“pure” chocolate may be deceptive if it has too much heavy metal

Posted on December 31, 2024 by rtushnet

In re Theos Dark Chocolate Litigation, 2024 WL 4336631, No.
23-cv-02739-HSG, — F.Supp.3d —- (N.D. Cal. Sept. 27, 2024)

Plaintiffs alleged that Theo’s dark chocolate bars
contained, or risked containing, the heavy metals cadmium, lead, and arsenic at
levels exceeding California’s then-governing Maximum Allowable Daily Level, as revealed
by Consumer Reports in December 2022 and subsequently confirmed by plaintiffs’
independent testing. These heavy metals allegedly cause “harmful effects,
particularly in children,” putting children at risk for lowered IQ, behavioral
problems (such as attention deficit hyperactivity disorder), type 2 diabetes, and
adults face an increased risk of “cancer, cognitive reproductive problems, and
other adverse conditions” from just a “modest amount” of exposure. Plaintiffs
alleged that because “[i]t is possible to reduce or even eliminate toxic heavy
metals in the Products,” “Theo could have implemented changes to its business
and manufacturing practices to control and eliminate the heavy metals in the
Products it sold to Plaintiffs and the public,” but that it has failed to do
so. Certain products’ outside labels promote the product as “pure,” which was
allegedly deceptive because it “suggest[s] the absence of adulterants in the
Products.” Plaintiffs also argued that the heavy metals were deceptively omitted
from the ingredient list. And some plaintiffs allegedly relied on the inside of
the wrapper, which stated that Theo “pay[s] higher prices for quality cacao
beans,” that the products are “from farm to bar to you,” and that they are
“organic chocolate you can feel good about” eating.

Plaintiffs sued for violations of Washington’s Unfair
Business Practices and Consumer Protection Act, the usual
California statutes, the New Jersey Consumer Fraud Act, and common law negligent
misrepresentation, unjust enrichment, breach of implied warranty of
merchantability, and breach of express warranties.

Article III standing was present because of the alleged
price premium paid. Standing for injunctive relief was present because of the alleged
inability to rely on the advertising/labeling in the future despite plaintiffs’
desire to purchase Theo dark chocolate bars if the claims suggesting the absence
of heavy metals were true, given that they explicitly allege that “[i]t is
possible to reduce or even eliminate toxic heavy metals in the Products,” and
discuss various ways that reduction and elimination may be accomplished. This
was made even more plausible by the allegation that “competing dark chocolate
producers are able to manufacture products” with lower levels of heavy metals.

Theo also argued that plaintiffs couldn’t bring claims on
behalf of nationwide class under the laws of 48 other states, but plaintiffs
argued that their nationwide claims were based on the law of Theo’s home state,
Washington, so that was ok for now.

Nor did the doctrine of primary jurisdiction bar the claims.
“This case is far less about the science of food safety than it is about
whether a product label is misleading. Plaintiffs present a deceptive labeling
case well within this Court’s domain, as ‘this is not a technical area in which
the FDA has greater technical expertise than the courts – every day courts
decide whether conduct is misleading.’” Furthermore, “[t]he Court has no reason
to believe that the FDA is currently conducting a binding investigation or
rulemaking process regarding heavy metals in dark chocolate that will conclude
soon, and therefore sees no reason to defer to the FDA’s jurisdiction on the matter.”

Nor did a consent judgment entered into under California’s
Proposition 65 with several chocolate manufacturers bar the claims. This was
not a claim of failure to warn under Proposition 65, but an independent false
advertising claim.

Statutory consumer protection claims survived; all three
states use the reasonable consumer standard. The theory of deception here involved
both affirmative misrepresentations and omissions. Any claims based on statements
on Theo’s website failed because plaintiffs didn’t plead reliance on those
alleged misrepresentations.

So, the relevant representations included the descriptor
“Pure” on the outside label, and the statements on the inside label that the products
are “from farm to bar to you,” contain “quality cacao beans,” and are “organic
chocolate you can feel good about” eating. Theo argued that “pure”/ “purity” was
just a product descriptor and differentiated products containing added
ingredients such as fruit and nuts from bars compromised solely of dark
chocolate, not communicate an absence of heavy metals. And it argued that the
other statements were just puffery.

The court agreed that “Farm to bar to you” and “chocolate
you can feel good about” were nonactionable puffery, as reasonable consumers
would not rely on these aspirational statements as reliable promises about the
cacao bean’s journey from seed to shelf or how a consumer might feel about
their chocolate. But “pay[s] higher prices for quality cacao beans,” was a
factual assertion that Theo was selective about its cacao beans and chose to
invest in a superior raw product; it didn’t understand Theo to have challenged “pure”
as puffery (rather than just as having a different factual meaning); and “quality
cacao bean” could plausibly mislead consumers about heavy metal content. A
reasonable consumer could conceivably understand these statements to suggest
the absence of contaminants like heavy metals. The court expressed its doubts
that plaintiffs would be able to prove this—but that’s not a question for the
motion to dismiss stage.

However, the omission of warnings about heavy metal content
wasn’t actionable. To plausibly allege a fraudulent omission, the omission must
either (1) “be contrary to a representation actually made by the defendant,” or
(2) “an omission of a fact the defendant was obliged to disclose.” “[A]
defendant only has a duty to disclose when either (1) the defect at issue
relates to an unreasonable safety hazard or (2) the defect is material,
‘central to the product’s function,’ and the plaintiff alleges one of four
situations established by California law.  As to safety, plaintiffs argued that no amount
of lead is safe and that even low levels of cadmium and “long-term ingestion of
even small amounts of arsenic” (in its inorganic form) can cause health
concerns. But they didn’t plead that the amounts of heavy metals that occur in
Theo’s products have caused harm or create an unreasonable safety hazard; they
didn’t show that the levels exceeded the limits imposed by California’s new
limits under the consent judgment mentioned above.

