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Meta
Dastar bars false advertising claim based on patent filing
Akzo Nobel Surface Chemistry LLC v. Stern, 2014 WL 6910212, No. 2:13–CV–00826 (S.D. Ohio Dec. 8, 2014)
Akzo makes specialty chemicals, including adjuvants, which are additives that modify the properties of the main ingredient in formulations. Stern was formerly employed by Akzo as a research chemist with access to confidential information and is now emplyed by defendant Huntsman, a direct competitor of Akzo. His agreement with Akzo provided that any “inventions, ideas or improvements” he made were the sole property of Akzo and that he agreed to not divulge confidential information. Six years after he left Akzo, Huntsman filed a patent application whose subject matter, Akzo claims, infringes on (uses?) the specific adjuvants formulations that Stern developed and/or learned of while employed with Azko. Azko sued.
One of Akzo’s claims was that defendants’ filing of the pending patent was a misappropriation and misrepresentation of Akzo’s trade secrets, in violation of 43(a)(1)(B) and the Ohio Deceptive Trade Practices Act. Defendants argued that filing a patent application didn’t constitute making statements in commercial advertising or promotion. Akzo alleged, however, that after seeing the pending patent, a potential customer inquired about Akzo’s ownership of the adjuvants. Thus, Akzo argued, it was reasonable to infer that the patent application constituted a statement of ownership to the relevant (sophisticated) purchasing public. But Semco, Inc. v. Amcast, Inc., 52 F.3d 108 (6th Cir. 1995), held that a “detailed description and explanation of a new process” without advertising, is not commercial speech. Akzo didn’t claim that “advertising language” was included in the application.
Moreover, defendants successfully contended that claims “related solely to the creation and ownership of intellectual property” weren’t actionable under the Lanham Act because they didn’t go to the “nature, characteristics, or qualities” of the adjuvants, even though Dastar(which was about the meaning of “origin”) didn’t really hold that. Cf. Romero v. Buhimschi, 396 Fed. Appx. 224 (6th Cir. 2010) (§ 43(a)(1)(B) does not refer to failure to provide “authorship designation”). (Just to be clear, the real problem in most failure to credit false advertising claims is materiality, but they shouldn’t be entirely off the table, when the advertiser is trying to sell itself because it was the creative force behind something.) Here, the court rejected the argument that filing a patent application was a misrepresentation about whether Akzo had the legal right to use its own IP. (Is this even true given prior user rights under the AIA?) The court was unpersuaded. “To claim that information contained in a patent application equates to misrepresentation of the details underlying the goods or service is, at best, a stretch.” Such claims are better the province of copyright or patent law; to hold otherwise would be to create a perpetual patent/copyright, which Congress can’t do.
Actual confusion irrelevant when Rogers v. Grimaldi applies
Mil-Spec Monkey, Inc. v. Activision Blizzard, Inc., No. 14-cv-02361 (N.D. Cal. Nov. 24, 2014)
MSM alleged that the video game Call of Duty: Ghosts made infringing use of MSM’s “angry monkey” mark, “among the most popular morale patch designs” MSM sells. (Morale patches are patches that military personnel can’t wear officially, but are allegedly frequently used in unofficial contexts.)
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| Angry Monkey patch |
Ghosts includes an image visually similar to the angry monkey mark as a patch players can use on their avatars’ uniforms in multiplayer mode. When selected, the patch appears at various points during play, and it also appeared in Activision’s pre-release promotional trailer for Ghosts’ multi-player edition. MSM alleged copyright and trademark infringement and related claims.
Activision moved to dismiss the non-copyright claims based on the First Amendment, and won. Ghosts’ use of the patch was artistically relevant and not explicitly misleading, thus passing Rogers v. Grimaldi.
Ghosts is the tenth installment in the Call of Dutyfranchise. Ghosts “depicts highly realistic combat in a near-future, war-torn setting, featuring numerous characters, complex narratives, and advanced graphics. Its main protagonists are the Ghosts—a force of U.S. Special Operations personnel trained to conduct secret missions behind enemy lines.” The game uses “dozens of contemporary weapons and vehicles that players can customize with modifications or attachments, and a variety of military equipment based on real-life counterparts or portrayals of future designs.” It likewise uses “names and insignia of contemporary forces such as the National Security Agency, the United States Marine Corps, and the United States Air Force.” A new feature allows players in multiplayer mode the option to customize their avatars, including gender, uniform style, gear, accessories, and over 600 patches. Thirty-two patches are available at the beginning, while more can be unlocked as rewards, and others are available for download; the angry monkey is one of the standard 32.
