even after default, court may constrain recovery in competitive market

Posted on October 16, 2024 by rtushnet

KHN Solutions LLC v. Shenzhen City Xuewu Feiping Trading Co.,
No. C 20-07414 WHA, 2024 WL 4351861 (N.D. Cal. Sept. 30, 2024)

I don’t usually blog default judgments, but this one was interesting.
It granted interim relief against Amazon.com, impounding funds and products of
defendants. KHN makes blood-alcohol concentration breathalyzers; defendants
make competing breathalyzers “popularized by fake reviews and false quality
assurances on Amazon.” After difficulties serving the Chinese defendants, the
magistrate allowed email service and recommended a default judgment.

The district court asked Amazon to comment, since the
recommended injunction would burden it. Amazon proposed revisions, including expanding
the injunction to cover products newly identified by three Amazon Standard
Identification Numbers, and that Amazon transfer defendants’ allegedly
ill-gotten gains only after Amazon covered its fees from all those sales.

The recommended injunction didn’t specify the particular
breathalyzers for Amazon to discontinue. Amazon and plaintiffs proposed adding
identifiers for three specific models of Rofeer-branded breathalyzers, not just
one model. The complaint never stated a specific model name, product number, or
web address of the complained-of product(s). The complaint’s allegations about
fake reviews and poor breathalyzer test results — even when accepted as true — were
untethered from specific models. Amazon did suggest that of the many
“Rofeer®-branded breathalyzers” it investigated only “certain” products
identified “by Plaintiff,” the “B07ZH6PVD4” and “B08CZBL7YS” products, but neither
identifier made it into the proposed text of the injunction, and then they
proposed to expand it to a third.

“But how can the Court permanently enjoin the sales of three
specific products, when there is only an allegation or evidence supporting at
most one product being falsely advertised? Plaintiff was required to plead
false advertising with specificity, then prove it.” It only did so with
evidence as to B07ZH6PVD4.

This is a false advertising case, not a counterfeiting case.
Usually, a false advertising injunction stops false statements about products. The
recommended injunction would do more:

It would permanently stop
defendants from selling their product (including from unspecified sites besides
Amazon’s, where no false statements have been shown). It would even order the
shipping of offending breathalyzers to plaintiff. And it would permanently
disable the defendants’ purported seller accounts, even though the record does
not show that defendants’ sole use of these accounts is for selling falsely
advertised items.

That would not be justified as a permanent injunction,
though interim relief was appropriate.

As for damages, “the proposed injunction permits double,
triple, or even sixteen-fold recovery,” by letting the plaintiff recoup “up to
the amount of the Court’s damages award” from Amazon, then from financial
institutions and payment processors “not limited to” the fifteen listed in the
injunction to get “the amount of the Court’s damages award.” “Plaintiff has not
established that defendants even have accounts with all third parties.” There
were no provisions to avoid double recovery, and even single recovery would be
unsupported.

The recommended damages award “exceeds what the law allows,
because it impounds all sales revenue, not just plaintiff’s actual damages or
defendants’ profits.” The Lanham Act allows compensation, not punitive damages,
as measured either by actual damages or defendant’s profits. The plaintiff
bears the burden of proving the “defendant’s gross profits from the infringing
activity with reasonable certainty.”

But selling always has costs.

Awarding defendants’ total revenues
ignores that reality. Similarly, total sales surpass what plaintiff possibly
would have earned but-for the purported misconduct. Selling products almost
always involves competing against more than one rival for the sale. Here, there
were multiple rivals: Plaintiff compares defendants’ product not only to its
own but to third-party “Lifeloc’s FC10 police-grade industry standard
breathalyzer.” If plaintiff made fewer sales because of defendants, Lifeloc
likely made fewer sales, too. Thus, awarding all of defendants’ revenues (or
profits) to plaintiff also ignores this reality. Plaintiff makes no substantive
or equitable argument to justify such outsized relief.

District courts have awarded damages in trademark infringement
cases in the amount of defendant’s sales where no offsetting costs were proven.
But trademark infringement involves more direct harm than defendants “who
simply made false statements about their own products.” The recommended award
here surpassed “what equity allowed, which is the Lanham Act’s limit.” And
there were other problems with the proposed award, including that Amazon
omitted dollar amounts from its spreadsheet showing sales “ostensibly for
confidentiality reasons.” Because of the lack of detail, there was no way to
attribute sales to specific models.

Thus, the court ordered Amazon to cease to deal with the
defendants/anyone operating for their benefit; impound any products in Amazon’s
control that are at issue in this case, specifically including three ASINs; and
impound all revenues in the Amazon accounts of persons or entities that have
accrued from selling those products. “Upon the Court’s further order, the
impounded funds might be released to defendants or possibly to plaintiff — or
to someone else, perhaps even to disappointed purchasers. Same goes for the
products. But defendants must show up to make their case.”

