Ad agency liability for false advertising without scienter

Posted on April 24, 2015 by rtushnet
Nestlé Purina Petcare Co. v. Blue Buffalo Co., No. 4:14 CV
859, 2015 WL 1782661 (E.D. Mo. Apr. 20, 2015)
 
Purina sued Blue Buffalo for false advertising of its dog
food as “grain free” and containing “no chicken by-product.” Purina issued
press releases about the suit and launched PetFoodHonesty.com, criticizing Blue
Buffalo for its alleged false advertising. Blue Buffalo denied the allegations
and alleged that the “independent testing” Purina relied upon for its claims
against Blue Buffalo was unreliable. 
Blue Buffalo countersued Purina for false advertising and defamation,
and added the ad agencies working with Purina.
 
PetFoodHonesty.com began with an “open letter” to pet owners
from Purina describing Blue Buffalo’s allegedly false advertising. Blue Buffalo
alleged that a number of statements about Blue Buffalo and the content of Blue
Buffalo’s dog food were false, e.g., “[T]esting conducted by an independent
laboratory revealed that several of Blue Buffalo’s top-selling ‘Life
Protection’ pet food products actually contain substantial amounts of poultry
by-product meal” and “Blue Buffalo is not being honest about the ingredients in
its pet food.” Blue Buffalo made similar allegations about Purina’s Facebook
and Twitter pages, with content developed by ad agency Blue State Digital.  Purina also allegedly promoted its Honesty
website through Google ads developed by Blue State Digital, e.g., “A dog food
company is lying about its ingredients. Learn the facts.”
 
Under Lexmark,
Lanham Act false advertising liability isn’t limited to direct competitors. And
those who work with competitors to produce false ads can also be liable.  There isn’t much caselaw on this, but what
there is has held that ad agencies can be liable under the Lanham Act as joint
tortfeasors for knowing participation. 
The ad agency defendants argued that they weren’t active participants in
preparing the ads and didn’t know or have reason to know of its falsity. 
 
Blue Buffalo pointed out that the Lanham Act doesn’t have a
scienter requirement, but the ad agency defendants argued that the law “silently”
imposes such a requirement as to ad agencies. But the main case supporting
that, Gillette v. Wilkinson Sword,
relied on the pre-1988 version of the Lanham Act, which did have a knowledge
requirement for false advertising claims. Thus, given the express removal of “knowing”
as an element of Lanham Act false advertising, knowledge was not required.
 
The ad agency defendants also argued that Blue Buffalo
failed to satisfy Rule 9(b). Blue Buffalo pled that defendant PRCG Haggerty
“designed and built” the Honesty website, and that Blue State Digital
“developed the content” of the ads on Purina’s Facebook & Twitter accounts and
“arranged for these links to PetFoodHonesty.com to appear when Google.com users
search for terms related to Blue Buffalo.”
 
There’s a split over whether 9(b) applies to Lanham Act
claims “grounded in fraud,” but only one bound the court here: In re
NationsMart Corp. Sec. Litig., 130 F.3d 309 (8th Cir.1997). The Eighth Circuit
held that Rule 9(b) does not apply to § 11 Securities Act claims for false
statements and misrepresentations because proof of fraud is “not a prerequisite
to establishing liability,” and it would be unjust to dismiss a case because
plaintiffs alleged more than was necessary to recover under the law.  So too here, because Lanham Act liability
doesn’t require fraud, even if Blue Buffalo did include fraud allegations.  (This has always eemed to me to be the right
approach.)
 
Blue Buffalo’s Lanham Act claim met the notice pleading
standards of Rule 8(a). Blue Buffalo attached and cited several examples of allegedly
false statements and advertisements from Purina’s Honesty website, Facebook
page, Twitter account, and Google search results. Blue Buffalo also alleged
that the ad agencies participated in the design and creation of those ads.  These allegations weren’t “particularly
robust,” but “it would be difficult for Blue Buffalo to plead many additional
facts at this time without the benefit of discovery.” And even if 9(b) did
apply, Blue Buffalo alleged sufficient details to put the ad agency defendants
on notice, quoting language from specific ads, and noting the dates on which
those ads ran.
 
PRCG/Haggerty argued that it was immune under CDA § 230.  The court rejected this for two reasons: (1) CDA
immunity is an affirmative defense that a plaintiff is not required to plead
around (yikes!), and (2) given the allegations of the complaint, PRCG/Haggerty was
an “information content provider” for the content it created for the Honesty
website—allegations that PRCG/Haggerty “designed and built” the advertising
campaign were sufficient.
 
The court dismissed claims for false advertising under Missouri
common law, concluding that no such claim exists under Missouri law. Unfair
competition and unjust enrichment claims survived for the same reason as the
Lanham Act claims. The ad agency defendants also didn’t get the injurious
falsehood and defamation claims kicked out, because scienter can be alleged
generally even under Rule 9(b).
 
Unfair competition under Connecticut common law: the ad
agency argued that this claim could only be maintained against competitors. Blue Buffalo said the state
law tracked the Lanham Act, but under Connecticut law, “the word ‘competition’
as used in ‘unfair competition’ limits coverage to claims by competitors.”  (This language came from an insurance case
but provided guidance.)  Although state
trademark law follows the Lanham Act, false advertising/unfair competition isn’t
the same thing. Claim dismissed.

Finally, the court dismissed claims for violation of trade practice statutes of
different states because the counterclaim “summarily lists citations to
statutes of twenty-six different states,” which wasn’t enough to make a
plausible claim or provide notice.