Under the second theory, plaintiffs alleged that the levels
of lead or cadmium in the Products affect the central functionality of the
products because “[t]he central function of food, even in the form of
chocolate, is to provide nutrition and this is contradicted by the presence of
heavy metals,” which plaintiffs allege are unsafe even in trace amounts. But
they didn’t plausibly plead that chocolate containing trace amounts of heavy
metals ceases to function as food – or ceases to provide any nutritional value.
So the omission theory failed.

Negligent misrepresentation and unjust enrichment claims
survived (for now); breach of implied warranty claims failed because plaintiffs
didn’t plead the products were unfit for use as food; but express warranty
claims survived because of the affirmative misrepresentation theory above.

UCL unlawful claim: Theo argued that it wasn’t “required to
list the possible presence of heavy metals as separate ingredients in the
Products’ ingredients lists” and need not disclose “incidental additives.” The
FDA exempts manufacturers from the obligation to disclose “[i]ncidental
additives that are present in a food at insignificant levels and do not have
any technical or functional effect in that food.” “Incidental additives”
include “[s]ubstances migrating to food from equipment or packaging or
otherwise affecting food” provided they are “not food additives,” or, if they
are food additives, “are used in conformity with regulations established
pursuant to [the Federal Food, Drug, and Cosmetic Act (FDCA)].”

But plaintiffs alleged that the levels are significant—both
to consumers and in numerical quantity. This was a factual question that couldn’t
be resolved at this stage.

Nor was the issue expressly preempted by the FDCA. Plaintiffs
brought their unlawful misbranding claim under California’s Sherman Law, “which
expressly adopts federal labeling requirements in their entirety and without
modification.” But Theo argued that heavy metals are not “ingredients” or
“incidental additives” at all and are thereby exempt from federal labeling
disclosure requirements, which would make plaintiffs’ theory non-identical to
federal law. The court rejected that argument:

While Defendant may disagree with
Plaintiffs as to the meaning of the FDA requirements at issue and whether its
products conform to those requirements, that disagreement does not mean that
Plaintiffs are trying to impose additional requirements. Moreover, according to
Plaintiffs’ allegations, Heavy Metals “get into cacao after beans are
harvested,” during “post-harvest processing,” and when the beans are cleaned at
factories. Therefore, as alleged, the Heavy Metals are plausibly incidental
additives, potentially subject to disclosure under FDA regulations.

At this stage, the court also declined to dismiss plaintiffs’
claims for equitable remedies; they alleged that the available legal remedies
are inadequate, especially for prospective harms.

from Blogger http://tushnet.blogspot.com/2024/12/pure-chocolate-may-be-deceptive-if-it.html

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Reading list: The Patterns of Digital Deception, Gregory Dickinson

Posted on December 30, 2024 by rtushnet

B.C.L.R. (2024). From the introduction:

… In contrast with the mass emails of old, scammers now
stalk and target their victims with expert precision. … To bolster the FTC’s
traditional, case-by-case approach to combating unfair competition, lawmakers
have proposed (and in some instances enacted) new statutes and regulations to
restrict the digital technologies that power online deception. The idea is to
preserve the FTC’s scarce enforcement resources by enacting prophylactic
restrictions on the technologies that drive deception instead of waiting to
pursue wrongdoers after the fact.

This Article warns that that approach is a mistake for two
reasons. First, what is new and dangerous about technology-powered scams is not
any special power to deceive but their unprecedented efficiency.  …

Second, although across-the-board restrictions on digital
technologies might have some effect on online fraud, they would do so only at a
major cost to innovation…. Across-the-board regulation of key technologies would
increase costs and reduce product quality for everyone, for a comparatively
minor benefit: scammers would be forced to adopt new tools or, more likely, to
ignore the restrictions altogether.

Instead of enacting new technology restrictions, this
Article argues, regulators should bolster enforcement efforts in a different
way—by coordinating governmental enforcement efforts with those of private
litigants….

In particular, four types of online schemes—what this
Article identifies as the patterns of deception—have been especially resistant
to private enforcement efforts: (1) fly-by-nighters, whose highly mobile
operations or location in foreign jurisdictions makes private enforcement
difficult; (2) nickel-and-dimers, who operate at a large scale but extract
small sums of money from people who individually lack sufficient interest to
pursue litigation; (3) user-interface shapeshifters, whose varied and quickly
changing user interfaces pose an obstacle to aggregate litigation; and (4)
calculated arbitrators, whose terms of service include agreements requiring
individualized arbitration of claims and barring consumers from seeking class
relief.

… Focus on these legal patterns of deception will offset the
procedural limitations of private litigation, thereby enhancing the overall
effectiveness of efforts to combat online fraud, while avoiding the
impediments to technological innovation that would come from across-the-board
technology restrictions.

from Blogger http://tushnet.blogspot.com/2024/12/reading-list-patterns-of-digital.html

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false advertising claim survives because math is hard for reasonable consumers

Posted on December 24, 2024 by rtushnet

Robertson v. Clean Control Corp., No. 5:24-cv-01478-SSS-DTBx,
2024 WL 5193852 (C.D. Cal. Dec. 18, 2024)

Robertson bought Odoban, a concentrated multi-purpose
cleaning product, which states “Makes up to 32 Gallons” on the front label. That
principally describes Odoban as a “Disinfectant” usable as “Laundry & Air
Freshener.” When using Odoban for nine of its ten advertised uses, the
concentrate does not produce up to 32 gallons. When using Odoban for laundry,
it only produces one gallon, and when using Odoban as an air freshener, it
produces 6.8 gallons. Only when using Odoban as a “cleaning solution” does the
product deliver up to 32 gallons. Robertson brought CLRA
and UCL claims, as well as breach of express warranty claims, seeking
monetary and injunctive relief.