The court reasoned that impounding would create a fund to
allow damages, once properly determined. Impounding was also intended to “get
the immediate attention of defendants and to break the cycle of selling into
our country but refusing to appear and to defend, meaning to get the attention
of defendants and persuade them to appear and to defend on the merits.” If
defendants failed to appear, the court would entertain a renewed motion for
default judgment.

from Blogger http://tushnet.blogspot.com/2024/10/even-after-default-court-may-constrain.html

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false “patented/proprietary/exclusive” claims can be actionable despite Dastar

Posted on October 16, 2024 by rtushnet

Crocs, Inc. v. Effervescent, Inc., No. 2022-2160 (Fed. Cir. Oct.
3, 2024)

Crocs sued competitors for patent infringement; defendant
Dawgs counterclaimed for false advertising about the characteristics of the
primary material Crocs uses to make its footwear products, a material it
promoted as the “patented,” “proprietary,” and “exclusive” “Croslite.” Dawgs
alleged that none of this was true, but that Crocs misled current and potential
customers to believe that “Crocs’ molded footwear is made of a material that is
different than any other footwear.” The district
court, relying on the Federal Circuit’s Baden
decision interpreting Dastar, tossed out the claims, reasoning that
these terms were Dastar-barred claims of inventorship rather than claims
about the nature of Crocs’ products. The court of appeals reversed.

Baden found that claims to have “innovative” technology
were Dastar-barred. Baden had argued that Molten’s advertisements were
false “precisely because Molten was not the source of the innovation,” i.e.,
not the author. But “authorship, like licensing status, is not a nature,
characteristic, or quality, as those terms are used in Section 43(a)(1)(B) of
the Lanham Act.” By contrast, “here, the false claim that a product is patented
does not stand alone. Dawgs presents allegations and evidence that the falsity
of Crocs’ promotional statements is rooted in the nature, characteristics, or
qualities of Crocs’ products.”

Specifically, “[a] claim that a product is constructed of ‘patented’
material is not solely an expression of innovation and, hence, authorship.” In Baden,
there weren’t ads “linking such claims to a product’s tangible nature,
characteristics, or qualities.” But here, Dawgs alleged promotional statements
by Crocs that a patent covers Croslite, paired with statements that “Croslite
has numerous tangible benefits.” Thus, the claim “patented” “was used by Crocs
to ascribe characteristics that go to the nature and qualities of Croslite.” This
plausibly alleged that consumers would be misled about the “nature,
characteristics, or qualities” of Crocs’ product.

from Blogger http://tushnet.blogspot.com/2024/10/false-patentedproprietaryexclusive.html

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For-profit company can republish ASTM standards incorporated by reference into law

Posted on October 16, 2024 by rtushnet

Am. Soc. for Testing & Materials v. UpCodes, Inc., No.
24-1895 (E.D. Pa. Oct. 2, 2024)

ASTM, which produces technical standards, sued UpCodes  for providing free online access to
unauthorized copies of ten ASTM standards, all of which have been incorporated
by reference into state and local legal codes. ASTM sought a preliminary injunction
based on its copyright and trademark claims, which the court denied.

Over seventy percent of ASTM’s revenue comes from the sale
of its standards. Along with individual sales, ASTM sells a publication
entitled ASTM Standards in Building Codes that contains over 13,000 ASTM
standards including the ten at issue here.

“Although local, state, and federal jurisdictions reference
ASTM standards in their laws, it is accepted that ASTM does not lobby the
government—or other entities—to reference their standards.” Nonetheless, ASTM’s
official form and style manual indicates that certain ASTM standards are
“developed for reference in model building codes.” Plus, “when ASTM standards
are adopted into law, ASTM can market its own compliance-focused training
materials.”

UpCodes is a for-profit start-up, which only publishes
standards that, in its view, have been adopted into law by specific
jurisdictions. Users of the UpCodes website can filter their searches by
jurisdiction or by the original publisher of the adopted standard. Any user
with an UpCodes account can freely view and copy a supported jurisdiction’s
laws , and they can also purchase a subscription to access UpCodes’ premium
features, including bookmarking, annotating, and automation tools. Posting
these standards therefore “may provide UpCodes with tangential benefits like
drawing users to its website, increasing active account numbers, and enabling
the collection of user information.”

Each unauthorized copy that UpCodes posted at issue here includes
what ASTM describes as “expressly non-mandatory” material, such as explanatory
notes, supplementary materials, appendices, and Annexes. UpCodes identifies
ASTM as the original publisher. Since promulgating the ten standards at issue,
ASTM has published updated versions of nine of them.

When a standard is incorporated by reference,

the incorporated standard may be
enforced against regulated entities without being included in the text of the
law itself. When this happens, a regulated entity will not find the text of the
standard that details their legal obligations in the official public code. They
must look elsewhere to access the content of the standard. Often, that access
comes with a price. The private standard-developing organizations that create
these referenced standards typically copyright their work and charge fees for
users to access them.

