First Amendment takes another bite out of law protecting military medals

Posted on January 13, 2016 by rtushnet
United States v. Swisher, No. 11-35796 (9th Cir. Jan. 11,
2016) (en banc)
 
H/T Eric Goldman.
 
The facts of Swisher
are colorful (a murder trial, at which he was not the defendant, is involved) but irrelevant.  United
States v. Alvarez, 132 S. Ct. 2537 (2012), invalidated a statute
prohibiting lying about being awarded military medals.  Reversing circuit precedent, the en banc
court here also invalidated a prohibition on wearing such medals without
authorization.  Since the statute has
been amended to remove the mere prohibition, this particular issue won’t come
up again, but the First Amendment analysis is of interest for trademark
purposes.
 
Under Alvarez,
false statements aren’t for that reason unprotected; punishment is confined to
particular contexts.  The plurality’s
exacting scrutiny required (1) a compelling government interest; (2) that the
restriction at issue was necessary to achieve; (3) and that there was a direct
causal link between the restriction imposed and the injury to be prevented.  (Question: what work does (3) do?  Is there a case where the restriction would
be necessary but there was no direct causal link between restriction and
injury?)  Here, though the interest in
protecting “the integrity of the military honors system”  was compelling, the government’s interest
could be satisfied by counterspeech, including a “Government-created database
[that] could list Congressional Medal of Honor winners.” The government also
failed to prove “its claim that the public’s general perception of military
awards is diluted by false claims.”
 
Justice Breyer concurred, using intermediate scrutiny.  He would (1) take “account of the seriousness
of the speech-related harm the provision will likely cause”; (2) consider “the
nature and importance of the provision’s countervailing objectives,” and (3) weigh
“the extent to which the provision will tend to achieve those objectives, and
whether there are other, less restrictive ways of doing so.”  Other statutes punishing false statements were
more acceptable, he found, because they typically “narrow the statute to a
subset of lies where specific harm is more likely to occur.”  Breyer noted that a more limited statute could
have adopted these requirements by (1) requiring a showing that the false
statements caused a specific harm, (2) requiring that the lies be made in a
context “where such lies are most likely to cause harm,” or (3) focusing on the
more important military awards that Congress most values.
 
Previously, the 9th Circuit held that Alvarez didn’t control the false
medal-wearing statute because the statute regulated conduct, not speech.  Thus, it was more akin to (ok) impersonation
statutes or statutes prohibiting “the unauthorized wearing of military
uniforms.”  Under O’Brien’s test for regulating expressive conduct, the government
had “a compelling interest in ‘preserving the integrity of its system of
honoring our military men and women for their service and, at times, their
sacrifice.’”  The government’s interests
were “unrelated to the suppression of free expression” because the statute
“does not prevent the expression of any particular message or viewpoint.” And
third, “the incidental restriction on alleged First Amendment freedoms” was “no
greater than is essential to the furtherance of that interest,” because, “even
if § 704(a) is not the most effective mechanism, in at least some measure it
promotes the goals of maintaining the integrity of the military’s medals and
preventing the fraudulent wearing of military medals.”
 
The en banc court reasoned that, if a law suppresses conduct
to regulate the communicative nature of that conduct, then strict scrutiny
applies, not O’Brien.  Under Reed,
if “a regulation of speech ‘on its face’ draws distinctions based on the
message a speaker conveys,” it is a content-based regulation.  This was exactly what the law here did.  “Wearing a medal, like wearing a black
armband or burning an American flag, conveys a message.”  The law was designed to stop a particular
message: “the misappropriation or distortion of the message of valor conveyed
by a medal.” Thus, O’Brien didn’t
apply.
 
Under Justice Breyer’s concurring opinion in Alvarez, the law here failed as well,
lacking the same necessary limiting features that other laws against false
statements have.  The government said
that this law was like the Lanham Act’s ban against trademark infringement,
since it prevented “misappropriation” of government property.  But Justice Breyer rejected a similar argument,
albeit incoherently; trademark law focuses on “commercial and promotional
activities” and requires showing likely confusion, which makes it more likely
that the feared harm is involved.
 
Circuit precedent said that “[t]he use of a physical object
goes beyond mere speech and suggests that the wearer has proof of the lie, or
government endorsement of it,” but the en banc majority saw no basis for the
claim that wearing a medal is more probative than speaking a lie. (Citing Kevin
Jon Heller, The Cognitive Psychology of Circumstantial Evidence, 105 Mich. L.
Rev. 241 (2006) (noting, as an empirical matter, that jurors give more weight
to testimony, such as eyewitness identifications and confessions, than to
physical evidence, such as blood and fingerprints).)  Given that military medals are freely
available for purchase, “the probative value of owning a medal or other
military decoration is minimal.” Regardless, “wearing a medal has no purpose
other than to communicate a message,” so it was core protected symbolic speech.
 
Nor was the ban like laws barring impersonation of
government officials, or the unauthorized wearing of military uniforms, which
the Alvarez Court assumed (without
deciding) were valid.  Impersonation
statutes typically focus on impersonation, not mere speech, and require
showings that others were deceived. 
Other laws, limited to false representations in the contexts of banking,
finance, or law enforcement, where “a tangible harm to others is especially
likely to occur,” were distinguishable.
 
Although the government had a strong interest in avoiding
dilution of “the country’s recognition of [award recipients’] sacrifice in the
form of military honors,” a narrower law, plus a register of awards, could also
serve the government’s interests equally effectively.
 
Judges Bybee, N.R. Smith, and Watford dissented, and would
have viewed the case as one involving deceptive conduct, not just mere
speech.  The dissent pointed to a number
of other now-threatened laws: bans on unauthorized wearing of a uniform of a
friendly nation; wearing of the Red Cross (or related international symbols)
with the fraudulent purpose of inducing the belief that the wearer is a member
or agent of the Red Cross (or related national/international organizations).
 
The dissent disagreed with the majority that the “quantum of
conduct involved in pinning on a medal . . . is not materially different from
the quantum of conduct involved in speaking or writing.”  If that were true, the dissent contended,
 
then we could save ourselves
trouble and money by simply announcing that we are awarding medals without
actually giving the recipients anything. But as anyone knows who has witnessed
the President awarding the Congressional Medal of Honor or a promotion ceremony
pinning a new officer—or even an Olympic medals ceremony or a Cub Scout court
of honor—there is value, both symbolic and tactile, in the awarding of a
physical emblem. If there is important value in the act of awarding a physical
medal, there is important value in the wearing of it.
 
Here the dissent is nitpicking about the phrase “quantum of
conduct,” whatever that means.  The
majority means wearing a medal is an act in the world that is fundamentally
communicative; speaking and writing also have physical aspects, but the extent
to which that makes them “conduct” is usually zero given why they are usually
regulated, and so here.  The dissent says
that the physical act of receiving (and thus wearing) a medal means more than just announcing that
medal, which is also true, but (as is inherent in the dissent’s own
formulation), the act remains almost entirely communicative, with the physical
aspects serving to confirm the communication, just as standing at attention as
the national anthem is sung confirms a communication of respect.
 
The dissent also would have found that this particular ban
risked less of a chilling effect, because you can’t carelessly wear a medal as
you can carelessly claim to be a medal winner. 
(Everybody, majority and dissent, would require intent to deceive for
liability here.)  There was also less
ambiguity in wearing a medal than in speaking—the risk of misinterpretation or
“censorious selectivity” by prosecutors was less.
 
Moreover, the power of visuals meant that falsely wearing a
military medal did more harm to the govenrment’s interest than “mere false
speech”:
 
Even if the wearer is later exposed
as a liar, the utility of the medal as a symbol of government commendation has
been undermined. The public can no longer trust that the medal actually is a
symbol of government commendation …. It is one thing to say that one has been
decorated; it is quite another to produce the evidence for it by appropriating a
symbol that the government, through decades of effort, has imbued with a
particular message. Unlike false statements, which may work harm by giving the
public the general impression that more personnel earn military honors than
actually do, the false wearing of medals directly undermines the government’s
ability to mark out specific worthy individuals, because the symbol the
government uses to convey this message can no longer be trusted. This may also
mean that those who rightfully wear a military medal are less likely to be
believed…. [T]he wearing of an unearned medal offers more convincing proof of
the lie than a mere false statement.
 