The patches may appear onscreen during multiplayer matches “when a player may glimpse a patch on the uniform of another player, or alongside a flash of the name of an avatar wearing a patch who just performed a particular objective in the ongoing mission. The patches also appear alongside other player information in match summaries,” which are displayed at the end of play. Thus, patches serve to identify characters during play. In the pre-release trailer, the design is visible for about 2 seconds at the bottom of the screen, associated with an avatar, along with other patches for other avatars.
Ghosts is an expressive work entitled to First Amendment protection. MSM argued that before applying Rogers to an expressive work, the Ninth Circuit requires a mark to be a cultural icon. This argument was based on a misreading of Mattel v. MCA. While it found support in “an outlier decision from this district,” Rebelution, LLC v. Perez, 732 F. Supp. 2d 883 (N.D. Cal. 2012), the court distinguished Rebelution even if it was consistent with governing law: That case favored a reggae band using the name Rebelution in a case against Pitbull’s album with the same name, but there Pitbull wasn’t referring to the band. (If “Rebelution” was artistically relevant to Pitbull’s own message, for example through its slightly punny connotations, of course, that should count too, as the court here seems to signal with its skepticism.) But Ghosts’ use of a patch drawing on a design that’s extremely popular in the military world was artistically relevant.
Mattel “stands for the proposition that a trademark owner may not control public discourse whenever the public ‘imbues his mark with a meaning beyond its source-identifying function’—a far more inclusive standard than the ‘cultural icon’ one MSM advocates.” Plus, this rule wasn’t a threshold limitation, but just part of the first prong analysis. ESS Entertainment 2000 v. Rock Star Videos didn’t require the Play Pen strip club to be a cultural icon; Rogers applies as long as the game is an artistic work.
Rogers provides that a use of a mark in an artistic work is not actionable unless (1) the use of the mark has “no artistic relevance to the underlying work whatsoever,” or (2) it has some artistic relevance, but “explicitly misleads as to the source or the content of the work.” This is a highly speech-protective standard. Ghosts’ multiplayer mode was supposed to be a realistic combat experience, “the intensity of which is heightened by sophisticated features permitting players to customize their avatars’ identities and engage with other players in the virtual environment.” The use of many real-world references creates a “critical mass” to achieve a “look and feel” consistent with the game creators’ vision. The angry monkey patch is a small part of this vision, helping to create “an authentic universe of morale patches, like those available in the real world.” Thus, the inclusion of the patch had “some artistic relevance,” all that was required. MSM argued that there was no artistic relevance because the armed forces ban morale patches on uniforms in the field. “But MSM invokes no authority, nor is there any, for the proposition that use of a mark must sufficiently mimic reality to fall within the First Amendment’s safe haven.”
MSM argued that the use of the patch was commercial speech, but it wasn’t. Its brief appearance in the pre-release trailer and in a menu that also allowed players to access additional patches for purchase didn’t change its artistic relevance in the game. Creators of artistic works can market them, and can even choose to focus on trademarked products as a “crass marketing tool” as long as they’re also artistically relevant. Winchester Mystery House, LLC v. Global Asylum, Inc., 210 Cal. App. 4th 579 (2012).
Nor was the use explicitly misleading. Explicit misleadingness requires “an affirmative and overt statement that indicates a relationship with or endorsement by the plaintiff.” Using the mark can’t itself be affirmatively misleading, or Rogers would be meaningless, and this rule extended to using the mark in promotional materials for the work (as is necessarily entailed by Rogers’ origin in a case against a movie title!). MSM didn’t show any way in which Activision affirmatively purported to “share a relationship” with MSM. The packaging was very clear about origin and source.
MSM’s evidence of “actual confusion” from a blogger was irrelevant. As the Ninth Circuit has already held in Brown v. EA, survey evidence can’t change mere use of a mark to “explicitly” misleading. The only relevant evidence under Rogers relates to the nature of the behavior of the defendant, not the impact of the use. Rogersitself disregarded a survey showing 38% confusion. The risk of confusion was outweighed by the First Amendment interests at stake.