When federal agencies incorporate by reference
privately authored materials, federal law requires copies of incorporated
standards to be, at a minimum, available for public inspection at the Office of
the Federal Register’s reading room in Washington D.C., and in the promulgating
agency’s public library. ASTM also operates an online read-only reading room
(with no print or download options) for ASTM standards that have been
incorporated into federal law.

But no such law regulates state or local government
incorporation by reference. The standards at issue in this case were not
available online for free before UpCodes posted them. Although incorporation by
reference can save money and work, it can create “serious notice and
accountability problems.” “[P]lacing legally binding standards behind paywalls
undermines the ‘principle that [government] should provide regulated parties
fair warning of the conduct [a regulation] prohibits or requires.’” This may
also hinder mechanisms of democratic accountability.

Incorporation by reference can also occur indirectly: A
government incorporates by reference a third-party publication. That
publication incorporates by reference a separate privately authored standard. Whether
incorporation by reference is direct or indirect, neither involve having “the
content of the technical standard reprinted in the text of the law itself.
Thus, people are typically unable to view the content of these standards unless
they pay a fee.”

The Philadelphia Building Code states that the 2018
International Building Code “is incorporated as if fully set forth herein,
subject to [] local amendments.” As the IBC’s Chapter on Referenced Standards
explains, “[t]he International Building Code contains numerous references to
standards promulgated by other organizations that are used to provide
requirements for materials and methods of construction . . . . These standards,
in essence, are part of this code to the extent of the reference to the
standard.” The ten ASTM standards at issue are so incorporated. If individuals
violate the Philadelphia Building Code, they can face fines of up to three
hundred dollars a day per violation.

Reading the fair use factors in light of copyright’s
purposes, UpCodes’ copying was likely to be fair use.

Factor one “considers the reasons for, and nature of, the
copier’s use of an original work.” The court deemed UpCodes’ use of the
standards “largely noncommercial,” since it didn’t derive any direct monetary
profit from publishing them. And the transformative nature of the use outweighed
its status as a for-profit company. “UpCodes achieves the distinct objective of
making the law freely accessible and educating the public on the contents of
binding laws. Unlike ASTM, UpCodes seeks neither to publish industry best
practices nor to ‘positively impact[] public health and safety’ by developing
high-quality technical standards.” This use had a different character and
further purpose from ASTM’s use.

The court declined to see both purposes as “providing information
to professionals.” UpCodes focused on standards that have been enacted into
law, while ASTM sought to publish standards that improve safety and
performance. One objective indication of that different purpose (following
Warhol) that weighed in UpCodes’ favor was that ASTM has updated 9 of the
10 standards, but UpCodes doesn’t publish the updated versions because they’re
not the law, showing that the reasons for copying were different than ASTM’s
reasons for publishing. (Although this isn’t a big data case, it follows the pattern, which Warhol may have accelerated, of courts being more confident in identifying different purpose in identical copies than different “character” when the latter requires assessing the meaning of physical changes to the copied work.)

In addition, the use was “justified because it furthers the
goal[s] of copyright,” including “enriching public knowledge.” And it was
“justified because copying is reasonably necessary to achieve [UpCodes’] new
purpose.” As UpCodes explained, “[i]f [it] attempted to express that law using
other words . . . it would not be publishing the law of Philadelphia.” The DC
Circuit’s decision in Public Resource was persuasive, even though
UpCodes is not a nonprofit, given the mostly noncommercial nature of the use. Although
the explanatory notes, supplementary materials, and appendices weren’t binding,
the court agreed with the DC Circuit that, “because law is interpreted
contextually, even explanatory and background material will aid in
understanding and interpreting legal duties” and, like legislative history,
such materials “may prove [] important for resolving ambiguities in the
portions of standards that set forth the directly binding legal obligations.”

Factor two: Technical standards generally “fall at the
factual end of the fact-fiction spectrum, which counsels in favor of finding
fair use.” And because “the express text of the law falls plainly outside the
realm of copyright protection,” “standards incorporated by reference into law
are, at best, at the outer edge of ‘copyright’s protective purposes.’” The
nature of the work, that is, is that it has been incorporated into law, weighing
“heavily” in favor of fair use.

Factor three: It’s ok to copy the whole thing when that’s
reasonable in relation to the purpose and character of the use. “[T]his amount
of copying was plainly reasonable in relation to UpCodes’ objective.” Like the
DC Circuit, the court agreed that this factor “strongly” supported fair use
because the copying was limited “to only what is required to fairly describe
the standard’s legal import.”  

Factor four: Following Google v. Oracle’s directive
that “a potential loss of revenue is not the whole story,” the court analyzed
both the source of any market harm and the countervailing public benefits of
the copying. Courts must consider “whether enforcing a copyright will allow the
copyright holder to gain profits that would ‘interfere with, not further,
copyright’s basic creativity objectives’” and balance the monetary effects
against the public benefits, a consideration that was “especially weighty” when
it came to standards that have been given the force of law.