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Deducting points for a 3-point landing in copyright claim

Posted on April 24, 2015 by rtushnet

Horizon Comics Prods., Inc. v. Marvel Entertainment, LLC, No. 15-cv-11684 (D. Mass. filed Apr. 23, 2015): Newly filed; the claim is that movie Iron Man’s armor infringes the copyright in another comic armored suit.  All I’ll say right now is that one part of the allegations is clearly silly: the complaint alleges that one movie poster is a copy of an image from plaintiffs’ cartoon:

Radix image and Iron Man 3 poster

Three Point Landing is such a trope that it has its own supercut, as well as its own entry on TVTropes.  (Warning: link goes to TVTropes.  I accept no responsibility for the time you’ll spend there.)  I would kind of love to put together the exhibits for the motion to dismiss, actually.

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Ad agency liability for false advertising without scienter

Posted on April 24, 2015 by rtushnet
Nestlé Purina Petcare Co. v. Blue Buffalo Co., No. 4:14 CV 859, 2015 WL 1782661 (E.D. Mo. Apr. 20, 2015)
 
Purina sued Blue Buffalo for false advertising of its dog food as “grain free” and containing “no chicken by-product.” Purina issued press releases about the suit and launched PetFoodHonesty.com, criticizing Blue Buffalo for its alleged false advertising. Blue Buffalo denied the allegations and alleged that the “independent testing” Purina relied upon for its claims against Blue Buffalo was unreliable.  Blue Buffalo countersued Purina for false advertising and defamation, and added the ad agencies working with Purina.
 
PetFoodHonesty.com began with an “open letter” to pet owners from Purina describing Blue Buffalo’s allegedly false advertising. Blue Buffalo alleged that a number of statements about Blue Buffalo and the content of Blue Buffalo’s dog food were false, e.g., “[T]esting conducted by an independent laboratory revealed that several of Blue Buffalo’s top-selling ‘Life Protection’ pet food products actually contain substantial amounts of poultry by-product meal” and “Blue Buffalo is not being honest about the ingredients in its pet food.” Blue Buffalo made similar allegations about Purina’s Facebook and Twitter pages, with content developed by ad agency Blue State Digital.  Purina also allegedly promoted its Honesty website through Google ads developed by Blue State Digital, e.g., “A dog food company is lying about its ingredients. Learn the facts.”
 
Under Lexmark, Lanham Act false advertising liability isn’t limited to direct competitors. And those who work with competitors to produce false ads can also be liable.  There isn’t much caselaw on this, but what there is has held that ad agencies can be liable under the Lanham Act as joint tortfeasors for knowing participation.  The ad agency defendants argued that they weren’t active participants in preparing the ads and didn’t know or have reason to know of its falsity. 
 
Blue Buffalo pointed out that the Lanham Act doesn’t have a scienter requirement, but the ad agency defendants argued that the law “silently” imposes such a requirement as to ad agencies. But the main case supporting that, Gillette v. Wilkinson Sword, relied on the pre-1988 version of the Lanham Act, which did have a knowledge requirement for false advertising claims. Thus, given the express removal of “knowing” as an element of Lanham Act false advertising, knowledge was not required.
 
The ad agency defendants also argued that Blue Buffalo failed to satisfy Rule 9(b). Blue Buffalo pled that defendant PRCG Haggerty “designed and built” the Honesty website, and that Blue State Digital “developed the content” of the ads on Purina’s Facebook & Twitter accounts and “arranged for these links to PetFoodHonesty.com to appear when Google.com users search for terms related to Blue Buffalo.”
 
There’s a split over whether 9(b) applies to Lanham Act claims “grounded in fraud,” but only one bound the court here: In re NationsMart Corp. Sec. Litig., 130 F.3d 309 (8th Cir.1997). The Eighth Circuit held that Rule 9(b) does not apply to § 11 Securities Act claims for false statements and misrepresentations because proof of fraud is “not a prerequisite to establishing liability,” and it would be unjust to dismiss a case because plaintiffs alleged more than was necessary to recover under the law.  So too here, because Lanham Act liability doesn’t require fraud, even if Blue Buffalo did include fraud allegations.  (This has always eemed to me to be the right approach.)
 
Blue Buffalo’s Lanham Act claim met the notice pleading standards of Rule 8(a). Blue Buffalo attached and cited several examples of allegedly false statements and advertisements from Purina’s Honesty website, Facebook page, Twitter account, and Google search results. Blue Buffalo also alleged that the ad agencies participated in the design and creation of those ads.  These allegations weren’t “particularly robust,” but “it would be difficult for Blue Buffalo to plead many additional facts at this time without the benefit of discovery.” And even if 9(b) did apply, Blue Buffalo alleged sufficient details to put the ad agency defendants on notice, quoting language from specific ads, and noting the dates on which those ads ran.
 
PRCG/Haggerty argued that it was immune under CDA § 230.  The court rejected this for two reasons: (1) CDA immunity is an affirmative defense that a plaintiff is not required to plead around (yikes!), and (2) given the allegations of the complaint, PRCG/Haggerty was an “information content provider” for the content it created for the Honesty website—allegations that PRCG/Haggerty “designed and built” the advertising campaign were sufficient.
 
The court dismissed claims for false advertising under Missouri common law, concluding that no such claim exists under Missouri law. Unfair competition and unjust enrichment claims survived for the same reason as the Lanham Act claims. The ad agency defendants also didn’t get the injurious falsehood and defamation claims kicked out, because scienter can be alleged generally even under Rule 9(b).
 
