IPSC Opening Plenary Session

Posted on August 8, 2024 by rtushnet

IP Outside the (Doctrinal) Box

Andrew Gilden: Love & Hate in IP

IP’s struggles with joy, pleasure, and fun—happens with sex,
but also with enjoyment. Courts are pretty openly hostile to statements by Ds
that they enjoyed engaging in the disputed conduct. Fandom—Polychron (LoTR), Axanar
(Star Trek), Harry Potter Lexicon. Fandom is considered a reason to rule
against the D. “Perhaps because Vander Ark is such a HP enthusiast, the Lexicon
often lacks restraint in using Rowling’s original expression.” Also, efforts to
entertain fans are seen as a reason to impose liability: fans’ pleasure as what
the IP owner owns. Making people think differently about a work: fair. Fans are
framed as hungry, passionate, horny. Anti-fandom or alienation from the work is
more likely to be found fair. Lombardo v. Dr. Seuss, Adjmi v. DLT Entertainment
(Three’s Company, Adjmi talks about finding pop culture baffling and
alienating); Lyons v. Giannoulas (D really hated Barney the dinosaur).
Appropriation art: see a distinction between celebration and detachment. Cariou
v. Prince finds fairness in many images when Prince didn’t care about other
artists; Graham v. Prince rejects fair use when his stated intent was to have
fun. Critical distance from work matters.

Sexual pleasure: when mark is used to “titillate” or convey
a message that sex is good, that doesn’t establish parody or commentary.
Copyrightability of sex toys: court says that providing sexual pleasure is a
purely utilitarian function, not creative. Stimulating the mind is not
separable from stimulating the body. But insulting someone, including by degrading
them sexually, is more likely to be found fair/parodic. Disdain as paradigmatic
fair use. Mattel v. Pitt: Dungeon Doll is fair use in the context of sexual
slavery and torture. Catcalling in Campbell.

IP cases privilege violent sexuality over affirming,
light-hearted sexuality.

By contrast: having fun is not privileged. Buckyballs case;
Jack Daniels v. VIP—amusing dog owners is not a relevant interest. But outright
mocking does better. Thus, butt-related parodies are less likely to be
confusing—Buttwiper, Lardashe. Insult as litigation strategy: Jim Henson made
sure to mock Spam in the Muppets case.

Harms of the pleasure taboo: (1) rejects lived experience of
creativity: creativity feels good; (2) if you admit to having fun, it weakens
your case, so that discourages you from telling the truth/encourages you to tap
into your childhood trauma; intellectualize motives; (3) turns fun into
something owned by the IP owner. Most fandom involves a combination of love and
hate; but IP encourages downplaying the celebration in mix of celebration and
critique. Punishing things that are incentives for creativity is bad, actually.
Market failure explanations exist, but the flip side is that joy and pleasure
end up seen as commercial property.

Recommendations: think critically about love and hate; hate
and pain can be silencing; calling a woman ugly is not the proper paradigmatic
example of fair use. Happy-talk rules are bad and viewpoint discriminatory
according to the Court in Elster; but so are awful-talk rules.

Peter Lee, Synthetic Data and the Future of AI

ML models and training data

Real world training data can be difficult and expensive to
gather; needs to be cleaned and label; high cost of acquisition contributes to
concentration in ML field. Threats to privacy: personal info used as training
data. Real world data may have biases—African Americans have lower historical
health care expenses b/c they have lower access, but ML may interpret that as
lower needs. Copyright infringement claims: uncertainty creates enormous risk
for ML developers.

Synthetic data is artificially created; has a recursive
character. AI models create synthetic data to train other models. Estimate: by
end of this year, 60% of training data will be synthetic. Varies in how
synthetic it is—could rotate an image 15%; augmentation/modify an existing
dataset. Model-based synthetic data (deepfakes used to train); synthetic environments
like simulated driving space. Training on fictitious records can minimize
privacy concerns, fill in gaps of RW datasets for underrepresented populations;
avoid © infringement, in theory, though may simply shift issues upstream. But
it can be low quality; leak information, too similar to reality, amplify
real-world bias. It can also be too different from the real world; “model
collapse.”

Innovation mechanisms to ensure robust, responsible development
of synthetic data: Law & policy are inputs into the creation of synthetic
data. Three objectives: provisioning high quality data; disclosure of data and
methods to promote validation; democratization of access and multiple sources
of synthetic data generation.

Jacob Noti-Victor, Regulating Hidden AI Authorship

Marvel got in trouble/claimed that AI was only used to
supplement humans; it’s getting hard to tell in many cases what’s AI generated.
Creates incentive to hide use of AI. Also problems with copyrightability create
incentive to hide AI origin.

Are consumers harmed by failure to disclose? Consumers have
preferences for process—like ethically sourced coffee. Authenticity concerns;
concerns for fandom/connection to the artist. Artists have recourse for
appropriation of voice or likeness, but maybe artists license their voice or
likeness and so they are ok and the consumers are the ones who lose out. Of
course, AI is supplanting a lot of authorial agency—that creates a contrast
between assistive uses (editing) versus generating main plot points plus a teeny
bit of human tweaking. Copyright Office guidance is actually similar to what he
thinks is a good distinction. Prompting an AI system isn’t enough; something
more is needed. [Editing doesn’t make someone an author in our system of joint
authorship!]

How do we incentivize disclosure? Industry might self-regulate.
Watermarking; certification. Mandatory disclosure legislation; FTC enforcement;
IP could be used as information forcing if we used copyright misuse to raise
the financial stakes of nondisclosure. Fraud on the CO is not serious, but
misuse could be.

Jennifer Rothman, The IP Exception to the First Amendment

The SCt is intentionally not giving more robust 1A review
and giving IP claims a pass or differential/bespoke/lesser scrutiny—lower-value
speech when you use someone else’s IP. The idea of this project is to take that
seriously: what if they’re right, by their own lights? If we take it seriously,
what are the opportunities to increase predictable outcomes or develop more
speech-protective outcomes?

In 2003, Eugene Volokh said it was “unfortunate” the Court
hadn’t heard more 1A/IP cases, but 20 years later, they have. (The monkey’s
paw!) He hoped for more clarity and also more rules favoring speech like
putting the burden on showing lack of fair use on the plaintiff. These decisions
are not, as
Lemley/Tushnet say, at odds with the Court’s other 1A jurisprudence, but
consistent with a history of treating IP differently. (I think those are … the
same thing, described differently?) A descriptive, not a normative project: the
IP exception to the First Amendment. She thinks Elster shows she’s
right. [OK, since I got called out by name, note that Elster represents—and
Barrett’s concurrence shows that she understands it to represent—a very different
approach to the 1A than other cases, including other IP cases, although there’s
a surface resemblance to Eldred. Elster and Rahimi are
clearly about the same questions about history and tradition, even if they’re
about different amendments. (Even JDI doesn’t give us 1A theory/a theory
of 1A coverage and protection; it just announces a conclusion.) The history and
tradition view of the 1A would—as Thomas very much wants—rewrite the rest of 1A
doctrine. And that might happen! But this is not a continuity story; rather, it’s
part of the Trump Justice revolution.]

Idealist vision of IP and 1A: (1) IP laws are content-based
speech restrictions; (2) no exception applies; (3) strict scrutiny applies. (1)
was controversial 20 years ago, but now isn’t. (2) is where the fight is. (2)
seemed to die with Eldred because of the definitional balancing in ©.
But now that seems to be a broader story: you can’t use other people’s property
to make your speech. It’s not just a © exception, but an IP or property
exception to free speech. We see this in claims not justified through the Progress
Clause. INS v. AP; Zacchini; SFAA (Gay Olympics); Elster.
You can also limit speech to get more and better speech. INS; Zacchini.
[But see NetChoice v.
Moody, this Term, the same people say: “But this Court has many times
held, in many contexts, that it is no job for government to decide what counts
as the right balance of private expression—to ‘un-bias’ what it thinks biased,
rather than to leave such judgments to speakers and their audiences.”] Her list
is a pantheon of hated IP cases, sure, but they are there. The Court loves them
and cites them a lot! [I’m not sure this is numerically true, but it’s
certainly a fair characterization of Elster. That’s why the
speech-promotion rationale for an IP exception contradicts the rest of 1A law.]