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plaintiff must identify elements of trade dress, specific false claims
Homeland Housewares, LLC v. Euro-Pro Operating LLC, 2014 WL 6892141, No. CV 14–03954 (C.D. Cal. Nov. 5, 2014)
Previously, the court granted a preliminary injunction on certain false advertising claims and refused to stop the plaintiff from publicizing that. Now it granted in part and denied in part a motion to dismiss. The parties compete in the home blender market. Homeland sells the Nutribullet, Nutribullet Sport, and Nutribullet Pro, and allegedly spent several hundred million dollars in ads, including infomercials. Euro-Pro’s Nutri Ninja allegedly copied “the color scheme, fonts, phraseology, and overall look and feel of Plaintiff’s NUTRIBULLET packaging trade dress.” Also, the packaging compares the Nutri Ninja to the Nutribullet in a chart. Homeland also alleged that Euro-Pro planted “false reviews on the Internet, making false claims of defects in NUTRIBULLET blenders and touting the NUTRI NINJA as a superior alternative.”
Euro-Pro didn’t move to dismiss false advertising claims based on the chart, but did as to the allegedly fake reviews. Homeland didn’t sufficiently allege that part of the claim. It didn’t specify what “false claims of defects” Euro-Pro allegedly made:
Without something more, the allegation is ambiguous. Do the reviews, for example, label Plaintiff’s products “poorly made” or “too small” or “ugly,” which would be statements of opinion? Or do they make falsifiable factual claims about Plaintiffs’ blenders? Secondarily, even if Defendant made statement of fact, were they material? These questions matter, because merely alleging that Defendant said negative things about one’s product is not stating a claim for false advertising. Plaintiffs must clarify its allegations to state a cognizable false advertising claim based on false reviews.
In addition, saying that false reviews were somewhere on the internet wasn’t enough, “as the internet is vast and contains multitudes.” Without more, Homeland failed to allege likely deception or injury. “Some indication of the nature and scope of the communication is required to successfully allege false advertising.”
The trade dress infringement claim was dismissed for failure to sufficiently specify the elements of the claimed trade dress. A photo plus a written description wasn’t enough where the written description claimed “the color scheme, fonts, phraseology, and overall look and feel” of Homeland’s product packaging.
Trade libel: this requires pleading special damages, which Homeland didn’t do. Instead it just claimed “lost sales, disruption of business relationships, loss of market share and of customer goodwill” to the tune of $3 million. Homeland needed to allege its established sales for a substantial period, sales after the allegedly libelous publication, and facts showing that loss was the natural and probable result of the publication.
California FAL and UCL claims: tracked the results above.
It’s all about control: how to get a survey excluded
First Data Merchant Services Corp. v. SecurityMetrics, Inc., No. RDB–12–2568, 2014 WL 6871581 (D. Md. Dec. 3, 2014)
This is a motion to exclude in a false advertising/antitrust case. “This origins of this contentious case lie in a soured business relationship and the settlement of earlier litigation in the United States District Court for the District of Utah.” Plaintiffs (First Data) sued SecurityMetrics over alleged post-settlement misconduct, and SecurityMetrics asserted 15 counterclaims.
PCI is an acronym for Payment Card Industry. The PCI Security Standards Council (PCI Council) was formed in 2006 by the major credit card brands and developed the PCI Data Security Standard, which has been adopted by the major credit card brands as their data security compliance requirement for all merchants. The PCI Standard’s requirements vary based on merchant size; at issue here are merchants with the lowest transaction volume (but because there are so many of them, they have the highest number of transactions collectively). There are a number of different types of certified PCI standard compliance service vendors, with certifications recognized by the card brands; SecurityMetrics has a number of these PCI Council certifications while First Data allegedly does not.
First Data processes credit and debit card transactions for merchants and independent sales organizations. SecurityMetrics provided PCI compliance services to some merchants for whom First Data provides processing services. The parties worked together until the relationship deteriorated, ending with SecurityMetrics’ allegation of a material breach of their contract by First Data. SecurityMetrics also alleged that at that point First Data began offering a service called PCI Rapid Comply, which competes with the services offered by SecurityMetrics. First Data allegedly allowed its fees for PCI Rapid Comply to count toward the required billing minimums for customers, but not fees paid to other PCI compliance services; and First Data allegedly told merchants they’d have to pay for PCI Rapid Comply even if they used a different security compliance vendor. The parties settled their first suit, and then First Data sued.
