False advertising claims over music licensing survive

Posted on February 11, 2015 by rtushnet

Tresóna Multimedia LLC v. Legg, 2015 WL 470228, No. CV–14–02141 (D. Az. Feb. 4, 2015)

Tresóna is a music copyright licensing company that sells custom arrangement licenses for particular pieces of music, allowing the purchaser to arrange a piece of music for a client (typically a music organization or a “show choir”). Defendant David Legg applied for a custom arrangement license for the song “Black Sheep” and signed a “Work for Hire Agreement” for the song. Tresóna alleged that the Agreement gave Legg the right to arrange Black Sheep for one client—“Nitro Show Choir”—and nothing more, but Legg then breached the Agreement by allowing the other defendants (CALLC) to sell his custom arrangement as a “stock arrangement” on their website.

The court found that it had personal jurisdiction over the defendants, at least at the motion to dismiss stage.  Tresóna’s claims arose out of defendants’ forum-related activities: the false advertising claim would not have arisen but for the alleged false advertising, and the intentional interference claims likewise.

False advertising: Tresóna alleged that defendants’ website falsely advertised their ability to grant exclusive rights to use musical arrangements in a specific geographical area for a specific period of time, and that it can accept and sell arrangements licensed by Tresóna. Tresóna also alleged materiality: the ability to grant exclusive rights in a particular arrangement is important because “[s]how choirs often purchase these arrangements so they can use them in a competition, and want to ensure that other show choirs will not be using the same arrangement.”

Intentional interference with contract: The other defendants allegedly induced Legg to breach his Tresóna contract by telling him he could license to them.  Defendants argued that no breach was possible in the way Tresóna argued, because Tresóna itself had no rights in Legg’s arrangement or in the original copyrighted song.  At this stage, the court wasn’t going to decide whether the breach of contract claim was actually a veiled copyright infringement claim.  The contract could be read as prohibiting resale of Legg’s arrangement. If, as alleged, the other defendants intentionally lied to Legg about the royalty rates they could give him for an arrangement licensed by Tresóna, then that was wrongful conduct with an improper motive sufficient to state a claim for intentional interference with contract (and business expectancy).  CALLC allegedly dishonestly obtained an 85%–15% royalty split from music publishers by falsely representing itself as a print publisher, when in fact it was a digital publisher. This enabled it to offer a higher royalty for the Black Sheep arrangement than Tresóna could with its 50/50 digital publisher split, thus inducing Legg to breach its contract and Tresóna to lose the opportunity to sell the arrangement to thousands of choirs in the US.  Defendants argued that Tresóna failed to identify a specific business expectancy. However, courts have allowed a plaintiff to allege a business expectancy with a class of individuals, as long as they’re specifically identifiable.  At the pleading stage, Tresóna had done enough, but to survive summary judgment, it would need to present evidence showing more than a mere “hope” that its business expectancy would have been realized.

Defendants also argued copyright preemption.  In return for the right to arrange “Black Sheep” for the Nitro Show Choir, Legg agreed to grant all rights in his arrangement of Black Sheep to the original copyright owner of the song if his arrangement did not qualify as a work for hire. The contract also specified that “neither the [Legg] nor [Nitro Show Choir] has any right to sell, resell, reproduce, disseminate, lease, rent and/or use the Arrangement in any manner whatsoever beyond the scope of the grant of rights hereunder.” Tresóna sufficiently stated a claim for breach of contract.  The court declined to find copyright preemption.  Tresóna alleged that it had the right to allow arrangers to make limited-use arrangements of “Black Sheep” on behalf of the copyright owner.  “As a party to the contract, Tresóna clearly has standing to enforce it. Legg cites no authority to suggest that an entity in Tresóna’s position is somehow foreclosed from enforcing a contract to which it is a party.”  As to whether breach of contract contained an extra element here, as required to avoid §301 preemption, the parties failed to adequately brief the issue, and the court denied the motion to dismiss.

Legg argued that the contract couldn’t limit his ability to get further permission from the copyright owner, and that the contract didn’t allege that defendants failed to get permission from the copyright owner.  If the copyright owner allowed it, then arguably Legg didn’t breach his contract, but this affirmative defense couldn’t be resolved at the motion to dismiss stage.

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gay conversion therapy as NJCFA violation

Posted on February 11, 2015 by rtushnet

Slate on “gay conversion therapy” as a violation of the New Jersey Consumer Fraud Act, not to mention human dignity.

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fake reviews actionable; unflattering comparison not

Posted on February 11, 2015 by rtushnet
Homeland Housewares, LLC v. Euro-Pro Operating LLC, 2015 WL 476287, No. CV 14–03954 (C.D. Cal. Feb. 5, 2015)
 
The parties compete in the market for home blenders.  Homeland makes the Bullet line, and Euro-Pro makes the Nutri Ninja Pro.  Previous proceedings discussed here.  Homeland sued for false advertising and also claimed the Nutri Ninja’s packaging infringed Homeland’s trade dress by copying the “color scheme, fonts, phraseology, and overall look and feel” of the Nutribullet packaging. As for the falsehoods, Homeland alleged false comparisons on the packaging, “a campaign to plant false reviews on the Internet making false claims of defects in NUTRIBULLET blenders and touting the NUTRI NINJA as a superior alternative,” and false claims in Nutri Ninja infomercials.
 
Homeland alleged that certain negative consumer reviews online were actually planted by Euro-Pro.  It identified a specific review and a comment on that review, allegedly making particular false statements about the Nutribullet’s performance.  “Assuming, as seems reasonable, that placing a review on a widely-available website is placing a statement into interstate commerce, these allegations suffice to state a claim for false advertising.”
 
As to the infomercial, it included a head-to-head comparison of the two blenders attempting to blend the same “ice, frozen fruits, and … fibrous, difficult to extract vegetables, nuts, and seeds.”  One host declared that the Nutribullet had “trouble” blending those ingredients, and that the Nutri Ninja didn’t, but Homeland alleged that the comparison test failed to use the Nutribullet properly and didn’t fill it with enough liquid. So the comparison test allegedly didn’t show “trouble” blending when the Nutribullet was operated according to its instructions. However, Homeland didn’t allege differences in the power provided to the products, or that some component of the Nutribullet had been removed, or that the Nutribullet was actually effective in blending that particular combination of ingredients.  “[N]ot adding liquid does not result in a literally false impression on the part of the viewer. Rather, it creates the literally true impression that the NUTRI NINJA can blend this particular set of ingredients without adding any liquid, while the NUTRIBULLET cannot.”  This could still be misleading, but the court didn’t find that plausible here.  The demonstration “merely demonstrates that the products perform differently.”
 
Turning to the trade dress claim, Homeland tried to fix the defects in its earlier pleading by specifying more carefully the trade dress claimed: “predominantly” green packaging; block-font, all-capital lettering in white or green; the product’s “trademark logo” in the top left hand corner; photo of the product against “a cornucopia of fruits and vegetables”; pictures of blender container filled with blended contents; wattage of the blender on the right side; a “band of text” on the bottom of the package; and distinctive “phraseology,” including “Nutri,” “Pro,” “Extractor,” “Watt,” “Power” and “Extractor Blade.”  Homeland also pled that the overall look and feel was the same.
 
Euro-Pro argued that Homeland failed to plead secondary meaning.  Homeland alleged that it had spent several hundred million dollars on promoting the Bullet line and its associated trade dress.  By alleging specific promotional channels, including infomercials, it probably pled distinctiveness for purposes of a motion to dismiss. 
 
Euro-Pro also argued functionality, in that most of the details described features and functionality of the Nutribullet. The court determined that “at least some of the elements of the trade dress are commonly used by others in the industry, and Plaintiffs could not be given exclusive use of them: e.g., photographs of fruits and vegetables; photos of blended juice; and references to the wattage of the blender’s motor.” But multiple functional features can be combined into a nonfunctional whole. “[I]t is possible to arrange photographs of fruits and vegetables, photos of blended juice, and claims about wattage, along with other purely arbitrary elements like color, typeface, and layout, into a non-functional trade dress.”
 
It was at the confusion stage that the allegations failed.  (Very interesting to see a dismissal on likely confusion grounds in a non-expressive use case.)  Homeland alleged high similarity, identical goods, and identical marketing channels.  Euro-Pro argued that Homeland’s allegations were conclusory and implausible given the obvious differences in packaging, especially Euro-Pro’s use of the Nutri Ninja mark.
 
Not all of the factors in the multifactor test have equal weight; strength and uniqueness of the trade dress and actual similarity are paramount.  Here, the claimed elements of the trade dress were largely functional—photos of fruit, product photos, product descriptions—arranged in a unique way. This was protectable but not strong; the predominant nonfunctional element was color, which wasn’t enough by itself to justify strong protection. Thus, the court required substantial similarity to find likely confusion plausible.
 