Unfair competition under Connecticut common law: the ad agency argued that this claim could only be maintained against competitors. Blue Buffalo said the state law tracked the Lanham Act, but under Connecticut law, “the word ‘competition’ as used in ‘unfair competition’ limits coverage to claims by competitors.”  (This language came from an insurance case but provided guidance.)  Although state trademark law follows the Lanham Act, false advertising/unfair competition isn’t the same thing. Claim dismissed.
Finally, the court dismissed claims for violation of trade practice statutes of different states because the counterclaim “summarily lists citations to statutes of twenty-six different states,” which wasn’t enough to make a plausible claim or provide notice.
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8th Circuit dismisses right of publicity claim as copyright preempted

Posted on April 23, 2015 by rtushnet
Ray v. ESPN, Inc., No. 14-2117 (8th Cir. Apr. 22, 2015)
 
Steve “Wild Thing” Ray wrestled professionally in
the Universal Wrestling Federation (UWF) from 1990 to 1994. ESPN obtained films
of his wrestling matches and re-telecast them without his consent.  He sued for invasion of privacy and
misappropriation of name.  The Copyright
Act preempts state-law claims if (1) the work at issue is within the subject
matter of copyright as defined in § 102 and 103 of the Copyright Act, and (2) the
state law created right is equivalent to any of the exclusive rights within the
general scope of copyright as specified in § 106.
.
The films of Ray’s wrestling performances were within the subject
matter of copyright law. Ray argued that ESPN’s use of his “likeness”
was the true “focal point of this case.” Not so. The cases he cited
were distinguishable because they involved use of an identity to sell something
else. Downing v. Abercrombie & Fitch, 265 F.3d 994 (9th Cir. 2001) (use in
ads suggesting endorsement of clothing seller); Brown v. Ames, 201 F.3d 654
(5th Cir. 2000) (use to sell “cassettes and CD’s,” “music
catalogs,” “posters,” and “videotapes,” even though
the defendants “lacked copyrights”). “Brown specifically distinguished Baltimore Orioles—and in so doing, distinguished this case as
well—on the grounds that ‘the right of publicity claimed’ by the plaintiffs in Baltimore Orioles ‘was essentially a
right to prevent rebroadcast of games whose broadcast rights were already owned
by’ other parties.” I find this frustrating because it just announces a
conclusion: use in ads is use of likeness but use of the same copyrighted work
in a broadcast isn’t, at least if defendants own the copyright. But the result’s
right.  “ESPN did not use Ray’s likeness
or name in an advertisement without his permission to promote its commercial
products, and, as the district court correctly noted, Ray’s ‘likenesses could
not be detached from the copyrighted performances that were contained in the
films.”
 
And the rights were equivalent: they were “‘infringed
by the mere act of reproduction, performance, distribution or display'” of
his performances. Dismissal affirmed.

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8th Circuit dismisses right of publicity claim as copyright preempted

Posted on April 23, 2015 by rtushnet
Ray v. ESPN, Inc., No. 14-2117 (8th Cir. Apr. 22, 2015)
 
Steve “Wild Thing” Ray wrestled professionally in the Universal Wrestling Federation (UWF) from 1990 to 1994. ESPN obtained films of his wrestling matches and re-telecast them without his consent.  He sued for invasion of privacy and misappropriation of name.  The Copyright Act preempts state-law claims if (1) the work at issue is within the subject matter of copyright as defined in § 102 and 103 of the Copyright Act, and (2) the state law created right is equivalent to any of the exclusive rights within the general scope of copyright as specified in § 106.
.
The films of Ray’s wrestling performances were within the subject matter of copyright law. Ray argued that ESPN’s use of his “likeness” was the true “focal point of this case.” Not so. The cases he cited were distinguishable because they involved use of an identity to sell something else. Downing v. Abercrombie & Fitch, 265 F.3d 994 (9th Cir. 2001) (use in ads suggesting endorsement of clothing seller); Brown v. Ames, 201 F.3d 654 (5th Cir. 2000) (use to sell “cassettes and CD’s,” “music catalogs,” “posters,” and “videotapes,” even though the defendants “lacked copyrights”). “Brown specifically distinguished Baltimore Orioles—and in so doing, distinguished this case as well—on the grounds that ‘the right of publicity claimed’ by the plaintiffs in Baltimore Orioles ‘was essentially a right to prevent rebroadcast of games whose broadcast rights were already owned by’ other parties.” I find this frustrating because it just announces a conclusion: use in ads is use of likeness but use of the same copyrighted work in a broadcast isn’t, at least if defendants own the copyright. But the result’s right.  “ESPN did not use Ray’s likeness or name in an advertisement without his permission to promote its commercial products, and, as the district court correctly noted, Ray’s ‘likenesses could not be detached from the copyrighted performances that were contained in the films.”
 