Using this analysis, the fourth factor didn’t weigh clearly
in either side’s favor. It was “plain” that free availability from UpCodes
would have a market effect on purchases of the standards from ASTM.  Nonetheless, copyright “should not grant
anyone more economic power than is necessary to achieve the incentive to
create,” and “ASTM may have other incentives to continue developing technical
standards even if some of its standards lose their copyright protection after
being enacted into law”: “its mission of promoting product quality and public
safety, its professional interest in being recognized as a global leader in
standard development, and other monetary benefits that it may derive after its
standards are incorporated into law, like profits derived from marketing its
own compliance-focused training materials.”

And of course the countervailing public benefits were
substantial—there was no requirement that referenced standards enacted by state
and local jurisdictions be publicly available, but significant practical value
to the public of unfettered access to such incorporated standards. “For
example, journalists have explained that this access is essential to inform
their news coverage; union members have explained that this access helps them
advocate and negotiate for safe working conditions; and the NAACP has explained
that this access helps citizens assert their legal rights and advocate for
legal reforms.”

Weighing the factors, the use was fair. After all, copyright
law is not designed for the primary purpose of providing “a special private
benefit” to authors like ASTM. The court didn’t see why incorporation by
reference was any different from direct incorporation into law for fair use
purposes, since the legal consequences were “virtually indistinguishable.” (Is
it even “virtually” indistinguishable? Maybe for the commentary.)

Trademark: This was nominative fair use. In nominative fair
use cases, “the alleged infringer uses the trademark holder’s mark to describe
the trademark holder’s product, even if the alleged infringer’s ultimate goal
is to describe his own product.” Like car mechanics identifying VWs as among
the types of cars they repair, UpCodes used ASTM’s mark in a nominative manner.
And “the only practical way” for UpCodes to refer to them was to use the term,
because the entities that incorporated the standards into law did so.

In the Third Circuit, courts use a modified LOC case in
nominative use cases. Under that test, two usually key factors—similarity between
the owner’s mark and the allegedly infringing mark, and strength of the owner’s
mark—are ignored (because in a NFU situation they wouldn’t actually bear on likely
confusion/the use is justified even, or especially, because it’s identical to a
strong mark). Although district courts have discretion, four other factors are likely
to be relevant: (1) the price of the goods and other factors indicative of the
care and attention expected of consumers when making a purchase; (2) the length
of time the defendant has used the mark without evidence of actual confusion;
(3) the intent of the defendant in adopting the mark; and (4) the evidence of
actual confusion. Only if those factors favor a likely confusion finding does
the burden shift to the defendant to show that it’s satisfied the NFU test.
ASTM didn’t make it to the burden-shifting stage.

Here, length of defendant’s use was short and thus not very
probative one way or another. But the relevant consumers were sophisticated: ASTM’s
standards are “targeted at technical people” including “engineers, architects,
builders, and suppliers and manufacturers of construction materials.”

UpCodes’ intent was not to “confuse or deceive consumers as
to the product’s source . . . .” Instead, “ASTM” was the only practical way to
refer to the standards; its intent was accuracy.

And there was no evidence of actual confusion.

Thus, there was no likely success on the merits.

(It’s not even obvious that there’s more to do for summary judgment,
certainly on the copyright claims.)

from Blogger http://tushnet.blogspot.com/2024/10/for-profit-company-can-republish-astm.html

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republishing scientific study to prospective customers isn’t protected opinion

Posted on October 15, 2024 by rtushnet

Advance Dx, Inc. v. YourBio
Health, Inc., — F.Supp.3d —-, 2024 WL 4393314, No. 24-10595-WGY (D.
Mass. Oct. 3, 2024)

Advance sued YourBio, which competes in the market for
at-home medical device testing patients’ level of anti-Mullerian hormone, for
false advertising, tortious interference, defamation/disparagement, unjust
enrichment, and unfair trade practices under Massachusetts statutory law.

Advance makes a card used to collect a blood sample
obtained from a patient’s lanced fingertip, while YourBio manufactures a device
that is used to collect a blood sample by attaching to the back of a patient’s
arm and piercing capillaries close to the skin’s surface with microneedles. In
2022, BioMed studied the parties’ products and conventional venipuncture. “After
processing the data, BioMed imposed an internal control, calculated based on
the Study’s data, to normalize Advance’s results to the venipuncture instead of
using the recommended internal control provided in Advance’s guidelines.” It
then published the study, concluding that YourBio’s testing device was more
accurate, superior, and has stronger consumer preference than Advance’s.
YourBio used PR Newswire to tout its superiority and also repeatedly promoted
the study “to consumers, industry professionals, and third parties at trade
shows and in YourBio’s marketing materials.” However, after it learned about
the use of the simulated control, the testing lab “stated that any discordance
noted in the Study may be due to BioMed’s failure to follow Advance’s
instructions for the Card, and not due to any fault of the Card.”