The two packages were “plainly” not substantially similar. Though the packages used a quite similar green background color, the Nutribullet package offset the green with black bands at the top and bottom. Both trademark logos were in the upper left corner of the front of the box, but the marks themselves had different fonts/design elements.  Features were mentioned in different places, and the Nutri Ninja showed a cyclone of fruits and ice being drawn down into a cup, with three other cups in the background, while the Nutribullet box showed two cups, much larger and closer in scale, and their lids. Examining the two packages as a whole, “the Court finds that there is no plausible claim that the two are substantially similar, and this is determinative of the question of likelihood of consumer confusion.”  Plus, one whole side of the Nutri Ninja is devoted to a comparison with the Nutribullet, “which would also tend to alleviate consumer confusion.”
 
Homeland argued trade libel based on its claims above; Euro-Pro argued it hadn’t sufficiently pled special damages.  Homeland needed to allege facts “showing an established business, the amount of sales for a substantial period preceding the publication, the amount of sales subsequent to the publication, and facts showing that such loss in sales were the natural and probable result of such publication.” This time around Homeland alleged somewhat more specific facts about its established business and the dropoff in sales: in stores where the Nutri Ninja Pro appeared, sales declined about 31%, but increased 14.5% where it wasn’t sold. Homeland also alleged a dollar amount of loss.  Though these numbers weren’t “well-tethered to specifics,” that was enough at the pleading stage to allege special damages.
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Shore loser: "shorebilly" mark invalid for fraud

Posted on February 10, 2015 by rtushnet
Teal Bay Alliances, LLC v. Southbound One, Inc., 2015 WL 401251 (D. Md. Jan. 26, 2015)
 
It’s never good to have the court’s first sentence describe a plaintiff’s claims as “specious claims that—as exposed once the evidence was tested in the crucible of trial—are utterly meritless.”  Specifically, Teal Bay obtained a trademark registration by false statements to the PTO, requiring Southbound to defend itself against “baseless” claims.  Likewise, there was no valid common-law infringement claim based on the parties’ use of the word “shorebilly,” over which Teal Bay had no monopoly.
 
Teal Bay falsely represented to the PTO that it used “shorebilly” as a mark on T-shirts, rather than ornamentally. Thus, it didn’t acquire any trademark rights in advance of Southbound’s first use of the term. Regardless, it didn’t show likely confusion.  Thus, Teal Bay lost its claims and its registration was cancelled.  (This was also an “extraordinary” case, unsurprisingly, entitling Southbound to attorney’s fees.)
 
Since Southbound first used the name “Shorebilly Brewing Company” in commerce no later than October, 2012, that’s our key date.  Teal Bay is run by the Rogersons, who in 2010 considered developing a business selling t-shirts and vacation mementos in Ocean City stores. They intended to name the business “Shorebilly,” “a word that is the seashore context equivalent of ‘hillbilly.’” At that time, there were several ongoing commercial uses of the name in the Ocean City area and elsewhere: e.g., Shorebilly Camping, Shorebilly Restoration & Fabrication, a fertilizer company using shorebilly.com, and a musical band named “Shorebilly.” Also, “Shorebilly” was a common username on a variety of online forums. The Rogersons thought that Ocean City tourists might identify with the shorebilly lifestyle and thus buy shorebilly-themed merchandise.
 
In May 2010, Teal Bay created a car bumper sticker referring to “Shorebilly Surf’n Life” that it provided at no cost to some Ocean City businesses to give to their customers. The artwork was freely available clip art, and the bumper sticker said “TM” but didn’t refer to any particular service or product. 

Teal Bay also produced, and gave away, another 1,000 car bumper stickers that used the word “shorebilly” in a form suggestive of a fish. 

Teal Bay decided to produce T-shirts using the wave artwork and apply to register SHOREBILLY.  In March 2011, Teal Bay ordered 1,000 t-shirts from Logo Dogz Printz using the clipart wave artwork. The t-shirts were made by Port & Company and carried a Port & Company label.

 

Teal Bay gave about 30 T-shirts to Mike’s Shell, an Ocean City gas station and store, to be sold on consignment. The Rogersons also sold a few t-shirts to family, friends, and neighbors directly, either by mail or from the trunk of their car. In November 2011, Teal Bay delivered a second consignment of 100 t-shirts to Mike’s Shell. There were other minor marketing efforts, including some networking and the creation of a Shorebilly Facebook page.
 
In April 2010, Teal Bay filed an ITU for  “shorebilly” to identify clothing items including hats, t-shirts, sweatshirts, and golf shirts, as well as bumper stickers, coffee mugs, cups, drink huggies, and posters, later modified to clothing (Class 25). The PTO issued a notice of allowance in December 2010, and in June 2011, Teal Bay filed its Statement of Use.  Its specimen was the design drawing of the t-shirt from its Logo Dogz order, stating “shirts in retail stores now,” though really that should have been “store.”  Teal Bay claimed first use in May 2010 (the bumper sticker, later corrected to March 2011, the date of consignment to Mike’s Shell) and first use in commerce March 2011 (when t-shirts were sold to Mrs. Rogerson’s mother in Virginia).
 

The PTO rejected the statement as unacceptable because it didn’t show use in commerce.  At that time, Mr. Rogerson spoke with an examiner and learned of the difference between ornamental use and trademark use of a brand name. “The examiner specifically referred to the use of the Polo and Izod trademarks on shirts as illustrative of trademark rather than ornamental use.” As a result, Mr. Rogerson ordered three sample t-shirts from Vistaprint using the proffered “Shorebilly” mark in the Polo and Izod fashion that the examiner had told him was illustrative of a proper trademark use.  He took a photo of one and submitted it as if it were a genuine specimen of the March 2011 use in commerce.  But “[t]here has never been any commercial use of these samples, nor have there ever been any t-shirts produced pursuant to the samples.” Instead, Teal Bay continued to offer for sale the t-shirts it had in inventory. (The court noted that, in March 2014, during this lawsuit, “Teal Bay falsely stated to the State of Maryland that it had no inventory in order to evade its business personal property tax liability.”)  The PTO duly issued the registration for clothing, “namely, hats, t-shirts, sweatshirts, and golf shirts.”
 

There was no plausible explanation for Teal Bay’s failure to provide the PTO with an actual specimen or its statement that a photo of the sample t-shirts was a genuine specimen of the March 2011 use. The court found an intent to deceive the PTO about trademark use, as opposed to ornamental use, based on a specimen showing a materially different use than was on the actual goods that were sold in commerce.
 
Meanwhile, Southbound operated a restaurant/bar on the Ocean City boardwalk, and began to make plans to expand with a nano-brewery (smaller than a micro-brewery).  Unaware of Teal Bay’s use, Southbound chose “Shorebilly Brewing Company.”  Its informal research—Google searches [NB court did not capitalize Google], checking domain names, and asking others for feedback—discovered several local commercial uses of the word “shorebilly,” including a campground, a skeet-shooting site, an eastern shore blog called “Shorebilly’s Swill,” and Teal Bay’s trademark application for clothing.  Southbound didn’t believe any of these uses affected its freedom to use the name.  In November 2011, Southbound registered six domain names for future promotional use; all were variations of ShoreBilly Beer or ShoreBilly Brew. 
 
By February 2012, Southbound had created a placeholder Shorebilly Beer Facebook page, which was not yet public.  In March, Southbound’s counsel filed an ITU with the PTO for “shorebilly” for Class 43: bar, nightclub, brew pub, brewery, and restaurant services.  Southbound then published the Shorebilly Beer Facebook and, in late March 2012, ordered 288 t-shirts to use promoting Shorebilly Brewing Company.
 
In June, the PTO issued an Office Action rejecting the Southbound application because of its similarity to Teal Bay’s registered trademark. Counsel had warned Southbound of this possibility but promised to respond with the clarification that the names were being used in different categories of goods—clothing v. beer—and advised that it was reasonable to expect that such a response would be satisfactory to the PTO. Counsel, local Erik Pelton, filed a lengthy response to the PTO and Southbound continued its promotional efforts.
 
In September 2012, a local newspaper article included photos of the then-current version of a Shorebilly Brewing Company t-shirt and Shorebilly Brewery beer bottles and growlers (containers with beer produced on site that customers are allowed to take out).  This was when Teal Bay discovered Southbound’s efforts and sent a C&D referencing the PTO rejection.
 
Counsel responded that the goods were different, that Teal Bay’s use was ornamental, and that “shorebilly” was widely in use.  Nonetheless, Southbound was willing to amend to SHOREBILLY BREWING COMPANY, to agree not to use a similar logo, and to agree never to use “Shorebilly” without “Brewing Company” on clothing if Teal Bay consented to the use and registration and provided evidence of its use in commerce. Teal Bay did not reply.  The PTO approved Southbound’s application in January 2013.  Southbound then selected a logo with no similarity to Teal Bay’s proffered mark.  Teal Bay did not oppose the approved application, which was allowed in April 2013. Southbound then ordered more t-shirts and other merchandise using the Shorebilly Brewing Company name and proceeded to sell them on its premises.  The brewery opened in May 2013.
 

