Preclusion lives even after Pom Wonderful

Posted on October 10, 2014 by rtushnet

JHP Pharmaceuticals, LLC v. Hospira, Inc., 2014 WL 4988016, No. CV 13–07460 (C.D. Cal. Oct. 7, 2014)
Pom Wonderful had a lot of broad language in it, and there is a pattern in which lower courts interpret Supreme Court Lanham Act opinions to mandate a course correction, whether in the direction of expanding or constraining liability.  Those of us who follow these things were deeply interested in how expansively they’d read Pom Wonderful.  Here, the court largely adheres to the pre-Pomprecedent; while some claims related to marketing of FDA-unapproved drugs survive, many don’t.
Plaintiff (aka Par) sued defendants for false advertising (state and federal; the parties agreed that both claims should be analyzed similarly even though the preemption/preclusion issue differs). Par makes injectable epinephrine sold as ADRENALIN.  (That’s a brand name?  This might be the old “aspirin” situation, a trademark to druggists but not to consumers.)  Defendants make other injectable epinephrine products.
In 2012, Par received FDA approval for its 1 mL version of Adrenalin.  Defendants sell non-FDA-approved injectable epinephrine products.  Par alleged that they represented to consumers, either expressly or by implication, that their products were FDA-approved, and misleadingly advertised them as “safe” or “effective.” Also, Par alleged that defendants advertised products that are illegal to sell while maintaining that they were law-abiding, misleading wholesalers and the public about the legality of their products.  Finally, Par alleged that defendants omitted injection location and adverse reaction information Par’s product had to carry as part of its FDA-approved labeling, misleading the public into thinking Par’s product is more dangerous than the generics because it has more restrictions.
One defendant, American Regent, argued that Par failed to exhaust its administrative remedies by submitting a citizen petition to the FDA.  But Par wasn’t arguing that the FDA had done anything wrong or failed to act where it was required to do so; exhaustion was irrelevant.
How about preclusion?  The Lanham Act and the FDCA are “two discrete statutory schemes that can regulate the advertising, marketing, and labeling of food and drugs.” Neither precludes the application of the other, and the Lanham Act brings the market expertise of competitors to bear on advertising, serving a different function.  However, Pom Wonderful did say that “Unlike other types of labels regulated by the FDA, such as drug labels, it would appear the FDA does not preapprove food and beverage labels under its regulations and instead relies on enforcement actions, warning letters, and other measures” (emphasis added). Thus, the Court suggested that it might find preclusion where a Lanham Act claim turns on the content of a drug label, especially if it were preapproved by the FDA.  Also, a Lanham Act claim might be barred where “the agency enacted a regulation deliberately allowing manufacturers to choose between different options,” or where the plaintiff’s theory of liability otherwise conflicted with an “affirmative policy judgment” by the FDA.
Pre-Pom cases like PhotoMedex, Inc. v. Irwin, 601 F.3d 919 (9th Cir. 2010), might have limited precedential value, but even they recognized that claims weren’t barred if the law didn’t require the FDA’s expertise or rulemaking authority to interpret.  PhotoMedex said that if it was clear that FDA approval was required and that no such approval had been granted, a competitor could recover for misrepresentations of approval.  So, taking these decisions together, Lanham Act claims are not generally precluded by the FDCA, but some claims may require the FDA’s expertise to resolve.
The court then rejected defendants’ argument that Pom didn’t reach drug advertising.  Though the Court made frequent mention of “food and drink,” “the arguments, logic, and holding of POM Wonderful are couched in much broader language and strongly suggest a more wide-ranging application.”  The Court’s argument about competitors’ expertise, for example, wasn’t peculiar to food and beverages.  Nor was its failure to find any preclusive language in the FDCA.  “The logical building blocks of the Court’s specific holding with regard to food and beverage labeling would seem to be equally applicable to food and beverage advertising, drug marketing, medical device labeling, cosmetics branding, or any other kind of marking or representation which would fall under both the Lanham Act and the FDCA, unless preclusion is required for some specific reason.”  (In a footnote, the court noted that specific reasons would involve affirmative FDA action such as preapproving labeling or explicitly allowing manufacturers a menu of lawful choices.)  Thus, after Pom, the general presumption is that “Lanham Act claims with regard to FDCA-regulated products are permissible and, indeed, desirable.”
Given that presumption, Par’s claims mostly survived.  Par’s fundamental argument was that FDA approval was a government imprimatur of quality, safety, and desirability.  Though not all drugs must be approved, consumers take approval to mean assurance that a drug has been properly tested and meets minimum quality standards.  Given the expense of FDA approval, a company that invests in such approval can be put at a competitive disadvantage if others can misrepresent their status.
The alleged misrepresentations came in several ways: First, Par alleged that Hospira advertised its drug as a New Drug Application (NDA) product without FDA approval.  Second, Par alleged that Hospira (maybe others) advertised that Adrenalin was the “brand name equivalent” of its own product, and that it is a “generic” version of Par’s product.  Third, more generally Par alleged that defendants encouraged purchasers to think of their products as “comparable to or interchangeable with” Par’s product. Finally, Par alleged that defendants advertised using certain industry lists, and that consumers expect the products on such lists to be “branded drugs or generic products,” even though defendants’ products weren’t “generics” as defined by the FDA.