YourBio argued that the study was a non-actionable
scientific conclusion and statement of opinion and therefore could not be
falsified. The court disagreed. Even under the rule of ONY, Inc. v. Cornerstone
Therapeutics, Inc., 720 F.3d 490 (2d Cir. 2013), “we must take into account the
statement’s context, including the medium in which the statement was published
and the audience to which it was presented.” The medium here was republication
by YourBio specifically to promote its devices. “Unlike a typical scientific
journal, the medium in this case is not meant to communicate insights into
matters of scientific debate, despite the fact that the Study may have been
first published by BioMed for exclusively scientific reasons.” The audience was
also not “purely scientific,” but rather targeted at customers/potential
customers.

The court also found that Advance was not a public figure,
so defamation required only negligence, although it did plead that YourBio was
aware of the falsity. And damage could be presumed without evidence of economic
loss because the statements were of the kind that would harm Advance’s
business.

The same basic logic allowed the Lanham Act false
advertising claims to proceed. (Advance didn’t say a lot about “interstate
commerce,” but alleging that the false statements were published online
sufficed.) Unfair trade practices under Chapter 93A MGL are treated the same way
as Lanham Act false advertising claims, so they also survived.

Tortious interference and commercial/product disparagement
claims likewise survived. Under Massachusetts law, “[p]roduct disparagement is
similar to defamation but lacks a reputational harm element and makes greater
demands as to the ‘falsity of the statement[s], fault of the defendant and
proof of damage.’ ”  That didn’t make a
difference here.

Unjust enrichment claims failed, however, because Advance
didn’t plead it had the right to some benefit/money that YourBio received.

from Blogger http://tushnet.blogspot.com/2024/10/republishing-scientific-study-to.html

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9th Circuit refuses to kick out claim over benzene in sunscreen on standing

Posted on October 15, 2024 by rtushnet

Bowen v. Energizer Holdings, Inc., — F.4th —-, 2024 WL
4352496, No. 23-55116 (9th Cir. Oct. 1, 2024)

Bowen sued Energizer for false advertising, alleging that
its Banana Boat sunscreen was adulterated with dangerous
levels of benzene, a carcinogen that scientists have determined can cause
cancer.

Energizer moved to dismiss under
Rule 12(b)(1), arguing that there was no Article III standing because Bowen’s
allegations that small amounts of benzene in sunscreen are unsafe were false. The
district court held that “[i]n light of the [FDA] guideline permitting 2 [parts
per million] of benzene in sunscreen, [Bowen] does not allege facts that tend
to show a non-speculative increased health risk or actual economic harm”
arising from her purchase of Banana Boat products. This was a premature
resolution of the merits issue. “Although a district court faced with a factual
challenge to its exercise of jurisdiction may resolve disputed facts as to
purely jurisdictional questions, it may not do so when those jurisdictional
questions are intertwined with the merits of a claim. When the jurisdictional
and merits issues are inseparable, the court must treat a factual attack on
jurisdiction as a motion for summary judgment and construe disputed issues of
fact in favor of the nonmoving party. Applying that standard here, Bowen has
adequately established an injury in fact for purposes of Article III.”
Remanded.

Bowen had one bottle of the
sunscreen tested at a lab, revealing that it contained 0.29 parts per million
(“ppm”) of benzene. A non-party pharmacy also allegedly tested various Banana
Boat products and found that they too contained benzene, including a bottle
with more than 0.1 ppm of benzene.

Bowen alleged that “[b]enzene
is a carcinogen that can cause cancer in humans,” and that “the application of
sunscreen specifically increases the absorption rate of benzene through the
skin.” A Yale researcher, clinician, and professor of dermatology allegedly
opined that “[t]here is not a safe level of benzene that can exist in sunscreen
products,” given the large surface area of the human body and the amount of
sunscreen needed to properly cover it. This contamination allegedly has led to
public concern and voluntary recalls of Banana Boat products.  

Looking to documents produced
or relied on by the FDA, the district court determined that they “impl[y] that
manufacturers like Defendants may continue to release products that are
adequately tested and contain less than 2 ppm of benzene.” It further held that
Bowen’s “alleged economic harm”—i.e., that she paid more than she would have
had she known that Banana Boat contained benzene—“is premised on the
speculative notion that the presence of 0.29 ppm of benzene, or any potential
presence of benzene, makes the sunscreen unsafe.”

Bowen’s allegations relating
to standing weren’t “separable from the merits of the case,” but rather
“intertwined with an element of the merits of the plaintiff’s claim,” such that
the district court was required to “leave the resolution of material factual
disputes to the trier of fact.”