Teal Bay wrote in June 2013 expressing concern over reverse confusion, then sued.  When it became clear that the dispute would take a while to resolve and be expensive, Southbound made the business decision to select a new name and abandon the pending trademark application, choosing Backshore Brewing Company as the new name. Teal Bay persisted in the lawsuit, claiming damages. The court commented that “[n]o purpose would be served by detailing herein the implausibility of the damage theories Teal Bay has presented.”
 
Registration creates a presumption of validity, which shifts the burden to the challenger to produce sufficient evidence to rebut the presumption. The evidence established that Teal Bay failed to file a genuine specimen, which is required to show the manner in which the mark is seen by the public.  A picture such as an artist’s drawing or printer’s proof is not enough; that “merely illustrates what the mark looks like and is not actually used on or in connection with the goods in commerce.”  “[W]ith the intent to mislead the PTO, Teal Bay created and filed a purported specimen (never used in commerce) that presented a Polo or Izod type of use of the proffered mark rather than the actual use in commerce.”  There was therefore no genuine administrative filing that the mark was valid.

Teal Bay argued that the mark as shown on the substitute specimen was the same mark as used on t-shirts actually sold in commerce, though smaller and located differently.  But the size and location were exactly what materially misled the PTO. The validity of a specimen generally doesn’t constitute a valid ground for cancellation, where the PTO determined that a specimen reflected a trademark use. But where, as here, the PTO was prevented by the applicant from making a determination based on actual use, the registration had no validity and needed to be cancelled. 
 
The TTAB has said that the sufficiency of specimens is a technical question and not something for the TTAB to supervise, but also that “it is not the adequacy of the specimens, but the underlying question of [trade] mark usage which would constitute a proper ground for opposition.”  Rejection of a mark on such grounds is not about the inadequacy of the specimen as such, but about failure to function as a mark.  The TTAB has found a registration void because the specimens didn’t show use in commerce, and another district court has found that an invalid specimen justified cancellation; cancellation was also appropriate here.
 
Even if the registration had been properly obtained and its validity were presumed, the court would still find that Teal Bay had no valid rights before Southbound’s first use in commerce.  Had the burden of producing sufficient evidence to rebut the presumption of validity been shifted to Southbound, Southbound would amply have carried it, for the reasons noted above. Teal Bay’s use prior to October 2012 was ornamental, not trademark use, though thereafter Teal Bay “took some actions—such as using hangtags and labels—that could be considered to be trademark, rather than ornamental, usage of the name ‘Shorebilly.’”
 
McCarthy says: “Trademark usage is typically immediately evident. Usually, when viewed in context, if it is not immediately obvious that this ornamental design is being used as an indication of origin, then probably it is not.” There’s no bright-line rule; trademark use is a question of fact.  A recognizable logo of a clothing designer can be immediately recognized as trademark use even if it’s also a decorative design.  And use of a mark as ornamentation (basically, promotional goods—apparel licensed by a non-apparel maker) can be trademark use as long as the mark also serves to identify source.

This is what happens with college insignia.  But purely ornamental designs can’t be marks.  The commercial impression of the alleged mark is a key factor, which is affected by the size, location, and dominance of the design as applied to the goods. “The larger the display relative to the size of the goods, the more likely it is that consumers will not view the ornamental matter as a mark.”

 
Teal Bay used the TM symbol on the shirts, but that’s not enough to make a mark.  Moreover, the fact that the symbol might have been a trademark for some product or service didn’t lead to the conclusion that the trademark was for the t-shirt being sold. Rather, it most reasonably looks like the display of a mark for a product other than a t-shirt, like a Coca-Cola branded shirt.  The t-shirts had a Port & Co. label, indicating that Port & Co. was the source of the shirt, as distinct from the source of whatever Shorebilly was a mark for. 
 
Teal Bay sought, but was not entitled to, patent- or copyright-like protection for “shorebilly.” It was not using the term as a mark before Southbound’s first use.  A design used as ornamentation may ultimately acquire secondary meaning, but Teal Bay didn’t prove it had done so by October 2012. “[B]y the time Teal Bay filed the instant lawsuit, it had sold or given away no more than about 150 t-shirts and spent only a little more than $100 on promotion and advertising, including the cost of t-shirts given away.”
 
And, even if Teal Bay had priority, the court would still find noninfringement.  The mark was commercially weak given Teal Bay’s limited sales/promotion and the term’s use in the Ocean City area by others.  The marks as used weren’t very similar given Southbound’s use of different graphics and “Brewing Company.” The goods weren’t similar, even though Southbound sold T-shirts with the company logo.  There was no reason to think someone who bought a Shorebilly Brewing Co. promotional t-shirt would likely think that the source was Teal Bay, “the producer of totally dissimilar t-shirts that did not refer to the brewing company.”  Sales channels: both marketed to tourists and local consumers, but Southbound sold only at its bar/restaurant and its t-shirts were strongly identified with its brewery, while Teal Bay sold only at a Shell station, which weighed against likely confusion.  There was no similarity in advertising, given that Teal Bay had little, if any, advertising and promotion.  There was no bad intent.
 
Actual confusion: “Teal Bay presented testimony of two individuals who stated that they were confused about whether there was a relationship between Teal Bay and the Shorebilly Brewery, evidence of telephone calls to Mrs. Rogerson asking about the brewery’s location or hours, and examples of a few in-person comments made to Mrs. Rogerson indicating some confusion about whether there was an affiliation between Teal Bay and Shorebilly Brewery.” But there was no evidence of confusion about a purchase decision, so that didn’t weigh in favor of finding confusion.  Sophistication of consumers wasn’t relevant because the consuming public was the general public.  Overall, there was no likely confusion. 
 
Teal Bay argued reverse confusion. Where the factors differ, courts consider the commercial strength of the junioruser’s mark (counterfactually treating Southbound as the junior user).  Southbound invested in advertising and promotion, and received a fair amount of media coverage; its mark was commercially stronger than Teal Bay’s. But this factor was totally outweighed by the other factors.
 
Intent: in reverse confusion, knowledge or reckless disregard of the senior user’s right matters, not intent to trade on goodwill. Southbound was aware of Teal Bay’s ITU, but Teal Bay was doing little, if anything, more than offering a few t-shirts for sale at a Shell station and out of the trunk of an automobile. This weighed strongly against reverse confusion.  For actual reverse confusion, Teal Bay pointed to misdirected telephone calls and comments indicating confusion about whether the Rogersons owned the brewing company. But there was no evidence indicating that consumers believed that Southbound was the source of Teal Bay’s Shorebilly t-shirts. “Moreover, it is unlikely in the extreme that any consumer buying a Teal Bay t-shirt would believe, or even contemplate, that Southbound—selling promotional t-shirts bearing the Shorebilly Brewing Company name and logo—would be the source of t-shirts having no reference to its business and presenting a totally different logo.” Even if the Fourth Circuit were to recognize this cause of action, which it has yet to do, it wouldn’t matter here.
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Another keyword defendant victory, among other tort claims

Posted on February 10, 2015 by rtushnet
M-Edge Accessories LLC v. Amazon.com Inc., 2015 WL 403164,  No. MJG–11–3332 (D. Md. Jan. 29, 2015)
 
M-Edge started selling Kindle accessories soon after the Kindle was released. The parties’ relationship began well, but began to sour by 2011. M-Edge sued, alleging patent infringement and tort claims.  The court granted summary judgment on patent claims against one Kindle cover and denied it on claims against another.  I will only discuss the various false advertising/unfair competition torts.
 
Under Maryland unfair competition principles, “all dealings must be done on the basis of common honesty and fairness, without taint of fraud or deception.” But the tort isn’t boundless; it doesn’t protect against mere competition. 
 
M-Edge was a member of the “Kindle Compatible Vendor” program, which allowed it to label its products as “Kindle Compatible” and sell them online through Amazon.com. By the end of 2009, “M–Edge was Amazon’s largest third-party Kindle accessories seller.” Amazon underestimated the market for Kindle accessories, and wanted to increase its margin.  Thus, Amazon initiated the “Made for Kindle” (MfK) program.  Amazon’s partners would get special benefits, including being sold in the Kindle Store area of Amazon.com, permission to use the “Made for Kindle” trademark, pre-launch access to new Kindle products, and inclusion on Amazon’s list of “Made for Kindle” vendors. MfK members paid a royalty on their sales of Kindle-related products.
 
M-Edge rejected the MfK program at least in part due to the high royalty rates.  The court found that the MfK program was not actionable unfair competition. M-Edge made an informed business decision not to participate, and any harm to it was caused by its decision that the costs outweighed the benefits.  Plus, there were valid business reasons for the MfK program—Amazon was justified in seeking to promote quality merchandise for the Kindle, and there was nothing wrong with charging a royalty to manufacturers who benefited from Amazon’s endorsement.  Nor was there anything wrong with boosting a smaller M-Edge competitor as part of the MfK program, encouraging it to adopt features of other successful products, including M-Edge accessories. There was no evidence that any copied features were legally protected.
 