Odoban argued that the back of the label clarified what “up
to” meant by providing instructions and stating that some uses “require more
concentrate” and “will provide less than the maximum yield.” But a front label
is only ambiguous enough to require a reasonable consumer to read the back
label “if ‘reasonable consumers would necessarily require more information
before they could reasonably conclude’ that the front label was making a
specific representation.” Here, “a reasonable consumer would likely conclude
the concentrate produces ‘up to 32 gallons’ of laundry and air freshener, the
only two cleaning uses named on the front-label.” That’s not true, and it’s not
true by a lot: Odoban can only make 1 gallon of laundry detergent and 6.8
gallons of air freshener. “Makes up to 32 Gallons,” like “One a Day,” states a
“concrete number” which “carries a tangible meaning to a reasonable consumer.” “Though
reasonable consumers may wonder which of Odoban’s many uses will result in 32
gallons of cleaning product, it is reasonable to assume the only two named uses
on the front-label –laundry and air freshener – would, at the bare minimum,
produce a quantity in the ballpark of 32 gallons. Some reasonable consumers may
even assume the majority of Odoban’s uses would result in 32 gallons.”

The court also noted an FTC report attached to the complaint
that studied the effects of “up to” in ads, which found that “a significant
proportion of people” exposed to “up to” advertisements “saw the ad as
communicating that [product] users would typically” reach the “up to” quantity.

Further, even with the back label, it was plausible that a
“significant portion of the general consuming public … could be misled.” “Understanding
which cleaning uses result in 32 gallons, and which result in substantially
less, requires math more complicated than a reasonable consumer should be
expected to calculate.”

The front label has the “up to” representation and states
that a bottle has “1 Gallon (3.79 L[iters]).” The back label instructs
consumers to mix a certain number of ounces of Odoban per gallon of water.

Thus, to understand how many
gallons of cleaning product a bottle of Odoban produces, a consumer would need
to (1) know how many ounces are in a gallon (i.e., 128 ounces), and (2) divide
that number by ounces of Odoban used per cleaning product (ex. 22 ounces per
gallon of water for air freshener) to arrive at the number of gallons of
specified cleaning product (ex. 5.8181811). “Barring a consumer’s exceptional
skill” at long division, “it is difficult to imagine how a consumer could
generate an accurate estimate” of which cleaning products make up to 32
gallons.

Indeed, the court noted, the complaint pled that one gallon
of Odoban produces 6.8 gallons of air freshener when using Clean Control’s
suggested 22 ounces per gallon of water. But 128 divided by 22 is 5.818181. “Robertson’s
mathematical error further underscores how unreasonable it is to expect
consumers, much less those with professional degrees, to calculate the gallons
of cleaning product Odoban can produce.” (Or is it that you get 6.8 gallons of
air freshener comprised of 5.8 gallons of water and 1 gallon of Odoban? Anyway,
the court’s point is made either way, it seems to me.) “Odoban’s label does not
clarify which of its ten advertised uses produces 32 gallons of cleaning
product, instead relying on consumers to conduct long division in the aisle of
a general store.”

Likewise, “Makes up to 32 Gallons” is a specific promise to
consumers, one with a set meaning, such that Odoban’s label creates an express
warranty.

And, for similar reasons, Robertson had standing to pursue
injunctive relief, because there was still a threat of future harm.  She might reasonably, but incorrectly, assume
the product was improved in the future.

from Blogger http://tushnet.blogspot.com/2024/12/false-advertising-claim-survives.html

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Two recent amicus briefs: Santos v. Kimmel and Sedlik v. Von Drachtenberg

Posted on December 23, 2024 by rtushnet

 In the Second Circuit, supporting fair use on a motion to dismiss in Santos v. Kimmel, and in the Ninth Circuit, supporting the jury’s verdict of lack of substantial similarity in Sedlik v. Von Drachtenberg. 

from Blogger http://tushnet.blogspot.com/2024/12/two-recent-amicus-briefs-santos-v.html

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Celebration on Rimini Street as it achieves significant (c)/Lanham Act victories in 9th Circuit

Posted on December 18, 2024 by rtushnet

Oracle Int’l Corp. v. Rimini Street, Inc., — F.4th —-, No.
23-16038, 2024 WL 5114449 (9th Cir. Dec. 16, 2024)

Rimini Street gets a reasonably substantial victory in its
long-running battle with Oracle in this appeal.

Prior rulings held that Rimini’s processes for serving
clients who use Oracle’s software programs infringed on Oracle’s copyrights.
Rimini therefore developed new processes for servicing its Oracle-using
clients. After a bench trial, the district court ruled that many of these new
processes still infringed Oracle’s copyrights and found that certain
security-related statements violated the Lanham Act. The court of appeals
vacated in part, reversed in part, and remanded.

Oracle’s programs include PeopleSoft, which can be
customized to manage all sorts of business processes, including HR processes
such as timekeeping, benefits administration, and recruitment and financial
processes such as expense tracking and payroll. Oracle also provides optional
software support for PeopleSoft, including updates to reflect changes to tax
laws and other regulations. Customers can also modify and customize the
software themselves or through third-party providers.

“Rimini Street is a third-party provider and direct
competitor with Oracle in the support-services market.” Its services include
troubleshooting support and software updates, including creating files that
only work with Oracle’s products. After the first Oracle lawsuit in 2010, the
court found that Rimini infringed Oracle’s copyrights by engaging in
“cross-use” and creating copies of Oracle’s materials on Rimini’s computer
systems. The court of appeals largely affirmed the district court’s permanent
injunction. The district court later found that Rimini violated the injunction
and held it in contempt on five issues, four of which the court of appeals
upheld. Rimini changed aspects of its business model and sought declaratory
judgment that its revised process, “Process 2.0,” did not infringe. Oracle
counterclaimed for copyright infringement and violations of the Lanham Act. The
district court held that Rimini had, in fact, infringed by engaging in
cross-use prohibited by PeopleSoft license agreements and that an update
created for the City of Eugene’s PeopleSoft software environment was a
“derivative work.” After Oracle abandoned claims for monetary relief, the
district court held a bench trial and additionally found that Rimini (1)
created infringing derivative works, (2) violated Oracle’s PeopleSoft and
Database licensing agreements, and (3) made several statements violating the
Lanham Act.