Thus, a medal is like a trademark.  [Actually, the dissent is claiming that the
physical medal is like a trademark; apparently the name of the medal is not as
much like a trademark.]  “When those who
are unworthy are allowed to wear the medal, the government can no longer
identify its heroes in a way that is easily discernible by the public.”  Of course, this harm doesn’t occur “when an
unearned medal is worn for purposes of art, theater, political expression, or
the like.”  It’s only when the
medal-wearer tries to convey that he’s actually earned a military honor that
the medal’s symbolic value is diluted.  
[Under this rationale, it follows, trademark dilution is
unconstitutional, despite the way Justice Breyer tosses around “confusion” and
“dilution” as synonyms.]
 
Also, the government had fewer less restrictive alternatives
to banning the false wearing of a medal than it did to banning false claims of
military honors.  “[T]he fact that the
lie here is told in a more effective way, with physical proof in the form of
the medal to support the false claim of entitlement, increases the harm caused
by the lie and also means that other, less restrictive means are less likely to
be effective.”  Counterspeech would be
less effective, because, as the Fourth Circuit held, “speech may not
effectively counter that which a person sees.”  Plus, if a person has to check a database to
confirm that a medal was honestly earned, “the purpose of the medal itself is
utterly defeated. If we can no longer trust what we can see, the only honor the
United States can confer on its heroes is a listing in a database.”

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Is it safe? Uber’s media statements about safety are commercial speech

Posted on January 12, 2016 by rtushnet
Greater Houston Transportation Company v. Uber Technologies,
Inc., — F.Supp.3d —-, No. 4.14-0941, 2015 WL 9660022 (S.D. Tex. Dec. 18,
2015)
 
[Yes, I know, but I couldn’t find a relevant Taxi Driver quote.]
 
Previous opinion discussed
earlier in this space. Plaintiffs hold taxicab permits in Houston and San
Antonio.  They alleged that Uber falsely
advertised the safety of Uber rides compared to taxis, and the superiority of
Uber’s background check process compared to that of taxis. “On April 1, 2015,
one of Houston’s Uber drivers was arrested for allegedly sexually assaulting a
passenger. The Uber driver had passed an Uber background check despite having a
criminal record.”  Earlier claims related
to statements about insurance have been dismissed, except as relevant to the
alleged safety misrepresentations, because the Texas legislature passed a
relevant law.
 
Uber argued that the targeted statements were puffery.  The court agreed in part and disagreed in
part. Uber said it had the “SAFEST RIDE ON THE ROAD—Going the Distance to Put
People First.”  It continued that its
promise meant “setting the strictest safety standards possible, then working
hard to improve them every day. The specifics vary, depending upon what local
governments allow, but within each city we operate, we aim to go above and
beyond local requirements to ensure your comfort and security—and what we’re
doing in the U.S. is an example of our standards around the world.”  The first slogan was unmeasurable,
exaggerated and unreliable puffery.  The “specifics
vary” supporting language made clear that the overall safety claim was relative
to location, and its “aim to go above and beyond” language was aspirational,
not factual.  So too with the statement, “Wherever
you are around the world, Uber is committed to connecting you to the safest
ride on the road”: given its massive scope, it was clearly unverifiable,
exaggerated, and unreliable.  “BACKGROUND
CHECKS YOU CAN TRUST” was also a blanket generalization without further
explanation, and thus puffery.
 
Plaintiffs also challenged an October 2014 post on Uber’s
blog by former Rudolph Giuliani, headlined “UBER SETTING THE STANDARD FOR
SAFETY IN RIDESHARING: Posted by Rudolph Giuliani”: “I am pleased to say that
in my opinion and that of my safety consulting team at Giuliani Partners and
our partners at Guidepost Solutions, Uber is setting the safety standard in the
ride-sourcing industry.” The court found this a nonactionable statement of
opinion attributed to a third party.  The
post also said, “we believe [Uber’s background check process] represents a
substantial improvement over the existing safety standards in the personal hire
transportation world.” The court deemed it probable that a third party’s
opinion would be irrelevant to most people (really? not more relevant because
of security expertise?), and anyway opinions aren’t facts, but nonactionable
puffery.
 
Uber’s Head of Communications for North America, Lane
Kasselman, also made statements on Uber’s website:
 
All Uber ridesharing and livery
partners must go through a rigorous background check. The three-step screening
we’ve developed across the United States, which includes county, federal and
multi-state checks, has set a new standard…. We apply this comprehensive and
new industry standard consistently across all Uber products, including uberX.
Screening for safe drivers is just
the beginning of our safety efforts. Our process includes prospective and
regular checks of drivers’ motor vehicle records to ensure ongoing safe
driving. Unlike the taxi industry, our background checking process and
standards are consistent across the United States and often more rigorous than
what is required to become a taxi driver.
 
By contrast, this statement “was clearly intended to lead
and could lead a reasonable consumer to believe that an Uber ride is
objectively and measurably safer than a taxi ride.”  The court noted the comparative nature of the
statement and deemed “consistent” and “more rigorous” to be objective claims.
 
Plaintiffs also alleged misrepresentations about the “Safe
Rides Fee,” a $1 added fee on each ride that Uber claimed “supports continued
efforts to ensure the safest possible platform for Uber riders and drivers,
including an industry-leading background check process.” The court found that
this wasn’t puffery.  By stating that a
specific amount of money charged will be going towards Uber maintaining “the
safest possible platform,” the statement could lead consumers to believe that Uber
was specifically using this fee for safety improvements.  Uber also argued that the Safe Rides Fee
statements weren’t ads because they weren’t made for the purpose of influencing
consumers to buy Uber’s services: consumers are sent a link to that statement
after an Uber ride terminates. But the webpage would have been available to
consumers either before or after an Uber ride, just by going to Uber’s site.
 
Uber also made safety-related statements that were repeated
by journalists in news reports.  Were
these advertising and promotion? The court used Gordon & Breach (not needing to note that “commercial
competition” is probably gone after Lexmark,
given the competitive relationship between the parties). Uber argued that each
of its statements quoted in news articles are “inextricably intertwined with
the reporters’ coverage” in each article, citing Boule v. Hutton, 328 F.3d 84 (2d
Cir. 2003), which held that statements reported in a magazine weren’t
commercial advertising or promotion. 
Moreover, Uber argued that its statements weren’t commercial speech
because they did more than propose a commercial transaction.
 
Ony, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490
(2d Cir. 2013), found that “publication and dissemination of a scientific study
that had the effect of touting a company’s product is noncommercial speech and
was thereby immune from the false advertising provisions of the Lanham Act.”  However, Ony
treated the statements as potentially commercial; the Fifth Ciruit followed
suit in Eastman Chem. Co. v. PlastiPure, Inc., 775 F.3d 230 (5th Cir. 2014),
holding that disseminating scientific study results in a marketing campaign is
commercial speech.  The Lanham Act thus
applied more broadly than Uber claimed.
 