The court rejected M-Edge’s claim that Amazon misused confidential information about M-Edge sales to design its own accessories. Amazon copied M-Edge’s best-selling colors, but this wasn’t confidential: it was from Amazon’s own sales records.  Likewise, while a former Best Buy executive gave Amazon M-Edge’s offline margin (information about what offline retailers paid), there was no evidence that this damaged M-Edge.
 
Amazon also offered discounts and sold related products as bundles, amounting to below-cost pricing. But there was no evidence of a motive to harm a competitor or destroy competition.  The specific promotions at issue were undertaken to get rid of excess inventory, some of which were related to an obsolete product. Maryland law permitted below-cost sales where “the merchandise … [m]ust be sold promptly in order to prevent loss.”
 
M-Edge also challenged Amazon search strategies, like running an ad for “M Edge TM–Official Site … Kindle.Amazon.com Buy Kindle or Kindle DX at Amazon….” as a search result for “M-Edge” on the WSJ’s site.  But there was no evidence this damaged or jeopardized M-Edge’s business.  Though Amazon discussed using the keyword M-Edge to promote competitors, M–Edge engaged in the same practice with its competitors’ keywords, and the practice was permissible under 1–800 Contacts, Inc. v. Lens.com, Inc., 722 F.3d 1229 (10th Cir. 2013) and Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011). “Therefore, this conduct cannot serve as a basis for a claim of unfair competition.”
 
Nor did Amazon make actionable “threats” in the course of contract negotiations. While Amazon demanded increased rates, M-Edge successfully resisted its demand for retroactive fees. An Amazon employee allegedly told M–Edge’s Vice President of Sales when M-Edge expressed discomfort with MfK: “That’s a path you really don’t want to go down, because we are going to be putting pressure on retail to use the preferred partners. It will cause damage to you if you’re not part of the program.”  But Amazon had a valid reason to discourage M-Edge from rejecting MfK, since M-Edge was a successful and popular merchant—at least one Amazon executive’s “favorite brand.”
 
M-Edge also didn’t prove that Amazon deceived it by not fulfilling a promise to provide M-Edge with pre-launch access to the third generation Kindle. M-Edge didn’t identify any contract obligation on Amazon’s part, and it only renewed its merchant contract with Amazon eight days before the launch—even if it had a contractual right to prelaunch specifications, there was no evidence that a one-week delay harmed it. Also, in a 2011 meeting, Amazon allegedly “pumped” M-Edge for product information after already deciding to shut it out.  “But asking a competitor who has agreed to meet with you about their products is not deceit.”
 
Tortious interference claims also failed. M-Edge alleged that Amazon made misrepresentations about M–Edge’s status as an Amazon-approved vendor and performed “unlawful acts of coercion against retailers.”  Amazon allegedly spread false messages that only MfK vendors had ‘High quality products: Amazon approved and tested,’ and that only MfK vendors were ‘highly capable, honest, and trusted.’”  But Amazon had a right to promote MfK vendors; it didn’t say “only” Amazon vendors were high-quality or disparage M-Edge.  There was no evidence of deliberate disparagement.  For example, one Amazon employee in an email described responding to an accessory buyer’s question about M–Edge as follows: “I stuck to the script and focused on our partners abilities, leaving risk on M–Edge.”
 
False advertising: No luck here either.  M-Edge challenged (1) ads on third-party search engines that resulted in Amazon advertising Amazon.com as the “official site” of M–Edge; (2) statements on Amazon.com that M–Edge’s products are “no longer available”; and (3) Amazon’s use of the approved vendor list in connection with the MfK program.
 
Third-party ads directing users who used M-Edge keywords to the Amazon accessories page is fine, see, e.g. Judge Berzon’s concurrence in Playboy. Amazon’s use of such ads wasn’t literally false and there was no extrinsic evidence of confusion.  As for “no longer available,” that was literally true because M-Edge products weren’t available on Amazon.  “Moreover, in the modern world, with ready availability of eBay and numerous sources for products discontinued by a manufacturer, a consumer would not reasonably conclude that a message of unavailability on Amazon.com would constitute a statement that a product was not available from any other source.” M-Edge didn’t show materiality.
 
Finally, as for the approved vendor list, Amazon allegedly engaged in false advertising by “approach[ing] M–Edge’s existing and prospected offline retail customers with a list of ‘approved’ vendors and messages about the MfK program.”  Amazon’s message that M–Edge was not an “approved” vendor was allegedly “literally false” because “[w]hen Amazon contrived the [MfK] program, M–Edge was already an Amazon-approved vendor of Kindle covers.” That is, M-Edge was part of the Kindle-Compatible Vendor program, allowed to label its products as Kindle Compatible and sell them through Amazon.  Still, Amazon’s statements weren’t literally false, since the MfK approved list and the earlier KCV list were separate programs. 
 
One side note: Amazon proffered the testimony of Dr. Allyn Strickland as a damages expert. M-Edge sought to exclude “character” testimony that “Amazon … seeks to be Earth’s most customer-centric company,” that Amazon announced that it would be opening a fulfillment center in a previously inactive area in Baltimore that would create over 1000 jobs; that Amazon’s founder/CEO was named Time Magazine’s Person of the Year in 1999 and  “America’s Best Leader” by USNWR; and that the Kindle won consumer awards.  “The Court finds a considerable degree of potential undue prejudice—and an effort to pander to a local jury—in Dr. Strickland’s purported character or ‘background’ evidence. At least two days prior to offering any “background” testimony (and preferably prior to trial), Amazon would need to proffer the testimony for an advance ruling on admissibility.  Also, because the tort claims were gone, Dr. Strickland’s opinions regarding Amazon and M-Edge’s respective responsibility for M-Edge’s losses due to the MfK issues described above were irrelevant and inadmissible.
 
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Public comments on proposed DMCA classes

Posted on February 10, 2015 by rtushnet
Public comments on the proposed DMCA classes are up. I had the great privilege of working with EFF’s Corynne McSherry on the noncommercial remix exemption.  The comment of EFF and the Organization for Transformative works is here.  I believe we put forward a strong case to continue the protection of political and artistic speech.
 
Special thanks to Jeremy Sheff for contributing a comment in support of the academic use exemption, and to the National Congress of American Indians for supporting the remix exemption.  The EFF also provided petition-like language for individuals to use to support the exemptions, and many did.  Most simply signed on to the suggested language (with a few specifically noting that they did so because it accurately reflected their views), but I noticed some interesting patterns in the comments nonetheless.
 
First of all, except for the vidders, the commenters overwhelmingly use male names.  Perhaps more interesting is what people add to the proposed text: there’s a lot of work to be done here about the lay concept of ownership, often claimed as a trump to both contract and law. Another common theme is the importance of tinkering to learning and innovation. I picked Ryan Crabtree’s additional comments as representative:
 
Suggested text:
Copyright was designed to encourage creativity and fuel innovation. But it’s being abused to do exactly the opposite. Every single day, copyright law is twisted to stifle creativity, limit consumer choice, dismantle property rights, and chip away at our digital freedoms. I should have the right to remix, modify, and repair the things that I own. As electronics are integrated into every kind of product, please consider the needs of consumers as well as rights holders.
 
Added by Crabtree:
Think of it in terms of educational evolution. I didn’t discover or develop Algebra; I had to learn from the building blocks of those ahead of me. The same is true for anything else. Having just registered for the first classes of my MBA, I can assure you that I have not discovered much of anything! I’ve held onto the coattails of many amazing minds before me. My point is this: if I am to learn about the operating systems of my phone or video game system (for example), I will be greatly hindered without access to said operating system software. Perhaps I am developing security software as a small startup or research outfit, criminalizing tinkering will only hinder progress and advancement. We need to have access and freedom to not only learn, but also to fix our own items. If I have paid for something and own it completely, I cannot fathom how I should be limited to what I can do with it. This kind of stranglehold on freedom goes against the very idea of American ingenuity and exceptionalism. Let us become more and more exceptional as time moves forward.
 
Finally, I wanted to single out the comments of vidder Laura Shapiro, so they don’t become lost in the crowd:
People watch remix videos the way they watch television now: on a big screen far away, or on a small screen close-up. Either way, low-resolution footage is noticeable and undesirable. I don’t want audiences to be seeing pixels, I want them to be seeing what I’m saying. My message can’t come through in a clear, engaging manner when viewers are struggling to read it around video artifacts in low-resolution shots. Give me high-quality, high-resolution footage for my remixes to ensure my audiences see and understand what I’m saying.
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false claim of gov’t affiliation not actionable by non-gov’t plaintiff

Posted on February 10, 2015 by rtushnet
Two Jinn, Inc. v. Government Payment Serv., Inc., A136984, 2015 WL 456063 (Cal. Ct. App. Feb. 3, 2015)
 
Two Jinn (dba Aladdin Bail Bonds), a licensed bail agent, tried to enjoin GPS, a financial services entity, from allegedly engaging in bail agent activities in violation of state licensing and regulatory requirements. The court of appeals upheld the dismissal of Aladdin’s UCL and Lanham Act claims.
 