Court sees this as competition policy, not speech, which is
why there’s a lot of focus on fairness. Market annihilation cases are key: Harper
& Row; Zacchini; Warhol—worried about destroying the
market for photographers and their work. INS also fits.

Limiting speech to get more speech is a broader notion than
just IP. [I wrote
something about this.] Not anomalous in IP: heckler’s veto cases limit
speech to get more speech; TPM cases are like that. [This, by the way, is why
content-based distinctions have been very important in doctrine: TPM
restrictions and heckler’s veto cases are not content-based.] Compelled speech
concerns loom large—the Court doesn’t like that and disfavors compelled speech.
[This is one thing Lemley & I talk about when we talk about the sudden
shift in the treatment of corporate speech, most
on display in the 5th Circuit but also showing up in the
disclosure parts of the NetChoice cases.]

She would bet a lot of money that dilution is constitutional
absent viewpoint discrimination. Commercial use is not a likely dividing line
given the property framing. People aren’t facts: they’re protectable property.
[This is a version of Thatcher’s line that there is no such thing as society,
as if you could carve off a person from the environment in which she exists.
The Court majority is not coconut-pilled.] Therefore, countervailing stories
about competition and property would be good—the public domain as property. [This
was the 10th Circuit approach in Golan that the Court didn’t
deign to mention.] Implications beyond IP: access to property, as in NetChoice
and physical spaces; access to data. Propertizing privacy might succeed
(although alienability is a big issue). Limiting speech to improve speech can
be harnessed to limit deceptive political ads and other deceptive uses of AI

If we don’t like it, we should focus on shifting the
property-speech balance more broadly. Overpreferring property—Justice Marshall’s
dissent in Lloyd v. Tanner.

SCt has long preferred property to speech. [This is why I
have trouble thinking that there’s much good room to work in this framework.
The “property is different” justification is different from the “suppress
speech to get more and better speech” justification,” and doesn’t authorize the
same things. Compare: give the US a property right in the US flag and ban flagburning;
give people a property right in their reputations and ban true but damaging
statements. Only if “suppress speech to get more and better speech” is why
IP is different do you get potential links to misinformation, campaign finance,
etc.—and linking tangible property to IP works against, not for, that without a
lot of additional work and a progressive view of the affordances of tangible
property that, it seems fair to say, will not get much traction with this
Court.]

Lemley: if it can be characterized in some way as IP, it is
therefore property—that’s a crucial step in this. People are not property!
Maybe one way to rethink this is not to rethink land, but about how to challenge
the link between IP and land.

Rothman: agrees that IP is different from tangible property.
Not suggesting we should treat IP more like property in land, but SCt has, and
has for a long time, put IP in the “property” basket. We can argue that they
shouldn’t do that, but if that’s how it’s being conceptualized, then is there a
way to navigate that to get some results that are more speech-protective? [Note
that much of this doesn’t seem internal to IP; it’s more “use the rule that it’s
ok to suppress some speech to get more speech outside of IP to get other non-IP
regulations we like” which has different implications.] [This treatment—which I
think is real descriptively—is also frustrating for a 1L property teacher who
spends an entire semester on the concept that the label “property” is the
beginning of the inquiry rather than the end—with what boundaries? With what ability
to interfere with others’ freedom of decision/movement?]

For Gilden: people hate criticism and love praise; no one
will license criticism, so we need a free speech regime for that. But you can
turn that around by showing all the situations in which people will not license
praise. And refusals to license could even be turned around to show that we
should treat things that don’t seem critical should also be favorable.

Gilden: people are not often suing over lost market—they have
privacy or dignity concerns. Parody/loss of market isn’t really what’s going on,
on either side.

Q for Gilden: people in this room may really enjoy
criticism!

A: yes, there is not a bright line; we should think
critically about both sides of the equation. Being involved in a hateful
political movement can feel really good; that doesn’t make it good. Love v.
hate is not a good divider; what are we trying to do and what is the impact of
expressions of love and hate on the relevant interest?

Betsy Rosenblatt for Lee: why wouldn’t synthetic data
exacerbate these problems by being generated from existing garbage? [E.g., how
do you generate missing data for groups you haven’t actually gathered data
from?]

Lee: it’s definitely true that there is high and low quality
synthetic data. This is one reason to use open source: communal efforts to
understand how people use these processes and engender trust. Requires judgment
about how the synthetic data should differ from real world data; otherwise can
make the bias much worse.

from Blogger http://tushnet.blogspot.com/2024/08/ipsc-opening-plenary-session.html

Posted in Uncategorized | Tagged , , , , , | Leave a comment

“fair and skill-based” may falsely imply absence of bots in online gaming

Posted on July 29, 2024 by rtushnet

Skillz Platform Inc. v. Papaya Gaming, Ltd., 2024 WL
3526853, No. 24cvl646(DLC) (S.D.N.Y. Jul. 23, 2024)

Skillz sued its competitor in mobile gaming, Papaya, for
violating federal and NY law against false advertising by falsely advertising
that its games pit human players against each other when in fact Papaya uses
bots masquerading as human players.

Skillz alleged that its platform matches users with similar
skill levels in one-to-one tournaments. Skillz does not use artificial
competitors, i.e., “bots”, in its cash competitions. Like Skills, Papaya
allegedly offers cash competitions in which players are matched by their skill
level; unlike Skillz, Papaya hosts competitions with up to twenty players.

Papaya allegedly advertises that players will “be matched
with other players within the same skill level … so the game is totally fair
and skill-based.” Also: Papaya “make[s] sure to match players against other
opponents with a similar skill level to ensure a fun and fair experience for
everyone.” It allegedly advertises that its cash tournaments are available “to
all players over the age of 18.” In its Terms of Use, Papaya states that the
“individuals who better use their relevant skill and knowledge and accumulate
the highest scores will be the winner(s).” However, unlike Skillz, Papaya
allegedly does not provide a function to allow players to chat with each other
or give access to a competitor’s gaming history. Reviews have complained that
Papaya uses bots to play against them.

The complaint sufficiently alleged implied falsity. References
to “players”, “individuals”, “winners”, “fair” and “skill-based” “may be found
by a jury to imply that Papaya’s games of competition are conducted among human
players only and not among humans and bots.” Explicit “no bots” statements
weren’t required for implied falsity. Also, it doesn’t matter that using bots
wouldn’t necessarily make the games unfair. “The issue is not whether bots have
been unfairly employed but whether consumers were misled about the presence of
bots in the game.”

The complaint plausibly alleged materiality, because humans
v. bots was a “material quality” of the platform, and the negative online
reviews complaining about bots reinforced materiality, whether or not they were
admissible at trial.

And the complaint plausibly alleged injury, because it
alleged that, in this online gaming world, players are not likely to switch
between platforms once they have decided on which to join. “Instead, they are
motivated to build up in-game rewards and accomplishments on a single platform.
Accordingly, when players have joined Papaya because of its false advertising,
these players are often lost to its competitors.” Even if its damages are
difficult to quantify, Skillz could still obtain injunctive relief and
disgorgement.

The NY GBL claim survived for similar reasons.

 

from Blogger http://tushnet.blogspot.com/2024/07/fair-and-skill-based-may-falsely-imply.html

Posted in Uncategorized | Tagged | Leave a comment

“Pure Irish Butter” plausibly misleads as to absence of dangerous chemicals

Posted on July 25, 2024 by rtushnet

Winans v. Ornua Foods North America Inc., — F.Supp.3d —-,
2024 WL 1741079, No. 2:23-cv-01198-FB-RML (E.D.N.Y. Apr. 23, 2024)

Plaintiffs alleged that the presence of per- and
polyfluoralkyl substances (“PFAS”) in Kerrygold butter made the use of “pure Irish
butter” into false advertising under NY law. The court declined to dismiss the
complaint. Additional background: “[I]n early 2023, in response to a New York
state law banning PFAS in food packaging, Ornua issued a recall of the
Kerrygold Butter Products because the packaging contained PFAS. Exposure to
PFAS — a category of synthetic, artificial chemicals often called ‘forever
chemicals’ — is linked to fertility issues, developmental delays, increased
risk of cancer, increased cholesterol and obesity, and reduced immune response
and can be dangerous even at low levels.”