Here, the statements directly reached out to or addressed
consumers.  Statements reported in the
media included the claim that Uber “want[s] to assure all riders …”—a direct
quote from Uber’s website.  As in Eastman, “[e]ach of Uber’s statements
was issued by its corporate spokesperson or on Uber’s own official website as
part of a concerted campaign by the company in response to incidents that had
been publicized in the media.”  Three
were made by Uber’s Head of Communications for North America, one by Uber’s
Senior Communications Associate, and one by Uber’s Public Policy representative.  In context, this was commercial speech with a
coherent theme, as part of an effort by Uber “to influence consumers to buy
defendant’s goods or services….”  The
statements formed “a group of internally consistent statements in a manner
similar to an advertising campaign,” but using “sophisticated advertising
techniques… to transform traditional news media into a method of influencing
consumers.”  The court concluded:
 
In the modern age of hybrid
advertising and advertising in social media, Courts must remain vigilant in
order to separate commercial from non-commercial speech, regardless of the form
in which it was disseminated. Uber has previously argued for a paradigm shift
regarding its business model: asserting that it should be viewed as a software
company, not a transportation company. Likewise, here, the Court finds that
Uber’s disputed statements, although released in traditional news media,
require a paradigm shift, to evaluate the statements as commercial speech because
their predominant purpose is promotional and persuasive. The evolution in
business requires us to reevaluate the use of the media as advertising to
understand the commercial use and significant business benefits that many
companies derive from the media in today’s economy. The comments issued by
Uber’s communication executives demonstrate a careful, uniform, and
orchestrated message designed to encourage and facilitate the commercial use of
its product and service.
 
In addition, on a motion to dismiss, the court accepted that
the statements were “disseminated sufficiently to the relevant purchasing
public,” the final element of “advertising or promotion.”
 
Puffery: The statement of Uber’s Senior Communications
Associate read:
 
What I can tell you is that Uber
takes passenger safety very seriously. We work every day to connect riders with
the safest rides on the road and go above and beyond local requirements in
every city we operate. Uber only partners with drivers who pass an
industry-leading screening that includes a criminal background check at the
county, federal and multistate level going back as far as the law allows. We
also conduct ongoing reviews of drivers’ motor vehicle records during their
time as an Uber partner.
For more information on what makes
Uber the safest rides on the road, please see our website …
 
This statement contained specific, measurable and concrete
factual assertions that could be falsified: a factfinder could determine
whether Uber used the screening described and conducted ongoing reviews of
records.  Similarly, another statement
claiming “Our driver partner background checks are more thorough than those of
taxi [sic] in most cities and include county, state and federal screens going
back seven years” was falsifiable: it mentioned specific procedures and made an
explicit comparison to taxis.  Moreover,
the context made its seem more fact-like: it was released to news media because
of the public interest in Uber’s safety, meaning that “it would be more likely
to be viewed as objective and verifiable information by the public.”  Similar statements, “We’re confident that
every ride on the Uber platform is safer than a taxi,” and “We’re confident
that every ride on Uber is safer than a taxi,” were also potentially
quantifiable, despite the “we’re confident” intro.  “[S]tatements as to the comparative safety of
a product are specific and measurable, and thus frequently considered
actionable.”
 
Uber’s public policy representative also said: “Uber works
with Hirease to conduct stringent background checks going back seven years,
which all drivers must undergo and clear to partner with Uber. This driver [who
killed a child] had a clean background check when he became an Uber partner.”
These were objectively verifiable statements on which consumers could rely.  Similarly, responding to news that an Uber
driver in Chicago had been previously convicted of a felony but had not been
screened out by Uber’s background check process, Uber wrote: “[W]e have already
taken steps to prevent this from happening again, by expanding our background
check process to set new industry-leading standards … We are sincerely sorry
for this error, and want to assure all riders that we are taking the necessary steps
to fix it and build the safest option for consumers.”  The first part was factual, while the second
part was mere puffery.
 
For the same reasons, Texas common law unfair competition
claims survived.
 
Uber’s related motion for summary judgment on the surviving
claims failed.  Plaintiffs argued literal
falsity and introduced expert testimony and official reports creating genuine
issues of material fact on falsity/misleadingness.  For example, plaintiffs’ background check
expert, the former Deputy Director of the Department of Homeland Security,
Alonzo Pena, affirmed that background checks employing fingerprinting are
inherently superior to background checks that do not employ fingerprinting. “[N]o
statement of relative safety or of the superiority of Uber’s background checks
could be true if a trier of fact found that Uber employs fundamentally inferior
background check and safety practices.” 
Likewise, an official Houston report suggested that Uber’s background
check process fails to search across all states and counties, and leaves large
gaps where criminal background information would not be detected, including Delaware,
Massachusetts, South Dakota and Wyoming.
 
The court also didn’t rule on materiality; literal falsity
would allow a jury to find materiality without further evidence, and also I can’t
imagine that comparative safety is immaterial to consumers even if communicated
implicitly.
 
Uber, inexplicably, disputed
whether its advertised goods or services “travelled in interstate commerce.”  There was no disputed fact issue on the
interstate nexus here. Uber “use(s) smartphones, mobile communications, credit
card processing transactions, bank to bank payments, and transfers of funds to
receive payments from customers and provide payments to their employees and/or
drivers.” Uber’s challenged statements were published on the internet, reaching
across state lines to a national and international audience.  Uber’s own interstate background checking process showed that its business
involves interstate commerce, not to mention its interstate and international
operations.  (Well, that’s at least $400
of lawyer time wasted.)
 
Injury: injury to plaintiffs could be presumed from a false
or misleading comparative ad.
 
The court also refused to dismiss plaintiffs’ request for
permanent injunctive relief.  Irreparable
injury could be presumed from a showing of likely confusion, so that relief
remained on the table.  (This will be
cited by many a plaintiff!)

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Chobani ad campaign draws Lanham Act suits

Posted on January 11, 2016 by rtushnet

The NYT has a story here.  Interestingly, the campaign is similar to some others I’ve seen condemned by the NAD and even the FTC in the context of “green” claims, by focusing on the use of chlorine etc. in producing some of the ingredients in competitors’ yogurt.  If the chemicals aren’t present in the yogurt itself, or aren’t present in amounts significant enough to affect health, then Chobani could have a problem. 

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My other district court decision is a loss: LV loses parody bag case

Posted on January 11, 2016 by rtushnet
Louis Vuitton Malletier, S.A. v. My Other Bag , Inc., No.
14-CV-3419 (S.D.N.Y. Jan. 8, 2016)
 
The Hon. Jesse Furman again demonstrates his good sense.  My Other Bag sells canvas tote bags with the
text “My Other Bag . . .” on one side and drawings meant to evoke iconic
handbags by luxury designers, such as Louis Vuitton, Chanel, and Fendi, on the
other.  The court identified the totes,
and the company name, as “a play on the classic ‘my other car . . .’ novelty
bumper stickers, which can be seen on inexpensive, beat up cars across the country
informing passersby — with tongue firmly in cheek — that the driver’s ‘other
car’ is a Mercedes (or some other luxury car brand).”  These bumper stickers riff on expectations
about car drivers and luxury cars, and MOB’s totes were “just as obviously a
joke.” 
 

LV can’t take a joke, and sued for dilution, trademark
infringement, and copyright infringement. 
The court granted summary judgment. 
MOB’s bags have drawings of various bags on them; the ones at issue here
“use simplified colors, graphic lines, and patterns that resemble Louis
Vuitton’s famous Toile Monogram, Monogram Multicolore, and Damier designs, but
replace the interlocking ‘LV’ and ‘Louis Vuitton’ with an interlocking ‘MOB’ or
‘My Other Bag.’”  MOB says its products
are “[e]co-friendly, sustainable tote bags playfully parodying the designer
bags we love, but practical enough for everyday life,” and they sell for $30
and $44.  Its marketing touts the idea
that high-priced designer bags are inappropriate for dirty gym clothes or
groceries, but its casual canvas totes are fine for that: “[T]his luncheon
worthy designer bag doesn’t fit in at the gym, BUT My Other Bag . . . DOES . .
. .”
 
Dilution: An introductory note: the court says, based on
statements in other cases, that the NY and federal analyses are basically the
same, although NY does not require fame. 
Under both laws, analysis “‘must ultimately focus on whether an
association, arising from the similarity between the subject marks, impairs the
distinctiveness of the famous mark’— that is, the ability of the famous mark to
serve as a unique identifier.”  However,
it is hard to reconcile those statements with Deere v. MTD, which very clearly
would have been a defense victory under federal law given the federal
exclusions.  (I have seen suggestions to
the contrary but I don’t find them credible; even Hyundai-style analysis wouldn’t condemn the ad in Deere.) 
Deere, of course, predated the
FTDA and the TDRA, so the Deere court
was not in a position to consider the initial or revised exclusions to federal
dilution. 
 