I’m only going to discuss advertising-relevant issues. One SecurityMetrics expert was a marketing professor at San Diego State, Michael Belch. He surveyed consumer perceptions of the name PCI Rapid Comply, and opined that consumers would be deceived if the service wasn’t in fact approved or certified by the PCI Council. But his survey didn’t use a control to test for whether it was the name, PCI Rapid Comply, creating confusion. SecurityMetrics didn’t adequately explain how Belch reached his conclusions linking confusion to the use of PCI in the name. This was a “significant flaw,” and justified exclusion when combined with several other “troubling” aspects of the survey. First, the survey tested the name alone, divorced from typical marketing materials. Second, the original, online version of the survey was not preserved and was never turned over to First Data. Third, the survey questions repeatedly mentioned the name PCI Rapid Comply, creating a possible bias that wasn’t addressed because there was no control. Thus, Belch’s testimony could confuse a jury.
SecurityMetrics’ proffered expert Clark Nelson was a CPA, CGMA, and CFF with an MBA from Wharton, who opined that First Data generated $190,951,243 in PCI-related revenues, which SecurityMetrics sought to disgorge under its two Lanham Act claims. Challenges to Nelson’s calculations could be addressed on cross-examination. Though First Data argued that he failed to consider alternative reasons for SecurityMetrics’ lost profits, his report “reflect[ed] a complex analysis that included calculation and consideration of SecurityMetrics’ natural attrition and penetration rates and a variety of other factors,” and wasn’t so methodologically flawed as to warrant exclusion.
SecurityMetrics, however, was bound by the fact that its Rule 30(b)(6) deponent was only able to identify a few specific instances of merchant customers lost due to First Data’s alleged conduct. It later created a more detailed chart and argued that, since it had already disclosed the recordings on which the chart was based, the chart should come in. Whether intentional or not, this reflected an end run around Rule 30(6)(b), so SecurityMetrics’ evidence of damages would have to be tied to specific testimony from the deposition or evidence in exhibits from that deposition.
Public Knowledge on the monkey selfie threat letter
Sherwin Siy, bringing just enough snark in reply to the camera-owner’s demand letter.
Reading list: Putting Intellectual Property in Its Place
Laura J. Murray, S. Tina Piper, & Kirsty Robertson, Putting Intellectual Property in Its Place: Rights Discourses, Creative Labor, and the Everyday: Coming at roughly the same time as Jessica Silbey’s The Eureka Myth, this book, like Silbey’s, challenges IP lawyers’ reflexive assumption that intellectual property is central to the production of creative works, even for-profit creative works. They’re both important and intriguing works. Here, the basic argument is that IP laws have limited and attenuated effects in many different creative fields. Though rights talk and economics do matter, they’re at best loosely linked to formal law, which is “invoked or imagined occasionally, opportunistically, or instrumentally,” often to achieve objectives other than incentivizing creativity. IP is more rhetoric than rule; it can appear as fantasy (potential riches), rumor (fear of being sued), threat, whipping boy fueling resistance—“as a symbol of corporate power rather than as a specific set of rules,” and so on.
Much like Silbey, the authors conclude that IP appears as a strategy “adopted to cross or police boundaries long after a work has been created or an innovation has taken place.” Even when statutory and case law is readily available, “people actually choose to understand the law through information and opinion gathered from friends, strangers, coworkers, and the media.” They regularly choose their own grounds for negotiation and dispute, ignoring legal mechanisms. So, law on the books is far less important than how law is mis/understood on the ground.
The authors position themselves partly against studies of IP’s “negative space,” contending that such framing positions IP as primary and low-IP spaces as the ones in need of explanation, whereas creative practices generally are in fact low-IP. All groups have rules about attribution, ownership/custodianship, and fairness; sometimes those are formalized, but more often they are “indigenous”—“foundational and persistent, not ancestral or supplemental.”