Prominent “Pure Irish Butter” on Kerrygold packaging

First, Ornua argued that Winans failed to plausibly allege
the presence of PFAS, depriving her of standing. The court disagreed:

The parties do not appear to
dispute that Winans purchased Kerrygold Butter products with packaging that
contained PFAS. The question is thus whether Winans has alleged that the butter
itself contained PFAS. To make that link, Winans posits the migration theory,
whereby the PFAS migrated from the packaging to the butter, which she supports
by citing several studies establishing other instances of PFAS migrating from
packaging to food products.

That was plausible. Lab tests were not required at this
stage. “Certainly, a testing requirement might be sensible in cases where there
is no reason to otherwise believe that a product contained PFAS. But here,
where Ornua publicly removed its products because the packaging contained PFAS,
Winans’s allegations suffice.”

Misrepresentation: Ornua argued that “pure” modified only “Irish,”
not “butter,” so it meant “butter purely from Ireland,” rather than “pure
butter from Ireland.” Deceptiveness is generally a fact question, and it was plausible
that a reasonable consumer reading the label would conclude that the adjective
“pure” modifies the noun, “butter.” Indeed, Ornua’s reasoning was less plausible;
the court noted that “pure Irish butter,” rather than “Irish pure butter” obeyed
“the standard ordering of adjectives in English.”

Omission-based claims also survived; Winans plausibly alleged
that Ornua knew of the problem. She alleged that “(1) Ornua exclusively
controlled the contents of the Kerrygold packaging that contained PFAS; and (2)
Ornua recalled its Kerrygold Products in response to a New York law banning
PFAS from packaging, which suggests that Ornua was at the very least aware that
its packaging did contain the chemical. It seems at least plausible that Ornua
may have suspected that the PFAS could migrate from the packaging to the
product.”

Nor did federal law preempt the omission-based claims. FDA
regulations exempt from disclosure requirements “[i]ncidental additives that
are present in a food at insignificant levels.” These “incidental additives”
include “[s]ubstances migrating to food from equipment or packaging or
otherwise affecting food.” But whether the levels were insignificant was a
factual question.  

However, Winans lacked standing to seek injunctive relief.

from Blogger http://tushnet.blogspot.com/2024/07/pure-irish-butter-plausibly-misleads-as.html

Posted in Uncategorized | Tagged , | Leave a comment

No copyright over simple colors and shapes used to annotate X-rays

Posted on July 25, 2024 by rtushnet

Overjet, Inc. v. VideaHealth, Inc., 2024 WL 3480212, No.
24-cv-10446-ADB (D. Mass. Jul. 19, 2024)

The court denied Overjet’s request for a preliminary injunction
on copyright and false advertising claims, concluding that Overjet’s selection
of colors and shapes for annotating dental x-rays was unlikely to be protected
by copyright and that the literally false statements identified by Overjet had
been removed, thus preventing a finding of irreparable harm.

“Overjet uses AI to scan dental radiographic X-rays and
detect dental diseases. Specifically, Overjet uses an approach called
segmentation, which outlines exact borders and shows the extent to which
pathologies, or diseases, exist.” Its software “annotates diseases and
structures on dental X-rays,” which “allows clinicians to better detect
diseases and devise treatment plans.” It’s presently the only dental AI company
with FDA clearance for “performing dental detection and segmentation to outline
exactly where pathologies exist.”

In fall 2023, Overjet launched its “Anatomical Structures
Visualization Tool” for Overjet Caries Assist, which introduced the relevant
coloring scheme and design. The tool uses “white to represent enamel, purple to
denote the pulp of a tooth, bright green lines with circles at the ends to
indicate measurements of bone levels, and red and translucency to mark areas of
decay.” [Id. Overjet allegedly chose these colors and shapes in order to create
a “contrast with the gray scale” of the X-rays and with the ultimate goal of
assisting with “patient assessment, diagnosis, and treatment planning.” It also
allegedly “selected the design and colors to help with brand identification;
the purple, for example, complements Overjet’s purple brand color.” Example
image showing use of red, white, purple, and green lines ending in dots: 

Videa is a competing dental AI company. In December 2023,
the FDA cleared “Videa Dental AI,” for “identifying and localizing a range of
dental findings and indications, including caries or cavities and periapical
radiolucency, when analyzing bitewing, periapical, and panoramic X-rays taken
from patients three years of age and older.” If the software detects any
indications, it “returns a set of bounding boxes representing the suspect
dental finding.” Unlike Overjet, VideaAI offers a Clinical View and Patient
View; the former “uses boxes and lines with dots to quickly display … points of
interest.” Patient View, at issue here, is designed to be a “communication tool
for [ ] provider[s].” and offers “a version of the results that are ‘segmented’
and highlights the shape of the points of interest” by “show[ing] more than
mere lines and boxes.”

 Example; patient view with red areas, blue, white, and greenish lines with circles:

Videa beat Overjet out of a lucrative partnership with a
large dental client.

Copyright: Overjet’s copyright protected its source code,
but there were no allegations of code copying. Instead, it alleged copying of its
“coloring scheme, shades, and shape.” First, there were real questions about
whether actual copying occurred, given the timeline, which I won’t get into,
though those questions are related to the existence of protection for, e.g.,
selecting green as the color for healthy gum levels, yellow for some risk,
orange for higher risk, and red for a “potential problem.” Videa argued that it
chose this “stoplight” system because it was “intuitive for patients and clinicians.”
Likewise, it argued that red boxes to indicate tooth decay was an “obvious
color choice to indicate warning … and commonly used across industries.” Videa
further argued that it used white to indicate enamel and blue to demarcate pulp
was made “because white is the color of enamel and blue provides contrast to
render pulp more visible.”

Second, the color scheme, shades, and shapes were not
sufficiently creative/concrete to get copyright protection. The court began
with 17 U.S.C. § 102(b): “In no case does copyright protection for an original
work of authorship extend to any idea, procedure, process, system, method of
operation, concept, principle, or discovery, regardless of the form in which it
is described, explained, illustrated, or embodied in such work.”

The court found that Overjet’s claim to shapes, colors, and
shading defined the relevant “abstraction” for the infringement test. The next
step was filtration: eliminating unprotectable elements. Functional elements
are uncopyrightable. The scheme here seemed functional:

The underlying impetus of the color
scheme and display is seemingly to aid clinicians in carrying out dental
diagnostics.. Thus, although there may not be industry-standards or guidelines
specifying what colors and shapes may be used on an X-ray, it nevertheless
appears intuitive to use certain specific colors to indicate problem areas or
create contrast in order to efficiently identify pathologies, suggesting that
Overjet’s color, shape, and shading decisions were primarily driven by
functionality.

Overjet’s own complaint indicated that the tool was “a
tremendous aid in patient education …. Highlighting enamel and pulp allows for
a richer understanding of the nature and severity of disease progression and a
visual that matches dentists’ quantified AI finding.”

Relatedly, the individual colors and shades did not rise to
the necessary low level of creativity. Although the “selection, coordination,
and arrangement” of elements that are by themselves not protectable may
nonetheless meet the originality requirement, that wasn’t the case here. It did
not seem to the court that “countless artistic decisions” were possible, as they
would be for turning a real animal into a stuffed toy. Overjet “organized and
arranged only four colors (red, white, purple, and green) and two shapes (a
line with circles at the end).”

False advertising:

Overjet challenged statements that allegedly falsely
indicated that (1) “Videa’s software is safe and effective for various medical
purposes,” even though it had not obtained the relevant FDA clearance, and (2) it
had “reached a technological milestone in AI development before Overjet.”

For (1): In a now-deleted LinkedIn post from December 2023, Videa
stated, “[h]ear from the clinicians who are experiencing firsthand VideaAI’s
transformative power.” [The X-ray accompanying the statement allegedly implied
that Videa had FDA clearance for segmentation when, in reality, the FDA had
only cleared Videa’s “bounding box” approach. But “[b]ecause Videa is in fact
an AI platform, the statement is not explicitly false. The Court cannot,
however, without the benefit of the full LinkedIn post, assess the extent to
which Videa’s statement, in light of the accompanying X-ray, is misleading, and
refrains from evaluating Statement # 1 under the first prong of the Lanham Act
at this juncture.”

