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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Plaque buildup: Rosa Parks foundation loses publicity case

Posted on January 5, 2016 by rtushnet
Rosa & Raymond Parks Institute for Self Development v.
Target Corp., No. 15-10880 (11th Cir. Jan. 4, 2016)
 
[Long description of Rosa Parks’ role in the Montgomery Bus
Boycott and iconic status for the civil rights movement omitted, as well as
details about the targeted biographies—the critical praise for them, their
educational value for children, the star status of those who starred in the
biopic, etc.]  The striking features of
this case: (1) Somebody thought it made sense to sue Target for violating the
right of publicity by selling biographical books, movies, and a plaque with an
inspirational quote on it.  (2) There is
simply no analysis of the proper boundaries of the right of publicity, because
how could there be?  All we know is that
Michigan common law, guided by the Michigan Constitution (interpreted in pari
materia with the First Amendment for these purposes), grants a qualified
privilege to speech about matters of public interest, and Rosa Parks is of
public interest.
 
The only work that merits detailed description, because
books and movies are just different, is a “collage-styled plaque that included,
among other items, a picture of Parks, alongside Dr. Martin Luther King, Jr.”  The plaque’s title was “Civil Rights.”
Besides Parks’s photograph and a statement of the years that she lived, the plaque
included the word, “CHANGE”; a photograph and diagram of the bus where Parks “threw
down the Civil Rights Movement gauntlet”; and a picture of Parks’ later-awarded
Congressional Gold Medal.  The statement,
“People always say that I didn’t give up my seat because I was tired, but that
isn’t true. I was not tired physically. . . [.] I was not old . . . [.] I was
forty two. No, the only tired I was, was tired of giving in,” was overlaid over
the picture of Parks and Dr. King. 
 
The
court explains that a “professional artist,” Stephanie Workman Marrott,
designed the plaque to “tell[] a story about civil rights in America . . . [to]
describe important aspects of American history and convey a message about those
events.” She stated that her decision to “include[] the name and image of Rosa
Parks, as well as an image of the Montgomery bus and the word ‘CHANGE,’ was in
order to tell the story of Rosa Parks and the civil rights movement in a way
that would convey an inspirational message about standing up for what you
believe is right and what you believe in.”
 
The biographies were all “bona fide works of non-fiction
discussing Parks and her role in the Civil Rights Movement,” and there was also
a fictionalized biography “meant to introduce children to the importance of
Parks,” also concerning a matter of public interest. Likewise, the plaque
contained images, dates, and statements “related to Parks and the Civil Rights
Movement, in an effort to convey a message concerning Parks, her courage, and
the results of her strength.”

Plaintiff didn’t make any argument about why the qualified privilege wouldn’t
apply to these works:
 
The use of Rosa Parks’s name and
likeness in the books, movie, and plaque is necessary to chronicling and
discussing the history of the Civil Rights Movement—matters quintessentially
embraced and protected by Michigan’s qualified privilege. Indeed, it is
difficult to conceive of a discussion of the Civil Rights Movement without
reference to Parks and her role in it. And Michigan law does not make
discussion of these topics of public concern contingent on paying a fee.
 
We need a federal anti-SLAPP law and a Supreme Court ruling
on the right of publicity to guard against these claims, which are only
ridiculous because lower courts continue to discriminate against video games.

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Prior use can’t be determined on motion to dismiss, even using Wayback Machine

Posted on December 31, 2015 by rtushnet
My Health, Inc. v. General Electric Co., 2015 WL 9474293,
No. 15-cv-80 (W.D. Wis. Dec. 28, 2015)
 
GE allegedly uses MYHEALTH on a section of its website that
provides health and benefits information to GE employees, http://ift.tt/1mrYzcM,
infringing plaintiff’s incontestable trademark.  GE argued that it had priority, but this could
not be determined on a motion to dismiss.
 