When plaintiffs in a false advertising
case “ ‘contend that [they] paid more for [a product] than they otherwise would
have paid, or bought it when they otherwise would not have done so’ [because of
a false claim or misleading omission] they have suffered an Article III injury
in fact.” Whether the statements they relied on were materially false was also
a merits issue. These allegations weren’t separable from the merits.

The district court thus “mistakenly
required Bowen to show that Banana Boat was noncompliant with FDA guidelines in
order to establish injury under an economic-harm theory.” Her alleged
overpayment was the harm, not the safety/risk profile. In addition, to find
0.29 ppm benzene “safe” was to improperly weigh disputed evidence. The court of
appeals pointed out that, even without considering Bowen’s countervailing
evidence, the FDA hardly blessed the presence of benzene at any level in the
relevant documents. Its guidance was that benzene “should not be employed in
the manufacture of … drug products because of their unacceptable toxicity or
their deleterious environmental effect. However, if their use is unavoidable in
order to produce a drug product with a significant therapeutic advance, then
their levels should be restricted” to 2 ppm, “unless otherwise justified.” That
“caveat-laden” guidance was hardly a safety endorsement. “Faced with two
sunscreens in the skincare aisle of a pharmacy—one with benzene, the other with
no benzene—it is perfectly reasonable that the consumer would avoid the product
containing benzene, as Bowen alleges that she would have absent Defendants’
alleged false advertising.”

from Blogger http://tushnet.blogspot.com/2024/10/9th-circuit-refuses-to-kick-out-claim.html

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Revisiting the Silvertop banana costume case

Posted on September 23, 2024 by rtushnet

Silvertop v. Kangaroo (3d Cir. 2019) held that a banana costume was both copyrightable and infringed:

In holding that the costume was protectable, the Third Circuit reasoned:

Although a banana costume is
likely to be yellow, it could be any 
shade of yellow—or 
green or brown for that matter. Although a banana costume is likely to be curved, it need not be—let alone in any
particular manner. And although a banana costume is likely to have ends that
resemble a natural banana’s, those tips need not look like Rasta’s black tips  (in color, shape, or size).

Commenting on this reasoning, Jamie Boyle and Jennifer Jenkins said: 

So, while the court admits that a
banana costume is likely to be yellow and curved, it says it could
also be brown and straight. On Halloween, when your child goes out in her
brown, straight, banana costume and her friends ask “why are you dressed up as
a stick!?” she will be able to respond with a simple, terse explanation.
“Star Athletica,” she will say.

(It’s not really Star Athletica that is the direct culprit, but the court’s cramped understanding of scenes a faire/basic designs; Star Athletica just means that all the limiting work is done by idea/expression and similar doctrines, and the court misapplied Star Athletica‘s holding that the designer’s intent is irrelevant to separability to the separate issue of whether the designer did something creative/original.)

Anyway, the court has a possibly better argument: “copyrighting Rasta’s banana costume would not  effectively monopolize the underlying idea because there are many other ways to make a costume resemble a banana.  Indeed, Rasta provided over 20 non-infringing examples.”

So I decided to take a look at the record.

First, there aren’t “over 20”–there are 21 pictures, 2 of which are of a costume from Arrested Development. (I only used one of those two pictures.) Of the 20 costumes–treating minor variations as different costumes–3 are “sexy” bananas, a different 6 cover the face, 1 is a guy in a yellow suit with a hood, and 1 is an odd Wolverine. Maybe that’s still enough to justify protection for Rasta’s version, but the fact that no one noticed Wolverine in there suggests to me that principles of equity were doing more work than copyright principles.

On the other hand, the court isn’t really suggesting that noninfringing costumes need to be straight and brown or green. Yay?

 

from Blogger http://tushnet.blogspot.com/2024/09/revisiting-silvertop-banana-costume-case.html

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“natural” class certified based in part on internal acknowledgement of materiality and potential falsity

Posted on September 20, 2024 by rtushnet

Drake v. Bayer Healthcare LLC, 2024 WL 4204921, No.
22-cv-1085-MMA (JLB) (C.D. Cal. Sept. 16, 2024)

Plaintiffs alleged that Bayer falsely advertised One A Day Natural
Fruit Bites Multivitamin products as “natural” even though they “contain
non-natural, synthetic ingredients.” They brought claims under NY and
California law. The court certified plaintiff classes. I’ll just make a few
notes.

Materiality: “[P]laintiffs must offer some means of
providing materiality and reliance by a reasonable consumer on a classwide
basis in order to certify a class.” Here, named plaintiffs’ depositions,
Bayer’s internal documents, and a materiality survey were sufficient.
Particularly notable: Bayer had internal debate about “natural.” Its senior
brand manager wrote that the “Regulatory [department] did not support” the use
of the word “natural” on the labels “based on the presence of vitamins (which
are synthetic) in the formula.” But Bayer’s vice president of marketing
mentioned that she “would keep [the word “natural”] to test …” because
“[c]onsumers loved those words …” This was enough to support, for purposes of
certification, the claims that a reasonable consumer would attach importance to
“natural” and that Bayer knew this. The survey was also fine—the battle of the
experts also created a common question of fact. With materiality comes a
presumption of reliance.