In 2021, Videa represented that its AI software can “aid in
the diagnosis and prediction of the progression of diseases such as caries or
periodontitis.” But Videa has not been cleared for progression analysis. Video
argued that it “merely provides this comparative tool to aid clinicians’
analyses.” The court found that the challenged statement emphasized the
benefits of “AI within diagnostics and treatment planning,” [Ex. 27 at 2], and was
neither false nor misleading. Its software localizes and identifies various
dental indications in X-rays using bounding boxes. “In comparing these
AI-generated annotated X-rays over time, clinicians can assess the extent to
which certain conditions, including caries and periodontitis, have progressed.”
Thus, the statement didn’t communicate that Videa provided progression
analyses or that Videa had obtained FDA clearance for conducting such analyses.
Similar analysis applied to Videa’s statement that its “artificial intelligence
software … helps gauge the caries level in carious lesions.” (The court also
noted that, when the blog post was published, it contained an “investigational”
disclaimer; that disclaimer was removed when Videa obtained the relevant FDA
clearance.)

In 2024, Videa blogged that “[w]e suggest choosing an AI
provider with the most FDA-cleared annotations.” According to Videa,
annotations are “not equivalent to segmentation,” for which it’s not cleared, but
rather refer to “a visual way of showing the results of AI analysis, which can
take many forms, including a simple bounding box.” This wasn’t literally false,
because Videa had just obtained FDA clearance for thirty plus indications. Nor
was there a necessary implication that “annotation,” that is, labeling an
X-ray, refers to FDA clearance for segmentation. That was too attenuated.

Overjet argued that the statement was misleading because the
image right above the alleged misrepresentation is captioned “VideaAI’s patient
view showing a segmented x-ray,” which could create an implied connection
between “annotations” and “segmentations,” but there was no evidence of actual
deception.

However, another ad, a segmentation view with the caption
“[i]ntroducing the first FDA-cleared dental AI for patients aged 3 and up,” whose
images were subsequently replaced, could lead a viewer to recognize the claim that
Videa obtained FDA clearance for segmentation as “readily as if it had been
explicitly stated” because of the combination of the image sand text.

Videa also stated that it is the “only dental AI company to
spend time and money to retest and improve [caries] models.” Overjet argued
that it had also done so, submitting a new iteration of its model after the FDA
cleared it, and the court agreed that this rendered the statement literally
false. Likewise, an initial statement that “[p]roviders can use VideaAI to help
diagnose all patients, regardless of age” was literally false; it has been
modified to “[p]roviders can use VideaAI to help diagnose all patients 3 years
and older.” And another removed statement, “[t]he world’s first pediatric
dental AI” was literally false because Overjet obtained clearance for pediatric
patients—at least 12,efore Videa did, even though it was the first to receive
clearance for patients 3 and older. “Pediatric care refers to the treatment of
infants, children, adolescents, and young adults, and commonly encompasses all
ages up to twenty-one years old.”

Another statement that VideaAI could “identify cysts” was
potentially false, even though it was FDA-cleared for periapical radiolucency
(“PRL”) detection, which includes cysts; identifying a PRL might not be the
same thing as identifying a cyst. So too with a statement that Videa’s software
“annotates 18+ months of historical images to help monitor and track
progression of disease.” The software itself doesn’t track or quantify progression,
but seeks to assist clinicians in assessing side by side comparisons of
annotated X-rays. Although the statement was literally true, an image captioned
“Current Visit” indicates that the subject tooth’s caries size has increased by
20% since the previous X-ray was taken. That image, coupled with the statement
that Videa’s “AI annotates 18+ months of historical images to … track
progression of disease,” could suggest that the software—rather than the
clinician—evaluates the progression.

Of the surviving statements, there was “scant” support for
materiality. Statements focusing on the idea that Videa’s AI software can aid
in the diagnosis and prediction of various diseases didn’t seem material. But
references to VideaAI’s pediatric qualities were more plausibly material. Nonetheless,
Videa sells to sophisticated customers such as dental practices and services,
who “likely have the scientific and technological understanding to fully
appreciate Videa’s product offering and its limitations.”

Online advertising and
presentations during trade shows appear to be a starting point for potential
purchases, but do not alone drive such decisions. It is reasonable to assume
that, given the actors involved and the considerable monetary value of potential
contracts, the sales process is thorough and lengthy, with a heavy focus on the
software’s actual capabilities, including relevant FDA clearance.

What about bait and switch reasoning?

There was also no evidence of actual deception. “It seems
reasonable that discussions surrounding relevant FDA clearance—and verification
thereof—are a critical component of the sales process. A few promotional videos
and blog posts, it appears, are unlikely to cause consumer deception among the
relevant pool of potential consumers.”

Nor did Overjet show injury from the deception. This also
prevented a showing of irreparable harm, especially as the literally false
statements have been removed.

from Blogger http://tushnet.blogspot.com/2024/07/no-copyright-over-simple-colors-and.html

Posted in Uncategorized | Tagged , | Leave a comment

Trademark law and LinkedIn resumes: watch out?

Posted on July 25, 2024 by rtushnet

Portkey Tech. PTE Ltd v. Venkateswaran, 2024 WL 3487735, No.
23-CV-5074 (JPO) (S.D.N.Y. Jul. 19, 2024)

Another case that starkly shows the effects of trademark’s
abandonment of any harm requirement, not to its benefit, where false
advertising claims fail because alleged misstatements about the extent of the
defendant’s past involvement with a company don’t do it any identifiable harm,
but trademark claims succeed because something something affiliation. (Maybe
companies can resurrect noncompetes by prohibiting uses of their trademarks in
former employees’ resumes! This is a joke, but that doesn’t mean it won’t
happen.)

Portkey sued for unfair competition/reverse passing off,
false advertising, and trademark infringement under the Lanham Act, as well as
related state-law claims. It alleged that plaintiff Vignesh Sundaresan is the
founder and sole proprietor of Portkey, a “software and technology company that
operates many of Sundaresan’s blockchain, NFT, and Web3 projects.” Venkateswaran
allegedly worked as an independent contractor for Portkey from 2017 to 2022,
during which Venkateswaran performed work in areas like “communications and
public relations,” “management of social media platforms,” and “attending and
representing in conferences.” Sundaresan allegedly directed Venkateswaran and
others at the company to adopt the alias “TWOBADOUR” when communicating with
the public, and to “assist in the operation of METAPURSE,” which is “a fund
utilized for the acquisition of digital art NFTs and virtual land NDTs, and
other Web3-related investments.”

In 2022, the relationship dissolved; Portkey objected to
Venkateswaran’s alleged references to Portkey and its asserted trademarks since
2022. “Venkateswaran publicly lists his former work at Portkey—including use of
the TWOBADOUR alias and involvement with METAPURSE—on his ‘bios’ on Twitter and
LinkedIn and has allegedly continued to associate himself with those projects
in his public and private statements.”

This is the Second Circuit, so nominative fair use is just a
set of considerations to put into the hopper, and it’s almost impossibly
difficult to kick out an infringement claim on a motion to dismiss without
something like “clear parody or a total absence of proximity between the marks.”

Here, the marks in question were
used at the top of Venkateswaran’s public profiles, directly proximate to his
current business ventures. Sometimes Venkateswaran noted a past affiliation
with TWOBADOUR and METAPURSE, but other times he did not. And sometimes he used
terms that may still lend themselves to confusion (such as abbreviating
“Former” into “Fmr”). For example, the First Amended Complaint alleges that
Venkateswaran included on LinkedIn that he was the “Fmr Steward of Metapurse,”
but then simply “Creator of the @Twobadour pseudonym.” Even if Venkateswaran is
correct that an indication of former affiliation is not likely confusing as a
matter of law, that would not shield the alleged reference to the TWOBADOUR
mark, which at least on LinkedIn lacks an indication that the affiliation had
ended.

Anyway, you can’t use “any indication of non-affiliation” to
avoid an infringement claim, per JDI. “It still may be that some
disclaimers or other explicit indications of non-affiliation will be enough to
render consumer confusion unlikely, but whether that is true in this case will
depend on facts not yet before the Court.” This bore on the similarity factor: “arguments
about explicit indications of non-affiliation go to similarity.” And because the
text of the alleged marks was similar (which will always be the case in any
truthful reporting of former employment), and there was a disputed issue of
fact about whether “former” and the like mattered, similarity weighed in favor
of confusion.  