Aladdin and GPS allegedly “provide pretrial release services to detainees in exchange for a monetary compensation.” Aladdin posts surety bonds, while GPS allegedly posts cash bail for detainees using contracts with county sheriffs in several counties.  Under those agreements, GPS agreed to process credit/debit card transaction requests for cash bail.  Aladdin alleged that this required a license under the insurance law regulating bail/bail bonds, and violated other provisions of the insurance code.  Aladdin also alleged that ads GPS posts in county jails are false, misleading and confusing to consumers because it employs the terms “Government,” and “GOV” in combination with a state capitol dome logo to create the false impression of government status or affiliation.

First, the court agreed that Aladdin didn’t have UCL standing. Standing requires a plaintiff to “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.”  The evidence showed that any customer diversion didn’t result from GPS’s lack of a bail bond license or noncompliance with regulations.  GPS doesn’t compete directly with Aladdin or post bond. The legislative history shows that the state authorized counties to accept a credit card, debit card or other EFT in order to “make it easier for people to pay fines, post bail, and to alleviate time spent in jail.” Plus, GPS isn’t the only company that provides EFT services to California counties, so even were GPS enjoined, Aladdin’s customer base could still make a cash bail payment that way.  “[A]ny diversion of potential customers from Aladdin to GPS results from the Legislature’s establishment of the cash bail payment system as an alternative to the traditional bail bond service, and not from the fact that GPS conducts its business without a bail agent license.”
 
Nor did Aladdin’s investigation costs give it standing, because they were in anticipation of litigation. “Aladdin has failed to identify any evidence supporting its remarkable claim that it investigated GPS’s activities for non-litigation reasons.”
 
In addition, GPS’s business practices weren’t unlawful or unfair under the UCL.
The unlawfulness theory required a violation of the Insurance Code, which wasn’t present, and there was also no unfairness.
 
Lanham Act: Aladdin failed to allege a false statement in commercial advertising or promotion. The court described Aladdin’s theory as being that the advertising was “conceptually misleading” by using words like “gov,” “government,” and a capitol dome as its logo. This allegedly misled consumers to believe that GPS is a government agency or affiliate.
 
The court misunderstood the Lanham Act, finding that Aladdin didn’t have standing to bring a false association claim, which is true, but should be irrelevant given the special status of government approval.  But the court reasoned that Aladdin conflated false association and false advertising when it argued that the Lanham Act prohibited misleading ads, including misleading statements about endorsement or approval by another, including the government.  (Does that mean that competitors lack standing to claim that a competitor falsely claims FDA approval, or compliance with ISO standards, or UA certification?  This is a deceptively simple argument that is nonetheless troubling, and does conflict with the FDA cases.)
 
Aladdin correctly pointed to Trafficschool.com, Inc. v. Edriver, Inc., which did find false advertising based on use of dmv.org based on consumer confusion about whether the website was owned by or affiliated with state governments.  Puzzlingly, the court said, “Edriver was not a pleading case; it did not address or even consider what allegations are sufficient to allege a false advertising claim. Furthermore, Aladdin overlooks that EDriver expressly confirms that the first element of false advertising under the Lanham Act is ‘a false statement of fact.’”  Hunh?  The false/misleading statement in Edriver was “dmv.org,” which caused consumers to have the mistaken belief that the website was official. The analogy is exact. 
 
True, the court said, Edriver does support the proposition that false statements can either be literally false or literally true but misleading, but Aladdin didn’t identify “any actual statement in a GPS advertisement that allegedly misled or deceived consumers.”  (Other than the name and the logo?  Names and images can be false and misleading; e.g., the 3d Circuit’s Breathasure case.)  Though Aladdin alleged that the use of the words “gov” and “government” was misleading, it didn’t allege “that these isolated words were used in a statement of fact that was provably false or misleading.”  I’m still befuddled.  The claim makes perfect sense: in the context in which it’s encountered, GPS’s name confuses consumers into thinking it’s an official government entity.  GPS’s name is part of its advertising.  This might or might not be material, but it’s not incapable of being falsified.
 
Nonetheless, Aladdin’s claim failed.
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No TM or false advertising claims without use of mark in US commerce

Posted on February 9, 2015 by rtushnet
Belmora LLC v. Bayer Consumer Care AG, No.  1:14-cv-00847 (E.D. Va. Feb. 6, 2015)
 
Territoriality lives!  Belmora sells an OTC pain relief product, Flanax, in the US with a similar trade dress to, and capitalizing on the good will of, Bayer’s Flanax, sold in Mexico.  The Lanham Act does not provide Bayer with a remedy in this situation.  (Perhaps Bayer should’ve sued in NY, where state law might do so.)   [NB: Marty Schwimmer & John Welch represent Belmora.]
 

Belmora’s Flanax

Belmora registered FLANAX for analgesic tablets in 2005, with use in commerce since March 1, 2004.  Bayer has used FLANAX in Mexico since the 1970s, with sales of hundreds of millions of dollars and promotion in Mexico, including major cities near the Mexico-US border. Bayer attempted registration for Flanax in 2004, but failed due to Belmora’s preexisting application. Bayer has never had FDA approval to market or sell Flanax in the US.
 

Bayer’s Flanax

Belmora’s early packaging was virtually identical to Bayer’s, and the court found that Belmora copied Bayer’s logo and trade dress.  The packaging has changed but is still similar to Bayer’s, and Belmora’s marketing “often suggested a historical connection between its FLANAX and Latino customers.”
 
Bayer petitioned for cancellation in 2007.  In 2014, the TTAB cancelled Belmora’s registration under §14(3) of the Lanham Act.  Belmora appealed to the Federal Circuit, but Bayer sued Belmora; though Bayer wanted the case heard in California for obvious reasons, it was transferred to Virginia.
 
The court found that Bayer lacked standing under §43(a)(1)(A) and (B) under Lexmark.  Starting with false designation of origin: Lexmark established that the plaintiff needed to be within the Lanham Act’s zone of interests and plead proximate cause of its injuries to have standing.  The zone of interests test isn’t very demanding, and the plaintiff receives the benefit of the doubt. It “forecloses suit only when a plaintiff s interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress authorized that plaintiff to sue.”  Lexmark.
 
Nonetheless, Bayer’s interests didn’t fall within the zone of interests Congress intended to protect, because Bayer didn’t have a protectable interest in Flanax in the US.  Congress intended “to regulate commerce within the control of Congress.”  For trademarks, the purpose was to provide national protections to marks to secure to owners the benefits of their goodwill and to protect consumers. Park ‘N Fly.  “[A] key purpose of the Lanham Act is to protect the interests of those with a protectable interest in a mark,” and ownership of a mark is an element of a §43(a)(1)(A) cause of action.  Unregistered marks must be used in commerce in the US. Bayer failed to plead facts showing that it used Flanax in US commerce.  Bayer was therefore not within the class of plaintiffs Congress authorized to sue under §43(a)(1)(A).
 
Also, even if Bayer satisfied the zone of interests test, it failed to plead facts showing that Belmora’s false designation of origin proximately caused Bayer economic or reputational injury. Bayer suggested that it lost sales in the US by not being able to convert immigrating Flanax consumers to Aleve, its American counterpart to Flanax. But a core purpose of the Lanham Act is to “help assure a trademark’s owner that it will reap the financial and reputational rewards associated with having a desirable name or product.” To let Bayer make this argument “would require the Court to extend Lanham Act protections to an international mark that was not used in United States commerce.” The economic consequences targeted by the Lanham Act are those caused by infringement in the US.
 
The Fourth Circuit hadn’t adopted any exceptions to this rule. It hadn’t recognized the famous marks doctrine had suggested it was disinclined to do so. In addition, some courts allow extraterritorial conduct to be actionable if it has a significant effect on US commerce, since sales to foreign consumers may harm the income of an American company.  The Fourth Circuit hasn’t recognized this theory, and, even if it did, Belmora is selling to US consumers, not to foreign consumers.  “[T]he Court expressly declines to find that the loss of potential sales to immigrating consumers is the type of economic loss recognized by the Lanham Act as they are speculative.”  [Compare doctrines surrounding the likelihood of irreparable harm.]  Speculative allegations of harm are insufficient for Lanham Act standing.
 
Not only did Bayer fail to plead that Belmora proximately caused cognizable economic injury, it also failed to plead proximately caused damage to its reputation. Speaking of  irreparable harm, here’s a line we might see quoted again: “Mere confusion by itself does not amount to reputational injury—there must also be evidence of harm resulting from the use of the allegedly infringing product” (citing Haute Diggity Dog). 
 