Derivative works: The court says several useful things, in
line with Pam
Samuelson’s exposition of the derivative works right. (I note amicus
support from, among others, EFF, Glynn Lunney, and Betsy Rosenblatt.) The
district court held that Rimini’s Process 2.0 files and updates were infringing
derivative works because they “only interact[ ] and [are] useable with” Oracle
software. But this was the wrong test.  

The Copyright Act defines a “derivative work” as:

a work based upon one or more
preexisting works, such as a translation, musical arrangement, dramatization,
fictionalization, motion picture version, sound recording, art reproduction,
abridgment, condensation, or any other form in which a work may be recast,
transformed, or adapted.

This “broad” language nonetheless has limits. The text
starts with examples. Although “such as” means the list isn’t exhaustive, it
still indicates the “kind” of works covered. Thus, “based upon” requires “copying
of the kind exhibited in translations, movie adaptations, and
reproductions. Mere interoperability isn’t enough.” I would have thought that
this was the canon of noscitur a sociis, which means we define a term by
“the company it keeps,” but the court treats that as a second principle: “[t]he
examples of derivative works provided by the Act all physically incorporate the
underlying work or works.” Thus, a derivative work “must be in the subset of
works substantially incorporating the preexisting work.” That substantiality
can be literal or nonliteral, in total concept and feel.

Here, though there were several examples of literal copying,
Rimini challenged only the ruling that Rimini’s programs were derivative works
“even if the work[s] do[ ] not contain any of [Oracle’s] copyrighted code … because
they interact only with PeopleSoft,” “are extensions to and modifications of
Oracle’s copyrighted software” and they “cannot be used with any software
programs other than PeopleSoft.” But without more, “derivative status does not
turn on interoperability, even exclusive interoperability, if the work doesn’t
substantially incorporate the preexisting work’s copyrighted material.” Because
the district court applied the wrong legal standard, the court remanded and
didn’t reach Rimini’s alternative argument that Oracle’s licensing agreements
nonetheless authorize any derivative work or analyze whether Rimini’s programs
incorporated protectable nonliteral elements of Oracle’s programs.

In addition, the district court applied the wrong legal
standard on Rimini’s § 117(a) defense, which provides that it’s not infringing
when an “owner of a copy of a computer program … mak[es] … another copy or
adaptation of that computer program” for certain purposes, such as when it’s an
“essential step” in using the program. At the pleading stage, the district
court struck this affirmative defense because it found that “Oracle’s customers
only license, rather than buy, Oracle’s copyrighted software.”

In the Ninth Circuit, courts look for “sufficient incidents
of ownership” to distinguish a license to a copy from ownership of the copy.
Mere labeling of an arrangement as a license, while relevant, is not itself
dispositive. Courts also consider whether the parties’ arrangement
“significantly restricts the user’s ability to transfer the software” and
whether the agreement “imposes notable use restrictions.” Because the concern
is ownership of the copy of the copyright, not of the copyright itself, use
restrictions that only protect against the infringement of the copyrighted
material are less relevant. Instead, courts should attend to use restrictions
that affect using the copy of the computer program, such as limiting the
user to “one working and one back up copy of the software,” forbidding the
“examination, disclosure, copying, modification, adaptation, and visual display
of the software,” and permitting the “software use on [a] single computer,
[while] prohibit[ing] multicomputer and multi-user arrangements, and
permitt[ing] transfer to another computer no more than once every thirty days.”
Other “incidents of ownership” may be considered, including whether the user
paid “significant consideration to develop the programs for [the user’s] sole
benefit” and whether the user could use the “programs ‘forever,’ regardless of
whether the parties’ relationship terminated.”

The district court seemed to rely only on the labeling of
the agreements between Oracle and its customers as a “license,” and that wasn’t
enough. Remand again, both on ownership and on the other elements of the §117
“required step” defense.

The court of appeals also found that the Oracle Database
licensing agreement did not prohibit third-party support providers, like
Rimini, from possessing a copy of Oracle’s software to further a client’s
“internal business operations,” requiring reversal of the district court’s
conclusion that it infringed Oracle’s copyright in Database.

A similar ruling about Rimini’s delivery of PeopleSoft
updates to clients was intertwined with the derivative works ruling above and
needed further sorting out.

Lanham Act: The district court found that Rimini engaged in
false advertising; Rimini challenged whether 12 statements about its security
services could be found to be misleading.

Oracle provides periodic security patches, aka “Critical
Patch Updates,” to customers who buy Oracle software support. Rimini offers its
own security service using a technology called “virtual patching.” Unlike
Oracle’s patches, virtual patching does not modify source code. Instead, it
acts as a firewall for software programs, attempting to intercept and block any
exploits. Rimini’s statements covered: (1) statements about the relative
security of the parites’ services; (2) statements that Rimini offers “holistic”
security; and (3) statements about the need for software patching.

(1)  “Relative
security” statements

• “Security professionals have found that traditional vendor
security patching models are outdated and provide ineffective security
protection.”

• Oracle’s [Critical Patch Updates] are unnecessary to be
secure.

• It is not risky to switch to Rimini and forgo receiving
[Critical Patch Updates] from Oracle.

• Virtual patching can serve as a replacement for [Oracle]
patching.

• “Virtual patching can be more comprehensive, more
effective, faster, safer, and easier to apply than traditional [Oracle]
patching.”