The court specifically noted that actual confusion was not
plausibly alleged because the allegations were conclusory, but that didn’t
matter. By contrast, allegations that defendant had “actual knowledge that
Plaintiffs own all rights, title, and interest in the trademark METAPURSE,” that
such references “have been willful, wanton, and in bad faith, and with intent
to misrepresent Plaintiff’s business operations and successes as that of his
own,” and that Venkateswaran “is attempting to exploit Plaintiff’s reputations
and intellectual property to intentionally cause confusion among investors,
artists, artist estates, trade conference organizers and organizations,
scholars, publishers, and other market participants, hoping people choose to do
business with him and his associated businesses, mistakenly believing that …
he remains associated with Plaintiffs and their business” plausibly alleged bad
faith. What’s the difference?

The NFU factors didn’t help because they were “often heavily
factual and thus ill-suited for the motion-to-dismiss stage.” Most notably,
“the third element of the nominative fair use defenses requires that the use of
the trademark not create a likelihood of confusion as to the mark-holder’s
sponsorship, endorsement, or affiliation … the existence of [which]
necessitates focusing on ‘the minds of the relevant purchasers—an analysis
based on a factual inquiry inappropriate to a motion to dismiss.’ ”

There was also “use in commerce” because Venkateswaran was
promoting himself and his business ventures on LinkedIn.  

Reverse passing off claims, however, failed. Plaintiffs alleged
that Venkateswaran represented to the public that he was more involved with the
creation and management of TWOBADOUR and METAPURSE than he actually was, thus
“passing off” the goods and services sold under those marks as his own. Under Dastar,
prior involvement in the creation and promotion of a trademark is not “origin” of
tangible goods or services, and thus misrepresentations as to same aren’t misrepresentations
of “origin.”

False advertising: Plaintiffs didn’t plausibly allege “economic
or reputational injury flowing directly from the deception wrought by the
defendant’s advertising,” which usually occurs when “deception of consumers
causes them to withhold trade from the plaintiff.” Where there is no allegation
of a comparative advertisement, §43(a)(1)(B) requires “some affirmative
indication of actual injury and causation.” There were no allegations of
literal falsity, only “a subjective disagreement among the parties concerning
the degree of Venkateswaran’s prior involvement with the business.” Nor did
plaintiffs allege reputational damage.

State law consumer protection claims also failed because
they didn’t allege harm to consumers; trademark confusion isn’t sufficient.

Puzzlingly, the court did find state law dilution plausibly
pled because plaintiffs alleged that “Venkateswaran acted with hostility to
Sundaresan’s and Portkey’s marks” and thus had predatory intent.

from Blogger http://tushnet.blogspot.com/2024/07/trademark-law-and-linkedin-resumes.html

Posted in Uncategorized | Tagged , , | Leave a comment

Announcing the Seventh Edition of Advertising & Marketing Law Casebook by Goldman & Tushnet

Posted on July 23, 2024 by rtushnet

Eric Goldman and I are pleased to announce the seventh edition of our casebook, Advertising & Marketing Law: Cases & Materials. It is available for purchase in the following formats:

* DRM-free PDF file. Price: $12
* Kindle. Price: $9.99
* Print-on-demand paperback from Amazon. Price: $30 + shipping and tax. Paperback buyers can get a free PDF file by emailing me a copy of their receipt showing which edition they bought.

If you are a professor, or are hoping to teach the course, and would like a free evaluation copy, please email Eric (egoldman@gmail.com).

A sample chapter, Chapter 14 (on publicity rights and endorsements), is available as a free download. We also have two online-only chapters on housing discrimination (Chapter 20) and political advertising (Chapter 21), both also freely downloadable.

We’ve discussed the book’s background and our goals as authors in this essay.

What Does the Book Cover?

Preface
Chapter 1: Overview
Chapter 2: What is an Advertisement?
Chapter 3: False Advertising Overview
Chapter 4: Deception
Chapter 5: Which Facts Matter? Reasonable Consumers and Materiality
Chapter 6: Omissions and Disclosures
Chapter 7: Special Topics in Competitor Lawsuits
Chapter 8: Consumer Class Actions
Chapter 9: False Advertising Practice and Remedies
Chapter 10: Other Business Torts
Chapter 11: Copyrights
Chapter 12: Brand Protection and Usage
Chapter 13: Competitive Restrictions
Chapter 14: Featuring People in Ads
Chapter 15: Privacy
Chapter 16: Promotions
Chapter 17: The Advertising Industry Ecosystem–Intermediaries and Their Regulation
Chapter 18: Case Study: Food, Drugs, and Supplements
Chapter 19: Case Study: Organic and “Green” Claims
Chapter 20 (online only): Case Study: Regulation of Discriminatory Advertising (Mostly Housing)
Chapter 21 (online only): Case Study: Regulation of Political Advertising

What Changed from the Sixth to the Seventh Editions?

We didn’t make many major changes in this edition. Most minor changes are standard updates. Some hot areas include courts’ treatment of reasonable consumers, online discrimination in ad targeting, and Section 230’s application to scammy online ads.

If You Are Teaching (Or Want to Teach) Advertising Law

For reasons why you should consider teaching an advertising law course, see this post. In addition to a complimentary book copy, we can provide (1) access to the Georgetown Intellectual Property Teaching Resources database, with digitized props galore; and (2) our PowerPoint slide decks, lecture notes, and other materials. If you are creating a new course, we can provide feedback on your draft syllabus and course proposal. Email me or Eric! You can see his old syllabi and exams on his Advertising Law course page.

from Blogger http://tushnet.blogspot.com/2024/07/announcing-seventh-edition-of.html

Posted in Uncategorized | Tagged , , , | Leave a comment

“plant-based” is plausibly misleading without qualification; can asterisks save the day?

Posted on July 18, 2024 by rtushnet

Whiteside v. Kimberly Clark Corp., No. 23-55581, 2024 WL
3435308, — F.4th — (9th Cir. Jul. 17, 2024)

Whiteside alleged that KC’s “plant-based” baby wipes were
misleadingly advertised; the court of appeals revived some claims that the
district court had dismissed for failure to sufficiently plead misleadingness. The
same stresses that have caused courts to occasionally modify the (nontextually-based)
Lanham Act distinction between “explicitly false” and “misleading” here show up
with competing interpretations of what an “unambiguous” front-of-package claim
means. Just as the Lanham Act’s text does not make the distinctions courts have
adopted, consumer protection laws don’t use “ambiguous” in their text either.
In practice, “unambiguous” tends to mean “I think reasonable consumers could be
fooled by this.” That might be as good a rule as we can practically get unless
we want to restore caveat emptor, but it would be more useful for courts to write
in terms of “reasonable consumers could think they had all the information they
needed from the front of the package” than of “ambiguity.” The court here takes
useful steps in that direction.

Whiteside alleged that the words “plant-based wipes” (or
“plant-based ingredients”) and “natural care®” on the front label, together
with the nature-themed imagery displayed on the packaging, suggest that
Defendant’s baby wipes contain only “water, natural ingredients, and ingredients
that come from plants and that are not subject to chemical modification or
processing.” But they also contain synthetic ingredients that do not come from
plants and are subject to chemical modification or processing.

Examples of the packaging:

 

The district court distinguished (1) labels where an
asterisk was placed after “plant-based wipes*” and a corresponding qualifying
statement (“*70%+ by weight”) was present elsewhere on the front label (the
“Asterisked Products”); and (2) labels on which no asterisk or qualifying statement
appeared on the front label. For both, directly preceding the ingredients list
is a statement reading: “NATURAL AND SYNTHETIC INGREDIENTS.” Back label images:

 

closeup of ingredients list

After making the distinction, though, the court found that
both sets of labels were ambiguous and therefore it was unreasonable to be
fooled instead of consulting the back label.  The district court reasoned that when a
product’s front label is not “unmistakably clear about the facet for which she
seeks more information,” a reasonable consumer is expected to look to other
features of the packaging, such as the fine print on the back label. Anyway,
the term “plant-based” “plainly means mostly, not necessarily all, derived from
plants,” making the Unasterisked Products not misleading as a matter of law,
even without reference to the back label.

The court of appeals reversed as to the unasterisked
products. The Ninth Circuit has long held that reasonable consumers aren’t “expected
to look beyond misleading representations on the front of the box to discover
the truth from the ingredient list in small print on the side of the box.” Thus,
the rule is that, “if a product’s front label is plausibly misleading to
reasonable customers, then the court does not consider the back label at the
pleadings stage. Whether the back label ultimately defeats the plaintiff’s
claims is a question left to the fact-finder.”