Defendants cited Catheter Connections, Inc. v. Ivera Med. Corp., No. 2:14–CV–70–TC, 2014 WL 3536573 (D. Utah July 17, 2014), for the proposition that such claims are precluded post-Pom, but that case involved re-approval of a new model of an existing medical device, where the manufacturer gets to make the call about the need for new approval in the first instance, and thus the manufacturer there could “plausibly claim that its product was, in fact, approved, at least until the FDA determined otherwise.”  This was very different from the case at bar, where the defendants have never had approval.  No preclusion.
Defendants also argued for the application of the primary jurisdiction doctrine.  Nope. No special expertise was required to determine whether the FDA had granted approval or not; there’s a comprehensive list of approved drugs and defendants didn’t contest that their drugs were unapproved. The same thing was true for “generic.”  The FDA will only declare a drug “generic” if it goes through an approval process; it also maintains a list of approved generics. “If all that Par alleges is that Defendants are advertising their products as approved generics when they are not in fact approved, the Court need not refer the question to the FDA’s expertise to make factual determinations.”
But did Par state a claim?  It didn’t allege specific affirmative representations of FDA approval.  Defendants argued that under Mylan Labs., Inc. v. Matkari, 7 F.3d 1130 (4th Cir. 1993), there’s no cause of action for implying FDA approval by putting a product on the market.  For Hospira, Par did allege a specific representation of having “an NDA product.” That could easily be construed as a representation of FDA approval, “who should not bear the burden of uncovering information that contradicts the impression given by misleading advertising” (citing Williams v. Gerber Products Co., 552 F.3d 934 (9th Cir. 2008)).
It wasn’t clear whether the other two defendants said similar stuff.  “Mylan, though not binding on this Court, makes a compelling point: merely putting the product on the market is probably not a representation that the product is FDA-approved.”  (Why not?  There has to be a policy argument behind it: Congress deliberately allowed non-approved products to remain on the market.  Thus, even if consumers are confused by the fact that the product is on the market, other considerations require us to allow it.  However, we could require prominent disclosure of the non-approved status without conflicting with the congressional grandfathering decision.)
Par’s complaint was somewhere between “they put it on the market” and “they said it was FDA-approved.”  Par argued that defendants did more than put their products on the market; they also put their products on industry “Price Lists,” and Par alleged that “buyers believe that all prescribed drugs identified on the Price Lists are … FDA-approved.” Further, it alleged that by listing their drugs as “generics,” they implied that their products are “equivalents” of Par’s FDA-approved product, misleading consumers.
Par’s problem was that misleadingness carries a high evidentiary bar: the plaintiff must show that the ads actually conveyed the implied message and deceived a significant portion of recipients.  Par did allege actual confusion about what buyers believe.  At the motion to dismiss stage, allegations sufficed without evidence of the alleged consumer beliefs.
Par also alleged misleading representations of safety and effectiveness, which might well fall within the FDA’s primary jurisdiction.  But that didn’t matter because Par failed to allege facts showing that the products were unsafe or ineffective.  Those claims were dismissed.
False representations of compliance with all applicable laws, including the FDCA: at least with respect to two defendants, the complaint alleged sufficient overt statements, such as Hospira’s alleged claim on its website that it complied with “applicable laws and other requirements.” But unlike a mere determination of FDA non-approval, the allegation that the drugs were being sold unlawfully would require a more “complex” finding from the FDA.  What was needed was a “clear and absolute rule making it patently unlawful to market any drug without going through the FDA approval process.”  Though the statute apparently provided such a clear rule for new drugs, many older drugs, even when updated, were exempt from this rule.  “The determination of whether a drug is ‘new,’ and whether it can be lawfully marketed under the FDCA, involves complex issues of history, public safety, and administrative priorities that Congress has delegated exclusively to the FDA.”  While an allegation of illegality under the FDCA could under some circumstances form the basis of a successful Lanham Act claim, for example if there were a clear statement from the FDA that defendants were selling their products illegally or otherwise breaking the law, the court wouldn’t proceed here withough a clear statement by the FDA.  Whether the drugs here were “new” was an issue within the FDA’s primary jurisdiction and required the FDA’s expertise.
Misleading labeling from omitting the warnings required for Par’s product: This was allegedly misleading implication, and Par had to plead “at least some facts tending to show that the alleged implied message is actually transmitted to the consumer.” The pleadings were thin; the message conveyed by lack of labeling was “at least ambiguous: a savvy consumer of pharmaceuticals, used to many pages of dire warnings, might well be put on guard by the lack of similar warnings on the Defendants’ products.”  Plus, Pom singled out drug labeling as an area where the FDA takes a particularly active role, and claims might be precluded.  Par argued that the defendants’ products were unapproved and thus effectively unregulated by the FDA; the court wasn’t unsympathetic to this argument, since there was no pre-approval of the label here.
But the court didn’t need to resolve the question, because the court could not determine that Par’s Adrenalin was not less safe than defendants’ products, as required for the implied message to be false. Par didn’t allege any facts about comparative safety, and if it had done so “the safety determination would almost certainly require the scientific expertise of the FDA, and so would likely fall within the agency’s primary jurisdiction.” Claims dismissed.