And the rights were equivalent: they were “‘infringed by the mere act of reproduction, performance, distribution or display'” of his performances. Dismissal affirmed.
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Amazon doesn’t want you to know how to appy 1-800’s IIC rule

Posted on April 22, 2015 by rtushnet

SanMedica Int’l, LLC v. Amazon.com, Inc., No. 13-cv-00169 (D. Utah filed publicly Apr. 15, 2015)

The parties agreed to dismiss the case with prejudice on the day the redacted version of the opinion was released, so we won’t get more.
I’ll have more to say later, but: Amazon continued to run ads saying “buy SeroVital [SanMedica’s supplement product] at Amazon” in response to keyword searches on Google etc. even after it removed SeroVital from Amazon due to policy violations.  The court declined to grant summary judgment on initial interest confusion, finding that

It is undisputed that during the Advertising Period, approximately [redacted] sponsored ads were generated. Out of those, there were approximately [redacted] clicks on the sponsored ads. The click to impression rate of the sponsored ads is approximately [redacted] percent. This rate sets the “upper limit on how often consumers really were lured in such a fashion.” Amazon contends that of the [redacted] users that clicked on the ads for SeroVital, only [redacted] made any purchase at Amazon.com, a measly [redacted] percent.” Although consumer purchases constitute [redacted] percent, the focus is not on the purchase rate but instead on the [redacted] percent rate that consumers were lured to Amazon’s website. [Redacted]-percent, although a relative small number, is not so insufficient to suggest that there was no likelihood of confusion.

I do not think it is consistent with the rule of law to leave us to guess at the meaning of this.  In the Tenth Circuit, 1-800 governs the IIC analysis, and we know from that case that 1.5% clickthrough isn’t sufficient to make confusion likely; we also know that 7% confusion is usually not enough.  But what is enough? Is this one of the unusual cases where 7% is enough?  These redactions make it impossible to put this case in its proper context.

Separately, the court rejects SanMedica’s 43(a) false advertising claim for failure to show materiality.  SanMedica argued that the ads were literally false so that it didn’t need to show materiality separately, but the court disagreed:

Amazon’s misrepresentation was that consumers could purchase SeroVital on Amazon.com. But when consumers clicked on the sponsored ads, they were taken to a landing page that did not contain for sale any SeroVital products. Amazon’s misrepresentation thus related to the marketing of the product, that is, the channel through which a consumer may purchase the product. Amazon’s misrepresentation did not discuss the quality or characteristics of SeroVital which could potentially affect consumers’ purchasing decisions.

Under the undisputed facts on this motion, no reasonable jury could find that Amazon’s misrepresentation likely influenced a consumer’s purchasing decision.

This seems … wrong.  Bait and switch is false advertising, too (something the court acknowledges in its analysis of state law).  The misrepresentation that they could buy that particular product at Amazon was material to the people who clicked–that’s the theory of trademark infringement!  Alternatively, I suppose we could read the court as saying that we don’t
know whether consumers cared at all whether they were buying SeroVital—that is,
whether they cared about the source/producer—but there can still be trademark
infringement, because trademark doesn’t have a materiality requirement. Why is this sensible?

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Amazon doesn’t want you to know how to apply 1-800’s IIC rule

Posted on April 22, 2015 by rtushnet

SanMedica Int’l, LLC v. Amazon.com, Inc., No. 13-cv-00169 (D. Utah filed publicly Apr. 15, 2015)

The parties agreed to dismiss the case with prejudice on the day the redacted version of the opinion was released, so we won’t get more. I’ll have more to say later, but: Amazon continued to run ads saying “buy SeroVital [SanMedica’s supplement product] at Amazon” in response to keyword searches on Google etc. even after it removed SeroVital from Amazon due to policy violations.  The court declined to grant summary judgment on initial interest confusion, finding that

It is undisputed that during the Advertising Period, approximately [redacted] sponsored ads were generated. Out of those, there were approximately [redacted] clicks on the sponsored ads. The click to impression rate of the sponsored ads is approximately [redacted] percent. This rate sets the “upper limit on how often consumers really were lured in such a fashion.” Amazon contends that of the [redacted] users that clicked on the ads for SeroVital, only [redacted] made any purchase at Amazon.com, a measly [redacted] percent.” Although consumer purchases constitute [redacted] percent, the focus is not on the purchase rate but instead on the [redacted] percent rate that consumers were lured to Amazon’s website. [Redacted]-percent, although a relative small number, is not so insufficient to suggest that there was no likelihood of confusion.

I do not think it is consistent with the rule of law to leave us to guess at the meaning of this.  In the Tenth Circuit, 1-800 governs the IIC analysis, and we know from that case that 1.5% clickthrough isn’t sufficient to make confusion likely; we also know that 7% confusion is usually not enough.  But what is enough? Is this one of the unusual cases where 7% is enough?  These redactions make it impossible to put this case in its proper context.

Separately, the court rejects SanMedica’s 43(a) false advertising claim for failure to show materiality.  SanMedica argued that the ads were literally false so that it didn’t need to show materiality separately, but the court disagreed:

Amazon’s misrepresentation was that consumers could purchase SeroVital on Amazon.com. But when consumers clicked on the sponsored ads, they were taken to a landing page that did not contain for sale any SeroVital products. Amazon’s misrepresentation thus related to the marketing of the product, that is, the channel through which a consumer may purchase the product. Amazon’s misrepresentation did not discuss the quality or characteristics of SeroVital which could potentially affect consumers’ purchasing decisions. Under the undisputed facts on this motion, no reasonable jury could find that Amazon’s misrepresentation likely influenced a consumer’s purchasing decision.

This seems … wrong.  Bait and switch is false advertising, too (something the court acknowledges in its analysis of state law).  The misrepresentation that they could buy that particular product at Amazon was material to the people who clicked–that’s the theory of trademark infringement!  Alternatively, I suppose we could read the court as saying that we don’t know whether consumers cared at all whether they were buying SeroVital—that is, whether they cared about the source/producer—but there can still be trademark infringement, because trademark doesn’t have a materiality requirement. Why is this sensible?