Bayer also argued that plaintiffs failed to present a
workable damages model. But “class wide damages calculations under the CLRA are
particularly forgiving[,]” because “California law requires only that some
reasonable basis of computation of damages be used, and the damages may be
computed even if the result reached is an approximation.” Plaintiffs’ expert
proposed a “choice-based conjoint survey methodology,” which will “measure the
value of an individual product attribute, such as a specific understanding of
the label” and in turn will help “determine the price premium attributable” to
the label claims. That was a well-established method for measuring classwide
damages in false advertising product label cases.

 

from Blogger http://tushnet.blogspot.com/2024/09/natural-class-certified-based-in-part.html

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Copyright preemption in trade dress claims?

Posted on September 20, 2024 by rtushnet

Scotts Company LLC v. SBM Life Science Corp., — F.Supp.3d
—-, No. 2:23-cv-1541, 2024 WL 4217446 (S.D. Ohio Sept. 18, 2024)

Scotts makes consumer lawn, garden, pesticide, and
insecticide products, including under the “ORTHO” brand. Scotts alleged rights
in its red mark, black trade dress, black label, and yellow barrier design that
were allegedly infringed by competitor SBM’s competing products.
Unsurprisingly, the court accepts those claims on a motion to dismiss, but
seems to get the copyright preemption analysis backwards.

Scotts sufficiently alleged fame for dilution purposes.

Ortho red design mark

The allegations were, along with pictures, sufficient to
allege a defined, distinctive trade dress:

The distinctive packaging of
certain Scotts’ ORTHO control products consists of a unique arrangement of
colors, graphic elements, font styles and text, with a black background with
some lighter gradations of gray, a prominent placement of a red pentagon containing
a brand name in white lettering above horizontal information bars that start on
the left side of the label and connect into a circular or arc design that
contains an image of green plant material. One information bar is
yellowish/gold and the other information bar is silver. A product name is
placed between the pentagon design and the information bars.

Ortho black trade dress

This was sufficiently definite; it didn’t include terms like
“such as” or “for example,” which can be problematic.

However, coordinate state law claims under the Ohio
Deceptive Trade Practices Act were preempted by §301 because the alleged extra
element—the fact that the copied matter was put on products and sold on
products that compete with Scotts’—didn’t qualitatively distinguish Scotts’
copyright claim from its trade dress claim. “[B]ased on Scotts’ allegations,
the source of any likelihood of confusion—the extra element required to advance
Scotts’ state-law claims—is the same activity that forms Scotts’ copyright claim,”
so it wasn’t qualitatively different. (As TM gets more property-like, this
argument may be more attractive to courts; when “confusion” is more notional
than real, it seems less like an extra element.)

The court did find a copyright claim based on label
similarity plausible. “Each [label has] a primarily black background, lighter
gradations of gray, a prominent placement of a red pentagon containing white
lettering where the brand name is, and horizontal information bars in
yellowish/gold and silver that extend from the left side of the label to a
circular image depicting green plant material.”

accused SBM trade dress–I really can’t see substantial similarity of protectable expression here; this seems to conflate (c) and TM

The court doesn’t separately deal with the copyright claim over the yellow barrier design, which to me clearly falls on the idea side of the idea/expression line:

False advertising: Scotts challenged SBM’s advertising
statements that its Brush Killer Product kills brush for up to 12 months,
protects for up to 12 months, and provides consumers with up to 365 days of
control. Scotts alleged that the products do not provide the advertised
protection for up to 12 months or 365 days; that was sufficient to allege
falsity. At least the court is equally lenient with TM and false advertising?

from Blogger http://tushnet.blogspot.com/2024/09/copyright-preemption-in-trade-dress.html

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“Made in the USA” materiality showing requires evidence, not just interested witness testimony

Posted on September 13, 2024 by rtushnet

Illinois Tool Works Inc. v. J-B Weld Co., No. 3:19-cv-1434
(JAM), 2024 WL 4117244 (D. Conn. Sept. 9, 2024)

The parties compete in the sale of “chemical bonding
products marketed for home and automotive use.” Here, the court kicks out
Lanham Act claims/counterclaims on summary judgment for want of materiality—for
“Made in USA” and the term “epoxy”—as well as another claim on laches grounds. The
first one’s the potential surprise, and raises evidentiary questions about hearsay that a
court in a trademark case might have seen differently.

J-B has used unqualified “Made in USA” claims in its
advertising. The parties disputed whether J-B’s silicone sealants, manufactured
by its suppliers, contain ingredients sourced from abroad and the significance
of those ingredients.