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3rd Annual Trademark Works in Progress event at AU

Posted on October 10, 2014 by rtushnet

Charles Colman, Trademark Law and the Prickly Ambivalence of Post-Parodies: The way that people play with trademarks that companies have deliberately infused with atmospherics, per Jessica Litman, and to which people have predictable emotional responses.  TM doesn’t have good ways to deal with these playful uses, especially with respect to images—have more precise rules for language (whether or not those rules are good) and the rules just don’t map—there’s no such thing as syntax/plain meaning (or, I’d say, the syntax of the image is different).  His examples: used on apparel and thus not subject to Rogers or other First Amendment protections—infringing/dilutive but still expressive/satirical.  These images don’t lend themselves to one definitive, articulable message as parody law demands, partly because of the nature of imagery. Even trained artists have trouble expressing abstract concepts in recognizable forms.  Hyundai/LV example: the court didn’t find a coherent message.  Won’t always have narrative, or indices of what images mean—it’s not manageable to have canons about what a triangle means or what it means when it’s next to a circle: artist intention/audience reception will be diverse.
Companion paper: possible avenues of approach.  (1) Take author at their word. Creates problem w/authors who lie or don’t speak intelligibly.  (2) have the jury interpret.  Less productive even than confusion b/c of diversity of interpretations.  (3) compulsory licensing? Something between all-out infringement and total freedom—like a cover song.  Not a critique; not a market failure, but using the mark in a way that justifies some compensation.  Hard to implement. (4) Allow all ornamental uses of TMs.  There’s a major disconnect b/t the notion of a TM use in the courts and a notion of TM use in the PTO: examiners don’t allow specimens that are ornamental.  Courts haven’t adopted this notion explicitly, though they sometimes do it through other means.  Under this approach, these are all ornamental uses under the PTO’s interpretation. (5) disallow all these uses, but he thinks that’s unconstitutional because these are artistic uses.
Leah Chan Grinvald: RT’s idea of double identity would clash w/your proposal; that’s what the Arsenal football case was about. 
Colman: true, these are artistic uses but they are uses on clothing. TM has been obsessed w/economics, efficiency, search costs but TMs serve a lot of noneconomic functions that the law hasn’t properly addressed.  “Copyright” uses of TMs.  The First Amendment should trump efficiency concerns.  What Posner thinks of as waste, when consumers sort out things in their minds, is actually constructive—they have to think. 
Mary LaFrance: why not just say these aren’t TM uses?
Colman: because that doctrine hasn’t been accepted. At least ornamentality is a doctrine that exists at the PTO. Other countries don’t belabor the issue as they do here.
LaFrance: if these things were on a wall, they’d be Rogers. Why not here?
Colman: still requires a TM use inquiry. Need to bypass that inquiry, as compulsory licensing does. Or maybe you only get injunctive relief.  Images can’t be descriptive fair use because images don’t have clear descriptive meaning.  Courts either pretend the meaning is obvious or say that any expression there doesn’t count for TM purposes.
LaFrance: is compulsory licensing a potential trap for the unwary? College kids doing fundraising?
Colman: possible; maybe an ASCAP like system where the university has a license.
LaFrance: concerns about that—not all naïve people w/messages are affiliated w/institutions.
Colman: preferable to being sued!  (Can you stop TM owners from threatening suit even in a compulsory license situation?  ASCAP threatens all the time.)  Not inclined to compulsory licensing as a practical matter because of the TRIPS problem.  Where TRIPS conflicts w/the 1A, though, domestic law controls.
Dan Hunter: praises thick description of what’s going on in fashion.
Colman: we need these studies; it’s also ignored because of devaluation of the feminine.
Hunter: too hard on Veblen. 
Colman: his theory continues to dominate judicial thinking—post-sale confusion.  Beebe points out issues w/his theory; Sheff’s article on Veblen Brands shows that it continues to wield influence.  There are many other roles for fashion, but wasn’t trying to write a comprehensive account.
Hunter: he’s never interested in 1A law.  Ornamental use is the flip side of the merchandising right.  All our assumptions these days about merchandising on products in a non-source-identifying way are that this is ok.  In looking at rise of merchandising right, could we say: we’ll give you that right, but in exchange, this sort of ornamental referential use to your merchandising is allowed.
Colman: yes, brands sort of got what they deserved in embuing these products with atmospherics.  Hard to get too far based just on equity.
Hunter: not equity; why we’re ok w/merchandising right, which seems contrary to stated aims of TM law. We’ve just given in? 
Colman: result of ambiguity of 43(a)’s language of source, affiliation, sponsorship.  Would have to tackle irrelevant confusion. Not sure he has new things to say about that general topic.
Cathay Smith: In the ideal situation, would Rogers v. Grimaldi work? 
Homies T-shirt in Hermes style font

Colman: it’s a conceptual non sequitur.  You can’t discuss whether Hermes has relevance to this shirt because it’s an image.  Transformativeness has no meaning in TM law.  Parody test in TM, because of Campbell, has gotten so narrow; it hasn’t benefited from concomitant expansions in fair use though so we’re left without First Amendment breathing room. Thought about © fair use, but if you can’t interpret the image then it comes down to how much is taken and how you determine whether it’s transformative other than the judge’s intuition. Market substitution: at least that’s somewhat empirical, unless you go down the licensing rabbit hole.

With parodies, the confusion test gets turned upside down. Use of the whole mark doesn’t matter; strength of the mark favors defendant; etc. Courts are pretending to apply confusion/are intuiting that this is free expression. Doesn’t want to draw distinctions about what’s art and what’s not.  Larger percentage of viewers may be able to agree on Barbie messages than on these—visually simple/interpretable compared to his examples.  (I really disagree.)
Sarah Hinchcliffe: how realistic is jury as proxy for image interpretation?  Also, why not consider economic rights/property rights as a balance to expressive rights?
Colman: can’t put a price on 1A rights; Rogers avoids economic inquiry altogether. The definition of property is what’s up for debate.  If TM is about efficiency of communication, then it’s often an efficient way to convey information for other speakers.
RT: There are other cases on confusion/parody where the defendant wins in circumstances where there’s no clear message: LV in the Fourth Circuit; Timmy Holedigger.  Barbie: take a look at those photos and try to articulate their message.  I have: it’s hard to do!  Nonetheless both levels of courts recognized them as parodic even in the presence of a consumer survey.  So there’s not consensus on the need for a particular type of humor. Go back to history when there wasn’t a parody/satire distinction. I do think Rogers can be applied meaningfully: Pig Pen case; Tiger Woods case: there’s artistic relevance because it’s about him. Why isn’t Hermes relevant because this is a riff on Hermes? Rogers might just always remove liability but that doesn’t make it incoherent. It just makes Rogers a strong protection: right of publicity cases.  Check out Zahr Said on interpretivism, dealing w/similar problems in ©.  (I think it’s not the ambiguity of the language of 43(a) that gave us the merchandising right; it’s the equation of recognition w/confusion in Boston Hockey + lack of a materiality requirement that used to be inherent in the statute.)