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Reading list: class ascertainability & preemption of state sound recording public perf. rights

Posted on April 21, 2015 by rtushnet
Geoffrey C. Shaw, Class
Ascertainability, forthcoming, Yale Law J. (2015)
Abstract:
 
In recent years, federal courts
have been enforcing an “implicit” requirement for class certification, in
addition to the explicit requirements established in Rule 23 of the Federal
Rules of Civil Procedure. The ascertainability requirement insists that a
proposed class be defined in “objective” terms and that an “administratively
feasible” method exist for identifying individual class members and
ascertaining their class membership. This requirement has generated
considerable controversy and prevented the certification of many proposed
classes. The requirement has taken a particular toll on consumer class actions,
where potential class members are often unknown to the representative
plaintiffs, often lack documentary proof of their injury, and often do not even
know they have a legal claim at all.
This Note explores the
ascertainability requirement’s conceptual foundations. The Note first evaluates
the affirmative case for the requirement and finds it unpersuasive. At most,
Rule 23 implicitly requires something much more modest: that classes enjoy what
I call a minimally clear definition. The Note then argues that the
ascertainability requirement frustrates the purposes of Rule 23 by pushing out
of court the kind of cases Rule 23 was designed to bring into court. Finally,
the Note proposes that courts abandon the ascertainability requirement and
simply perform a rigorous analysis of Rule 23’s explicit requirements. This
unremarkable approach to class certification better reflects what the Rule says
and better advances what the Rule is for.
 
Julie L. Ross, [Un]happy Together: Why the Supremacy Clause Preempts State Law Digital Performance Rights in Radio-Like Streaming of Pre-1972 Sound Recordings
Abstract:

Lovers of the music of Frank Sinatra, The Beatles, Etta
James, and hundreds of other recording artists whose records were made before
February 15, 1972, may soon have a hard time hearing these great artists on any
satellite or Internet radio service. Recently, two federal district courts have
found that state laws were violated when satellite radio broadcaster Sirius XM
Radio included pre-1972 sound recordings in its broadcasts without the owners’
permission, but these courts did not consider-–and the parties did not
argue-–how the Supremacy Clause applies to those state law claims. This article
argues that state laws purporting to grant digital performance rights to
pre-1972 sound recordings are necessarily preempted by the Supremacy Clause of
the United States Constitution.
This article contends that enforcement of those state laws
would create a serious obstacle to “the accomplishment and execution of the
full purposes and objectives of Congress” in enacting the Digital Performance
Right in Sound Recordings Act of 1995 (“DPRA”). The DPRA reflects Congress’
careful balancing of interests and recognition of the need for an easily
administrable system of licensing, which Congress established through a complex
and comprehensive compulsory licensing system. The Supremacy Clause thus
preempts all state laws purporting to require licenses for digital performance
rights or payment of royalties for the use of such rights by Internet or
satellite radio stations beyond what is expressly provided for in the
compulsory licensing system established by the DPRA, because permitting
countless owners of individual pre-1972 sound recordings to assert claims for
royalties and other damages outside of the compulsory licensing system would
frustrate Congress’ goals in establishing that system.
Part I of this article provides a brief overview of the
federal rights at issue and the (very) brief history of performance rights in
sound recordings, noting the absence of any express state law recognition of a
performance right in sound recordings throughout most of the 20th century
(other than short-lived decisions in two states over seventy-five years ago
that focused on notices stamped on records purporting to prohibit a purchaser’s
use of sound recordings on radio rather than a true performance right). It is
only in very recent cases that courts in New York and California have
recognized state law performance rights. However, they did so without
considering Supremacy Clause preemption or how any state law performance rights
might conflict with the federal statutory compulsory license regime established
by the DPRA.
Part II of the article explains the relevant legislative
history and provisions of the DPRA governing the comprehensive licensing
system. That statutory license and rules governing it were established to
provide an efficient mechanism for digital Internet and satellite radio
services to operate in compliance with their legal obligations. In Part III,
the article explains Supremacy Clause doctrine and distinguishes the Supreme Court’s
opinion in Goldstein v. California, which rejected a Supremacy Clause challenge
to a state record piracy law in 1973. It demonstrates why neither the Court’s
decision in Goldstein nor the language of the Copyright Act’s express
preemption clause, which exempts state laws governing pre-1972 sound recordings
from statutory preemption, precludes conflict preemption under the Supremacy
Clause in the context of digital radio services that are subject to the federal
compulsory license.
Part IV of the article acknowledges that preemption of state
law protection for digital performances of pre-1972 sound recordings raises
equitable concerns, as it leaves some of this nation’s most treasured musical
artists uncompensated for use of their works by Internet and satellite
streaming services while the authors of more current works are compensated.
However, given the delicate balancing that has gone into Congress’ recognition
of a limited digital performance right and creation of a compulsory statutory
licensing system, any remedy for the inequity to owners of pre-1972 sound
recordings must be left to Congress. Allowing individual courts in individual
states to craft a patchwork of inconsistent remedies would disrupt the balance
struck by Congress and interfere with the functioning of the compulsory license
system for digital sound recording performances. This is a result that the
Supremacy Clause does not permit.