On the other hand, if the front label is only plausibly
ambiguous, the back can resolve the ambiguity. Indeed, the Ninth Circuit has held
that “other contextual factors aside from the back label can defeat claims that
a product’s label is misleading,” specifically in its manuka
honey decision. In that case, the court said, the “foremost” reason for finding
only ambiguity was that, “given the foraging nature of bees, a reasonable honey
consumer would know that it is impossible to produce honey that is derived
exclusively from a single floral source,” and “[a] reasonable consumer would
not understand Trader Joe’s label . . . as promising something that is
impossible to find.” Its low price and use of a honey grading scheme also meant
that “100% New Zealand Manuka Honey” was not misleading. Here, the court says,
it was very important in that case that manuka honey is “a niche, specialty
product,” and that buyers were “undoubtedly more likely to exhibit a higher
standard of care than a parent walking down the dairy aisle in a grocery store,
possibly with a child or two in tow, who is not likely to study with great
diligence the contents of a complicated product package.”

KC argued that a front label was ambiguous if it can have
more than one possible meaning. Whiteside argued that a front label can be
unambiguous if it was plausible that a reasonable consumer would view the label
as having one unambiguous (and deceptive) meaning. Whiteside was correct. The
plaintiff doesn’t have to prove unambiguous deceptiveness to avoid dismissal at
the pleading stage. Instead, “a plaintiff must plausibly allege that the front
label would be unambiguously deceptive to an ordinary consumer, such that the
consumer would feel no need to look at the back label.” Thus, a front label is
ambiguous if “reasonable consumers would necessarily require more information
before they could reasonably conclude” that the front label was making a
specific representation. The California courts have followed this rule, for
example in the One-a-Day
case, which “acknowledged that some sophisticated consumers might not
interpret ‘One A Day’ literally and would inquire into the back label. But
other reasonable consumers might take the front label at face value and assume
that they needed to take only one vitamin daily. … Put another way, reasonable
consumers would not necessarily require more information before concluding that
they needed to take only one vitamin daily.”

The unasterisked products were plausibly misleading.  “Plant-based” “plausibly conveys a concrete
and unambiguous meaning to a reasonable customer: that the product is entirely
plant- based and exclusively contains ‘natural’ materials.” It was not an “all-but-meaningless
marketing term” like “Nature Fusion,” especially combined with allusions to
“natural care” and nature imagery

Although consumers could consult the back label, “[f]ront-label
ambiguity is determined not by whether a consumer ‘could’ look beyond the front
label, but whether they necessarily would do so.” The district court’s standard
would always require a consumer to consult the back label, which contradicts
controlling precedent.  Plus, baby wipes
aren’t a niche, specialty product. “[C]onsumers of everyday items are not
expected to study labels with the same diligence as consumers of specialty
products.”

The district court also reasoned that the products were in
fact “plant-based” because they contained at least 70% plant-based ingredients
by weight. But California prohibits both literally false and misleading ads.
And the district court’s definition of “plant-based” as “mostly, not
necessarily all, derived from plants” had little support.

Even if consumers understand “tomato-based sauce” to mean “mostly
but not all tomatoes,” that’s not helpful here, where the issue was not a
characterizing ingredient. “[T]here is no reason to assume that consumers
interpret all terms ending in ‘-based’ in the same way,” any more than they
interpret “100%” the same way in every label.

Reasonable consumers also
understand that meat does not grow on trees, yet technology has advanced such
that plant-based meat is now available. Consumers could reasonably suppose that
manufacturers have similarly devised a way to make baby wipes using only
plant-based compounds.… Unlike bees … , which are familiar to anyone who has
encountered vegetation,  most people
likely have  not contemplated how baby
wipes are made. Similarly, most consumers likely have not considered whether
synthetic ingredients are necessary to make wipes “shelf-stable,” a term that
is not part of

The court further pointed to the FTC’s “Green Guides,” which
warn that unqualified representations like “made with renewable materials” are
likely to mislead a reasonable consumer to believe that a product “is made
entirely with renewable materials.” Although the FTC has declined to provide
guidance on the term “plant-based” specifically, it’s the lack of qualification
that is significant here; the FTC recommends using percentages or other
qualifiers.

On the other hand, the use of an asterisk and the qualifying
statement “*70+% by weight” on the front label of the Asterisked Products
“ameliorate[s] any tendency of [the] label to mislead.” Those tracked the Green
Guides’ recommendation for qualifications and complied with California law
adopting the Green Guides. Even assuming that “70%+ by weight” is ambiguous, a
reasonable consumer would require more information from the back label, which
clarifies that the Products contain both “natural and synthetic ingredients.” “Even
before reading the back label, the presence of an asterisk alone puts a
consumer on notice that there are qualifications or caveats, making it
unreasonable to assume that the Products were 100% plant- based.” (I don’t
think the court thinks that it has taken back everything it said in the first
part of the case, but maybe it has. If you thought the message was clear, how
would you know that the asterisk related to the message you thought was clear
and not to some other or peripheral feature? That’s the FTC’s reasoning for why
asterisks and “disclosure” aren’t good qualifiers.)

from Blogger http://tushnet.blogspot.com/2024/07/plant-based-is-plausibly-misleading.html

Posted in Uncategorized | Tagged , , | Leave a comment

Plaintiffs win partial summary judgment on falsity/materiality in “made in US” tea case

Posted on July 17, 2024 by rtushnet

Banks v. R.C. Bigelow, Inc., No. 2:20-cv-06208-DDP-RAOx, 2024
WL 3330554 (C.D. Cal. Jul. 8, 2024)

The court here grants the consumer plaintiffs’ motion for
partial summary judgment on their theory of falsity of Bigelow’s “manufactured
in the USA” claim for its tea bags. All of the products at issue use tea leaves
grown and processed abroad. Processing ves includes plucking, withering,
rolling, oxidizing, drying, and sorting. “It is this processing which
determines the type of tea — black, green, or oolong.” Bigelow then imports the
tea leaves, blends and packages the tea into its tea bag products, and
distributes them. The logo on back of the packaging stated “MANUFACTURED IN THE
USA 100% AMERICAN FAMILY OWNED.” Plaintiffs received class action certification
as to (1) CLRA, (2) common law fraud and intentional misrepresentation, and (4)
breach of express warranty claims.

prominent Manufactured in the USA 100% claim on bottom right of back package

It was undisputed that all the tea leaves, and all the tea
leaf processing, occurred abroad, and that foreign processing both determines
type and renders the tea consumable. Still, Bigelow argued that “Manufactured
in the USA 100%” was not literally false because the tea bags were made in the
US. The court disagreed. California law makes unlawful the use of “Made in the
U.S.A.,” “Made in America,” or “similar words when the merchandise or any
article, unit, or part thereof, has been entirely or substantially made,
manufactured, or produced outside of the United States.” The court found no
substantive difference between the terms “made” and “manufactured” for the
purposes of a CLRA claim involving alleged misrepresentations of United States
origin; the words of the law suggested a legislative decision that the terms
were “largely interchangeable.” In addition:

Judges should not engage in
fashioning excessively nuanced exceptions to these consumer protection
statutes, such as finding some artificial distinction between the words made
and manufacture. Otherwise, the marketing industry will undoubtedly attempt to
sidestep consumer protection statutes and mislead consumers through clever and
ambiguous terminology, the very outcome these statues seek to prevent. Indeed,
the Legislature has specifically instructed that the CLRA is to be “liberally
construed and applied to promote its underlying purposes, which are to protect
consumers against unfair and deceptive business practices and to provide
efficient and economical procedures to secure such protection.”

Anyway, “manufacture” means “something made from raw
materials by hand or machinery” and “describe[s] the physical process of
transforming raw materials into goods.” A Made in the U.S.A. claim is false “if
a substantial or significant portion of the component parts of the product are
manufactured abroad.” The tea leaves, the “key component” of the tea bags, undergo
a “physical process” that “transforms” them from “raw” unconsumable tea leaves
into a consumable “good” of a distinct variety and flavor profile (black,
green, or oolong tea) outside of the United States. “The distinctive aspects of
tea, the flavor and quality, are made or destroyed during this process.
Defendant’s own promotional video refers to the actions which happen abroad as ‘the
steps of tea-making.’” The additional actions taken to create the tea bags didn’t
change the fact that the tea leaves “have already been processed abroad and are
no longer a raw material prior to import.” Even Bigelow’s Rule 30(b)(6)
designee acknowledged that manufacture includes a broader set of activities
than the blending and packaging that occurs in the United States. The tea
leaves were “vital” and “the very essence” of the tea bags; they were why
consumers buy the bags, which served as packaging for the product desired.