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Court declines to apply Lexmark to TM

Posted on October 8, 2014 by rtushnet
Peter Kiewit Sons’, Inc. v. Wall Street Equity Group, Inc., 2014 WL 4843674, No. 8:10–CV–365 (D. Neb. Sept. 29, 2014)
This is a default so it’s just what the court decided to examine with respect to the facts; nonetheless there are some points here worth noting about Lexmark and dilution.
Kiewit is a construction and mining company.  The primary defendant is Steven West (apparently a name he uses for business) who was associated with various corporations, including the corporate defendants.  The Wall Street entities claimed to help (relatively) small business owners sell their businesses to larger companies.  Kiewit does from time to time acquire other companies, and in 2008 it acquired a business that had responded to an ad placed by one of West’s businesses and West’s company initiated contact with Kiewit. Kiewit concluded after speaking with them that West’s company did not have any actual expertise in business acquisition, so Kiewit worked directly with the other business to complete the sale. “West only appeared at the closing, apparently to collect his fee.” Then:
Later that year, a small business owner from Virginia contacted Kiewit and asked if Kiewit was interesting in buying his business. He explained to Schmidt that he’d been contacted by Mr. West and that he was told Mr. West performed valuations of companies and that his valuation was the only one that Kiewit would accept and that Mr. West had a Kiewit executive in his board room waiting to talk to [the small business owner] as soon as [he] signed an engagement letter to engage Mr. West’s firm to perform a valuation.
Wall Street Group sent a letter claiming to be the “leading private investment bank in America,” and mentioning “[b]ackground on the buyer, Kiewit.”  The business would be expected to pay $20,000 to $30,000 to create an “appraisal and business profile” to assist with the sale.  Kiewit sent a C&D, and received a letter denying that any affiliated entities had held themselves out as representing Kiewit.  But in April 2010, the problem recurred with a small business in Wyoming. 
Kiewit sued, resulting in a “protracted and ugly discovery process” involving defendants’ misbehavior.  While defendants claimed to have no other documents showing use of Kiewit’s mark, they in fact did: “Kiewit eventually obtained a number of effectively-identical letters using the Kiewit mark to solicit different businesses, and client lists and records suggesting that more letters had been sent that remained undiscovered.”  The use of the Kiewit mark, the court found, was widespread and “It involved dozens and perhaps hundreds of solicitations, and at least hundreds of thousands of dollars in fees paid by unsuspecting businesses.”
The court entered a finding of default as a sanction for the discovery abuses.  On a default judgment, facts alleged in the complaint—except as to damages—may not be later contested.  But the court has to determine whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit conclusions of law.  Also, the court can conduct a hearing to “establish the truth of any allegation by evidence” and “investigate any other matter.”  Because the allegations of the complaint were relatively threadbare, the court did so; Kiewit was entitled to both the admitted allegations of the complaint and all reasonable inferences from the evidence admitted at the hearing.
Trademark infringement: yup.
False advertising: Kiewit proved that defendants made statements that conveyed a false impression that Kiewit was already an interested purchaser that had engaged the defendants to broker a sale. The court commented that “[t]he evidence suggests that in conversation, the defendants’ representatives were less ambiguous than the letters that are in the record,” but thought that private assurances wouldn’t be commercial advertising or promotion so limited its considerations to the letters.  I think this is too limited a reading: once there is a coordinated campaign of advertising or promotion, statements made in furtherance of it, at least regularly so, ought to be considered part of that overall campaign.
The court found other problems, specificially the need for sufficient dissemination to the relevant purchasing public within an industry.  “The speech must target a class or category of purchasers or potential purchasers, not merely particular individuals.”  Section 43(a)(1)(B) doesn’t cover all commercial speech, only organized attempts to penetrate the relevant market. The court found defendants’ promotional efforts to be “extensive,” but insufficient to count as commercial advertising or promotion.  Each letter referred to a previous telephone call, making them “individual follow-ups to previous contact with potential customers. … There may have been a lot of letters, and they may have been form letters, but they do not suggest a concerted effort to penetrate a marketplace.”  Again, this seems to me an unduly narrow reading of the cases.  What is a form letter, sent apparently hundreds of times, if not a “concerted” attempt to penetrate a market? Even if the form letter is the second contact, it’s still part of an organized campaign—and I imagine the phone calls had a script as well.
And also there was the issue of standing.  When the case was filed, it was DOA on standing, but Lexmark might’ve revived it.  Now the question is whether Kiewit is within the zone of interests protected by the Lanham Act, and whether its injuries were proximately caused by defendants’ false advertising. This requires economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising, “and that that occurs when deception of consumers causes them to withhold trade from the plaintiff.” In a footnote, the court commented that it saw no reason to apply the same proximate cause standard to §43(a)(1)(A), even though the Court referred generally to §43(a), because the Court’s reasoning was particular to false advertising and because that standard would cause a “sea change” in trademark law.  Well, yes, it would.  So too has eBay (or, going back further, Wal-Martand Dastar).  I myself don’t see a basis in Lexmark’s statutory interpretation—which includes the Court saying that proximate cause is always, always, always required unless Congress does something magical—for making this distinction.
Anyway, Kiewit was ultimately unaided by Lexmark.  It was “arguably possible to get from the defendants’ false claim about an association with Kiewit to a reputational injury to Kiewit, by virtue of associating Kiewit with disreputable defendants.”  But defendants’ customers weren’t likely to be Kiewit’s, “and it is difficult to imagine how the defendants’ false representations—even if they reflected poorly on Kiewit—could result in an actual commercial injury to Kiewit capable of clearing the bar set by the Supreme Court in Lexmark.”  So here we have the payoff: the court wants to find trademark harm, but not false advertising harm.  Proximate cause may be required, but proximate cause of what?  Like eBay, Lexmark may force courts to confront the return of the repressed: the fact that about a hundred years ago courts accepted sketchy theories of trademark harm that don’t actually apply across the board and may rarely be true at all.
Surprisingly, after its extreme care with §43(a)(1)(A), the court proceeds to be extremely sloppy about federal trademark dilution.  Kiewit’s evidence and allegations established a prima facie case of dilution by tarnishment, and “[t]he allegation that Kiewit’s mark is famous is admitted,” so that was it.  Because actual economic injury isn’t required, the reputational injury of being seen as complicit in what defendants’ customers could fairly describe as a scam was sufficient for liability.  But, as I noted in an earlier post, “famous” shouldn’t be treated as a factual allegation, and it defies credulity to claim that Kiewit is widely recognized by the general consuming public, as the statute requires.
State law claims: yep, liability, except for liability under Nebraska’s Consumer Protection Act, which requires that unfair or deceptive acts or practices affect the public interest/the people of Nebraska.  There was no evidence that defendants solicited in Nebraska, at least on more than an isolated basis.
Damages: defendants’ conduct was willful, but there was little reason to conclude that Kiewit suffered actual damages, which also put treble damages off the table. However, the court could also look at awarding profits, including an award of an amount found to be “just” if profit-based recovery was inadequate or excessive to make violating the Lanham Act unprofitable.  The court therefore enhanced the profit award, in part to avoid rewarding defendants for successfully concealing and destroying evidence.  The court had no doubt that the actual profit from use of the Kiewit mark was “substantially greater” than that for which direct evidence was obtained.  Kiewit was prejudiced by defendants’ spoliation; though this wasn’t a monetary sanction for spoliation, an adverse inference from the spoliation was justified.
There was direct evidence of $124,910 paid to the defendants based on solicitations known to have contained the Kiewit mark, plus payment of unknown amounts from four other businesses.  Using the average from the known payments, that went up to $174,874. Tripling that amount was a conservative measure to recover amounts paid from unknown businesses. The incomplete records suggested that “at least dozens of businesses were contacted and paid the defendants,” which then got them on a do not call list for further solicitations.  The court inferred from the type of businesses on the list and the consistency of the defendants’ solicitations that they used the Kiewit mark in many if not all of these sales.  Thus, the court awarded $524,622 for disgorged profits as a remedy for the defendants’ willful trademark infringement—“and the Court stops there in no small part because Kiewit conservatively elected not to ask for more.”
No damages for dilution.  Although defendants intended to take advantage of Kiewit’s reputation, there was nothing to suggest they “willfully intended to harm the reputation of the famous mark.”
Attorneys’ fees and injunctive relief were also awarded (the court using a presumption of irreparable harm), and the court pierced the corporate veil to get at West.  No prejudgment interest, though, since that’s appropriate “when the amount of the underlying liability is reasonably capable of ascertainment and the relief granted would otherwise fall short of making the claimant whole because he or she has been denied the use of money which was legally due.”  Given that the amount of the underlying liability was substantially questionable—even though that was defendants’ fault—and that the remedy here was disgorgement instead of compensation for injury, the court found prejudgment interest inappropriate.