Chapters examine specific communities of practice. One chapter (attributed to all authors) analyzes free culture rhetoric in Canada, which they argue has been raced, gendered, and US-oriented, with a presumed-male subject as the unexamined universal. Individualism is a politically limiting feature of this vision of “free culture,” they argue. (I’ve long thought that “free as in free speech, not free as in free beer” has a very interesting gender resonance on both sides—not only does some speech trade off with and suppress other speech in a way unrecognized by the first part of the slogan, but I always saw “free beer” as very far from free.) Creative Commons, then, tries to be liberatory, but accepts a US model that might not apply elsewhere, trying to fight supposedly restrictive norms that might not have been shared. Programs may be “ported,” but cultures are far trickier, and in choosing the language of “porting” CC licenses from the US to other countries, CC is making a significant move in presuming mechanical commonality between countries, legal systems, and creative cultures. Ultimately, what CC licenses legally would do in court isn’t as important as the symbolic relations they indicate. And the authors suggest that licenses aren’t appropriate to structure certain relations.
One example of different cultural meanings they explore is “appropriation.” In US legal discourse, “appropriation art” is edgy, challenging, and increasingly legally accepted as fair use, which most people treat as an advance compared to earlier infringement findings. But “appropriation” has a very different meaning when it comes to dominant groups exploiting artistic traditions and practices of oppressed groups.
Another chapter (Robertson) studies various crafters, using works like quilt patterns. Crafters use the rhetoric of IP if not the real law; their rules may even be more stringent than law when it comes to the acceptability of making money from an object created using a pattern. And, like many others, they often conflate copyright, trademark, and patent into a kind of agglomeration of “rights.” It’s easier to manage boundary issues when the rightsholders come from outside: while disputes persist about some norms within the community, other practices coalesce into best practices over time, particularly with respect to first sale/the acceptability of making things from purchased fabric featuring licensed characters. The discussion of knitters leads into a comparison with Canadian scientists, “who like the online knitters work and compromise with, cajole and bully their peers into common (and sometimes community-created) norms” as a way of managing community in new situations or spaces.
The scientists chapter (Piper) then examines a historical example of the use of patents relating to plant hormones as moves in a larger conversation with multiple goals: credit, sometimes commercialization, furthering the public interest. Uncertainty about the law allowed ideas about IP, rather than formal law, to shape behavior. In addition, the chapter emphasizes the importance of the material world: objects were often more important than abstract rights, as scientists shared their products with those they trusted.
Another historical chapter (Murray) looks at exchanges among 19th-century newspaper editors, who didn’t get copyright protection for their works but instead used cheap postage to get stories and to share stories in return so that everyone could fill their local papers with interesting coverage. To the publishers, this wasn’t permissionless copying—it was “the essence of an editor’s job” to select and collate the best. As one newspaper said, after condeming plagiarism, “This doctrine of never borrowing, of saying nothing but what you yourself originated, is cruel in the extreme. It would condemn most men to perpetual silence. In the halls of legislation, in the courts of law, in drawing rooms, and at dinner parties, what a long, sad, solemn stillness there would be!” Credit and reciprocity were important, but not law. “IP law can be a strategic crisis-management and boundary-policing tool without driving everyday knowledge management practices.” Borrowing was the beginning of the process, generating responses; newspapers developed brands based on the sources from which they copied and the editorial stance they took towards other sources.
The entry of new competitors and outsiders, however, drove a resort to law. In a familiar pattern, new entrants disrupted existing behaviors, and producers responded with any tools they could find—just as they did more recently with search engines. When producers began to use “hot news” misappropriation claims, however, they faced continuing challenges from non-IP methods of organization. The authors suggest that a high level of rights enforcement may indicate a sector’s sickness, not its health.
Another chapter (Piper) considers copying in the Canadian legal profession. Copying is a core feature of legal thought—making up new expression would often risk distortion of the meaning of a law or a legal test, so we often value fidelity. Lawyers, like other professionals, police the boundaries of their field; this self-regulation clashed with attempts by legal publishers to control copying legal materials from law libraries. And in Canada, the legal profession won: the Canadian Supreme Court ruled that such copying was fair dealing. Here, the authors argue, unlike knitters, “lawyers do not appeal to law to bolster their credibility or ability to make an income in their profession; such an appeal may even undermine their reputations.” But like knitters and scientists, they do appeal to IP law “when dealing with strangers or for market-based transactions.”