Takeaway: Even in New York, with perhaps the most developed
history of state-law dilution claims, courts interpret state and federal
dilution law as similarly as possible.  I
don’t think this is just a matter of not wanting to do two different
analyses/judicial economy.  Since we don’t
have any idea what dilution is, courts are understandably leery of trying to
implement two different strained
definitions.  I do wonder what this
implies for future Deere-type cases
brought under NY and federal law—arguably, given Deere’s scope, this is one of them, given that it involves
competitor’s alteration of the mark. If the reasoning for keeping the analysis
the same is that federal dilution law has the same justification as state
dilution law (query why one requires fame and the other doesn’t, then), then
even later federal law can shed light on the proper interpretation of state
law, I suppose, meaning that Deere
should come out differently today.  (Also,
to the extent that state law tries to make non-false/misleading comparative
advertising unlawful, I think it’s unconstitutional, also meaning that Deere should come out differently.)
 
OK, so LV’s theory is dilution by blurring.  MOB argued that federal law requires “use as
a mark” for a dilution claim, and McCarthy agrees, but the court didn’t need to
reach that issue because MOB won anyway. 
First, federal law excludes fair use “other than as a designation of
source for the person’s own goods or services,” including “identifying and
parodying, criticizing, or commenting upon the famous mark owner or the goods
or services of the famous mark owner.” 
Parody is “a simple form of entertainment conveyed by juxtaposing the
irreverent representation of the trademark with the idealized image created by
the mark’s owner,” conveying the contradictory messages that it is and isn’t
the original.
 
As a matter of law, MOB’s bags were fair use.  They communicated a lack of connection to the
original producer with a joke about how this
bag wasn’t a Louis Vuitton bag.  Combined
with the “stylized, almost cartoonish renderings” of LV bags on the totes, the
joke created “significant distance between MOB’s inexpensive workhorse totes
and the expensive handbags they are meant to evoke.  LV’s exclusive image was, at least in part,
the brunt of the joke—LV’s bags are treated revently to communicate status,
while MOB’s totes are utilitarian.
 
LV argued that the bags weren’t really a parody, and that
the company’s CEO stated that she never intended to disparage LV.  As in Hyundai,
any humor was, according to LV, just part of a larger social commentary.  McCarthy doesn’t like Hyundai, and neither does Judge Furman, because the Hyundai court failed to notice the
distinction between association and dilution. 
But in any event, Hyundai is
distinguishable: “it is self-evident that MOB did mean to say something about
Louis Vuitton specifically.”  LV’s
handbags are integral to the joke; that the joke is also about society’s
obsession with status is not disqualifying.
 
Tommy Hilfiger Licensing, Inc. v. Nature Labs, LLC, 221 F.
Supp. 2d 410 (S.D.N.Y. 2002), was a better guide.  That case blessed a pet perfume called Tommy
Holedigger, which resembled a Tommy Hilfiger fragrance in name, scent, and
packaging.  Though the defendant’s
general partner had difficulty expressing the parodic content of his
communicative message, parodies do convey a message; “[t]he message may be
simply that business and product images need not always be taken too seriously;
a trademark parody reminds us that we are free to laugh at the images and
associations linked with the mark.” 
 
LV relied on Dallas Cowboys Cheerleaders, Inc. v. Pussycat
Cinema, Ltd., 604 F.2d 200 (2d Cir. 1979), to argue that the totes couldn’t be be
a parody because they didn’t need to use Louis Vuitton’s trademarks for the
parody to make sense.  (The court doesn’t
address the otherwise outdated/deprecated status of Dallas Cowboys Cheerleaders; wonder what effect the analysis in In re Tam would have here?)  True, MOB could use any well-known luxury
handbag brand to make its points.  But,
while you can talk about sex in athletics without talking about the Cowboys
Cheerleaders, the tote bags here wouldn’t make any sense if they just depicted
a generic handbag: “my other bag . . . is some other bag.”  At least when a parody must evoke one of a
finite set to make its point, the parodist can choose; otherwise it could be
excluded from all under LV’s rationale.
 
LV also argued that there couldn’t be fair use because MOB
used LV’s trademarks “as a designation of source for [MOB’s] own goods.” Given
the overall design of the tote bags—identical, stylized text on one side,
different caricatures on the other—and the fact that the bags used a range of
luxury brands, the court disagreed.  LV’s
marks were the target of the joke, not the designation of source.  LV cited MOB’s CEO’s deposition where she was
asked whether she agreed that the LV pictures with their markings “are
depictions . . . you use in order for people to understand that the product
comes from you, My Other Bag.”  She
responded affirmatively: “People know that the product . . . our tote bags with
those depictions come from My Other Bag.”  But that’s not an admission of use of LV’s
marks to identify the source of MOB’s bags. 
In context, when counsel was attempting to establish likely confusion,
her sole point was that consumers weren’t likely to be confused.
 
Even if MOB were using LV’s marks as a designation of
source, MOB would still win summary judgment, because association caused by
parody strengthens the uniqueness of a famous mark, rather than blurring
it.  Association is necessary to, but not
sufficient for, blurring.  The statute
explicitly requires a likelihood that the association “impairs the
distinctiveness of the famous mark.”  Haute Diggity Dog persuasively explains
why parody is unlikely to do so—parody requires the distinctiveness of the
famous mark to be maintained.  The
mimicry involved in parody is very different from hypothetical “Louis Vuitton
aspirin tablets.”
 
Trademark infringement: also a loser, for many of the same
reasons.  The strength of LV’s marks, in
a parody context, made confusion less likely, so the strength factor favored
MOB or at most was neutral.  Similarity
also didn’t favor LV given the presence of joke signals in the cartoonish
image, the text, and the workhorse style of the canvas bag.  Proximity of the products/bridging the gap
favored MOB because LV isn’t going to make cheap canvas bags, though it does
make “casual” and canvas bags. Its handbags cost hundreds or thousands of
dollars, and were sold exclusively in LV’s stores and on its website.  MOB’s totes are cheaper and sold elsewhere—“in
no meaningful sense ‘competitive’ with Louis Vuitton’s designer handbags.” 
 
Nor was there evidence of actual confusion.  LV pointed to a handful of descriptions of
the MOB bags as “LV” bags.  Even taking
those literally, a handful wasn’t enough to show likely confusion, given the
fact that the bags had been on the market for several years.  But there was no reason to take them
literally, since the speakers were plainly using “LV” as a shorthand to
describe the designs evoking LV bags: they showed that consumers were getting
the joke.
 
MOB’s intent to parody wasn’t bad faith.  Its benefit from using the marks arose from
the humorous association, not from confusion. 
The sad-sack 2d Circuit “quality” factor, which should really just be
put out of its misery, also didn’t favor LV, because LV didn’t show that the
lower quality of MOB totes risked tarnishing its mark, nor were the totes of
the same quality as LV bags and thus more likely to cause confusion.  Consumer sophistication/degree of care
favored MOB because of the substantial price of LV bags, and because “MOB’s gimmick
would be obvious to even its most unsophisticated customers, as one whole side
of the tote bag is blank except for the words ‘My Other Bag . . . .’”  The obviousness of the joke would protect
even a minimally prudent consumer.
 
LV hypothesized post-sale confusion among observers who saw
only one side of the bag and didn’t notice the replacement of LV with MOB in
the logo.  But the Second Circuit
generally treats post-sale confusion as actionable only in the context of
“knockoffs.”  Plus, “no reasonable
observer is likely to infer from the cartoon-like bag-within-the-bag design and
the juxtaposition of MOB’s basic, canvas tote with the exclusive, luxury status
of Louis Vuitton that Louis Vuitton sponsors or otherwise approves of MOB’s
tote bags.”  Furthermore, likely
confusion isn’t assessed using “a hypothetical scenario that is most likely to
result in confusion.” The overall impression of reasonable consumers is key,
and the overall impression/context certainly includes both sides of the bag.
 