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Reading list: class ascertainability & preemption of state sound recording public perf. rights

Posted on April 21, 2015 by rtushnet
Geoffrey C. Shaw, Class Ascertainability, forthcoming, Yale Law J. (2015)
Abstract:
 
In recent years, federal courts have been enforcing an “implicit” requirement for class certification, in addition to the explicit requirements established in Rule 23 of the Federal Rules of Civil Procedure. The ascertainability requirement insists that a proposed class be defined in “objective” terms and that an “administratively feasible” method exist for identifying individual class members and ascertaining their class membership. This requirement has generated considerable controversy and prevented the certification of many proposed classes. The requirement has taken a particular toll on consumer class actions, where potential class members are often unknown to the representative plaintiffs, often lack documentary proof of their injury, and often do not even know they have a legal claim at all.
This Note explores the ascertainability requirement’s conceptual foundations. The Note first evaluates the affirmative case for the requirement and finds it unpersuasive. At most, Rule 23 implicitly requires something much more modest: that classes enjoy what I call a minimally clear definition. The Note then argues that the ascertainability requirement frustrates the purposes of Rule 23 by pushing out of court the kind of cases Rule 23 was designed to bring into court. Finally, the Note proposes that courts abandon the ascertainability requirement and simply perform a rigorous analysis of Rule 23’s explicit requirements. This unremarkable approach to class certification better reflects what the Rule says and better advances what the Rule is for.
 
Julie L. Ross, [Un]happy Together: Why the Supremacy Clause Preempts State Law Digital Performance Rights in Radio-Like Streaming of Pre-1972 Sound Recordings
Abstract:

Lovers of the music of Frank Sinatra, The Beatles, Etta James, and hundreds of other recording artists whose records were made before February 15, 1972, may soon have a hard time hearing these great artists on any satellite or Internet radio service. Recently, two federal district courts have found that state laws were violated when satellite radio broadcaster Sirius XM Radio included pre-1972 sound recordings in its broadcasts without the owners’ permission, but these courts did not consider-–and the parties did not argue-–how the Supremacy Clause applies to those state law claims. This article argues that state laws purporting to grant digital performance rights to pre-1972 sound recordings are necessarily preempted by the Supremacy Clause of the United States Constitution.This article contends that enforcement of those state laws would create a serious obstacle to “the accomplishment and execution of the full purposes and objectives of Congress” in enacting the Digital Performance Right in Sound Recordings Act of 1995 (“DPRA”). The DPRA reflects Congress’ careful balancing of interests and recognition of the need for an easily administrable system of licensing, which Congress established through a complex and comprehensive compulsory licensing system. The Supremacy Clause thus preempts all state laws purporting to require licenses for digital performance rights or payment of royalties for the use of such rights by Internet or satellite radio stations beyond what is expressly provided for in the compulsory licensing system established by the DPRA, because permitting countless owners of individual pre-1972 sound recordings to assert claims for royalties and other damages outside of the compulsory licensing system would frustrate Congress’ goals in establishing that system.Part I of this article provides a brief overview of the federal rights at issue and the (very) brief history of performance rights in sound recordings, noting the absence of any express state law recognition of a performance right in sound recordings throughout most of the 20th century (other than short-lived decisions in two states over seventy-five years ago that focused on notices stamped on records purporting to prohibit a purchaser’s use of sound recordings on radio rather than a true performance right). It is only in very recent cases that courts in New York and California have recognized state law performance rights. However, they did so without considering Supremacy Clause preemption or how any state law performance rights might conflict with the federal statutory compulsory license regime established by the DPRA.Part II of the article explains the relevant legislative history and provisions of the DPRA governing the comprehensive licensing system. That statutory license and rules governing it were established to provide an efficient mechanism for digital Internet and satellite radio services to operate in compliance with their legal obligations. In Part III, the article explains Supremacy Clause doctrine and distinguishes the Supreme Court’s opinion in Goldstein v. California, which rejected a Supremacy Clause challenge to a state record piracy law in 1973. It demonstrates why neither the Court’s decision in Goldstein nor the language of the Copyright Act’s express preemption clause, which exempts state laws governing pre-1972 sound recordings from statutory preemption, precludes conflict preemption under the Supremacy Clause in the context of digital radio services that are subject to the federal compulsory license.Part IV of the article acknowledges that preemption of state law protection for digital performances of pre-1972 sound recordings raises equitable concerns, as it leaves some of this nation’s most treasured musical artists uncompensated for use of their works by Internet and satellite streaming services while the authors of more current works are compensated. However, given the delicate balancing that has gone into Congress’ recognition of a limited digital performance right and creation of a compulsory statutory licensing system, any remedy for the inequity to owners of pre-1972 sound recordings must be left to Congress. Allowing individual courts in individual states to craft a patchwork of inconsistent remedies would disrupt the balance struck by Congress and interfere with the functioning of the compulsory license system for digital sound recording performances. This is a result that the Supremacy Clause does not permit.

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2(a) avoids First Amendment challenge, for now

Posted on April 21, 2015 by rtushnet
In re Tam, — F.3d –, 
No. 2014-1203 (Fed. Cir. Apr. 20, 2015)
 
The Federal Circuit affirmed the refusal to register THE
SLANTS for entertainment (a band) because it was disparaging, with “additional
views” from one judge suggesting that it’s time for the Federal Circuit to
reconsider its precedent upholding §2(a) against First Amendment challenge.
 
The TTAB pointed to record evidence that THE SLANTS would
likely be perceived as referring to people of Asian descent, and that this was
offensive to a substantial component of such people.  The band’s website displayed the mark next to
“a depiction of an Asian woman, utilizing rising sun imagery and using a
stylized dragon image,” and the applicant said that he selected the mark in
order to “own” the stereotype it represents. Nonetheless, “[t]he dictionary
definitions, reference works, and all other evidence unanimously categorize the
word ‘slant,’ when meaning a person of Asian descent, as disparaging,” and
there was record evidence of individuals and groups in the Asian community
objecting to Tam’s use of the word.
 