Indeed, the fact that the tea was consumable increased the
need for consumer protection here. The court offered an example of a baby food
seller who “sourced peach puree from the Chernobyl area, then pasteurized that
puree in the United States and packaged it in a convenient pouch labeled ‘Made
in the USA’ or ‘Manufactured in the USA.’” Thus, the statement was literally
false.

Reliance: This can be presumed classwide from exposure plus
materiality, as long as the named plaintiff actually relied on the
representation. “[A] showing of class-wide exposure sufficient to establish
predominance at the class certification stage creates a rebuttable presumption
that there was in fact class-wide exposure.” That presumption was not rebutted.
Bigelow argued that the statement was just on the back of the box, but it was
prominent—set off to the side in bold type.

Materiality:  Bigelow
pointed to market research data indicating that consumers purchase tea for a
variety of reasons that are “overwhelmingly unrelated to the source of the
constituent tea leaves.” But “[t]hat other factors are material to a consumer’s
purchasing decision does not establish that the origin of the tea would be
immaterial to a reasonable consumer,” and Bigelow’s market data didn’t test
consumers’ reaction to origin or made in the USA statements. Bigelow also
offered a consumer survey purporting to show no effect on consumer purchasing behavior,
but plaintiffs’ expert calculated a price premium. That’s generally for a jury.
And the named plaintiffs may have purchased Bigelow tea before the statements
was added to the package, but whether it was material to them was also for a
jury.

Further, false or misleading U.S. origin claims are material
as a matter of law. “While materiality is generally a question of fact, when
the legislature has seen fit to specifically outlaw certain statements in order
to protect consumers, such statements are material as a matter of law.” This
was not a rebuttable presumption, so survey evidence wasn’t relevant. “When the
Legislature has deemed a particular statement material enough to warrant
legislative action, a defendant cannot rebut such a determination through
self-serving surveys and market research. Further, even if it were a rebuttable
presumption, Defendant’s above referenced evidence would be insufficient to
rebut the presumption.”

However, damages remained a jury question. Bigelow argued
that plaintiffs failed to show a price premium. But their expert’s testimony
was admissible, and punitive damages remained possible.

Bigelow’s knowledge and intent was also a jury question for fraud
and negligent misrepresentation, as well as punitive damages. “Plaintiffs point
to sufficient evidence from which a reasonable jury could conclude that Bigelow
knew that ‘Manufactured in the USA 100%’ was false or, at the very least, had
no reasonable grounds for believing it.” There was also evidence of intent to
induce reliance, “as the very purpose of advertising a particular statement on
a package is to induce reliance.”

 

from Blogger http://tushnet.blogspot.com/2024/07/plaintiffs-win-partial-summary-judgment.html

Posted in Uncategorized | Tagged , , | Leave a comment

court allows Nike’s legal theories and most of its expert testimony against StockX’s resales/NFTs

Posted on July 15, 2024 by rtushnet

Nike, Inc. v. StockX LLC, 2024 WL 3361411, No. 22-CV-0983
(VEC) (S.D.N.Y. Jul. 10, 2023)

Nike sued over StockX’s use of Nike trademarks on StockX NFTs
without Nike’s consent and alleged sales of counterfeit Nike sneakers despite allegedly
guaranteeing that all products sold by StockX were authentic. This opinion
deals with various Daubert motions, allowing at least some of the
testimony of eight challenged experts in.

Counterfeits background:

Unlike some other major resellers
like eBay, StockX acts as an active intermediary. Prior to listing a product
for sale on its website, StockX takes physical possession of that item and
purportedly vets it through “a proprietary, multi-step authentication process.”
According to StockX, no item is listed for sale unless it passes that test, a
fact that, prior to the filing of this complaint, StockX touted on its website
in support of its guarantee that all listed goods were “100% Verified
Authentic.” Nike claims that, despite those efforts, StockX sold a number of
Nike-branded shoes that were counterfeits.

NFT background:

In early 2022, StockX introduced
Vault NFTs, which featured Nike’s trademarks and provided the holder ownership
of an associated physical item. Many of the physical items were Nike sneakers.
Around the same time, Nike began releasing its own NFTs. As with the physical
sneakers, StockX claimed that its NFTs were “100% Authentic.” … The parties
dispute whether the StockX NFTs were separate, virtual products that conveyed
benefits beyond access to the physical good or merely receipts that allowed an
NFT holder to claim ownership of the underlying good without taking physical
possession.

StockX’s expert Sarah Butler surveyed consumers on the
effects of StockX’s authenticity statements as a rebuttal to Nike’s expert John
Hansen. “The test group was presented five pages from StockX’s website
featuring the Authenticity Statements, and the control group was presented with
similar webpages that featured versions of those statements that omitted
references to ‘authentication’ or substituted them with references to ‘inspection.’”
Butler found that there was no statistically significant difference in cells’
self-reported likelihood of purchasing shoes on StockX, suggesting lack of
materiality.

Nike’s criticisms warranted cross-examination, not
exclusion.

First, Nike argued, materiality was irrelevant because
literally false claims are conclusively presumed to be material. (The cases of
which I am aware say that literally false claims are presumed to be
material, not conclusively presumed—it seems reasonable to say that the
presumption should be rebuttable, and the Second Circuit’s holding in the NBA
v. Motorola case—which held that the statement that scores were updated “from
the arena” was immaterial because of its lack of prominence in/relevance to the
main ad claim—certainly implies rebuttability, even from context alone.) Rather
than treating the presumption as irrebuttable, however, the court here merely
said that literal falsity depends on context, and literal falsity of the authenticity
statements was still a contested issue, at least for now.

The rest of Nike’s objections went to reliability, which
generally goes only to the weight of the evidence. Surveying previous
purchasers from StockX was a potential weakness, but “not so egregious or clear
cut” as to warrant exclusion. Nike also alleged that the survey was tainted
with demand effects that “ ‘cued’ respondents that StockX was the survey’s
sponsor” and that “the correct answer” was to indicate a likelihood to purchase
from StockX. The putative sources were a screener question measuring current or
past interest in purchasing from StockX and the inclusion of StockX webpages
with “overwhelmingly positive content.” But the screener question offered StockX
as just one option in an order-randomized list of fifteen resellers, which wasn’t
a problem. As for the positivity of the ads, “consumer surveys in false
advertising cases commonly display the challenged advertisement.” (Surely a
highly negative control is not a very plausible ad.)

Nike also criticized the control as insufficiently distinct
from the test—“inspection” wasn’t sufficiently different from “authentication.”
Indeed, a handful of individuals in the control group said they were likely to
buy from StockX because of its authentication process. But this too was fodder
for cross-examination. And the fact that respondents responded very similarly
to both claims didn’t require a finding that the survey was flawed; the alternate
plausible explanation was that StockX was right about immateriality. The court
pointed out that Nike’s own complaint treated “authentication” and “inspection”
differently, claiming that the shoes were not properly authenticated, not that
they weren’t inspected. The dictionary agreed that “authentication” involves a
guarantee that the product is genuine; inspection does not. “Of course, a
survey respondent could have easily reached the conclusion that the ‘inspection’
process was designed to weed out counterfeit products. That is an obvious
ground for cross-examination but not exclusion.” (In the context of puffery,
courts often distinguish “designed to” from “guaranteed or confirmed to”; if
that’s the case—which I’m not sure it is, but that’s a problem with puffery
doctrine—then surely it must also matter in determining meaning.)

Nike’s complaints about the stimuli were also nitpicking;
stimuli must merely roughly simulate market conditions.  “Nike does not explain how the minor
differences in the layout of products and third-party advertisements, which
have no significant effect on the content or display of the Authenticity
Statements, render the survey results unreliable, let alone less probative than
prejudicial.”

Nike also argued that testing all the challenged statements
at once overwhelmed respondents, and that respondents were only required to
view the pages for a minimum of ten seconds. (This seems like an implicit
criticism of Nike’s own theory of deception; if they overwhelmed respondents,
how could they all be deceptive? There’s an answer, of course, which is probabilistic:
those who noticed a particular statement might have been deceived by it.) Regardless,
real consumers vary in their engagement with ads, and frequently only interact
with them for a short time. Cross-examination could address any deviation from
market conditions.