Bayer argued that its reputation was harmed because Belmora’s deceptive marketing caused actual confusion.  Telemarketers hired by Belmora allegedly called potential distributors and suggested to them that Belmora’s Flanax products were the same as those offered by Bayer in Mexico. Belmora also allegedly advertised that its Flanax was a brand that Latinos had turned to “for generations,” and that “FLANAX acts as a powerful attraction for Latinos by providing them with products they know, trust, and prefer.”  However, that didn’t show injury to Bayer’s reputation.  There was no evidence showing that Belmora’s products had harmed anyone, or that people had made misdirected payments.  “Without more, mere confusion by itself does not constitute reputational injury.”
 
Bayer argued that its inability to control the quality of goods sold under the Flanax brand harmed its reputation.  This “demonstrates a fundamental misapprehension of the protections of the Lanham Act.”  But quality control injury depends on ownership, and Bayer can’t bring a trademark infringement claim because it’s not an owner. Bayer pled neither actual reputational injury nor a protectable interest in a mark.
 
The court also dismissed the §43(a)(1)(B) claim on standing grounds, for the same reasons: Bayer didn’t sufficiently plead an injury to commercial interest in sales or business reputation proximately caused by Belmora’s alleged misrepresentations.
 
The court dismissed Bayer’s California state law claims for unfair competition and false advertising, declining to exercise its supplemental discretion.
 
Further, the court affirmed the TTAB’s dismissal of Bayer’s Article 6bis claim.  “[T]he Paris Convention is not self-executing and Sections 44(b) and (h) of the Lanham Act, 15 U.S.C.
§ 1126(b) and (h), do not render Article 6bis of the Paris Convention a ground for contesting trademark registration.”  Section 44 incorporates the Paris Convention only to provide foreign nationals with the necessary substantive rights. The court would not infer, “from uncertain terms in the Lanham Act, a declaration from Congress adopting the famous marks exception captured in Article 6bis, thus creating a cause of action therein.”  Such a new rule would “eviscerate” territoriality, “a principle that has been accepted  by  the  Supreme  Court  for  nearly  one  hundred  years  and  remains  essentially unassailable in each circuit court except for the Ninth Circuit.”  More definite instruction from Congress would be required to do so.
 
Then the court reversed the TTAB’s holding that Bayer had standing to seek cancellation, because Bayer lacked standing to sue under Lexmark. The TTAB had found standing based on injury allegedly caused by strikingly similar packaging and copying that was done to misrepresent a connection with Mexican Flanax. Cancellation can be sought by any person who believes they are or will be damaged by the registration, including “if the registered mark is being used by, or with the permission of, the registrant so as to misrepresent the source of the goods or services on or in connection with which the mark is used . . . .” Lexmark guided the standing inquiry here too, though the TTAB didn’t apply it. Again, Bayer failed the zone of interests test as well as the proximate cause test. [Interesting collapse of protection & registration, something I’m thinking a lot about.] 
 
Section 14(3), the court held, requires use of the mark in US commerce to find a misrepresentation of source. Bayer argued that the plain language of the statute didn’t require that, and that such an interpretation was inconsistent with other provisions of the Lanham Act barring registration of deceptive marks.  The TTAB found standing.  But the court was persuaded otherwise by case law and comparison to other provisions of the Lanham Act.
 
Previous misrepresentation of source cases either involved petitioners who owned a mark or were silent on the question.  Nor could Bayer rely on cases applying special standing rules to Cuban entities, because there’s a special law providing for that treatment.
 
What about the argument that some provisions, like §2(d), mention owning a mark and others, like §§43 and 14(3), do not, implying a difference between them?  “[A]lthough Section 43(a)(l)(A), by its terms, does not require use of the mark, courts have consistently required a plaintiff to use the mark in United States commerce in order to state a claim under that statute.”  Congress’s intent “to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce” was also relevant, making it appropriate to read a use requirement into §14(3) as well.  Thus, the TTAB ruling was reversed.
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WIPIP, part 2, Session 3 Trademark

Posted on February 9, 2015 by rtushnet
Session 3, Trademark
 
Leah Chan Grinvald, Constructive Consent
 
Courts adopt as evidence of fame the number of users = strength = fame.  Example: the number of Flipboard users accepted by a court in October.  But that also is read to include shortened forms like the stylized F Flipboard uses.  May be unconscious influence. 
 
Bad because there’s a theoretical disconnect.  In contract, judges acknowledge that they’re creating a hypothetical world where people assent to terms through reasonable notice, for reasons of efficiency; we want online contracts to be valid and we want to put the burden on the user to read the terms.  In TM, at least in theory, the law takes more of a legal realist approach: we really want to get into consumers’ minds. Though we use proxies like advertising, we are trying to reach consumer thought. Internal criticisms of constructive consent in contract are very strong in themselves—coercion, reality that consumers/users don’t read the terms. 
 
Judges who do this lower the burden of proof for some TM owners.  Rack up user downloads = strength, but that’s an unfair shortcut.  So don’t import the theory. Scrutinize agreements carefully.  Are the claims based on prominent marks?  Adopt “interactive” theory of fame.
 
Is this really happening on a large scale?  Aren’t companies like Facebook famous anyway? Yes, but there’s overreach too.  Tumblr = ‘t’ famous?  Efficiency: maybe this is efficient cheap way to prove fame. At least w/r/t current TM doctrine, we want fame to be done on a case by case basis.
 
Gibson: you don’t have to reject the contract theory to reject it in TM.  Contract = there’s a theory of the informed minority who reads and protects the rest of us.  Fame numbers generated by overall customer base don’t take that into account.  Second, reputational argument: consumers usually work these out as customer service matters and not contract matters, but again that is not a TM context. These theories don’t work for TM purposes.
 
A: right, that goes to my argument about fit.
 
Rosenblatt: to what extent is this counting users approach really constructive consent versus a way of figuring out how many people have seen the mark?
 
A: she thinks it’s unconscious; also it’s a way to prove secondary meaning (which is a factor to prove fame, Rosenblatt points out) but it needs to be scrutinized more carefully. We have all downloaded random apps we don’t know much about/we deleted quickly.
 
Ramsey: separate issue of using number of users who downloaded versus agreement in fame.  Constructive consent applies to agreeing that its famous. Has any court really explicitly relied on the idea that users have agreed the mark is famous?
 
A: Run the risk; need to scrutinize evidence carefully.
 
William McGeveran, What Campbell Can (and Can’t) Teach Trademark Law
 
Campbell is important for various things, including ill-advised parody/satire distinction. What does it do for TM? Error and administrative burden in adjudicating parody.
 
Lessons of Campbell: parody is important—significant speech/social value.  Parody is inherently tricky because imitation is inherently necessary to do parody.  No bright-line rules; fact intensive.  Parody should be handled consistent w/the underlying purposes of IP.  Underlying purpose of TM is different from that of ©!  (Though Silbey’s work suggests that laypeople don’t agree.)
 
Present lessons: Judges get it right. Parody almost always wins nowadays. We don’t have a meaningful error cost problem now, though we did in the past.  Too much discussion suggests that might be the case.  Some markholders get it wrong: overclaiming.  We talk too much about problem #1 (judges) and not enough about problem #2 (overclaiming by TM owners), giving sustenance to the narrative out there that helps sustain overbroad C&Ds by suggesting that parody is vulnerable in court when by and large it’s not. 
 
Dogan & Lemley; David Simon; Tushnet & Keller have cataloged the scene. There are 12 key cases, and not a ton more. The age of these cases suggests that, whether cause or symptom of change in attitudes, Campbell was an inflection point, w/trend to much better results if they go through full adjudication.  10 of the 12 are from last century; Buttwiper is 2008 and Charbucks 2009.  Some of these lawsuits are probably justifiable b/c parody was cream-skimming ex post justification, or at least you can understand why the court thought so. The reasons parodies lose are varied; there’s not one magic problem.  Direct competitors who’s doing what Campbell was worried about; unjustifiable general concerns over free riding; messing up what confusion is about; just blowing it: NAACP v. Radiance (Nat’l Ass’n for Abortion of Colored People). Hard to figure out any tweak in law that would fix that last one: neither def’t nor court cited Rogers, ESS, or any other relevant case.  The real cost we face is adjudicative cost. Any effort to tweak parody is likely to make that worse rather than better because Campbell teaches us that’s hard.  Start doing work to make adjudication quicker and cleaner.
 
Future: Think holistically about parody as part of larger set of expressive uses and respond with expressive use reform more generally.  Expressive works, political uses, maybe comparative ads.  Can’t make too big a list b/c then people claim anything not on the list is excluded. Argument will then not be about whether it’s a parody or whether it’s confusing but whether it fits these other parameters.  Presumptions and the Rogerstest.  Confusion isn’t everything.
 