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Future of Music conference announcement w/scholarships

Posted on October 8, 2014 by rtushnet

The Future of Music Coalition’s 14th annual Policy Summit ( http://futureofmusic.org/summit ) is October 27-28 in Washington, DC. It is offering scholarships for students and musicians starting at $25 for both days. 

From FOMC:

Future of Music Coalition ( http://futureofmusic.org ) is a national education, research, and advocacy nonprofit for musicians based in Washington, D.C. 

The goal of the Future of Music Policy Summit is bring together some of the smartest people to discuss some of the toughest issues facing music today. Gathering academics, attorneys, composers, entrepreneurs, managers, musicians, policy thought leaders, students, and technologists this year the Summit will tackle musician’s services, copyright, metadata, activism, transparency, monopolies, songwriting, a road plan for jazz, the rise of electronic dance music industry, and much, much more. 

You can see video highlights from our 2013 Policy Summit at http://vimeo.com/album/2903526. The 2014 Summit will feature Keynote Addresses from: 
· Mignon Clyburn, Commissioner, Federal Communications Commission
· Damian Kulash, OK Go 

And feature more than 50 expert panelists including: 
· Ceci Bastida, Musician
· Felix Contreras, Co-host, Alt.Latino, NPR
· Kiran Gandhi, Drummer/Percussionist
· Katie Alice Greer of Priests
· Jodie Griffin Senior Staff Attorney, Public Knowledge
· Shawn King, Musician, DeVotchKa
· Thomas Frank Columnist, Salon.com
· Tracy Maddux, CEO, CD Baby
· Martín Perna, Musician, Antibalas
· Tom Silverman, Executive Director, New Music Seminar
· Fox Stevenson, Singer, Songwriter and Producer
· Joe Torres, Senior External Affairs Director, Free Press
· Emily White, Co-founder, Whitesmith Entertainment

The Future of Music Policy Summit is two jam-packed days of discussion that go beyond the typical conference fare. The Summit is widely respected as a place where all perspectives can be heard in constructive dialogue, cutting through industry hype and overheated rhetoric to focus in on the real challenges and opportunities in today’s music space. 