• “Rimini Security Support Services helps clients
proactively maintain a more secure application compared to [Oracle’s] support
program which offers only software package-centric fixes.”

• Rimini provides more security as compared to Oracle.

• Rimini’s [Global Security Services] can “pinpoint and
circumvent vulnerabilities months and even years before they are discovered and
addressed by the software vendor.”

These statements were puffery.

Comparative assertions about
effectiveness, riskiness, and security are the kinds of generalized statements
of product superiority that we have routinely found to be nonactionable. Here,
neither Oracle nor the district court provided any objective, quantifiable metric
to measure software’s security, risk to vulnerabilities, or security protocols’
effectiveness to prove the falsity of Rimini’s statements. Indeed, the
possibility of exploitation by hackers always exists. No product can offer
complete “security” or eliminate all “risk.” Without an objective measure of
the difference between perfect security and the security programs offered by
Rimini’s and Oracle’s products, any statement about comparative security is
necessarily tinged with subjectivity. As Oracle’s security expert acknowledged,
“security experts can reasonably disagree on what constitutes adequate
security.”

The district court held that Rimini’s statement that its
security services could “pinpoint” future vulnerabilities “before they even
exist” was literally false because such technology is “not technically
feasible.” But “Rimini never claimed clairvoyance in spotting vulnerabilities;
instead, it was merely claiming that its products can spot problems before they
are ‘discovered and addressed by the software vendor.’” That was “a comparative
statement of superiority—not a statement of psychic ability. Indeed, Rimini
presented evidence that it had identified and addressed specific
vulnerabilities before Oracle released a patch to address them.” Reversed.

(2)  The
claim that Rimini offers “holistic security” solutions for Oracle software for
enterprises

The district court found that “holistic security” is a term
of art within the world of software security that refers to “a comprehensive
approach to security at all layers of a system, and includes security patching
at the software level.” Because “industry standards can provide objective
meaning to otherwise subjective or ambiguous terms in particular contexts,” the
statement was actionable.

If “holistic security” means “multi-layered security
protection including at the source-code level” that’s a “binary determination”
with “falsifiable criteria.” The district court found that Rimini doesn’t offer
multi-level security, so the court of appeals affirmed.

(3)  “No
need for software patching” statements

• Oracle’s [Critical Patch Updates] provide little to no
value to customers and are no longer relevant.

• Once an Oracle ERP platform is stable, there is no real
need for additional patches from Oracle.

• If you are operating a stable version of an Oracle
application platform, especially with customizations, you probably cannot apply
or do not even need the latest patches.

The district court held that these statements were
misleading because the “security community recognizes that software-level
patching is one of the most important aspects of any modern IT security
strategy.” These too were puffery.

The record showed that Oracle’s
customers are “some of the most sophisticated companies in the world” and “take
the security of their systems seriously.” Whether to deploy or skip software
patching is a matter of subjective discretion. One Oracle customer testified
that it made the decision not to apply Oracle’s Critical Patching Updates
because it focused on its firewall security and believed that the patches could
introduce new problems—all before it considered signing up with Rimini. Thus,
it is doubtful that any of Oracle’s customers would be fooled about its own
security needs merely based on Rimini’s fanciful but vague statements. Indeed,
Oracle could not identify “any customers that left Oracle and went to Rimini
because of a statement about security.” Nor did Oracle present any evidence of
a security breach suffered by a Rimini client. So while these statements border
on falsehood, we cannot say that they are so specific and measurable to become
actionable under the Lanham Act. We thus reverse.

All this also required the district court to reconsider the
scope of the injunction.

Judge Bybee dissented in part, and would have found that the
statement “Oracle’s [Critical Patch Updates] provide little or no value to
customers and are no longer relevant” was not puffery.  “Little or no value” and “no longer relevant”
were “absolute characteristics” that could be “falsified”—Oracle’s product was
either valueless and irrelevant or not, even if using software patching is a
discretionary decision, and even if Oracle’s “sophisticated” customers would
not be “fooled” by this statement. Rimini “internally acknowledges that
patching … is necessary,” and has said that “no one is thinking of not
applying patches at all.” Most of Rimini’s statements were puffery because they
used qualifiers like “probably,” “can,” and “more”—and made generalized
statements. [FWIW, the “qualifiers” justification doesn’t persuade me—most
studies I’ve seen show that consumers don’t distinguish in that way.]

from Blogger http://tushnet.blogspot.com/2024/12/celebration-on-rimini-street-as-it.html

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Reading list: Carys Craig, The AI-Copyright Trap

Posted on December 12, 2024 by rtushnet

 The AI-Copyright Trap

Carys J. Craig

Abstract

As AI tools proliferate, policy makers are increasingly being called upon to protect creators and the cultural industries from the extractive, exploitative, and even existential threats posed by generative AI. In their haste to act, however, they risk running headlong into the Copyright Trap: the mistaken conviction that copyright law is the best tool to support human creators and culture in our new technological reality (when in fact it is likely to do more harm than good). It is a trap in the sense that it may satisfy the wants of a small group of powerful stakeholders, but it will harm the interests of the more vulnerable actors who are, perhaps, most drawn to it. Once entered, it will also prove practically impossible to escape. I identify three routes in to the copyright trap in current AI debates: first is the “if value, then (property) right” fallacy; second is the idea that unauthorized copying is inherently wrongful; and third is the resurrection of the starving artist trope to justify copyright’s expansion. Ultimately, this article urges AI critics to sidestep the copyright trap, resisting the lure of its proprietary logic in favor of more appropriate routes towards addressing the risks and harms of generative AI.

from Blogger http://tushnet.blogspot.com/2024/12/reading-list-carys-craig-ai-copyright.html

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incontestable LIZZIE BORDEN registration + actual confusion insufficient to overcome weight of history, 1st Circuit rules

Posted on December 11, 2024 by rtushnet

US Ghost Adventures, LLC v. Miss Lizzie’s Coffee LLC, No.
23-2000 (1st Cir. Nov. 15, 2024)

The Lizzie Borden House “bears a storied history that
originates with the still-unsolved murders — in 1892 — of Lizzie Borden’s
father and stepmother.” Ghost Adventures “provides ghost tours and related
hospitality services across the United States.” It owns a bed and breakfast operated
out of the Lizzie Borden House featuring a museum, “ghost tours,” and kindred
activities. 

bed & breakfast sign

Its success “depends in large part on the Lizzie Borden name and
lore.” Ghost Adventures owns incontestable trademark registrations for both the
name “Lizzie Borden” for hotel and restaurant services and for a realistic
hatchet logo displaying a notched blade (a reference to the implement that
allegedly killed Borden’s parents).