Copyright infringement: Nope, this couldn’t substitute for
trademark.  Transformative uses can be
commercial, and usually copy popular, expressive works.  MOB used a reasonable amount in relation to
its aim.  “Finally, although MOB’s totes
are, in an abstract sense, in the same market as Louis Vuitton’s handbags, its
totes do not ‘serve[] as a market replacement for’ Louis Vuitton’s bags in a
way that would make ‘it likely that cognizable market harm to [Louis Vuitton]
will occur.’”

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Can a “no-haggle” offer include negotiation? maybe not

Posted on January 11, 2016 by rtushnet
Dependable Sales & Service, Inc. v. Truecar, Inc., No. 15-cv-1742,
2016 WL 79992 (S.D.N.Y. Jan. 6, 2016)
 
Plaintiffs, 162 auto dealerships, sued TrueCar for false
advertising under state and federal law. 
TrueCar’s website tells prospective car buyers search that it has more
than 9,000 affiliated auto dealerships nationwide and that more than 500,000
customers have purchased vehicles from “TrueCar Certified Dealers.”   Dealers’ identities are revealed only after
consumers enter their names and contact information, at which point dealers
contact consumers to solicit them. “As a result, instead of taking the
‘haggling’ out of car sales – as TrueCar advertises – TrueCar’s business model
facilitates and encourages haggling.”  Consumers
allegedly may ultimately pay prices higher than those offered through the
TrueCar website.  Likewise, consumers may
download a “Guaranteed Savings Certificate,” which allegedly doesn’t accurately
reflect the eventual price TrueCar customers pay.
 
The court granted in part and denied in part TrueCar’s
motion to dismiss based on lack of falsity. 
First, TrueCar argued that its ads promising a haggle-free,
negotiation-free buying experience weren’t false.  Example claims: “There’s zero negotiation
….,” “You get a negotiation free guaranteed savings and hassle free buying
experience,” and “Because I used TrueCar there was no haggling about the price.”  However, plaintiffs alleged that TrueCar instead
facilitates dealership solicitations to consumers, the purpose of which is to
“haggle” and negotiate over the vehicle purchase.
 
TrueCar argued that “TrueCar’s user experience does not
involve negotiation,” and that “the customer is immediately entitled to the
Guaranteed Savings with the click of a mouse,” as “a lump-sum discount.”  This was a factual issue that couldn’t be resolved
on a motion to dismiss. Nor could any effects of TrueCar’s website disclaimer
be assessed.  The disclaimer stated:
  
Guaranteed Savings represents the
amount that a TrueCar Certified Dealer selected by you guarantees that you will
save off the Manufacturers’ Suggested Retail Price (’MSRP’) on any in-stock
vehicle that is the same make, model, and trim as your Ideal Vehicle. The
Guaranteed Savings is based on a vehicle without factory or dealer installed
options and includes generally available manufacturer incentives. … Each
dealer sets its own pricing. Your actual purchase price is negotiated between
you and the dealer.”
 
“While a disclaimer may be so plain, clear and conspicuous
as to bar a claim as a matter of law, this is not such a case.”  There was a factual question whether “[t]he
few words of disclaimer are lost when the ads are considered as a whole” or
were effective.
 
Nor could the court determine at this time that the claims
were puffery.  TrueCar argued that “haggling”
was an opinion-based concept.  But there
were conflicting definitions, which the court couldn’t resolve on the
pleadings.  TrueCar cited one definition
of haggle as to “bargain in a petty, quibbling, and naggingly quarrelsome
manner,” while plaintiffs’ definition was “to talk or argue with someone
especially in order to agree on a price.” The complaint plausibly alleged that lay
consumers understood “no haggle” to mean that the given price is the actual
price, and that no negotiation is required. 
(What does the presence of CarMax in the market mean for consumer
expectations?)
 
Other supporting allegations also made the puffery defense
inapposite at this stage: TrueCar made other claims such as “No Negotiation,”
“No Surprises,” “No hidden costs or surprise fees. Ever.,” “the
negotiation-free car buying and selling mobile marketplace,” “we provide true
up front pricing information and a network of trusted dealers that guarantee
savings without negotiation,” “it’s negotiation free guaranteed savings and a
hassle free buying experience,” and “the negotiation-free car-buying platform.”
TrueCar didn’t explain how these statements concerning negotiation were mere
puffery.
 
However, the court dismissed claims going to alleged “bait
and switch” tactics.  Plaintiffs alleged
that the ads led consumers to think they could get a specific car at a
guaranteed price. But not all TrueCar-affiliated dealers who contact consumers
have the desired make and model in their inventory, and instead offered different
vehicles, amounting to bait and switch.  But
the complaint didn’t specifically identify the false statements that supported
a bait and switch claim.
 
TrueCar’s ads also allegedly misled consumers into believing
that they could learn a vehicle’s “factory invoice” price through TrueCar, and
that they would be able to buy a vehicle for less than the amount originally
paid by the dealer. However, the advertised “factory invoice” price allegedly
didn’t reflect rebates, incentives and other discounts that the manufacturer
provided to the dealer. One ad, for example, had a graph identifying a “TrueCar
Price” of $24,450, an “Average Paid” figure of $25,386, a “Factory Invoice”
price of $25,970 and a Manufacturers’ Suggested Retail Price of $26,445. The
accompanying text, “Information is Power,” said, “As a data company, we study
millions of purchase transactions every year. … Within minutes, you can get
upfront pricing information from TrueCar Certified Dealers and know how those
prices compare to the current market.”
 
TrueCar argued that any reasonable consumer would believe
that dealerships profit from their auto sales. But plaintiffs didn’t claim that
TrueCar failed to disclose that fact; they alleged that the “factory invoice”
price cited in advertisements was misleadingly high and misled consumers about
the extent of their purported savings. 
TrueCar also cited a webpage describing factory invoices for the Toyota
Corolla, which said that the factory invoice “does not include discounts,
dealer incentives, or holdbacks ….” On a motion to dismiss, the court couldn’t
resolve whether this definition cured any misleading ad.  Finally, TrueCar argued that the graph wasn’t
misleading “because TrueCar users on occasion will pay less than the factory
invoice price.” Not on a motion to dismiss they don’t.

The court dismissed a few more claims, one about financing—the ads allegedly
led consumers to believe that TrueCar would calculate the financing terms of a
vehicle purchase, including monthly payments. TrueCar’s website contains a
feature that calculates an “Estimated Loan Payment” for the particular car
selected by the consumer, but it displays financing terms that “are not
available to all consumers.” But the express “Estimated” showed that TrueCar
wasn’t offering actual financing terms. 
(But if they aren’t “estimates” of what someone with bad credit would
pay, why is “estimated” nonfalse?)
 
The court also dismissed claims based on statements about
transparency, such as “you can trust that everything is upfront and out in the
open. No hidden costs or surprise fees.” Plaintiffs alleged that TrueCar
conceals costs and fees, because dealerships affiliated with TrueCar paid
TrueCar for every car sold, and those fees are inevitably passed to consumers.
That didn’t plausibly allege that claims of no hidden costs/surprise fees were
false.  A fee that’s included in a price
quoted to a consumer isn’t hidden or surprising.
 
Finally, plaintiffs alleged that TrueCar’s ads were false
because they indicated that consumers would receive the full discount
advertised by TrueCar.  But some rebates were
only available to certain customers, such as loyalty rebates or rebates offered
to recent college graduates or members of the military. The complaint alleged
that some TrueCar customers expressed confusion after receiving the impression
that they would be eligible for all rebates advertised by TrueCar. Again, the
complaint didn’t sufficiently identify the relevant ads to put TrueCar on
notice of the claims against it.
 