The full schedule with speakers and panelists can be found at http://futureofmusic.org/summit . 

Students and musicians can apply for a scholarship to attend starting at $25 athttp://bit.ly/FMC2014.

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How to analyze fame on the pleadings

Posted on October 8, 2014 by rtushnet
Leapers, Inc. v. SMTS, LCC,  2014 WL 4964376, No. 14–CV–12290 (E.D. Mich. Oct. 3, 2014)
Leapers alleged trade dress rights “in the distinctive scalloping design applied to the adjustment knobs and bells of its rifle scopes and/or sights” which were allegedly both “distinctive and non-functional” as well as “famous and … widely recognized by the general consuming public of the United States as a designation for the source of the goods of Leapers.”  Defendants allegedly infringed and diluted the mark.
The description of the alleged trade dress was sufficiently precise to sustain the infringement claims, and was identifiable in the photos attached to the complaint.  Defendants argued that the grooves served a function, and that Leapers didn’t plead nonfunctionality with sufficient particularity.  “Although the court will be keen to learn how Plaintiff’s ‘scalloping’ design is no more than decoration, that it is neither in any way ‘essential to the use or purpose of the article,’ nor a feature that significantly ‘affects the cost or quality of the article,’ at the pleadings stage a simple, and illustrated, assertion of non-functionality shall be sufficient.” Likewise, the complaint’s allegations about Leapers’ efforts over the past twenty years in advertising and otherwise developing its marks was enough to plead secondary meaning.
Not so fame.  Under the case law, famous marks include Audi, Victoria’s Secret, Nissan, Nike, Rolex, Pepsi, and “the iconic … classic Hershey’s bar” design.  Niche fame isn’t enough.  Grease pumps, the Texas Longhorns logo, MENSA, Quicken Loans, and the red seal on Maker’s Mark whisky aren’t famous.  Even assuming fame in the firearms community, “it is implausible that Leapers can support its conclusory assertion that Leapers’ ‘marks have become distinctive and famous and are widely recognized by the general consuming public of the United States.’”  (Footnote: the court comments that Maker’s Mark didn’t appeal its loss on dilution, “which is fitting given that Maker’s Mark is best undiluted.”  Cute—if not entirely logical.)
That’s the way to do a fame analysis on the pleadings.  Later in the day I’ll have another case that, in evaluating a defendant’s default, wrongly accepts a ridiculous and similarly conclusory allegation of federal fame.  “Famous” here is a legal conclusion, not a factual allegation, given that fame is defined using a multifactor test in the statute.

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The language of consumer reviews

Posted on October 7, 2014 by rtushnet

Via Eric Goldman’s roundup, the best thing I’ve seen all day:

In a recent study we used computational linguistics to examine a million reviews on the web and found that when people write a 1-star review, they use the language of trauma: precisely the same words used by people writing about tragedies like the deaths of loved ones, for instance the pronoun “we” to emphasize a collective sense of grief and solidarity….Positive reviews of expensive restaurants use metaphors of sex and sensual pleasure, such as “orgasmic pastry” or “seductively seared foie gras”, demonstrating our sensuous, hedonistic nature. But positive reviews of cheap restaurants and foods instead employed metaphors of drugs or addiction: “these cupcakes are like crack,” and “the wings are addicting”.

Dan Jurafsky, The Language of Reviews.

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Phantom trademark of the Opera: Dastar bars Slep-Tone’s claim

Posted on October 3, 2014 by rtushnet
(There are a lot of Slep-Tone cases floating out around there. I like this one.)

Slep-Tone Entertainment Corp. v. Canton Phoenix Inc., 3:14-cv-00764 (D. Or. Sept. 4, 2014) (magistrate judge)