GE argued that its website was a document specifically
referred to in the complaint, thus incorporated by reference.  Separately, GE argued that the court could take
judicial notice of the historical content of the GE website based on print-outs
from the Internet Archive, showing use at least by November 2005, before My
Health’s 2008 registration.  The court
rejected both arguments.  “GE’s website
is not a simple document that can be incorporated by reference into the
complaint. A website, particularly one like GE’s, is a dynamic library of
documents.”  No more would a citation to
the NYT website incorporate everything on newyorktimes.com by reference.  Separately, “a snapshot of a moment in time,
which is all the Internet Archive can provide, does not establish the
continuous use for particular purposes that GE must show to establish priority
over My Health’s rights.”  Nor would the
court take judicial notice of Internet Archive printouts anyway.  They would have to be authenticated by an
Internet Archive employee, and that made them inappropriate for judicial
notice.
 
My Health’s registration was incontestable and couldn’t be
cancelled because of another’s prior use, but a senior user who could show
continuous use could have common-law trademark rights unaffected by any
subsequent registration.  (This is an
interesting strategic dilemma.  I might possibly
have gone with descriptive fair use; did GE really acquire trademark rights by
using a term just for information for its employees?)  But the court couldn’t consider priority, a
factual issue, on a motion to dismiss.
 
Even if the court considered the Wayback Machine evidence,
showing some prior use wouldn’t sustain GE’s burden of showing prior rights. My Health plausibly alleged a
protectable interest in its mark, even though GE might later prove an
affirmative defense based on a priority.
 
Likewise, My Health plausibly alleged consumer confusion
(among GE employees?).  My Health alleged
that the marks were virtually identical and differed only in insignificant ways
(“My Health” versus “myHealth”); that the parties market similar products
(patented remote patient care technology versus websites to facilitate
exchanges between medical professionals and patients); and that both parties
market their offerings to consumers via the internet. My Health alleged that
potential licensees and customers found GE’s products because of the accused
mark and confused GE’s offerings with My Health’s. GE’s website invites
customers to “[g]o to the main U.S. myHealth site” and allegedly created “the
impression that GE’s website is run and operated by My Health.” Assuming these
facts to be true, they plausibly alleged likely confusion.  [Here, current law’s indifference to the
identity of people suffering confusion hurts GE.]   

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Bait and switch on different versions of the same brand isn’t TM infringement

Posted on December 31, 2015 by rtushnet
Adobe Sys. Inc. v. Christenson, No. 12-1731 (9th Cir. Dec.
30, 2015)
 
Adobe loses this case because of pleading and discovery
choices, allowing the 9th Circuit to avoid harder first sale
questions.  Christenson sold Adobe
software, which he purchased from a third-party distributor, without Adobe’s
authorization.  Adobe argued that first
sale didn’t apply because Adobe never sells (copies of) its software. A
declaration by its Anti-Piracy Enforcement Manager described different ways that
Adobe licenses software.  Adobe also
submitted evidence of customer returns and complaints in which customers
complained that they had received software licensed for academic use from
Christenson despite having understood that they had purchased software
appropriate for non-academic users.  However, Adobe pled trademark infringement,
not false advertising.
 
Christenson filed a motion to preclude Adobe from relying on
contracts, licenses, or agreements that Adobe failed to disclose under Rule
26(a), which was granted.  Since it was
uncontroverted that Christenson purchased genuine copies of Adobe software, the
trial court reasoned that the burden shifted to Adobe to show that there had
been no first sale, which it could not do. 
The trademark claim failed because the use was nominative.
 
On appeal, the court of appeals noted that “some purported
software licensing agreements may actually create a sale.”  But first: who bears the initial burden of
showing ownership through lawful acquisition? 
The answer: the party asserting the defense, to wit, the defendant.  (Which is too bad for anyone who doesn’t keep
receipts for the books they buy.)  To
pass summary judgment, “the party asserting a first sale defense must come
forward with evidence sufficient for a jury to find lawful acquisition of
title, through purchase or otherwise, to genuine copies of the copyrighted
software.”  If the copyright owner claims
that the defendant couldn’t acquire title because the software [read “copies of
the software”] was never sold, only licensed, the burden shifts back to the
copyright owner to show such a license. 
The copyright owner is in a superior position to show the terms of any
such licenses.  “[F]airness dictates that
a litigant ought not have the burden of proof with respect to facts
particularly within the knowledge of the opposing party.” And, without the
burden shift, the defendant would have to prove a negative; a downstream
possessor “is hardly in a position to prove either a negative—the absence of a
license—or the unknown—the terms of the multiple transfers of the software.”
 