A chapter on cultural labor and institutions in a small Canadian city (Murray) looks at the art world outside prestige art and also outside “traditional knowledge,” the two more usual objects of study. IP is only a small part of the messy, in-between ways in which artists in this community make art and make a living.
A final chapter on production of paintings in Dafen, China (Robertson), looks at the ways in which the labor of individual copiers, who hand-paint the copies of classic and sometimes modern art, is understood or ignored. Copying “functions in many ways in the art world, most of them totally separate from both appropriation and also IP protection.” As in the other chapters, IP is invoked “where perceptions of how the art market should function collide with long-held, but often unmarked, norms among artists (for example in terms of what constitutes originality).” Thus, Robertson focuses on Western perceptions of Dafen, which tend to valorize Western art and denigrate Chinese artists. Westerners, she suggests, tend to position authenticity in the content, while Chinese commentators find authenticity in the act of painting.
When Western coverage didn’t find sufficiently sweatshop-like conditions of production, it shifted to Dafen’s challenge to the idea of “art” through its mass production techniques, though as the chapter points out, “arguably the presence of the hand in the Dafen paintings is precisely the opposite of industrialization.” The painters themselves say they’d run out of ideas if they had to paint their own works, and defend the idea of giving access to art to people who otherwise couldn’t afford it. They see their works as original because they aren’t mass replicated. And, the chapter notes, given that most art is accessed through copies—online, in books, etc.—these works may not be exceptional. Price depends on the quality of the copy, and customers can also request changes so that people in paintings look more like loved ones.
In another manifestation of the interaction between material objects and immaterial rights (or lack thereof), source images (including digital files or existing paintings) are important assets, returned to a boss after a commission is complete, and protected through agreements more like trade secrets or contracts than IP rights, since knowing what’s popular is key to profiting. Even copies of in-copyright works aren’t “fakes,” she argues, any more than the appropriated artworks of Sherrie Levine or Richard Prince are fakes—they’re copies, and they serve different functions. But the Western perception that Levine and Prince deliberately challenge concepts of originality and expression insulates them from the charge of fakery, as Dafen is not. Originality and authenticity may even give us alternatives to talking about the more politically challenging and controversial subject of labor; and at the same time, whether paradoxically or naturally, our discourse tends to focus on business rather than art. It’s a fascinating set of complications.
Overall, highly recommended.
Reading list: facts versus opinions in mandatory disclosure
Daniel E. Herz-Roiphe, Stubborn Things: An Empirical Approach to Facts, Opinions, and the First Amendment
From the intro:
[This] essay reports the results of an original survey that presented respondents with the actual disclosures at issue in a number of recent compelled speech cases, and asked them to categorize these disclosures as factual or opinionated. Participants proved proficient at distinguishing fact from opinion, suggesting that consumer surveys could provide a valuable resource for courts. They also expressed dramatically different understandings of the controversial disclosures at issue in NAM and R.J. Reynolds than the D.C. Circuit did, offering a new and important perspective on how these, and similar, forms of mandated speech should be treated in future litigation.
When is a 13-year discrepancy immaterial?
According to the UK ASA, when it’s the difference between 1860 and 1873 as the confirmed date of a bakery’s founding: “We understood that their competitors were much younger, with the oldest having been founded in 1949 and so Warrens Bakery was the oldest pasty provider still trading. In light of that, we considered that any consumers who had chosen to purchase a pasty from Warrens Bakery, as opposed to one of their competitors, because of their claimed heritage, would still have made the same decision to do so had they been aware that the earliest official record of the bakery’s existence that they were able to supply was 1873.”
False advertising claims not arbitrable when ads predated agreement
Mohebbi v. Khazen, Case No. 13-cv-03044, 2014 WL 6845477 (N.D. Cal. Dec. 4, 2014)
Mohebbi sued Khazen over Mohebbi’s agreement to invest over $1 million in a partnership in exchange for defendants’ help in getting him qualified for the federal EB–5 immigrant visa program. He sought recission and brought 22 claims against defendants. The court found the arbitration agreement he signed enforceable and required him to arbitrate everything but his false advertising and recission claims, and stayed the false advertising claims pending the completion of arbitration.