Slep-Tone, a maker of karaoke CDs, alleged that defendants (a bar) possessed a hard drive storing over 24,000 unauthorized karaoke tracks “bearing Slep-Tone’s trademarks and distinctive trade dress,” and used those tracks to provide karaoke entertainment services to their customers without a license.  The marks display as part of the audio-visual display of a karaoke track when it’s played.  But Slep-Tone apparently won’t or can’t bring a copyright claim (indeed, elsewhere it’s being sued for infringing music companies’ copyrights in creating its karaoke CDs) so it brought trademark claims under state and federal law. Slep-Tone alleged that defendants’ customers were likely to be deceived by the graphical display of the marks during karaoke performances into believing that the tracks were properly licensed or legally purchased.  (Query whether it’s plausible that reasonable bar consumers would have any belief at all about this unless prompted.)
Defendants argued that this was a job for copyright.  The judge agreed that “not all potential consumer confusion involving commercial use of a product bearing an enforceable trademark (or bearing protectable trade dress) can give rise to a Lanham Act claim,” particularly when there was an overlap with copyright.  Though Slep-Tone’s claims didn’t depend on Fox’s rejected theory of required attribution in Dastar, Dastar nonetheless provided guidance by reaffirming the rule that the Lanham Act doesn’t provide protections of the same nature as those provided by copyright or patent.  In general, copying is allowed unless an IP right like copyright or patent protects it.  (What about a disclaimer requirement to harmonize TM with copyright/patent?  Since disclaimers often don’t work, especially when they’re about matters that are immaterial to most consumers, I’d suggest it doesn’t make sense to make protection from trademark claims based on copying an expressive work or functional item turn on whether or not there was some sort of disclaimer.)
So, in Dastar and Traffix, for example, the Court cautioned against “misuse or over-extension” of trademark and related protections into areas traditionally occupied by patent or copyright. Dastar rejected Fox’s theory because its interpretation of the Lanham Act “would permit trademark rights to be enforced to  prohibit the public from copying and using intellectual property, which is beyond the scope of trademark law.”  Dastar’s reasoning was not limited to cases in which the copyrights at issue were expired: “either in the absence of an enforceable copyright or where a copyright-holder elects not to invoke its copyright, under Dastar the protections of the Lanham Act cannot be construed as ‘dropping down’ to provide protection exclusively available under copyright law.”
Ninth Circuit cases similarly establish “a bright line between rights that may properly be enforced under copyright law and the protections available under the Lanham Act.”  Smith v.
Chanel, Inc., 402 F.2d 562 (9th Cir. 1968), held that someone who’s copied an unpatented article sold under a trademark can use the mark in advertising to identify the copied product, absent misrepresentations or confusion about source or sponsorship.  As Smith said, “it is difficult to see any other means that might be employed to inform the consuming public of the true origin of the design.” The alternative would be to convert a monopoly on a mark to a monopoly on a product.  Lack of protection against deliberate copying is not the unintentional result of the current law but rather the product of a congressional decision, and the copyist is tolerated for the greater public good. “Viewed from the narrow perspective of trademark law, copying the intellectual proprty of another, even if for the purpose of commercial gain, is not wrongful (notwithstanding  its potential wrongfulness relative to the metric of copyright or patent law).”
Nintendo v. Dragon Pac. Int’l, 40 F.3d 1007 (9th Cir. 1994), approved both copyright and trademark infringement damages against the argument that this was an inappropriate double recovery. But the Nintendo court “finely parsed the defendant’s complained-of conduct to detrmine which elements of the conduct specifically infringed the Lanham Act, and which the Copyright Act.”  The defendant imported video game cartridges with unauthorized copies of Nintendo’s games; the cartridges “bore the plaintiff s trademarks, and indeed were represented as the plaintiff s products.”  The Ninth Circuit found that there were separate wrongful acts, and that if the defendant had sold the cartridges without representing that they were Nintendo’s, it still would have infringed the copyright.  If the defendant had represented that its cartridges were Nintendo’s without copying, it still would have infringed the trademark.  (Note that the copyright infringement version would certainly still involve Nintendo’s marks appearing in the game itself.)  Thus, separate damage awards were allowed.
Then there’s Comedy III Prods., Inc. v. New Line Cinema, 200 F.3d 593, 595 (9th Cir. 2000). The owner of the Three Stooges’ trademark rights sued New Line for using a public domain clip from a Three Stooges film in the background of a scene in a New Line film.  The Ninth Circuit characterized the plaintiff’s argument as “fanciful,” and rejected it in “summary fashion,” stating that “the Lanham Act cannot be used to circumvent copyright law.”  The court further noted that Comedy III’s argument was that the Stooges’ images could be protected by the Lanham Act “because it contains elements that in other contexts might serve as trademarks.”  If New Line had used the Three Stooges’ likenesses on T-shirts, maybe there’d be an arguable trademark claim, but the claim at bar intruded “squarely into the dominion of copyright law,” by claiming trademark coverage of “a piece of footage taken directly from a film by The Three Stooges.”
This reasoning applied with equal force where the underlying material was not in the public domain. Comment: The way I’d put it for these purposes is that if the trademark claim stems solely from the copying of an expressive work, rather than from the separable packaging of that work (and images of/metadata about the expressive work should be considered inseparable), then copyright law must trump trademark law.  In other words, an expressive work’s producer shouldn’t be able to create a trademark claim by embedding a network bug or other logo in its copyrighted work.
Though none of the cases was precisely on point, together they guided the judge to the conclusion that Slep-Tone’s claim was untenable.  Slep-Tone alleged facts tending to establish that its tracks were derivative works created based on underlying works, and that defendants’ hard drive contained unlicensed, unauthorized copies thereof.  The allegations, if true, established unauthorized reproduction and public performance; it was outside the scope of the pleadings to speculate about why Slep-Tone didn’t sue for copyright infringement.
The question was whether calling defendants’ conduct trademark infringement would “impermissibly intrude on the exclusive bailiwick of copyright law.”  It would.  Under Smith, the presence of Slep-Tone’s marks at the beginning of a track, and the display of its trade dress, “is not calculated to cause consumer confusion but rather performs the entirely appropriate function of conectly identifying the provenance of the tracks.” Under Dastarand Comedy III, it would infringe to sell CDs labeled with Slep-Tone’s marks or advertised Canton Phoenix as offering “Sound Choice” karaoke services. But copying or publicly performing the tracks doesn’t infringe.
In a footnote, the judge noted that other opinions had disagreed on the theory that Slep-Tone wasn’t seeking to protect its “intellectual content” but rather to prevent an unauthorized third party from using Slep-Tone’s marks to create the impression that it was Slep-Tone’s licensee. [The problem with that, of course, is that Slep-Tone has embedded its marks in expressive works.  The “use” is the copying.]
Ultimately, “a trademark holder may not rely upon trademark law to safeguard rights available only under the Copyright Act.”  And here the judge offers a fantastic example:
[B]ecause the 1925 silent film The Phantom of the Opera is in the public domain, it is uncontroversial that it may be performed publicly, including for the purpose of commercial gain, and that copies of the 1925 public-domain version of the film (as opposed to more recent re-edits which may be subject to copyright as derivative works) may be (and routinely are) packaged under a new label and sold to the public for commercial benefit.  The fact that the public-domain film opens and closes with Universal Studios’ registered and still­enforceable trademarks is no obstacle to either public performance or sale of the public-domain film, so long as the packaging or labeling of the medium in which the copy is fixed does not bear the Universal Studios trademark or any information likely to confuse consumers as to whether the repackaged copy is a Universal Studios product. 
Defendants’ alleged conduct was no different.  Slep-Tone’s remedies would sound exclusively in copyright. 
The judge also recommended dismissal of Slep-Tone’s state law claims on the merits, not just for lack of federal subject-matter jurisdiction.  The state law claims would stand or fall with the Lanham Act claims.  For state statutory trademark infringement, defendants’ use of the marks wasn’t “in connection with” sale, distribution, offer for sale or advertisement of goods or services, but rather was in connection with public performance of the karaoke tracks.  [Use as a mark can be used as spackle to solve complicated trademark problems!]  The fact that defendants allegedly derived economic benefit from the performance isn’t enough to create a sale, distribution, offer for sale, or advertisement.  Likewise, Oregon common law requires competition, and defendants don’t compete with Slep-Tone in  the production, marketing, or sale of karaoke CDs, nor would the presence of Slep-Tone’s marks suggest that the tracks were defendants’ products.