Lemley: one thing you don’t include is cases where the Q is whether or not it fits in the parody box. Mostly, once we decide something’s a parody, we give it credence. Campbell draws unjustified divide between satire and parody, and people try to tug one way or another because it changes results.
 
A: I did look at those cases; Ds do really well there too, though it can be costly. Parodic character perceptible = ok. And sometimes when the court disagrees, he thinks the court is right.  Series of fishing nets—scoop up easy cases first.  That might mean some parody cases go to the end of the line, but hopefully that’s where the cases are the hardest.
 
Heymann: consumer oriented language: reasonably be perceived. Relationship to audience: what is the market you’re talking about?  Market for parody or market for rap in Campbell? Who is perceiving this as parody, and in what market?
 
A: agree, but hopefully won’t need that level of analysis. But when you do consider full scope in confusion analysis, that would be important.
 
RT: Makes me think about why transformativeness has expanded in content.  Satire/parody distinction never worked and it was almost immediately apparent that it didn’t.  Timmy Holedigger & Cariou have in common their lack of interest in specifying the transformative/parodic message. [And Chewy Vuiton too, and even Charbucks as it rejects the defense.]
 
A: yes, agree—we’re working on problems that don’t need much work. Courts haven’t taken up Souter’s invitation to make what is essentially a meaningless distinction, even if at first they were willing to try (Cat NOT in the Hat).
 
Ramsey: incentive to explain to potential witnesses that commenting = helpful (a problem in the LV Hyundai basketball ad). Global issue?
 
A: also a problem in Rosa Parks case.  Not going global in a symposium on Campbell, but it is an issue elsewhere. My position = what needs to be reformed is the admin process, which is US-focused.
 
Gibson: is the point to get more cases before judges b/c judges do a good job? Or what?
 
A: I want you to be able to reply to a C&D with “no, b/c X.” Categorical defense = great.  Simple & straightforward Rogers-like test = great. If they do sue, resolution should be cheap and early.  Not complicated confusion based tests but simple tests. I’m not trying to improve outcomes, I’m trying to improve defenses. [This actually sounds like a reason to make registration more substantive—and to defer to 2(d) rejections in subsequent confusion cases.]
 
Xiyin Tang, Against Fair Use: The Case for Genericide Defenses in Artistic Works
 
Rogers v. Koons: cited in the LV/Hyundai case.  Folded parody/1A defenses into each other.

Genericide: formerly protectable mark is found no longer protectable b/c stopped signifying source but rather the product itself.  Increasing intersection between luxury goods/art/commerce.  Original Campbell’s soup can à Warhol’s silkscreens of can à Warhol estate-authorized Campbell’s soup cans colored in honor of 50th anniversary of silkscreens.  Genericness in a market = lose protection in that market. Murphy bed used to be a protectable TM, and then became the name for a bed that pulls down from the wall. 
 
In expressive context: b/c of the way rap employs tropes, like liquor brands and cars.  Rolls Royce sued a rapper named Royce Rizzy, demanding he stop using the RR mark in connection w/stage shows, albums, and merchandise.  Rizzy seems likely to settle. 

Genericness defense could discourage overzealous TM owners from going after expressive uses.  Many uses will just go away if you threaten; many artists lack time/energy to take to full trial.  Court could invalidate mark across a market—Cristal could be generic in the rap industry but retains secondary meaning in liquor industry.  Betty Boop on T-shirts: decorative/aesthetically functional—not a complete invalidation.
 
Rosenblatt: Genericity is about ordinary descriptive term for the goods; it means that expressive use isn’t applying as we usually understand it unless it’s already a mark for expressive goods.  What you’re talking about isn’t genericity so much as ubiquity or expressive value as a result of ubiquity—wouldn’t that make every famous mark generic for expressive goods?
 
A: some marks do catch on and are used more often as stand-ins than others.  Cristal in rap, compared to McDonald’s which is not used as much in expressive works.
 
Ramsey: need to know what marks would qualify. How would judges or juries decide. Also, how do you define what’s artistic?  Artistic designs are applied to shoes, product packaging, etc.
 
A: category of expressive use. You can create markets where you don’t need to define artistic works as a whole to invalidate a mark in a market.  Should introduce the idea of genericness into the public dialogue.  The way people are actually using it expressively.  “Gucci” to mean “fancy.”  [I was thinking about Idris Elba being, as they say, “one GQ m——-”].
 
McGeveran: courts are reluctant to find genericism because it’s so radical in consequences. Is this genericity or something else about confusion? Will using the term introduce ideas that you don’t want to have?
 
A: Abercrombie spectrum shows that you can fine tune genericity—SAFARI generic for hats, not for other apparel.
 
Heymann: maybe you really want to use the term functionality. 
 
Gibson: or TM use. 
 
Lemley: no, we can’t say that, we have to invent 20 different doctrines that serve the same function as TM use.
 
Q: what would balancing test look like in commercial use cases?
 
A: case by case.  Do you use mark as general stand-in for category of goods?  Was the brand involved in promotions in the industry in the past?  How close are the goods?
 
Q: what’s the relationship between nominative fair use and genericide?  You’re using this as references to ideas, not products: Louis Vuitton as a reference to luxury, not to a particular class of products.
 
A: we’ve seen a collapse between goods and goodwill—the mark is the product.  So the idea could be the thing that’s generic.
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WIPIP, Part 2, Session 2, Trademark

Posted on February 9, 2015 by rtushnet
Glynn Lunney, Inefficient Trademark Law
 
Older TM lawyer would be surprised at breadth: inherently distinctive marks were the only marks, and double identity was essentially the rule.  Today: looks very different. What will it look like in 100 years—will expansion continue? Even if we could change the Lanham Act today, would it be that Act in 50 years after the courts were done with it.
 
De-evolution: trademark protection has expanded radically in ways undesirable normatively and unjustified by the language of the Act.  Expansion not due to changing markets or marketing/advertising. Flaws inherent in the judicial process: party-driven nature of judicial process (wrong set of cases before the courts) + judicial myopia because courts focus on parties before them not on society. Too easy to give into the restitutionary impulse/instinctive dislike of copyist. 
 
Example: The “Who Dat” controversy.  Saints tried to control the phrase but that was unpopular with local businesses/politicians. Then two brothers who popularized the phrase sued Fleurty Girl and a couple of other T-shirt shops; their claims were weak—limited use, likely naked licensing, not much likelihood of confusion. Attorneys around town agreed to represent the Ds pro bono.  Court rejects sj motion: factual issues on abandonment, ownership, validity, confusion.  Ds all settle.  Not worth it to them to litigate.  They wouldn’t win enough by winning: right to compete w/other merchants to sell the shirts, and it’s distracting from their business.  Ps have a greater incentive: if they prevail, they get lots of licensing revenue.  That’s the story of the 20thcentury: TM owners have strong incentive to litigate and develop legal rules that benefit them and similarly situated TM owners in the future; TM defendants usually have no systematic interest in developing TM law on lines more favorable to competition.
 
Trade dress: Congress relegated it to the Supplemental Register; In re Haig & Haig (Comm’r 1958) Daphne Robert said that she didn’t care what Congress said; 8th Circuit said it was protectable under §43(a) for trade dress of corn hopper.  Two Pesos said secondary meaning wasn’t required by Congress (b/c they didn’t mean to protect trade dress); Qualitex says “symbol” means anything even though the term was added to the Act precisely to refute that contention.

New forms of confusion: post-sale; initial interest confusion; Boston Hockey/promotional goods.  Some are desirable—Aunt Jemima should be allowed to control pancakes, not just pancake syrup to avoid confusion. Case by case v. systematic: the cost of false positives and false negatives; court doesn’t consider the long-run consequences, like Boston Hockey or post-sale confusion.  In some cases, we should let the wrong go despite the false negatives. Consumers could figure out that Aunt Jemima pancakes were from a different source.
 
Good law becomes extended and becomes bad. Arguments aren’t made by attorneys: failed to argue that Congress explicitly excluded trade dress.  Respect for precedent preserves bad decisions, but not good decisions—why is Two Pesos still good law?  Silly excuses offered for expansion, like the 1962 Amendments mean any confusion is actionable and “commerce” means anything even though that’s put in to satisfy the Commerce Clause.
 
Parties set the agenda: decide whether to act, sue, settle.  Present info on which decision is based. Consumers are not allowed to participate.  Not necessarily a problem when resolution affects only the parties.  Sometimes nonparties are affected: asymmetric stakes—win for P increases market power and rents, while win for D leads to competition and no rents.
 
Thus, as problematic as TM is, it’s likely to get worse.  Increasingly broad protection w/increasingly narrow, complex and specialized exceptions.
 
Remedies: adjust stakes: attorneys’ fees/boundies to get right cases before the courts. Eliminate collective action by mandatory joinder of possible Ds; eliminate private enforcement. Also need courts to reach right results. Better information; create defense bar; ideology can create results by focusing attention—property-philia is a problem.
 