Finally, the court refused to dismiss the claims for failure
to allege injury.  TrueCar argued that,
even if consumers were misled, they knew the truth before they bought their
cars.  If a consumer tried a non-matching
car and decided to buy it, the deception would have dissipated.  The court rejected this argument as going to
the merits.  It is also legally
irrelevant, I think.  I’ll
let the Supreme Court explain:
 
We find an especially strong
similarity between the present case and those cases in which a seller induces
the public to purchase an arguably good product by misrepresenting his line of
business, by concealing the fact that the product is reprocessed, or by
misappropriating another’s trademark. In each the seller has used a
misrepresentation to break down what he regards to be an annoying or irrational
habit of the buying public—the preference for particular manufacturers or known
brands regardless of a product’s actual qualities, the prejudice against
reprocessed goods, and the desire for verification of a product claim. In each
case the seller reasons that when the habit is broken the buyer will be
satisfied with the performance of the product he receives. Yet, a
misrepresentation has been used to break the habit and, as was stated in Algoma Lumber, a misrepresentation for
such an end is not permitted.

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Seen on the streets of NYC

Posted on January 11, 2016 by rtushnet

Photo by Mark Lemley:

Does it matter whether Winebook sells both wine and books?

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AALS panel on the scope of IP rights

Posted on January 11, 2016 by rtushnet
Intellectual Property – Interpreting the Scope of IP Rights
Moderator: Zahr Said, University of Washington School of Law
 
Margaret-Jane Radin, The University of Michigan Law School:
Patent scope. The problem of describing innovation (thing in the world) in
words. Philosophical problem of extensive lineage; judges often don’t know it’s
a problem.  Related: problem of big
picture economic efficiency. If that’s what we want, what are patent
rationales?  Incentivizing/ex
post—coordination of future innovation, signaling market.  Recent discussions about notice: notice to
public & competitors is important, but patent claims are in words and thus
tempting analogy b/t notice in words and fences is flawed.  Longstanding puzzle; can’t be solved with
analogies or advice to be clearer in claim drafting. 
 
Costs/Benefit balance of large rights may change over time,
and that flexibility may be a good idea. 
Dilemma b/t calibrating rights properly and trying to make rights clear,
and both are parts of the efficiency calculation.  Some judges gravitate intuitively to one pole
or the other.  Even with philosophy the
dilemma would still be there.
 
Philips v. AWH: Fed. Cir. en banc.  Interpretation focused on entire text: claim,
specification, and prosecution history. 
They arrive at unified guideline, but interpretive guidelines are only
useful for notice if they generate more predictable outcomes, and it
didn’t.  Judges don’t all get the same
result—the majority agreed on the interpretive standard, but disagreed on the
mandated result in this particular case. 
Suppose something was indescribable at the time of the patent, but not
at the time of the litigation—is it covered in the patent?  Can be. 
But who is doing the describing? 
Usually the attorney, not the inventor. But that’s an issue the SCt
doesn’t go near; we don’t want anyone to think that drafters are
co-inventors.  Festo introduced the word of describability, but older cases often
understood the idea of emergent inventions for which language develops
later.  The idea of the essential nature
of the invention persists; a survival of central claiming, which is supposedly
gone.
 
Mark A. Lemley, Stanford Law School: co-authored paper with Mark McKenna.  We generally divide IP
into validity doctrines, infringement doctrines, defenses.  Result: We apply different rules at different
times and sometimes different actors: judge, jury, PTO.  Fact that we’ve divided IP into different
pieces creates the “nose of wax” problem: you say at T1 that a patent is really
broad when it benefits you to do so and at T2 that it is really narrow when it
benefits you.  It produces bad result
because courts don’t at any time take account of the scope of an IP right.  We ask “is this IP right invalid b/c it’s too
broad” and “is the thing D is doing sufficiently similar to what P is doing”
but generally not in an integrated proceeding “is the thing D is doing that P
is doing the thing that can be controlled under this right?” 
 
Part of this: (1)  we
generally allow fragmented infringement. 
We can point to some sub-piece of product or book that’s sufficiently
similar.  (2) We’ve also expanded subject
matter to cover things that are supposed to be protectable only in
part—utilitarian articles for ©; product configuration for TM.  But (3) jury has taken on increasing role in
resolving IP disputes. Often delegate legal decisions about proper scope of
right to the jury in the guise of fact questions about similarity, and often
with no guidance to the jury about that.
 
Example: design patents now allowed to cover prior art and
functional aspects. We used to look at prior art, design patent, and accused
infringer together, but now we’ve separated them.  Said functionality is extremely narrow;
limited/narrowed prior art. But then allow the patents upheld under these
standards to go to jury under ordinary observer standard.  That’s fine if the thing that makes the thing
that makes it sufficiently similar is the thing we want to protect. But if the
thing that makes it sufficiently similar is prior art or functional, that’s
bad.  Most recent example: Apple/Samsung
design patent case, where the key similarities are also in prior art, but jury
doesn’t see them at the same time.  Same
problem occurs in trade dress cases—Reynolds v. Handifoil case.  They are different in many respects, but
court finds striking similarity: both boxes say heavy duty, nonstick, Made in
USA, and list square footage in the box. Those are similarities, but not
similarities in what the law is supposed to protect.
 
© has similar problems, even though it at least purports to
filter out unprotectable elements.  Right
now we filter for actual copying, but allow jury to load them back in to
determine whether copying is so great as to be unlawful, even though that risks
jury relying on those unprotectable elements. 
“I need somebody to love” as lyric whose reappearance is enough to go to
the jury in Bieber case; also infects jury in Blurred Lines case where jury hears songs even though it’s supposed
to focus on the musical work and ignore intentional but unprotectable stylistic
similarities in performance.
 
Court plays blackjack: IP owners want to get as much as
possible, but if they claim too much the right may be invalidated.  This is good for gaming, but not good for IP,
where we really want to get scope right. 
Markman has problems, but it’s
good b/c it makes parties go into a room and come up with a scope—what the
patent covers and what it doesn’t—and that limits the nose of wax problem. We
could do more explicit scope proceedings. 
That would cause the court to focus on what we should be thinking about
when we think about IP: how much protection does the law intend to provide, and
are you seeking more than that?
 
Eva E. Subotnik, St. John’s University School of Law:
Derivative works: what are they?  For a
time, appellate courts have avoided interpretations bearing on scope that ask
for anything quantitative, as opposed to qualitative.  A sea of discarded tests.  Examine the roadkill to see the path we’re
on.  (I have questions about this
metaphor.)
 
How much of the plagiarist’s work the plagiarist didn’t
pirate: that would have suggested a brick by brick method.
 
Feist: Downplays
both sweat and binary copied/not copied distinction in favor of a more general
approach.  Feist decides validity but is still relevant; QP was about scope,
and also case sent the tone that clear-cut metrics were out and qualitative
metrics were in.
 
Similar issues about what’s required for a derivative
work.  Gracen: 7th Cir. required sufficiently gross difference
b/t derivative and underlying work to render the derivative work protectable to
avoid entangling subsequent artists in problems.  “Gross” signals a quantitative method. But
more recently, in Schrock, the 7th
Circuit capitulated and said it would apply a unitary standard.  Now we look for sufficient nontrivial
expressive variation to make it distinguishable from the underlying work in
some meaningful way. Reaffirms qualitative analysis.  Puts a lot of pressure on infringement
analysis to ensure the scope of rights in underlying work isn’t unduly
curtailed.
 
Fair use: Cambridge U.
Press v. Georgia: DCt used a rule of thumb about amount used: 10% or one
chapter where book had more than ten chapters was presumptively fair use.  Could wrongly signal to authors that use of
more than 10% would always be protected, but that wasn’t the 11th
Circuit’s problem—held that improper even as a starting point, b/c case by
case/work by work approach was required under Campbell.  Cariou v. Prince also downplayed
quantitative approach/intention of artist and said transformativeness had to be
judged by reasonable observer. But the basis for remand of remaining 5 works
was incredibly murky and provided no guidance to judge.
 