The test for disparagement asks “(1) what is the likely
meaning of the matter in question, taking into account not only dictionary
definitions, but also the relationship of the matter to the other elements in
the mark, the nature of the goods or services, and the manner in which the mark
is used in the marketplace in connection with the goods or services; and (2) if
that meaning is found to refer to identifiable persons, institutions, beliefs
or national symbols, whether that meaning may be disparaging to a substantial
composite of the referenced group.”
 
The TTAB appropriately took into account evidence gathered
with respect to a prior abandoned application for a version of the mark with an
Asian-inspired graphic; evidence outside the application can be relevant to
determine the manner of a mark’s use. 
Substantial evidence supported the Board’s finding that the mark
referred to people of Asian descent. 
Though the term “slant” has a number of alternative meanings, one of
them is (according to Tam’s own cited dictionaries) “a disparaging term for a
person of East Asian birth or ancestry,” (The American Heritage Dictionary of
the English Language), and “[a] person with slanting eyes, spec. one of Oriental
descent” (Oxford English Dictionary). 
Its innocuous meanings, and trademarks based thereupon, don’t prevent it
from being used in an offensive manner. Instead, those meanings require the PTO
to examine how the applicant uses the mark in the marketplace to determine its
likely meaning.
 
The factual record included Tam’s explanation of the band’s
name: “I was trying to think of things that people associate with Asians.
Obviously, one of the first things people say is that we have slanted eyes. . .
.” and “We want to take on these stereotypes that people have about us, like
the slanted eyes, and own them. We’re very proud of being Asian—we’re not going
to hide that fact. The reaction from the Asian community has been positive.” The
band’s website sets the mark against “a depiction of an Asian woman, utilizing
rising sun imagery and using a stylized dragon image.”  Individuals and Asian groups perceived the
term as referring to people of Asian descent.
 
Likewise, substantial evidence supported the finding of
likely offensiveness to a substantial composite of people of Asian descent. The
definitions in the record “universally characterize the word … as disparaging,
offensive, or an ethnic slur when used to refer to a person of Asian descent.” The
Japanese American Citizens League published a brochure describing the term as a
“derogatory term” that is “demeaning” and “cripple[s] the spirit.” The  offensive 
nature  of  the band’s name led to the cancellation of
the band’s scheduled performance at a conference for Asian youth. No survey or
other quantitative measure was required. 
 
Tam’s constitutional challenges were also unavailing.
Binding precedent establishes that §2(a) doesn’t violate the First Amendment
because it doesn’t ban use of a mark. In re McGinley, 660 F.2d 481 (C.C.P.A.
1981). (Note that the majority doesn’t say anything about whether §43(a) might
provide protection; the reasoning that “lack of registration doesn’t bar use
and so it’s not a problem” is equally applicable to refusing §43(a) protection.)  Nor was the §2(a) disparagement standard
unconstitutionally vague.  Although there
is inherent difficulty in finding an objective measure, the two-part test is “sufficiently
precise to enable the PTO and the courts to apply the law fairly and to notify
a would-be registrant that the mark he adopts will not be granted a federal
registration.”
 
Tam argued that the arbitrary application of the standard,
allowing registrations for “slurs against homosexuals such as DYKES ON BIKES,”
violated due process. But due process was satisfied by a full opportunity to
prosecute an application and appeal any denial. Moreover, “allegations
regarding similar marks are irrelevant because each application must be
considered on its own merits.” Past errors don’t bind the PTO to improperly
register an applicant’s mark.
 
Tam finally argued that the rejection hinged on his and his
bandmates’ ethnic identities, thus denying him equal protection.  Instead, the registration was rejected
because it used the mark in a disparaging matter; as the TTAB said, “[a]n
application by a band comprised of nonAsian-Americans called THE SLANTS that
displayed the mark next to the imagery used by applicant . . . would also be
subject to a refusal under Section 2(a).”
 
Judge Moore offered “additional views,” though this isn’t
styled a concurrence or a dissent.  Judge
Moore wrote to argue that it was time to revisit McGinley’s holding on the constitutionality of §2(a).  First Amendment jurisprudence on
unconstitutional conditions and commercial speech, she noted, has evolved
significantly since McGinley.
 
First, Judge Moore noted, trademarks are commercial speech
and thus “unquestionably … protected” (skipping over the question of whether a
mark is truthful and nonmisleading, but ok). And the mark here was more than a
source identifier.  (Which, incidentally,
undermines the articulated justification for commercial speech—that it provides
consumers with useful information.) 
Instead, Tam sought to “reclaim” and “take ownership” of Asian
stereotypes. This name “weigh[ed] in on cultural and political discussions
about race and society that are within the heartland of speech protected by the
First Amendment.”
 
True, banning registration doesn’t mean banning use.  But, as B&B
v. Hargis just told us, “[t]he 
Lanham  Act  confers 
important  legal  rights 
and benefits on trademark owners who register their marks.” These
benefits were both substantive and procedural, including nationwide rights even
without nationwide use and a presumption of validity/possible
incontestability. 
 