Christenson discharged his burden by showing legitimate
sales from third-party distributors of Adobe software. Adobe didn’t produce its
alleged licenses until too late, and excluding its evidence was not an abuse of
discretion.  Its “effort to substitute
general testimony and generic licensing templates in lieu of the actual
licensing agreements does not withstand scrutiny.”  Calling an agreement a “license” is not
dispositive; the precise terms matter for first sale, and here there was no
admissible evidence about those terms.
 
As for the Lanham Act claim, Adobe “confuses the claim that
it made—trademark infringement—with the claim it wishes it had made—unfair
competition, or false advertising.”  It
pled infringement, and nominative fair use precluded that claim.  On appeal, Adobe argued that Christenson
engaged in a “bait and switch” tactic of selling Adobe products licensed as
academic or OEM products by describing them as “full” or “retail” versions,
misleading consumers as to which version they would receive. But that was a
false advertising theory, not a trademark infringement theory, since there was
no claim that the marks weren’t applied to genuine Adobe products, or that
“Adobe Acrobat Pro” was only the mark for the non-academic/OEM version.  Christenson’s use of the marks was to
identify the products themselves and not to “inspire a mistaken belief on the
part of consumers that the speaker is sponsored or endorsed by the trademark
holder.”

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Selfie restraint: It’s hard to show fame and irreparable harm

Posted on December 30, 2015 by rtushnet
ArcSoft, Inc. v. Cyberlink Corp., 2015 WL 9455516, No.
15-cv-03707 (N.D. Cal. Dec. 28, 2015)
 
ArcSoft makes the Perfect365 selfie editing app, and sued
defendants for infringing and diluting the trademarks/trade dress of that app
with their YouCam Perfect selfie editing app. 
ArcSoft claimed first use of the Perfect365 mark as of Nov. 2, 2011, and
registered it in 2012, along with a design mark for “Perfect365” and the image
of a human face.  It alleged that over 20
million US consumers have downloaded the app, and that it had “significant
acquired distinctiveness and goodwill” in its mark and in the term “Perfect”
for selfie editing apps.  “The famous
Kardashian family, including Kim Kardashian, Kendall Jenner, and Kylie Jenner
(perhaps the world’s foremost authorities on the selfie), reportedly use the
Perfect365 app to edit their widely-consumed selfies,” amplifying Perfect365’s
consumer recognition.  ArcSoft also
alleged substantial media coverage of the app.
 

Interface for Perfect365

Logo for Perfect365

In addition, ArcSoft claimed to own the following trade
dress: A distinctive purple color scheme throughout the app and app icon; the
Perfect365 mark; the “distinctive (in function and form) photo-taking feature,
which utilizes the smart device’s camera within the app to enable the user to
easily take and edit selfies all within the confines of the app,” with a
circular shutter button at the bottom of the screen comprised of an inner white
circle surrounded by circular bands in ArcSoft’s purple; and the photo-editing
and beautification function of the app, featuring icons reflecting selfie
editing options (e.g., for editing “Blemishes,” “Blush,” and eye features) at
the bottom of screen in ArcSoft’s purple when selected, over a white
rectangular band.  It alleged that this
trade dress had both inherent and acquired distinctiveness.
 

YouCam Perfect interface

YouCam Perfect logo

Trademark dilution: ArcSoft failed to sufficiently allege federal
fame (also required under California law). 
Alleging 20 million US downloads, along with “widespread and favorable
recognition of its Perfect365 Mark throughout the United States,” was
insufficient, despite allegations of celebrity use and media coverage from
outlets from the New York Times to Allure and TechCrunch.  Although the
Perfect365 mark was registered, other factors in assessing fame weighed “heavily”
against ArcSoft.
 