Ghost Adventures’ registered logo

Miss Lizzie’s Coffee LLC recently opened a coffee shop next
door to the Lizzie Borden House. You will not be surprised to learn that it,
too, markets itself by reference to the Lizzie Borden saga. One sign says “Miss
Lizzie’s Coffee” between a cup of coffee and a stylized bloody hatchet. A
second sign advertises Miss Lizzie’s as “The Most Haunted Coffee Shop in the
World!” “The hatchets on both signs include handles and dramatic blood
splatters.”

2 hatchets and blood splatters, “The Most Haunted Coffee Shop in the World!”

Miss Lizzie’s Coffee in Sweeney Todd-like font and a bloody hatchet

Some visitors have incorrectly assumed that the Lizzie
Borden House and Miss Lizzie’s are affiliated or asked about whether such a
relationship existed. Some guests of the Lizzie Borden House were frustrated to
learn that they could not bring Miss Lizzie’s coffee on their tours of the
Lizzie Borden House, having bought the coffee under the erroneous impression
that the coffee shop was affiliated with the historical site. A Fall River city
official called Ghost Adventures to discuss its “new business in the building
next door named Miss Lizzie’s.”

Ghost Adventures sought to enjoin Miss Lizzie’s from using
either the “Lizzie Borden” trademark or the hatchet logo in the coffee shop’s
trade names, trade dress, and marketing materials.

The core problem here was causation. Ghost Adventures needed
to show that Miss Lizzie’s used its mark in commerce in a way that
caused confusion, not the Lizzie Borden mythos. The district court found that
the hatchet displayed on Miss Lizzie’s signage was “not at all the hatchet
trademarked by Ghost Adventures” nor even “a colorable imitation of it.” It
continued: “Miss Lizzie’s mark associates its business with the historical
story of Lizzie Borden, not the mark ‘Lizzie Borden’” that Ghost Adventures
owns. Although “Ghost Adventures has an ‘incontestable’ trademark in ‘Lizzie
Borden’ and its hatchet, Miss Lizzie’s is using neither the mark ‘Lizzie Borden’
nor the Ghost Adventures hatchet.” “Ghost Adventures has not demonstrated that
its mark bears the strength which might give it the ‘secondary meaning’ reach
that, for example, ‘Sam Adams Beer’ might claim regarding the historical figure
Sam Adams.”

The court found the consumer confusion “limited” and caused
mainly by physical proximity, their common but independent reliance on the
shared Lizzie Borden mythos, and the tendency to associate services related to
a historical site with the site itself, not by the similarity of the businesses’
marks. After all, “the same issues would arise if Miss Lizzie’s called its cafe
‘Forty Whacks Coffee’ and used a different image as its logo.”

The district court also noted that the parties’ services
were different: “on one hand, sophisticated buyers who come from afar with
tickets or reservations to experience the Lizzie Borden House; and the other,
buyers seeking food or coffee.”

The parties also rely on different forms of advertising, and
a sign on Miss Lizzie’s storefront explicitly disclaimed any relationship with
the neighboring Lizzie Borden House. Such a disclaimer can “tip the scales to a
finding of no likelihood of confusion and no infringement” where, as here, “the
multi-factor analysis points to a low likelihood of confusion.”

disclaimer of affiliation or association in window

The court of appeals affirmed, noting, for example, that “Miss
Lizzie’s hatchet spews blood, whereas Ghost Adventures’ is spotless. Indeed, it
appears that the only similarity between the hatchet logos is that they both
depict hatchets. The court, then, did not clearly err in finding that the
hatchet logos are facially dissimilar.” Also, “the district court supportably
found that Miss Lizzie’s reference to ‘Lizzie’ was to the lore of Lizzie Borden
— which Ghost Adventures does not own — rather than to the mark ‘Lizzie Borden.’
Thus, the meaning associated with the name ‘Miss Lizzie’s Coffee’ is only
incidentally similar to that of the ‘Lizzie Borden House.’” Ghost Adventures
didn’t persuade the court of appeals that consumers would associate “Lizzie
Borden” with its services rather than with Lizzie Borden herself.

Likewise, the district court permissibly viewed the parties’
differences as more important than their joint presence in the broad
hospitality industry. “Ghost Adventures’ registration of the mark ‘Lizzie
Borden’ did not prohibit other businesses in the hospitality industry from
setting up shop in the vicinity of the Lizzie Borden House. Nor did it prohibit
such businesses from marketing themselves by the use of Lizzie Borden’s story.”

What about actual confusion?