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CFP: INTA trademark scholarship symposium

Posted on October 3, 2014 by rtushnet
Call For Papers: Sixth Annual INTA Trademark Scholarship Symposium

The International Trademark Association (“INTA”) is pleased to host the Sixth Annual Trademark Scholarship Symposium during the 137th INTA Annual Meeting in San Diego, California. The Symposium will take place on Monday, May 4, 2015 as part of INTA’s Academic Day and is an opportunity for trademark scholars from around the world (including part-time and full-time professors, graduate and post-graduate students) to participate in small group discussions of scholarly works-in-progress. Each selected scholar will present their project in a workshop setting, receive comments, and engage in a dialogue with other academic scholars and accomplished trademark practitioners.

Please send an abstract (approximately 300 words) describing a current trademark or unfair competition scholarship project to project co-chairs Julie Cromer Young at jcromer@tjsl.edu and Jim Faier at jmfaier@faier.com by November 1, 2014. The project team will then select a maximum of 8 projects to be presented at the Symposium, grouped into related topics or themes. Selections will be announced by February 1, 2015. For each selected project, a working draft of the paper (10-20 pages) must be submitted by March 15, 2015. There is no publication obligation.

Participants will receive complimentary registration to the Academic Day program, including an all-professor panel exploring boundaries of trademark law, a trademark professor luncheon, a reception and other networking opportunities. Additional expenses are the speaker’s responsibility. For INTA membership and Annual Meeting registration information, please contact Nilsa Laboy at nlaboy@inta.org.

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statements to regulators aren’t commercial advertising

Posted on October 3, 2014 by rtushnet
Presby Environmental, Inc. v. Advanced Drainage Systems, Inc., No. 13–cv–355, 2014 WL 4922986 (D.N.H. Sept. 30, 2014)
Presby sued ADS, a competitor in the septic system product market, for allegedly violating a settlement agreement; I’m only going to address the Lanham Act aspects.  Presby’s waste treatment disposal system at issue is Enviro-Septic, while ADS’s is GEO-Flow, both designed to replace traditional septic systems, and both subject to regulation by environmental authorities.  In 2008, Presby sued, alleging that ADS was securing state approvals for GEO-Flow by improperly relying on testing that Presby had conducted on the Enviro-Septic system.  They settled with an agreement that ADS wouldn’t represent in the marketplace that GEO-Flow was the “functional equivalent” of Enviro-Septic and that it wouldn’t use Enviro-Septic test data as if they applied to GEO-Flow in regulatory or approval processes.
ADS allegedly made a series of representations about the functional equivalence of GEO-Flow and Enviro-Septic, including by providing the Vermont Department of Environmental Conservation and the Indiana State Department of Health with a copy of a document prepared by the New Hampshire Department of Environmental Services that compared the two systems. ADS allegedly told Vermont and Indiana regulators suggesting that GEO-Flow and Enviro-Septic were similarly-sized and functionally equivalent.  The complaint also alleged that ADS provided similar information to environmental regulators in Massachusetts and New York.
The court allowed the breach of contract claim based on the settlement agreement to continue in part, but dismissed the Lanham Act claims.  It wasn’t clear whether Presby brought a false association or false advertising claim, but it failed either way.  For false association, consumer confusion is required.  Presby didn’t allege any confusion by consumers; the only relevant allegations involved representations to state environmental regulators, but didn’t explain how consumer confusion could result. 
Presby argued that deliberately false statements, made with an intent to deceive, didn’t require accompanying allegations of consumer confusion.  But that’s false advertising literal falsity, not false advertising. Presby pointed to an affidavit about the surreptitious installation of GEO-Flow instead of Enviro-Septic at certain job sites. Even if the court considered these allegations, isolated incidences of swapped septic systems weren’t the same as confusing an appreciable number of reasonable consumers.  (What’s the size of the relevant market?)
False advertising also failed as a theory for want of “commercial advertising or promotion.” The complaint merely alleged a series of representations to environmental regulators in different states.  Advertising or promotion for Lanham Act purposes requires commercial speech intended to influence potential consumers to buy the speaker’s products or services, sufficiently disseminated to the consuming public. “[S]tatements made to government regulators do not constitute commercial advertising,” and “generally are not intended to influence consumer choice.”  Presby argued that the regulators here were gatekeepers, whose approval was required before ADS could market its product. That was insufficient.

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EFF investigates keylogger software, finds false advertising

Posted on October 1, 2014 by rtushnet

From its report on ComputerCOP:

In investigating ComputerCOP, we also discovered misleading marketing material, including a letter of endorsement purportedly from the U.S. Department of Treasury, which has now issued a fraud alert over the document. ComputerCOP further claims an apparently nonexistent endorsement by the American Civil Liberties Union and an expired endorsement from the National Center for Missing and Exploited Children.

And, of course, this software touts itself as the “perfect election and fundraising tool,” and its producers donate to the campaigns of at least one purchaser. 

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