Defendants’ alleged use began in February 2014, and ArcSoft
didn’t plausibly allege that it acquired fame in the approximately 28 months
that passed between its first use date of November 2, 2011 and then.  It didn’t allege that the widespread
recognition and media coverage occurred before February 2014, or allege details
about its advertising.  Even assuming,
contrary to the court’s expectation, that 20 million downloads sufficed (in a
nation of over 318 million), again ArcSoft didn’t allege how many of those
occurred before February 2014.  Nor were
there any nonconclusory allegations about the extent to which consumers
actually recognized the Perfect365 Mark.  Dilution claims dismissed, with leave to
amend.
 
As for trade dress infringement, ArcSoft likewise failed to
plead nonfunctionality.  Given the
explicit functionality of many of the features claimed in its initial
description, ArcSoft retreated in its moving papers to claiming (1) “a
distinctive purple color scheme,” (2) “a unique app icon for the Perfect365
app,” (3) the “Perfect365 Mark itself,” (4) “a circular shutter button at the
bottom of the screen comprised of an inner white circle surrounded by
distinctive circular bands in ArcSoft’s purple,” and (5) the “icons reflecting
selfie editing options …at the bottom of [the] screen in ArcSoft’s
distinctive purple when selected, over a white rectangular band,” or even
further, to “how the shutter button [and] [selfie editing] icons look.”  However, given the importance of defining
trade dress sufficiently to give defendants adequate notice, Arcsoft’s
“shifting-sands approach” to defining the trade dress was insufficient.  Given the apparent concession that the trade
dress described in the complaint wasn’t the trade dress ArcSoft wanted to
assert, this claim was also dismissed with leave to amend.
 
That left only alleged word mark infringement in ArcSoft’s
motion for preliminary injunction, which the court denied for failure to show
irreparable harm.  After Herb Reed
Enterprises, LLC v. Florida Entm’t Mgmt., Inc., 736 F.3d 1239 (9th Cir. 2013), likely
confusion isn’t enough to show irreparable harm, nor are conclusory statements
about lost control over reputation and damage to goodwill.  Thus, ArcSoft’s claims of actual confusion
and lost goodwill, and allegations that these losses were “incalculable,” were
insufficient.  So were claims that
ArcSoft’s success depended on a “broad and loyal user base,” perhaps meaning to
evoke the idea of network effects.
 
ArcSoft offered one incident that provided “some, but not
much, support for its claim of loss of goodwill.” A user, “Rosiella
ShadowsHeart,” posted a one-star review of ArcSoft’s Perfect365 app, stating
“they stole the whole ui and all from You Cam Makeup.” This evidence was “on
the right track,” but still didn’t show irreparable harm.  First, the reference to the whole user
interface meant that the user was relying on the (not-yet-protected) trade
dress, not just the word mark.  Second, a
review consisting of “a single, somewhat ambiguous sentence by an anonymous
internet user” was of minimal probative value even under the relaxed
evidentiary standard applicable to preliminary injunction motions.

An additional declaration from ArcSoft’s legal counsel was no more helpful.  The declaration stated that the number of
users of its app in 2015 had materially decreased by about 1/3 compared to
2014, while defendants engaged in increasingly aggressive promotional efforts.  Moreover, ArcSoft “commenced in-depth
discussions with a major cosmetics company to enter into a partnership to
implement looks sponsored by said company in our Perfect365 app,” but the company
ultimately elected to use the YouCam Makeup app.  This didn’t show a sufficient connection
between the infringement and the lost business, since the timing of defendants’
incorporation and marketing didn’t support a reasonable inference that the
number of Perfect365 app users decreased because of confusion.  Any decrease in downloads, users, and ad
sales reflected economic injury, which could be remedied by money damages.  Also, the cosmetics company, on these
allegations, understood the difference between the two and chose YouCam. “That
is what happens when products compete.”

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UK ASA doesn’t think “in association with” is enough to disclose an ad

Posted on December 30, 2015 by rtushnet

See this ruling on an ad for Michelin tires.  Note also the stricter regulation of comparative advertising than in the US.

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