Mohebbi’s false advertising claims concerned defendants’ alleged misrepresentations on their website, including an alleged misrepresentation of defendants’ business as a qualified Regional Center designated by the US Customs and Immigration Service for the purpose of assisting investors in applying for EB–5 visas. False advertising claims are arbitrable, but the false advertising and reliance occurred before Mohebbi signed the agreement with the arbitration clause. The agreement didn’t explicitly encompass claims predating its signing. An agreement must be retroactive on its face to cover claims that predate its execution, and thus the false advertising claims were not arbitrable.
The arbitration clause was, however, enforceable and Mohebbi failed to meet his heavy burden to show that it was fraudulently induced, so he was not entitled to recission.
The court then rejected defendants’ motion to dismiss the Lanham Act claim (California false advertising claims also survived but defendants apparently didn’t make separate arguments about them). Along with the “Regional Center” claims, defendants allegedly promised to help “achiev[e] the fastest path to U.S. residency and citizenship.” This adequately alleged falsity with respect to defendants’ services. (The court didn’t address the obvious Lexmark problem of “standing,” that is, Mohebbi was a customer, not a competitor or other type of market participant. But that wouldn’t get rid of the California claims anyway.) The court then stayed the litigation pending the completion of arbitration, as required by the FAA. Note that if arbitration is more trouble for Mohebbi than for defendants, then defendants gained an advantage in the non-arbitrable claims because Mohebbi brought arbitrable claims; there’d have been no stay without them.
Garcia v. Google thoughts: input welcome!
Along with many others, Shyamkrishna Balganesh, Justin Hughes, Peter Menell, and David Nimmer submitted an amicus in Garcia v. Google making a number of interesting arguments; I’m generally sympathetic to the idea that we should be more flexible about joint authorship. But right now I want to talk about a different argument in the brief: they say that, even assuming that Youssef had an implied license to incorporate Garcia’s performance, an implied nonexclusive license is nontransferable. (This line of reasoning depends on the idea that Garcia could own a separate copyright in her performance, rather than a share of the copyright in the entire film by virtue of her performance; if she has a share in the entire film, then Youssef is simply her co-owner and his ability to license nonexclusively is unfettered. Which itself is a good reason to conclude that the only viable “work” here is the film as a whole.)
If that’s so, then the reassurances of the original panel opinion and SAG that implied licenses will usually solve any failure to enter into work for hire agreements are completely wrong. An implied license may work pretty well when a programmer writes a program for internal use at a business. But Warner Bros. needs to license its rights to Netflix, Amazon, Wal-Mart, etc. If all it has is a nontransferable license, then it has nothing of any value. And remember, Petrella means there’s no such thing as a stale copyright claim.
So if a studio didn’t get a signed release from one of the extras in Titanic, the question it ought to be asking itself (and its insurers) is: Do you feel lucky? Well, do you? (According to SAG, that’s enough for a copyrightable performance.)
Side note: The Balganesh et al. brief also introduces a bit of error into the discussion because of the case’s unusual posture–the brief says that Youssef didn’t counternotify. But Google didn’t take down the video after Garcia’s notice, so there was nothing to him to counternotify about. And now that the mandatory injunction requires Google to police all its sites, there’s no way to counternotify, even for the multiple non-Youssef parties who wanted to distribute the video in order to discuss its message.
Side note 2: The brief also takes a position on what would happen if Garcia were a joint author of the film that requires a resolution of what is as far as I know a novel question. If she’s an author, it says, she can file a DMCA notice based on her authorship of the film; Youssef could then counternotify because he’s also an author and thus has the right to put it on YouTube. Perhaps she opens herself up to a 512(f) claim with her notice; but if Google honors it, the film has to stay down for 10 business days regardless of his objections. But sending a DMCA notice requires that the sender own (or act on behalf of an owner of) an “exclusive” right. See 512(c)(3). Is a single co-owner acting alone an owner of an “exclusive” right? My sense is that the right answer is yes, but it does raise the prospect of a co-owner getting undue leverage when another co-owner is using an online intermediary for distribution–and this wouldn’t just include YouTube, but also Amazon and other sites that might be generating substantial revenue.
What do you all think?