As for StockX’s economist damages expert, the court granted
Nike’s unopposed motion to exclude his affirmative opinion regarding other
factors that drive a consumer’s decision to purchase on StockX, but allowed it
as rebuttal testimony. “At bottom, a rebuttal expert need not proffer a
methodology or model, but only critique the opposing expert’s.”

StockX was also allowed to present the expert testimony of a
self-professed “sneakerhead,” who opines on sneakerhead culture and explains
how sneakerheads view the Vault NFTs and navigate the secondary market. His
testimony was based on his own experience and his conversations with others. This
was relevant to show the degree of sophistication of the sneakerhead community
and “contextualize the manner in which members of the sneakerhead subculture
approach their purchasing decisions.” His opinions that sneakerheads credit the
Authenticity Statements as improving the resale experience were “relevant to
the sophistication of at least this subset of StockX’s consumers and how likely
they are to be deceived by any falsehoods.” Nike acknowledged that at least
some of the Nike-branded sneakers purchased on StockX were bought by avid
collectors. However, if the statements were shown to be literally false, Nike
could re-raise its Daubert motion.

His methodology was also reliable, based as it was “on his
vast experience with the sneakerhead community, including his discussions with
other sneakerheads over the years.” Also, the fact that he acknowledged that there
were other definitions of “sneakerhead” and that the group is heterogeneous
wasn’t a “fatal” flaw meriting exclusion as opposed to cross-examination.

Nike’s expert Kari Kammel leads the Anti-Counterfeiting and
Product Protection Center at Michigan State University. Kammel opined on the
rise of counterfeiting generally and on platforms like StockX, as well as what
constitutes authentication. The court allowed Kammel’s testimony except for
testimony about (1) counterfeiting generally and (2) about shoes that Nike
claimed were counterfeit and sold on StockX, but that were not previously
disclosed to StockX.

Counterfeiting generally: Kammel opined that counterfeiting
can be tied to terrorist activity and results in lost jobs and tax revenue.
Nike argued that these opinions were important to contextualize the alleged
counterfeiting enabled by StockX, including the fact that a counterfeiting
operation based in China sold over 1800 products on StockX. “Even assuming that
Kammel could reliably connect these global forces to the parties in this case,
the jury does not need a primer on the complex global economics and geopolitics
of counterfeiting to understand the relatively narrow set of facts in dispute.
Nor is this testimony necessary to establish a factual basis for her opinion.”
In addition, “the lay public, particularly in New York, does not need expert
testimony to understand that luxury goods face high demand or that
counterfeiting is on the rise. The Second Circuit has made clear that district
courts should exclude expert testimony within the jury’s ken, including matters
that are frequently in the news.” Any minimal relevance was outweighed by the
risk of wasting the jury’s time.

However, Kammel could opine about “how StockX’s
authentication practices may make it vulnerable to counterfeiters and the types
of harms that companies like Nike experience from counterfeiting.” This opinion
was based on “a review of the discovery in this matter, discussions with Nike’s
Vice President for Brand Protection and Digital IP, her own experience, and
materials from trade associations.” In addition, her opinions on what constitutes
authentication, based on the International Organization for Standardization, were
“reliable and relevant to StockX’s state of mind.” She was also qualified to
opine in rebuttal on how consumers approach the risks of encountering
counterfeits in the market.

Nike’s damages expert John Hansen, a forensic accountant,
sought to quantify a potential disgorgement award. StockX moved to exclude it
because his calculations were based on StockX’s profits from all of its sales
of Nike sneakers, not just sales attributable to the allegedly false
advertisements. The court rejected that argument: Nike must demonstrate “
‘economic or reputational injury’ proximately caused by the alleged false
advertisement” to establish a false advertising claim. But once that’s
established, the court may “award a defendant’s full profits,” not just those
directly tied to the violation.

However, his opinion with respect to direct harms to Nike
was unreliable and didn’t apply any expert methodology. Lay witnesses and
documentary evidence, and the inferences to be drawn from that evidence, could be
argued by Nike’s lawyers to establish direct harm to Nike.

Another Nike witness was allowed; he sampled shoes and
opined that, in the year prior to his opinion, StockX sold “at least 200,000
shoes … that were simultaneously offered by Nike for retail sale.”

And a Nike NFT witness was allowed in part. He studied
blockchain and cryptocurrency at MIT and has extensive experience in the
cryptocurrency sphere. He opined that, while the Vault NFTs were marketed and
understood by consumers to be NFTs, they were not true NFTs. He compared the
prices of the Vault NFTs to the underlying shoe to argue that consumers
believed the Vault NFTs carried additional benefits.

He would be allowed to testify about the technology
underlying NFTs, which was appropriate expert testimony subject matter. But his
pricing opinion wasn’t based on an explained methodology. He didn’t explain why
subtracting the price maxima on possibly different dates was a reliable method
of valuing the benefits of the Vault NFTs beyond providing access to the
physical shoe; he hadn’t used the approach before nor did he connect it to an
accepted method of comparative valuation. His opinion that it was “illogical”
for consumers to pay a premium for storing their sneakers with StockX was
insufficient. Nike could establish a price premium through documentary evidence
and basic logical arguments. Likewise, his opinion on consumer perception of
StockX’s Vault NFTs were not based on expert methodology; he relied on StockX
documents, including internal materials, and social media posts. This wasn’t
beyond the ken of a lay juror; the documents spoke for themselves.

Finally, Nike’s survey witness Itamar Simonson was allowed;
he conducted two surveys based on a variation of Eveready that sought to
measure whether consumers understood the Vault NFTs to be sold or endorsed by
Nike. StockX argued that his methodology wasn’t adaptable to the resale context
where resellers may use the original producer’s trademark to describe the
product being resold. But resellers don’t have “carte blanche” to use another
company’s trademarks, and maybe the use on the Vault NFTs wasn’t permissible.
Anyway, even if “Simonson failed to account for the fact that consumers may not
be able accurately to identify a seller when presented with more than one
trademark, or that the inclusion of more than one trademark may be permissible,”
that wouldn’t justify exclusion.

Likewise, his use of a broad universe—people who, inter
alia, (1) owned or expected to purchase sneakers; (2) were looking for new
investment or collection opportunities; (3) were interested in investing in
NFTs, buying collectibles, or investing in cryptocurrency; and (4) previously
purchased new products from online resale marketplaces—sufficiently
approximated the appropriate population such that this just affected the weight
to be given his surveys.

The court didn’t think that the use of “products” when
referring to a list that included pictures of four shoes (including one Nike
shoe), a watch, a trading card, and an action figure, then repeating the term when
asking the test group to describe which company offered the depicted “product /
NFT” primed respondents to respond that Nike offered the shoe. Even if it was
leading, that again went to weight.

The court also allowed Simonson’s testimony that the Vault
NFTs represent an “unauthorized extension of the Nike Brand into [a] new
category.” This was offered as a rebuttal to the opinion of StockX’s expert
Scott Kominers that the Vault NFTs are not “ ‘digital brand’ NFTs” that serve
“as a springboard for establishing a broader product … brand,” and that to
the extent that the Vault NFTs do have a digital brand, “the digital brand is
unambiguously that of StockX alone.” This didn’t improperly embrace the ultimate
legal issue of whether StockX needed Nike’s permission to sell the Vault NFTs,
since his opinion that unauthorized brand extensions caused brand owners to “lose
control” of the brand didn’t “purport to opine as to whether such authorization
was legally required.”

from Blogger http://tushnet.blogspot.com/2024/07/court-allows-nikes-legal-theories-and.html

Posted in Uncategorized | Tagged , | Leave a comment

Team Blood Donor

Posted on July 15, 2024 by rtushnet

 Spotted in the wild:

Team Blood Donor “cooling towel” with five colored, overlapping blood drop outlines on label


Inova says, “[t]he Olympic-themed gifts add a fun and engaging element to the donation experience, making it more likely for donors to return and continue supporting our lifesaving mission.” Unfair free riding or normal participation in popular culture?

from Blogger http://tushnet.blogspot.com/2024/07/team-blood-donor.html

Posted in Uncategorized | Tagged | Leave a comment