The relevant consumer confusion in
a trademark infringement action is confusion caused by an infringing
mark. Consumer confusion due to non-trademarked similarities between businesses
or products does not indicate infringement. For example, if two outdoor
Saturday farmers’ markets opened on the same block, causing wandering shoppers
to think that they were affiliated, their proximity and similar business
models, without more, would not be suggestive of trademark infringement. This
basic principle tracks a core purpose of trademark law: to prevent a copycat
from appropriating the goodwill of a brand by wrongly copying the brand’s mark.
Because the district court supportably found that the source of consumer
confusion was not the similarity of their marks, but something else altogether,
the evidence of confusion relied upon by Ghost Adventures is of no consequence.
(emphasis added)

Of course, this means that we have to be very sure what you
can and can’t own as a mark! The foundational proposition of the district court
and court of appeals here is “Ghost Adventures can’t own the Lizzie Borden mythos,
even if consumers think they do.” I agree! But apparently a beer company might
own the Sam Adams mythos, at least for sufficiently beer-related activities?
This is of course related to the difference between owning a mark for something
and confusion about affiliation, which is a very different animal.

What about intent? Ghost Adventures argued that the coffee
shop “opened a location in immediate proximity to [Ghost Adventures’] business”
and “intentionally used the word ‘Lizzie’ and a hatchet in [its] name and
signage.” The district court supportably found that Miss Lizzie’s sought to
benefit from the Lizzie Borden story in its own right, “not from the manner in
which Ghost Adventures used that story.” It was not clear error to decide, “given
the historical significance of the location,” neither Miss Lizzie’s acts alone
nor those acts “considered in light of the entire record” evinced an intent to
appropriate Ghost Adventures’ trademark.

What about incontestability? It didn’t affect the
marketplace strength of the mark, which was not strong enough to displace
consumers’ association with the real Lizzie Borden. 

The district court also pointed to a sign taped to the physical storefront that conspicuously reads: “Miss
Lizzie’s Coffee is NOT ASSOCIATED, NOR AFFILIATED in any way with the Lizzie
Borden Museum or Bed and Breakfast next door, nor any other business.” The district court supportably found that this
clarification “further distinguish[ed] the businesses,” noting that effective
disclaimers can “tip the scales to a finding of no likelihood of confusion and
no infringement.”

from Blogger http://tushnet.blogspot.com/2024/12/incontestable-lizzie-borden.html

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allegations of copied instructions lead to finding of noninfringement and possible 512(f) violation

Posted on December 11, 2024 by rtushnet

MFB Fertility, Inc. v. Action Care Mobile Veterinary Clinic,
LLC, — F.Supp.3d —-, 2024 WL 1719347, No. 23 cv 3854 (N.D. Ill. Apr. 22, 2024)

MFB sued Action Care for copyright and trademark
infringement; Action Care counterclaimed for misrepresentation under 17 U.S.C.
§ 512(f), tortious interference, defamation per se and per quod, and
cancellation of Plaintiff’s “PROOV” trademark. Defendant won dismissal of the copyright
claim and plaintiff won partial dismissal of the counterclaims.

MFB was founded by fertility expert Dr. Amy Beckley, who invented
PROOV to measure the presence of progesterone (PdG) metabolites in urine and to
allow women to confirm successful ovulation by tracking their PdG levels.
Through Amazon and its website proovtest.com, MFB “promotes, offers for sale,
and sells products … under the trademark PROOV.” Proov products include ads
and instructions, such as FDA-required labels and their website’s Frequently
Asked Questions page, so that Proov can be readily used by unskilled persons at
home.

Competitor Action Care also specializes in the sale of PdG
ovulation test strips. Action Care’s PdG test is called OvuProof, using Amazon  and buyovuproof.com.

MFB sent a DMCA takedown notice to Amazon in 2023 targeting
Action Care, resulting in at least 174 units of Action Care’s products being
stranded or lost. MFB’s DMCA Takedown Notice included, along with the statutorily
required language, the following statements:

They [Action Care] found a cheap
Chinese manufacturer to copy our tests then used all of our wording on the
product page and product inserts. Copyrighted content: They copied all of our
FAQs and product description from this product page [ ] They also took wording
from our FAQ on our website: https://ift.tt/BMX7LZI
including the ‘who might have a problem with ovulation, comment FAQ, when to
test, and what is successful ovulation.

Action Care counternoticed, but MFB sued, sent its complaint
to Amazon, and got Amazon to take down OvuProof again. The putative copyright
infringement is here:

 

comparison of instructions (far from identical)

Action Care’s legal strategy (waiting on the trademark part,
which courts are often reluctant to decide on a motion to dismiss) was good
here, and Amazon might well be willing to restore its storefront, though I have
no insight into its decisionmaking. The court reasoned that MFB’s works were “scientific
and factual,” “entitled to the narrowest copyright protections.”

It is “axiomatic” that copyright law denies protection to
“fragmentary words and phrases” and to “forms of expression dictated solely at
functional considerations” on the grounds that “these materials do not exhibit
the minimal level of creativity necessary to warrant copyright protection.” “[L]anguage
describing what a product does and how it is used is generally
noncopyrightable; and even where it is copyrightable, infringement can be
demonstrated only by precise copying.” Even assuming validity of MFB’s
copyright and access, there was no substantial similarity given the highly
factual nature of the works and the lack of striking similarity, a limit
imposed to avoid “monopolistic stagnation.” There was no verbatim copying here;
any overlap was necessary to describe an unprotected process.

MFB’s own claims of similarity showed their weakness:

• “The term ‘Cycle’ is identical to the term ‘Cycle.’ ”

• “The phrase ‘Works Great with Tests’ is substantially
similar to the phrase ‘Works Well with Ovulation/LH Tests.’ ”

• “The term ‘PdG Test Strips’ is identical to the term “
‘PdG Test Strips.’ ”

• “The term ‘CONFIRM OVULATION’ is identical to the term
‘CONFIRM OVULATION,’ and both are used in the first paragraphs of their
respective works as a way to distinguish from predicting ovulation.”

• “The phrases ‘THE ONLY FDA-CLEARED PdG Test’ is
substantially similar to the phrase ‘OvuProof is FDA registered,’ and each work
includes that point in the third paragraph of their respective works.”