Moreover, “[n]ot only is a disparaging trademark denied
federal registration, but it cannot be protected by its owner by virtue of a §
43(a) unfair competition claim.”  We know
this because the Supreme Court made “clear” in Taco Cabana “that § 43(a) protection is only available for unregistered
trademarks that could have qualified for federal registration.” See also Donchez
v. Coors Brewing Co., 392 F.3d 1211, 1215 (10th Cir. 2004) (plaintiff must
establish that its mark is protectable to prevail in a claim under § 43(a));
Yarmuth-Dion, Inc. v. D’ion Furs, Inc., 835 F.2d 990, 992 (2d Cir. 1987)
(requiring a plaintiff to “demonstrate that his [unregistered] mark merits
protection under the Lanham Act”).  “Thus,
no federal cause of action is available to protect a trademark deemed disparaging,
regardless of its use in commerce.”
 
And further, the Model State Trademark Bill was patterned
after the Lanham Act and includes similar prohibitions.  “[V]irtually all states have adopted the
Model Bill and its disparagement provision. Thus, not only are the benefits of
federal registration unavailable to Mr. Tam, so too are the benefits of
trademark registration in nearly all states.” 
Plus, the common law mirrors the Lanham Act, so that means any state
protection is unlikely. The denial of any rights “severely burdens” the use of
disparaging marks.  Indeed, the
content-based restrictions of §2(a) were adopted to reduce use of
government-deprecated marks, creating a chilling effect.
 
The unconstitutional conditions doctrine says that the
government cannot deny access to a benefit because of the recipient’s exercise
of constitutionally protected speech. Of course the government can grant
benefits predicated on compliance with certain policies, so “when the
Government appropriates public funds to establish a program it is entitled to
define the limits of that program.” However, Congress does not have the
authority to attach “conditions that seek to leverage funding to regulate
speech outside the contours of the program itself,” and outside the spending
power.
 
Here, Judge Moore reasoned, “[b]ecause the government denies
benefits to applicants on the basis of their constitutionally protected speech,
the ‘unconstitutional conditions’ doctrine applies.”  The benefits of registration, while valuable,
weren’t monetary.  “Unlike tangible
property, a subsidy, or a tax exemption, bestowal of a trademark registration
does not result in a direct loss of any property or money from the public fisc.
Rather, a trademark redefines the nature of the markholder’s rights as against
the rights of other citizens, depriving others of their rights to use the mark.”
This was a regulatory regime, not a government subsidy program.  And registration doesn’t drain the public
fisc; PTO operations are funded by registration fees. There might be an
attenuated connection to spending, such as when ICE agents seize counterfeit
goods because of a registration, but that wasn’t enough.
 
Thus, §2(a) had to survive First Amendment scrutiny, and as
a content-based and viewpoint-based regulation it was presumptively invalid.
One can register a mark referring to a certain group in a positive,
nondisparaging manner, but not a mark referring negatively to the same
group.  “Section 2(a) discriminates
against disparaging or offensive viewpoints,” contrary to R.A.V. v. City of St. Paul, which doesn’t allow the government to
punish only fighting words directed at one group. It was thus presumptively
invalid and had to satisfy strict scrutiny.
 
Comment: this is the wrong comparator.  Defamation carried out with actual malice is
actionable, but lying positively about someone with actual malice is not
actionable, absent associated fraud (see Alvarez).  The government may punish fighting words
without punishing hugging words, as long as it punishes all fighting words, or
some subset that’s related to the reason it can punish fighting words in the
first place.  By the same logic, the mere
fact that only disparaging marks are barred is not itself a constitutional
problem.
 
Regardless, Judge Moore continued, §2(a) couldn’t even
survive Central Hudson.
 
Note an interesting presupposition here: that the bar on
registration restricts or suppresses commercial speech.  Arguably the better analogy is a mandatory
disclosure requirement, which may raise the cost of commercial speech—just as
denying registration may raise the cost of using a particular disparaging
symbol as a mark—but is not judged under Central
Hudson, but rather under a test much closer to rationality review.  We’d ask if the cost-raising requirement was
reasonably related to the government’s legitimate interests, and if it was not
so unduly burdensome as to be functionally speech-suppressive.  One could come out either way on this
inquiry, it seems to me, but it’s not Central
Hudson.
 
Anyway, Judge Moore continued, the speech here—the use of a
disparaging mark—was lawful and not misleading. 
The governmente thus needed a substantial interest independent of
disapproving the speech’s message to justify the regulation. There was none;
Congress disapproved of the message carried by disparaging marks.  That’s not a legitimate government interest. The
Supreme Court has “consistently held that the fact that protected speech may be
offensive to some does not justify its suppression.” It is a “bedrock principle
underlying the First Amendment . . . that the Government may not prohibit the
expression of an idea simply because society finds the idea itself offensive or
disagreeable.” (Note again the suppression language here.)
 
The alleged interest in not devoting government resources to
disparaging marks is makeweight/bunk. 
Nor did the ban harmonize longstanding state and federal law, because
§2(a) didn’t codify a common law bar on disparaging marks (which are different
from vulgar and misleading marks, which do have a history of state refusal to
recognize); §2(a) created new law.  (Of
course, the ban does harmonize now,
as she pointed out above.) 
 
Further, trademarks aren’t government speech.  Publication on the Principal Register is not
for the purpose of communicating a particular message or viewpoint; it is for
providing notice that a mark has been registered.  (That actually seems like a particular
message.)  The government would only have
a substantial interest in avoiding the appearance of giving a stamp of approval
to disparaging marks if the public believed that trademarks carry the stamp of
government approval.  But that’s not what
registration is.  The PTO’s job is to
register marks that are functioning to identify and distinguish goods and
services in the marketplace. “The purpose served by trademarks, to identify the
source of the goods, is antithetical to the notion that the trademark is tied
to the government.”

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