Sheff: Is TM exceptional in this regard or like any other regime in which stakes are asymmetric? Also, Q of institutional competence. If this is a structural problem w/ the nature of litigation, then courts aren’t the proper institution to balance in favor of competition and we need other institutions, maybe legislative.
 
A: can do it: antitrust, where ideology and other factors have produced counterbalances.  Or remove law-making authority from courts altogether.
 
Ramsey: nominative fair use—entertainment/news companies have an interest in pushing back. We have to identify companies w/broad interests and bring them in.
 
A: Wal-Mart. Sometimes you wonder: why did the Ds fight?  Why did Dallas Cap & Emblem fight so hard—were their sunk costs so high? Sometimes it’s idiosyncratic, and that can be really bad b/c defendants may make bad precedent.
 
McGeveran: when is there some other external doctrinal barrier for courts?  Speech or some kinds of competition get courts to take notice.  Results can be quite favorable. Part is just increasing salience to courts of those third rails, like the First Amendment.
 
Rosenblatt: there will still be uncertainties in the absence of rigid carveouts.  All the settlements hurt the law, they don’t help it.  Uncertainty drives settlement. [Compare fair use principles, though—we have been able to strengthen the resolve of at least some sectors in the © area.]
 
Gerhardt: I wonder about quality of lawyering. Smack Apparel: P has sophisticated TM counsel and D doesn’t.  Defense bar/more connections with people fighting = huge difference.
 
A: true, you can end up with a TM lawyer who usually is P-side and then you get the ridiculous argument in Two Pesos about secondary meaning in the making, or a non-TM lawyer who just misses the point.
 
Peter J. Karol, An Exclusive Right to Judicial Discretion: Learning from eBay’s Muddled Extension to Trademark Law
 
Most circuits had a rule presuming irreparable harm in TM cases.  Now: a mess.  9th Circuit: no longer receive presumption of irreparable harm, and generalized statements about losing control of TM/reputational harm won’t be enough. Need specific facts.  Middle: 11th: prevailing P don’t get categorical entitlement, but dcts may presume irreparable harm where cases bear substantial prallels to previous cases such that a presumption of irrep harm is appropriate exercise of discretion, per Roberts concurrence.  5th Cir. cites eBay but applies presumption in a laches case.  DCts are also completely over the map.  Many/most give lip service to no presumptions, but then find irreparable harm b/c P will lose control of TM; many cite eBay and then apply a presumption.  Platters cases: 9thCir. reverses grant of PI; M.D. Fla. grants PI a year later, saying it can apply presumption if it wants to and offering general statements about reputational harm.
 
Theory: damages to business reputation are inherently irreparable, therefore extending eBay doesn’t make sense.  Evidence showing likely confusion then shows irreparable harm.  Rierson: presumption for traditional TM actions might be justifiable, but post-sale confusion and the like should show harm.
 
What about property/liability rules literature? Most focuses on ©/patent.  Most pre-eBayeconomic analysis assumed infringement finding meant the D would stop. Exception: Epstein, after eBay, concludes TM are more like property than patent/© based on indefinite duration and thus more suited to property rule treatment.
 
All the circuits are right. How could that be? The Lanham Act is a conflicted statute lacking a single coherent purpose. Sec. 33 tells us registration is prima facie evidence of exclusive right to use mark in connection w/goods. Sec. 34: courts can grant injunctions on the principles of equity. Ex ante and ex post.  Almost identical to Patent Act language, BTW. 
 
More problematic than patent: Likely confusion is element of TM claim; patent infringement doesn’t have a harm element—might be true that likely confusion doesn’t = harm, but there’s at least a potential as there is not in patent.  It’s very hard to get $ in a TM case; usually you want the injunction. Damages require actual confusion; accounting of profits requires deception/bad faith.
 
Can legislative history solve the problem? Overarching tension b/t those who want registration to be truly substantive, federal right to exclusive national use, and those who want the state-based substantive common law model; federal registration is merely procedural. Drafts show pendulum swing. Early drafts show pendulum from substance/entitlement to injunction; later drafts paper over the conflict as a result of concerns from people who thought the federal law was going too far federally.
 
Complete lack of clarity on expected remedy for prevailing Ps, except in counterfeiting and holdover licensee cases. Jarring feedback loop: we made it hard to get money because of the ease of obtaining an injunction; but the eBay test explicitly looks to availability of monetary relief in whether injunctive relief is available.  Maybe no true difference w/out presumption in most courts.  Maybe a creep in of materiality requirement by the back door of remedy.
 
Thoughtful reevaluation is required of what it means to own a registered TM. If you really have an exclusive right, maybe a presumptive remedy. If not, don’t call it an exclusive right and explain better what it is.
 
Next up: more empirical work.
 
Sheff: Functional approach to distinction: bundle of rights approach. TM, unlike patent or ©, P must use IP to be entitled to the right. eBay is arguably about concerns over NPEs depriving public of access to the work/invention, and in TM you don’t have that concern. That would suggest that eBay’s motivation lacks bearing on TM law.  Treating eBay as inappropriate for TM, either formally or through the back door, is just recognizing that.
 
A: maybe the courts aren’t thinking about the differences.
 
Rosenblatt: There is a TM troll problem; it just looks different from patent and © trolling—expressive, ornamental, etc. uses that aren’t confusing. That may justify a similar rationale.
 
A: at least likely confusion filters that out a bit.
 
McGeveran: Civ pro perspective: preliminary injunction standard in general is messy, and there’s lots of complaining about lack of adequate remedy at law w/Q of irreparable harm. To what extent is what you’re observing just one manifestation of overall disorder in the state of injunctive relief decisionmaking? Relatedly, we have a general tradition of presuming reputational harm is irreparable, whether in defamation or in TM.  So, unless we put that to one side, it will be pretty easy for courts to plug in that long tradition.
 
A: Civ pro: part of what we’re seeing is eBay juggernaut disrupting injunctive relief across the board. Might be part of tidal wave. Courts want specific facts, not general statements about harm to reputation being irreparable.
 
[RT: arguments matter, though.  They told us it was statutory construction, and many courts are taking that seriously. Also, I think the arguments about how reputation is inherently irreparable are no longer as persuasive as they were.  (1) We have lots of ways to measure the economic value of reputation now. (2) I think the concept of reputation as dignity, priceless, has become less persuasive as commodification has become more pervasive. A judge 100 years ago would not think of a person’s “name” in the same way.]
 
Q: lack of consumer protection issue: how do you protect consumers from confusion w/out an injunction? Consumers can’t bring the injunction.  The remedy goes beyond the TM owner itself. [Though if we got damages right then many Ds would not infringe … ]
 
A: True, in every case the public interest seems like it would be served by stopping confusion. [Unless they don’t care?  That’s why materiality matters.]
 
Gibson: this is maybe why we keep going back to the substantive problems with TM’s breadth. If it’s a mess, rationalizing the remedies may not be possible.
 
David Welkowitz, Willfulness
 
Willfulness isn’t well defined in criminal or civil law.  Wants to examine meanings ascribed to it in TM and ask whether we should change/refine our understanding.  Comes in largely but not exclusively in the remedies area; counterfeiting. ACPA: presumption of willfulness from false contact info, seems to apply only to cybersquatting, though section applies by its terms to the whole remedies section, §35. Judges have also required willfulness in most circumstances to recover profits.  In inducement, line of cases deals with willful blindness.  Atty’s fees: willfulness is also a factor.  Bad faith: willful acts of copying will also influence the outcome of the liability test. 
 
Willful defiance of a child—not necessarily willful in TM.  Different views in SCt: FCRA case says generally willful means recklessness, but patent inducement cases say that willful blindness requires more than recklessness—some deliberate act on part of inducer that indicates knowledge of infringement.  Higher than recklessness.  Recklessness itself is difficult to define, and hard to distinguish from mere negligence. Another problem: how do we instruct juries?  Apple v. Samsung: TM and patent claims; did a careful definition of willfulness for patent, but didn’t define willfulness in TM, just gave the jury the statute.
 
How can we enhance remedies based on a word that is so inconsistent in meaning?  How do you prove it? In default judgments, courts use the fact of default as evidence of willfulness.
 
Tentative conclusion: if we use willfulness, we need to be very careful about remedy creep. When recklessness is distinguishable from willfulness, we are giving enhanced remedies in non-extraordinary cases and acting as if they are extraordinary.
 
McGeveran: should this even be a jury question?
 
A: that’s a legal q in many cases, especially if you just give them the statute, but after Hana Financial he expects SCt to say yes.
 
Ramsey: very troublesome when courts think knowledge is enough. What should be done?
 
A: not confident of Congress’s ability to do this because of legislative capture. Congress would draw the line too low, accepting recklessness w/out defining it.  Really nice if courts/SCt would say that the conflict needed to be resolved.  Not confident they’d do the same as in patent, but it might help.  If I ran the world, it would be like the patent standard: you have to intend to infringe.  Similarity alone wouldn’t be enough.
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