“In fact, under MFB’s construction, Action Care would
ostensibly be required to violate the FDA’s labeling requirements for in vitro
diagnostic products to bypass MFB’s copyright.” The court cited Feist in
support of the idea that regulatorily mandated statements may not be original;
here the FDA requires name and intended use(s), a statement of warnings or
precautions, and other key details. “This functional, regulated language is
precisely the ‘expression’ that MFB improperly claims intellectual property
over.” Any copying was “limited to fragments that are descriptive of its
product and is compelled by the legislature. MFB cannot claim ownership of
medical terms such as ‘cycle’ or ‘PdG Test Strips’ no more than Pfizer or
Moderna can claim ownership over ‘COVID-19 vaccine.’”

512(f) misrepresentation: Given the lack of binding precedent,
the court looked at Lenz; did Action Care plausibly plead a lack of good
faith? MFB’s DMCA notification represents that Action Care copied “all” of
MFB’s Copyrighted Works. The word “all” means 100 percent, or verbatim. That
was false as a matter of law, rendering Action Care’s allegations significantly
more plausible than in other cases, and Lenz makes willful blindness
actionable as well. “[W]hether a copyright owner formed a subjective good faith
belief is, in most instances, a factual issue that is not appropriate for
resolution on a motion to dismiss.” Thus, “a DMCA notice submitter like MFB
must proactively consider the potential that similarities in materials are
unprotectable. … Given the discrepancy between ‘all’ and, apparently, no
copying …, there is a triable issue as to whether the MFB formed a subjective
good faith belief that Action Care’s sale of its OvuProof was infringing, or if
instead MFB were willfully blind to the fact that Action Care was not
infringing in violation of 512(f).”

Defamation and tortious interference claims based on
statements to Amazon also proceeded.  (It
does not appear that MFB argued that 512(f) had preemptive effect.)

But the trademark cancellation claim failed because Action
Care argued that there was no likelihood of confusion, depriving Action Care of
standing.

from Blogger http://tushnet.blogspot.com/2024/12/allegations-of-copied-instructions-lead.html

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Right of publicity question of the day, Duolingo edition

Posted on December 6, 2024 by rtushnet

 Should Rogers apply to this language learning app? What about the transformative use test? 

Duolingo screenshot showing response to perfect lesson: “Are you Beyonce? You made 0 mistakes. You’re flawless.”

from Blogger http://tushnet.blogspot.com/2024/12/right-of-publicity-question-of-day.html

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individual pitches/RFPs are advertising/promotion, but not user support/FAQ pages

Posted on December 2, 2024 by rtushnet

Spotlight Ticket Management, Inc. v. Concierge Live LLC, No.
2:24-cv-00859-WLH-SSC, 2024 WL 4866813 (C.D. Cal. Aug. 30, 2024)

Spotlight provides ticket and event management enterprise
solutions. It entered into an exclusive agreement with Ticketmaster, a ticket
sales and distribution company, giving it “the exclusive right to directly
integrate its technology with Ticketmaster’s software and systems platform.” Integration
means “the ability to access Ticketmaster’s application programming interfaces
(‘API’) to automatically and directly move Ticketmaster tickets without needing
to go through the Ticketmaster website….” In exchange, Spotlight pays
Ticketmaster an annual fee and a percentage of its revenue—millions of dollars
for “a significant competitive edge in relation to its competitors.”

Concierge competes with Spotlight to provide similar ticket
and event management services. Spotlight alleged that Concierge falsely
advertised through its “public website, marketing materials, and direct
communications with potential clients” in pitch meetings that it has the same
functionality and integration capability with Ticketmaster as Spotlight does,
and falsely characterizes Spotlight’s relationship with Ticketmaster as merely
a marketing agreement, and not an exclusive agreement.

For example, Spotlight alleged that it lost out on a pitch
to an online food ordering and delivery company because Concierge “falsely
represented… that it could perform all the same functionality as
[Plaintiff]—including integrations with Ticketmaster—but for a lower cost.” It
brought false advertising claims under California and federal law along with
tortious interference claims.

When brought by competitors, California UCL/FAL claims are
basically Lanham Act claims, so they were analyzed together; the court applied
Rule 9(b)’s heightened pleading standard, and found that the complaint passed
it because it identified several specific pitches/requests for proposals. “While
Plaintiff fails to allege the ‘who’ including the individuals present at the
meetings (other than the Defendant and the entity issuing the RFP), the ‘where’
including the location or place of the pitches/RFPs, and the specific content
of the allegedly false representations including a statement about why each
statement is false, this is because Plaintiff was not in the room during the
pitches.”) Spotlight provided enough, including discussing whether the
statements were contained in marketing materials, the RFP, or were provided
orally.

However, applying the Lanham Act’s “commercial advertising
or promotion” requirement to both state and federal claims, some of the alleged
false statements didn’t qualify. Specifically, Concierge’s public website’s
user support articles weren’t advertising. The titles included “How do I add
Ticketmaster inventory into Concierge Live?” and “How do I add Ticketmaster
inventory into Concierge Live?” Plaintiff’s characterization of these as
“marketing materials” did not persuade the court, since they were under the
support subdomain, and the content was “written in a question-and-answer format
suggesting that this material is a guide for users of Defendant’s platform.”
These were “more akin to guides or instruction manuals and not commercial
advertisement.”

Tortious interference with contractual relations: Spotlight didn’t
sufficiently allege Concierge’s knowledge of its contract with Ticketmaster or
the exclusive agreement; it wasn’t enough to allege that Ticketmaster issued a
public letter in 2021 stating that it was in an exclusive partnership with
Spotlight.

Tortious interference with prospective economic advantage:
There was no independent tort alleged other than the alleged misrepresentations
on Concierge’s website, which the court had just held not actionable.

 

from Blogger http://tushnet.blogspot.com/2024/12/individual-pitchesrfps-are.html

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