We’re seeing some pushback in quantitative thinking about
scope.  Garcia v. Google en banc: Fleeting performance on film, which would
bear on filmmakers’ © scope.  En banc
majority referred multiple times to brevity of performance, but also referred
to smallness of claims in its policy analysis—cast of thousands would become ©
of thousands.  Cariou also did refer to intent in terms of Prince’s “drastically
different approach,” and also did remand on 5 works which did seem to be
influenced by how much he “took” and didn’t change.  7th Circuit’s retreat from
transformativeness in Kienitz also
may represent a retreat from qualitative considerations. 
 
This retreat is a good thing: more transparent.  [Not sure the decided cases bear out this
transparency.  E.g., the Georgia State
district court approach was much more predictable as a rule.  The Garcia
approach is unpredictable if considered as a rule about amount rather than
as a rule about performers versus filmmakers. 
Cariou is, as Subotnik rightly
notes, “murky” in its rationale for drawing a line between different prints (a)
at all and (b) where it does.  And Kienitz, ugh.]
 
Amy M. Adler, New York University School of Law: Why
transformativeness has proved so disastrous in the realm of contemporary art,
even though hailed as a savior elsewhere. Requires a court to adjudicate new
meaning/purpose, which is a failed enterprise. 
Three different ways to find meaning: intent; aesthetics; the
“reasonable” viewer—each is deeply problematic in assumptions about
contemporary art, b/c the assumptions are rejected by contemporary art itself.  Copying is now a basic tool of art.
 
Against intent: freeing art from the artist.  Prince (for whom she consulted) was a perfect
case where an artist disclaimed any intent to transform the work.  Intent rose in importance out of the Koons cases; Jeff Koons learned how to
testify in a way that courts liked about his intent to offer “new
insights.”  Intent is bad, among other
things, because of the difficulty of describing images in words—familiar in
First Amendment, cultural theory.  WJT
Mitchell: “Whatever images are, ideas are something else.”  Richard Serra, Tilted Arc case—one reason he
lost was his inability to describe the meaning of the work in a digestible
way.  Courts like words b/c it’s
familiar, old-fashioned, romantic idea of art. 
SCt cited Jackson Pollock as artist—but we understand the work as an
outpouring of the artist’s soul in a moment of expression, but that’s an
old-fashioned way of thinking about the relationship b/t intent and meaning.
Many artists reject it.  Andy Warhol,
asked about meaning: “Why don’t you ask my assistant Gerry some questions? He
did a lot of my paintings.”  Embracing
artist’s lack of control over his own meaning. 
Technology may have co-authorship.
 
It’s very hard to figure out intent given that authorship is
quite multiple: documentary as example. 
Famous image won Pulitzer Prize of naked girl on fire from napalm; it
was cropped carefully from the image he actually took (cutting off a
photographer whose presence in the frame raised uncomfortable questions).  Photographer didn’t know this was a key
photo; an unnamed editor picked it out of the roll of film and cropped it.  He still doesn’t know why this image was
picked.  Picking images is now a key
skill in our digital culture.  Shepard
Fairey: say what you like, but he knew what image to steal.
 
Also has similar arguments against aesthetics and against
the reasonable observer in the broader paper. 
Has begun to believe in Kienitz:
look strictly at the market, which would be more protective of contemporary
art.  [The racial and gender politics of
this move trouble me, given who is more likely to get recognized as an artist
by the market.]
 
Kevin Emerson Collins, Washington University in St. Louis
School of Law: Patent scope should be both/and not either/or: scope is a
philosophical issue, and understanding that can allow us to attune patent scope
to the world of commerce.
 
Philosophy of language: what is meaning of “meaning”?
Distinction between denotational meaning/reference and “sense.”  Meaning found within word-to-world
relationships is denotational/referential meaning.  Look at all the things referred to when we
say “dog” and the word “dog.”  Ideational
meaning/sense: words gain meaning through another mechanism, the concept of the
mind in anyone who understands the expression. Meaning is found in word-to-word
relationships (dogs have four legs, sense of smell, member of class mammals).
You don’t actually have to connect words to things in the world to get
meaning.  Identification requires a
two-step process: determine meaning of descriptive language, then determine
whether the thing in the world meets that description.
 
Everyday usage: these meanings are interdependent; don’t
need to clarify. But that’s not true in claim construction.  In patent we fix meaning on a particular
date: as PHOSITA would understand it on the date of filing (or invention,
there’s confusion).  This is an artifice
that doesn’t exist in everyday meaning. 
So are we fixing the denotational or ideational meaning?  That affects the ability of later-arising
tech to fit in.  To fix denotational
meaning, you’d idnetify the set of possible objects/actions that PHOSITA can
imagine on that date; then if new tech arose, it wouldn’t be within the set;
that would change the “meaning” of the fixed-time term.  But if we choose ideational meaning, you
stabilize the network of linguistic constructs. You don’t have to fix the set
of things to which the words refer—ideational meaning remains rigidly fixed as
scope of things in the world expands.
 
Courts usually use ideational meaning, but they switch to
denotational form time to time, when they believe that the after developed tech
shouldn’t infringe.  Should this be a
policy lever for the courts?  He thinks
yes, at least if it’s explicit.
 
Temporal paradox: enablement requires full scope of claim to
be enabled by specification as of th etime of filing. But Merges argues that
meaning that determines infringement isn’t fixed until time of infringement.
Fully enabled claims thus grow in literal scope over time.  Thus claim meaning isn’t fixed at time of
filing. Difficulties: Creates instability, lack of ex ante notice.  Contra black letter law of claim construction.   If we understand ideational/denotational
meaning, we can resolve this paradox more simply. Enablement requires
disclosure commensurate w/denotational meaning as of time of filing, but we
allow ideational meaning to control infringement. Claims remain fully enabled
even as they grow b/c denotational meaning didn’t change over time.
 
Said: what’s the expert’s role in these various
approaches?  If it’s a policy lever as
Collins says, who determines that?
 
Adler notes dramatic difference in what expert would think
of contemporary art and what ordinary viewer would think.  Two images that are visually identical have
dramatically different meaning according to art experts, but “reasonable”
viewer might be different (reasonable compared to what?).  How much do we want to defer to standards of
the art world?  Issues of elitism—over
and underinclusiveness.  People who
aren’t famous: how do we deal with them? 
But she prefers experts b/c art world is pretty unreasonable.
 
Lemley: didn’t recognize in either description by Collins
the way he makes meaning—if he sees a new animal, he uses an expansive or
relational view closer to denotational meaning—does this look enough like what
I know to be a dog?  Central
claiming-ish: how far is this from lodestar? Rather than is it within the
universe of things that are already known in some ways to be dogs.
 
Collins: There is discussion about whether the set is
determined by prototypes or full descriptions. But it’s unclear what we do with
prototype/archetype theory of meaning when we’re trying to fix meaning. The only way to do that is to figure out what the criteria
were that we were using at that time to identify members of the category.  (Which may be a complex probabalistic
assessment where high conformance with some criteria can be enough even when
other criteria are not satisfied, e.g., what is a “game”?)
 
Lemley: or give up on the idea of fixing meaning.
 
Lemley expresses concern that under Adler’s market standard,
the winners win and the losers lose—if I want to win, I’d better be recognized
in the art market before I get sued.
 
Adler: the art market is brand-driven.  Lemley won’t sell b/c he’s Lemley, not
Prince.  [I think that’s his point.]
 
Lemley: if filtration a la Altai were applied across the board instead of just to computer
programs, the world would be a much better place.
 
Fred Yen: Isn’t the decision to look at the market value of
a work an aesthetic decision?  And in any
event, don’t market participants have to use aesthetic concepts to set a market
value on the work, so we’re just going back to their aesthetic theories?  [I
agree.]
 
Adler: the intertwining of economics and aesthetics is a
definitional feature of the current art market. 
That’s a very deep issue; probably right.

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Transformative work of the day, comics edition

Posted on January 7, 2016 by rtushnet

Icons Unmasked, Alex Solis.  I particularly like the historicization of the various animated figures.