ITW advertises “the interchange between its products and the
matching OEM manufacturer products” in its materials, sometimes including OEM
interchanges for specific automotive brands in its package advertising. It also
marketed certain products as epoxies despite their not fitting the chemical
definition of an epoxy. The parties agreed that “an epoxy is a polymer
containing one or more epoxy or epoxide groups,” and that adhesives containing
epoxides are distinct from adhesives containing methyl methacrylate (“MMAs”),
and they have distinct health and safety concerns. ITW’s accused products didn’t
contain chemical epoxide groups, but it categorized them as epoxies on its
website. It took the position that, “from a marketing perspective, the
definition of an epoxy is any two-part adhesive,” regardless of its specific
chemical composition. J-B Weld disagreed and cited a few Amazon reviews in
which customers say things like “Is this epoxy or just adhesive?”; “Can anyone
tell me if this has methyl methacrylate (mma)? that’s what i want but i can’t
tell for sure”; “What is the base chemical of this glue—epoxy, methacrylate, or
polyurethane?” Some of ITW’s technical product data sheets did differentiate
between “the ‘chemical type’ of an epoxy and a non-epoxy,” identifying
differences in odor and flashpoint, among other product characteristics.

ITW didn’t submit sufficient evidence of the materiality of
“Made in USA,” offering only “two deposition excerpts in which ITW employees
offer their opinions and vague impressions on the issue.” The former director
of marketing testified that consumers “definitely” purchase products “based on
Made in the USA advertising.” He elaborated: “Because of the type of consumer
that shops for our products in general, the profile are people that highly
value Made in the USA.” He said that Walmart told his team that “made in the
USA is a priority for them.” The court deemed this hearsay and thus irrelevant
for summary judgment—but I wonder whether it could also be characterized as
evidence of the speaker’s mental state. Regardless, “[c]ourts that have deemed ‘Made
in USA’ claims material have been offered much richer evidentiary records,”
including actual retailer testimony.

In addition, ITW didn’t show actual injury; in the Second
Circuit, literal falsity alone isn’t enough to presume injury in the absence of
comparative advertising as well as direct competition. This wasn’t comparative
advertising (or a two-player market).

OEM: The court found laches; ITW had used OEM advertising
since 2001 and J-B didn’t sue until 2020. J-B argued that the relevant period
should begin in 2014, when J-B entered the market, and that it wasn’t
unreasonable for a new market entrant to wait to sue the most significant
competitor. But that still didn’t excuse six years of delay (where the relevant
state period was three years). And ITW was likely to be prejudiced “by being
forced to discontinue a marketing strategy it has relied on for so many years
and with the risk that customers will assume—in the absence of OEM labeling
claims—that the formulation of its products have changed.”

Epoxy: In J-B Weld Co., LLC v. Gorilla Glue Co., 978 F.3d
778 (11th Cir. 2020), J-B lost a false advertising claim against a different
competitor based on the competitor’s use of the term “epoxy” in advertising its
non-epoxy MMA-based product. The court of appeals reasoned that “consumers
likely categorize ‘epoxies’ as all two-part resin-and-hardener adhesives,
regardless of the chemical constitution of the resin.” It cited the testimony
of J-B’s own expert “that consumers likely only care about whether the product
sticks two surfaces together effectively.” Even if there were “safety and odor”
differences, there wasn’t a showing of materiality.

The record here wasn’t sufficiently different from that in Gorilla
Glue. A “smattering” of Amazon reviews was insufficient to change anything.
J-B’s own CEO’s opinion about whether ITW’s epoxy claim would affect consumer
purchasing decisions didn’t help because he wasn’t qualified expert on consumer
purchasing decisions, and “his self-interested opinion about consumer
purchasing decisions exceeds the limits of permissible lay opinion testimony
that must be based on a witness’s own sensory perception.”

In the alternative, J-B also failed to show injury from
either the OEM or epoxy advertising. Its 30(b)(6) witness testified that various
retailer customers told them that J-B was losing business because ITW used
“OEM” labels and J-B didn’t, but that was hearsay. Even nominal damages
required evidence of injury.

 

from Blogger http://tushnet.blogspot.com/2024/09/made-in-usa-materiality-showing.html

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Engagement rings in the news

Posted on September 6, 2024 by rtushnet

 I’m quoted in this story about a dispute in front of the Massachusetts Supreme Judicial Court this week. In the courts of talking to the reporter, I learned that there have been a couple more state supreme court cases since I last looked, including one, Cummins v. Goolsby, 255 So.3d 1257 (Miss. 2018), in which the court refused to follow the no-fault, man always gets the ring back rule, but only because he was still married to someone else when he gave her the ring. (You can read my student note on the topic, of which I’m still very proud, here.)

from Blogger http://tushnet.blogspot.com/2024/09/engagement-rings-in-news.html

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