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Failure to show harm dooms many claims based on negative press release

Posted on January 6, 2016 by rtushnet
Synygy, Inc. v. ZS Associates, Inc., — F.Supp.3d —-,
2015 WL 5818510, No. 10-4274 (E.D. Pa. July 30, 2015)
 
Wow, this
one’s been going on for a while. 
Note that evidence of damages is key to the traditional,
non-commercial-speech bounded torts, but not to the Lanham Act false
advertising claim.
 
Synygy and ZS compete in the marketplace for incentive
compensation or “IC” services. In 2007, Synygy sued ZS, and in 2009 it amended
the complaint, adding, among other things, a theory of copyright infringement.  Synygy also issued a press release.  The CEO, in an email to marketing staff, explained
that “[t]he goal … is to get our prospects and clients to have pity on us and
to believe that we are right and ZS is wrong.” The press release was titled “Synygy
Files Suit Against ZS Associates for Copyright Infringement and
Misappropriation of Intellectual Property,” and it went on in that vein. A
quote from the CEO said, “The lawsuit we filed today contends that ZS knowingly
copied our software and other confidential information with the intent to use
our intellectual property in direct competition with us. Our position is that
ZS continues to use our software and other confidential information, causing us
to lose substantial revenue, profit, and company valuation, while they profit
from its use.” The Synygy press release was republished on websites such as Reuters,
Yahoo Finance and Intellectual Property Today.
 
ZS issued its own press release saying that Syzygy’s
allegations had no merit.  The press
release cost ZS $5100 from a PR firm.  ZS
argued that it had to reassure a client about its software, creating “a certain
amount of discomfort with the client that we had to resolve.”  ZS “had to include language in its contract
that specified that in the event that the Javelin software became unavailable
that [ZS] would still have other systems as backup systems available.”  ZS’s revenue from work for this client
increased after this event.  Likewise, ZS
had to reassure another “concerned” client and direct it to ZS’s press release.  However, ZS did enter into contracts with
that client.
 
ZS argued that the press release was defamatory,
commercially disparaging, and in violation of the Lanham Act. An expert
witness, Dr. Richard Gering, concluded that “ZS suffered economic damages in
the form of internal costs of ZS’ personnel and fees paid to [the PR firm]” of
$76,753, for damage control.
 
Defmation: Although the court previously found that “there
is sufficient evidence of copying to require that Synygy’s copyright claim with
respect to the incentive compensation report scorecards be submitted to a
jury,” that didn’t mean that it was true
that, as accused in the press release, ZS “knowingly and improperly copied and
misappropriated components of Synygy’s sales compensation software and other
intellectual property.”
 
However, ZS didn’t show damages.  Starting with defamation per se: “Statements
by a defendant imputing to the plaintiff … conduct incompatible with the
plaintiff’s business constitute slander per se.” With such statements,
Pennsylvania law holds that “only general damages, i.e., proof that one’s
reputation was actually affected by defamation or that one suffered personal
humiliation, or both, must be proven; special damages, i.e., out-of-pocket
expenses borne by the plaintiff due to the defamation, need not be proven.”  Pennsylvania ordinarily doesn’t allow presumed
damages even in cases of defamation per se, unless actual malice is shown.  (The court noted that it didn’t think that
corporations should be eligible to claim defamation per se.  Synygy, Inc. v. Scott–Levin, Inc., 51
F.Supp.2d 570, 581 (E.D. Pa.1999) (“A corporation … cannot be embarrassed or
humiliated. A corporation’s analogue to humiliation would be damage to
reputation—an injury that should translate into a pecuniary loss. If a
corporation cannot point to loss of revenues or profits, for what are we
compensating it? Should the law allow corporations to avoid showing special
harm by taking advantage of an exception so clearly created to protect
individuals? The rule of defamation per se as it applies to corporations has
outrun its reason.”), aff’d sub nom. Synygy, Inc. v. Scott–Levin, 229 F.3d 1139
(3d Cir. 2000)).
 
Actual malice requires at least reckless disregard for the
truth, meaning that Synygy either “in fact entertained serious doubts as to
truth of” the Synygy press release, or had a “high degree of awareness of …
probable falsity.” “[O]bjective circumstantial evidence” may be sufficient to
show actual malice. There was insufficient evidence of actual malice here.  The CEO testified that he didn’t know how
long it had taken to write the software macros, despite having been quoted in
the Synygy press release as saying that Synygy’s software was the result of
“many years” of investment in product development.  Though he didn’t have personal knowledge of
the development time, that wasn’t evidence that he knew that his statement that
ZS continued to use misappropriated software was false or entertained serious
doubts as to its truth.  At most, his
testimony could show negligence.  Nor did
emails showing a desire to portray Synygy as a victim show malice—personal spite,
ill will, and intention to injure are not “actual malice,” a term of art.  The CEO wrote that the “goal is to get our
prospects and clients to have pity on us and to believe that we are right and
ZS is wrong”; that his “goal [was] to create a public battle and put all
companies on notice that ZS cannot be trusted”; and that “I want Synygy to be
perceived in the press as the ‘good guy’ which has been wronged by the ‘bad
guy.’ I would want our current clients to empathize with us and our former
clients to be concerned that they might be dragged into the legal mess.”  Given the record, these emails were just as
plausibly expressing the CEO’s firmly held belief that ZS had in fact wronged
Synygy.
 
Given the unavailability of presumed damages, there wasn’t
enough evidence of general damages, defined as “proof that one’s reputation was
actually affected by the slander, or that [the plaintiff] suffered personal
humiliation, or both.”  Such damage must
be measured by the perception of others, not that of the plaintiff itself,
because reputation “is the estimation in which one’s character is held by his
neighbors or associates.”  Although ZS
presented evidence that the Synygy press release prompted inquiries from
customers, it didn’t provide testimony from any employee of those customers, or
from any third party who “altered its opinion of ZS as a result of the Synygy
press release.”  Even assuming that ZS
employees’ testimony was not hearsay, that wasn’t enough.  Although the testimony showed that the Synygy
press release prompted “many more discussions” between ZS and identified
customers, ultimately relations continued and grew.  ZS didn’t identify any cancelled sales or
sales process from the press release.  No
reasonable jury could conclude that the Synygy press release had the requisite
reputational effect.
 
Even if ZS could show general damages through this evidence,
it wouldn’t suffice to show special damages, which are dollar-denominated
losses.  ZS couldn’t satisfy its burden
by relying solely on evidence of remediation costs, as its expert
calculated.  Such costs might be
recoverable once liability for defamation was established, but couldn’t be used
to establish defamation. “[S]pecial harm must result from the conduct of a
person other than the defamer or the one defamed and must be legally caused by
the defamation.” If ZS’s own expenditures were enough, any internal response to
an allegedly defamatory publication would satisfy the standard.
 
This conclusion also defeated the cause of action for commercial
disparagement, which requires “pecuniary loss.” Mitigation costs aren’t
sufficient, “because unless other pecuniary loss was occasioned by the [press
release]], the ‘rehabilitation’ was not reasonably necessary.”
 
As for the Lanham Act claim, it was possible that the press
release was literally false.  If ZS
proved literal falsity at trial, it would be entitled to a presumption of
actual deception presumption and appropriate injunctive relief.  But monetary damages require proof of actual
deception, even in literal falsity cases; individualized loss of sales need not
be shown, but some customer reliance must be. 
That usually requires a consumer survey, which wasn’t present here.  Nor was any other appropriate evidence.  ZS’s principal testified that the director of
sales operations of a pharma company showed him a copy of the Syzygy press
release and asked for assurances that ZS could provide the relevant work in the
event the accused software became unavailable. 
But this was inadmissible hearsay [not state of mind evidence?].  In any event, that wasn’t evidence of a
tendency to cause a substantial portion
of consumers to believe that ZS copied the software.  (Not clear to me that substantial portion is
the right measure once we’ve established literal falsity and are just looking
for damages—if some number of consumers are affected, wouldn’t that be enough,
especially in a smaller market?  But that
doesn’t matter here, since it seems that the assurances were duly provided.)

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